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EXHIBIT 2.13
10795/683876/6
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AGREEMENT AND PLAN OF REORGANIZATION
AMONG
MICRO FOCUS GROUP PLC,
XDB SYSTEMS, INC.
AND
THE SHAREHOLDERS OF XDB SYSTEMS, INC.
DECEMBER 23, 1997
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TABLE OF CONTENTS
PAGE
1. PLAN OF REORGANIZATION................................................................. 2
1.1 The Merger ................................................................... 3
1.2 Fractional Shares................................................................. 3
1.3 Escrow Agreement.................................................................. 3
1.4 Stock Options ................................................................... 4
1.5 Effects of the Merger............................................................. 5
1.6 Further Assurances................................................................ 5
1.7 Securities Law Issues............................................................. 5
1.8 Tax-Free Reorganization........................................................... 5
1.9 Pooling of Interests.............................................................. 6
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SHAREHOLDERS..................................................................... 6
2.1 Organization and Good Standing; Title............................................. 6
2.2 Power, Authorization and Validity................................................. 7
2.3 Capitalization ................................................................... 7
2.4 Subsidiaries ................................................................... 8
2.5 No Conflicts ................................................................... 8
2.6 Litigation ................................................................... 9
2.7 Company Financial Statements...................................................... 9
2.8 Taxes .......................................................................... 10
2.9 Title to Properties............................................................... 10
2.10 Absence of Certain Changes........................................................ 11
2.11 Agreements and Commitments........................................................ 12
2.12 Intellectual Property............................................................. 14
2.13 Compliance with Laws.............................................................. 15
2.14 Certain Transactions and Agreements............................................... 16
2.15 Employees......................................................................... 16
2.16 Corporate Documents............................................................... 18
2.17 No Brokers........................................................................ 18
2.18 Disclosure........................................................................ 18
2.19 Books and Records; Bank Accounts.................................................. 18
2.20 Insurance......................................................................... 19
2.21 Environmental Matters............................................................. 19
2.22 Customers......................................................................... 20
2.23 Accounts Receivable; Accounts Payable............................................. 20
3. REPRESENTATIONS AND WARRANTIES OF PARENT............................................... 20
3.1 Organization and Good Standing .................................................. 20
3.2 Power, Authorization and Validity................................................. 21
3.3 No Violation of Charter Documents or Laws......................................... 21
3.4 Disclosure ................................................................... 21
3.5 No Brokers ................................................................... 21
3.6 Reporting ................................................................... 22
3.7 Trading Markets................................................................... 22
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4. COVENANTS OF THE COMPANY ............................................................ 22
4.1 Advice of Changes .......................................................... 22
4.2 Maintenance of Business .......................................................... 22
4.3 Conduct of Business .......................................................... 24
4.4 Regulatory Approvals .......................................................... 24
4.5 Necessary Consents .......................................................... 24
4.6 Litigation ................................................................... 24
4.7 No Other Negotiations .......................................................... 24
4.8 Access to Information .......................................................... 24
4.9 Satisfaction of Conditions Precedent.............................................. 25
4.10 Securities Laws ................................................................ 25
4.11 Notification of Employee Problems................................................. 25
4.12 Pooling Accounting................................................................ 25
4.13 Audits ................................................................ 25
5.COVENANTS OF PARENT ............................................................ 25
5.1 Satisfaction of Conditions Precedent.............................................. 26
5.2 Regulatory Approvals .......................................................... 26
5.3 Employee Matters .......................................................... 26
5.4 Access to Information .......................................................... 26
5.5 Company Tax Refund .......................................................... 26
5.6 Parent Stock Listing .......................................................... 26
5.7 Parent Options Registration....................................................... 26
5.8 Parent Reporting .......................................................... 26
6. CLOSING MATTERS ............................................................ 27
6.1 The Closing ................................................................... 27
6.2 Exchange of Certificates.......................................................... 27
7. CONDITIONS TO OBLIGATIONS OF THE COMPANY............................................... 28
7.1 Accuracy of Representations and Warranties........................................ 28
7.2 Covenants ................................................................... 28
7.3 Compliance with Law............................................................... 28
7.4 Government Consents............................................................... 28
7.5 Documents ................................................................... 28
7.6 No Litigation ................................................................... 28
7.7 Opinion of Parent's Counsel....................................................... 28
7.8 Escrow Agreement .......................................................... 28
7.9 License Agreement .......................................................... 28
7.10 Parent Stock ................................................................ 28
8. CONDITIONS TO OBLIGATIONS OF PARENT.................................................... 29
8.1 Accuracy of Representations and Warranties........................................ 29
8.2 Covenants; No Material Adverse Change............................................. 29
8.3 Compliance with Law .......................................................... 29
8.4 Government Consents .......................................................... 29
8.5 Opinion of the Company's Counsel.................................................. 29
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8.6 Requisite Approvals .......................................................... 29
8.7 No Litigation ................................................................... 29
8.8 Documents ................................................................... 30
8.9 Investment and Affiliate Letters.................................................. 30
8.10 Escrow Agreement.................................................................. 30
8.11 Non-Competition Agreements........................................................ 30
8.12 License Agreement ................................................................ 30
8.13 Employment Agreements............................................................. 30
8.14 Due Diligence ................................................................ 30
8.15 Pooling Opinion ................................................................ 30
8.16 Closing Balance Sheet............................................................. 30
8.17 Company Common Stock.............................................................. 30
8.18 Releases ................................................................ 30
8.19 Audit Opinion ................................................................ 30
9. TERMINATION............................................................................ 31
9.1 Termination ................................................................... 31
9.2 Effect of Termination .......................................................... 31
10. INDEMNIFICATION....................................................................... 32
10.1 Survival .................................................................... 32
10.2 Indemnification ................................................................ 32
10.3 Procedures........................................................................ 33
11. MISCELLANEOUS ..................................................................... 34
11.1 Governing Law .................................................................... 34
11.2 Assignment; Successors and Assigns................................................ 34
11.3 Severability .................................................................... 34
11.4 Counterparts .................................................................... 34
11.5 Other Remedies.................................................................... 34
11.6 Amendment and Waivers............................................................. 34
11.7 No Waiver .................................................................... 35
11.8 Expenses .................................................................... 35
11.9 Notices .................................................................... 35
11.10 Construction of Agreement........................................................ 36
11.11 No Joint Venture ............................................................... 36
11.12 Further Assurances............................................................... 36
11.13 Absence of Third Party Beneficiary Rights........................................ 37
11.14 Public Announcement.............................................................. 37
11.15 Confidentiality ............................................................... 37
11.16 Time is of the Essence........................................................... 38
11.17 Entire Agreement ............................................................... 38
11.18 Dispute Resolution............................................................... 38
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EXHIBITS
Exhibit A Intentionally Omitted
Exhibit B Form of Escrow Agreement
Exhibit C Form of Non-Competition Agreement
Exhibit 1.8 Form of Officer Certificates
Exhibit 5.3 Form of Parent Affiliates Agreement
Exhibit 7.7 Form of Opinion of Counsel to Parent
Exhibit 7.9 Form of License Agreement
Exhibit 8.5 Form of Opinion of Counsel to the Company
Exhibit 8.9 Form of Investment and Affiliate Letter
Exhibit 8.9-A Form of Company Affiliates Agreement
Exhibit 8.13 Persons Signing Employment Agreements
Exhibits 8.18 Persons Signing Releases and Form of Release
Exhibit 10.2.1(C) Severance Agreements
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is entered
into as of December 23, 1997, by and among Micro Focus Group PLC, a public
limited company organized under the laws of England and Wales ("Parent"), XDB
Systems, Inc., a Maryland corporation (the "Company"), and Dr. S. ▇▇▇▇ ▇▇▇ and
▇▇▇▇ ▇▇▇ (collectively, the "Shareholders").
RECITALS
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, a new Delaware corporation that will be organized as a
wholly-owned subsidiary of Parent ("Newco") will merge with and into the Company
in a reverse triangular merger (the "Merger"), with the Company to be the
surviving corporation of the Merger, all pursuant to the terms and conditions of
this Agreement, and an Articles of Merger and a Certificate of Merger, each in
forms to be agreed by the parties (such Articles of Merger and Certificate of
Merger, collectively, the "Agreement of Merger"), and the provisions of
applicable law. Upon the effectiveness of the Merger, all the outstanding common
stock of the Company, par value $0.01 per share ("Company Common Stock"), will
be converted into ordinary shares of Parent, 10p nominal value per share
("Parent Stock"), in the manner and on the basis determined herein and as
provided in the Agreement of Merger.
B. The Merger is intended to be treated as a tax-free reorganization
pursuant to the provisions of Section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"), by virtue of the provisions of Section
368(a)(2)(E) of the Code. The Merger is intended to be treated as a "pooling of
interests" for accounting purposes.
C. Prior to the execution and delivery of this Agreement, (i) the Board
of Directors of the Company approved and recommended to the Shareholders that
they vote in favor of, the Merger, this Agreement, the Agreement of Merger and
the transactions provided for herein and therein, and (ii) each of the
Shareholders, who, collectively, own all of the issued and outstanding capital
stock of the Company, executed and delivered to the Company's Secretary their
written consent to the Merger, this Agreement, the Agreement of Merger and the
transactions provided for herein and therein.
D. At the closing of the Merger and the transactions contemplated
herein (the "Closing" and, the date of the Closing, the "Closing Date"),
1. Parent and the Shareholders will enter into an Escrow Agreement
in substantially the form of Exhibit B hereto (the "Escrow Agreement"); and
2. Parent and the Shareholders will enter into Non-Competition
Agreements in substantially the form of Exhibit C hereto (the "Non-Competition
Agreement").
In consideration of the foregoing and the representations,
warranties, covenants and agreements set forth in this Agreement, the parties
hereto agree as follows:
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1. PLAN OF REORGANIZATION
1.1 The Merger. The Agreement of Merger will be filed with the
Secretary of State of the State of Delaware and the State of Maryland Department
of Assessments and Taxation as soon as practicable after the Closing. The
effective time of the Merger as specified in the Agreement of Merger (the
"Effective Time") will occur on or before December 31, 1997, or on such other
date as the parties hereto may mutually agree upon. Subject to the terms and
conditions of this Agreement and the Agreement of Merger, at the Effective Time,
Newco will be merged with and into the Company in a statutory merger pursuant to
the Agreement of Merger and in accordance with applicable provisions of Delaware
and Maryland law as follows:
1.1.1 Conversion of Company Shares. Each share of
Company Common Stock that is issued and outstanding immediately prior to the
Effective Time will, by virtue of the Merger and at the Effective Time, and
without further action on the part of any holder thereof, be converted into that
number of fully paid and nonassessable shares of Parent Stock obtained by
multiplying each such share of Company Common Stock by the Exchange Ratio.
1.1.2 Definitions. The "Exchange Ratio" equals the
quotient obtained by dividing (A) the quotient of (x) the Total Acquisition
Price divided by (y) the Closing Price by (B) the sum of the aggregate number of
shares of Company Common Stock issued and outstanding at the Effective Time and
the aggregate number of shares of Company Common Stock issuable upon the
exercise of Company Options (as defined in Section 1.4) which are issued,
outstanding, vested and fully exercisable at the Effective Time.
The "Total Acquisition Price" equals $13,355,000, subject to the following
adjustments based upon the balance sheet of the Company as of December 31, 1997,
as adjusted by the items set forth on the schedule of closing adjustments to be
delivered by the Company to Parent not less than three business days prior to
the Closing Date (such schedule, the "Schedule of Closing Adjustments" and, the
December 31, 1997 balance sheet, as adjusted by the Schedule of Closing
Adjustments, the "Closing Balance Sheet"):
(i) plus $2,842,950 (the sum of "cash and cash equivalents" and
"investments" as shown on the unaudited balance sheet of the Company as of July
31, 1997 (the "Baseline Balance Sheet"), a copy of which is attached as Item
1.1.2(i) of the Company Disclosure Letter;
(ii) plus (if such amount is positive) or minus (if such amount is
negative) the lesser of (A) the sum of "cash and cash equivalents" and
"investments" on the Closing Balance Sheet minus the sum of "cash and cash
equivalents" and "investments" on the Baseline Balance Sheet, or (B) the sum of
working capital (total current assets less total current liabilities, exclusive
of deferred taxes and the amount of the Company Tax Refund) and "investments"
shown on the Closing Balance Sheet minus the sum of working capital and
"investments" shown on the Baseline Balance Sheet. Notwithstanding the
foregoing, the amount determined pursuant to clause (A) of this subsection shall
be increased by any amounts payable by Parent or any of its affiliates to the
Company which are contractually owing and overdue as of the Closing Date.
(iii) plus the amount of the net U.S. Internal Revenue Service federal,
Maryland, New Jersey, Virginia, California and New Hampshire state tax refunds
due to the Company as shown on the Closing Balance Sheet (collectively, the
"Company Tax Refund") less any costs and expenses incurred by the Company
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between July 31, 1997 and the Closing Date in obtaining payment of the Company
Tax Refund;
(iv) minus the amount of any employee bonus obligations accrued but
unpaid by the Company as of the Closing Date or which shall vest in connection
with the Closing, as shown on the Closing Balance Sheet.
The "Closing Price" equals the average middle market price per share of Parent
Stock as derived from the Stock Exchange Daily Official List (converted into
United States dollars at the "Noon Buying Rate" as determined by the Federal
Reserve Bank of New York on each trading day) for the 30 consecutive trading
days ending with and including the fourth trading day immediately preceding the
Closing Date.
1.1.3 Adjustments for Capital Changes. If prior to the
Merger, Parent recapitalizes either through a split-up of its outstanding shares
of Parent Stock into a greater number, or through a combination of its
outstanding shares into a lesser number, or reorganizes, reclassifies or
otherwise changes its outstanding shares into the same or a different number of
shares of other classes (other than through a split-up or combination of shares
provided for in the previous clause), or declares a dividend on its outstanding
shares payable in shares or securities convertible into shares, the calculation
of the Exchange Ratio shall be adjusted appropriately.
1.1.4 Conversion of Newco Shares. Each share of Newco Common
Stock, par value $0.01 per share ("Newco Common Stock"), that is issued and
outstanding immediately prior to the Effective Time will, by virtue of the
Merger and without further action on the part of the sole stockholder of Newco,
be converted into and become one share of Company Common Stock that is issued
and outstanding immediately after the Effective Time, and the shares of Company
Common Stock into which the shares of Newco Common Stock are so converted shall
be the only shares of Company Common Stock that are issued and outstanding
immediately after the Effective Time.
1.2 Fractional Shares. No fractional shares of Parent Stock
will be issued in connection with the Merger, but in lieu thereof, the holder of
any shares of Company Common Stock who would otherwise be entitled to receive a
fraction of a share of Parent Stock will receive from Parent, promptly after the
Effective Time, an amount of cash equal to the Closing Price multiplied by the
fraction of a share of Parent Stock to which such holder would otherwise be
entitled.
1.3 Escrow Agreement. Pursuant to the Escrow Agreement, on the
Closing Date, Parent will (i) withhold, pro rata, from the shares of Parent
Stock that would otherwise be delivered to the Shareholders a number of shares
equal to (A) 10% of the total number of shares of Parent Stock issued to them in
the Merger plus (B) a number of shares of Parent Stock equal to the aggregate
amount of the potential Company tax liabilities set forth on Exhibit 1.3 (such
amount, the "Company Tax Exposure") divided by the Closing Price, and (ii)
deposit or cause to be deposited in escrow certificates representing the shares
thus withheld. The shares of Parent Stock withheld pursuant to this Section 1.3
(the "Escrow Shares") will be held, with respect to (A) above, solely as
collateral for the indemnification obligations of the Shareholders under Section
10.2.1 and, with respect to (B) above, solely as collateral for the
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indemnification obligations of the Shareholders with respect to the Company Tax
Exposure, in each case pursuant to the Escrow Agreement.
1.4 Stock Options. (a) At the Effective Time, each of the then
outstanding Company Options shall by virtue of the Merger, and without any
further action on the part of any holder thereof, be assumed by Parent and
converted into an option to subscribe for that number of shares of Parent Stock
(a "Parent Option") obtained by multiplying the number of shares of Company
Common Stock underlying each such Company Option by the Exchange Ratio. If the
foregoing calculation results in a Parent Option being exercisable for a
fraction of a share of Parent Stock, then the number of shares of Parent Stock
subject to such option shall be rounded down to the nearest whole number of
shares. The exercise price of each Parent Option shall be equal to the exercise
price of the Company Option from which such Parent Option was converted divided
by the Exchange Ratio, rounded to the nearest whole cent. Except as otherwise
set forth in this Section 1.4, the term and vesting schedule, status as an
"incentive stock option" under Section 422 of the Code, if applicable, and all
other terms and conditions of Company Options will, to the extent permitted by
law and otherwise reasonably practicable, be unchanged. An optionholder's
continuous employment with the Company shall be credited as employment with
Parent for purposes of vesting of the Parent Options. Other than Company Options
which shall become vested and exercisable pursuant to acceleration provisions
not entered into in contemplation of the Merger, no Company Options shall become
vested or exercisable solely as a result of the Merger. The Company will take,
or cause to be taken, all actions which are necessary, proper or advisable under
the Stock Plans to make effective the transactions contemplated by this Section
1.4. Item 1.4(a) of the Company Disclosure Letter (as hereinafter defined) sets
forth the name of each holder of Company Options, the exercise price of such
holder's Company Options, and the number of shares of Company Common Stock
underlying such holder's Company Options which are (i) currently vested, (ii)
will vest upon the Closing, and (iii) will be unvested immediately following the
Closing, and for the Company Options described in clause (iii), the remaining
vesting periods and percentages for such options. The assumption by Parent of
the Company Options and their conversion into Parent Options by virtue of the
Merger is an obligation of Parent pursuant to the Merger and the transactions
contemplated by this Agreement.
"Company Options" means any option granted, and not exercised or expired, to a
current or former employee, director or independent contractor of the Company or
any of its subsidiaries or any predecessor thereof to purchase Company Common
Stock pursuant to any stock option, stock bonus, stock award or stock purchase
plan, program or arrangement of the Company or any of its subsidiaries or any
predecessor thereof (collectively, the "Stock Plans") or any other contract or
agreement entered into by the Company or any of its subsidiaries.
(b) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Stock for delivery
pursuant to the terms set forth in this Section 1.4. Parent shall promptly cause
the shares of Parent Stock issuable upon exercise of the assumed Company Options
to be registered, or to be issued pursuant to a then effective registration
statement on Form S-8 promulgated by the U.S. Securities and Exchange Commission
("SEC") and shall use all commercially reasonable efforts to maintain the
effectiveness of such registration statement or registration statements for so
long as such Parent Options remain outstanding.
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1.5 Effects of the Merger. At the Effective Time: (a) the
separate existence of Newco will cease and Newco will be merged with and into
the Company and the Company will be the surviving corporation pursuant to the
terms of the Agreement of Merger; (b) the Articles of Incorporation and Bylaws
of the Company will continue unchanged as the Articles of Incorporation and
Bylaws of the surviving corporation; (c) each share of Company Common Stock
outstanding immediately prior to the Effective Time will be converted as
provided in this Section 1; (d) each share of Newco Common Stock outstanding
immediately prior to the Effective Time will be converted as provided in this
Section 1; (e) the Board of Directors and executive officers of Parent will
remain unchanged, the directors of Newco immediately prior to the Effective Time
will become the directors of the Company and the officers of Newco immediately
prior to the Effective Time will become the officers of the Company; and (f) the
Merger will, at and after the Effective Time, have all of the effects provided
by applicable law.
1.6 Further Assurances. The Company agrees that if, at any
time after the Effective Time, Parent considers or is advised that any further
deeds, assignments or assurances are reasonably necessary or desirable to vest,
perfect or confirm in Parent title to any property or rights of the Company as
provided herein, Parent and any of its officers are hereby authorized by the
Company to execute and deliver all such proper deeds, assignments and assurances
and do all other things necessary or desirable to vest, perfect or confirm title
to such property or rights in Parent and otherwise to carry out the purposes of
this Agreement, in the name of the Company or otherwise.
1.7 Securities Law Issues. Based in part on the
representations and covenants of the Shareholders set forth in the Investment
and Affiliate Letters delivered by the Shareholders to Parent pursuant to
Section 8.9, the Parent Stock to be issued in the Merger will be issued pursuant
to an exemption from registration under Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act") and/or Regulation D promulgated under
the Securities Act and applicable state securities laws.
1.8 Tax-Free Reorganization. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Code, by virtue of
the provisions of Section 368(a)(2)(E) of the Code. The shares of Parent Stock
issued in the Merger will be issued solely in exchange for the issued and
outstanding shares of Company Common Stock pursuant to this Agreement, and no
other transaction other than the Merger represents, provides for or is intended
to be an adjustment to the consideration paid for Company Common Stock. Except
for cash paid in lieu of fractional shares, no consideration that could
constitute "other property" within the meaning of Section 356 of the Code will
be paid by Parent for shares of Company Common Stock in the Merger. In addition,
Parent represents that it presently intends, and that at the Effective Time it
will intend, to continue the Company's historic business or use a significant
portion of the Company's business assets in a business. At the Closing, officers
of Parent and officers of the Company will execute and deliver officers'
certificates in the forms of Exhibits 1.8, and the representations and other
statements set forth therein are incorporated in this Agreement by this
reference to the same extent as if Parent or the Company, respectively, had made
such statements herein.
1.9 Pooling of Interests. The parties intend that the Merger
be treated as a "pooling of interests" for accounting purposes.
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2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders hereby represent and warrant
to Parent that, as of the date hereof and the Closing Date, except as set forth
in the Company disclosure letter delivered by the Company to Parent prior to the
execution of this Agreement (the "Company Disclosure Letter"), including items
in the Company Disclosure Letter referred to as "Items" below:
2.1 Organization and Good Standing; Title.
2.1.1 The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland,
has the requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and is duly qualified
or licensed as a foreign corporation (or will be so qualified or licensed as of
the Closing Date) in each jurisdiction listed on Item 2.1, which is each
jurisdiction in which the nature of its business makes such qualification or
licensing necessary. Each subsidiary of the Company is a corporation or similar
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction in which it was organized, has the requisite power and
authority to own, operate and lease its properties and to carry on its business
as now conducted and is duly qualified or licensed in each jurisdiction listed
on Item 2.1, which is each jurisdiction in which the nature of its business
makes such qualification or licensing necessary, except where the failure to be
so qualified or licensed would not have a material adverse effect on the
Company. The Company has heretofore delivered to Parent true and complete copies
of its certificate of incorporation and bylaws and the equivalent charter
documents of each of its subsidiaries as currently in effect.
2.1.2 Each Shareholder owns and holds good and
valid title to the Company Common Stock to be converted in the Merger, free and
clear of any pledges, claims, liens, charges, encumbrances, security interests
of any kind or nature whatsoever and free of any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such Company Common Stock). Each Shareholder has no interest or right in the
equity or assets of the Company other than the Company Common Stock owned by
such Shareholder to be converted in the Merger. The Shareholders together own
all of the issued and outstanding capital stock of the Company, except for 10
shares of Company Common Stock owned by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, which is owned free and
clear of any pledges, claims, liens, charges, encumbrances, security interests
of any kind or nature whatsoever and free of any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such Company Common Stock).
2.2 Power, Authorization and Validity.
2.2.1 The Company has the corporate right, power
and authority to enter into and perform its obligations under this Agreement and
all agreements to which the Company is or will be a party that are required to
be executed pursuant to this Agreement (the "Company Ancillary Agreements") and
the transactions contemplated hereby and thereby. This Agreement and the Company
Ancillary Agreements have been duly and validly authorized by all necessary
corporate action on the part of the Company, including, without limitation, the
requisite approval of the Company's stockholders in connection with the
consummation of the Merger. Each Shareholder has the legal power and capacity to
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enter into and perform his or her obligations under this Agreement and all
agreements to which such Shareholder is or will be a party that are required to
be executed pursuant to this Agreement (the "Shareholder Ancillary Agreements")
and the transactions contemplated hereby and thereby.
2.2.2 No filing, authorization or approval,
governmental or otherwise, is necessary to enable the Company or the
Shareholders to enter into, and to perform their respective obligations under,
this Agreement, the Company Ancillary Agreements and the Shareholder Ancillary
Agreements, except for (a) the filing of the Agreement of Merger with the
Secretary of State of the State of Delaware and the State of Maryland Department
of Assessments and Taxation, the filing of such officers' certificates and other
documents as are required to effectuate the Merger under Delaware and Maryland
law and the filing of appropriate documents with the relevant authorities of the
states in which the Company is qualified to do business, (b) such filings as may
be required to comply with federal and state securities laws, (c) filings
required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act") and (d)
consents required under agreements set forth in Item 2.5 as exceptions to the
representation made in the last sentence of Section 2.5.
2.2.3 This Agreement and the Company Ancillary
Agreements are, or when executed and delivered by the Company and the other
parties thereto will be, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as to the effect, if any, of (a) applicable bankruptcy and other similar
laws affecting the rights of creditors generally and (b) rules of law governing
specific performance, injunctive relief and other equitable remedies; provided,
however, that the Company Ancillary Agreements will not be effective until the
Effective Time. This Agreement and the Shareholder Ancillary Agreements are, or
when executed and delivered by the respective Shareholders and the other parties
thereto will be, valid and binding obligations of such Shareholders enforceable
against such Shareholders in accordance with their respective terms, except as
to the effect, if any, of (a) applicable bankruptcy and other similar laws
affecting the rights of creditors generally and (b) rules of law governing
specific performance, injunctive relief and other equitable remedies; provided,
however, that the Shareholder Ancillary Agreements will not be effective until
the Effective Time.
2.3 Capitalization.
2.3.1 Authorized/Outstanding Capital Stock. The
authorized capital stock of the Company consists of 10,000,000 shares of Company
Common Stock. 5,100,010 shares of Company Common Stock are issued and
outstanding as of this date and as of the Closing Date. The Company has no
preferred stock authorized, issued or outstanding. All issued and outstanding
shares of Company Common Stock have been duly authorized and validly issued, are
fully paid and nonassessable, are not subject to any right of rescission, and
have been offered, issued, sold and delivered by the Company in compliance with
all registration or qualification requirements (or applicable exemptions
therefrom) of applicable federal and state securities laws.
2.3.2 Options/Rights. Company Options in respect
of 624,350 shares of Company Common Stock are issued and outstanding as of this
date and as of the Closing Date, of which 565,278 shall be vested and fully
exercisable at the Effective Time. There are no other stock appreciation rights,
options, warrants, conversion privileges or preemptive or other rights or
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agreements outstanding to purchase or otherwise acquire any of the Company's
authorized but unissued capital stock; there are no options, warrants,
conversion privileges or preemptive or other rights or agreements to which the
Company is a party involving the purchase or other acquisition of any shares of
the Company capital stock; there is no liability for dividends accrued but
unpaid; and there are no voting agreements, registration rights, rights of first
refusal or other restrictions (other than normal restrictions on transfer under
applicable federal and state securities laws) applicable to any of the Company's
outstanding securities. Other than the Company Options which shall become vested
and exercisable pursuant to acceleration provisions not entered into in
contemplation of the Merger and which are set forth in Item 2.3, no Company
Options shall become vested or exercisable solely as a result of the Merger.
There are no bonds, debentures, notes or other indebtedness of the Company
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters which shareholders of the Company may
vote.
2.4 Subsidiaries. Set forth in Item 2.4 is a true, correct and
complete list of each subsidiary of the Company and its respective jurisdiction
of organization. All of the issued and outstanding shares of capital stock of
each such subsidiary have been duly authorized and validly issued and are fully
paid and nonassessable and are owned by the Company free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever and free of any other limitation or restriction (including
any restriction on the right to vote, sell or otherwise dispose of such capital
stock). Except for the capital stock of its subsidiaries, the Company does not
own, directly or indirectly, any equity interest in any corporation,
partnership, joint venture or other business entity. XDB Systems Bejing, Ltd.
has no liabilities or obligations; it is currently in the process of being
liquidated by the Company, and such liquidation will not cause the Company or
Parent any present or future liability.
2.5 No Conflicts. Neither the execution and delivery of this
Agreement, any Company Ancillary Agreement or any Shareholder Ancillary
Agreement, nor the consummation of the transactions provided for herein or
therein, will conflict with, or (with or without notice or lapse of time, or
both) result in a termination, breach, impairment or violation of, (a) any
provision of the Articles of Incorporation, Bylaws or similar charter documents
of the Company or any of its subsidiaries as currently in effect, (b) any note,
bond, lease, mortgage, indenture, license, franchise, permit, agreement or other
instrument or obligation to which the Company, any of its subsidiaries or a
Shareholder is a party or by which the Company, any of its subsidiaries or a
Shareholder is bound or affected (which conflict, termination, breach impairment
or violation would have a material adverse effect on the Company and its
subsidiaries as a whole), (c) to the Company's or a Shareholder's knowledge, any
federal, state, local or foreign judgment, writ, decree, order, statute, rule or
regulation applicable to the Company or any of its subsidiaries or any of their
respective assets or properties. The consummation of the Merger will not require
the consent of any third party and will not adversely affect any of the material
rights, licenses, franchises, leases or agreements of the Company or any of its
subsidiaries pursuant to their terms other than as set forth in Item 2.5.
2.6 Litigation. Except as set forth in Item 2.6, there is no
action, proceeding or investigation pending or, to the Company's or any
Shareholder's knowledge, threatened against the Company, any of its subsidiaries
or any Shareholder before any court or administrative agency that, if determined
adversely to the Company, such subsidiary or such Shareholder, would adversely
affect the present or future operations or financial condition of the Company or
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such subsidiary or in which the adverse party or parties seek to recover in
excess of $10,000. Except as set forth on Item 2.6, there is no basis for any
person, firm, corporation or entity to assert a claim against the Company or any
of its subsidiaries or Parent as successor in interest to the Company based
upon: (a) ownership or rights to ownership of any shares of the Company Common
Stock or the capital stock of any of its subsidiaries, (b) any rights as a
securities holder of the Company or any of its subsidiaries, including, without
limitation, any option or other right to acquire any securities of the Company
or any of its subsidiaries, any preemptive rights or any rights to notice or to
vote regarding such securities, or (c) any rights under any agreement between
the Company or any of its subsidiaries and any securities holder or former
securities holder of the Company or any of its subsidiaries in such holder's
capacity as such.
2.7 Company Financial Statements. The Company has delivered to
Parent as Item 2.7 the Company's (i) Baseline Balance Sheet as of July 31, 1997
(the "Balance Sheet Date") and (ii) unaudited balance sheets as of October 31,
1997, and income statement for the nine-month period then ended (such financial
statements, together with the Closing Balance Sheet, the "Company Financial
Statements"). Except as set forth in Item 2.7, the Company Financial Statements
have been prepared according to U.S. generally accepted accounting principles
consistent with prior periods. The balance sheets of the Company as at the dates
set forth present fairly the financial position of the Company and its
subsidiaries as at such dates, and the related statements of the Company for
each of the respective specified periods then ended present fairly the results
of operations of the Company and its subsidiaries for each of the respective
periods then ended. For the purposes of this Agreement, all financial statements
referred to in this paragraph shall include any notes or schedules to such
financial statements. Except as set forth in Item 2.7, neither the Company nor
any of its subsidiaries has any material debt, liability or obligation of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due, that is not reflected, reserved against or disclosed in the
Company Financial Statements. The Schedule of Closing Adjustments will be, upon
delivery by the Company to Parent, a true, correct and complete list of (i) all
bonus or incentive payments, or any other compensation in any form due, payable
or transferable to an officer, director, employee or shareholder of the Company
or any other person or entity, the entitlement to which or the payment of which,
is triggered by, or arises out of, the Merger, this Agreement or the
transactions contemplated hereby, and (ii) all fees, costs, commissions or
expenses incurred by the Company or the Shareholders (including, without
limitation, those of counsel, accountants, investment bankers, and brokers)
incurred by the Company or the Shareholders in connection with or arising out of
the Merger, this Agreement or the transactions contemplated hereby ("Company
Fees").
2.8 Taxes. Except as set forth in Item 2.8, the Company and
each of its subsidiaries has filed all federal, state, local and foreign tax and
information returns and reports required to be filed prior to the date hereof,
has paid all taxes required to be paid in respect of all periods prior to the
date hereof for which returns have been filed, has made all necessary estimated
tax payments, and has no liability for taxes in excess of the amount so paid,
except to the extent adequate reserves have been established in the Company
Financial Statements. Except as set forth in Item 2.8, all such returns and
reports are and will be true, correct and complete in all material respects.
True, correct and complete copies of all such tax and information returns have
been provided or made available by the Company to Parent. Except as set forth in
Item 2.8, neither the Company nor any of its subsidiaries is delinquent in the
payment of any tax or in the filing of any tax returns, and no deficiencies for
any tax have been threatened, claimed, proposed or assessed which have not been
settled or paid. Except as set forth in Item 2.8, no tax return of the Company
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or any of its subsidiaries has ever been audited by the Internal Revenue Service
or any state or other national taxing agency or authority. For the purposes of
this Section 2.8, the terms "tax" and "taxes" include all federal, state, local
and foreign income, gains, franchise, excise, property, sales, use, employment,
license, payroll, occupation, recording, value added or transfer taxes,
governmental charges, fees, levies or assessments (whether payable directly or
by withholding), and, with respect to such taxes, any estimated tax, interest
and penalties or additions to tax and interest on such penalties and additions
to tax. Neither the Company nor any of its subsidiaries has any current or
deferred federal income tax liabilities and will not as a result of the Merger
become liable for any income tax not adequately reserved against on the Company
Financial Statements. Neither the Company nor any of its subsidiaries has filed
a consent pursuant to Section 341(f) of the Code. To the best of the Company's
and the Shareholders' knowledge and belief, the Company is entitled to collect
the full amount of the Company Tax Refund.
2.9 Title to Properties. The Company has good and marketable
title to, or a valid leasehold interest in, as applicable, all of the assets
reflected on the Company Financial Statements, free and clear of all liens,
mortgages, pledges, charges or encumbrances of any kind other than as set forth
on Item 2.9 or which are subject to capitalized leases. Item 2.9 sets forth a
list and brief description of all material personal property owned or leased by
the Company and its subsidiaries. Except as set forth in Item 2.9, there are no
UCC or other financing statements on record with the State of Maryland or any
other authority naming the Company or any of its subsidiaries as debtor. Such
assets (A) are in all material respects in good operating condition and repair,
normal wear and tear excepted, and (B) constitute all of the properties,
interests, assets and rights held for use or used in connection with the
business of the Company and constitute all those reasonably necessary to
continue to operate the business of the Company consistent with current
practice. All leases of real or personal property to which the Company or any of
its subsidiaries is a party are, to the Company's and each Shareholder's
knowledge, fully effective and afford the Company or such subsidiary peaceful
and undisturbed possession of the subject matter of the lease. Neither the
Company nor any of its subsidiaries owns any real property. To the Company's and
the Shareholders' knowledge, neither the Company nor any of its subsidiaries is
in violation of any material zoning, building, safety or environmental
ordinance, regulation or requirement or other law or regulation applicable to
the operation of owned or leased properties, and neither the Company nor any of
its subsidiaries has received any notice of such violation with which it has not
complied or had waived.
2.10 Absence of Certain Changes. Since the Balance Sheet Date,
the Company has carried on its business in the ordinary course substantially in
accordance with the procedures and practices in effect on the Balance Sheet
Date, and except as set forth in Item 2.10, since the Balance Sheet Date there
has not been with respect to the Company or any of its subsidiaries:
(a) any material adverse change in the financial
condition, properties, assets, liabilities, customer contracts or other customer
arrangements, business or results of operations;
(b any contingent liability incurred as guarantor or
surety with respect to the obligations of others;
(c) any mortgage, encumbrance or lien placed on any
of its properties;
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(d) any material obligation or liability (whether
absolute, accrued, contingent or otherwise, and whether due or to become due)
incurred other than in the ordinary course of business (including obligations
under customer contracts and current obligations);
(e) any purchase or sale or other disposition, or
any agreement or other arrangement for the purchase, sale or other disposition,
of any of its properties or assets other than in the ordinary course of business
or in nonmaterial amounts;
(f) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting its properties, assets
or business;
(g) any declaration, setting aside or payment of any
dividend on, or the making of any other distribution in respect of, the capital
stock of the Company or any of its subsidiaries, any split, stock dividend,
combination or recapitalization of the capital stock of the Company or any of
its subsidiaries or any direct or indirect redemption, purchase or other
acquisition by the Company or any of its subsidiaries of the capital stock of
the Company or any of its subsidiaries;
(h) any labor dispute or claim of material unfair
labor practices, any change in the compensation payable or to become payable to
any of the Company's or any of its subsidiaries' officers, employees or agents,
or any bonus payment or arrangement made to or with any of such officers,
employees or agents (except as previously disclosed in writing to and approved
in writing by Parent) other than normal annual raises in accordance with past
practice or any bonus payment or arrangement made to or with any of such
officers, employees or agents other than normal bonuses or compensation
increases noted on Item 2.10(h) hereof or other arrangements made in accordance
with past practices;
(i) any change with respect to its management,
supervisory, development or other key personnel (the management, supervisory,
development and other key personnel of the Company and each of its subsidiaries
are listed on Item 2.10(i) hereof);
(j) any payment or discharge of a material lien or
liability, which lien or liability was not either (i) shown on the balance sheet
as of the Balance Sheet Date included in the Company Financial Statements or
(ii) incurred in the ordinary course of business after the Balance Sheet Date;
(k) any obligation or liability incurred by the
Company or any of its subsidiaries to any of its officers, directors or
shareholders, or any loans or advances made to any of its officers, directors,
shareholders or affiliates, except normal compensation and expense allowances
payable to officers;
(l) any cancellation of any debts or claims or any
amendment, termination or waiver of any rights of value to the Company or any of
its subsidiaries in excess of $10,000 in the aggregate;
(m) any payment, discharge or satisfaction of any
claim or obligation, except in the ordinary course of business;
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(n) any dividend, distribution or other action
transferring from the Company's funds, or any reduction of the Company's
interest in, any of the compensation received by the Company in respect of the
licensing of Company Intellectual Property to Sand Technology;
(o) any agreement or action not otherwise referred
to in items (a) through (n) above entered into or taken that is material to the
Company and its subsidiaries, taken as a whole; or
(p) any agreement, whether in writing or otherwise,
to take any of the actions specified in the foregoing items (a) through (o).
2.11 Agreements and Commitments. Except as set forth in Item
2.11, neither the Company nor any of its subsidiaries is a party or subject to
any oral or written agreement, obligation or commitment, including but not
limited to the following:
(a) Any agreement, commitment, letter agreement,
quotation or purchase order entered into on or after February 1, 1990, providing
for payments by or to the Company or its subsidiaries in an aggregate amount of
$20,000 or more with respect to any one party (other than agreements of the
types described in Section 2.11(b));
(b)(i) Any license agreement entered into on or after
November 30, 1994 under which the Company or any of its subsidiaries is a
licensor, including, without limitation, any licenses of the Company
Intellectual Property (as defined in Section 2.12), pursuant to the Company's
standard forms of license agreement;
(ii) Any license agreement (other than those disclosed
pursuant to Section 2.11(b)(i)) under which the Company or any of its
subsidiaries is a licensor, including, without limitation, any licenses of the
Company Intellectual Property (as defined in Section 2.12), providing for
payments by or to the Company or its subsidiaries in an aggregate amount of
$50,000 or more with respect to any one party;
(iii) Any license agreement under which the Company
or any of its subsidiaries is a licensee (except for standard "shrink wrap"
licenses for off-the-shelf software products), including, without limitation,
any licenses of the Company Intellectual Property (as defined in Section 2.12);
(c) Any agreement by the Company or any of its
subsidiaries to encumber, transfer or sell rights in or with respect to any the
Company Intellectual Property, other than licenses which have been disclosed
under Section 2.11(b);
(d) Any agreement entered into on or after February 1,
1990 for the sale or lease of real or personal property involving more than
$10,000 per year;
(e) Any dealer, distributor, sales representative,
original equipment manufacturer, value added remarketer or other agreement for
the distribution of the Company's products entered into on or after February 1,
1990;
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(f) Any franchise agreement or financing statement;
(g) Any stock redemption or purchase agreement;
(h)(i) Any joint venture agreement or arrangement or any
other agreement that involves a sharing of profits with other persons or the
payment of royalties to any other person, which agreement or arrangement is
currently of any force or effect;
(ii) Any joint venture agreement or arrangement
or any other agreement entered into or commenced on or after February 1, 1990
that involves a sharing of profits with other persons or the payment of
royalties to any other person, whether or not such agreement or arrangement is
currently of any force or effect (other than agreements or arrangements
disclosed pursuant to Section 2.11(h)(i));
(i)(i) Any instrument evidencing indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee or otherwise, which is currently of any
force or effect, except for trade indebtedness or any advance to any employee of
the Company or any of its subsidiaries incurred or made in the ordinary course
of business, and except as disclosed in the Company Financial Statements;
(ii) Any instrument evidencing indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee or otherwise, entered into on or after
February 1, 1990, except for trade indebtedness or any advance to any employee
of the Company or any of its subsidiaries incurred or made in the ordinary
course of business, and except as disclosed in the Company Financial Statements,
whether or not such instrument is currently of any force or effect (other than
instruments disclosed pursuant to Section 2.11(i)(i));
(j) Any agreement containing covenants purporting to limit
the Company's or any of its subsidiaries' freedom to compete in any line of
business in any geographic area;
(k) Any agreement which is currently of any force or effect
relating to the employment or compensation of any director, officer, employee,
consultant or other agent of the Company or any of its subsidiaries;
(l) Any agreement between the Company or any of its
subsidiaries and any Shareholder; or
(m) Any agreement that it is otherwise material to the
Company and its subsidiaries, taken as a whole, or entered into other than
in the ordinary course of business.
The Company has provided Parent with true and
correct copies of each of the written agreements set forth in Item 2.11 and
true, correct and complete summaries of any oral agreements set forth in Item
2.11 (collectively, the "Company Agreements"), and each of the Company's
standard forms of license agreements. All Company Agreements are valid, binding
and enforceable against the parties thereto and in full force and effect. Except
as set forth in Item
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2.11, neither the Company nor, to the knowledge of the Company or the
Shareholders, any other party is in breach of or default under any material term
of any such Company Agreement.
2.12 Intellectual Property.
2.12.1. Except as set forth in Item 2.12.1, the Company owns
all right, title and interest in, or has the right to use, all patent
applications, patents, trademark applications, trademarks, service marks, trade
names, copyright applications, copyrights, trade secrets, know-how, technology
and other intellectual property and proprietary rights used in or, to the
Company's or any Shareholder's knowledge, necessary to the conduct of its
business as presently conducted and the business of the development, production,
marketing, licensing and sale of commercial products using such intellectual
property and proprietary rights (the "Company Intellectual Property"). All of
the Company Intellectual Property is owned or held by the Company and not by the
Company's subsidiaries (including, without limitation, XDB Systems Beijing,
Ltd.).
2.12.2. Except as set forth in Item 2.12.2, the Company has
taken all reasonable measures to protect all the Company Intellectual Property.
2.12.3 Except as set forth in Item 2.12.3, to the Company's or
any Shareholder's knowledge, no other person is infringing or violating any of
the Company Intellectual Property.
2.12.4. Set forth in Item 2.12.4 is a true and complete list
of all copyright, mask work and trademark registrations and applications and all
patents and patent applications for the Company Intellectual Property owned by
the Company. The Company is not aware of any material loss, cancellation,
termination or expiration of any such registration or patent.
2.12.5. The business of the Company as conducted as of the
date hereof does not, and, to the Company's or any Shareholder's knowledge, the
business of the development, production, marketing, licensing and sale of
commercial products using the Company Intellectual Property after the Effective
Time will not, cause the Company or any of its subsidiaries to, infringe or
violate any of the patents, trademarks, service marks, trade names, mask works,
copyrights, trade secrets, proprietary rights or other intellectual property of
any other person. Except as set forth in Item 2.12.5, none of the Company, its
subsidiaries nor any Shareholder has received any written or oral claim or
notice of infringement or potential infringement of the intellectual property of
any other person.
2.12.6. Except as set forth in Item 2.12.6, the Company has
the unrestricted, worldwide right to reproduce, manufacture, sell, license and
distribute all of its products, including, without limitation, ExpressLane,
JetConnect, JetAssist, JetStore, JetReport and Quantum Leap (all such products
being set forth in Item 2.12) (the "Products") and the right to use all of its
registered user lists, and is not using any confidential information or trade
secrets of any former employer of any past or present employees.
2.12.7. Except as set forth in Item 2.12.7, the Company
possesses copies of the source code for each of the Products and none of such
source code has been provided to any third party other than to an escrow agent
pursuant to source code escrow agreements, copies of which have been provided to
Parent. None of the Products contains any significant defect (including, without
limitation, in connection with processing dates in the year 2000 and any
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preceding or following years) or a material difference between such Product and
its current end-user documentation which results in severe inconvenience to the
end-users of such Product and which cannot be easily avoided or detoured by such
end-user.
2.13 Compliance with Laws. The Company and each of its
subsidiaries has complied in all material respects and is in compliance in all
material respects with all applicable laws, ordinances, regulations and rules,
and all orders, writs, injunctions, awards, judgments and decrees, applicable to
the Company or such subsidiary or to their assets, properties and business,
including, without limitation: (a) all applicable federal and state securities
laws and regulations, (b) all applicable federal, state and local laws,
ordinances and regulations, and all orders, writs, injunctions, awards,
judgments and decrees, pertaining to (i) the sale, licensing, leasing, ownership
or management of the Company's owned, leased or licensed real or personal
property, Company Intellectual Property, products or technical data, (ii)
employment or employment practices, terms and conditions of employment, or wages
and hours or (iii) safety, health, fire prevention, environmental protection
(including toxic waste disposal and related matters described in Section 2.21
hereof), building standards, zoning or other similar matters, (c) the Export
Administration Act and regulations promulgated thereunder or other laws,
regulations, rules, orders, writs, injunctions, judgments or decrees applicable
to the export or re-export of controlled commodities or technical data or (d)
the Immigration Reform and Control Act. The Company and each of its subsidiaries
has received all licenses, permits and approvals from, and has made all filings
with, third parties, including government agencies and authorities, necessary to
conduct its business as presently conducted, which licenses, permits and
approvals are set forth in Item 2.13.
2.14 Certain Transactions and Agreements. Except as provided
in the License Agreement (as hereinafter defined) no person who is an officer,
director or shareholder of the Company or any of its subsidiaries, or a member
of any such person's immediate family, has any direct or indirect ownership
interest in, or any employment or consulting agreement with, any firm or
corporation that competes with the Company or Parent (except with respect to any
interest in less than 1% of the outstanding voting shares of any corporation
whose stock is publicly traded). Except as set forth in Item 2.14, no person who
is an officer, director, employee or shareholder of the Company or any of its
subsidiaries, or any member of any such person's immediate family, is directly
or indirectly interested in any agreement or informal arrangement with the
Company or any of its subsidiaries, including, without limitation, any loan
arrangements, except for compensation for services as an officer, director or
employee of the Company and except for the normal rights of a shareholder or
optionholder. Except as set forth in Item 2.14, none of such officers,
directors, employees or shareholders or family members has any interest in any
property, real or personal, tangible or intangible, including, without
limitation, inventions, patents, copyrights, trademarks, trade names or trade
secrets, used in the business of the Company, except for the normal rights of a
shareholder and except as provided in the License Agreement and the
Noncompetition Agreement.
2.15 Employees.
2.15.1 Except as set forth in Item 2.15.1, (i)
neither the Company nor any of its subsidiaries has any employment contract or
consulting agreement currently in effect that is not terminable at will without
penalty or payment of compensation by the Company or such subsidiary and (ii)
each officer, employee, agent or consultant of the Company and each of its
subsidiaries has executed the Company's standard forms of noncompetition,
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nondisclosure of proprietary information and assignment of copyright and other
intellectual property rights to the Company, forms of which have been provided
to Parent.
2.15.2 Neither the Company nor any of its subsidiaries
(a) has ever been and is not now subject to a union organizing effort, (b) is
not subject to any collective bargaining agreement with respect to any of its
employees, (c) is not subject to any other contract, written or oral, with any
trade or labor union, employees' association or similar organization, and (d)
has no current labor dispute. To the Company's and the Shareholders' knowledge,
the Company and each of its subsidiaries has good labor relations, and neither
the Company nor the Shareholders has knowledge of any facts indicating that the
consummation of the transactions provided for herein will have a material
adverse effect on its labor relations, or that any of its key employees (each of
whom is listed on Item 2.15.2) has notified the Company of his or her intent to
leave its employ.
2.15.3 Item 2.15.3 delivered by the Company to Parent
herewith contains a list of all employment and consulting agreements, pension,
retirement, disability, medical, dental or other health plans, life insurance or
other death benefit plans, profit sharing, deferred compensation agreements,
stock, option, bonus or other incentive plans, vacation, sick, holiday or other
paid leave plans, severance plans or other similar employee benefit plans
maintained by the Company and each of its subsidiaries (the "Employee Plans"),
including, without limitation, all "employee benefit plans" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). The Company has delivered true and complete copies or descriptions of
all the Employee Plans to Parent and Parent's counsel. Except as set forth in
Item 2.15.3, each of the Employee Plans, and its operation and administration,
is, in all material respects, in compliance with all applicable, federal, state,
local and other governmental laws and ordinances, orders, rules and regulations,
including the requirements of ERISA and the Code. Except as set forth in Item
2.15.3, all such Employee Plans that are "employee pension benefit plans" (as
defined in Section 3(2) of ERISA) which are intended to qualify under Section
401(a)(8) of the Code have received favorable determination letters that such
plans satisfy the qualification requirements of the Tax Equity and Fiscal
Responsibility Act of 1982, the Deficit Reduction Act of 1984 and the Retirement
Equity Act of 1984. In addition, neither the Company nor any of its subsidiaries
has ever been a participant in any "prohibited transaction" within the meaning
of Section 406 of ERISA with respect to any employee pension benefit plan (as
defined in Section 3(2) of ERISA) which the Company or such subsidiary sponsors
as employer or in which the Company or such subsidiary participates as an
employer, which was not otherwise exempt pursuant to Section 408 of ERISA
(including any individual exemption granted under Section 408(a) of ERISA), or
which could result in an excise tax under the Code. The group health plans, as
defined in Section 4980B(g) of the Code, that benefit employees of the Company
and its subsidiaries are in material compliance with the continuation coverage
requirements of subsection 4980B of the Code. There are no outstanding
violations of Section 4980B of the Code with respect to any Employee Plan,
covered employees or qualified beneficiaries.
2.15.4 To the Company's or any Shareholders'
knowledge, no employee of the Company or any of its subsidiaries is in material
violation of any term of any employment contract, patent disclosure agreement or
noncompetition agreement or any other contract or agreement, or any restrictive
covenant, relating to the right of any such employee to be employed by the
Company or such subsidiary or to use trade secrets or proprietary information of
others, and, to the Company's or any Shareholders' knowledge, the employment of
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any employee of the Company or any of its subsidiaries does not subject the
Company or such subsidiary to any liability to any third party.
2.15.5 Except as set forth in Item 2.15.5, neither
the Company nor any of its subsidiaries is a party to any (a) agreement with any
executive officer or other key employee (i) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company in the nature of any of the transactions
contemplated by this Agreement or the Agreement of Merger, (ii) providing any
term of employment or compensation guarantee or (iii) providing severance
benefits or other benefits after the termination of employment of such employee
regardless of the reason for such termination of employment, or (b) agreement or
plan, including, without limitation, any stock option plan, stock appreciation
rights plan or stock purchase plan, any of the benefits of which will be
materially increased, or the vesting of benefits of which will be materially
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the Agreement of Merger or the value of any of the benefits of
which will be calculated on the basis of any of the transactions contemplated by
this Agreement or the Agreement of Merger. The Company is not obligated to make
any excess parachute payment, as defined in Section 280G(b)(1) of the Code, nor
will any excess parachute payment be deemed to have occurred as a result of or
arising out of the Merger to the extent Section 280G of the Code is applicable
to the Company.
2.15.6 A list of all employees, officers and
development consultants of the Company and its subsidiaries and their current
compensation and benefits as of the date of this Agreement is set forth on Item
2.15.6, which the Company has delivered to Parent.
2.15.7 All contributions due from the Company and
its subsidiaries with respect to any of the Employee Plans have been made or
accrued on the Company Financial Statements, and no further contributions will
be due or will have accrued thereunder as of the Closing Date.
2.15.8 Neither the Company nor any of its subsidiaries
has any employee bonus obligations or any other payments (other than regular
salary payments for the then-current pay period) due to its employees accrued
but unpaid by the Company as of the Closing Date or which shall vest in
connection with the Closing, in each case, which are not shown on the Closing
Balance Sheet.
2.16 Corporate Documents. The Company has made available to
Parent for examination all documents and information listed in Items 2.1 through
2.22 or other exhibits called for by this Agreement which have been requested by
Parent's legal counsel, including, without limitation, the following: (a) copies
of the Company's and each of its subsidiaries' Articles of Incorporation and
Bylaws or similar charter documents as currently in effect; (b) the Company's
and each of its subsidiaries' minute book containing all records of all
proceedings, consents, actions and meetings of its directors and shareholders;
(c) the Company's and each of its subsidiaries' stock ledger, journal and other
records reflecting all stock issuances and transfers; and (d) all permits,
orders and consents issued by any regulatory agency with respect to the Company
and each of its subsidiaries, or any securities of the Company and each of its
subsidiaries, and all applications for such permits, orders and consents.
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2.17 No Brokers. Other than Broadview Associates, whose fees
and expenses will be paid by the Company immediately prior to the Closing (and a
corresponding deduction for which shall be reflected on the Closing Balance
Sheet), the Company is not obligated for the payment of fees or expenses of any
investment banker, broker or finder in connection with the origin, negotiation
or execution of this Agreement or the Agreement of Merger or in connection with
any transaction provided for herein or therein.
2.18 Disclosure. This Agreement, its exhibits and schedules,
and any of the certificates or documents to be delivered by the Company to
Parent under this Agreement, taken together, do not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements contained herein and therein, in light of the circumstances under
which such statements were made, not misleading.
2.19 Books and Records; Bank Accounts.
2.19.1 The books, records and accounts of the Company (a) are
in all material respects true and complete, (b) have been maintained in
accordance with reasonable business practices on a basis consistent with prior
years, (c) are stated in reasonable detail and accurately and fairly reflect the
transactions and dispositions of the assets of the Company and (d) accurately
and fairly reflect the basis for the Company Financial Statements.
2.19.2 Item 2.19.2 sets forth a true, correct and complete
list of (i) all bank accounts and safe deposit boxes of the Company and all
persons who are signatories thereunder or who have access thereto and (ii) the
names of all persons holding general or special powers-of-attorney from the
Company and a summary of the terms thereof.
2.20 Insurance. Item 2.20 is a true, correct and complete list
of all fire and casualty, automobile, workers compensation, errors and
omissions, general liability and other insurance maintained by the Company.
2.21 Environmental Matters.
2.21.1 During the period that the Company and its
subsidiaries have leased the premises currently occupied by them and those
premises occupied by them since the date of their respective organizations,
there have been no disposals, releases or threatened releases of Hazardous
Materials (as defined below) on any such premises that would have a material
adverse effect upon the business or financial statements of the Company. Neither
the Company nor any Shareholder has any knowledge of any presence, disposals,
releases or threatened releases of Hazardous Materials on or from any of such
premises, which may have occurred prior to the Company or any of its
subsidiaries having taken possession of any of such premises that would have a
material adverse effect upon the business or financial statements of the
Company. For purposes of this Agreement, the terms "disposal," "release," and
"threatened release" have the definitions assigned thereto by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. ss.
9601 et seq., as amended ("CERCLA"). For the purposes of this Section 2.21,
"Hazardous Materials" mean any hazardous or toxic substance, material or waste
which is or becomes prior to the Closing Date regulated under, or defined as a
"hazardous substance," "pollutant," "contaminant," "toxic chemical," "hazardous
material," "toxic substance" or "hazardous chemical" under (i) CERCLA; (ii) the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001 et
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seq.; (iii) the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801,
et seq.; (iv) the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;
(v) the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 et
seq.; (vi) regulations promulgated under any of the above statutes; or (vii) any
applicable state or local statute, ordinance, rule or regulation that has a
scope or purpose similar to those identified above.
2.21.2 During the time that the Company or its
subsidiaries have leased such premises, none of the premises currently leased by
the Company or its subsidiaries or any premises previously occupied by the
Company or its subsidiaries is in violation of any federal, state or local law,
ordinance, regulation or order relating to industrial hygiene or to the
environmental conditions in such premises.
2.21.3 During the time that the Company and its
subsidiaries have leased the premises currently occupied by it or any premises
previously occupied by the Company or such subsidiary, neither the Company, its
subsidiaries nor, to the Company's knowledge, any third party, has used,
generated, manufactured or stored in such premises or transported to or from
such premises any Hazardous Materials that would have a material adverse effect
upon the business or financial statements of the Company.
2.21.4 During the time that the Company and its
subsidiaries have leased the premises currently occupied by it or any premises
previously occupied by the Company or such subsidiary, there has been no
litigation, proceeding or administrative action brought or threatened in writing
against the Company, or any settlement reached by the Company with, any party or
parties alleging the presence, disposal, release or threatened release of any
Hazardous Materials on, from or under any of such premises.
2.21.5 During the time that the Company and its
subsidiaries have leased the premises currently occupied by it or any premises
previously occupied by the Company or such subsidiary, no Hazardous Materials
have been transported from such premises to any site or facility now listed or
proposed for listing on the National Priorities List, at 40 C.F.R. Part 300, or
any list with a similar scope or purpose published by any state authority.
2.22 Customers. Item 2.22 sets forth the names with the dollar
value of sales to each of the customers of the Company and its subsidiaries
having aggregate annual sales of $50,000 or more during any of the three years
prior to the date hereof. The Company has no outstanding disputes with any such
customer and to the knowledge of the Company and each Shareholder, no such
customer has expressed dissatisfaction with any of the Company's products or
services provided to such customer.
2.23 Accounts Receivable; Accounts Payable.
2.23.1 Item 2.23.1 sets forth a true and complete aged list of
unpaid accounts and notes receivable owing to the Company and its subsidiaries,
all of which are, and all receivables generated from the date of this Agreement
through the Closing Date will be, collectible in the ordinary course of
business, except as set forth in Item 2.23.1. No such account has been assigned
or pledged to any other person, firm or corporation and no defense or setoff to
any such account has been asserted in writing by the account obligor.
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2.23.2 Item 2.23.2 sets forth a true and complete list of all
accounts payable of the Company and its subsidiaries as of the date hereof.
3. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants, that, as of the date
hereof and the Closing Date, except as set forth on the Parent disclosure letter
delivered to the Company herewith:
3.1 Organization and Good Standing. Parent is a public limited
company duly organized, validly existing and in good standing under the laws of
England and Wales and has the corporate power and authority to own, operate and
lease its properties and to carry on its business as now conducted and as
proposed to be conducted.
3.2 Power, Authorization and Validity.
3.2.1 Parent has the corporate right, power, legal
capacity and authority to enter into and perform its obligations under this
Agreement, and all agreements to which Parent is or will be a party that are
required to be executed pursuant to this Agreement (the "Parent Ancillary
Agreements"). The execution, delivery and performance of this Agreement and the
Parent Ancillary Agreements have been duly and validly approved and authorized
by all necessary corporate action on the part of Parent. The Parent Stock to be
issued to the Shareholders in the Merger will be , upon such issuance, duly
authorized, validly issued, fully paid and non-assessable, and, except as
provided in this Agreement and the Escrow Agreement, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever.
3.2.2 No filing, authorization or approval,
governmental or otherwise, is necessary to enable Parent to enter into, and to
perform its obligations under, this Agreement and the Parent Ancillary
Agreements, except for (a) the filing of the Agreement of Merger with the
Secretary of State of the State of Delaware, (b) such filings as may be required
to comply with federal and state securities laws, (c) the filing of a share
listing with the London Stock Exchange in respect of the Parent Stock to be
issued in the Merger, and (d) filings required under the HSR Act.
3.2.3 This Agreement and the Parent Ancillary
Agreements are, or when executed by Parent will be, valid and binding
obligations of Parent, enforceable against Parent in accordance with their
respective terms, except as to the effect, if any, of (a) applicable bankruptcy
and other similar laws affecting the rights of creditors generally, and (b)
rules of law governing specific performance, injunctive relief and other
equitable remedies; provided, however, that the Agreement of Merger and the
Parent Ancillary Agreements will not be effective until the earlier of the
Effective Time or the date provided for therein.
3.3 No Violation of Charter Documents or Laws. Neither the
execution nor delivery of this Agreement or any Parent Ancillary Agreement, nor
the consummation of the transactions contemplated hereby or thereby, will
conflict with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of (a) any provision of the
Memorandum of Association or Articles of Association of Parent, as currently in
effect, or (b) any contract that is material to Parent's business or (c) any
federal, state, local or foreign judgment, writ, decree, order, statute or
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regulation applicable to and that would have a material adverse effect on Parent
or its assets or properties.
3.4 Disclosure. Parent has furnished the Company and each of
the Company Shareholders with Parent's 1996 Annual Report to Shareholders,
Annual Report on Form 20-F for the fiscal year ended January 31, 1997, Second
Quarterly Report on Form 6-K for the quarter ended July 31, 1997, Half Yearly
Report on Form 6-K for the First Half Year ended July 31, 1997, Registration
Statement on Form S-8, filed April 9, 1997, First Quarterly Report on Form 6-K
for the quarter ended April 30, 1997 and Proxy Statement on Form 6-K, dated May
9, 1997 (collectively, the "Parent Disclosure Package"). The Parent Disclosure
Package, this Agreement, the exhibits and schedules hereto, and any certificates
or documents to be delivered to the Company pursuant to this Agreement, when
taken together, do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements contained
herein and therein, in light of the circumstances under which such statements
were made, not misleading.
3.5 No Brokers. Parent is not obligated for the payment of
fees or expenses of any investment banker, broker or finder in connection with
the origin, negotiation or execution of this Agreement or the Agreement of
Merger or in connection with any transaction provided for herein or therein.
3.6 Reporting. During the 12 months preceding the date hereof,
Parent has filed all reports required to be filed by (i) Section 13 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
regulations thereunder, as applicable to Parent, (ii) the securities laws of
England and Wales, and (iii) the Listing Rules of the London Stock Exchange.
3.7 Trading Markets. The majority of all trading in Parent
Stock currently takes place in, on or through the facilities of securities
exchanges and inter-dealer quotation systems not in the United States.
4. COVENANTS OF THE COMPANY
During the period from the date of this Agreement until the
Effective Time, the Company and Shareholders covenant to and agree with Parent
as follows; provided, however, that the covenants set forth in Section 4.12 and
4.13 shall continue in effect after the Effective Time:
4.1 Advice of Changes. The Company and each Shareholder will
promptly advise Parent in writing, to the full extent of such person's
knowledge, (a) of any event occurring subsequent to the date of this Agreement
that would render any representation or warranty of the Company or the
Shareholders contained in this Agreement, if made on or as of the date of such
event or the Closing Date, untrue or inaccurate in any material respect and (b)
of any material adverse change in the Company's financial condition, properties,
assets, liabilities, business or results of operations.
4.2 Maintenance of Business. The parties hereto understand and
acknowledge that it is their intent to work closely together during the period
from the date hereof until the Closing Date. If the Company or any Shareholder
becomes aware of a material deterioration in the Company's relationship with any
customer, supplier or key employee, it will promptly bring such information to
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the attention of Parent in writing and, if requested by Parent, will exert all
reasonable efforts to restore the relationship.
4.3 Conduct of Business. Except as otherwise provided herein
or as approved or recommended by Parent, the Company will not, and will not
permit any of its subsidiaries to, without the prior written consent of Parent:
(a) borrow any money;
(b) other than the conversion of investments
into cash or cash equivalents, enter into any transaction not in the ordinary
course of business or enter into any transaction or make any commitment
involving an expense or capital expenditure in excess of $50,000;
(c) except for the Merger, merge, consolidate or
reorganize with, or acquireany entity;
(d) dispose of any of its material assets except
in the ordinary course of business consistent with past practice;
(e) enter into any material lease or contract
for the purchase or sale ofany property, real or personal, tangible or
intangible, except in the ordinary course of business consistent with past
practice or enter into any agreement of the types described in Section 2.11;
(f) fail to maintain its equipment and other
assets in good working condition in a manner consistent with past practices and
repair according to the standards it has maintained to the date of this
Agreement, subject only to ordinary wear and tear;
(g) pay any bonus, royalty, increased salary or
special remuneration to any officer, employee or consultant (except pursuant to
existing arrangements heretofore disclosed in writing to Parent) or enter into
any new employment or consulting agreement with any such person, or enter into
any new agreement or plan of the type described in Section 2.15.3;
(h) change accounting methods;
(i) declare, set aside or pay any cash or
stock dividend or other distribution in respect of capital stock, or redeem or
otherwise acquire any of its capital stock;
(j) amend or terminate any contract, agreement
or license to which it is a party except those amended or terminated in the
ordinary course of business, consistent with past practice, and which are not
material in amount or effect;
(k) lend any amount to any person or entity,
other than advances for travel and expenses which are incurred in the ordinary
course of business consistent with past practice, not material in amount, which
travel and expenses shall be documented by receipts for the claimed amounts;
(l) guarantee or act as a surety for any
obligation except for the endorsement of checks and other negotiable instruments
in the ordinary course of business, consistent with past practice;
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(m) waive or release any material right or
claim except in the ordinarycourse of business, consistent with past practice;
(n) issue or sell any shares of its capital
stock of any class or any other of its securities, or issue or create any
warrants, obligations, subscriptions, options, convertible securities, stock
appreciation rights or other commitments to issue shares of capital stock, or
accelerate the vesting of any outstanding option or other security;
(o) split or combine the outstanding shares
of its capital stock of any class or enter into any recapitalization affecting
the number of outstanding shares of its capital stock of any class or affecting
any other of its securities;
(p) amend its Articles of Incorporation or Bylaws
or other charter documents;
(q) agree to any audit assessment by any tax
authority or file any federal or state income or franchise tax return unless
copies of such returns have been delivered to Parent for its review prior to
filing;
(r) except as contemplated by the License
Agreement, license any of the Company's technology or any of the Company
Intellectual Property, except in the ordinary course of business consistent with
past practice, or take any action which could have the effect of placing any of
the Company Intellectual Property in the public domain;
(s) change any insurance coverage or issue any
certificates of insurance;
(t) terminate the employment of any key employee
listed in Item 2.10(i); or
(u) agree to do any of the things described in
the preceding clauses 4.3(a) through 4.3(t).
4.4 Regulatory Approvals. The Company will promptly execute
and file, or join in the execution and filing, of any application or other
document that may be necessary in order to obtain the authorization, approval or
consent of any governmental body, federal, state, local or foreign, which may be
reasonably required, or which Parent may reasonably request, in connection with
the consummation of the transactions contemplated by this Agreement. The Company
will use all reasonable efforts to obtain or assist Parent in obtaining all such
authorizations, approvals and consents.
4.5 Necessary Consents. The Company will use its best efforts
to obtain such written consents and take such other actions as may be necessary
or appropriate to facilitate and allow the consummation of the transactions
contemplated by this Agreement and to facilitate and allow Parent to carry on
the Company's business after the Closing Date.
4.6 Litigation. The Company will notify Parent in writing
promptly after learning of any action, suit, proceeding or investigation by or
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before any court, board or governmental agency, initiated by or against the
Company or any of its subsidiaries or threatened against it.
4.7 No Other Negotiations. From the date hereof until the
termination of this Agreement (provided that such termination is not effected by
the Company or the Shareholders in breach of this Agreement) or the consummation
of the Merger, the Company will not, and will not authorize any officer,
director, employee or affiliate of the Company, or any other person, on its
behalf, directly or indirectly, to (a) solicit, facilitate, discuss, encourage
or accept any offer, inquiry or proposal received from any party other than
Parent, concerning the possible disposition of all or any substantial portion of
the Company's business, assets or capital stock by merger, sale or any other
means or any other transaction that would involve a change in control of the
Company or to otherwise solicit, facilitate, discuss or encourage any such
disposition (other than the Merger), or (b) provide any confidential information
to or negotiate with any third party other than Parent in connection with any
offer, inquiry or proposal concerning any such disposition. The Company will
immediately notify Parent of any such offer, inquiry or proposal.
4.8 Access to Information. Until the Closing Date, the Company
will provide Parent and its agents with full access to the files, books, records
and offices of the Company, including, without limitation, any and all
information relating to the Company's taxes, commitments, contracts, leases,
licenses, real, personal and intangible property, and financial condition, and
specifically including, without limitation, access to the Company source code
reasonably necessary for Parent to complete its diligence review of the
Company's products and technology. The Company will cause its accountants to
cooperate with Parent and its agents in making available all financial
information reasonably requested, including, without limitation, the right to
examine all working papers pertaining to all financial statements prepared or
audited by such accountants.
4.9 Satisfaction of Conditions Precedent. The Company will use
its reasonable best efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Section 8, and the Company will use
its reasonable best efforts to cause the transactions provided for in this
Agreement to be consummated, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and give all notices to, third parties that may be
necessary or reasonably required on its part in order to effect the transactions
provided for herein.
4.10 Securities Laws. The Company and the Shareholders shall
use their reasonable best efforts to assist Parent to the extent necessary to
comply with the securities and blue sky laws of all jurisdictions applicable in
connection with the Merger.
4.11 Notification of Employee Problems. The Company will
promptly notify Parent if any of the Company's officers becomes aware that any
of the key employees listed in Item 2.15.2 notifies the Company of his or her
intent to leave its employ.
4.12 Pooling Accounting. The Company and the Shareholders
shall use their reasonable best efforts to cause the Merger to be accounted for
as a "pooling of interests", including, without limitation, causing each person
who is an "affiliate" (for purposes of compliance with pooling requirements) of
the Company not to take any action that would adversely affect the Merger to be
accounted for as a "pooling of interests". The Company has no "affiliates" that
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own any of its capital stock, or possess rights to acquire any of its capital
stock, other than the Shareholders.
4.13 Audits. If the Company or any of its subsidiaries were to
become subject to an audit by the Internal Revenue Service or any state or other
national taxing agency or authority for tax years or periods prior to the
Effective Time (including, but not limited to, any short tax year resulting from
the Merger), the Shareholders will be responsible for such audits and the
liabilities arising therefrom and shall use all reasonable efforts to resolve
all such audits in a manner consistent with the intentions of the Company and
Parent as expressed in this Agreement.
5. COVENANTS OF PARENT
During the period from the date of this Agreement until the
Effective Time, Parent covenants to and agrees with the Company and the
Shareholders as follows; provided, however, that the covenants set forth in
Sections 5.3 and 5.5 through 5.8 shall continue in effect after the Effective
Time, in accordance with their respective terms:
5.1 Satisfaction of Conditions Precedent. Parent will use its
reasonable best efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 7, and Parent will use its reasonable
best efforts to cause the transactions provided for in this Agreement to be
consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties that may be necessary or reasonably
required on its part in order to effect the transactions provided for herein.
5.2 Regulatory Approvals. Parent will execute and file, or
join in the execution and filing, of any application or other document that may
be necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be reasonably
required, or which the Company may reasonably request, in connection with the
consummation of the transactions provided for in this Agreement. Parent will use
all reasonable efforts to obtain all such authorizations, approvals and
consents.
5.3 Pooling Accounting. Parent shall use its reasonable best
efforts to cause the Merger to be accounted for as a "pooling of interests."
Parent shall use its reasonable best efforts to have each person who is an
"affiliate" (for purposes of compliance with pooling requirements) of Parent to
execute and deliver to Parent a Parent Affiliate Agreement, in substantially the
form of Exhibit 5.3.
5.4 Access to Information. Until the Closing Date, Parent will
provide the Company, the Shareholders and their respective agents a reasonable
opportunity to perform due diligence on Parent.
5.5 Company Tax Refund. Parent shall use its reasonable
efforts to assist the Shareholders in obtaining full payment of the Company Tax
Refund but neither such obligation nor Parent's exercise thereof shall in any
manner limit Parent's right to reacquire Escrow Shares in partial or complete
payment of the value of the Company Tax Refund pursuant to the Escrow Agreement.
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5.6 Parent Stock Listing. Parent shall use its reasonable best
efforts to have the Parent Stock to be issued in the Merger (including Parent
Stock to be issued upon the exercise of Parent Options converted from Company
Options) approved for listing on the London Stock Exchange promptly, and in any
event, within ten business days, following the Closing.
5.7 Parent Options Registration. Parent shall use its
reasonable best efforts to cause the Parent Stock issuable upon the exercise of
Parent Options converted from Company Options to be registered, or to be issued
pursuant to a then effective registration statement, on Form S-8 promulgated by
the SEC promptly, and in any event, within fourteen business days, following the
Closing.
5.8 Parent Reporting. Parent shall use its reasonable best
efforts to file all reports required to be filed by (i) Section 13 of the
Exchange Act, and the regulations thereunder, as applicable to Parent, (ii) the
securities laws of England and Wales, and (iii) the Listing Rules of the London
Stock Exchange.
6. CLOSING MATTERS
6.1 The Closing. Subject to termination of this Agreement as
provided in Section 9 below, the Closing will take place at the offices of
Fenwick & West, Two ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m.,
Pacific Time, on or before January 15, 1998, or, if all conditions to Closing
have not been satisfied or waived by such date, such other place, time and date
as the Company and Parent may mutually select (the "Closing Date"). Prior to or
concurrently with the Closing, the Agreement of Merger and such officers'
certificates or other documents as may be required to effectuate the Merger will
be filed in the office of the Secretary of State of the State of Delaware and
the State of Maryland Department of Assessments and Taxation. Accordingly, the
Merger will become effective at the Effective Time.
6.2 Exchange of Certificates.
6.2.1 As of the Effective Time, all shares of
Company Common Stock that are outstanding immediately prior thereto will, by
virtue of the Merger and without further action, cease to exist, and all such
shares will be converted into the right to receive from Parent the number of
shares of Parent Common Stock determined as set forth in Section 1.1, subject to
Sections 1.2 and 1.3.
6.2.2 At and after the Effective Time, each
certificate representing outstanding shares of Company Common Stock will
represent the number of shares of Parent Stock into which such shares of the
Company Common Stock have been converted, and such shares of Parent Stock will
be deemed registered in the name of the holder of such certificate. As soon as
practicable after the Effective Time, each holder of shares of the Company
Common Stock will surrender the certificates for such shares (the "Company
Certificates") to Parent for cancellation. At the Effective Time and upon
receipt of the Company Certificates, Parent will cause its transfer agent to
issue to such surrendering holder or to such holder's designee certificates for
the number of shares of Parent Stock to which such holder is entitled pursuant
to Section 1.1, subject to Sections 1.2 and 1.3, and Parent shall distribute any
cash payable under Section 1.2.
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6.2.3 After the Effective Time, there will be
no further registration of transfers of the shares of Company Common Stock on
the stock transfer books of the Company. If, after the Effective Time, Company
Certificates are presented for transfer or for any other reason, they will be
canceled and exchanged and certificates therefor will be delivered or placed in
escrow as provided in this Section 6.2. Notwithstanding anything herein to the
contrary, except to the extent waived by Parent, any Company Certificate that is
not properly submitted to Parent for exchange and cancellation within two years
after the Effective Time shall no longer evidence ownership of or any right to
receive shares of Parent Stock and all rights of the holder of such Company
Certificate, with respect to the shares previously evidenced by such Company
Certificate, shall cease.
6.2.4 Until Company Certificates representing
Company Common Stock outstanding prior to the Merger are surrendered pursuant to
Section 6.2.2 above, such certificates shall be deemed, for all purposes, to
evidence ownership of (a) the number of shares of Parent Stock into which the
shares of Company Common Stock shall have been converted, subject to the
provisions of Sections 1.2 and 1.3, and (b) if applicable, cash in lieu of
fractional shares.
7. CONDITIONS TO OBLIGATIONS OF THE COMPANY
The Company's obligations under this Agreement are subject to the
fulfillment or satisfaction, on and as of the Closing, of each of the following
conditions (any one or more of which may be waived by the Company, but only in a
writing signed on behalf of the Company by its President):
7.1 Accuracy of Representations and Warranties. The
representations and warranties of Parent set forth in Section 3 shall be true
and accurate in all material respects on and as of the date hereof and the
Closing Date as if made on and as of the Closing Date, and the Company shall
have received a certificate to such effect executed on behalf of Parent by its
Chief Financial Officer.
7.2 Covenants. Parent shall have performed and complied in all
material respects with all of its covenants contained in Section 5 on or before
the Closing Date, and the Company shall have received a certificate to such
effect executed on behalf of Parent by its Chief Financial Officer.
7.3 Compliance with Law. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
7.4 Government Consents. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other actions, as may be required to consummate the Merger by
any regulatory authority having jurisdiction over the parties and the actions
herein proposed to be taken, including but not limited to satisfaction of all
requirements under applicable federal and state securities laws and the
expiration or termination of the waiting period under the HSR Act.
7.5 Documents. The Company shall have received all written
consents, assignments, waivers, authorizations or other certificates reasonably
deemed necessary by the Company's legal counsel to consummate the transactions
provided for herein.
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7.6 No Litigation. No litigation or proceeding shall be
pending which will have the probable effect of enjoining or preventing the
consummation of any of the transactions provided for in this Agreement.
7.7 Opinion of Parent's Counsel. The Company shall have
received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ & West LLP, counsel to Parent, opinions
substantially in the form of Exhibit 7.7.
7.8 Escrow Agreement. Parent shall have duly executed
and delivered to the Shareholders the Escrow Agreement.
7.9 License Agreement. Parent shall have executed and
delivered to Dr. S. ▇▇▇▇ ▇▇▇ the License Agreement, substantially in the form of
Exhibit 7.9 (the "License Agreement").
7.10 Parent Stock. Parent shall have delivered to the
Shareholders' designee certificates representing the shares of Parent Stock to
be issued to the Shareholders pursuant to Section 1.1, subject to Sections 1.2
and 1.3.
8. CONDITIONS TO OBLIGATIONS OF PARENT
The obligations of Parent under this Agreement are subject to
the fulfillment or satisfaction on, and as of the Closing, of each of the
following conditions (any one or more of which may be waived by Parent, but only
in a writing signed on behalf of Parent by its President or Chief Financial
Officer):
8.1 Accuracy of Representations and Warranties. The
representations and warranties of the Company set forth in Section 2 shall be
true and complete in all material respects on and as of the date hereof and the
Closing Date as if made on and as of the Closing Date, and Parent shall have
received a certificate to such effect executed on behalf of the Company by its
Chief Executive Officer.
8.2 Covenants; No Material Adverse Change. The Company shall
have performed and complied in all material respects with all of its covenants
contained in Section 4 on or before the Closing and Parent shall have received a
certificate to such effect signed on behalf of the Company by its Chief
Executive Officer. There shall not have occurred any material adverse change in
the assets, business or employee base of the Company since July 31, 1997, and
Parent shall have received a certificate to such effect executed on behalf of
Parent by its Chief Executive Officer.
8.3 Compliance with Law. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
provided for in this Agreement.
8.4 Government Consents. There shall have been obtained at or
prior to the Closing Date such permits or authorizations and there shall have
been taken such other action, as may be required to consummate the Merger by any
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to satisfaction of all
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requirements under applicable federal and state securities laws and the
expiration or termination of the waiting period under the HSR Act.
8.5 Opinion of the Company's Counsel. Parent shall have
received from ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, LLP, counsel to the Company, an
opinion substantially in the form of Exhibit 8.5.
8.6 Requisite Approvals. The terms of this Agreement and the
Agreement of Merger shall have been approved and adopted by the written consent
or vote of Shareholders holding not less than 98% of the outstanding shares of
the Company Common Stock.
8.7 No Litigation. No litigation or proceeding shall be
pending which will have the probable effect of enjoining or preventing the
consummation of any of the transactions provided for in this Agreement. No
litigation or proceeding shall be pending which could reasonably be expected to
have a material adverse effect on the financial condition or results of
operations of the Company that has not been previously disclosed to Parent
herein.
8.8 Documents. Parent shall have received all written
consents, assignments, waivers, authorizations or other certificates reasonably
deemed necessary by Parent's legal counsel to provide for the continuation in
full force and effect of any and all material contracts and leases of the
Company, except as disclosed in the Company Disclosure Letter, and for Parent to
consummate the transactions contemplated hereby.
8.9 Investment and Affiliate Letters; Affiliate Agreements.
Each Shareholder shall have duly executed and delivered to Parent an Investment
and Affiliate Letter, substantially in the form of Exhibit 8.9. Each "affiliate"
of the Company who is not also a Shareholder shall have duly executed and
delivered to Parent an Affiliate Agreement, substantially in the form of Exhibit
8.9-A.
8.10 Escrow Agreement. Each of the Shareholders shall
have duly executed and delivered to Parent the Escrow Agreement.
8.11 Non-Competition Agreements. Dr. ▇.▇▇▇▇ Yao and ▇▇▇▇
▇▇▇ shall have executed and delivered to Parent a Non-Competition Agreement.
8.12 License Agreement. ▇▇.▇.▇▇▇▇ Yao shall have executed
and delivered to Parent the License Agreement.
8.13 Employment Agreements. Each employee of the Company set
forth in Exhibit 8.13 shall have executed and delivered to Parent an employment
agreement on terms to be mutually agreed upon between Parent and such employee.
8.14 Due Diligence. Parent and its representatives shall have
completed a due diligence review of the condition (financial and otherwise),
operations, customer arrangements, intellectual property, business and prospects
of, and any other matters relating to, the Company, and the results of such due
diligence shall be satisfactory to Parent in its sole discretion.
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8.15 Pooling Opinion. Parent shall have received the opinion
of Ernst & Young, Parent's independent auditors, to the effect that the Merger
will qualify as a "pooling of interests" transaction under the relevant
accounting rules and principles.
8.16 Closing Balance Sheet. Parent shall have received the
Closing Balance Sheet (including the Schedule of Closing Adjustments) prepared
by the Company, certified as true, complete and correct by the Chief Financial
Officer of the Company.
8.17. Company Stock. The Shareholders shall have delivered to
Parent certificates representing all of the shares of Company Common Stock to be
converted into Parent Stock pursuant to Section 1.1.
8.18 Releases. Parent shall have received from each of the
persons set forth in Exhibit-8.18-A a release substantially in the form of
Exhibit 8.18-B.
8.19 Audit Opinion. Parent shall have received a true copy of
the unqualified audit opinion of Deloitte & Touche LLP with respect to the
Company's January 31, 1997 financial statements, which financial statements
shall be the same financial statements delivered by the Company to Parent,
without any changes thereto.
9. TERMINATION
9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the Merger by
the shareholders of the Company:
(a) by the mutual written agreement of Parent and
the Company;
(b) at any time after January 31, 1998, by either
Parent or the Company if the Closing shall not have occurred on or before such
date and such failure to consummate is not caused by a breach of this Agreement
by the terminating party;
(c) by the Company, if there has been a
breach by Parent of any representation, warranty, covenant or agreement set
forth in this Agreement on the part of Parent, or if any representation of
Parent will have become untrue, in either case which has or can reasonably be
expected to have a material adverse effect on Parent and which Parent fails to
cure within a reasonable time, not to exceed 30 days, after written notice
thereof (except that no cure period will be provided for a breach by Parent
which by its nature cannot be cured);
(d) by Parent, if there has been a breach by the
Company or a Shareholder of any representation, warranty, covenant or agreement
set forth in this Agreement on the part of the Company or a Shareholder, or if
any representation of the Company or a Shareholder will have become untrue, in
either case which has or can reasonably be expected to have a material adverse
effect on the Company and which the Company or such Shareholder fails to cure
within a reasonable time, not to exceed 30 days, after written notice thereof
(except that no cure period will be provided for a breach by the Company or a
Shareholder which by its nature cannot be cured); or
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(e) by either party, if a permanent injunction or
other order by any Federal or state court which would make illegal or otherwise
restrain or prohibit the consummation of the Merger will have been issued and
will have become final and nonappealable.
Any termination of this Agreement under this Section 9.1 will
be effective by the delivery of written notice of the terminating party to the
other party hereto.
9.2 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 9.1, such termination shall be without liability
or obligation of either party (or any shareholder, director, officer, employee,
agent, consultant or representative of such party) to the other party to this
Agreement; provided that if such termination shall result from the willful
failure of either party to fulfill a condition to the performance of the
obligations of the other party or to perform a covenant of this Agreement or
from a willful breach by either party to this Agreement, such party shall be
fully liable for any and all Damages incurred or suffered by the other party as
a result of such failure or breach; provided, further, that the failure of the
Company and Shareholders to satisfy the condition set forth in Section 8.5 shall
not constitute a willful failure for the purposes of this Section 9.2. The
provisions of Article 11 shall survive any termination hereof pursuant to
Section 9.1.
10. INDEMNIFICATION
10.1 Survival. The representations, warranties, covenants and
agreements of the parties hereto contained in this Agreement or in any
certificate, document or instrument delivered pursuant hereto or in connection
herewith shall survive the Closing until the one year anniversary of the Closing
Date (the "Expiration Date"); provided, that the Shareholders' indemnification
of the Parent Indemnified Persons for the Company Tax Exposure shall survive the
Closing until the three year anniversary of the Closing Date (the "Third
Anniversary") and that indemnification of claims made by tax authorities with
respect to the Company Tax Exposure prior to the Third Anniversary which are
unresolved on the Third Anniversary shall survive until such claims are finally
resolved.
10.2 Indemnification.
10.2.1 Subject to the limitations set forth in
this Section 10.2.1, the Shareholders hereby severally indemnify and hold
harmless Parent and its respective officers, directors, agents and employees,
and each person, if any, who controls or may control Parent within the meaning
of the Securities Act (collectively "Parent Indemnified Persons") from and
against any and all claims, demands, actions, causes of action, judgments,
fines, penalties, obligations, losses, costs, damages, liabilities and expenses
including, without limitation, the reasonable fees and disbursements of legal
counsel, investigators, consultants, accountants and other professionals
(collectively, "Damages") incurred or suffered by any such person arising from,
by reason of or in connection with any misrepresentation or breach of or default
in connection with any of the representations, warranties, covenants or
agreements given or made by the Company or the Shareholders in this Agreement or
any certificate, document or instrument delivered by or on behalf of the Company
or by a Shareholder pursuant hereto or in connection herewith (collectively,
"Company Breaches"); provided, however, that (i) the Parent Indemnified Persons
shall not have any right to be indemnified under this Section 10.2.1 unless the
aggregate amount of all Damages to the Parent Indemnified Persons exceeds
$75,000, in which case the Parent Indemnified Persons will be entitled to
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indemnification to the extent to which such Damages exceed $75,000, and (ii) the
maximum aggregate indemnification obligation of the Shareholders under this
Section 10.2.1 shall not exceed the Total Acquisition Price; provided, further,
that claims for Damages based upon or arising out of (A) the inability of Parent
to timely receive payment on accounts receivable owing to the Company on the
Closing Date, (B) the claims asserted by the Business Software Alliance against
the Company disclosed in the Company Disclosure Letter or (C) any severance or
similar termination or settlement payments due to the employees of the Company
set forth on Exhibit 10.2.1(C), in each case of (A), (B) or (C), whether or not
such Damages or payments arise in connection with a Company Breach, shall be
indemnified hereunder and shall not be subject to the deductible set forth in
clause (i) of this sentence. The Shareholders shall settle any claims for
indemnification by first returning to Parent, pro rata, escrowed shares of
Parent Stock (valued at the Closing Price) and if the aggregate amount of
Damages exceeds the value of such escrowed shares, the Shareholders shall
severally fulfill such indemnification obligations in cash or in shares of
Parent Stock (valued at the Closing Price). None of the provisions of this
Section 10.2.1 or of the Escrow Agreement shall in any manner limit liability
with respect to (i) claims of intentional misrepresentation or fraud, (ii) any
criminal matters, (iii) any claim concerning the breach of the representations
and warranties set forth in Section 2.3 or (iv) any claim concerning title to
the shares of the Company's capital stock. For the purposes of this Section
10.2.1, except for Damages arising out of, by reason of or in connection with
Company Breaches with respect to Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.11 or 2.12,
Damages indemnifiable by the Shareholders pursuant to this Section 10.2.1 shall
not include lost profits or consequential damages; provided, that the exception
contained in this sentence with respect to Section 2.5(b) and Section 2.11
(excluding Section 2.11(j)) shall apply only to lost profits and consequential
damages arising out of claims for equitable relief and not for claims for money
damages. For the avoidance of doubt, Damages indemnifiable hereunder shall
include lost profits and consequential damages arising out of Company Breaches
of Sections 2.1, 2.2, 2.3, 2.4, 2.5(a), 2.5(c), 2.11(j) and 2.12 in all
instances and Section 2.5(b) and Section 2.11 (excluding Section 2.11(j)) in
connection with claims for equitable relief.
10.2.2 Subject to the limitations set forth in
this Section 10.2.2, Parent hereby severally indemnify and hold harmless the
Shareholders from and against any and all Damages incurred or suffered by any
such person arising from, by reason of or in connection with any
misrepresentation or breach of or default in connection with any of the
representations, warranties, covenants or agreements given or made by Parent in
this Agreement or any certificate, document or instrument delivered by or on
behalf of Parent pursuant hereto or in connection herewith provided, however,
that (i) the Shareholders shall not have any right to be indemnified under this
Section 10.2.2 unless the aggregate amount of all Damages to the Shareholders
exceeds $75,000, in which case the Shareholders will be entitled to
indemnification to the extent to which such Damages exceed $75,000, and (ii) the
maximum aggregate indemnification obligation of Parent under this Section 10.2.2
shall not exceed the Total Acquisition Price. None of the provisions of this
Section 10.2.2 shall in any manner limit liability with respect to (i) claims of
intentional misrepresentation or fraud or (ii) any criminal matters.
10.2.3 The calculation of the amount required
to hold an indemnified party harmless shall be on (i) an after-tax basis, taking
into account any reduction in tax liability as a result of the facts giving rise
to the claim for indemnification and (ii) an after-insurance basis, taking into
account any insurance proceeds received under then-existing policies with
insurance companies covering the liability (it being understood that any amounts
which the indemnified party self-insures shall not be so taken into account).
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10.3 Procedures. Dr. S. ▇▇▇▇ ▇▇▇ shall act as Representative
of the Shareholders for all purposes of the Escrow Agreement and the
indemnification provisions of this Section 10, is duly authorized to be such
Representative and may bind the Shareholders with respect thereto. Promptly
after the receipt by a Parent Indemnified Person or a Shareholder (as the case
may be, the "Indemnified Person") of notice or discovery of any claim, damage or
legal action or proceeding giving rise to indemnification rights under this
Agreement, such Indemnified Person will give the indemnifying party (in the case
of a Parent Indemnified Person, notice shall be given to the Representative and
the Escrow Agent) written notice of such claim, damage, legal action or
proceeding (a "Claim") (in the case of a Parent Indemnified Person, such notice
shall be given in accordance with Section 3 of the Escrow Agreement). An
Indemnified Person may assert a claim in writing at any time prior to the
Expiration Date. Within ten days of delivery of such written notice, the
indemnifying party may, at the expense of such indemnifying party, elect to take
all necessary steps properly to contest any Claim involving third parties or to
prosecute such Claim to conclusion or settlement satisfactory to such
indemnifying party. If such indemnifying party makes the foregoing election, an
Indemnified Person will have the right to participate at its own expense in all
proceedings. If such indemnifying party does not make such election, an
Indemnified Person shall be free to handle the prosecution or defense of any
such Claim, will take all necessary steps to contest the Claim involving third
parties or to prosecute such Claim to conclusion or settlement satisfactory to
such Indemnified Person, and will notify the indemnifying party of the progress
of any such Claim, will permit the indemnifying party, at the sole cost of the
indemnifying party, to participate in such prosecution or defense and will
provide the indemnifying party with reasonable access to all relevant
information and documentation relating to the Claim and the prosecution or
defense thereof. In any case, the party not in control of the Claim will
cooperate with the other party in the conduct of the prosecution or defense of
such Claim. Neither party will compromise or settle any such Claim without the
written consent of either Parent (if the Representative defends the Claim) or
the Representative (if Parent defends the Claim), such consent not to be
unreasonably withheld; provided, that an Indemnified Person shall have the right
to settle any such Claim if the terms of such settlement are not materially
prejudicial to the indemnifying party, and that in such event the Indemnified
Person shall be deemed to have waived any right of indemnity for such claim
hereunder.
11. MISCELLANEOUS
11.1 Governing Law. The internal laws of the State of
California (irrespective of its choice of law principles) will govern the
validity of this Agreement, the construction of its terms, and the
interpretation and enforcement of the rights and duties of the parties hereto.
11.2 Assignment; Successors and Assigns. Neither party hereto
may assign any of its rights or obligations hereunder without the prior written
consent of the other party hereto. Any purported assignment not permitted by
this Section shall be void. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
11.3 Severability. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
unenforceable provision of this Agreement with a valid and enforceable provision
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that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
11.4 Counterparts. This Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
instrument. This Agreement will become binding when one or more counterparts
hereof, individually or taken together, bear the signatures of both parties
reflected hereon as signatories.
11.5 Other Remedies. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy will not preclude the exercise
of any other.
11.6 Amendment and Waivers. Any term or provision of this
Agreement may be amended only by a writing signed by Parent, the Company and
Shareholders holding at least 50% of Company Common Stock. This Agreement may be
amended by the parties hereto at any time before or after approval of the
Shareholders. The observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default.
11.7 No Waiver. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions. The waiver by any party of the
right to enforce any of the provisions hereof on any occasion will not be
construed to be a waiver of the right of such party to enforce such provision on
any other occasion.
11.8 Expenses. Each party will bear its respective expenses
and fees of its own accountants, attorneys, investment bankers and other
professionals incurred with respect to this Agreement and the transactions
contemplated hereby. If the Merger is consummated, the Company will pay at the
Closing all Company Fees, which paid Company Fees shall be reflected by
corresponding deductions of like amounts on the Closing Balance Sheet. If
payment of all Company Fees is not timely made, Parent may pay such Company Fees
or a portion thereof, in which event Parent will be entitled to be reimbursed by
the Shareholders for such payment and, if not so reimbursed, Parent will be
entitled to treat the amount of payment as Damages recoverable under the Escrow
Agreement.
11.9 Notices. Any notice or other communication required or
permitted to be given under this Agreement will be in writing, will be delivered
personally, by mail or express delivery, postage prepaid, or telecopy (confirmed
in writing) and will be deemed given upon actual delivery or, if mailed by
registered or certified mail, on the third business day following deposit in the
mails, addressed as follows:
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(i) If to Parent:
Micro Focus
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
(ii) If to the Shareholders:
Dr. S. ▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, LLP
1800 Mercantile Bank and Trust Building
Two ▇▇▇▇▇▇▇ Plaza
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Fax: ▇▇▇-▇▇▇-▇▇▇▇
and a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 11.9.
11.10 Construction of Agreement. The language hereof will not
be construed for or against either party. A reference to an article, section or
exhibit will mean an article or section in, or an exhibit to, this Agreement,
unless otherwise explicitly set forth. The titles and headings in this Agreement
are for reference purposes only and will not in any manner limit the
construction of this Agreement. For the purposes of such construction, this
Agreement will be considered as a whole. When this Agreement makes reference to
a person's "knowledge", such reference shall mean such person's (or a corporate
person's directors, officers or senior employees) actual knowledge, after due
investigation.
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11.11 No Joint Venture. Nothing contained in this Agreement
will be deemed or construed as creating a joint venture or partnership between
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other, and the
parties' status is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party will have any power or
authority to bind or commit any other. No party will hold itself out as having
any authority or relationship in contravention of this Section.
11.12 Further Assurances. Each party agrees to cooperate fully
with the other party and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by the other party to evidence and reflect the transactions provided
for herein and to carry into effect the intent of this Agreement.
11.13 Absence of Third Party Beneficiary Rights. No provisions
of this Agreement are intended, nor will be interpreted, to provide or create
any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, partner or employee of any party hereto or any
other person or entity, unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal solely between the
parties to this Agreement.
11.14 Public Announcement. Parent and the Company will issue a
press release approved by both parties announcing the Merger as soon as
practicable following the execution of this Agreement. Parent may issue such
press releases, and make such other disclosures regarding the Merger, as it
determines to be required or appropriate under applicable securities laws or
NASD rules after reasonable consultation, where possible, with the Company. The
Company will not make any other public announcement or disclosure of the
transactions contemplated by this Agreement. The Company will take all
reasonable precautions to prevent any trading in the securities of Parent by
officers, directors, employees and agents of the Company having knowledge of any
material information regarding Parent provided hereunder until the information
in question has been publicly disclosed.
11.15 Confidentiality. Except as expressly authorized by
Parent in writing, the Company will not directly or indirectly divulge to any
person or entity or use any Parent Confidential Information, except as required
for the performance of its duties under this Agreement. Except as expressly
authorized by the Company in writing, Parent will not directly or indirectly
divulge to any person or entity or use any the Company Confidential Information,
except as required for the performance of its duties under this Agreement. As
used herein, "Parent Confidential Information" consists of (a) any information
designated by Parent as confidential whether developed by Parent or disclosed to
Parent by a third party, (b) the source code to any Parent software and any
trade secrets relating to any of the foregoing, (c) any information relating to
Parent's product plans, product designs, product costs, product prices, product
names, finances, marketing plans, business opportunities, personnel, research
development or know-how, (d) any information contained in Parent's HSR Act
filing in connection herewith and (e) items and matters set forth in any
disclosure letter by Parent in connection herewith. As used herein, "Company
Confidential Information" consists of (v) any information contained in the
Company's HSR Act filing in connection herewith, (w) items and matters set forth
in the Company Disclosure Letter, (x) any information designated by the Company
as confidential whether developed by the Company or disclosed to the Company by
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a third party, (y) the source code to any the Company software, and any trade
secrets related to any of the foregoing, and (z) any information relating to the
Company product plans, product designs, product costs, product prices, product
names, finances, marketing plan, business opportunities, personnel, research,
development or know-how. "Parent Confidential Information" and "Company
Confidential Information" also include the terms and conditions of this
Agreement, except as disclosed in accordance with Section 11.14 above. The
foregoing restriction will apply to information about a party whether or not it
was obtained from such party's employees, acquired or developed by the other
party during such other party's performance under this Agreement, or otherwise
learned. The foregoing restrictions will not apply to information that (i) has
become publicly known through no wrongful act of the receiving party, (ii) has
been rightfully received from a third party authorized by the party which is the
owner, creator or compiler to make such disclosure without restriction, (iii)
has been approved or released by written authorization of the party which is the
owner, creator or compiler, or (iv) is being or has therefore been disclosed
pursuant to a valid court order or valid action of a governmental authority
after a reasonable attempt has been made to notify the party which is the owner,
creator or compiler.
11.16 Time is of the Essence. The parties hereto acknowledge
and agree that time is of the essence in connection with the execution, delivery
and performance of this Agreement, and that they will each utilize their best
efforts to satisfy all the conditions to Closing on or before January 15, 1998.
11.17 Entire Agreement. This Agreement and the exhibits hereto
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect to the subject matter hereof.
The express terms hereof control and supersede any course of performance or
usage of trade inconsistent with any of the terms hereof.
11.18. Dispute Resolution.
11.18.1 Arbitration. Any dispute arising under or in
connection with this Agreement and the transactions contemplated hereby
(including under each agreement or instrument attached hereto as an exhibit) (a
"Dispute") shall be settled by arbitration in San Francisco, California, and,
except as herein specifically stated, in accordance with the commercial
arbitration rules of the American Arbitration Association ("AAA Rules") then in
effect; provided, that discovery in such arbitration shall be permitted under
the Federal Rules of Civil Procedure then in effect. However, in all events,
these arbitration provisions shall govern over any conflicting rules which may
now or hereafter be contained in the AAA Rules. Any judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction over
the subject matter thereof. Arbitration pursuant to the terms of this Section
11.18 shall be the exclusive means of resolving Disputes; provided, that any
party under this Agreement or the other agreements contemplated hereby may seek
provisional, injunctive or other equitable relief in any court pending
resolution of a Dispute hereunder.
11.18.2 Compensation of Arbitrator. Any such arbitration will
be conducted before a single arbitrator who will be compensated for his or her
services at a rate to be determined by the parties, but based upon reasonable
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hourly or daily consulting rates determined by the American Arbitration
Association for the arbitrator in the event the parties are not able to agree
upon his or her rate of compensation.
11.18.3 Selection of Arbitrator. The American Arbitration
Association will have the authority to select an arbitrator from a list of
arbitrators who are lawyers familiar with California contract law; provided,
however, that such lawyers do not work for a firm then providing services for
either party, that each party will have the opportunity to make such reasonable
objection to any of the arbitrators listed as such party may wish and that the
American Arbitration Association will select the arbitrator from the list of
arbitrators as to whom neither party makes any such objection. In the event that
the foregoing procedure is not followed, each party will choose one person from
the list of arbitrators provided by the American Arbitration Association
(provided that such person does not have a conflict of interest), and the two
persons so selected will select from the list provided by the American
Arbitration Association the person who will act as the arbitrator.
11.18.4 Payment of Costs. Parent and the Shareholders will
each pay 50% of the initial compensation to be paid to the arbitrator in any
such arbitration and 50% of the costs of transcripts and other normal and
regular expenses of the arbitration proceedings; provided, however, that the
prevailing party in any arbitration will be entitled to an award of attorneys'
fees and costs, and all costs of arbitration, including those provided for
above, will be paid by the losing party, and the arbitrator will be authorized
to make such determinations. For Disputes arising under the Escrow Agreement,
the Shareholders' liability for such fees and expenses of arbitration initially
will be paid by Parent and, if so determined, will be recovered pursuant to the
Escrow Agreement.
11.18.5 Burden of Proof. For any Dispute submitted to
arbitration, the burden of proof will be as it would be if the claim were
litigated in a judicial proceeding.
11.18.6 Award. Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator will render findings of fact and
conclusions of law and a written opinion setting forth the basis and reasons for
any decision reached and will deliver such documents to each party to this
Agreement along with a signed copy of the award.
11.18.7 Terms of Arbitration. The arbitrator chosen in
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions of
this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MICRO FOCUS GROUP PLC
By:/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President and Chief Executive Officer
`
XDB SYSTEMS, INC.
By:/s/ S. ▇▇▇▇ ▇▇▇
-------------------------------------
Name: S. ▇▇▇▇ ▇▇▇
Title: Chairman and CEO
SHAREHOLDERS:
/s/ S. ▇▇▇▇ ▇▇▇
----------------------------------
Dr. S. ▇▇▇▇ ▇▇▇
/s/ ▇▇▇▇ ▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
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