EXHIBIT 10.37
SHARE EXCHANGE AGREEMENT
BY AND AMONG
AXENT TECHNOLOGIES, INC.
AND
THE EQUITYHOLDERS AND HOLDERS OF THE ENTIRE ISSUED SHARE
CAPITAL OF CKS LIMITED
March 29, 1999
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement (the "Agreement") is entered into as of this
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29th day of March, 1999 (the "Closing Date"), by and among AXENT Technologies,
Inc. a Delaware corporation ("AXENT"), and the undersigned holders (the
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"Equityholders") of all of the shares of capital stock, issued share capital and
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warrants of CKS Limited, a private company limited by shares incorporated in and
under the laws of England with registered number 2822049 and whose registered
office is at Xxxxxx Manor, Xxxxxx Cross, Ilminster, Somerset ("CKS"). AXENT and
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the Equityholders are referred to collectively herein as the "Parties" and each
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individually as a "Party."
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RECITALS:
WHEREAS, the Equityholders are the sole record, legal and beneficial owners
of all of the issued and outstanding shares of capital stock, issued share
capital and warrants of CKS;
WHEREAS, CKS is a holding company that operates through its direct and
indirect subsidiaries, PassGo (as defined below) and the PassGo Affiliates (as
defined below);
WHEREAS, AXENT desires to purchase and the Equityholders desire to sell all
of the outstanding shares of capital stock, issued share capital and warrants of
CKS upon the terms and subject to the conditions set forth herein with the
Parties intending that such transaction qualify as a reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS, following Closing the parties intend that an offer will be made to
the Option Holders (as defined below) to convert all of the outstanding CKS
Options (as defined below) into options to acquire AXENT Common Shares (as
defined below).
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND THE MUTUAL PROMISES
HEREIN MADE, AND IN CONSIDERATION OF THE REPRESENTATIONS, WARRANTIES, AND
COVENANTS HEREIN CONTAINED, THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
DEFINITIONS
1.1 Terms Defined in this Agreement. As used in this Agreement, the
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following terms shall have the respective meanings set forth below:
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
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promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
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Section 1504, or any similar group defined under a similar provision of state,
local or foreign law.
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"Agreement" has the meaning set forth in the preface above.
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"Articles" means the articles of association of CKS, PassGo and each PassGo
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Affiliate in the agreed form, including such changes to the existing articles of
CKS, PassGo and each PassGo Affiliate as AXENT may have required prior to
Closing.
"AXENT" has the meaning set forth in the preface above.
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"AXENT Common Shares" means the shares of common stock, par value $0.02 per
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share, of AXENT.
"AXENT Disclosure Schedule" has the meaning set forth in the first
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paragraph of Article V below.
"AXENT Share Price" means the average daily closing price of an AXENT
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Common Share as reported on NASDAQ over the twenty (20) day trading period
ending five (5) trading days preceding the Closing Date.
"Business Day" means any day (other than Saturdays, Sundays and any other
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day on which banks in London, England are authorized or obligated by law or
executive order to close or are otherwise generally closed for the transaction
of normal banking business.)
"Charter Documents" means, with respect to any Party, CKS, PassGo or the
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PassGo Affiliates, such Person's organizational and formation documents
including, without limitation, its memorandum and articles of association or its
constitutional documents, as applicable.
"CAA" means the U.K. Capital Allowances Xxx 0000, as amended.
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"CKS" has the meaning set forth in the preface above.
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"CKS Group Shares" has the meaning set forth in Section 4.2(d) below.
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"CKS Options" has the meaning set forth in Section 4.2(b) below.
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"CKS Shares" means all of the 6,076,665 ordinary shares of 20p each,
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3,126,338 `A' ordinary shares of 20p each, 6,272,500 preference shares of $1
each and 1,800,000 `A' preference shares of $1 each all being shares in the
issued share capital of CKS.
"CKS Securities" means the issued and outstanding CKS Shares and warrants
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to acquire shares of CKS including without limitation the equity warrants over
152,100 ordinary shares of 20p each and the 1,216,016 `A' ordinary shares of 20p
each, all being shares in the authorized share capital of CKS and being set
forth on Exhibit 2.1 hereto.
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"Closing" has the meaning set forth in Section 2.1 below.
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"Closing Date" has the meaning set forth in the preface above.
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"Code" has the meaning set forth in the recitals above.
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"Companies Acts" means the U.K. Companies Xxx 0000, the Companies Xxx 0000
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and the Companies Consolidation (Consequential Provisions) Xxx 0000.
"Confidential Information" means any information concerning the businesses
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and affairs of CKS, PassGo, PassGo Affiliates or AXENT, if any, that is not
already generally available to the public.
"Customs" has the meaning set forth in Section 4.11(a)(i) below.
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"Developed Software" means Software Programs developed, authored, and/or
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relicensed by CKS, PassGo or any PassGo Affiliate.
"Defined Benefit Scheme" means any non-U.S. pension or retirement scheme,
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plan, program or arrangement, under which the amount of some or all of the
benefits payable to or in respect of a member of the scheme, plan, program or
arrangement is calculated in accordance with a formula which takes account of
the service of the member during any particular period (whether to retirement,
death, termination of employment, withdrawal or any other event or date), and
the remuneration of the member averaged over any particular period or at any
particular time (including without limitation) his service at or close to his
retirement, death, termination of employment or withdrawal.
"Defined Contribution Scheme" means any non-U.S. pension or retirement
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scheme, plan, program or arrangement that is not a Defined Benefit Scheme and is
not a Personal Pension Scheme.
"Disclosed Group Life Assurance Plan" means the U.K. Life Assurance Plan
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details of which are set out in Section 4.26 of the Disclosure Schedule.
"Disclosed Pension Scheme" means the U.K. retirement benefit scheme details
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of which are set out in Section 4.26 of the Disclosure Schedule.
"Disclosed U.K. Disability Plan" means the U.K. group permanent health
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insurance policy details of which are set out in Section 4.26 of the Disclosure
Schedule.
"Disclosed U.K. Healthcare Plan" means the Western Provident Association
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corporate healthcare scheme details of which are set out in Section 4.26 of the
Disclosure Schedule.
"Disclosed U.S. Disability Plan" means the U.S. group disability insurance
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plan details of which are set out in Section 4.26 of the Disclosure Schedule.
"Disclosed U.S. Healthcare Plan" means the BlueCard PPO Program details of
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which are
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set out in Section 4.26 of the Disclosure Schedule.
"Disclosed Schemes" means the Disclosed Group Life Assurance Plan, the
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Disclosed Pension Scheme, the Disclosed U.K. Disability Plan and the Disclosed
U.K. Healthcare Plan.
"Documentation" has the meaning set forth in Section 4.13(h) below.
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"Embedded Software" means third party Software Programs integrated,
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embedded or otherwise incorporated into Developed Software.
"Employee" means any officer, director, self-employed consultant or
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employee of CKS, PassGo or any PassGo Affiliate.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
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retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
tax-qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) tax-qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), (d) Employee Welfare Benefit Plan or (e) any other written
or unwritten material fringe benefit plan or program (for current or former
employees).
"Employee Pension Benefit Plan" has the meaning set forth in ERISA (S)3(2).
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"Employee Welfare Benefit Plan" has the meaning set forth in ERISA (S)3(1).
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"Environmental, Health, and Safety Laws" means the Comprehensive
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Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, the U.K. Health and Safety at Work etc, Xxx 0000, the U.K. Control
of Pollution Xxx 0000, the U.K. Environmental Protection Xxx 0000 and, the U.K.
Environment Xxx 0000, each as amended, together with all other laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments and supranational bodies (including with limitation the European
Union) (and all agencies of any of the foregoing) concerning pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as
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amended.
"ERISA Affiliate" means any entity which is (or at any relevant time was) a
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member of a "controlled group of corporations" with, under "common control"
with, a member of an
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"affiliated service group" with, or otherwise required to be aggregated with,
CKS, PassGo or any PassGo Affiliate as set forth in Code Sections 414(b), (c),
(m) or (o).
"Escrow Deposit" has the meaning set forth in Section 7.7 below.
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"Equityholders" has the meaning set forth in the preface above.
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"Equityholders' Disclosure Schedule" has the meaning set forth in the first
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paragraph of Article IV below.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
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of the U.S. Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
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"Financial Statements" has the meaning set forth in Section 4.7 below.
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"French Employee" means any Employee who ordinarily works, or is resident
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in, France.
"GAAP" means, with respect to CKS, U.K. Financial Reporting Standards,
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statements of standard accounting practice and generally accepted accounting
principles in the U.K. as in effect from time to time and with respect to AXENT,
generally accepted accounting principles as in effect from time to time in the
U.S.
"German Employee" means any Employee who ordinarily works, or is resident
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in, Germany.
"Xxxx-Xxxxx-Xxxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
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Act of 1976, as amended.
"ICTA" means the U.K. Income and Corporation Taxes Xxx 0000, as amended.
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"IHTA" means the U.K. Inheritance Tax Xxx 0000, as amended.
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"Intellectual Property" means (a) all inventions (whether patentable or
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unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, domain names and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, applications and
renewals in connection therewith, (c) all copyrightable and copyright works, all
copyrights, and all applications, registrations, and renewals in connection
therewith, (d) all mask works and all applications, registrations, and renewals
in connection therewith, (e) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions,
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manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, technical data, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals), (f) all
computer software (including data, databases and related documentation), (g) all
moral rights, (h) all database rights, (i) all design rights and registered
designs, (j) all topography rights, (k) all other proprietary rights, and (l)
all copies and tangible embodiments thereof (in whatever form or medium and
whether or not any of the foregoing is registered and including all applications
for registration of any such thing) and all rights or forms of protection of a
similar nature or having equivalent or similar effect to any of those which may
subsist anywhere in the world.
"Knowledge" means, (a) with respect to CKS, the knowledge, after reasonable
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investigation of Xxxxxxx Xxxx, Xxxxxx Xxxx, Xxxx Xxxxxxxx, Xxx Xxxxxxx, and
Xxxxx Xxxx, and (b) with respect to AXENT, the knowledge of the executive
officers of AXENT.
"Leased Properties" means the premises identified as Leased Properties on
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Section 4.12(a) of the Equityholders' Disclosure Schedule.
"Liability" means any liability, debt or obligation (whether known or
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unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including any liability for Taxes.
"Licensed Property" means the Property identified as Building 1 Westcombe
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Trading Estate, Station Road, Ilminster on Section 4.12(a) of the
Equityholders' Disclosure Schedule.
"Material Adverse Effect" means, (a) as to any of CKS, PassGo or the PassGo
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Affiliates as that term is used in Article III and IV hereof, a material adverse
effect on the business, properties, operations, condition or future prospects
(financial or otherwise) of any of such Persons in excess of $25,000, and (b) as
to AXENT as that term is used in Article V hereof, a material adverse effect on
the business, properties, operations, condition or future prospects, (financial
or otherwise) in excess of $250,000.
"Most Recent Balance Sheet" means the consolidated balance sheet contained
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within the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section 4.7
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below.
"Most Recent Fiscal Month End" has the meaning set forth in Section 4.7
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below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4.7
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below.
"Multiemployer Plan" has the meaning set forth in ERISA (S)3(37).
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"NASDAQ" means the Nasdaq National Market.
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"Offer" means an offer addressed to each of the Option Holders of
substitute options to acquire AXENT Common Shares in the amounts set forth
opposite each Option Holder's name in Section 4.2(b) of the Disclosure Schedule
hereto in return for the transfer of all CKS Options and on the basis that:
(a) Other than the grant of the substitute AXENT options, no
consideration in respect of the transfer is due or will become due by AXENT,
CKS, PassGo or any PassGo Affiliate;
(b) each of the Option Holders will release and discharge CKS, PassGo
and each PassGo Affiliate from all and any rights that the Option Holder (or any
of them) may have to compensation, damages or otherwise in respect of the CKS
Options or their transfer;
(c) each of the Option Holders will waive and release any rights he may
have under or by reference to the Plan or any letter of grant issued in respect
of the Plan or otherwise (whether now or hereafter arising) to have any of the
CKS Options offered to him for purchase prior to or simultaneously with the
transfer of the CKS Options as contemplated by the Offer; and
(d) the substitute option agreements shall be governed by an AXENT
stock option plan and each of the Option Holders will enter into an option
agreement with AXENT. The substitute options will contain the same vesting
schedules as the CKS Options and shall be vested in respect of each Option
Holder to the extent of the CKS Options held by the Option Holder.
"Ordinary Course of Business" means the ordinary course of business
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consistent with past custom and practice (including with respect to quantity and
frequency).
"Option Holders" has the meaning set forth in Section 4.2(b) below.
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"Owned Freehold Property" means the Property identified as Xxxxxx Manor and
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adjoining land on Section 4.12(a) of the Equityholders' Disclosure Schedule.
"Party" or "Parties has the meaning set forth in the preface above.
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"PassGo" means CKS's wholly-owned operating subsidiary, PassGo
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Technologies, Ltd., a private company limited by shares incorporated in and
under the laws of England, with registered number 1764030 and whose registered
office is at Xxxxxx Manor, Xxxxxx Cross, Ilminster, Somerset, TA19 9PY,
including its operating divisions, PassGo German Branch, PassGo NA Branch,
PassGo UK Branch.
"PassGo (France)" means CKS's wholly-owned subsidiary, PassGo Technologies
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SARL, a limited liability company, incorporated under the laws of France.
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"PassGo Affiliates" means PassGo (France), and PassGo Group Ltd.,
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(individually, a "PassGo Affiliate").
"PassGo German Branch" means PassGo's operating division, referred to as
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PassGo Technologies Germany, operating in the Republic of Germany.
"PassGo Group Ltd" means CKS's wholly-owned subsidiary, PassGo Group Ltd.,
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a private company limited by shares incorporated in and under the laws of
England, with registered number 2822051 and whose registered office is at Xxxxxx
Manor, Xxxxxx Cross, Ilminster, Somerset, TA19 9PY.
"PassGo NA Branch" means PassGo's operating division, referred to as PassGo
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Technologies NA, qualified to transact business in the Commonwealth of
Pennsylvania and the Commonwealth of Massachusetts.
"PassGo UK Branch" means PassGo's operating division, referred to as
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PassGo Technologies UK, operating in the U.K.
"PBGC" means the Pension Benefit Guaranty Corporation.
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"Person" means an individual, a partnership, a limited liability company, a
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corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Personal Pension Scheme" means any personal pension scheme approved or
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provisionally approved for the purposes of Chapter IV of Part XIV of ICTA to
which contributions have been made or are intended to be made pursuant to any
agreement, arrangement, custom, or practice referred to in Section 4.27(a) of
the Equityholders' Disclosure Schedule.
"Plan" has the meaning set forth in Section 4.2(b) below.
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"Prohibited Transaction" has the meaning set forth in ERISA (S)406 and Code
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(S)4975.
"Properties" means the Owned Freehold Property, the Leased Properties and
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the Licensed Property.
"Purchase Price" has the meaning set forth in Section 2.1 below.
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"Reportable Event" has the meaning set forth in ERISA Section 4043.
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"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Exchange Act" means the Securities Exchange Act of 1934, as
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amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
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assignment by way of security or other security interest and includes the
concept of any security interest (of any nature whatsoever) in the U.S., the
U.K. or any other jurisdiction.
"Software Program" has the meaning set forth in Section 4.13(a) below.
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"Subsidiary" means any corporation, partnership, limited liability company,
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association, a joint stock company, a trust, a joint venture, an unincorporated
organization with respect to which a specified Person (or a Subsidiary thereof)
owns a majority of the common stock or other securities, or has the power to
vote or direct the voting of sufficient securities to elect a majority of the
directors or managers.
"System" has the meaning set forth in Section 4.13(m) below.
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"Tax" means any U.S., state, local, U.K. or foreign income, gross receipts,
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license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
Customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, consumption, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other duty or tax of any kind whatsoever, including any
interest, penalty, or addition thereto (including without limitation on any
penalties), whether disputed or not.
"Tax Authority" means any authority (federal, state, local, national or
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supranational) whether in the US, the U.K. or elsewhere having responsibility
for or jurisdiction over any Tax Matter including (without limitation) the US
Internal Revenue Service, the U.K. Inland Revenue and Customs.
"Tax Relief" includes any loss, allowance, exemption, set-off, credit
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(including an ability to grant a distribution) or deduction relevant to the
computation of any Tax or right to repayment of Tax.
"Tax Return" means any return, declaration, report, claim for refund, or
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information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TCGA" means the U.K. Taxation of Chargeable Gains Xxx 0000, as amended
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"Third Party Claim" has the meaning set forth in Section 7.3 below.
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"Transaction Expenses" has the meaning set forth in Section 8.11 below.
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"Transaction Expense Overage" has the meaning set forth in Section 8.11
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below.
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"U.K." means United Kingdom.
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"U.S." means the United States.
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"VAT" has the meaning set forth in Section 4.11(a)(iv) below.
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1.2 References to one gender include all genders.
1.3 Any reference to an enactment or statutory provision is a reference to
it as it may have been, or may from time to time be re-enacted.
1.4 Any reference to a document "in the agreed form" is to the form of the
relevant document agreed between the Parties and for the purpose of
identification initialed by each of them or on their behalf (in each case with
such amendments as may be agreed by or on behalf of the Equityholders and
AXENT).
1.5 References to any English or U.S. legal term for any action, remedy,
method of judicial proceeding, legal document, legal status, court, official or
any other legal concept shall, in respect of any jurisdiction other than,
England in respect of any English legal term, and the U.S. in respect of any
U.S. legal term, be deemed to include the legal concept which most nearly
approximates in that jurisdiction to the English or U.S. legal term (as the case
may be).
1.6 References to "$" are to U.S. dollars and references to "(Pounds)" are
to U.K. pounds sterling.
ARTICLE II
SHARE EXCHANGE; CLOSING
2.1 Share Exchange. At the closing (the "Closing"), each of the
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Equityholders will with full title guarantee (on terms that the same covenants
will be deemed to be given by each of the Equityholders at Closing in relation
to CKS Securities as are implied under Part I of the UK Law of Property
(Miscellaneous Provisions) Xxx 0000 where a disposition is expressed to be made
with full title guarantee), sell, transfer, and deliver to AXENT, and AXENT will
acquire from each of the Equityholders in the amounts set forth on Exhibit 2.1
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hereto, the CKS Securities, which represent all of the issued and outstanding
CKS Shares and warrants to acquire CKS capital shares in exchange for an
aggregate of 1,486,146 AXENT Common Shares (the "Purchase Price"). The CKS
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Securities shall be sold free from all Security Interests, options, equities,
claims or other third party rights (including rights of pre-emption) of any
nature whatsoever together with all rights attaching to the CKS Securities. The
Purchase Price shall be allocated among the holders of the CKS Securities as set
forth on Exhibit 2.1 hereto. The Purchase Price is subject to reduction for
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Transaction Expense Overages, if any, as provided in Section 8.11 hereof.
2.2 Delivery and Payment of Purchase Price. At Closing, AXENT shall
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deliver to the Equityholders certificates representing ninety percent (90%) of
the AXENT Common Shares to be issued in payment of the Purchase Price pursuant
to Section 2.1. and shall deliver certificates
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representing ten percent (10%) of the AXENT Common Shares to be issued in
payment of the Purchase Price into the escrow contemplated by Section 7.7 of
this Agreement.
2.3 Deliveries by the Equityholders. At Closing of the Agreement, the
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Equityholders have delivered (or caused to be delivered) to AXENT:
(a) duly executed transfers into the name of AXENT or its nominee or
as it may direct or have directed in respect of all of the CKS Securities,
together with the relative share certificates or, in the case of missing
certificates, an indemnity in a form and from persons reasonably acceptable to
AXENT;
(b) in respect of any shares and stock in PassGo or any PassGo
Affiliate not held by CKS, share certificates in respect of each such issued
share capital, in the case of missing certificates, an indemnity in a form and
from persons reasonably acceptable to AXENT together with duly executed
transfers into the name of AXENT or CKS, as applicable, or its nominee;
(c) the Charter Documents, common seal, share register and share
certificate book (with any unissued share certificates) and all minute books and
other statutory books (which shall be writtenup to but not including Closing) of
CKS, PassGo and each PassGo Affiliate and, in the case of PassGo (France)
written confirmation from a director or the secretary thereof that the same or
similar documentation under the laws of France are in the possession of PassGo
Technologies SARL and have been written up to date;
(d) all such other documents (including any necessary waivers of
preemption rights or other consents) as may be required to enable AXENT and/or
its nominee to be registered as the holder(s) of or otherwise gain title to the
CKS Securities and any third party consents reasonably required by AXENT all as
set forth in Exhibit 2.3(d) hereto;
(e) powers of attorney in the agreed form duly executed in each case
as a deed by each of Xxxxx Xxxx, Xxxxx Xxxxxxx and Xxxxxxx Xxxxx and authorizing
Xxxxxxx Xxxx and Xxxxxx Xxxx to enter into this Agreement and all other
associated documents and to carry out all other associated or desirable acts to
effect compliance with the obligations of Xxxxx Xxxx, Xxxxx Xxxxxxx and Xxxxxxx
Xxxxx hereunder and to consummate the transactions contemplated by this
Agreement;
(f) certificates of recent date (in no event more than thirty (30)
days prior to the Closing Date), as to the good standing of CKS, PassGo and the
PassGo Affiliates under the laws of their jurisdictions of organization;
(g) a letter of resignation in the agreed form duly executed as a deed
by each of the directors and alternate directors of each of CKS, PassGo and the
PassGo Affiliate along with a waiver of any severance benefits that would be
payable because of such resignations;
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(h) a letter of resignation in the agreed form duly executed as a deed
by the secretary and any other officers of each of CKS, PassGo and the PassGo
Affiliates along with a waiver of any severance benefits that would be payable
because of such resignations;
(i) letters of opinion from a firm of lawyers in England reasonably
acceptable to AXENT in the agreed form;
(j) Resolutions of the Board of Directors of CKS in which the
following business is transacted:
i. the registration (subject to their being duly stamped) of the
transfers in respect of the CKS Shares referred to in Section 2.1 is approved;
ii. altering rules 3.1, 3.2 and 3.3 (entitled "Options to be
personal to Grantees") in the rules of the Plan to permit transfers of CKS
Options to AXENT and to no other party; and
iii. such persons as are nominated by AXENT are appointed as
directors and/or secretary of CKS, PassGo and each PassGo Affiliate.
(k) a certificate stating the aggregate amount of the Transaction
Expenses and the Transaction Expense Overage, if any along with final bills from
the Equityholders' accountants, investment bankers and attorneys with respect to
the Transaction Expenses and a certificate of the managing director of CKS as to
the amount of VAT arising in connection with this Agreement;
(l) Power of attorney of Xxxx Xxxx as to registration of the transfer
of the CKS Securities;
(m) all warrants, letters of grant or option agreements (other than
the letters of grant for the CKS Options) in respect of CKS capital shares
marked cancelled; and
(n) satisfactory evidence of the termination (including Deeds of
Termination in the agreed form) of (a) all bonus plans under which officers,
directors or employees of CKS, PassGo or the PassGo Affiliates are
beneficiaries, except those that are contractually committed and disclosed on
Section 4.26(a)(i) of the Equityholders' Disclosure Schedule, and (b) all powers
of attorney for CKS, PassGo or the PassGo Affiliates.
2.4 Deliveries by AXENT. At the Closing AXENT has delivered:
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(a) to the Equityholders, the AXENT Common Shares pursuant to Section
2.1; and
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(b) to the accountants, investment bankers and counsel to Equityholders,
payment of Transaction Expenses (inclusive of all VAT) not to exceed $1.3
million.
2.5 Other Closing Items. At Closing, the following agreements have been
-------------------
executed:
(a) A Noncompetition Agreement between AXENT and Xxxxxxx Xxxx in the
agreed form.
(b) An Escrow Agreement in the agreed form between AXENT, the
Equityholders and the Escrow Agent, and the Equityholders shall have executed
blank stock powers with respect to the AXENT Common Shares to be held in the
Escrow Deposit.
(c) A Registration Rights Agreement between AXENT and the
Equityholders in the agreed form.
2.6 Waiver. Each Equityholder hereby waives and releases any rights,
------
including without limitation rights of first refusals, such Equityholder may
have under the Articles of CKS (whether now existing or hereafter arising) or in
any other agreement to have any of the CKS Securities to be sold hereunder
offered to him for purchase prior to or simultaneously with the transfer of the
CKS Securities pursuant to the provisions of this Agreement.
2.7 Termination of Subscription Agreements. Each Equityholder agrees that
--------------------------------------
any and all subscription agreements relating to CKS including without
limitation, subscription agreements dated July 9, 1997 and December 18, 1997,
are hereby terminated and hereby waives any claim or rights arising under such
agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE EQUITYHOLDERS
Each Equityholder represents and warrants with respect to himself to AXENT
that the statements contained in this Article III are true and correct as of the
date hereof:
3.1 Authorization of Transaction. Such Equityholder has full power and
----------------------------
authority to execute and deliver this Agreement and each of the documents in the
agreed form to be executed on or before Closing and to perform his obligations
hereunder. This Agreement and any other agreement contemplated herein to which
he is a party have been duly executed and delivered by such Equityholder and
this Agreement and any other agreement contemplated herein to which he is a
party constitute the valid and legally binding obligations of such Equityholder,
enforceable in accordance with their respective terms and conditions. Such
Equityholder does not otherwise need to take any action, give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
third party or any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
13
3.2 Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which such Equityholder is subject, or (b)
result in a breach of, constitute a default under, create a Security Interest
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
such Equityholder is a party or by which he is bound or to which any of his
assets is subject. Such Equityholder is not a party to, or to his knowledge,
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in or before any court or quasi-judicial or administrative
agency of any U.K. or U.S., state, local or foreign jurisdiction or before any
arbitrator relating to the CKS Securities.
3.3 Investment. Such Equityholder (a) understands that the AXENT Common
----------
Shares to be acquired by such Equityholder pursuant to this Agreement initially
will not be registered under the Securities Act, or under any state securities
laws, and will be exchanged in reliance upon federal and state exemptions for
transactions not involving a public offering, (b) is acquiring the AXENT Common
Shares solely for his own account for investment purposes, and not with a view
towards the distribution thereof, (c) is a sophisticated investor with knowledge
and experience in business and financial matters, (d) has received certain
information concerning AXENT, including, without limitation, (1) the most recent
annual report on Form 10-K, (2) the most recent quarterly reports on Form 10-Q,
(3) current reports on Form 8-K dated February 5, 1998, in each case as filed by
AXENT under the Securities Exchange Act, and (g) the most recent annual report
to stockholders of AXENT, and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks inherent in
holding AXENT Common Shares, (e) is able to bear the economic risk and lack of
liquidity inherent in holding AXENT Common Shares which have not been registered
under the Securities Act, (f) except as set forth in Section 3.3 of the CKS
Disclosure Schedule is either (i) an accredited investor" within the meaning of
Rule 501 under the Securities Act of 1933 or (ii) is not a "U.S. Person" within
the meaning of Rule 902 under the Securities Act, (g) understands that there is
a significant risk in holding AXENT Common Shares in that the trading price of
AXENT Common shares may be adversely effected by any number of factors including
but not limited to, AXENT's revenues and/or earnings for any reported period
(including the current quarter not yet closed) falling below market
expectations, an adverse reaction to the transaction contemplated herein or the
accounting treatment proposed by AXENT, an adverse reaction to any other
transaction completed by AXENT or the accounting treatment thereof proposed by
AXENT, failure to achieve the efficiencies, synergies and leverage contemplated
by the combining of the companies in the transaction contemplated herein or in
any other transaction completed by AXENT, failure to retain the key employees of
companies in the transaction contemplated herein or in any other transaction
completed by AXENT, inability to maintain or enhance products marketed by AXENT
and its subsidiaries, increased competitive pressures, adverse changes in the
future economic outlook for AXENT or industry in general and changes in the
prices and valuations in US equity markets in general, markets for technology
companies and markets for AXENT's industry group and peer companies; (h)
understands that the AXENT Common Shares are "restricted securities" within the
meaning of Rule 144 under the Securities Act agrees to provide AXENT with an
opinion of counsel, reasonably acceptable to AXENT, in
14
the event an Equityholder desires to transfer the AXENT Common Shares and (i)
each such Equityholder who is receiving AXENT Common Shares pursuant to
Regulation S, agrees to (1) resell the AXENT Common Shares only in accordance
with Regulation S under the Securities Act or pursuant to another exemption from
registration under the Securities Act, and (2) not engage in hedging
transactions with regard to the AXENT Common Shares unless such hedging
transactions comply with the Securities Act.
3.4 CKS Securities. Such Equityholder holds of record and is the legal
--------------
and beneficial owner of the CKS Securities set forth opposite such
Equityholders' name in Section 3.4 of the Equityholders' Disclosure Schedule.
Such CKS Securities are owned, free and clear of any restrictions on transfer,
Taxes (except for transfer Taxes arising in connection with this Agreement),
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. Except as set forth in Section 3.4 of the
Equityholders' Disclosure Schedule, such Equityholder (a) does not own any CKS
Options or any other options or securities convertible into or exchangeable for
CKS capital shares and (b) is not a party to any option, warrant, purchase
right, or other contract or commitment (other than as contained in the Articles
of CKS attached hereto as Exhibit 3.4), that could require such Equityholder to
-----------
sell, transfer, or otherwise dispose of any of the CKS Securities (other than
pursuant to this Agreement) and (c) is not a party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of any of the CKS
Securities.
3.5 Brokers' Fees. Except as set forth on Section 3.5 of the
-------------
Equityholders' Disclosure Schedule, such Equityholder has no liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES CONCERNING CKS,
PASSGO AND THE PASSGO AFFILIATES
Each of the Equityholders represents and warrants to AXENT that the
statements contained in this Article IV and in the Equityholders' Disclosure
Schedule are true and correct and not misleading as of the date hereof.
Nothing in the Equityholders' Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
matter is fully and fairly disclosed on the disclosure schedule delivered by the
Equityholders to AXENT on the date hereof ("Equityholders' Disclosure
-------------------------
Schedule"). The term "fully and fairly disclosed" means disclosed in such a
--------
manner and in such detail as to enable a reasonable purchaser to make an
informed and accurate assessment of the matter concerned; provided an item shall
not be fully and fairly disclosed unless the section of the Equityholders'
Disclosure Schedule identifies the exception with particularity and no
disclosure in one section of the Equityholders' Disclosure Schedule identified
as an exception to a particular representation or warranty shall be deemed an
exception to another representation or warranty unless it includes a cross
references to such other representation or warranty. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has
15
to do with the existence of the document or other item itself). The
Equityholders' Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this Agreement.
4.1 Organization, Qualification, and Corporate Power. CKS, PassGo and each
------------------------------------------------
PassGo Affiliate is duly organized and validly existing under the laws of its
jurisdiction of organization. CKS, PassGo and each PassGo Affiliate is duly
authorized to conduct business and is in good standing under the laws of each
foreign and U.K jurisdiction where such qualification is required (to the extent
the laws of such jurisdiction of incorporation have a concept of good standing),
except where the failure to so qualify or obtain authorization would not have a
Material Adverse Effect on such Person. CKS, PassGo and each PassGo Affiliate
has full corporate power and authority and all governmental licenses, permits,
or authorizations necessary to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it, except where the failure
to obtain such governmental licenses, permits, and authorizations would not have
a Material Adverse Effect on such Person. Section 4.1 of the Equityholders'
Disclosure Schedule lists the directors and officers of CKS, PassGo and the
PassGo Affiliates. CKS has delivered to AXENT correct and complete copies of
CKS's, PassGo's and the PassGo Affiliates' Charter Documents (as amended to
date). The share certificate books, and the share record books of CKS, PassGo
and the PassGo Affiliates in the forms in which they have been provided to AXENT
are correct and complete. Neither CKS, PassGo nor any PassGo Affiliate is in
default under or in violation of any provision of its applicable Charter
Documents. The corporate summaries attached hereto as Exhibit 4.1 regarding CKS
-----------
and PassGo are accurate, true and correct.
4.2 Capitalization.
--------------
(a) The authorized share capital of CKS consists of (i) 8,968,595
ordinary shares of 20p each of which 6,076,665 shares are issued and
outstanding, (ii) 4,381,405 `A' ordinary shares of 20p each of which 3,126,338
shares are issued and outstanding, (iii) 6,272,500 preference shares of $1 each,
all of which are issued and outstanding, and (iv) 1,800,000 `A' preference
shares of $1 each, all of which are issued and outstanding. All of the issued
and outstanding CKS Shares have been duly authorized, are validly issued, are
fully paid or credited as fully paid, and nonassessable, and are legally and
beneficially owned and registered in the name of the Equityholders as set forth
in Section 3.4 of the Equityholders' Disclosure Schedule under the heading "CKS
Shares".
(b) The CKS Options consist of options to acquire 544,315 CKS capital
shares under the Unapproved Executive Share Option Scheme (the "Plan"), all of
----
which have been granted only to employees (some of whom are now former
employees) of CKS, PassGo or the PassGo Affiliates (the "CKS Options"). Set
-----------
forth in Section 4.2(b) of the Equityholders' Disclosure Schedule is a complete
and accurate list of the legal and beneficial owners (the "Option Holders") of
--------------
the CKS Options indicating the number of shares for which each CKS Option is
exercisable and the exercise price. A complete and correct copy of the Plan (as
amended to date) and each letter of grant for each CKS Option has been delivered
to AXENT. Except as set forth in Section 4.2(b) of the Equityholders' Disclosure
Schedule, at Closing, the substitution of options to acquire AXENT Common Shares
for CKS Options pursuant to any
16
offer made in accordance with Section 6.1 or otherwise does not require notice
to or the consent of any of the Option Holders and does not breach any option
agreement, letter of grant, or any other agreement, violate any statute,
regulation, rule to which CKS, the CKS Options or any Option Holder is subject.
The CKS Options were duly authorized and validly issued, and upon payment of the
exercise price in accordance with the applicable option agreements, are fully
paid and nonassessable.
(c) The CKS Securities and the CKS Options have not been issued in
violation of any purchase option, call, warrant, right of first refusal,
preemptive, subscription or similar right under any provision of applicable law
(including, without limitation, any applicable securities laws) or any contract,
agreement or instrument to which any Equityholder or any Option Holder is
subject or by which any Equityholder or any Option Holder is bound. The CKS
Shares and warrants comprised in the CKS Securities, and the CKS Options are set
forth on Section 3.4 and 4.2(b) respectively, of the Equityholders' Disclosure
Schedule and are the only options, warrants, other debt or equity securities,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require CKS to issue, dispose of,
sell, or otherwise cause to become outstanding any of its shares of capital
stock or share capital or any of the Equityholders or any Option Holder to
dispose of or sell any of its shares of capital stock. There are no outstanding
or authorized stock appreciation, phantom stock, profit participation, or
similar rights with respect to CKS. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the CKS
Securities.
(d) CKS is the registered owner and owns beneficially and legally all of
the issued and outstanding shares of capital stock and share capital, vested and
unvested options, warrants and other equity or debt securities of PassGo, PassGo
(France), and PassGo Group Ltd. (collectively, the "CKS Group Shares"). The CKS
----------------
Group Shares are owned, free and clear of any restrictions on transfer (other
than any restrictions under applicable securities laws), Taxes (except with
respect to transfer taxes arising in connection with this Agreement), Security
Interests, options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands. Neither CKS nor PassGo is a party to any option, warrant,
purchase right, or other contract or commitment that could require CKS or PassGo
to sell, transfer, or otherwise dispose of any of the CKS Group Shares or is a
party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any of the CKS Group Shares. All of the issued CKS
Group Shares have been duly authorized, are validly issued, fully paid, and
nonassessable, and are set forth in Section 4.2(d) of the Equityholders'
Disclosure Schedule.
(e) There is no litigation, arbitration, prosecution, administrative or
other legal proceedings or dispute in existence or, to the Knowledge of CKS,
threatened against any of CKS, PassGo or any PassGo Affiliate in respect of the
CKS Securities, the CKS Options or the CKS Group Shares or the entitlement of
any Equityholder to dispose of the CKS Securities or the CKS Group Shares and,
to the Knowledge of CKS, there are no facts which might give rise to any such
proceedings or any such dispute.
17
(f) Neither the CKS Securities nor any of CKS' assets have been the
subject of a transaction at an undervalue within the meaning of part IX or part
VI of the U.K. Insolvency Xxx 0000.
(g) CKS has not received any notice or any application or notice of any
intended application under the provisions of the Companies Acts for the
rectification of the register of members of CKS.
(h) Set forth in Section 4.2(h) of the Equityholders' Disclosure
Schedule is a correct and complete list of the agreement
(the "Kenton Agreements") entered into between CKS, PassGo or any PassGo
-----------------
Affiliate and Xx. Xxxxxx Xxxxxx ("Xx. Xxxxxx") relating to the redemption of
----------
shares of CKS owned by Xx. Xxxxxx or that contain ongoing obligations of CKS,
PassGo or the PassGo Affiliates. Xx. Xxxxxx owns no shares, warrants or debt or
equity securities of CKS. The execution of Kenton Agreements by CKS were duly
authorized and are fully enforceable in accordance with their terms and do not
result in any Liability or give rise to any claim by third parties including,
but not limited to, any current or former equityholder or creditor. All advance
corporation tax payable in respect of the redemption of the preference shares of
CKS from Xx. Xxxxxx has been paid and Inland Revenue has confirmed that it will
not seek any further advance corporation or other tax in respect of the
redemption. Neither CKS, PassGo nor a PassGo affiliate has any Liability to Xx.
Xxxxxx.
(i) None of CKS, PassGo or any PassGo Affiliate has at any time given
any financial assistance in connection with the purchase of shares as would
contravene the provisions of Section 151 to 157 of the Companies Xxx 0000.
4.3 Third Party Approvals. Neither CKS, PassGo nor any PassGo Affiliate is
---------------------
required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement.
4.4 Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which CKS, PassGo or any PassGo Affiliate is
subject or any provision of such Person's applicable Charter Documents, or (b)
except as set forth in Section 4.4(a) of the Equityholders' Disclosure Schedule,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which CKS, PassGo or the PassGo Affiliates are a party
or by which it is bound or to which any of their assets are subject (or result
in the imposition of any Security Interest upon any of their assets) other than
breaches, defaults, accelerations, rights or notices that in the aggregate could
not reasonably be expected to have a Material Adverse Effect.
4.5 Title to Assets. CKS, PassGo and each PassGo Affiliate has such title
---------------
as is stated and confirmed in the covenants implied under Part I of the U.K. Law
of Property (Miscellaneous
18
Provisions) Act 1994 where a disposition is expressed to be made with full title
guarantee in respect of, or a valid leasehold interest in, the properties and
assets used by it, including without limitation, all properties and assets
located on its premises, shown on the Most Recent Balance Sheet or acquired
after the date thereof, free and clear of all Security Interests (other than
those set forth in Section 4.5 of the Equityholders' Disclosure Schedule),
except (a) for properties and assets disposed of in the Ordinary Course of
Business since the date of the Most Recent Balance Sheet, and (b) such Security
Interests that individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect.
4.6 Subsidiaries. Except for PassGo and the PassGo Affiliates, CKS does
------------
not have any Subsidiaries, operating or otherwise.
4.7 Financial Statements. CKS has delivered (collectively, the "Financial
-------------------- ----------
Statements") to AXENT its (i) consolidated audited balance sheets and statements
-----------
of income and cash flow as of and for the fiscal years ended December 31, 1996,
December 31, 1997 and December 31, 1998 (the "Most Recent Fiscal Year End"); and
-----------------------------
(ii) consolidated unaudited balance sheets and profit and loss statements,
changes in stockholders' equity, and cash flow (the "Most Recent Financial
----------------------
Statements") as of and for the two (2) months ended February 28, 1999 (the "Most
----------- -----
Recent Fiscal Month End"). The Financial Statements (including with respect to
------------------------
the Most Recent Fiscal Year End, the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly on a consolidated basis the financial condition
of CKS, PassGo and the PassGo Affiliates (subject to normal year-end adjustment
in the case of the Most Recent Financial Statements) and give a true and fair
view of the assets and liabilities of CKS, PassGo and the PassGo Affiliates as
of such dates and the results of operations of CKS, PassGo and the PassGo
Affiliates for such periods and are consistent with the books and records of
CKS, PassGo and the PassGo Affiliates.
4.8 Events Subsequent to Most Recent Fiscal Year End. Since the Most
------------------------------------------------
Recent Fiscal Year End, there has not been any Material Adverse Effect with
respect to CKS, PassGo or any PassGo Affiliate. Since that date, except as set
forth in Section 4.8 of the Equityholders' Disclosure Schedule, neither CKS,
PassGo nor any PassGo Affiliate:
(a) has sold, leased, transferred, or assigned any of its assets,
tangible or intangible, other than for a fair consideration in the Ordinary
Course of Business;
(b) has entered into any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses, other than non-
exclusive licenses with software vendors) either involving more than $25,000 or
outside the Ordinary Course of Business;
(c) has had accelerated, terminated, modified, or canceled any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) to which it is a party or by which it is bound;
(d) has allowed any Security Interest to be imposed upon any of its
assets, tangible or intangible;
19
(e) has made any capital expenditure (or series of related capital
expenditures) involving more than $25,000;
(f) has made any capital investment in, any loan to, or any acquisition of
the securities or assets of, any other Person (or series of related capital
investments, loans, and acquisitions);
(g) has issued any note, bond, or other debt security or created,
incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation;
(h) has delayed or postponed the payment of accounts payable and other
Liabilities outside the Ordinary Course of Business;
(i) has canceled, compromised, waived, or released any right or claim (or
series of related rights and claims) outside the Ordinary Course of Business;
(j) has granted any license or sublicense of any rights under or with
respect to any Intellectual Property (other than PassGo's standard non-exclusive
end user licenses, copies of which have been provided to AXENT);
(k) has changed or had a change authorized in its Charter Documents;
(l) has issued, sold, or otherwise disposed of any of its shares of
capital stock, share capital, or granted any options, warrants, or other rights
to purchase or obtain (including upon conversion, exchange, or exercise) any of
its shares of capital stock or share capital;
(m) has proposed or declared, set aside, or paid any dividend or made any
distribution (including but not limited to any dividend or distribution within
the meaning of Section 209 of ICTA) with respect to its shares of capital stock
or shares comprising its share capital (in all cases whether in cash or in kind)
or redeemed, purchased, or otherwise acquired any of its shares of capital stock
or share capital;
(n) has written back or brought into reserve any surplus on any pension
arrangements or failed to make less than full provision for pension obligations;
(o) has experienced any damage, destruction, or loss (whether or not
covered by insurance) to its property;
(p) has made any loan to, or entered into any other transaction with, any
of its directors, officers, employees or Equityholders outside the Ordinary
Course of Business;
20
(q) has entered into any employment contract, service agreement or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(r) has granted any increase in the base compensation of any of its
directors, officers, and employees outside the Ordinary Course of Business;
(s) has adopted, amended, modified, or terminated any bonus, profit-
sharing, incentive, severance, or other plan, contract, or commitment for the
benefit of any of its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan);
(t) has made any other change in employment terms for any of its
directors, officers, and employees outside the Ordinary Course of Business or in
the terms of its agreements with any independent contractors;
(u) has made or pledged to make any charitable or other capital
contribution outside the Ordinary Course of Business;
(v) has had any other material occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business;
(w) has suffered a Material Adverse Effect;
(x) has changed its accounting reference period; and
(y) is under any legal obligation, whether written or oral, to do any
of the foregoing.
4.9 Undisclosed Liabilities. Neither CKS, PassGo nor any PassGo Affiliate
-----------------------
has any Liability, except for (i) Liabilities accrued for or reserved against in
of the Most Recent Balance Sheet, and (ii) Liabilities (including Statutory
Liabilities) which have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law and, except as disclosed in
Section 4.9 of the Equityholders' Disclosure Schedule, none of which exceeds
$25,000 individually).
4.10 Legal Compliance. Each of CKS, PassGo and the PassGo Affiliates has
----------------
complied in all respects with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), except where the failure to so comply, individually or in the
aggregate, would not have a Material Adverse Effect, and no action, suit,
proceeding,
21
hearing, charge, complaint, claim, demand, notice, or to the Knowledge of CKS,
investigation has been filed or commenced against it alleging any failure so to
comply.
4.11 Tax Matters.
-----------
(a) U.K Tax Matters.
i. Except as set forth in Section 4.11(a)(i) of the
Equityholders' Disclosure Schedule, all Tax Returns or computations which ought
to have been made by or in respect of CKS, PassGo and any PassGo Affiliate for
any Tax purpose have been duly made and all such returns and any other notices,
including without limitation, accounts and information supplied to the Inland
Revenue or H.M. Commissioners of Customs and Excise ("Customs") or other Tax
---------
Authority concerned for any such purposes were when filed, up-to-date correct
and have been made on a proper basis and none of such returns, notices, accounts
or information is disputed in any material respect by the fiscal authority
concerned and, to the Knowledge of CKS, there is no fact which might give rise
to any such dispute or to any tax liability not provided for in the Most Recent
Balance Sheet in respect of any accounting period (as defined in section 12
ICTA) ending on or before the date of the Most Recent Balance Sheet. All Taxes
owed to the U.K. or any U.K. jurisdiction by CKS, PassGo or any PassGo Affiliate
(whether or not shown on any Tax Return) have been paid in full and within the
relevant time limit. Neither CKS, PassGo nor any PassGo Affiliate currently is
the beneficiary of any extension of time within which to file any Tax Return
required by the U.K. or any U.K. jurisdiction.
ii. Except as set forth in Section 4.11(a)(ii) of the
Equityholders' Disclosure Schedule, in all computations submitted to the Inland
Revenue proper adjustment has been made for any disallowable expenditure whether
by reason of section 577 ICTA or otherwise and all such computations for all
accounting periods ended on or before [Xxxxx to provide number] have been agreed
with the Inland Revenue.
iii. Except as set forth in Section 4.11(a)(iii) of the
Equityholders' Disclosure Schedule, the provisions included in the Most Recent
Balance Sheet are sufficient to cover all Taxes in respect of all accounting
periods ended on or before the date of the Most Recent Balance Sheet for which
CKS, PassGo or any PassGo Affiliate was then or might at any time thereafter
become or have become liable including (without limitation) Taxes: (1) On, in
respect of or by reference to the profits gains or income earned or accrued or
deemed for taxation purposes to be earned or accrued for any period ended on or
before the date of the Most Recent Balance Sheet; or (2) In respect of
distributions made and interest and charges on income paid on or before the date
of the Most Recent Balance Sheet.
iv. Except as set forth in Section 4.11(a)(iv) of the
Equityholders' Disclosure Schedule, in relation to Value Added Tax ("VAT"), all
---
amounts due to be paid to Customs have been paid, no dispute exists with Customs
and, to the knowledge of CKS there are no present circumstances which are likely
to give rise to any such dispute; on all invoices issued by CKS, PassGo or any
PassGo Affiliate, VAT at the percentage rate which at the time of the relevant
supply was chargeable thereon has been so charged (and all amounts of VAT which
22
have been so charged since the last return made to Customs have been retained
for the account of Customs pending the next return date); Neither CKS, PassGo or
any PassGo Affiliate has made any election to waive exemption from VAT in
relation to any land; and neither CKS, PassGo nor a PassGo Affiliate has ever
been a member of any group of companies for VAT purposes.
v. Except as set forth in Section 4.11(a)(v) of the
Equityholders' Disclosure Schedule, since the date of the Most Recent Balance
Sheet, neither CKS, PassGo nor any PassGo Affiliate: (1) has made any claim
under section 279 or sections 152, 153, or 154 TCGA; or (2) has done or agreed
to do anything as a result of which any investment grant paid to CKS, PassGo or
any PassGo Affiliate is or may be liable to be refunded in whole or part; and no
expenditure has been incurred nor any rents, interest, annual payments or any
other sums have been paid or are liable to be paid by CKS, PassGo or any PassGo
Affiliate which are wholly or partly disallowable as a deduction or a charge on
income in computing profits for the purposes of corporation tax.
vi. All chargeable assets of CKS, PassGo or any PassGo
Affiliate were acquired at market value at the time of acquisition and there are
no circumstances giving rise or which may give rise to a Liability or the
disallowance of any loss under or pursuant to any of sections 139, 140, 176,
177, 178, and 179 TCGA or sections 17 or 30 TCGA and no loss falls to be
restricted under section 18(3) TCGA as a result of the transactions contemplated
by this Agreement.
vii. Except as set forth in Section 4.11(a)(vii) of the
Equityholders' Disclosure Schedule, during the 3 years before the date of this
Agreement: (1) There has been no major change in the nature or conduct of a
trade carried on by CKS, PassGo or any PassGo Affiliate; and (2) The scale of
activities of any trade carried on by CKS, PassGo or any PassGo Affiliate has
not been small or negligible within the meaning of section 245 and 768 ICTA.
viii. Except as set forth in Section 4.11(a)(viii) of the
Equityholders' Disclosure Schedule, neither CKS, PassGo nor any PassGo Affiliate
has been a party to or involved or concerned in any transaction (other than as
contemplated by this Agreement) in which the following provisions have been or
could be applied except where all applicable clearances (based on full
disclosure of material facts and circumstances) have been obtained:
(1) Sections 139 or 140 TCGA 1992;
(2) Sections 703 and 704 ICTA;
(3) Sections 765, 765A and 766 ICTA;
(4) Sections 770 and 773 ICTA;
(5) Section 776 ICTA;
23
(6) Sections 779 to 785 (inclusive) ICTA;
(7) Sections 135, 136 and 137 TCGA 1992;
(8) Sections 213 to 218 (inclusive) ICTA;
(9) Section 343 or 467 ICTA;
(10) Section 000 XXXX; and
(11) Sections 219 to 229 (inclusive) ICTA.
ix. No claim has been made by CKS, PassGo or any PassGo
Affiliate under section 42 Finance Act 1930 during the 12 months before the date
of this Agreement.
x. Except as set forth in Section 4.11(a)(x) of the
Equityholders' Disclosure Schedule, all income tax under the PAYE system and
payments due in respect of employees' contributions to national insurance and
graduated state pension (including in each case any equivalent salary
withholding or social security contributions under any Taxation system) have
been properly deducted by CKS, PassGo or the relevant PassGo Affiliate and
(together with any employers contribution) have been fully and correctly paid to
the appropriate authority and proper records thereof have been maintained.
xi. Except as set forth in Section 4.11(a)(xi) of the
Equityholders' Disclosure Schedule, neither the Inland Revenue nor Customs nor
any other Tax Authority has at any time carried out or, to the knowledge of CKS
is at present conducting any investigation into the business or affairs of CKS,
PassGo or any PassGo Affiliate (or any aspect thereof) and CKS, PassGo and the
PassGo Affiliates, having made all reasonable inquiries, know of no reason why
any such investigation should be initiated.
xii. Except as set forth in Section 4.11(a)(xii) of the
Equityholders' Disclosure Schedule, neither CKS, PassGo nor any PassGo Affiliate
has registered or applied to register a profit-related pay scheme with the
Inland Revenue.
xiii. None of CKS, PassGo or a PassGo Affiliate has taken any
action which has had, or might have, the result of altering or prejudicing or in
any way disturbing any arrangement or agreement which it has previously
negotiated with a Tax Authority.
xiv. Save as provided for in the Most Recent Financial
Statements, the value attributed to each of the assets of CKS, PassGo and each
PassGo Affiliate as at the date of the Most Recent Balance Sheet is such that on
any disposal of any of those assets which is treated for Tax purposes as being
for a consideration equal to such value (ignoring any available
24
reliefs and allowances other than amounts falling to be deducted under Section
38 TCGA) no chargeable gain or allowable loss would arise.
xv. Since the date of the Most Recent Balance Sheet
no asset has been acquired or sold by CKS, PassGo or a PassGo Affiliate
otherwise than by way of a bargain made at arms length and for a consideration
equal to its market value.
xvi. Except as set forth in Section 4.11(a)(xvi) of
the Equityholders' Disclosure Schedule, the book value of each of the
assets of CKS, PassGo or a PassGo Affiliate in or adopted for the purposes
of the Most Recent Financial Statements on which capital allowances are
calculated separately does not exceed the written down value of such
asset for the purposes of the CAA and the aggregate book value of plant
and machinery for which capital allowances have been claimed under Part
II of that Act does not exceed the written down value of the qualifying
expenditure under that Act.
xvii. None of CKS, PassGo or a PassGo Affiliate has
ever ceased to be a member of a group of companies for the purposes
of Sections 178 and 179 TCGA and will not cease to be a member of such
a group as a result of Closing.
xviii. None of CKS, PassGo or a PassGo Affiliate has at
any time within the period of six years ending with the date of this
Agreement acquired any assets other than trading stock from any company
which at the time of the acquisition was a member of the same group
(as defined in Section 170 TCGA) as itself.
xix. None of CKS, PassGo or a PassGo Affiliate has
been or is liable to be assessed to Inheritance Tax by virtue of
Section 202 IHTA and there is no potential liability or any unsatisfied
liability to Inheritance Tax attached or attributable to any CKS
Securities or any shares in or any assets of CKS, PassGo or a PassGo
Affiliate such that they are or may hereafter become subject to a charge
as mentioned in Sections 237 and Section 238 IHTA.
xx. Except as set forth in Section 4.11(a)(xx) of
the Equityholders' Disclosure Schedule, no event or series of events
has occurred which might cause the disallowance of the carry forward
of losses or excess charges by CKS, PassGo or the PassGo Affiliates
or such that any of Sections 245 or 245A or 245B ICTA have applied or
could apply.
xxi. Except as set forth in Section 4.11(a)(xxi) of
the Equityholders' Disclosure Schedule, none of CKS, PassGo or a PassGo
Affiliate has issued any share capital to which the provisions of Section
249 ICTA or Section 141(1) TCGA could apply nor does it own any such share
capital nor granted options or rights to any person which entitles
that person to require the issue of any share capital.
xxii. Except as set forth in Section 4.11(a)(xxii) of
the Equityholders' Disclosure Schedule, none of CKS, PassGo or a PassGo
Affiliate CKS has since 31st December
25
1995 paid a dividend or made a distribution in respect of which advance
corporation tax should have been paid and none of CKS, PassGo or a PassGo
Affiliate has made or received or purported to make or receive any surrender of
the benefit of advance corporation tax under Section 240 ICTA.
xxiii. All instruments (other than those which have ceased to
have a legal effect) executed by CKS, PassGo or a PassGo Affiliate(and in
respect of which stamp duty is or may be liable to be paid) have been duly
stamped.
xxiv. None of CKS, PassGo or a PassGo Affiliate has any
liability of any nature whatsoever to stamp duty reserve tax.
xxv. None of CKS, PassGo or a PassGo Affiliate has entered
into or been a party to any pre-ordained series of transactions, composite
transactions or any other schemes or arrangements into which steps were inserted
which served no purpose other than the saving of Tax.
xxvi. None of CKS, PassGo or a PassGo Affiliate has been party
to any other transaction or arrangement of any nature which could give rise to a
charge to taxation under Part XVII of ICTA.
(b) French Tax Matters.
i. Except as set forth in Section 4.11(b) of the
Equityholders' Disclosure Schedule, and except as provided for in the Most
Recent Financial Statements, neither CKS, PassGo nor a PassGo Affiliate is or
will be liable to pay any Tax to a French Tax Authority in respect of any period
ending, or any event that occurred, on or before the date of the Most Recent
Balance Sheet.
ii. In respect of the period from the date of the Most Recent
Balance Sheet until Closing, none of CKS, PassGo or a PassGo Affiliate will have
any Liability to Tax in France other than Tax on trading profits earned in the
Ordinary Course of Business.
iii. The execution of this Agreement and the consummation of the
transactions contemplated hereby will not result in CKS, PassGo or a PassGo
Affiliate incurring any Liability to Tax in France.
(c) German Tax Matters.
i. Except as provided for in the Most Recent Financial
Statements, neither CKS, PassGo nor a PassGo Affiliate is or will be liable to
pay any Tax to a German Tax Authority in respect of any period ending, or any
event that occurred, on or before the date of the Most Recent Balance Sheet.
26
ii. In respect of the period from the date of the Most
Recent Balance Sheet until Closing, none of CKS, PassGo or a PassGo
Affiliate will have any Liability to Tax in Germany other than Tax on
trading profits earned in the Ordinary Course of Business.
iii. The execution of this Agreement and the consummation
of the transactions contemplated hereby will not result in CKS, PassGo
or a PassGo Affiliate incurring any Liability to Tax in Germany.
(d) U.S. Tax Matters.
i. Except as set forth in Section 4.11(d)(i) of the
Equityholders' Disclosure Schedule, CKS, PassGo and each PassGo Affiliate
has withheld and paid all U.S. Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
ii. Neither the Equityholders, CKS, PassGo nor the
PassGo Affiliates know of any facts that might reasonably cause any
U.S. authority to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of CKS, PassGo or any PassGo Affiliate either (1)
claimed or raised by any authority in writing or (2) as to which CKS
has Knowledge.
iii. Neither CKS, PassGo nor any PassGo Affiliate has
waived any statute of limitations in respect of Taxes which may be
imposed by a U.S., federal, state or local Tax Authority or agreed to
any extension of time with respect to a Tax assessment or deficiency
which may be imposed by a U.S., federal, state or local Tax Authority;
no U.S. Federal, state or local Taxing Authority is currently conducting
an audit or to CKS's Knowledge, an investigation of CKS's, PassGo or
any PassGo Affiliate, and CKS has no Knowledge of any threatened or
proposed audit or adjustment of tax liability.
iv. Neither CKS, PassGo nor any PassGo Affiliate has
filed a consent under Code Section 341(f) concerning collapsible
corporations. Neither CKS, PassGo nor any PassGo Affiliate has made
any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Code (S)280G except for
such payments which either individually or in the aggregate do not exceed
$25,000. CKS, PassGo and the PassGo Affiliates have disclosed on any
U.S. federal income Tax Returns all positions taken therein that could
give rise to a substantial understatement of federal income Tax within
the meaning of Code (S)6662. Neither CKS, PassGo nor any PassGo Affiliate
is a party to any Tax allocation or sharing agreement. Neither CKS,
PassGo nor any PassGo Affiliate (i) has been a member of an Affiliated
Group filing a consolidated federal income Tax Return (other than a group
the common parent of which was CKS, PassGo or the PassGo Affiliates)
or (ii) has any Liability for the Taxes of any Person (other than CKS)
under Treas. Reg. (S)1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or otherwise.
27
(e) General Tax Matters.
i. Except as set forth in Section 4.11(e)(i) of the
Equityholders' Disclosure Schedule, all Tax Returns and related
information which were required to be filed by CKS, PassGo and the
PassGo Affiliates up to and including the date hereof (taking into
account any extensions) have been filed, and such Tax Returns were
true and correct when filed. All Taxes owed by the CKS, PassGo or any
PassGo Affiliate have been paid when due. Any current extensions to any
Tax Returns are set forth in Section 4.13(e) of the Equityholders'
Disclosure Schedule.
ii. Except as set forth in Section 4.11(e)(ii) of the
Equityholders' Disclosure Schedule, no claim has ever been made by a Tax
Authority in a jurisdiction where CKS, PassGo or the PassGo Affiliates
do not file Tax Returns that they are or may be subject to taxation by
that jurisdiction. There are no Security Interests on any of the assets
of CKS, PassGo or the PassGo Affiliates that arose in connection with
any failure (or alleged failure) to pay any Tax.
iii. Except as set forth in Section 4.11(e)(iii) of the
Equityholders' Disclosure Schedule, Section 4.11(e)(iii) of the
Equityholders' Disclosure Schedule lists all income Tax Returns filed
with any jurisdiction with respect to CKS, PassGo or the PassGo Affiliates
for taxable periods ended on or after December 31, 1991, indicates those
Tax Returns that have been audited, and indicates those Tax Returns
that currently are the subject of audit. CKS has delivered to AXENT
correct and complete copies of all such income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by
CKS, PassGo or any PassGo Affiliate since December 31, 1991.
iv. Except as set forth in Section 4.11(e)(iv) of the
Equityholders' Disclosure Schedule, the unpaid Taxes of CKS, PassGo and
the PassGo Affiliates do not exceed the reserve for Tax liability set
forth in the face of the Most Recent Balance Sheet (rather than in any
notes thereto) as adjusted for the passage of time through the Closing Date.
v. All Tax required to be deducted from any payments
made by CKS, PassGo or any PassGo Affiliate which it is obliged or entitled
to make or has been deducted and accounted in full to the relevant Tax
Authority.
vi. Neither the execution of this Agreement nor Closing
will result in a liability to Tax on the part of CKS, PassGo or a PassGo
Affiliate.
vii. Except as set forth in Section 4.11(e)(vii) of the
Equityholders' Disclosure Schedule, none of CKS, PassGo or a PassGo
Affiliate has claimed any Tax Relief to which it is not entitled or made
any Tax computation that includes a Tax Relief to which it is not entitled.
28
4.12 Real Property.
-------------
(a) Section 4.12(a) of the Equityholders' Disclosure Schedule lists
all the land, buildings and premises now owned or occupied by CKS, PassGo or any
PassGo Affiliate or in which CKS, PassGo or any PassGo Affiliate has any estate,
interest, right or title whatsoever (including for the avoidance of doubt
interests in the nature of options, rights of preemption or other contractual
relationships).
(b) Except as described in Section 4.12(b) of the Equityholders'
Disclosure Schedule and except to the extent that any such matters in the
aggregate would not have a Material Adverse Effect, none of CKS, PassGo, or any
PassGo Affiliate has any actual or contingent liability (whether as original
tenant, surety or otherwise howsoever) in respect of any land, buildings or
premises.
(c) The Properties are not subject to any agreement or right to
acquire the same nor any option, right of preemption or right of first refusal,
there are no outstanding actions, claims or demands between CKS, PassGo or a
PassGo Affiliate and any third party affecting or in respect of any of the
Properties, there is no Person who is in occupation or to the Knowledge of CKS
who has or claims any rights or easements of any kind in respect of the
Properties adversely to the estate, interest, right or title of CKS, PassGo or
any PassGo Affiliate and there are no disputes, oral agreements or forbearance
programs in effect relating to any of the Properties or any lease, sub-lease or
license of any of the Properties.
(d) PassGo is the sole legal and beneficial owner of the fee simple
absolute in possession (as that expression is understood under English law) of
the Owned Freehold Property free (except as described in Section 4.12(d) of the
Equityholders' Disclosure Schedule) of all Security Interests.
(e) CKS, PassGo or a PassGo Affiliate has a valid leasehold interest
(free of Security Interests) in each of the Leased Properties pursuant to a
lease or sub-lease listed in Section 4.12(e) of the Equityholders' Disclosure
Schedule of which a correct and complete copy (as amended to date) has been
delivered to AXENT which, to the Knowledge of CKS, is valid, binding and
enforceable against the lessor or sub-lessor thereof, is in full force and
effect and has not been repudiated.
(f) PassGo has a valid license to occupy the Licensed Property
pursuant to the license agreement listed in Section 4.12(f) of the
Equityholders' Disclosure Schedule of which a correct and complete copy (as
amended to date) has been delivered to AXENT which, to the Knowledge of CKS, is
valid, binding and enforceable against the licensor thereof, is in full force
and effect and has not been repudiated.
(g) None of CKS, PassGo or any PassGo Affiliate has assigned,
transferred, conveyed or deeded in trust any interest in any Property.
29
(h) No consent is required with respect to any such lease, sub-lease
or license agreement as a result of this Agreement, and the actions contemplated
by this Agreement will not result in the change of any terms of any such lease,
sub-lease or license agreement.
(i) None of CKS, PassGo or any PassGo Affiliate is in breach or
default of any such lease, sub-lease or license agreement and, to the Knowledge
of CKS no other party to any such lease, sub-lease or license is in default, no
event has occurred which, with giving of notice or lapse of time, would
constitute a breach or default or would permit termination, modification,
forfeiture or acceleration thereof or thereunder.
(j) Except where such matters would not, in aggregate have a Material
Adverse Effect, if any Leased Property or the Licensed Property were to remain
in its present condition at the time of termination of the relevant lease, sub-
lease or license agreement, neither CKS, PassGo nor any PassGo Affiliate would
have any Liability in respect of the condition of such Leased Property or the
Licensed Property.
(k) CKS, PassGo or a PassGo Affiliate holds all licenses,
permissions, permits authorizations and consents necessary for its current,
operation, occupation or use of any of the Properties.
(l) There are no demolition, condemnation or compulsory purchase
notices, orders or resolutions or similar or analogous instruments or measures
affecting any of the Properties.
(m) The information in the Equityholders' Disclosure Schedule with
respect to the insurance of the Properties is up to date and true and accurate
in all material respects.
(n) All the Properties are supplied with utilities and other
services necessary for their operation.
(o) In respect of any Leased Property held under a sub-lease and in
respect of the Licensed Property, no superior lessor and no Property owner is
entitled to terminate, or affect in a material and adverse way, the interest of
CKS, PassGo or a PassGo Affiliate or to take any action against CKS, PassGo or a
PassGo Affiliate except by reason of a material breach by CKS, PassGo or a
PassGo Affiliate of the terms of the relevant sub-lease or license agreement.
4.13 Intellectual Property.
---------------------
(a) Either CKS, PassGo or a PassGo Affiliate is the sole and
exclusive owner of all right, title and interest in and has good, valid and
marketable title to, or, as to third party rights identified in Section 4.13(a)
of the Equityholders' Disclosure Schedule (which identifies all such rights
other than general commercial software programs), has obtained a license to use,
all Intellectual Property necessary for the operation of the businesses of CKS,
PassGo and the
30
PassGo Affiliates as presently conducted. The Intellectual Property owned by
CKS, PassGo or the PassGo Affiliates is free and clear of all mortgages,
pledges, liens, security interests, conditional sales agreements, encumbrances
or charges of any kind. The rights of CKS, PassGo and the PassGo Affiliates as
licensees of any Intellectual Property are free and clear of all pledges, liens,
security interests, encumbrances or similar charges of any kind. Each item of
Intellectual Property owned or used by CKS, PassGo or any PassGo Affiliate
immediately prior to the Closing hereunder will be owned or available for use by
such Person on identical terms and conditions immediately subsequent to the
Closing hereunder. Either CKS, PassGo or a PassGo Affiliate is the sole and
exclusive owner of all right, title and interest in, and has good, valid and
marketable title to, or, as to third party programs identified in Section
4.13(a) of the Equityholders' Disclosure Schedule (including Embedded Software),
has obtained a license to use and for the right to sublicense, the Embedded
Software, Developed Software and any other software programs including without
limitation those software programs listed on Section 4.13(a) of the
Equityholders' Disclosure Schedule (collectively, the "Software Programs") and
-----------------
the Documentation (as defined in Section 4.13(h) below), free and clear of all
mortgages, pledges, liens, security interests, conditional sales agreements,
encumbrances or charges of any kind. Section 4.13(a) of the Equityholders'
Disclosure Schedule contains a complete list of all Software Programs (and the
owner or licensee of such Software Program) registered trademarks and service
marks, all reserved trade names, all registered copyrights, all pending
applications for registration of any marks or copyrights, and all filed patent
applications and issued patents used in, or otherwise necessary for the conduct
of, the business of CKS, PassGo and the PassGo Affiliates as currently
conducted.
(b) In no instance has the eligibility of the Embedded Software or
the Developed Software for protection under applicable copyright law been
forfeited to the public domain by omission of any required notice or any other
action.
(c) The source code and Documentation (except end-user manuals)
relating to the Software Programs owned by CKS, PassGo or the PassGo Affiliates
(i) have at all times been maintained in strict confidence, (ii) have been
disclosed only to employees having a "need to know" the contents thereof in
connection with the performance of their duties and (iii) have not been
disclosed to any third party, except pursuant to any agreements containing a
confidentiality obligation, which agreements are set forth in Section 4.13(c) of
the Equityholders' Disclosure Schedule.
(d) Except as set forth in Section 4.13(d) of the Equityholders'
Disclosure Schedule, all personnel, including employees, agents, consultants,
and contractors, who have contributed to or participated in the conception and
development of the Software Programs, Documentation or Intellectual Property
have executed the nondisclosure agreements in the form set forth in Section
4.13(d) of the Equityholders' Disclosure Schedule and either (i) have been party
to a written agreement with CKS, PassGo or a PassGo Affiliate that has accorded
CKS, PassGo or such PassGo Affiliate full, effective, exclusive and original
ownership of all the Software Programs, Documentation and Intellectual Property,
or (ii) have executed appropriate instruments of assignment in favor of CKS,
PassGo or such PassGo Affiliate as assignee that have conveyed to CKS, PassGo or
the PassGo Affiliate full, effective, and exclusive ownership of all the
Software Programs, Documentation and Intellectual Property.
31
(e) Section 4.13(e) of the Equityholders' Disclosure Schedule
contains a complete list of software libraries, compilers and other third-party
software used in the development of the Developed Software by CKS, PassGo or the
PassGo Affiliates. Section 4.13(e) of the Equityholders' Disclosure Schedule
lists all license agreements for the use of such Software Programs by CKS,
PassGo or the PassGo Affiliates and, if such software is not licensed, the basis
for use of such Software Programs. All use of each of such Software Programs has
been in full compliance with the respective license agreement or other right of
use listed on Section 4.13(e) of the Equityholders' Disclosure Schedule and all
royalties, licenses, use or other similar fees due under such agreements have
been paid in full. The Software Programs perform in all material respects in
accordance with the technical specifications therefor and with the warranties
set forth in the licenses.
(f) The Software Programs, the use thereof by CKS, PassGo or any
PassGo Affiliate and the use, license, sale or lease of the Software Programs,
or of any part thereof, or of any copy, or of any part thereof, do not, and will
not, infringe on, or contribute to the infringement of, any copyright, trade
secret, patent or any other exclusionary right of any third party in either the
U.S., the U.K. or any foreign country. No Person has asserted a claim that the
use, license, sale or lease of any Software Program, or any part thereof,
infringes or contributes to the infringement of any patent claim, copyright or
trade secret right of any third party in either the U.S., the U.K. or any other
country, and neither the Equityholders, CKS, PassGo nor any PassGo Affiliate is
aware of any fact which would reasonably be a basis for any such claim.
(g) Except as set forth in Section 4.13(g) of the Equityholders'
Disclosure Schedule and except with respect to demonstration or trial copies, no
portion of the Software Programs contains any "back door," "time bomb," "Trojan
Horse," "worm," "drop dead device," "virus" or other software routines or
hardware components designed to permit unauthorized access; to disable or erase
software, hardware, or data; or to perform any other such actions.
(h) The documentation of the Software Programs (other than licensed
Software Programs that is not Embedded Software) includes without limitation the
source code (with comments) for all Software Programs, as well as any pertinent
commentary or explanation that may be necessary to render such materials
understandable and usable by a trained computer programmer, any programs
(including compilers), "workbenches," tools and higher level (or "proprietary")
language necessary for the development, maintenance and implementation of the
Software Programs and any all materials relating to the Software Programs,
including without limitation all notes, flow charts, programmer's or user's
manuals (collectively, the "Documentation").
---------------
(i) Except as set forth on Section 4.13(i) of the Equityholders'
Disclosure Schedule, CKS has delivered to AXENT correct and complete samples or
copies of all trademarks, service marks, trade names copyrights, patents,
registrations and applications, licenses, agreements or permissions (as amended
to date) held by CKS,
32
PassGo and the PassGo Affiliates, and has made available to AXENT correct and
complete copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. With respect to each item of
Intellectual Property used in, or otherwise necessary for the conduct of, the
business of CKS, PassGo and the PassGo Affiliates as and heretofore conducted:
(i) either CKS or the identified party possesses all right, title, and interest
in and to the item; (ii) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge; (iii) no charge, complaint,
action, suit, proceeding, hearing, investigation, claim, demand or claim of
abandonment is pending or, to the Knowledge of CKS, is threatened which
challenges the legality, validity, enforceability of the item; (iv) the item
does not and its use will not infringe on, or contribute to the infringement of,
any copyright, trademark, trade secret or other similar right of any third party
and (v) except as set forth in Section 4.13(i) of the Equityholders' Disclosure
Schedule and except for end-user agreements with respect to Developed Software,
neither CKS, PassGo nor any PassGo Affiliate has ever agreed to indemnify any
person or entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(j) CKS has supplied AXENT with correct and complete copies of all
third party licenses, sublicenses, agreements, and permissions (as amended to
date). With respect to each such item: (i) the license, sublicense, agreement,
or permission covering the item is legal, valid, binding, enforceable, and in
full force and effect; (ii) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms immediately following the Closing; (iii) neither CKS,
PassGo nor any PassGo Affiliate is and, to the Knowledge of CKS, no other party
to the license, sublicense, agreement, or permission is in breach or default,
and no event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or acceleration
thereunder; (iv) neither CKS, PassGo nor any PassGo Affiliate has and no other
party to the license, sublicense, agreement, or permission has repudiated any
provision thereof; (v) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree, stipulation, injunction, or
charge; (vi) no charge, complaint, action, suit, proceedings, hearing, claim,
demand or to the Knowledge of CKS, investigation is pending against the interest
of CKS, PassGo or the PassGo Affiliates, or to the Knowledge of CKS is
threatened which challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property; and (vii) neither CKS, PassGo nor any
PassGo Affiliate has granted any sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
(k) Section 4.13(k) of the Equityholders' Disclosure Schedule sets
forth a complete and accurate list of all licenses and sublicenses of the
Software Programs and of all customer trial agreements for the Software Programs
that are currently in effect granted by CKS, PassGo or any PassGo Affiliate to
other parties. All licenses identified in Section 4.13(k) of the Equityholders'
Disclosure Schedule constitute only end-user agreements, each of which grants
the end-user thereunder principally the nonexclusive right and license to use an
identified Software Program and related user documentation, for internal
purposes only, at the sites specified in each agreement.
33
(l) CKS has supplied AXENT with correct and complete copies of all
distributor and reseller agreements that are currently in effect to which any of
CKS, PassGo or any PassGo Affiliate is a party. With respect to CKS, PassGo and
the PassGo Affiliates, and with respect to the other party, to the Knowledge of
CKS, each such agreement: (i) is legal, valid and binding, enforceable, and in
full force and effect, (ii) will continue in full force and effect on identical
terms immediately following the Closing, and (iii) neither CKS, PassGo nor any
PassGo Affiliate is and, to the Knowledge of CKS, no other party to such
agreement is, in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit termination,
modification or acceleration thereunder.
(m) Each system, comprised of Software Programs, databases, hardware
or embedded control systems (microprocessors controlled or controlled by any
robotic or other device) that is sold, licensed or otherwise included as a part
product or service offerings of CKS, PassGo or the PassGo Affiliates to their
customers or that constitutes any material part of, or is used in connection
with the use, operation or enjoyment of any material tangible or intangible
asset or real property of CKS, PassGo or the PassGo Affiliates (collectively, a
"System") will not be materially adversely affected by the advent of the year
--------
2000, the advent of the twenty-first century or the transition from the
twentieth century through the year 2000 and into the twenty-first century. CKS
has no Knowledge or any reason to believe that it may incur material expenses
arising from or relating to the failure of any of its Systems as a result of the
advent of the year 2000, the advent of the twenty-first century or the
transition from the twentieth century through the year 2000 and into the twenty-
first century. Each System is able to accurately process date data, including
but not limited to, calculating, comparing and sequencing from, into and between
the twentieth century (through year 1999), the year 2000 and the twenty-first
century, including leap year calculations.
(n) Except as utilized in paragraphs (b), (c), (e) and (g) above,
----------
the terms "Software Programs" and "Documentation" shall not include general
commercial software programs internally utilized by CKS, PassGo or the PassGo
Affiliates that is not Embedded Software, the absence of which would not result
in a Material Adverse Effect.
4.14 Confidential Information.
------------------------
(a) None of CKS, PassGo and the PassGo Affiliates use any processes
and none of them are engaged in any activities which involve the misuse of any
confidential information belonging to any third party or alleged misuse.
(b) To the Knowledge of CKS, no Confidential Information is being or
has been misused in a manner that would result in a Material Adverse Affect.
(c) None of CKS, PassGo and the PassGo Affiliates has disclosed to
any person any Confidential Information except where such disclosure was
properly made in the normal course of CKS' business and was made subject to an
agreement under which the recipient is obliged to maintain the confidentiality
of such Confidential Information and is restrained from further disclosing or
using it other than for the purposes for which it was disclosed.
34
(d) Confidential Information used by any of CKS, PassGo or the
PassGo Affiliates is kept strictly confidential and each of CKS, PassGo and the
PassGo Affiliates operates and fully complies with procedures which maintain
such confidentiality, which confidentiality has not been breached.
4.15 Single European Currency.
------------------------
(a) For the purposes of this section, "product" means any product,
service, item of equipment, hardware, software (or other item containing, using
or dependent on any of the foregoing) and the phrase "euro compliant" means that
(i) the introduction of the single European currency shall not affect the
performance or functionality of any products nor cause products to malfunction,
end abruptly, provide invalid results or adversely affect the business of any
person using a product, and (ii) all products shall continue to operate in
accordance with their published specifications and the terms of any contracts
relating thereto up to, during and after the introduction of the single European
currency.
(b) The products used in the internal systems and procedures of each
of CKS, PassGo and the PassGo Affiliates are euro compliant and neither the
continuity of supply of products by CKS to its customers nor the supply of
products to any of CKS, PassGo and the PassGo Affiliates will be affected by the
introduction of the single European currency.
4.16 Tangible Assets. Either CKS, PassGo or a PassGo Affiliate owns or
---------------
leases all buildings, machinery, equipment, and other tangible assets used in
the conduct of their businesses as presently conducted. Each such tangible is in
good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used. The Most Recent
Balance Sheet sets forth all of the assets necessary to conduct the businesses
of CKS, PassGo and the PassGo Affiliates, as currently conducted and as it is
contemplated they are to be conducted in the future.
4.17 Records. All the accounts, books (including the minute books),
-------
registers, ledgers and financial and other material records of whatsoever kind
of each of CKS, PassGo and the PassGo Affiliates (including all invoices and
other records required for VAT purposes) are up-to-date, in its possession or
under its control and have been fully properly and accurately kept and compiled;
there are no material inaccuracies or discrepancies of any kind contained or
reflected therein and they give and reflect a true and fair view of the
financial, contractual and trading position of each of CKS, PassGo and the
PassGo Affiliates and of its plant and machinery, fixed and current assets and
liabilities (actual and contingent), debtors, creditors and stock-in-trade and
work-in-progress.
4.18 Contracts. Section 4.18 of the Equityholders' Disclosure Schedule
---------
lists the following contracts and other agreements to which CKS, PassGo or any
PassGo Affiliate is a party:
35
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in excess
of $50,000 per annum;
(b) any agreement concerning a partnership or joint venture;
(c) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation or under which it has imposed a
Security Interest on any of its assets, tangible or intangible;
(d) any agreement concerning noncompetition;
(e) any agreement with the Equityholders and their Affiliates;
(f) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(g) any agreement for the employment of any individual on a full-
time, part-time, consulting, or other basis providing annual compensation in
excess of $80,000 or providing severance benefits other than standard offer
letters;
(h) any agreement under which it has advanced or loaned any amount
to any of its directors, officers, employees or Equityholders outside the
Ordinary Course of Business; or
(i) any agreement for performing services for customers or clients
providing for payments in excess of $50,000 per annum or any agreement under
which CKS, PassGo or any PassGo Affiliate is receiving services providing for
payments in excess of $50,000 per annum.
A correct and complete copy of each written agreement listed in Section 4.18 of
the Equityholders' Disclosure Schedule (as amended to date) and a written
summary setting forth the terms and conditions of each oral agreement, if any,
referred to in Section 4.18 of the Equityholders' Disclosure Schedule has been
delivered to AXENT. With respect to each agreement to which CKS, PassGo or a
PassGo Affiliate is a party, including without limitation, the agreements set
forth above: (i) such agreement is, with respect to CKS, PassGo and the PassGo
Affiliates, legal, valid, binding, enforceable, and in full force and effect and
to the Knowledge of CKS, legal, valid, binding and enforceable with respect to
the other parties thereto except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditor's rights
generally and except that the availability of equitable remedies, including
specific performance, is subject to, discretion of the court before which
proceedings therefor may be brought; (ii) such agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms immediately following the consummation of the transactions contemplated
hereby; (iii) none of CKS, PassGo or the PassGo
36
Affiliates is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default and, except as set forth
in Schedule 4.18 of the Equityholders' Disclosure Schedule, to the Knowledge of
CKS, no other party to any agreement is in breach or default, or which would
permit termination, modification, or acceleration, under the agreement.
4.19 Restrictive Agreements.
----------------------
(a) There are no agreements in force restricting the freedom of any
of CKS, PassGo or the PassGo Affiliates to provide and take goods and services
or to otherwise conduct its trade and business by such means and from and to
such persons as it may from time to time think fit.
(b) None of CKS, PassGo and the PassGo Affiliates is nor has it been
party to any agreement, arrangement, concerted practice or course of conduct
which:
i. is subject to registration under the U.K. Restrictive Trade
Practices Acts 1976 and 1977 or contravenes the provisions of the U.K. Resale
Prices Xxx 0000 or is or has been the subject of any inquiry, to the Knowledge
of CKS, investigation or proceeding under any of these Acts; or
ii. is or has been the subject of an inquiry, to the Knowledge
of CKS, investigation, reference or report under the U.K. Fair Trading Act 1973
(or any previous legislation relating to monopolies or mergers) or the U.K.
Competition Xxx 0000; or
iii. contravenes Article 85(l) or 86 of the Treaty of Rome or
which has been notified to the Commission of the European Community for an
exemption or in respect of which an application has been made to the said
Commission for a negative clearance or infringes any regulation or other
enactment made under Article 87 of the said Treaty or is or has been the subject
of any inquiry, proceeding, or to the Knowledge of CKS, investigation in respect
thereof; or
iv. has or is intended to have the effect of restricting,
distorting or preventing competition in connection with the production, supply
or acquisition of goods in the U.K. or any part of it or the supply or securing
of services in the U.K. or any part of it; or
v. is by virtue of its terms or by virtue of any practice for
the time being carried on in connection therewith a "Consumer Trade Practice"
within the meaning of Section 13 of the Fair Trading Act 1973 and susceptible to
or under reference to the Consumer Protection Advisory Committee or the subject
matter of a report to the Secretary of State or the subject matter of an Order
by the Secretary of State under the provisions of Part II of that Act; or
37
vi. infringes any other competition, anti-restrictive trade
practice, anti-trust or consumer protection law or legislation applicable in the
U.K. or elsewhere and not specifically mentioned in this Section 4.19(vi).
(c) None of CKS, PassGo and the PassGo Affiliates has given any
assurance or undertaking to the Restrictive Practices Court or the Director
General of Fair Trading or the Secretary of State for Trade and Industry or the
Commission or the Court of Justice of the European communities or any other
court, person, or body nor is any of CKS, PassGo or the PassGo Affiliates
subject to any act, decision, regulation or other instrument made by any of them
relating to any matter referred to in this Section 4.19(c).
(d) None of CKS, PassGo and the PassGo Affiliates is in default or
in contravention of any article, act, decision, regulation or other instrument
or of any undertaking relating to any matter referred to in this Section 4.19(d)
("the Anti-Trust Rules") and none of CKS, PassGo and the PassGo Affiliates has
received any complaint or threat to complain under or referring to the Anti-
Trust rules from any person and has not received any request for information,
investigation or objection relating to the Anti-Trust Rules or been party to any
proceedings to which the Anti-Trust Rules (or any of them) were pleaded or
relied upon.
(e) None of CKS, PassGo and the PassGo Affiliates is in a dominant
position in any market in any substantial part of the European Union for the
purposes of Article 86 of the Treaty of Rome.
4.20 Notes and Accounts Receivable. All notes and accounts receivable of
-----------------------------
CKS, PassGo and the PassGo Affiliates are reflected properly on their books and
records, are valid receivables subject to no setoffs or counterclaims, are
current and are and will be collectible in accordance with their terms at their
recorded amounts.
4.21 Administration.
--------------
(a) Except as set forth in Section 4.21 of the Equityholders'
Disclosure Schedule, every document required by the Companies Acts to be filed
with the Registrar of Companies has been duly filed and compliance has been and
is being made by the Company with the Companies Acts.
(b) As regards CKS, PassGo and the PassGo Affiliates, no order has
been made or petition presented or resolution passed for its winding-up, no
distress, execution or other process has been levied on any of its assets, it
has not suspended payment and is not insolvent or unable to pay its debts within
the meaning of Section 123 Insolvency Xxx 0000, no receiver has been appointed
or could be appointed by any person of its business or assets or undertaking or
any part thereof and there is no unfulfilled or unsatisfied judgment,
arbitration award or court order or arbitration order outstanding against it.
38
(c) None of CKS, PassGo and the PassGo Affiliates or their
respective officers, servants or agents nor any of respective appointed
representatives has committed any breach of the U.K. Financial Services Xxx
0000, the rules of any applicable self-regulatory organization or its terms of
appointment as an appointed representative nor has any of their respective
procedures been criticized in the course of any investigation by a monitoring
unit of the Securities Investment Board, any applicable self-regulatory
organization or by its auditors.
4.22 Powers of Attorney. There are no outstanding powers of attorney
------------------
executed on behalf of CKS, PassGo or any PassGo Affiliate.
4.23 Insurance. Section 4.23 of the Equityholders' Disclosure Schedule a
---------
list of each current insurance policy (including fire, theft, casualty, general
liability, and workers compensation, business interruption, environmental,
product liability and automobile insurance) and bond and surety arrangements) to
which CKS, PassGo or any PassGo Affiliate is a party, a named insured, or
otherwise currently the beneficiary of coverage. With respect to each insurance
policy presently in effect: (i) the policy is legal, valid, binding,
enforceable, and in full force and effect; (ii) the policy will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms immediately following the consummation of the transactions contemplated
hereby; (iii) no party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification, or acceleration, under the
policy. CKS, PassGo and the PassGo Affiliates are covered by insurance in scope
and amount customary and reasonable for the businesses in which it has engaged
during the aforementioned period. Section 4.23 of the Equityholders' Disclosure
Schedule describes any self-insurance arrangements affecting CKS.
4.24 Litigation. Section 4.24 of the Equityholders' Disclosure Schedule
----------
sets forth each instance in which CKS, PassGo or any PassGo Affiliate (a) is
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (b) is a party or, to the Knowledge of CKS, is threatened to be made a
party to any action, suit, proceeding, hearing, or, to the Knowledge of CKS,
investigation of, in, or before any court or quasi-judicial or administrative
agency of any U.K., U.S., state, local, or other foreign jurisdiction or before
any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 4.24 of the Equityholders' Disclosure
Schedule could individually or in the aggregate result in any Material Adverse
Effect on CKS, PassGo or any PassGo Affiliate.
4.25 Employees. To the Knowledge of CKS, no executive, key employee, or
---------
group of employees currently has any plans to terminate employment with CKS,
PassGo or any PassGo Affiliate independently of or as a result of this
Agreement. Neither CKS, PassGo nor any PassGo Affiliate has committed any unfair
labor practice. Except as set forth in Section 4.25 of the Equityholders'
Disclosure Schedule, since January 1, 1998, no present or former Employees of
CKS, PassGo or the PassGo Affiliates have terminated their employment, with, or
have been terminated by CKS, PassGo or the PassGo Affiliates. CKS has no
Knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to employees of CKS, PassGo nor any
PassGo Affiliate.
39
4.26 Employee Benefits.
-----------------
(a) General.
i. Except as set forth in Section 4.26(a)(i) of the
Equityholders' Disclosure Schedule, full particulars (whether or not the same
are reduced to writing) of the terms and conditions of employment or engagement
of all the Employees (including without limitation, all remuneration,
incentives, bonuses, expenses, profit sharing arrangements and other payments,
share option schemes and other benefits whatsoever payable) are detailed in the
Equityholders' Disclosure Schedule and, where an Employee has been continuously
absent from work for more than one month, the reasons for the absence are set
out in the Equityholders' Disclosure Schedule.
ii. Except as set forth in Section 4.26(a)(ii) of the
Equityholders' Disclosure Schedule, there is not in existence any contract of
employment with any Employee (or any contract for services with any individual)
which cannot be terminated by CKS, PassGo or any PassGo Affiliate giving three
months' notice or less without giving rise to a claim for damages or
compensation (other than a statutory redundancy payment or statutory
compensation for unfair dismissal) or which is in suspension or has been
terminated but is capable of being revived or enforced or in respect of which
CKS, PassGo or any PassGo Affiliate has a continuing obligation.
iii. CKS, PassGo or any PassGo Affiliate has not appointed any
self-employed consultant whose consultancy arrangements are current;
iv. CKS, PassGo and each PassGo Affiliate has;
(1) complied with all obligations imposed on them by
Articles of the Treaty of Rome, European commission
Regulations and Directives and all statutes,
regulations and codes of conduct relevant to the
relations between them and their Employees or them and
any recognized trade union;
(2) maintained adequate and suitable records regarding the
service of each present and former Employee;
(3) complied with all collective agreements and customs
and practices for the time being dealing with
relations with or the conditions of service of all
present and former Employees; and
40
(4) complied with all relevant orders and awards made
under any statute or by a court or tribunal affecting
the conditions of service of each present and former
Employee.
v. Except as set forth in Section 4.26(a)(v) of the
Equityholders' Disclosure Schedule, CKS, PassGo or any PassGo Affiliate is not
involved in any disputes and there are no circumstances which may result in any
dispute involving any present or former Employee and none of the provisions of
this Agreement including the identity of AXENT is likely to lead to any such
dispute.
vi. There is not outstanding any agreement or arrangement to
which CKS, PassGo or PassGo Affiliate is a party for profit sharing or for
payment to any present and former Employee of bonuses or for incentive payments
or other similar matters.
vii. Except as set forth in Section 4.26(a)(vii) of the
Equityholders' Disclosure Schedule, there is no agreement or arrangement between
CKS, PassGo or any PassGo Affiliate and any Employee which is not included in
the written terms of his employment or previous employment detailed in the
Equityholders' Disclosure Schedule.
viii. Except as set forth in Section 4.26(a)(viii) of the
Equityholders' Disclosure Schedule, since the Most Recent Financial Statements
no change has been made in the terms of employment by CKS, PassGo or any PassGo
Affiliate (other than those required by law) of any of the Employees of CKS,
PassGo or any PassGo Affiliate and CKS, PassGo or any PassGo Affiliate are not
obliged to increase and have not made provision to increase the total annual
remuneration payable to their Employees by more than 5 per cent.
ix. CKS, PassGo or any PassGo Affiliate have not entered into
any recognition agreement with a labor union (or similar organization) nor have
they done any act which may be construed as recognition.
(b) U.K. Employee Benefits.
i. CKS, PassGo or any PassGo Affiliate have complied
with all recommendations made by the Advisory Conciliation and Arbitration
Service and with all awards and declarations made by the Central Arbitration
Committee, if applicable.
ii. Within the two years preceding the Closing Date
CKS, PassGo and any PassGo Affiliate have not been a party to a relevant
transfer (as defined in the Transfer of Undertakings) (Protection of Employment)
Regulations 1981).
iii. Except as set forth in Section 4.26(b)(iii) of the
Equityholders' Disclosure Schedule, no amounts due to or in respect of any of
the present and former Employee (including without limitation PAYE and national
insurance and pension contributions) are in arrears or unpaid.
41
iv. Except as set forth in Section 4.26(b)(iv) of the
Equityholders' Disclosure Schedule, no monies or benefits other than in respect
of contractual emoluments are payable to any of the present and former Employee
and there is not at present a claim, occurrence or state of affairs which may
hereafter give rise to a claim against CKS, PassGo or any PassGo Affiliate
arising out of the employment or termination of employment of any present and
former Employee for compensation for loss of office or employment or otherwise
and whether under the U.K. Employment Rights Xxx 0000, U.K. Equal Pay Xxx 0000,
U.K. Sex Discrimination Xxx 0000, U.K. Race Relations Xxx 0000, U.K. Disability
Discrimination Xxx 0000, U.K. Sex Discrimination Xxx 0000 or any other
legislation or otherwise howsoever.
(c) French Employee Benefits.
i. In respect of each French Employee, PassGo France
has fully complied with all applicable French laws including (without
limitation) laws relating to social security payments and Taxes, employee
consultation and the enactment into French laws of all applicable provisions
of the laws of the European Union.
ii. Neither this Agreement nor the consummation of
any of the transactions contemplated hereby is required by the laws of
France to be the subject to consultation with, or approval of, any French
Employee or any union or other body representing all or any of the French
Employees.
iii. None of CKS or PassGo or a PassGo Affiliate has
established a Works Council (or similar body) in France and none of
them is legally obliged to do so.
(d) German Employee Benefits.
i. In respect of each German Employee, PassGo has fully
complied with all applicable German laws including (without limitation) laws
relating to social security payments and Taxes, employee consultation and the
enactment into German laws of all applicable provisions of the laws of the
European Union.
ii. Except as set forth in Section 4.26(d)(ii) of the
Equityholders' Disclosure Schedule, neither this Agreement nor the consummation
of any of the transactions contemplated hereby is required by the laws of
Germany to be the subject to consultation with, or approval of, any German
Employee or any union or other body representing all or any of the German
Employees.
iii. None of CKS or PassGo or a PassGo Affiliate has
established a Works Council (or similar body) in Germany and none of them is
legally obliged to do so.
42
(e) U.S. Employee Benefits.
----------------------
i. Section 4.26(e) of the Equityholders' Disclosure
Schedule lists each Employee Benefit Plan that CKS, PassGo, any PassGo
Affiliate, or any ERISA Affiliate maintains or to which CKS, PassGo,
any PassGo Affiliate or any ERISA Affiliate contributes.
ii. Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in operation
in all respects with the applicable requirements of ERISA, the Code,
and other applicable laws.
iii. All required reports and descriptions (including
Form 5500 Annual Reports, Summary Annual Reports, and Summary Plan
Descriptions) have been filed or distributed appropriately with respect
to each such Employee Benefit Plan. The requirements of Part 6 of Subtitle
B of Title 1 of ERISA and of Code (S)4980B have been met with respect
to each such Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
iv. All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been
paid to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan and all contributions for any period ending on or before
the Closing Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with the past
custom and practice of CKS, PassGo, any PassGo Affiliate or any ERISA
Affiliate. All premiums or other payments which are due for all periods
ending on or before the Closing Date have been paid or accrued in
accordance with GAAP and past custom and practice with respect to each
such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
v. Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan" under
Code (S)401(a) and except as disclosed has received, within the last
two years, a favorable determination letter from the Internal Revenue
Service; no such determination letter has been revoked nor has any
revocation been threatened; nor has any Employee Pension Plan been
amended since the date of its last determination letter which adversely
affect its qualification and nothing has occurred or failed to occur
which would cause the loss of such qualification.
vi. CKS has delivered to AXENT correct and complete
copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service
if applicable, the most recent Form 5500 Annual Report if applicable,
and all related trust agreements, insurance contracts, and other funding
agreements if any, which implement each such Employee Benefit Plan.
vii. With respect to each Employee Benefit Plan that
CKS, PassGo or the PassGo Affiliate or an ERISA Affiliate maintains
or ever has maintained or to which it contributes, ever has contributed,
or ever has been required to contribute: (1) No such Employee Benefit
Plan which is an Employee Pension Benefit Plan, subject to Title IV of
ERISA, exists
43
and no liability exists with respect to any Employee Benefit Plan (2) No such
Employee Pension Benefit Plan is a Multiemployer Plan and no liability
(including withdrawal Liability) exists with respect to any Multiemployer Plan;
(3) There have been no non-exempt Prohibited Transactions with respect to any
such Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit Plan. No
action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or, to the Knowledge of CKS,
threatened. CKS has no Knowledge of any facts that would reasonably result in
any such action, suit, proceeding, hearing, or investigation; and (4) Neither
CKS, PassGo nor any PassGo Affiliate has incurred, and CKS has no Knowledge of a
reason to expect that they will incur, any Liability to the PBGC or otherwise
under Title IV of ERISA (including any withdrawal Liability) or under the Code
with respect to any such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
viii. CKS, PassGo, the PassGo Affiliates and the ERISA
Affiliates do not maintain or contribute, and have never maintained or
contributed, and have never been required to contribute to any Employee
Welfare Benefit Plan providing medical, health, or life insurance or
other welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance
with Code (S)4980B) and Part 6 of Subtitle B of Title I of ERISA.
ix. All voluntary employee benefits associations
maintained by CKS, PassGo or PassGo Affiliates or any ERISA Affiliate
and intended to be exempt form federal income tax under Code (S)501(c)(9)
have been submitted to an approved as exempt from federal income tax
under Code (S)501(c)(9) by the IRS, and to the best knowledge of CKS,
PassGo, the PassGo Affiliates and ERISA Affiliates, nothing has occurred
or failed to occur that would cause the loss of such exemption.
x. Except or described in Section 4.26(e)(x) of the
Equityholders' Disclosure Schedule, neither the execution of this
Agreement nor the consummation of the transactions contemplated by
this Agreement will give rise to or trigger any change of control,
severance or similar provisions in any Employee Benefit Plan, employment
agreement or other benefit program or plan, whether or not such program
or plan constitutes an Employee Benefit Plan.
4.27 Pension Schemes - General.
-------------------------
(a) Other than the Disclosed Schemes, there is not in
operation, and no proposal has been announced to enter into or
establish, any agreement, arrangement, custom or practice (whether
legally enforceable or not or whether or not Approved, as defined in
Section 4.27(c)) to which CKS, PassGo or any PassGo Affiliate or other
employer contributes (or promises to provide) for the payment of, any
pensions, allowances, lump sums or other like benefits on retirement,
death, termination of employment (whether voluntary or not) or during
periods of sickness or disablement, for the benefit of any Employee or
for the benefit of the dependents of any Employee.
44
(b) Disclosed Scheme.
i. Full details of the Disclosed Schemes have been
given to AXENT in the form of copies of all agreements, deeds and rules
governing or relating to the Disclosed Scheme including, without
limitation, agreements between CKS, PassGo and any PassGo Affiliate and
any Employee relating to the provision of any of the benefits referred
to in Section 4.27(a);
ii. The Disclosed Pension Scheme is a Defined
Contributions Scheme under which all benefits are provided by an insurer
of good reputation under a policy or policies, issued to PassGo and
Xxxxxx Xxxx XxXxxx as trustees of the Disclosed Pension Scheme, each of
which is in full force and effect and, subject to the trusts of the
Disclosed Pension Scheme, is vested in PassGo and Xxxxxx Xxxx XxXxxx
free of any Security Interest.
iii. All employer contributions in respect of the
Disclosed Schemes have been fully and promptly paid over to the relevant
insurer and all contributions due from any present or former Employee in
respect of the Disclosed Pension Schemes have been deducted from such
Employee's salary and promptly paid over to the relevant insurer.
iv. No discretion or power has been exercised under
any Disclosed Scheme in respect of any present or former Employee to:
(1) augment benefits;
(2) admit to membership any Employee who would
not otherwise have been eligible for
admission to membership;
(3) provide a benefit which would not otherwise
be provided; or
(4) pay a contribution which would not otherwise
have been paid.
v. No plan, proposal or intention to amend, discontinue in
whole or in part or exercise any discretion in relation to any Disclosed Scheme
has been communicated to any present or former Employee who is a member of any
Disclosed Scheme and to the Knowledge of CKS no such plan or proposal exists nor
has any intention yet been so communicated and no event has occurred which would
or could result in or entitle any person to wind up or terminate any Disclosed
Scheme in whole or in part.
45
vi. Each present or former Employee who has been
admitted to or promised admission to membership of the Disclosed
Pension Scheme and/or Disclosed Group Life Assurance Plan has been
admitted or promised admission on terms which are consistent with the
continued treatment of these Disclosed Schemes as Approved and (if
applicable) the provisions of Part II of Schedule 6 to the U.K. Finance
Xxx 0000 and the substance of the terms of admission or promised
admission have been communicated to the Employee.
vii. To the Knowledge of CKS, there has been no breach
of the trusts of any Disclosed Scheme and there are no actions, suits
or claims (other than routine claims for benefits that, in the case of
any Disclosed Scheme that is not a Defined Contribution Scheme, are fully
insured) outstanding, pending or threatened against the trustees of the
Disclosed Pension Scheme or against CKS, PassGo or any PassGo Affiliate
or Equityholder, the directors and officers of CKS, PassGo or any PassGo
Affiliate or any other employer participating in any Disclosed Scheme in
respect of any act, event, omission or other matter arising out of or in
connection with the Disclosed Scheme and, to the Knowledge of CKS, there
are no circumstances which may give rise to any such claim.
viii. No increase has been made to the remuneration which
is pensionable under the Disclosed Pension Scheme of any present or former
Employee who is or was a member of the Disclosed Pension Scheme since the
date on which the current administrative year of the Disclosed Pension
Scheme commenced.
ix. There is set out in or annexed to the
Equityholders' Disclosure Schedule a statement of the basis on which
CKS, PassGo or any PassGo Affiliate have undertaken to contribute to
the Disclosed Schemes and the rate and amount of the contributions in
respect of each present or former Employee who is a member of any
Disclosed Scheme made in the one-year period ending on the date of
this Agreement.
x. No assurance, promise or guarantee (whether
oral or written) has been made or given to any present or former
Employee who is a member of a Disclosed Scheme of any particular
level or amount of benefits.
xi. None of CKS, PassGo or a PassGo Affiliate has
any obligation to any present or former Employee with respect to any
Disclosed Scheme other than to make contributions at the rate disclosed
in respect of each present Employee at Section 4.27(b)(xi) of the
Equityholders' Disclosure Schedule and each such obligation can be
terminated by CKS, PassGo or the relevant PassGo Affiliate without
liability to such Employee.
(c) Disclosed Schemes - compliance.
------------------------------
i. For the purposes of this Section 4.27 "Approved"
or "Approval" shall mean approved by the Board of Inland Revenue for
the purposes of Chapter I of Part XIV of ICTA.
46
ii. The Disclosed Pension Scheme and the Disclosed
Group Life Insurance are Approved and to the Knowledge of CKS there
are no circumstances which might give the Board of Inland Revenue
reason to withdraw Approval.
iii. No Disclosed Scheme is a contracted-out scheme
for the purposes of the U.K. Xxxxxxx Xxxxxxx Xxx 0000.
iv. To the Knowledge of CKS, each Disclosed Scheme
has been designed to comply with, complies with, and has been
administered so as to comply with, all applicable laws including,
without limitation, all relevant statutes and subordinate legislation
of the Parliament of the U.K. and all relevant provisions of the law
of the European Union (including notwithstanding the generality of the
foregoing, Article 119 of the Treaty of Rome and the U.K. Pensions
Act 1995) and subject to all applicable laws, in accordance with the
trusts, powers and provisions of such Disclosed Scheme and in particular
(but without limitation):
(1) No part-time Employee has either:-
(a) been excluded from membership of any
Disclosed Scheme; or
(b) been provided with benefits under any
Disclosed Scheme which are different
from those provided for, or in respect
of, full-time Employees; and
(2) No discrimination is made between members
of any Disclosed Scheme on the basis of
gender.
(3) The Disclosed Pension Scheme has not accepted
any transfer value from a pension arrangement
("the Paying Scheme") in respect of an Employee
where the Paying Scheme in relation to such
transfer value did not comply with the
requirements of Article 119 of the Treaty of
Rome (which, for the avoidance of doubt,
includes obligations in respect of
part-timers).
4.28 Guaranties. Except as set forth on Section 4.28 of the
----------
Equityholders' Disclosure Schedule, neither CKS, PassGo nor any PassGo Affiliate
is a guarantor or otherwise is liable for any Liability or obligation (including
indebtedness) of any other Person.
4.29 Environment, Health, and Safety.
-------------------------------
(a) CKS, PassGo and the PassGo Affiliates have complied in all
material respects with all Environmental, Health, and Safety Laws except where
non-compliance would not have a
47
Material Adverse Effect, and no action, suit, proceeding, hearing, charge,
complaint, claim, demand, notice or, to the Knowledge of CKS, investigation has
been filed or commenced against it alleging any failure so to comply. Without
limiting the generality of the preceding sentence, CKS, PassGo and the PassGo
Affiliates have obtained and been in compliance with all of the terms and
conditions of all permits, licenses, and other authorizations which are required
under, and have complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and timetables
which are contained in, all Environmental, Health, and Safety Laws.
(b) CKS, PassGo and the PassGo Affiliates do not have any Liability
and have not handled or disposed of any substance, arranged for the disposal of
any substance, except as set forth in Section 4.29(b) of the Equityholders'
Disclosure Schedule, exposed any employee or other individual to any substance
or condition, or owned or operated any property or facility in any manner that
could reasonably result in any present or future action, suit, proceeding,
hearing, charge, complaint, claim, demand, or to the Knowledge of CKS,
investigation against CKS, PassGo or the PassGo Affiliates giving rise to any
Liability for damage to any site, location, or body of water (surface or
subsurface), for any illness of or personal injury to any employee or other
individual, or for any reason under any Environmental, Health, and Safety Law.
(c) All properties and equipment used in the business of CKS, PassGo
and the PassGo Affiliates have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans, and
Extremely Hazardous Substances.
4.30 Customers. The names and addresses of the ten (10) largest customers
---------
of PassGo in terms of revenue recognized with respect to such customers during
fiscal year 1998 are listed in the Equityholders' Disclosure Schedule. Each
contract and agreement with such customers are with respect to CKS, PassGo or
the PassGo Affiliates, valid, effective and enforceable and, to the Knowledge of
CKS, are valid, effective and enforceable with respect to the other parties
thereto, except as enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditor's rights generally and except
that the availability of equitable remedies, including specific performance, is
subject to discretion of the court before which proceedings therefore may be
brought. The Equityholders' Disclosure Schedule sets forth all customers who
have account balances that are in excess of ninety (90) days past due.
4.31 Relationships with Customers and Suppliers. Since the Most Recent
------------------------------------------
Balance Sheet Date, none of the following have or have given notice that they
are planning to terminate or materially reduce its business with CKS, PassGo or
the PassGo Affiliates:
(a) any current customer which accounted for over one percent (1%)
of total net sales of CKS, PassGo or any PassGo Affiliate for 1998; or
(b) any current supplier to CKS, PassGo or any PassGo Affiliate of
items essential to the conduct of their businesses, loss of which would have a
Material Adverse Effect on CKS, PassGo or any PassGo Affiliate.
48
4.32 Employee and Equityholder Indebtedness. Section 4.32 of the
--------------------------------------
Equityholders' Disclosure Schedule sets forth all indebtedness to CKS, PassGo or
any PassGo Affiliate of the Equityholders or the officers, directors or
employees of CKS, PassGo or any PassGo Affiliate. Except as set forth in
Section 4.32 of the Equityholders' Disclosure Schedule, all of such indebtedness
has been or will be repaid on or before the Closing Date.
4.33 Product Liability. Neither CKS, PassGo nor any PassGo Affiliate has
-----------------
any Liability (and, to the Knowledge of CKS, there is no threatened action,
suit, proceeding, hearing, charge, complaint, claim or demand or to the
Knowledge of CKS, investigation against CKS, PassGo or any PassGo Affiliate
giving rise to any liability) arising out of any injury to individuals or
property as a result of the ownership, possession or use of any product
(including the Developed Software) developed, manufactured, sold, leased,
licensed or delivered by CKS, PassGo or any PassGo Affiliate.
4.34 Bank Accounts. Section 4.34 of the Equityholders' Disclosure Schedule
-------------
sets forth all bank accounts and marketable securities (both debt and equity) of
CKS, PassGo and the PassGo Affiliates.
4.35 Related Party Agreements. Section 4.35 of the Equityholders'
------------------------
Disclosure Schedule sets forth (i) all agreements (other than employment
agreements) between CKS, PassGo or any PassGo Affiliate on the one hand, and any
of their employees or any of their Affiliates, on the other hand, and (ii) all
agreements between CKS, PassGo or any PassGo Affiliate, on the one hand, and the
Equityholders or any of their Affiliates on the other hand.
4.36 Change in Control. Except as set forth in Section 4.36 of the
-----------------
Equityholders' Disclosure Schedule, CKS is not a party to any contract or
arrangement which contains a "change in control," "potential change in control"
or similar provision, and the consummation of the transactions contemplated by
this Agreement shall not (either alone or upon the occurrence of additional acts
or events) result in any payment or payments becoming due from CKS to any person
or give any person the right to terminate or alter the provisions of any
agreement to which CKS is a party.
4.37 Disclosure of Information. To the Knowledge of CKS, the
-------------------------
representations and warranties contained in this Article IV do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this Article IV not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AXENT
AXENT represents and warrants to CKS that the statements contained in this
Article V are true and correct as of the date hereof except as set forth in the
Equityholders' Disclosure Schedule delivered by AXENT to CKS on the date hereof
(the "AXENT Disclosure Schedule"):
---------------------------
5.1 Organization. AXENT is a corporation duly organized, validly
------------
existing, and in good standing under the laws of the State of Delaware. AXENT is
duly authorized to conduct
49
business and is in good standing under the laws of each jurisdiction where such
qualification is required except where a failure to so qualify or obtain
authorization would not have a Material Adverse Effect on AXENT. AXENT has full
corporate power and authority and all licenses, permits and authorization
necessary to carry on the business in which it is engaged and to own and use the
properties owned and used by it.
5.2 Capital Stock. The authorized capital stock of AXENT consists of
--------------
50,000,000 AXENT Common Shares, of which 26,389,552 shares are outstanding as
of March 1, 1999, and 5,000,000 shares of preferred stock, par value $.02 per
share, none of which are outstanding as of March 1, 1999. Since March 1, 1999,
AXENT has not issued any shares of capital stock except pursuant to the exercise
of options outstanding on such date to purchase AXENT Common Shares or in
connection with AXENT's 1998 Employee Stock Purchase Plan and stock option
plans. All outstanding AXENT Common Shares are, and all AXENT Common Shares
issuable under the 1998 Employee Stock Purchase Plan and stock option plans of
AXENT will be when issued in accordance with the terms thereof, duly authorized,
validly issued, fully paid and nonassessable. Except for the AXENT Common
Shares reserved for issuance pursuant to the 1998 Employee Stock Purchase Plan
and stock option plans of AXENT, there are outstanding on the date hereof no
options, warrants, calls, rights, commitments or any other agreements of any
character to which AXENT is a party or by which it may be bound, requiring it to
issue, transfer, sell, purchase, register, redeem or acquire any shares of
capital stock or any securities or rights convertible into, exchangeable for or
evidencing the right to subscribe for or acquire any shares of its capital
stock. AXENT has no shareholder rights plan or any other plan of a similar
nature in effect.
5.3 Authorization for Common Stock. The AXENT Common Shares issued in
------------------------------
payment of the Purchase Price will, when issued, be duly authorized, validly
issued, fully paid and nonassessable, and no stockholder of AXENT will have any
preemptive right or similar rights of subscription or purchase in respect
thereof. The AXENT Common Shares issued in payment of the Purchase Price will,
subject to the accuracy of the Equityholder's representations contained in
Section 3.3 hereof, be exempt from registration under the Securities Act and
will be exempt from registration under all applicable state securities laws. The
AXENT Common Shares issued in payment of the Purchase Price will, when issued,
be approved for listing on the NASDAQ, subject to official notice of issuance.
5.4 Authorization of Transaction. AXENT has full power and authority
-----------------------------
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its respective obligations hereunder. The execution and
performance of this Agreement has been duly authorized by AXENT's Board of
Directors constitutes the valid and legally binding obligation of AXENT,
enforceable in accordance with its terms and conditions. No filing is required
under the applicable requirements under the Xxxx-Xxxxx-Xxxxxx Act. AXENT does
not otherwise need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement, except in
connection with the federal securities laws and any applicable "Blue Sky" or
state securities laws all of which filings have been, or will be, made when due.
50
5.5 Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which AXENT is subject or any provision of its
certificate of incorporation or by-laws or (b) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which AXENT is a party or by which it is bound or to which any of
its assets is subject.
5.6 Brokers' Fees. Except as set forth in Section 5.6 of the AXENT
-------------
Equityholders' Disclosure Schedule, AXENT does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
5.7 NASDAQ National Market. AXENT is in compliance in all material
----------------------
respects with its NASDAQ Listing Agreement. The AXENT Common Shares to be issued
in payment of the Purchase Price have been authorized for listing on NASDAQ,
subject to official notice of issuance.
5.8 SEC. AXENT has filed and made available to the Equityholders, if
---
requested, all forms, reports and other filings required to be filed by AXENT
with the SEC (collectively, the "SEC Reports"). The SEC Reports (a) at the time
-----------
filed, complied in all material respects with the applicable requirements of the
Securities Act and the Securities Exchange Act, as the case may be, and (b) did
not at the time they were filed contain any untrue statement of a material fact
or omit to state a material fact required to be stated in the SEC Reports or
necessary in order to make the statements in the SEC Reports, in the light of
the circumstances under which they were made, not misleading. The audited
financial statements and unaudited interim financial statements of AXENT
included in the SEC Reports (i) comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, (ii) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby (except as
may be indicated therein or in the notes thereto, and in the case of quarterly
financial statements, as permitted by Form 10-Q under the Securities Exchange
Act), (iii) fairly present the consolidated financial condition, results of
operations and cash flows of AXENT as of the respective dates thereof and for
the periods referred to therein, and (iv) are consistent with the books and
records of AXENT.
5.9 Litigation. AXENT is not subject to any outstanding injunction,
----------
judgment, order, decree, ruling or charge. Except as set forth in Section 5.9 of
the AXENT Disclosure Schedule, AXENT is not a party to, or to the Knowledge of
AXENT has not been threatened to be made a party to, any action, suit,
proceeding, hearing or investigation of, in, or before any court or quasi-
judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator. None of the actions, suits, proceedings,
hearings and investigations set forth in Section 5.9 of the AXENT Equityholders'
Disclosure Schedule could reasonably be expected to result in any Material
Adverse Effect on AXENT.
51
5.10 United States Real Property Holding Corporation. AXENT is not, and
-----------------------------------------------
does not anticipate that it will become, a "United States real property holding
corporation" as defined in Section 897 of the Code and in the applicable
Treasury Regulations promulgated thereunder.
5.11 Reorganization Status under the Code.
------------------------------------
i. AXENT has no plan to cause CKS to issue additional
shares of its stock after the share exchange that would result in AXENT
losing "control" of CKS within the meaning of Section 368(c) of the Code;
ii. AXENT has no plan (1) to liquidate CKS; (2) to
merge CKS into another corporation; (3) to cause CKS to sell or otherwise
dispose of any assets, except for dispositions made in the ordinary course
of business; or (4) to sell or otherwise dispose of any of the CKS Shares
acquired in the Share Exchange, except for transfers described in
Section 368(a)(2)(C) of the Code;
iii. neither AXENT nor any person that would be treated
as a "related person" with respect to AXENT has any plan (as defined in
Treasury Regulation Section 1.368-1(e)(3), (4) or (5)) directly or
indirectly, to reacquire any of the AXENT Common Shares issued in the
Share Exchange, except as provided in Section 7.7 and the Escrow
Agreement;
iv. AXENT is not an investment company as defined in
Sections 368(a)(2)(F)(iii) and (iv) of the Code;
v. AXENT will not take a position in its Tax Returns
that is inconsistent with the position that the share exchange
consummated pursuant to this Agreement qualifies as a transaction
defined under Section 368(a) of the Code.
ARTICLE VI
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
6.1 CKS Options. As soon as practicable after AXENT and CKS shall become
-----------
bodies corporate in the same group (as determined by reference to Section 207(a)
of the UK Financial Services Act 1986) and in any event after Closing and
completion of all or such of the actions stated in Article II at AXENT's
request, Xxxxxxx Xxxx and AXENT shall use their respective best efforts to
deliver the Offer to each of the Option Holders of all of the outstanding and
unexpired, vested and unvested CKS Options and to procure irrevocable
acceptances of the Offer from all such Option Holders by April 6, 1999.
6.2 General. In the event that at any time after the Closing any further
-------
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further
52
action (including the execution and delivery of such further instruments and
documents) as any other Party reasonably may request, all at the sole cost and
expense of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Article VII below). Each Equityholder
acknowledges and agrees that from and after the Closing, CKS and AXENT will be
entitled to exclusive possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to CKS, PassGo and
the PassGo Affiliates.
6.3 Litigation Support. In the event and for so long as any Party actively
------------------
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (a) any
transaction contemplated under this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving CKS, PassGo or the PassGo Affiliates, each of the other Parties will
cooperate with him and his counsel in the contest or defense, as shall be
reasonably necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Article VII
below); provided, however, that the foregoing shall not apply to the extent the
action, suit, proceeding, hearing, charge, complaint, claim or demand was
brought by, against or otherwise involves such other Party.
6.4 Transition. No Equityholder will take any action that is designed or
----------
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of CKS, PassGo or any PassGo Affiliate
from maintaining the same business relationships with CKS, PassGo or the PassGo
Affiliate after the Closing as it maintained with CKS, PassGo or the PassGo
Affiliate prior to the Closing.
6.5 Confidentiality. Each Equityholder will treat and hold as such all of
---------------
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement. In the event that an
Equityholder is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, such Equityholder will notify AXENT promptly of the request or
requirement so that AXENT may seek an appropriate protective order or waive
compliance with the provisions of this Section 6.4. If, in the absence of a
protective order or the receipt of a waiver hereunder, an Equityholder is, on
the advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, then such Equityholder may disclose
the Confidential Information to such tribunal; provided, however, that the
-------- -------
disclosing Equityholder shall use his reasonable best efforts to obtain, at the
request of AXENT, an order or other assurance that confidential treatment will
be accorded to such portion of the Confidential Information required to be
disclosed as AXENT shall designate. Notwithstanding the foregoing, an
Equityholder shall not be prohibited from using Confidential Information to the
extent necessary to prosecute or defend any action or claim by or against AXENT.
53
6.6 AXENT Common Shares.
-------------------
(a) Prior to the registration of the AXENT Common Shares as
contemplated by the Registration Rights Agreement dated as of the date of this
Agreement, each certificate issued to the Equityholders representing the AXENT
Common Shares will be imprinted with any legend required by Regulation D or
Regulation S (as applicable) of the rules and regulations promulgated under the
Securities Act. Each Equityholder agrees and understands that AXENT and the
registrar of the AXENT Common Shares will refuse registration of any transfer of
any AXENT Common Shares not made in compliance with the procedures specified in
such legends.
(b) In addition, the transfer agent shall place on each certificate,
whether registered or not, any legend required by the blue sky laws of any state
in the U.S. to the extent such laws are applicable to the shares represented by
such certificate.
(c) If an Equityholder desires to transfer any of the AXENT Common
Shares received in connection with this Agreement, other than in a registered
offering, such Equityholder must first furnish AXENT with (i) a written opinion
reasonably satisfactory to AXENT in form and substance to the effect that the
Equityholder may transfer the AXENT Common Shares as desired without
registration under the Securities Act and (ii) a written undertaking executed by
the desired transferee reasonably satisfactory to AXENT in form and substance
agreeing to be bound by the restrictions on transfer contained herein.
6.7 Cooperation on Tax Matters.
--------------------------
(a) AXENT and each Equityholder further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(b) AXENT and each Equityholder further agree, upon request, to
provide the other party with all information that either party may be required
to report pursuant to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
6.8 Certain Taxes. All transfer, documentary, sales, use, stamp,
-------------
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid when due by
the AXENT. AXENT will, at its own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees. The Equityholders will take all
reasonable best efforts to cooperate with AXENT so as to minimize all such
taxes.
6.9 Listing. AXENT shall effect, at or before the issuance of any AXENT
-------
Common Shares issued pursuant to Section 2.1(a), authorization for listing or
quotation of such AXENT Common Shares on the NASDAQ, subject to official notice
of issuance.
54
6.10 Section 368(a) Reorganization. The Parties intends that the share
-----------------------------
exchange qualify as a "reorganization" as defined in Section 368(a) of the Code.
AXENT and its affiliates will comply, and following the share exchange will
cause CKS to comply, with any information reporting, notice filing, delivery,
record-keeping and other requirements imposed upon them by Sections 367 and 368
of the Code and the applicable Treasury Regulations promulgated thereunder.
Following the Closing, AXENT intends that either the historic business of CKS
will continue or a significant portion of CKS's historic business assets will be
utilized in a business.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnity Obligations of the Equityholders.
------------------------------------------
(a) Subject to Sections 7.4, 7.5 and 7.6, the Equityholders hereby
jointly and severally agree to indemnify and hold AXENT and CKS harmless from,
and to reimburse AXENT and CKS for, any AXENT Section 7.1(a) Indemnity Claim
arising under the terms of this Agreement. For purposes of this Agreement, the
term "AXENT Section 7.1(a) Indemnity Claim" shall mean any loss, damage,
--------------------------------------
deficiency, claim, liability, obligation, suit, action, fee, cost or expense of
any nature whatsoever resulting from (i) any breach of any representation or
warranty of the Equityholders which is contained in Article IV of this Agreement
or any Schedule delivered pursuant thereto; (ii) any breach or non-fulfillment
of, or any failure to perform, any of the covenants, agreements or undertakings
of any Equityholder which are contained in or made pursuant to this Agreement;
and (iii) interest, penalties and costs and expenses (including, without
limitation, all reasonable fees and disbursements of counsel) arising out of or
related to any indemnification made under this Section 7.1(a).
(b) Subject to Sections 7.4 and 7.6, each of the Equityholders
hereby severally agrees to indemnify and hold AXENT and CKS harmless from, and
to reimburse AXENT and CKS for, any AXENT Section 7.1(b) Indemnity Claim arising
under the terms of this Agreement. For purposes of this Agreement, the term
"AXENT Section 7.1(b) Indemnity Claim" shall mean any loss, damage, deficiency,
--------------------------------------
claim, liability, obligation, suit, action, fee, cost or expense of any nature
whatsoever resulting from (i) any breach of any representation or warranty of
such Equityholder which is contained in Article III of this Agreement or any
Schedule delivered pursuant thereto or any breach of such Equityholders covenant
to deliver the CKS Securities with full title guarantee pursuant to Section 2.1
hereof; (ii) any breach or non-fulfillment of, or any failure to perform, any of
the covenants, agreements, or undertakings of such Equityholder which are
contained in or made pursuant to this Agreement and (iii) all interest,
penalties and costs and expenses (including without limitation, all reasonable
fees and disbursements of counsel) arising out of or related to any
indemnification made under this Section 7.1(b).
(c) AXENT Section 7.1(a) Indemnity Claims and AXENT Section 7.1(b)
Indemnity Claims are collectively referred to as "AXENT Indemnity Claims".
------ -------
55
7.2 Indemnity Obligations of AXENT. AXENT hereby agrees to indemnify and
------------------------------
hold the Equityholders harmless from, and to reimburse the Equityholders for,
any Equityholder Indemnity Claims arising under the terms and conditions of this
Agreement. For purposes of this Agreement, the term "Equityholder Indemnity
Claim" shall mean any loss, damage, deficiency, claim, liability, suit, action,
fee, cost or expense of any nature whatsoever incurred by an Equityholder
resulting from (a) any breach of any representation and warranty of AXENT which
is contained in Article V of this Agreement or any Schedule delivered pursuant
thereto; (b) any breach or non-fulfillment of, or failure to perform, any of the
covenants, agreements or undertakings of AXENT which are contained in or made
pursuant to the terms and conditions of this Agreement; and (c) all interest,
penalties, costs and expenses (including, without limitation, all reasonable
fees and disbursements of counsel) arising out of or related to any
indemnification made under this Section 7.2.
7.3 Notification of Claims. Subject to the provisions of Sections 7.4,
----------------------
7.5 and 7.6, in the event of the occurrence of an event which any party asserts
constitutes an AXENT Indemnity Claim or an Equityholder Indemnity Claim, as
applicable, such party shall provide the indemnifying party with prompt notice
of such event and shall otherwise make available to the indemnifying party all
relevant information which is material to the claim and which is in the
possession of the indemnified party. An Equityholder Indemnity Claim to be
brought hereunder must be asserted by at least 50% in interest of the
Equityholders as measured in terms of the aggregate number of shares received by
all Equityholders. If such event involves the claim of any third party (a
"Third-Party Claim"), the indemnifying party shall have the right to elect to
-------------------
join in the defense, settlement, adjustment or compromise of any such Third-
Party Claim, and to employ counsel to assist such indemnifying party in
connection with the handling of such claim, at the sole expense of the
indemnifying party, and no such claim shall be settled, adjusted or compromised,
or the defense thereof terminated, without the prior consent of the indemnifying
party unless and until the indemnifying party shall have failed, after the lapse
of a reasonable period of time, but in no event more than fifteen (15) days
after written notice to it of the Third-Party Claim, to join in the defense,
settlement, adjustment or compromise of the same. Subject to Section 7.4, an
indemnified party's failure to give timely notice or to furnish the indemnifying
party with any relevant data and documents in connection with any Third-Party
Claim shall not constitute a defense (in part or in whole) to any claim for
indemnification by such party, except and only to the extent that such failure
shall result in any material prejudice to the indemnifying party. If so desired
by any indemnifying party, such party may elect, at such party's sole expense,
to assume control of the defense, settlement, adjustment or compromise of any
Third-Party Claim, with counsel reasonably acceptable to the indemnified
parties, insofar as such claim relates to the liability of the indemnifying
party, provided that such indemnifying party shall obtain the consent of all
indemnified parties before entering into any settlement, adjustment or
compromise of such claims, or ceasing to defend against such claims, if as a
result thereof, or pursuant thereto, there would be imposed on an indemnified
party any material liability or obligation not covered by the indemnity
obligations of the indemnifying parties under this Agreement (including, without
limitation, any injunctive relief or other remedy). In connection with any
Third-Party Claim, the indemnified party, or the indemnifying party if it has
assumed the defense of such claim pursuant to the preceding sentence, shall
diligently pursue the defense of such Third-Party Claim.
56
7.4 Survival.
--------
(a) All representations and warranties, and, except as otherwise
provided in this Agreement, all covenants and agreements of the parties
contained in or made pursuant to this Agreement, shall survive the Closing and,
except as otherwise provided in Section 7.4(b), (c) and (d) below, the rights of
the parties to seek indemnification with respect thereto, shall survive until
the first anniversary of the Closing Date. Except as provided in Sections
7.4(b), (c) or (d), no claim for indemnification by AXENT or CKS hereunder shall
be made after the first anniversary of the Closing Date unless notice of such
claim has been provided, in which case such indemnity claim shall continue until
fully resolved.
(b) The representations and warranties set forth in Sections 4.11
and 4.13 shall survive until the third anniversary of the Closing Date, unless
notice of a claim has been made prior to such date, in which case such indemnity
claim shall continue until fully resolved.
(c) The representations and warranties set forth in Section 4.2
shall survive until the fifth anniversary of the Closing Date, except as to
HarbourVest International Private Entity Partners II-Direct Fund L.P.
("HarbourVest") and in the case of HarbourVest, the representations and
warranties set forth in Section 4.2 shall survive until the third anniversary of
the Closing Date unless notice of a claim has been made prior to such date, in
which case such Indemnity Claim shall continue until fully resolved.
(d) The representations and warranties set forth in Section 3.4
shall survive the Closing and the rights of the parties to seek indemnification
with respect thereto, shall survive forever.
7.5 Indemnity Basket. No AXENT Section 7.1(a) Indemnity Claim shall be
----------------
brought until individually or in the aggregate the amount of such AXENT Section
7.1(a) Indemnity Claim, together with all other AXENT Section 7.1(a) Indemnity
Claims, exceeds $250,000; and then only to the extent that such AXENT Section
7.1(a) Indemnity Claims exceeds $250,000.
7.6 Limitations. Notwithstanding the foregoing:
-----------
(a) With the exception of HarbourVest, the aggregate indemnification
obligation of each of the Equityholders for any AXENT Indemnity Claims based on
any breach or alleged breach of Section 3.4, 4.2, 4.11 or 4.13 shall not exceed
the value of the AXENT Common Shares received by such Equityholder in payment of
the Purchase Price as determined based on the AXENT Share Price. The aggregate
indemnification obligation of HarbourVest for any AXENT Indemnity Claim based on
any breach or alleged breach of (i) Sections 4.2, 4.11 or 4.13 shall not exceed
fifty percent (50%) of the value of the AXENT Common Shares received by
HarbourVest in payment of the Purchase Price as determined based on the AXENT
Share Price (the "HarbourVest 50% Limit") and (ii) Section 3.4 shall not exceed
the value of the AXENT Common Shares received by HabourVest in payment of the
Purchase Price as determined based on the AXENT Share Price; provided, if
HarbourVest's indemnification obligation for an AXENT Indemnity Claim based on
any breach or alleged breach of Section 4.2 is limited because of the
57
HarbourVest 50% Limit, then Xxxxxxx Xxxx shall be liable for the amount that
such claim exceeds the HarbourVest 50% Limit (such obligation being referred to
as the "Special Xxxx Indemnity"). The aggregate indemnification obligation of
----------------------
each of the Equityholders for any other AXENT Indemnity Claims brought under
Articles III or IV of this Agreement shall be limited to the AXENT Common Shares
included in the Escrow Deposit. Notwithstanding the foregoing, in the case of
Section 7.1(a) Indemnity Claims and except for the Special Xxxx Indemnity, the
liability of any Equityholder for indemnification obligations after exhaustion
of the Escrow Deposit shall be further limited to such Equityholder's pro rata
share of any AXENT Indemnity Claim based on the number of AXENT Common Shares
received by such Equityholder relating to the aggregate number of AXENT Common
Shares received by the Equityholders.
(b) The right of AXENT and CKS to indemnification hereunder shall be
reduced by the (i) amount of any tax benefits accruing to AXENT or CKS (as
determined in good faith by AXENT), or (ii) insurance proceeds received by AXENT
or CKS (provided, to the extent that insurance premiums are increased, such
proceeds shall not reduce the amount of indemnification provided hereunder), in
each case as a result of or in connection with such claims, which tax benefits
or insurance proceeds AXENT will take reasonable steps to obtain.
(c) The rights of the Equityholders under this Article VII shall be
the exclusive remedy of the Equityholders with respect to claims arising out of
or relating to any misrepresentation or breach of any representation or
warranty, or failure to perform any covenant or agreement of AXENT contained in
this Agreement. The rights of AXENT and CKS under this Article VII shall be the
exclusive remedy of AXENT and CKS with respect to claims arising out of or
relating to any misrepresentation breach of any representation or warranty, or
failure to perform any covenant or agreement of the Equityholders contained in
this Agreement. Notwithstanding the foregoing, the Parties' remedies relating to
or arising out of any claims for fraud are not intended to be limited by the
foregoing, and nothing in this Agreement shall be construed as a waiver of any
such claims.
7.7 Escrow. A total of ten percent (10%) of the AXENT Common Shares (such
------
deposit being referred to as the "Escrow Deposit") issued in connection with the
----------------
purchase of the CKS Securities shall be deposited at Closing into escrow, with
the Escrow Agent named in the Escrow Agreement. Subject to the terms of the
Escrow Agreement, all remaining shares are to be released on the first
anniversary of Closing (subject to there being no indemnity claims during such
period). Until such time as payment of the aggregate amount of AXENT Indemnity
Claims which have been definitively resolved to be payable in favor of AXENT (or
CKS for the benefit of AXENT) shall have exhausted the Escrow Deposit, all AXENT
Indemnity Claims shall be satisfied first out of the AXENT Common Shares held in
the Escrow Deposit, as further provided under the terms of the Escrow Agreement.
For purposes hereof, all AXENT Common Shares returned to AXENT in settlement of
any AXENT Indemnity Claims under the Escrow Agreement shall be valued at the
AXENT Share Price. The liability of the Equityholders for payment of AXENT
Indemnity Claims after exhaustion of the Escrow Deposit may be satisfied, at the
election of each Equityholder, through (i) the delivery of AXENT Common Shares
to AXENT, such shares to be valued at the AXENT Share Price,
58
(ii) the payment of cash or (iii) any combination of such AXENT Common Shares
valued at the AXENT Share Price and cash.
7.8 AXENT Payment of Equityholder Indemnity Claims. Notwithstanding
----------------------------------------------
anything to the contrary herein, any liability of AXENT under this Agreement for
Equityholder Indemnity Claims shall be satisfied through the issuance of
additional AXENT Common Shares, such additional AXENT Common Shares to be valued
at the average daily closing price of such shares as reported over the thirty
(30) day trading period ending five (5) trading days preceding the payment.
ARTICLE VIII
MISCELLANEOUS
8.1 Press Releases and Public Announcements. No Party shall issue any
---------------------------------------
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of AXENT
and CKS; provided, however, that any Party may make any public disclosure it
-------- -------
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its best efforts to advise the other Parties prior to
making the disclosure).
8.2 No Third Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
8.3 Entire Agreement. This Agreement (including the documents referred to
----------------
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
8.4 Succession and Assignment. This Agreement shall be binding upon and
-------------------------
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
rights, interests, or obligations hereunder without the prior written approval
of AXENT and each Equityholder; provided, however, that AXENT may (a) assign any
-------- -------
or all of its rights and interests hereunder to one or more of its Affiliates
and (b) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases AXENT nonetheless shall remain
responsible for the performance of all of its obligations hereunder).
8.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
8.6 Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
59
8.7 Notices. All notices, requests, demands, claims, and other
-------
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
Business Days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Equityholders:
To the addresses set forth in Exhibit 8.7 hereto.
With copies to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
High Street Tower
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Xx.
Telecopy: (000) 000-0000
and
Burges Salmon
Xxxxxx Xxxx Xxxxx
Xxxxxxx XX0 0XX
Xxxxxx Xxxxxxx
Attn: Xxxxxxxxxxx Xxxxxxx
Telecopy: 00.000.000.0000
If to AXENT:
0000 Xxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxx, Esquire
Telecopy: (000) 000-0000
With copy to:
Shaw, Pittman, Xxxxx & Xxxxxxxxxx
0000 Xxxx Xxxxxx Xxxxx, Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esquire
Telecopy: (000) 000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail),
60
but no such notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is received by the
intended recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
8.8 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
8.9 Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be in writing and signed by AXENT
and each Equityholder. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
8.10 Severability. Any term or provision of this Agreement that is invalid
------------
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
8.11 Expenses. After the consummation of the Closing, AXENT shall bear up
--------
to $1,300,000 of CKS's and Equityholders' transaction related costs and expenses
(including any of their investment banking, legal and accounting fees and
expenses and any VAT) in connection with this Agreement or any of the
transactions contemplated hereby (the "Transaction Expenses"). If and to the
----------------------
extent the Transaction Expenses incurred by CKS or the Equityholders (including
any expenses incurred prior to Closing) exceed $1,300,000 (a "Transaction
-----------
Expense Overage"), the Purchase Price paid at Closing shall be reduced by the
---------------
amount of the Transaction Expense Overage (as certified to AXENT pursuant to
Section 2.3(k) hereof) calculated based upon the AXENT Share Price.
8.12 Construction. The Parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
61
8.13 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
---------------------------------------
identified in this Agreement are incorporated herein by reference and made a
part hereof.
8.14 Specific Performance. Each of the Parties acknowledges and agrees
--------------------
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the U.S. or any state thereof having jurisdiction over the Parties and
the matter (subject to the provisions set forth in Section 8.15 below), in
addition to any other remedy to which they may be entitled, at law or in equity.
8.15 Submission to Jurisdiction. Each of the Parties submits to the
--------------------------
jurisdiction of any state or federal court sitting in the State of Delaware, in
any action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court.
8.16 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
62
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
AXENT:
AXENT TECHNOLOGIES, INC.
/s/ Xxxx X. Xxxxxx
By: _________________________
CEO and Chairman of the Board
Its: _________________________
EQUITYHOLDERS:
/s/ X. Xxxx
______________________________
Xxxxxxx Xxxx
/s/ X. Xxxxx
______________________________
X. Xxxxx
/s/ X. Xxxx
______________________________
Xxxxxx Xxxx
/s/ X. Xxxx
______________________________
Xxxxx Xxxx
63
/s/ X. Xxxxxxx
______________________________
X. Xxxxxxx
/s/ X. Xxxxx
______________________________
Xxxxxxx Xxxxx
/s/ X. Xxxxx
______________________________
X. Xxxxx
______________________________
HarbourVest International Private
Equity Partners II - Direct
Fund L.P.
By: Back Bay Partners XVI L.P.
By: HarbourVest Partners, LLC.
/s/ Xxxx Xxxxxxxxxx
By: ________________________
Its:________________________
Xxxx Xxxxx & Sons, Inc.
/s/ X. X. Xxxxxxx
By: ________________________
Vice President
Its:________________________
64
ABS Employee's Venture Fund Limited
Partnership
/s/ X. X. Xxxxxxx
By: ________________________
Managing Director
Its:________________________
65
