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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
ISOCOR,
NETCS INFORMATIONSTECHNIK GMBH
AND
THE STOCKHOLDERS OF NETCS INFORMATIONSTECHNIK GMBH
DATED AS OF AUGUST 29, 1996
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TABLE OF CONTENTS
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ARTICLE 1 - PURCHASE AND SALE OF COMPANY CAPITAL STOCK ................ 1
1.1 Purchase and Sale ........................................... 1
1.2 Acquisition Price ........................................... 1
1.3 Certain Definitions ......................................... 2
1.4 Closing ..................................................... 2
1.5 Surrender of Shares; Payment of Acquisition Price ........... 4
1.6 Additional Closing Date Deliveries .......................... 4
1.7 No Further Ownership Rights in Company Common Stock ......... 6
1.8 Accounting Treatment ........................................ 6
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE
SELLING STOCKHOLDERS ..................................... 6
2.1 Organization of the Company ................................. 6
2.2 Company Capital Structure ................................... 7
2.3 Subsidiaries ................................................ 7
2.4 Authority ................................................... 7
2.5 No Conflict ................................................. 7
2.6 Consents .................................................... 8
2.7 Company Financial Statements ................................ 8
2.8 No Undisclosed Liabilities .................................. 9
2.9 No Changes .................................................. 9
2.10 Tax Matters ................................................ 9
2.11 Restrictions on Business Activities ........................ 10
2.12 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment ..................................... 10
2.13 Intellectual Property ...................................... 11
2.14 Agreements, Contracts and Commitments ...................... 13
2.15 Interested Party Transactions .............................. 13
2.16 Governmental Authorization ................................. 14
2.17 Litigation ................................................. 14
2.18 Accounts Receivable; Inventory ............................. 14
2.19 Minute Books ............................................... 15
2.20 Environmental Matters ...................................... 15
2.21 Brokers' and Finders' Fees ................................. 16
2.22 Employees .................................................. 16
2.23 Employee Benefit Plans and Compensation .................... 16
2.23 Insurance .................................................. 18
2.25 Compliance with Laws ....................................... 18
2.26 Complete Copies of Materials ............................... 18
2.27 Warranties; Indemnities .................................... 18
2.28 Pooling Matters ............................................ 18
2.29 Customers .................................................. 19
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TABLE OF CONTENTS
(continued)
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2.30 Selling Stockholder Loans .................................. 19
2.31 Representations Complete ................................... 19
2.32 Limitations ................................................ 19
ARTICLE IIA - FURTHER REPRESENTATION AND WARRANTIES OF
THE SELLING STOCKHOLDERS ................................ 20
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PARENT
AND ACQUISITION SUB ..................................... 22
3.1 Organization, Standing and Power ............................ 22
3.2 Authority ................................................... 23
3.3 No Conflict ................................................. 23
3.4 Consents .................................................... 23
3.5 SEC Documents; Parent Financial Statements .................. 23
3.6 Absence of Certain Changes or Events ........................ 24
3.7 Litigation .................................................. 24
3.8 Broker's and Finder's Fees .................................. 24
3.9 Parent Common Stock ......................................... 25
3.10 Compliance with U.S. Securities Laws ....................... 25
3.11 Pooling Matters ............................................ 25
3.12 Parent Affiliates .......................................... 25
ARTICLE IV - CONDUCT PRIOR TO THE CLOSING DATE ........................ 25
4.1 Conduct of Business of the Company .......................... 25
4.2 No Solicitation ............................................. 26
ARTICLE V - ADDITIONAL AGREEMENTS ..................................... 26
5.1 Access to Information ....................................... 27
5.2 Confidentiality ............................................. 27
5.3 Expenses .................................................... 27
5.4 Public Disclosure ........................................... 28
5.5 Consents .................................................... 28
5.6 Legal Requirements .......................................... 28
5.7 Employment Agreements ....................................... 28
5.8 Spousal Consents ............................................ 28
5.9 Loans to Company ............................................ 29
5.10 Bank Guarantees ............................................ 29
5.11 Option Pool ................................................ 29
5.12 Company Accountants and Auditors ........................... 29
5.13 Operating Plan and Financial Statements .................... 29
5.14 Disposition of Aggregate Parent Shares ..................... 29
5.15 Notification of Certain Matters ............................ 30
5.16 Additional Documents and Further Assurances ................ 30
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TABLE OF CONTENTS
(continued)
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ARTICLE VI - CONDITIONS TO THE ACQUISITION ............................ 30
6.1 Conditions to Obligations of Selling Stockholders ........... 30
6.2 Conditions to the Obligations of Parent and Acquisition Sub . 31
ARTICLE VII - SECURITIES LAW COMPLIANCE ............................... 32
7.1 Restrictions on Transfer of Parent Common Stock; Legends .... 32
7.2 Rule 144 Reporting .......................................... 34
ARTICLE VIII - SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNITY; ESCROW ...................................... 34
8.1 Survival of Representations, Warranties and Covenants ....... 34
8.2 Agreement to Indemnify ...................................... 35
8.3 Costs Included .............................................. 35
8.4 Limitation on Indemnity ..................................... 35
8.5 De minimus Limitation ....................................... 35
8.6 Further Limitation .......................................... 35
8.7 Indemnification Procedures .................................. 35
8.8 Escrow Arrangements ......................................... 36
8.9 Mechanics of Making Claims During Escrow Period ............. 36
ARTICLE IX - APPOINTMENT OF AGENT FOR SELLING STOCKHOLDERS ............ 37
9.1 Appointment of Agent ........................................ 37
ARTICLE X - TERMINATION, AMENDMENT AND WAIVER ......................... 38
10.1 Termination ................................................ 38
10.2 Effect of Termination ...................................... 39
10.3 Amendment .................................................. 39
10.4 Extension; Waiver .......................................... 39
ARTICLE XI - GENERAL PROVISIONS ....................................... 40
11.1 Notices .................................................... 40
11.2 Interpretation ............................................. 41
11.3 Counterparts ............................................... 41
11.4 Entire Agreement; Assignment ............................... 41
11.5 Severability ............................................... 41
11.6 Other Remedies ............................................. 42
11.7 Specific Performance ....................................... 42
11.8 Governing Law .............................................. 42
11.9 Rules of Construction ...................................... 42
11.10 English Language .......................................... 42
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of August 29, 1996 by and among ISOCOR, a California corporation ("Parent"),
ISOCOR B.V. (as described below), NetCS Informationstechnik GmbH, a corporation
organized under the laws of the Federal Republic of Germany registered under HRB
28025 AG Charlottenburg (the "Company"), and the stockholders of the Company and
the partners of NetCS Mitarbeiter GbR whose names appear on the signature pages
hereto (each a "Selling Stockholder" and, collectively, the "Selling
Stockholders").
RECITALS
A. The Selling Stockholders collectively own all of the capital stock
(quota interests) of the Company issued and outstanding or issuable upon
exercise of options, warrants or other rights ("Rights") to purchase capital
stock of the Company.
B. Through ISOCOR, B.V., a corporation organized under the laws of The
Netherlands and a wholly owned subsidiary of Parent ("Acquisition Sub"), Parent
desires to acquire from the Selling Stockholders, and the Selling Stockholders
desire to sell to the Parent, all of the shares of Company Capital Stock (as
hereinafter defined) owned by them (the "Acquisition"), in exchange for the
consideration specified herein and subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMPANY CAPITAL STOCK
1.1 Purchase and Sale. Subject to the terms and conditions set forth in
this Agreement, at the Closing (as hereinafter defined), Parent shall cause
Acquisition Sub to purchase from each Selling Stockholder and Acquisition Sub
shall purchase from each Selling Stockholder, and each Selling Stockholder shall
sell, assign, transfer and deliver to Acquisition Sub, the quotas of Company
Capital Stock indicated next to such Selling Stockholder's name on Schedule 1.1
hereto, free and clear of all liens, claims, encumbrances or adverse interests
of any kind ("Liens").
1.2 Acquisition Price.
(a) In reliance on the representations, warranties and covenants of
the Selling Stockholders contained herein, and in consideration of the aforesaid
sale, assignment, transfer and delivery of the Company Capital Stock,
Acquisition Sub shall pay to the Selling Stockholders, in full payment for the
Company Capital Stock, an aggregate number of shares of Parent's common stock
("Parent Common Stock"), equal to such Selling Stockholder's portion of the
Aggregate Parent Shares (as hereinafter defined). The number of shares of Parent
Common Stock to which each Selling Stockholder shall be entitled at the Closing
shall be determined by multiplying (i) the
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Aggregate Parent Shares by (ii) applicable percentages for each Selling
Stockholder as set forth on Schedule 1.2 hereto. At the request of Acquisition
Sub, Parent shall issue the Aggregate Parent Shares directly to the Selling
Stockholders in fulfillment of Acquisition Sub's obligations under this Section
1.2(a). The parties understand and acknowledge that promptly following the
Closing, NetCS Mitarbeiter GbR, a Selling Stockholder, shall distribute its
portion of the Aggregate Parent Shares to its constituent partners, in the
applicable percentages set forth on Schedule 1.2 hereto.
(b) No fraction of a share of Parent Common Stock will be issued,
but in lieu thereof, each Selling Stockholder who would otherwise be entitled to
a fraction of a share of Parent Common Stock (after aggregating all fractional
shares of Parent Common Stock to be received by such Selling Stockholder) shall
be entitled to receive from Parent an amount of cash (rounded to the nearest
whole cent) equal to the product of (i) such fraction, multiplied by (ii) the
Average Price (as hereinafter defined).
1.3 Certain Definitions. As used in this Agreement, the following terms
not otherwise defined herein shall have the meanings specified in this Section
1.3:
(a) "Company Capital Stock" shall mean the aggregate number of
quotas ("Geschaefts-anteile") of Company Common Stock outstanding immediately
prior to the Closing Date (as hereinafter defined) with a total nominal value of
DM 100,000, including quotas of Company Common Stock issuable upon exercise of
all Rights to purchase Company Common Stock that are not canceled immediately
prior to the Closing Date.
(b) "Aggregate Parent Shares" shall be 475,000 shares of Parent
Common Stock (appropriately adjusted to reflect the effect of any reverse split,
stock split, stock dividend, reorganization, recapitalization or the like (a
"Recapitalization") with respect to the Parent Common Stock occurring after the
date hereof and prior to the Closing Date).
(c) "Average Price" shall mean the per share price of the Parent
Common Stock that equals the closing sale price for the Parent Common Stock as
reported on the Nasdaq National Market on the Closing Date.
(d) "Escrow Amount" shall be a number of shares of Parent Common
Stock obtained by multiplying (i) the Aggregate Parent Shares by (ii) ten
percent (10%), rounded to the nearest whole share.
1.4 Closing. The Closing of the Acquisition (the "Closing") shall occur at
the offices of Doeser, Amereller Noack located at Kleiststr. 23-26, 10787
Berlin, Germany, at 4:00 p.m., local time, on August 29, 1996 or, if any consent
or approval of any Governmental Entity required to be obtained has not been
obtained by such date, then the second business day following the date such
approval or consent is obtained, but in no event later than August 31, 1996. The
date on which the Closing shall occur is referred to herein as the "Closing
Date."
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1.5 Surrender of Shares; Payment of Acquisition Price.
(a) Prior to the Closing Date (as hereinafter defined), Parent shall
designate American Stock Transfer & Trust Company, or such other bank or trust
company with assets of not less than $100,000,000 as it may determine, to act as
exchange agent (the "Exchange Agent") in the Acquisition.
(b) At the Closing, each Selling Stockholder shall assign his, her
or its quota or quotas of the Company Capital Stock owned by such Selling
Stockholder under a notarized deed in substantially the form set forth on
Schedule 1.5 hereto, along with an executed Form W-9 or W-8, as applicable.
(c) Not later than the Closing Date, Parent shall, through
Acquisition Sub, cause the Exchange Agent to issue to the Selling Stockholders,
for exchange in accordance with this Article I, the Aggregate Parent Shares in
exchange for the Company Capital Stock; provided that Acquisition Sub shall
deposit a portion of the Aggregate Parent Shares constituting the Escrow Amount
into an escrow account pursuant to Section 8.8 below. The portion of the Escrow
Amount contributed on behalf of each Selling Stockholder shall be as set forth
on Schedule 1.5.
(d) As promptly as practicable after Acquisition Sub's receipt from
a Selling Stockholder of his, her or its quota or quotas of Company Capital
Stock, the Exchange Agent shall mail to such Selling Stockholder the number of
shares of Parent Common Stock to which such Selling Stockholder shall be
entitled pursuant to Section 1.2 (subject to the escrow pursuant to Section
8.8). Until so surrendered, each outstanding quota of Company Capital Stock held
by a Selling Stockholder shall be deemed, from and after the Closing Date, to
evidence only the right to receive shares of Parent Common Stock or cash, as
applicable, in respect of each such quota of Company Capital Stock (subject to
the escrow pursuant to Section 8.8). Notwithstanding the foregoing, an
individual Selling Stockholder shall only be entitled to receive Aggregate
Parent Shares upon compliance with Section 5.8 by such Selling Stockholder.
1.6 Additional Closing Date Deliveries.
(a) Subject to fulfillment or waiver of the conditions set forth in
Section 6.2, at the Closing, Parent shall deliver or cause to be delivered to
the Selling Stockholders the following:
(i) a copy of Parent's Articles of Incorporation, certified as
of a recent date by the Secretary of State of the State of California;
(ii) a certificate of good standing of Parent issued as of a
recent date by the Secretary of State of the State of California;
(iii) a certificate of the Secretary or an Assistant Secretary
of Parent, dated the Closing Date, as to (1) no amendments to the Articles of
Incorporation of Parent since the date of the certificate specified in clause
(i); (2) the Bylaws of Parent; (3) the resolutions of the Board of Directors of
Parent authorizing the execution and performance of this Agreement
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and the transactions contemplated hereby; and (4) incumbency and signatures of
officers of Parent executing this Agreement and any Related Agreement (as
hereinafter defined);
(iv) opinion of Venture Law Group, A Professional Corporation,
counsel to Parent, in form and substance reasonably satisfactory to counsel for
the Company and covering the matters set forth in Sections 3.1, 3.2, 3.3, 3.4,
3.7 and 3.9 as they relate to Parent, and opinion of Coopers & Lybrand L.L.P.,
in its capacity as special counsel to Acquisition Sub with respect to the
Acquisition, in form and substance reasonably satisfactory to counsel for the
Company and covering the matters set forth in Sections 3.1, 3.2, 3.3, 3.4, 3.7
and 3.9 as they relate to Acquisition Sub;
(v) the certificate contemplated by Section 6.1(c), duly
executed by the President or any Vice President of Parent; and
(vi) the Escrow Agreement, duly executed by Parent and
Acquisition Sub.
(b) Subject to fulfillment or waiver of the conditions set forth in
Section 6.1, at the Closing, the Selling Stockholders shall deliver to Parent
and Acquisition Sub the following:
(i) certified Charter of the Company ("Satzung");
(ii) certified excerpt from the commercial register regarding
the Company dated not more than three (3) days prior to the Closing Date;
(iii) such other appropriate certificates on behalf of the
Company as to resolutions and incumbency as Parent may reasonably request;
(iv) opinion of Doeser, Amereller Noack, counsel for the
Company, in form and substance reasonably satisfactory to Parent and covering
the matters set forth in Sections 2.1, 2.2, 2.4, 2.5, 2.6 and 2.17,
respectively, and opinions of counsel for the Selling Stockholders (who may be
the same as counsel for the Company), in form and substance reasonably
satisfactory to Parent and covering the matters set forth in paragraph (a) of
Article IIA;
(v) the certificates contemplated by Section 6.2(b), duly
executed by the Managing Directors ("Geschaeflsfuehrer") of the Company and the
Agent (as hereinafter defined) on behalf of each of the Selling Stockholders;
(vi) the Escrow Agreement, duly executed by the Agent on
behalf of the Selling Stockholders; and
(vii) such other certificates as may reasonably be requested
by Parent.
(c) At the Closing, the Company shall deliver to the Selling
Stockholders the following:
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(i) Copies of the opinion of Doeser, Amereller Noack delivered
to Parent as provided in Section 1.6(b)(iv), in each case addressed to the
Selling Stockholders; and
(ii) A certificate similar to the certificate provided to
Parent pursuant to Section 6.2(c), duly executed by the Managing Directors
(Geschaeflsfuehrer) on behalf of the Company.
(d) Parent, Acquisition Sub and the Selling Stockholders shall
execute and deliver to each other such other documents and instruments as the
other may reasonably request, or as necessary or appropriate, to effect the
sale, transfer, assignment, conveyance and delivery to Acquisition Sub of good
title to the Company Capital Stock and the Acquisition Sub's ownership of the
Company and to evidence the due execution, delivery and performance of this
Agreement and satisfaction of the conditions to the obligations of each party.
1.7 No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued in exchange for quotas of Company Capital Stock in
accordance with the terms of this Agreement (including any cash paid in respect
thereof) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such quotas of Company Capital Stock. If, after the Closing Date,
quotas of Company Capital Stock are presented by a Selling Stockholder to the
Company for any reason, they shall be exchanged as provided in this Article I
(subject to the escrow pursuant to Section 8.8).
1.8 Accounting Treatment. The parties intend that the transactions
contemplated by this Agreement shall be treated by Parent as a pooling of
interests for accounting purposes.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLING STOCKHOLDERS
The Company and the Selling Stockholders, jointly and severally, hereby
represent and warrant to Parent and Acquisition Sub, subject to the exceptions
specifically disclosed in the disclosure letter (referencing the appropriate
section number) to be delivered by the Company to Parent at least five (5) days
prior to the Closing (the "Company Disclosure Letter"), as follows (unless the
content otherwise requires, references to the Company shall include references
to the Company and any subsidiary of the Company):
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Germany. The
Company has the corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified could have a material adverse effect on the business,
assets, financial condition, results of operations or prospects of the Company
("Material Adverse Effect"). The Company has delivered a true and correct
officially certified copy of its actual excerpt from the Commercial Register of
the Company, as amended to date (the "Charter"), to Parent or its counsel.
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2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists solely of
14 quota interests (shares) in the aggregate amount of DM 100,000, all of which
are issued and outstanding. The Company Capital Stock is held by the persons and
in the amounts set forth on Schedule 1.1. At the time of the Closing, Schedule
1.1 shall have been appropriately adjusted to reflect exercises from the date
hereof of options outstanding on the date hereof as provided in paragraph (b).
All outstanding shares of Company Capital Stock are duly authorized, validly
issued, fully paid and non-assessable and not subject to preemptive rights
created by statute, the Charter or any agreement to which the Company or its
stockholders are parties or by which they are bound.
(b) Except as set forth in Section 2.2(b) of the Company Disclosure
Letter, there are no Rights, commitments or agreements of any character, written
or oral, to which the Company or any Selling Stockholder is a party or by which
any of them is bound obligating the Company or its stockholders to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of the Company or
obligating the Company or its stockholders to grant, extend, accelerate the
vesting of, change the price of; otherwise amend or enter into any such option,
warrant, call, right, commitment or agreement, including without limitation in
favor of employees of the Company.
2.3 Subsidiaries. Except as set forth in Section 2.3 of the Company
Disclosure Letter, the Company does not have and has never had any subsidiaries
or affiliated companies and does not otherwise own and has never otherwise owned
any shares of capital stock or any interest in, or control, directly or
indirectly, any other corporation, partnership, association, joint venture or
other business entity.
2.4 Authority. The Company has all requisite corporate power and authority
to enter into this Agreement. The execution and delivery of this Agreement have
been duly authorized by all necessary corporate action on the part of the
Company, and no further action is required on the part of the Company to
authorize the Acquisition, this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Acquisition
Sub, constitutes the valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors and to
rules of law governing specific performance, injunctive relief or other
equitable remedies.
2.5 No Conflict. Except as set forth in Section 2.5 of the Company
Disclosure Letter, the execution and delivery of this Agreement by the Company
do not, and, as of the Closing Date, the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation, modification or acceleration of any
obligation or loss of any benefit under (any such event, a "Conflict") (i) any
provision of the Company's Charter, (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise or
license required to be set forth in Section 2.14(a) of the Company Disclosure
Letter
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or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or its properties or assets, except, in the
case of clauses (ii) and (iii), to the extent any such conflict, violation,
default or loss would not have a Material Adverse Effect.
2.6 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other U.S. or German federal, state, county or local or European
Community or other foreign governmental authority, instrumentality, agency or
commission ("Governmental Entity") or any third party, including a party to any
agreement with the Company (so as not to trigger any Conflict), is required by
or with respect to the Company or the Selling Stockholders in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for such consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings (i) as may be
required under applicable securities laws, (ii) as are set forth in Section 2.6
of the Company Disclosure Letter or (iii) the failure to obtain which would not
have a Material Adverse Effect.
2.7 Company Financial Statements.
(a) Section 2.7(a) of the Company Disclosure Letter includes the
Company's unaudited financial statements (balance sheets, income statements and
statements of cash flows ("Kennzahlen Cash Flow")) as of and for the fiscal
years ending December 31, 1995, 1994 and 1993 and for the seven (7) months ended
July 31, 1996. Such financial statements are referred to collectively as the
"Financial Statements." Except as set forth in Schedule 2.7(a), the Financial
Statements are complete and correct and have been prepared in accordance with
generally accepted accounting principles in Germany ("GAAP"), applied on a basis
consistent throughout the periods indicated (except that they do not contain the
notes necessary to be in accordance with GAAP). The Financial Statements present
or will present, as applicable, fairly the financial condition and operating
results of the Company as of the dates and during the periods indicated therein.
The balance sheet of the Company as of July 31, 1996 is hereinafter referred to
as the "Balance Sheet." July 31, 1996 is hereinafter referred to as the "Balance
Sheet Date." The Balance Sheet, and the Company's results of operations for the
seven (7) months ended July 31, 1996, will not include any reserves, write-offs
or non-recurring charges in an amount that is not consistent with the Company's
past practices.
(b) Irrespective of any disclosure set forth in Section 2.7 of the
Company Disclosure Letter, the net asset value of the Company pursuant to
Section 272 of the German Commercial Code (HGB) calculated according to German
GAAP amounts to at least DM 750,000 as of the Balance Sheet Date.
2.8 No Undisclosed Liabilities. Except as set forth in Section 2.8
of the Company Disclosure Letter or reflected or reserved against in the Balance
Sheet, as of the Balance Sheet Date the Company did not have any liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other
(whether or not required to be reflected in financial statements in accordance
with GAAP), which in the aggregate exceeded U.S. $50,000, nor has the Company
incurred any such liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or
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endorsement since the Balance Sheet Date, except for liabilities incurred in the
ordinary course of business that, in the aggregate, do not exceed U.S. $50,000.
The guarantees described in Section 2.8 of the Company Disclosure Letter are the
only guarantees outstanding in favor of the Company, and the amount and purpose
of such guarantees are as described in the Company Disclosure Letter.
2.9 No Changes. Since July 31, 1996, there has not been, occurred or
arisen any transaction by the Company except in the ordinary course of business,
to the best knowledge of the Company and the Selling Stockholders, no
circumstances have arisen that would materially alter the financial position of
the Company with lasting effect and there have not occurred any extraordinary
events that could negatively affect the current or future business activities or
results of operations of the Company.
2.10 Tax Matters.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
or, collectively, "Taxes," means (i) any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use, occupation and value, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, social
security, excise and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts; (ii) any liability for the
payment of any amounts of the type described in clause (i) as a result of being
a member of an affiliated, consolidated, combined or unitary group for any
period; and (iii) any liability for the payment of any amounts of the type
described in clause (i) or (ii) as a result of any express or implied obligation
to indemnify any other person or as a result of any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) The Company, as of the Closing Date, will have prepared
and timely filed or made a timely request for extension for all required
federal, state, local and foreign returns, estimates, information statements and
reports ("Returns") relating to any and all Taxes concerning or attributable to
the Company or its operations, and such Returns are true, correct and complete
and have been completed in accordance with applicable law.
(ii) The Company, as of the Closing Date: (A) will have paid
or properly accrued on the Financial Statements all Taxes it is required to pay
or accrue (whether or not required to be shown on the Returns) or would be
required to accrue on the Balance Sheet Date if that date was the end of the
Company's fiscal year and (B) will have withheld and timely remitted with
respect to its employees all income taxes and other Taxes required to be
withheld and remitted.
(iii) The Company has not been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding, assessed or proposed
against the Company, nor has
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the Company executed any waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of the
Company is presently in progress or pending. All previous audits or examinations
of any Returns of the Company are described in Section 2.10 of the Company
Disclosure Letter.
(v) The Company does not have any liabilities for unpaid
federal, state, local and foreign Taxes due and payable on or before the Closing
Date which have not been accrued or reserved against in accordance with GAAP on
the Company Balance Sheet, whether asserted or unasserted, contingent or
otherwise.
(vi) The Company has provided to Parent or its legal counsel
copies of all foreign, federal and state income and all state sales and use Tax
Returns and "Equity Statements" (EK-Gliederungen) filed for all years as to
which any applicable statute of limitations has not expired.
(vii) There are no Liens of any sort on the assets of the
Company relating to or attributable to Taxes other than Liens for Taxes not yet
due and payable, and the Company has no knowledge of any basis for the assertion
of any claim relating or attributable to Taxes which, if adversely determined,
would result in any Lien on any assets of the Company.
(c) Tax Losses. The Company's trade loss as of December 31, 1995
amounted to at least DM 80,000.
2.11 Restrictions on Business Activities. Except as set forth in Section
2.11 of the Company Disclosure Letter, there is no agreement (noncompete or
otherwise), commitment, judgment, injunction, order or decree to which the
Company or any of its employees is a party or otherwise binding upon the Company
or any of its employees that has or reasonably could be expected to have the
effect of prohibiting or impairing any business practice of the Company, any
acquisition of property (tangible or intangible) by the Company or the conduct
of business by the Company, except such prohibitions or impairments as would not
have a Material Adverse Effect.
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition of
Equipment.
(a) The Company owns no real property, nor has it ever owned any
real property, except to the extent that its leasehold interests constitute
ownership. Section 2.12(a) of the Company Disclosure Letter sets forth a list of
all real property currently owned or leased by the Company and, in the case of
leased property, the name of the lessor, the date of the lease and each
amendment thereto and the aggregate annual rental and/or other fees payable
under any such lease. All such leases are in full force and effect, are valid
and effective as against the Company and, to the best knowledge of the Company
and the Selling Stockholders, the lessors thereto, in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default) by the Company, which could have a Material
Adverse Effect.
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14
(b) Except for customary retention of title (whereby title is not
transferred until payment is made for an asset), the Company has good and valid
title to, or, in the case of leased properties and assets, valid leasehold
interests in, all of its tangible properties and assets other than real property
used or held for use in its business, free and clear of any Liens), except as
reflected in the Company Financial Statements and except for liens for taxes not
yet due and payable and such imperfections of title and encumbrances, if any,
which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present use,
of the property subject thereto or affected thereby.
(c) The equipment and other tangible personal property owned or
leased by the Company (i) is, in the reasonable judgment of the Company,
adequate for the conduct of the business of the Company as currently conducted,
(ii) is in good operating condition, subject to normal wear and tear, and (iii)
has been reasonably maintained.
(d) Except as set forth in Section 2.12(d) of the Company Disclosure
Letter, the Company owns or has valid and continuing rights to use all of the
properties and assets (including without limitation all intellectual property
rights) necessary to conduct its business as currently conducted in all material
respects.
(e) Except as set forth in Section 2.12(e) of the Company Disclosure
Letter, the Company has not entered into any agreements or arrangements with
respect to the leasing of real or personal property.
2.13 Intellectual Property.
(a) Except as set forth in Section 2.13(a) of the Company Disclosure
Letter, the Company owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, maskworks, net lists, schematics,
technology, know-how, computer software programs or applications (in both source
code and object code form), and tangible or intangible proprietary information
or materials that are used in the business of the Company as currently conducted
or as proposed to be conducted (the "Company Intellectual Property Rights"),
except to the extent the failure to so own, license or possess any such Company
Intellectual Property Right would not have a Material Adverse Effect. All
software of the Company is owned 100% by the Company free and clear of all
present and future claims (except for future claims made under the Employee
Invention Act) from any third parties currently or previously involved with the
software in any capacity, including but not limited to employees of the Company,
and there are no claims pursuant to the German Gesetz ueber
Arbeitnehmererfindungen and related regulations thereto. All products of the
Company are described in Section 2.13(a) of the Company Disclosure Letter. The
Company agrees that within seven (7) days following the Closing of the
Acquisition, it shall deliver copies of the software in source code format to
Parent, provided that such delivery shall not be construed as a transfer of any
rights in the software.
(b) Section 2.13 of the Company Disclosure Letter sets forth a
complete list of all patents, trademarks, registered copyrights, trade names and
service marks, and any applications therefor, in respect of any of the foregoing
included in the Company Intellectual
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Property Rights, and specifies, where applicable, the jurisdictions in which
each such Company Intellectual Property Right has been issued or registered or
in which an application for such issuance and registration has been filed,
including the respective registration or application numbers and the names of
all registered owners. Section 2.13 of the Company Disclosure Letter also sets
forth a complete list of all material licenses, sublicenses and other agreements
as to which the Company is a party and pursuant to which the Company or any
other person is authorized by the Company to use any Company Intellectual
Property Right or other trade secret material of the Company, and includes the
identity of all parties thereto, a description of the nature and subject matter
thereof, the applicable royalty and the term thereof. The Company is not in
violation in any material respect of any such license, sublicense or agreement.
The execution and delivery of this Agreement by the Company, and the
consummation of the transactions contemplated hereby, (i) will not cause the
Company to be in violation or default in any material respect under any such
license, sublicense or agreement, (ii) entitle any other party to any such
license, sublicense or agreement to terminate or modify such license, sublicense
or agreement or (iii) require the Company to repay any funds already received by
it from a third party.
(c) Except as set forth in Section 2.13(c) of the Company Disclosure
Letter, no claim with respect to the Company Intellectual Property Rights has
been asserted against the Company, nor to the best knowledge of the Company or
the Selling Stockholders is threatened against the Company or has been asserted
or threatened against a third party, nor is the Company or any Selling
Stockholder aware of any valid grounds for any bona fide claims (i) to the
effect that the manufacture, sale, licensing or use of any of the products of
the Company as now manufactured, sold, licensed or used infringes on any
copyright, patent, trademark, service mark, trade secret or other proprietary
right of any third party, (ii) against the use by the Company of any trademarks,
service marks, trade names, trade secrets, copyrights, patents, technology, how-
how or computer software programs and applications used in the Company's
business as currently conducted or as proposed to be conducted by the Company or
(iii) challenging the validity, effectiveness or ownership by the Company of any
of the Company Intellectual Property Rights. All registered patents, trademarks,
service marks and copyrights held by the Company are valid and subsisting. To
the best knowledge of the Company and the Selling Stockholders, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights owned by the Company by any third party, including
any employee or consultant or former employee or consultant of the Company. No
Company Intellectual Property Right or product of the Company is subject to any
outstanding decree, order, judgment or stipulation restricting in any manner the
licensing thereof by the Company. The Company has not entered into any agreement
under which the Company is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any significant
geographic area, during any period of time in excess of one (1) year, or in any
significant segment of the market.
(d) Except as set forth in Section 2.13(d) of the Company Disclosure
Letter, all current and former employees and contractors of the Company have
executed an Employee Proprietary Information and Invention Agreement.
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2.14 Agreements, Contracts and Commitments.
(a) Except as set forth in Section 2.14(a) of the Company Disclosure
Letter, the Company does not have continuing obligations under, is not a party
to nor is it bound by:
(i) any agreement of indemnification or guaranty, other than
intellectual property indemnification to customers in the ordinary course of
business and containing customary and reasonable terms,
(ii) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company to engage in any line of business
or to compete with any person,
(iii) any development agreement, or
(iv) any other agreement, contract or commitment (except for
agreements, contracts or commitments with customers) that involves U.S. $50,000
or more or is not cancelable without penalty within ninety (90) days.
(b) Except as noted in Section 2.14(b) of the Company Disclosure
Letter, the Company has not breached, violated or defaulted under, or received
notice that it has breached, violated or defaulted under, any of the material
terms or conditions of (i) any agreement, contract or commitment required to be
set forth in Section 2.14(a) of the Company Disclosure Letter, or (ii) any other
material agreement, contract or commitment to which it is a party or by which it
is bound (any such agreement, contract or commitment, a "Contract"), nor is the
Company aware of any event that would constitute such a breach, violation or
default with the lapse of time, giving of notice or both. Each Contract is in
full force and effect as against the Company and, to the best knowledge of the
Company and the Selling Stockholders, the other parties thereto, and, except as
otherwise disclosed in Section 2.14(a) of the Company Disclosure Letter, the
Company is not aware that any party obligated to the Company pursuant thereto is
subject to any material default thereunder. The Company has obtained, or will
obtain prior to the Closing Date, all necessary consents, waivers and approvals
of parties to any Contract as are required thereunder in connection with the
Acquisition or to remain in effect without modification after the Acquisition.
2.15 Interested Party Transactions. To the best knowledge of the Company
and the Selling Stockholders, no officer, director, employee , consultant or
holder of Company Capital Stock, nor any ancestor, sibling, descendant or spouse
of any of such persons, or any trust, partnership or corporation in which any of
such persons has or has had an interest), has or has had, directly or
indirectly, (i) an interest in any entity which furnished or sold, or furnishes
or sells, services or products that the Company furnishes or sells, or proposes
to furnish or sell, or (ii) any interest in any entity that purchases from or
sells or furnishes to, the Company, any goods or services or (iii) a beneficial
interest in any contract or agreement set forth in Section 2.14 of the Company
Disclosure Letter; provided that passive ownership of no more than five percent
(5%) of the outstanding stock (or equivalent ownership interests) of a
corporation or other entity shall not be deemed an "interest in any entity" for
purposes of this Section 2.15.
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2.16 Governmental Authorization. Section 2.16 of the Company Disclosure
Letter accurately lists each material consent, license, permit, grant or other
authorization issued to the Company by a Governmental Entity (a) pursuant to
which the Company currently operates or holds any interest in any of its
properties or (b) which is required for the operation of its business or the
holding of any such interest (herein collectively called "Company
Authorizations"). The Company Authorizations are in full force and effect and
constitute all Company Authorizations required to permit the Company to operate
or conduct its business or hold any interest in its properties or assets, except
to the extent the failure to maintain any such Company Authorization would not
have a Material Adverse Effect.
2.17 Litigation. There is no action, suit, claim, proceeding or
arbitration of any nature pending or, to the best knowledge of the Company and
the Selling Stockholders, threatened against the Company, its properties or any
of its officers, directors or stockholders in respect of the Company. There is
no investigation pending or, to the best knowledge of the Company and the
Selling Stockholders, threatened against the Company, its properties or any of
its officers, directors or stockholders in respect of the Company by or before
any governmental entity. No governmental entity has at any time challenged or
questioned the legal right of the Company to manufacture, offer or sell any of
its products in the present manner or style thereof.
2.18 Accounts Receivable; Inventory.
(a) Set forth in Section 2.18(a) of the Company Disclosure Letter is
a list of all accounts receivable of the Company reflected on the Balance Sheet
("Accounts Receivable") along with a range of days elapsed since invoice as of
the Balance Sheet Date. All Accounts Receivable of the Company (i) arose in the
ordinary course of business, (ii) represent bona fide indebtedness incurred by
the applicable account debtors in the amounts invoiced by the Company and stated
on its books and records, subject to collection, (iii) are carried at values
determined in accordance with GAAP, consistently applied, and (iv) are not
subject to any defenses, counterclaims or claims for set off. The reserves
against the Accounts Receivable have been established in accordance with GAAP,
and based upon a review of such Accounts Receivable, the Company believes such
reserves to be adequate. No person has any Lien on any of such Accounts
Receivable and no request or agreement for deduction or discount has been made
with respect to any of such Accounts Receivable. To the best knowledge of the
Company and the Selling Stockholders, none of such Accounts Receivable is owed
by a person or entity that has sought the protection of any bankruptcy or
insolvency law or is the subject of any dispute as to payment.
(b) Set forth in Section 2.18(b) of the Company Disclosure Letter is
a list of all accounts receivable of the Company outstanding as of the date two
(2) days prior to the date of this Agreement. Ninety seven percent (97%) of the
aggregate amount of such accounts receivable shall be paid and collected within
one hundred five (105) days following the Closing Date; provided, however, that,
in the event of breach of this representation, the Selling Stockholders shall
only be obligated under the indemnification provisions set forth in Article VIII
hereof if the Company transfers and assigns the accounts receivable which are
the subject of the requested indemnification.
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(c) All of the inventories of the Company reflected on the Balance
Sheet and the Company's books and records on the date hereof were purchased,
acquired or produced in the ordinary and regular course of business and in a
manner consistent with the Company's regular inventory practices and are set
forth on the Company's books and records in accordance with the practices and
principles of the Company. The reserves against such inventory have been
established in accordance with GAAP. Based upon a review of its inventories, the
Company believes its inventory reserves as reflected on the Balance Sheet to be
adequate with respect to inventories that are obsolete, defective or in excess
of the needs of the business of the Company reasonably anticipated for the
normal operation of the business consistent with past practices and outstanding
customer contracts. The presentation of inventory on the Balance Sheet conforms
to GAAP and such inventory is stated at the lower of cost (determined using the
first-in, first-out method) or net realizable value.
2.19 Minute Books. The minute books of the Company described in Section
2.19 of the Company Disclosure Letter and made available to counsel for Parent
or otherwise to the persons designated by Parent are the only minute books of
the Company and contain a reasonably accurate summary of all meetings of the
directors (or committees thereof) and stockholders or actions by written consent
since the formation of the Company.
2.20 Environmental Matters.
(a) Hazardous Material. Except as set forth on Section 2.20 of the
Company Disclosure Letter, no underground storage tank containing any regulated
amount of any substance that has been designated by any Governmental Entity or
by applicable law to be radioactive, toxic, hazardous or otherwise a danger to
health or the environment, including without limitation, PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as hazardous substances
pursuant to applicable law (a "Hazardous Material"), excluding reasonable
quantities of office and janitorial supplies properly and safely maintained, is
present in, on or under any property, including the land and the improvements,
ground water and surface water thereof, that the Company has at any time owned,
operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing Date, nor has the Company disposed of, transported, sold or manufactured
any product containing a Hazardous Material (collectively "Hazardous Materials
Activities") in violation of any rule, regulation, treaty or statute promulgated
by any Governmental Entity in effect prior to or as of the date hereof to
prohibit, regulate or control Hazardous Materials or any Hazardous Materials
Activity.
(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Materials
Activities as such activities are currently being conducted, except to the
extent the failure to hold any such Environmental Permit would not have a
Material Adverse Effect.
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(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company. The Company is not
aware of any fact or circumstance which could involve the Company in any
environmental litigation or impose upon the Company any material environmental
liability.
2.21 Brokers' and Finders' Fees. Except as described on Section 2.21 of
the Company Disclosure Letter, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.22 Employees. Section 2.22 of the Company Disclosure Letter sets forth a
list of all employees of and consultants to the Company, including for each
employee or consultant, his or her name, employment or consulting commencement
date, birthdate, compensation (including salary, bonus, commissions,
perquisites, insurance benefits and car allowances) and notice required prior to
termination of employment or consulting services. Such list is complete and
accurate in all material respects.
2.23 Employee Benefit Plans and Compensation.
(a) For purposes of this Section 2.23, the following terms shall
have the meanings set forth below:
(i) "Company Employee Plan" shall refer to any plan, program,
policy, practice, contract, agreement or other arrangement providing for
bonuses, severance, termination pay, performance awards, stock or stock-related
awards, pensions, fringe benefits or other employee benefits of any kind,
whether formal or informal, funded or unfunded and whether or not legally
binding, including without limitation, any plan which is or has been maintained,
contributed to, or required to be contributed to, by the Company for the benefit
of any Employee (as defined below), and pursuant to which the Company has or may
have any material liability, contingent or otherwise;
(ii) "Employee" shall mean any current, former or retired
employee, officer or director of the Company or any Affiliate; and
(iii) "Employee Agreement" shall refer to each employment,
severance, consulting or similar agreement or contract between the Company and
any Employee.
(b) Section 2.23(b) of the Company Disclosure Letter contains an
accurate and complete list of each Company Employee Plan and each Employee
Agreement. The Company does not have any plan or commitment, whether legally
binding or not, to establish any new Company Employee Plan or Employee
Agreement, to modify any Company Employee Plan or Employee Agreement (except to
the extent required by law or to conform any such Company Employee Plan or
Employee Agreement to the requirements of any applicable law, in each case as
previously disclosed to Parent in writing, or as required by this Agreement), or
to enter into any
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Company Employee Plan or Employee Agreement, nor does it have any intention or
commitment to do any of the foregoing.
(c) The Company and its Affiliates have performed all obligations
required to be performed by them under each Company Employee Plan, and each
Company Employee Plan has been established and maintained in accordance with its
terms and in compliance with all applicable laws, statutes, orders, rules and
regulations, except to the extent the failure to so perform or maintain would
not have a Material Adverse Effect; (ii) there are no actions, suits or claims
pending, or, to the knowledge of the Company, threatened (other than routine
claims for benefits) against any Company Employee Plan or against the assets of
any Company Employee Plan; and (iii) each Company Employee Plan can be amended,
terminated or otherwise discontinued after the Closing Date in accordance with
its terms, without liability to the Company, Parent or any of its Affiliates
(other than ordinary administration expenses typically incurred in a termination
event).
(d) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Company
Employee Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(e) The Company (i) to the best knowledge of the Company and the
Selling Stockholders, is in compliance in all material respects with all
applicable laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
with respect to Employees; (ii) has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries and other payments to
Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
health benefits, social security, pension or other benefits for Employees (other
than routine payments to be made in the normal course of business and consistent
with past practice and other than payments which are not material either
individually or in the aggregate, required under applicable German statutory
provisions).
(f) No work stoppage or labor strike against the Company is pending
or, to the best knowledge of the Company and the Selling Stockholders,
threatened. The Company is not involved in or threatened with any labor dispute,
grievance, or litigation relating to labor, safety or discrimination matters
involving any Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in liability to the Company. The
Company has not engaged in any unfair labor practices which could, individually
or in the aggregate, directly or indirectly result in a liability to the
Company. The Company is not presently, nor has it been in the past, a party to,
or bound by, any collective bargaining agreement or union contract with respect
to Employees and no collective bargaining agreement is being negotiated by the
Company.
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2.24 Insurance. Section 2.24 of the Company Disclosure Letter lists all
insurance policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company. The
Company believes that such insurance policies are customary for similarly
situated companies and reasonably satisfactory to ensure the Company against the
risks associated with its business. There is no claim by the Company pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid, and the
Company is otherwise in material compliance with the terms of such policies and
bonds (or other policies and bonds providing substantially similar insurance
coverage). The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
2.25 Compliance with Laws. The Company has complied in all material
respects with, is not in violation in any material respect of, and has not
received any notices of any material violation with respect to, any foreign, or
any German federal, state or local statute, law or regulation with respect to
the conduct of its business, or the ownership or operation of its business,
assets or properties.
2.26 Complete Copies of Materials. The Company has made available to
Parent or Parent's counsel prior to the Closing, true and complete copies of
each agreement, contract, commitment or other document (or summaries of same)
that is referred to in the Company Disclosure Letter or that has been requested
by Parent or its counsel.
2.27 Warranties; Indemnities. Section 2.27 of the Company Disclosure
Letter sets forth a summary of all warranties and indemnities relating to
products sold or services rendered by the Company, and no warranty or indemnity
has been given by the Company which differs therefrom in any material respect.
Section 2.27 of the Company Disclosure Letter also indicates all warranty and
indemnity claims in excess of $10,000 made against the Company since January 1,
1996.
2.28 Pooling Matters. Neither the Company nor any of its affiliates has,
to its knowledge and based upon consultation with its independent accountants,
taken or agreed to take any action that would affect adversely the ability of
Parent to account for the transactions contemplated by this Agreement as a
pooling of interests in accordance with U.S. generally accepted accounting
principles.
2.29 Customers. Section 2.29 of the Company Disclosure Letter sets forth
(i) a list of the Company's top ten customers, (ii) a list of customers of
strategic importance to the Company not otherwise set forth in the list required
by (i) above and (iii) a list of all contracts or agreements with customers
which cannot be terminated on or prior to December 31, 1997. With respect to
each contract or agreement referenced in (iii) above, Section 2.29 of the
Company Disclosure Letter contains a description of all future obligations of
the Company under such contract or agreement, a description of provisions
related to transfer of intellectual property rights, a description of the
termination provisions of such contract or agreement and, if applicable, a
description of any minimum purchase requirements under such contract or
agreement. None of the Company's contracts or agreements with its customers
contains any extraordinary terms, in
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particular with respect to future obligations of the Company, transfers of
intellectual property rights, termination provisions or minimum purchase
requirements.
2.30 Selling Stockholder Loans. Section 2.30 of the Company Disclosure
Letter sets forth a list of all outstanding loans made by any Selling
Stockholder to the Company, including the name of the lender, the due date of
the loan and the current (and any previous) rate at which the loan bears
interest. All interest paid by the Company under such loans has been paid at
arm's length. There are no other loans outstanding and no other obligation of
any type, absolute or contingent, owed to any Selling Stockholder by the
Company. The amounts of such Selling Stockholder loans do not exceed the amounts
set forth in the Company Disclosure Letter. Any loans made by the Company to any
of the Selling Stockholders are in amounts not less than set forth in Section
2.30 of the Company Disclosure Letter.
2.31 Representations Complete. None of the representations or warranties
made in this Article II (as modified by the Company Disclosure Letter), nor any
statement made in any Schedule or certificate furnished by the Company pursuant
to this Agreement, or furnished in or in connection with documents mailed or
delivered to the stockholders of the Company in connection with soliciting their
agreement to become a party to this Agreement and the Acquisition, contains, as
of the date hereof; any untrue statement of a material fact, or omits, as of the
date hereof, to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading. To the best knowledge of the Company and the Selling
Stockholders, there is no event, fact or condition that materially and adversely
affects the business, assets, financial condition or results of operations of
the Company, or that reasonably could be expected to do so, that has not been
set forth in this Agreement or in the Company Disclosure Letter, other than
general economic or industry-wide events, facts or conditions.
2.32 Limitations. The Selling Stockholders hereby disclaim any
representation or warranty of merchantability or fitness for any particular
purpose.
ARTICLE IIA
FURTHER REPRESENTATION AND WARRANTIES
OF THE SELLING STOCKHOLDERS
Each Selling Stockholder further represents and warrants severally to
Parent and Acquisition Sub as follows:
(a) Selling Stockholder is the sole record and beneficial owner of the
shares of Company Capital Stock set forth next to his, her or its name on
Schedule 1.1, and such shares are to be sold pursuant to this Agreement. Such
shares of Company Capital Stock are not subject to any claim, lien, pledge,
charge, security interest or other encumbrance or to any rights of first refusal
of any kind, and Selling Stockholder has not granted any rights to purchase such
shares to any other person or entity. Selling Stockholder has the sole right to
transfer such shares to Acquisition Sub. Such shares constitute all of the
shares of Company Capital Stock owned, beneficially or of record, by Selling
Stockholder, and Selling Stockholder has no other Rights to
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acquire shares of Company Capital Stock. Upon delivery to Acquisition Sub of
such shares, together with a duly executed transfer instrument, Acquisition Sub
will receive good title to such shares, subject to no claim, lien, pledge,
charge, security interest or other encumbrance retained, granted or permitted by
Selling Stockholder or the Company.
(b) The quotas exchanged hereunder do not represent all or substantially
all of each of the Selling Stockholder's assets (Sec. 419 German Civil Code). In
the event that Parent and/or Acquisition Sub becomes liable under the provisions
of Section 419 of the German Civil Code, the Selling Stockholders other than
Thomas Schaefer and Cornelia Sternke, jointly and severally, shall hold Parent
and Acquisition Sub harmless from such liabilities, and all Selling Stockholders
other than Thomas Schaefer and Cornelia Sternke, jointly and severally, shall
assume such liabilities. Any Selling Stockholder whose quotas represent all or
substantially all of his, her or its assets under Section 419 of the German
Civil Code hereby agrees that he, she or it shall apply the proceeds of any
sales of Aggregate Parent Shares to his, her or its liabilities prior to any
other disposition of such proceeds. The Company and the Selling Stockholders
hereby agree that Parent and Acquisition Sub shall be entitled to rescind this
Agreement in the event that Parent and/or Acquisition Sub becomes subject to
significant liabilities under Section 419 of the German Civil Code.
(c) Selling Stockholder has received and read information concerning the
Company and Parent, including without limitation the SEC Documents (as defined
below) and Parent Financial Statements, and has had an opportunity to ask
questions and receive answers from representatives of Parent and the Company
concerning the terms of the Acquisition, the Company and Parent.
(d) (i) Neither Selling Stockholder nor any person for the account or
benefit of whom Selling Stockholder is acting is a "U.S. Person," as that term
is defined in Rule 902 of Regulation S of the Securities Act of 1933, as amended
(the "Securities Act"), including but not limited to: (i) a natural person
resident in the United States (which term includes the United States of America,
its territories and possessions, any state of the United States and the District
of Columbia); (ii) a partnership or corporation organized or incorporated under
the laws of the United States; (iii) any estate of which any executor or
administrator is a U.S. Person; (iv) any trust of which any trustee is a U.S.
Person; (v) any agency or branch of a foreign entity located in the United
States; (vi) any non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the benefit or account
of a U.S. Person or held by a dealer or other fiduciary organized, incorporated
or (if an individual) resident in the United States; or (vii) any foreign
partnership or corporation formed by a U.S. Person principally for the purpose
of investing in securities not registered under the Securities Act, unless it is
organized or incorporated, and owned, by accredited investors (as defined in
Rule 501(a) of Regulation D under the Securities Act) who are not natural
persons, estates or trusts.
(ii) Without limiting Selling Stockholder's rights under Article VII
hereof, Selling Stockholder acknowledges that the Aggregate Parent Shares must
be held indefinitely unless subsequently registered under the Securities Act or
unless an exemption from such registration is available. Selling Stockholder is
aware of the provisions of Rule 144 promulgated under the Securities Act, which
permit limited resale of shares purchased in a private placement
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subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the shares, the availability of
certain current public information about Parent, the resale occurring not less
than two years after a party has purchased and paid for the security to be sold,
the sale being effected through a "broker's transaction" or in transactions
directly with a "market maker" and the number of shares being sold during any
three month period not exceeding specified limitations.
(iii) Selling Stockholder acknowledges and agrees that Parent is
relying on the foregoing representations and the covenants contained in Article
VII hereof to ensure that the offer, issuance and sale by Parent of the
Aggregate Parent Shares are exempt from the registration requirements of the
Securities Act by virtue of Regulation S thereunder.
(e) Selling Stockholder has had an opportunity to review with its own tax
advisors the tax consequences to Selling Stockholder of the Acquisition and the
transactions contemplated by this Agreement. Selling Stockholder understands
that it must rely solely on its advisors and not on any statements or
representations by Parent, the Company or any of their agents. Selling
Stockholder understands that it (and not Parent or the Company) shall be
responsible for its own tax liability that may arise as a result of the
Acquisition or the transactions contemplated by this Agreement.
(f) Selling Stockholder has all requisite power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Selling Stockholder and,
assuming the due authorization, execution and delivery by Parent and Acquisition
Sub, constitutes the valid and binding obligation of the Selling Stockholder,
enforceable against the Selling Stockholder in accordance with its terms,
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and to rules of law governing specific performance,
injunctive relief or other equitable remedies.
(g) Except as described on Schedule IIA to this Agreement, the Selling
Stockholder has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
(h) Except as set forth on Schedule IIA to this Agreement, the execution
and delivery of this Agreement by the Selling Stockholder do not, and, as of the
Closing Date, the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation, modification or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the Company's
Charter, (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise or license required to be set forth in
Section 2.14(a) of the Company Disclosure Letter, (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
its properties or assets, except, in the case of clauses (ii) and (iii), to the
extent any such conflict, violation, default or loss would not have a Material
Adverse Effect or (iv) any other contract or agreement to which the Selling
Stockholder is a party.
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(i) Prior to the Acquisition, Selling Stockholder is not a shareholder of
Parent, either directly or indirectly through the ownership of any interest in
any third party that, to the knowledge of the Selling Stockholder, is a
shareholder of Parent, nor is Selling Stockholder a director or officer of any
shareholder of Parent.
(j) In the event that Selling Stockholder is a partner in NetCS
Mitarbeiter GbR, such Selling Stockholder represents and warrants to Parent and
Acquisition Sub that there are no outstanding liabilities of NetCS Mitarbeiter
GbR. Each Selling Stockholder who is a partner in NetCS Mitarbeiter GbR agrees
that he or she shall, jointly and severally, assume any liabilities of NetCS
Mitarbeiter GbR and shall indemnify the Company and hold it harmless from any
liabilities arising out of the Company's participation in NetCS Mitarbeiter GbR
until such time as the Company shall no longer participate in NetCS Mitarbeiter
GbR. Effective as of the Closing, the Company shall no longer be a partner in
NetCS Mitarbeiter GbR.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION SUB
Parent and Acquisition Sub represent and warrant to the Company and the
Selling Stockholders as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Acquisition Sub is a corporation duly organized, validly existing
and in good standing under the laws of The Netherlands. Each of Parent and
Acquisition Sub has the corporate power to own its properties and to carry on
its business as now being conducted and is duly qualified to do business and is
in good standing in each jurisdiction in which the failure to be so qualified
would have a material adverse effect on the business, assets, financial
condition or results of operations of Parent or the ability of Parent and
Acquisition Sub to consummate the transactions contemplated hereby.
3.2 Authority. Parent and Acquisition Sub have all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and
Acquisition Sub, and no further action is required on the part of Parent to
authorize the Acquisition, this Agreement and the transactions contemplated
hereby except as expressly set forth elsewhere herein. This Agreement has been
duly executed and delivered by Parent and Acquisition Sub and, assuming due
authorization, execution and delivery by the Company and the Selling
Stockholders, constitutes the valid and binding obligation of Parent and
Acquisition Sub, in each case enforceable in accordance with its terms, except
as such enforceability may be limited by principles of public policy and subject
to the laws of general application relating to bankruptcy, insolvency and the
relief of debtors and rules of law governing specific performance, injunctive
relief or other equitable remedies.
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3.3 No Conflict. The execution and delivery of this Agreement do not, and,
as of the Closing Date, the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under (i) any provision of the Articles of Incorporation or
Bylaws (or other charter documents) of Parent and Acquisition Sub or (ii) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or its properties or assets,
other than any such conflicts, violations, defaults, terminations, cancellations
or accelerations which would not have a material adverse effect on the ability
of Parent and Acquisition Sub to consummate the transactions contemplated
hereby.
3.4 Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any third
party is required by or with respect to Parent and Acquisition Sub in connection
with the execution and delivery of this Agreement by Parent and Acquisition Sub
or the consummation by Parent and Acquisition Sub of the transactions
contemplated hereby, except for (i) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable U.S. state and federal securities laws and the laws of any foreign
country, (ii) such filings as may be required with respect to listing of the
Aggregate Parent Shares on the Nasdaq National Market and (iii) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not have a material adverse effect on the ability of
Parent to consummate the transactions contemplated hereby.
3.5 SEC Documents; Parent Financial Statements. Parent is a reporting
company under the U.S. Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Parent has furnished or made available to the Company for
delivery to the Selling Stockholders true and complete copies of (i) the final
prospectus dated March 14, 1996 included in its Registration Statement on Form
S-1, as declared effective by the U.S. Securities and Exchange Commission (the
"SEC") on March 9, 1996, and (ii) all other reports and registration statements
filed with the SEC under the Exchange Act since such date, all in the form
(including exhibits) so filed (collectively (including, without limitation, such
final prospectus), the "SEC Documents"). The SEC Documents include all forms,
reports, statements and other documents required to be filed by Parent with the
SEC since March 14, 1996. As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a subsequently filed document with the SEC. As of the date hereof,
no additional filings or amendments to previously filed SEC Documents are
required pursuant to such rules and regulations. The financial statements of
Parent, including the notes thereto, included in the SEC Documents (the "Parent
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with U.S.
generally accepted accounting principles consistently applied (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by the rules and regulations of
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the SEC) and fairly present the consolidated financial position of Parent at the
dates thereof and of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal, recurring audit
adjustments). There has been no change in Parent accounting policies except as
described in the notes to the Parent Financial Statements. Parent has no
material obligations other than (i) those set forth in the Parent Financial
Statements and (ii) those not required to be set forth in the Parent Financial
Statements under U.S. generally accepted accounting principles, as of the
respective dates of the financial statements.
3.6 Absence of Certain Changes or Events. Except as set forth in the SEC
Documents, since June 30, 1996, Parent has conducted its business in the
ordinary course and there has not occurred any event the affect of which has
been, or could reasonably expected to be, material and adverse to the business,
assets, financial condition or results of operations of Parent and its
subsidiaries, taken as a whole, or on the ability of Parent to consummate the
transactions contemplated hereby.
3.7 Litigation. There is no action, suit, claim, proceeding or arbitration
of any nature pending or, to the best knowledge of Parent, threatened, nor is
Parent aware of any pending or threatened investigation against Parent or any of
its properties that could reasonably be expected to have a material adverse
effect on the business, assets, financial condition or results of operations of
Parent and its subsidiaries, taken as a whole.
3.8 Broker's and Finder's Fees. No broker, finder or investment banker is
entitled to any brokers', finders' or other fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent.
3.9 Parent Common Stock. The shares of Parent Common Stock, when issued in
the Acquisition in compliance with this Agreement, will be validly issued, fully
paid and nonassessable and will be listed on the Nasdaq National Market.
3.10 Compliance with U.S. Securities Laws. Assuming the accuracy of the
representations set forth in Article IIA and the covenants contained in Article
VII, the offer, issuance and sale by Parent of the Aggregate Parent Shares are
exempt from the registration requirements of the Securities Act by virtue of
Regulation S thereunder.
3.11 Pooling Matters. Neither Parent nor any of its affiliates has, to its
knowledge and based upon consultation with its independent accountants, taken or
agreed to take any action that would affect adversely the ability of Parent to
account for the transactions contemplated by this Agreement as a pooling of
interests in accordance with U.S. generally accepted accounting principles.
3.12 Parent Affiliates. Based solely on information available to Parent
without further investigation by Parent, and contemplating the employment
agreements expected to be entered into in connection with the Acquisition and
the reporting and other relationships, if any, between Parent or any of its
subsidiaries and the respective Selling Stockholders following consummation of
the Acquisition, Parent has no reason to believe that any of the Selling
Stockholders would be
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deemed to be affiliates of Parent within the meaning of Rule 144 promulgated
under the Securities Act.
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING DATE
4.1 Conduct of Business of the Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing Date, the Company agrees (except to the extent that
Parent shall otherwise consent in writing), to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Taxes when due unless validly
withheld and appropriately reserved for, to pay its employees only their regular
monthly salaries, to pay no bonuses to employees of the Company (other than in
the ordinary course), to make no other extraordinary payments to its employees
or stockholders, including, without limitation, dividends or other distributions
with respect to its outstanding capital stock or equivalent ownership interests,
to issue no additional capital stock or equivalent ownership interests or repay
any bona fide debt owed to stockholders other than strictly in accordance with
the written terms of such debt as provided to Parent, to incur no indebtedness
or make any purchases other than in the ordinary course, to pay or perform other
obligations consistent in all material respects with past practice, and, to the
extent consistent with such business and except as agreed to by Parent and the
Company, use all reasonable efforts consistent with past practice and policies
to preserve intact the Company's present business organization and Company
Intellectual Property Rights, keep available the services of its present
officers and key employees and consultants and preserve their relationships with
customers, suppliers, distributors, licensors, licensees and others having
business dealings with it, all with the goal of preserving unimpaired the
Company's goodwill and ongoing businesses at the Closing Date. The Company shall
not, without the consent of Parent, take any action or make any filings with any
governmental or judicial agency, department or other authority that would modify
or alter the Company's corporate, legal or regulatory status, and will not form
or finance or contribute any property to any new business entity. The Company
shall promptly notify Parent of any event or occurrence or emergency not in the
ordinary course of business of the Company, and any material event involving the
Company.
4.2 No Solicitation.
(a) Until the Closing Date or the date of termination of this
Agreement pursuant to the provisions of Section 10.1 hereof, whichever shall
occur first, neither the Selling Stockholders nor the Company shall (nor shall
the Company or Selling Stockholders permit any of the Company's officers,
directors, agents, representatives or affiliates to) directly or indirectly,
take any of the following actions with any party other than Parent, Acquisition
Sub and their designees: (i) solicit, conduct discussions with or engage in
negotiations with any person, relating to the possible acquisition of the
Company or any of its subsidiaries (whether by way of
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merger, purchase of capital stock (or equivalent ownership interests), purchase
of assets or otherwise) or any material portion of its or their capital stock
(or equivalent ownership interests) or assets, (ii) provide information with
respect to it or any of its subsidiaries to any person, other than Parent,
relating to the possible acquisition of the Company or any of its subsidiaries
(whether by way of merger, purchase of capital stock (or equivalent ownership
interests), purchase of assets or otherwise) or any material portion of its or
their capital stock (or equivalent ownership interests) or assets, (iii) enter
into an agreement with any person, other than Parent, providing for the
acquisition of the Company or any of its subsidiaries (whether by way of merger,
purchase of capital stock (or equivalent ownership interests), purchase of
assets or otherwise) or any material portion of its or their capital stock (or
equivalent ownership interests or assets or (iv) make or authorize any
statement, recommendation or solicitation in support of any possible acquisition
of the Company or any of its subsidiaries (whether by way of merger, purchase of
capital stock (or equivalent ownership interests), purchase of assets or
otherwise) or any material portion of its or their capital stock (or equivalent
ownership interests) or assets by any person, other than by Parent.
(b) If prior to the earlier of the Closing Date or the termination
of this Agreement the Company, any of its subsidiaries or any Selling
Stockholder receives any bona fide offer or proposal relating to any of the
above, the Company or such Selling Stockholder shall immediately notify Parent
thereof, including information as to the identity of the offeror or the party
making any such offer or proposal and the specific terms of such offer or
proposal, as the case may be.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access to Information. The Company shall afford Parent and its
accountants, counsel and other representatives ("Representatives") reasonable
access during normal business hours upon reasonable notice during the period
prior to the Closing Date to all of the Company's properties, books, contracts,
commitments, records and all other information concerning the business,
properties and personnel (subject to restrictions imposed by applicable law) of
the Company as Parent may reasonably request, including without limitation
access upon reasonable request to the Company's employees, customers and vendors
for due diligence inquiry. The Company agrees to provide to Parent and its
Representatives copies of internal financial statements, business plans and
projections promptly upon request. No information or knowledge obtained in any
investigation pursuant to this Section 5.1 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the transactions contemplated hereby.
5.2 Confidentiality. Each party to this Agreement will refrain from
disclosing any confidential or proprietary information about or belonging to
another party to this Agreement received in the course of any due diligence
investigation or pursuant to the negotiation and execution of this Agreement or
the effectuation of the transactions contemplated hereby (the "Evaluation
Material") and from using the Evaluation Material other than in connection with
consideration of the transactions proposed in this Agreement. Each party also
shall use reasonable care to prevent disclosure of any Evaluation Material to
third parties (which shall mean at least the same degree of care that such party
uses in the protection of its own proprietary or confidential information). Upon
request of a party, the other parties shall promptly return or destroy all
copies of Evaluation Material in their possession, and no copy thereof shall be
retained. Each party agrees to be responsible for ensuring compliance with this
provision by its employees,
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directors, agents and other representatives. "Evaluation Material" shall not be
deemed to include information that (a) was in the receiving party's possession
prior to receipt from the disclosing party, (b) becomes generally available,
other than as a result of the receiving party's fault, (c) becomes available to
the receiving party from a third party under no non-disclosure obligation, or
(d) is developed independently by the receiving party. Such obligations of
confidentiality shall expire with respect to Parent and Acquisition Sub
effective and contingent upon the Closing of the Acquisition.
5.3 Expenses. All fees and expenses incurred in connection with the
Acquisition, including without limitation all legal, accounting, financial
advisory, consulting and all other fees and expenses of third parties ("Third
Party Expenses") incurred by a party in connection with the negotiation of the
terms and conditions of this Agreement and the consummation of the transactions
contemplated hereby, shall be the obligation of the respective party incurring
such fees and expenses, provided any legal, financial advisory, consulting or
other similar fees incurred by the Company for the benefit of the Selling
Stockholders shall be paid or reimbursed by such Selling Stockholders, and
provided further that Acquisition Sub shall pay the legal expenses incurred by
the Selling Stockholders in connection with the negotiation of the terms and
conditions of this Agreement and the transactions contemplated hereby in an
amount not in excess of U.S. $10,000. Notary fees shall be paid half by the
Selling Stockholders and half by Acquisition Sub.
5.4 Public Disclosure. Upon execution and delivery of this Agreement by
the parties hereto, Parent and the Company shall release a jointly prepared
announcement describing the Acquisition. Except as aforesaid, prior to the
Closing Date no disclosure (whether or not in response to an inquiry) of the
subject matter of this Agreement shall be made by any party hereto unless
approved by Parent and the Company prior to release, such approval not to be
unreasonably withheld; provided that the foregoing shall not preclude any party
from making any announcement or other disclosure if such party is advised by its
counsel that such announcement or disclosure is required to be made by law or
the rules of the Nasdaq National Market.
5.5 Consents. Parent and the Company shall promptly apply for or otherwise
seek, and use their respective best efforts to obtain, all consents and
approvals required to be obtained for the consummation of the Acquisition, and
the Company shall use its best efforts to obtain all consents, waivers and
approvals under any of the Company's agreements, contracts, licenses or leases
in order to preserve its rights and benefits thereunder.
5.6 Legal Requirements. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its reasonable best efforts
to take promptly, or cause to be taken, all reasonable actions, and to do
promptly, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to (i) consummate and make effective the
transactions contemplated hereby, (ii) to obtain all necessary waivers, consents
and approvals and to effect all necessary registrations and filings and (iii) to
remove any injunctions or other impediments or delays, legal or otherwise, in
order to consummate and make effective the transactions contemplated by this
Agreement for the purpose of securing to the parties hereto the benefits
contemplated by this Agreement; provided that Parent shall not be required to
agree to any divestiture by Parent or the Company or any of Parent's
subsidiaries or affiliates of shares of
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capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or the Company or its affiliates, or the imposition
of any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and stock.
5.7 Employment Agreements. On or prior to the Closing Date, the Company
shall enter employment agreements with Marco Brueders, Bernd Grohmann,
Jens-Peter Haack, Oliver Kofrmacher, Stefan Koehler, Rick Kuhlbars, Jochen
Roehrig, Thomas Schaefer, Clemens Schrimpe and Cornelia Sternke, in form
satisfactory to Parent, the Company and such individuals. Compensation
arrangements during the first year of such employment agreements shall consist
of base salary (or on-target compensation for commissioned salespersons) no less
than the base salary (or on-target compensation for commissioned salespersons)
for each employee in effect as of December 31, 1995.
5.8 Spousal Consents. Each Selling Stockholder who is an individual shall
present three (3) days prior to the Closing the written consent of such Selling
Stockholder's spouse to such Selling Stockholder's execution of the Agreement,
sale of the Company Capital Stock and consummation of the other transactions
contemplated hereby.
5.9 Loans to Company Each Selling Stockholder agrees that it will not
demand repayment on loans previously made by such Selling Stockholder to the
Company for a period of six (6) months following the Closing Date. Subject to
the foregoing and subject to a recalculation of the interest amount accrued on
such loans, Parent agrees that it will honor the existing terms of such loans as
described in Section 2.30 of the Company Disclosure Letter. Each Selling
Stockholder agrees that such Selling Stockholder shall repay to the Company all
interest paid on interest to such Selling Stockholder under such loans within
thirty (30) days following the Closing Date.
5.10 Bank Guarantees. Parent and Acquisition Sub shall indemnify the
Selling Stockholders from and against any claims made by Dresdner Bank AG under
certain guarantees described in the Company Disclosure Letter ("Buergschaften")
extended by the Selling Stockholders for the direct benefit of the Company.
Parent and Acquisition Sub shall use their best efforts to cause Dresdner Bank
AG to release such guarantees.
5.11 Option Pool. Parent shall reserve 350,000 shares of Parent Common
Stock for issuance upon exercise of stock options to be granted to key employees
of the Company, such options to be granted by Parent's Board of Directors based
on the recommendations of management of the Company and consistent with past
practice by Parent. Such option grants shall be made on terms no more and no
less favorable than the terms of options granted to current employees of Parent.
The Selling Stockholders hereby waive any current and/or future rights they
might have to profit distributions as described under Section 2.23 of the
Company Disclosure Letter.
5.12 Company Accountants and Auditors. From and after the Closing Date,
the Company agrees that Parent or Acquisition Sub shall appoint the independent
accountants and auditors for the Company at its sole discretion.
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5.13 Operating Plan and Financial Statements. Prior to the beginning of
each calendar year following the Closing Date, Parent and senior management of
the Company then employed shall mutually agree upon an Operating Plan for the
Company setting forth projections regarding minimum total net revenues, total
cost of sales, headcount and cash requirements for the Company for the ensuing
year. Once adopted, an Operating Plan may be revised with the mutual consent of
Parent and such senior management of the Company. The initial Operating Plan is
set forth in Schedule 5.13 hereto. From and after the Closing Date, the Company
shall deliver to Parent monthly financial statements, prepared in accordance
with GAAP, within three (3) business days of the end of each calendar month.
5.14 Disposition of Aggregate Parent Shares. Notwithstanding Article VII
hereof, each Selling Stockholder agrees that it will not dispose of the
Aggregate Parent Shares acquired by such Selling Stockholder in the Acquisition
prior to public issuance by Parent of financial results reflecting at least
thirty (30) days of combined operations of Parent and the Company. Parent shall
give prompt written notice to the Selling Stockholders of such public issuance.
5.15 Notification of Certain Matters. The Company and the Selling
Stockholders shall give prompt written notice to Parent, and Parent shall give
prompt written notice to the Company and the Agent on behalf of the Selling
Stockholders, of (i) the occurrence or non-occurrence of any event, the
occurrence or nonoccurrence of which may cause any representation or warranty of
the Selling Stockholders and Parent, respectively, contained in this Agreement
to be untrue or inaccurate at the Closing Date and (ii) any failure of the
Company, the Selling Stockholders or Parent, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it or them hereunder, provided, however, that the delivery of any notice
pursuant to this Section 5.15 shall not limit or otherwise affect any remedies
available to the party receiving such notice.
5.16 Additional Documents and Further Assurances. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO THE ACQUISITION
6.1 Conditions to Obligations of Selling Stockholders. The obligations of
the Selling Stockholders to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing and on behalf of all Selling Stockholders, by the Agent:
(a) The Board of Directors of Parent shall have approved the
transactions contemplated by this Agreement.
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(b) The Company and the Selling Stockholders shall have completed
their due diligence of Parent and Acquisition Sub to the reasonable satisfaction
of the Company and the Selling Stockholders.
(c) The representations and warranties of Parent and Acquisition Sub
in this Agreement shall be true and correct in all material respects on and as
of the Closing Date as though such representations and warranties were made on
and as of such date, each of Parent and Acquisition Sub shall have performed and
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by it as of the
Closing Date, and the Selling Stockholders shall have been provided with a
certificate, dated the Closing Date and executed on behalf of Parent by its
President or any Vice President to such effect.
(d) The Selling Stockholders shall have received the legal opinion
from Venture Law Group and certificates referred to in Section 1.6(a)(i)-(iv)
and the legal opinions and certificates referred to in Section 1.6(c).
(e) Parent, Acquisition Sub and the Escrow Agent (as hereinafter
defined) shall have executed and delivered the Escrow Agreement.
(f) There shall not be in effect any order of a court of competent
jurisdiction preventing consummation of the Acquisition, nor shall there have
been taken any action, or any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Acquisition by a Governmental
Entity that makes consummation of the Acquisition illegal.
6.2 Conditions to the Obligations of Parent and Acquisition Sub. The
obligations of Parent and Acquisition Sub to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, by Parent:
(a) Parent and Acquisition Sub shall have completed their due
diligence of the Company and the Selling Stockholders to the reasonable
satisfaction of Parent and Acquisition Sub.
(b) The representations and warranties of the Company and the
Selling Stockholders in this Agreement shall be true and correct in all material
respects on and as of the Closing Date as though such representations and
warranties were made on and as of such date, the Company and the Selling
Stockholders shall have performed and complied in all material respects with all
covenants, obligations and conditions of this Agreement required to be performed
and complied with by it as of the Closing Date, and Parent shall have been
provided with a certificate, dated the Closing Date and executed on behalf of
the Company by its Managing Directors (Geschaeflsfuehrer) and by or on behalf of
(by the Agent or an attorney-in-fact) the Selling Stockholders to such effect.
(c) All material consents, waivers and approvals listed on the
Company Disclosure Letter or as otherwise may be required to be obtained in
order to enable the Company
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to continue to enjoy all of its material rights and benefits following
consummation of the Acquisition, and the spousal consents described in Section
5.8, shall have been obtained.
(d) Parent shall have received the legal opinion referred to in
Section 1.6(b)(iv).
(e) Parent shall have received an opinion from Coopers & Lybrand
L.L.P. that the transactions contemplated by this Agreement qualify for "pooling
of interests" accounting treatment.
(f) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or prohibition challenging the Acquisition or
limiting or restricting Parent's conduct or operation of the business of the
Company (or its own business) following the Acquisition shall be in effect, nor
shall any proceeding brought by any Governmental Entity, in the U.S., Germany or
otherwise, seeking any of the foregoing be pending.
(g) No action, suit, claim or proceeding of any nature shall be
pending or threatened against Parent, Acquisition Sub or the Company, their
respective properties or any of their officers or directors, arising out of, in
any way connected with, or seeking to prevent the Acquisition or the other
transactions contemplated by the terms of this Agreement.
(h) From the date hereof through the Closing Date, there shall not
have occurred any material adverse change in the business, assets (including
intangible assets), financial condition, results of operations or prospects of
the Company, unless such change shall have been disclosed in the Company
Disclosure Letter.
(i) The agreements described in Section 5.7 (including the
proprietary information and confidentiality agreements attached thereto) shall
have been duly executed and delivered by Marco Brueders, Bernd Grohmann,
Jens-Peter Haack, Oliver Kofrmacher, Stefan Koehler, Rick Kuhlbars, Jochen
Roehrig, Thomas Schaefer, Clemens Schrimpe and Cornelia Sternke and shall be in
full force and effect.
(j) The Selling Stockholders shall assign and transfer to
Acquisition Sub the quotas exchanged hereunder under a notarial deed
representing one hundred percent (100%) of the Company Capital Stock.
(k) All outstanding options, warrants or other rights to purchase
shares of Company Capital Stock that have not been exercised shall, immediately
prior to the Closing Date, expire or be canceled such that the holder thereof
shall have no further rights with respect thereto following the Closing Date.
(l) The Managing Director of the Company and the partners of NetCS
Mitarbeiter GbR, respectively, shall have approved the transfers of quotas which
occurred on February 14, 1991 and January 14, 1993, and the partners of NetCS
Mitarbeiter GbR shall have consented to any stockholder resolution adopted by
the stockholders of the Company in which NetCS Mitarbeiter GbR participated.
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ARTICLE VII
SECURITIES LAW COMPLIANCE
7.1 Restrictions on Transfer of Parent Common Stock; Legends.
(a) Each Selling Stockholder agrees that, prior to forty (40) days
after the Closing Date, he, she or it will not offer, sell, transfer or
otherwise dispose of the Aggregate Parent Shares received by him, her or it
pursuant hereto unless (i) such offer, sale, transfer or other disposal is not
made to a U.S. person (as that term is defined in Rule 902 of Regulation S
promulgated under the Securities Act); (ii) such offer, sale, transfer or other
disposal is made in accordance with the provisions of Rule 903 or 904 of
Regulations S promulgated under the Securities Act, pursuant to registration of
the Aggregate Parent Shares under the Securities Act or pursuant to Rule 144
promulgated under the Securities Act or another available exemption from the
registration requirements of the Securities Act (including, without limitation,
Section 4(1) of the Securities Act); (iii) all offering materials and documents
(if any) used in connection with such offers, sales, transfers or other
disposals bear the statements required by Rule 902(h)(2) of Regulation S
promulgated under the Securities Act; and (iv) each distributor (if any) selling
Aggregate Parent Shares to a distributor, a dealer (as defined in Section 2(12)
of the Securities Act) or to a person receiving a selling concession, fee or
other remuneration in respect of the securities sold sends a confirmation or
other notice to the purchaser stating that the purchaser is subject to the same
restrictions on offers, sales, transfers and other disposals that apply to a
distributor.
(b) Each certificate representing the Aggregate Parent Shares shall
be stamped or otherwise imprinted with one or more of the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD OR TRANSFERRED, DIRECTLY OR INDIRECTLY, IN THE UNITED
STATES, ITS TERRITORIES, POSSESSIONS, OR AREAS SUBJECT TO ITS
JURISDICTION, OR TO OR FOR THE ACCOUNT OR BENEFIT OF A "U.S. PERSON"
AS THAT TERM IS DEFINED IN RULE 902 OF REGULATION S PROMULGATED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, AT ANY TIME PRIOR
TO FORTY (40) DAYS AFTER THE ISSUANCE OF THIS CERTIFICATE."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER CONTAINED IN A STOCK PURCHASE
AGREEMENT DATED AUGUST 29, 1996 PURSUANT TO WHICH SUCH SECURITIES
WERE ORIGINALLY ISSUED BY ISOCOR. A COPY OF SUCH AGREEMENT MAY BE
OBTAINED FROM THE SECRETARY OF ISOCOR AT ITS PRINCIPAL OFFICE.
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Upon request, Parent will reissue certificates for the Aggregate Parent
Shares without the restrictive legends commencing on the later of (i) forty (40)
days after the Closing of the Acquisition or (ii) upon public issuance by Parent
of financial results reflecting at least thirty (30) days of combined operations
of Parent and the Company.
(c) In connection with the limitations on disposition with respect
to the Aggregate Parent Shares contained in this Agreement, each Selling
Stockholder acknowledges that Parent will issue stop transfer instructions to
its transfer agent with respect to such shares to the effect that no transfer
shall be permitted unless made in compliance with this Section 7.1 and with
Section 5.14 of this Agreement.
7.2 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC which may at any time permit the sale
of the Aggregate Parent Shares to the public without registration, Parent agrees
to use all reasonable efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) file with the SEC in a timely manner all reports and other
documents required of Parent under the Securities Act and Exchange Act; and
(c) furnish to any Selling Stockholder forthwith upon request a
written statement by Parent as to its compliance with the reporting requirements
of said Rule 144, a copy of the most recent annual or quarterly report of
Parent, and such other reports and documents of Parent and other information in
the possession of or reasonably obtainable by Parent as a Selling Stockholder
may reasonably request in availing itself of any rule or regulation of the SEC
allowing a Selling Stockholder to sell any such securities without registration.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNITY; ESCROW
8.1 Survival of Representations, Warranties and Covenants. All
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement and all covenants to be performed prior to the
Closing Date shall survive the Closing for a period ending on the date two (2)
years after the Closing Date, except that the representations and warranties set
forth in paragraphs (a) and (b) of Article IIA shall survive indefinitely and
the representations and warranties set forth in Section 2.10 shall survive until
thirty (30) days following expiration of all applicable statutes of limitations
(including extensions or waivers thereof).
8.2 Agreement to Indemnify. Subject to the limitations set forth herein,
the Selling Stockholders, jointly and severally, agree to indemnify, defend and
hold harmless Parent, Acquisition Sub, the Company (from and after the Closing)
and their respective affiliates, officers, directors, employees, advisors and
shareholders (collectively, the "Parent Group Members") from and against any and
all losses, expenses, liabilities or other damages, including interest and
penalties (collectively, "Damages") by reason of or otherwise arising out of any
breach of any
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representation or warranty made by the Company or the Selling Stockholders in
Article II (as qualified by the Company Disclosure Letter) or such Selling
Stockholder in Article IIA, or any covenant to be performed by the Company prior
to the Closing or by such Selling Stockholder hereunder.
8.3 Costs Included. The amounts for which any Parent Group Member may seek
indemnification under this Article VIII shall extend to, and as used herein the
term "Damages" shall include, attorneys' fees, accountants' fees, costs of
litigation and other expenses actually incurred by them in the defense of any
claim asserted against them and any amounts paid in settlement or compromise of
any claim asserted against them, but only to the extent that the claim asserted
is or would have been subject to the indemnification provisions of Section 8.2.
8.4 Limitation on Indemnity. With respect to the inaccuracy of the
representations or the breach of the warranties referred to in Section 8.2 due
to the unintentional or negligent acts or omissions of the Selling Stockholders,
but not due to the intentional or fraudulent acts or omissions of the Selling
Stockholders, the aggregate indemnification by the Selling Stockholders referred
to in Section 8.2 shall be limited under all circumstances to the portion of the
Escrow Fund contributed on behalf of each Selling Stockholder and, after
expiration of the escrow period, to an amount obtained by multiplying (i) the
shares contributed to the Escrow Fund on behalf of each Selling Stockholder by
(ii) the Average Price; provided, however, that the indemnification by the
Selling Stockholders who hold partnership interests in NetCS Mitarbeiter GbR
shall be limited to the shares allocable to such Selling Stockholders upon
liquidation of NetCS Mitarbeiter GbR and, after expiration of the escrow period,
to an amount obtained by multiplying (i) such allocable shares by (ii) the
Average Price. In case of indemnification due to intentional or fraudulent act
or omission, only the Selling Stockholder or the Selling Stockholders who is or
who are responsible for the intentional or fraudulent act or omission shall be
obligated to indemnify under this Article VIII.
8.5 De minimus Limitation. Notwithstanding the other sections of this
Article VIII, the Selling Stockholders shall have no liability with respect to
the inaccuracy of any representations or the breach of any of the warranties
referred to in Section 8.2 for the first U.S. $50,000 in aggregate Damages, but
shall be liable for all such Damages (including the first U.S. $50,000 of such
Damages) for any such Damages beyond the first U.S. $50,000 in aggregate Damages
with respect to any inaccuracy of any representations or the breach of any of
the warranties referred to in Section 8.2.
8.6 Further Limitation. Prior to taking recourse to the Escrow Fund or to
requiring indemnification, Parent shall use reasonable efforts to consult with
the Selling Stockholders regarding the subject matter of the potential claim and
shall provide the Selling Stockholders a reasonable opportunity to remedy the
subject of the potential claim. Notwithstanding the foregoing, nothing in this
Section 8.6 shall limit the ability of Parent to take recourse to the Escrow
Fund or to require indemnity under this Article VIII.
8.7 Indemnification Procedures. Parent agrees to give the Agent on behalf
of the Selling Stockholders, prompt written notice of any event or assertion of
which it has knowledge concerning any claim for Damages as to which it may
request indemnification hereunder. Failure
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to so notify the Agent shall not relieve the Selling Stockholders of any
liability they may have to any Parent Group Member except to the extent that the
defense of any claim or demand asserted by a third party is materially
prejudiced by such failure to notify, and only so long as the Agent and the
Selling Stockholders did not receive or otherwise have actual notice thereof.
Each party will cooperate with the other in determining the validity of any such
third party claim or assertion. If the Damages relate to a claim or demand
asserted by a third party, the Agent on behalf of the Selling Stockholders shall
have the right at its expense to participate in the defense of any such claim or
demand, and the Parent agrees not to settle such claim or demand without the
Agent's consent, which consent shall not be withheld unreasonably.
8.8 Escrow Arrangements
(a) As soon as practicable after the Closing Date, Parent shall
cause to be deposited with the corporate Secretary of Parent (or other person or
entity acceptable to Parent and the Agent) as Escrow Agent (the "Escrow Agent"),
shares of Parent Common Stock which comprise the Escrow Amount, such deposit to
constitute an escrow fund (the "Escrow Fund") to be held in escrow for the
benefit of the Selling Stockholders pursuant to an Escrow Agreement reasonably
satisfactory to Parent, the Company and the Agent.
(b) To the extent any Parent Group Member becomes entitled to
indemnity as a result of any Damages, Parent shall be entitled to set off and
apply against such Damages the appropriate remaining portion of the Escrow
Amount, based on the Average Price, in accordance with the terms of the Escrow
Agreement and this Article VIII. Any such set-off shall be applied on a pro rata
basis to the interests of the Selling Stockholders in the Escrow Amount. The
Escrow Agreement shall provide that any portion of the Escrow Amount still
remaining shall be released not later than the first to occur of the first
anniversary of the Closing Date or the publication of combined audited financial
statements for the year ending December 31, 1996, subject to continual
maintenance in the Escrow Fund of any portion of the Escrow Amount necessary to
cover any claims for Damages made by a Parent Group Member prior to the release
date.
8.9 Mechanics of Making Claims During Escrow Period. The amount of Damages
to be paid from the Escrow Fund shall be determined in the manner hereinafter
provided:
(a) Parent shall provide written notice to the Agent of a claim for
indemnification, including a brief description of the facts upon which such
claim is based and the amount of the claim. Not less than thirty (30) but within
forty (40) days following the receipt by the Agent of written notice from Parent
of a claim of indemnification pursuant to this Section 8.9, the Escrow Amount
shall be reduced as described in Section 8.8 above.
(b) If the Agent shall, in good faith, notify Parent in writing of
his or her objection to a claim of indemnification within thirty (30) days
following its receipt by the Agent, the aggregate amount of Damages as to which
such objection applies payable by the Selling Stockholders from the Escrow
Amount shall not be determined, and no distribution from the Escrow Amount will
be made with respect thereto, until the rights of the Selling Stockholders and
Parent with respect thereto have been agreed upon between the Agent and Parent
or until such
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rights are finally determined by binding arbitration in London, England pursuant
to the procedures established by the International Chamber of Commerce. Such
arbitration shall be conducted by one (1) arbitrator mutually acceptable to
Parent and the Agent. If the parties are unable, within sixty (60) days of such
notification of claim by Parent, to agree upon an arbitrator, an arbitrator
shall be appointed pursuant to the procedures of the International Chamber of
Commerce. The costs and expenses (including reasonable counsel fees) of any such
arbitration shall be borne by the party against whom the award is rendered or,
in the case of an award of a portion of the amount claimed, will be shared
equally by Parent and the Selling Stockholders, from the Escrow Amount if
available. Any such arbitration order may be entered in any court having
jurisdiction thereof. In all events, such arbitrator shall render a decision and
all Escrow Amount distributions required to be made as a result of that decision
will be issued prior to the third anniversary of the Closing Date. The decision
of any such arbitrator and any such arbitration award shall be binding on Parent
and each Selling Stockholder, without the right to appeal.
ARTICLE IX
APPOINTMENT OF
AGENT FOR SELLING STOCKHOLDERS
9.1 Appointment of Agent.
(a) Power of Attorney. Upon execution of this Agreement, and without
further act of any Selling Stockholder, Marco Brueders shall be appointed as
agent and attorney- in-fact (the "Agent") for each Selling Stockholder on whose
behalf shares of Parent Common Stock are to be deposited into escrow, to give
and receive certificates, notices and communications, to authorize delivery to
Parent of shares from the Escrow Fund in satisfaction of claims by Parent, to
object to such deliveries, to agree to, negotiate, enter into settlements and
compromises of, and to comply with orders of courts and awards of arbitrators
with respect to such claims, and to take all actions necessary or appropriate in
the judgment of Agent for the accomplishment of any action required or permitted
to be taken by the Selling Stockholders hereunder or under the Escrow Agreement.
Such agency may be changed by the Selling Stockholders from time to time upon
not less than thirty (30) days prior written notice to Parent and Escrow Agent;
provided that the Agent may not be removed unless holders of a two-thirds
interest of the Escrow Amount agree to such removal and to the identity of the
substituted agent. No bond shall be required of the Agent, and the Agent shall
not receive compensation for his or her services. Notices or communications to
or from the Agent shall constitute notice to or from each of the Selling
Stockholders.
(b) Limitation of Liability. The Agent shall not be liable for any
act done or omitted hereunder as Agent while acting in good faith and in the
exercise of reasonable judgment. The Selling Stockholders on whose behalf the
Escrow Amount was contributed to the Escrow Fund shall severally indemnify the
Agent and hold the Agent harmless against any loss, liability or expense
incurred without negligence or bad faith on the part of the Agent and arising
out of or in connection with the acceptance or administration of the Agent's
duties hereunder, including the reasonable fees and expenses of any legal
counsel retained by the Agent.
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(c) Actions of the Agent. A decision, act, consent or instruction of
the Agent shall constitute a decision of all the Selling Stockholders for whom a
portion of the Escrow Amount otherwise issuable to them are deposited in the
Escrow Fund and shall be final, binding and conclusive upon each of such Selling
Stockholders. In connection with any such decision, act, consent or instruction,
the Agent shall be entitled to rely upon the written consent or instruction by
holders of a majority in interest of the Escrow Amount on behalf of all such
holders. The Escrow Agent and Parent may rely upon any such decision, act,
consent or instruction of the Agent as being the decision, act, consent or
instruction of each every such stockholder of the Company. The Escrow Agent and
Parent are hereby relieved from any liability to any person for any acts done by
them in accordance with such decision, act, consent or instruction of the Agent.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by mutual consent of the Company, on behalf of the Selling
Stockholders, and Parent; or
(b) by the Company, on behalf of the Selling Stockholders, or
Parent, if the Closing has not occurred by September 30, 1996, other than due to
the failure of the party seeking to terminate this Agreement to perform its
obligations under this Agreement which are required to be performed at or prior
to the Closing Date; or
(c) by Parent, within five (5) days following its receipt of the
final Company Disclosure Letter, if in its sole discretion the results of its
financial or legal due diligence investigation of the Company is not
satisfactory in all respects; or
(d) by Parent if there shall be an order of a court of competent
jurisdiction in effect preventing consummation of the Acquisition; or there
shall be any action taken, or any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Acquisition by any
Governmental Entity which would (i) make the consummation of the Acquisition
illegal, (ii) prohibit ownership or operation by Parent, Acquisition Sub or the
Company of all or a material portion of the business of the Company; or (iii)
compel Parent or the Company to dispose of or hold separate all or a material
portion of the business or assets of the Company or Parent as a result of the
Acquisition; or
(e) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company or any Selling Stockholders, provided that, if such breach is curable by
the Company or such Selling Stockholder within ten (10) days through the
exercise of its reasonable best efforts, then for so long as the Company or such
Selling Stockholder continues to exercise such reasonable best efforts Parent
may not
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terminate this Agreement under this Section 10.1(e) unless such breach is not
cured within such ten (10) day period; or
(f) by the Company if it is not in breach of its obligations under
this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Parent or Acquisition Sub, provided that, if such breach is curable by Parent
within ten (10) days through the exercise of its reasonable best efforts, then
for so long as Parent continues to exercise such reasonable best efforts the
Company may not terminate this Agreement under this Section 10.l(f) unless such
breach is not cured within such ten (10) day period.
10.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 10.1, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of Parent, Acquisition
Sub, the Selling Stockholders or the Company, or their respective officers,
directors or stockholders; provided, however, that (i) each party shall remain
liable for any breaches of this Agreement prior to its termination, (ii) the
provisions of Sections 5.3 and 5.4 and Articles X and XI of this Agreement shall
remain in full force and effect and survive any termination of this
Agreement.and (iii) any quotas of Company Capital Stock and any Aggregate Parent
Shares previously exchanged by the parties shall be returned to the Selling
Stockholders in the case of Company Capital Stock and to Parent in the case of
Aggregate Parent Shares.
10.3 Amendment. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of the
parties hereto, provided that any requirements with respect to a notarial deed
have been satisfied. For purposes of this Section 10.3, the Selling Stockholders
agree that any amendment of this Agreement signed by the Agent shall be binding
upon and effective against all Selling Stockholders whether or not they have
signed such amendment.
10.4 Extension; Waiver. At any time prior to the Closing Date, Parent and
Acquisition Sub, on the one hand, and the Company, on behalf of the Selling
Stockholders on the other, may, to the extent legally allowed, (a) extend the
time for the performance of any of the obligations of the other party hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be delivered by hand, mailed by
registered air mail (return receipt requested), postage prepaid, or delivered by
recognized air courier, freight prepaid, or sent via
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facsimile (with acknowledgment of complete transmission) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or Acquisition Sub, to:
ISOCOR
3420 Ocean Park Boulevard
Santa Monica, California 90405
U.S.A.
Attention: President
Facsimile No.: (310) 581-8111
with a copy to: Venture Law Group,
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
U.S.A.
Attention: Elias J. Blawie
Facsimile No.: (415) 854-1121
(b) if to the Company, to: NetCS Informationstechnik GmbH
Katharinenstr. 17-18
D-10711 Berlin
Germany
Attention: Geschaeflsfuehrer
Facsimile No.: 011 49 30 89 66 09 99
with a copy to: Doeser, Amereller Noack
Baker & McKenzie
Kleiststr. 23-26
10787 Berlin
Germany
Attention: Andres Schollmeier
Facsimile No.: 011 49 30 214 99 0 95
(c) if to the Agent, to: Marco Brueders
c/o NetCS Informationstechnik GmbH
Katharinenstr. 17-18
D-10711 Berlin
Germany
Facsimile No.: 011 49 30 89 66 09 99
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective when received, and shall in any event be
deemed to have been received (i) when delivered, if delivered personally or sent
by telecopy and confirmed in writing, (ii) if sent by registered air mail, five
(5) business days after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States or German mail, as applicable,
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addressed and mailed as aforesaid, or (iii) two (2) business days after the
business day of deposit with a recognized air courier, addressed and shipped as
aforesaid.
11.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only, and shall not affect in any way the meaning or
interpretation of this Agreement.
11.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
11.4 Entire Agreement; Assignment. This Agreement, the schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder, except that the Agent shall have
the express rights articulated in Article IX hereof and that the Parent Group
Members shall be entitled to the indemnification provided in Article VIII
hereof, and (c) shall not be assigned, by operation of law or otherwise, except
as otherwise specifically provided and except that, other than with respect to
Parent's obligations under Sections 1.5(a) and (c) and Article VII, Parent may
assign its rights and delegate its obligations hereunder to any wholly owned
subsidiary, directly or indirectly, of Parent, and to any party that acquires
the Company or all or substantially all of its assets from Parent or its
subsidiaries. Without limiting the generality of clause (b) of this Section
11.4, the transactions contemplated by this Agreement shall not be deemed to
constitute the purchase of all or substantially all of the assets or any
assumption of liabilities of the Company or any Selling Stockholder by Parent or
Acquisition Sub pursuant to Section 419 of the German Civil Code, and neither
Parent nor Acquisition Sub shall be liable to any creditor of the Company or any
Selling Stockholder by reason of the consummation of the Acquisition or any
other transaction contemplated hereby.
11.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect, and the 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 void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
11.6 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 or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
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11.7 Specific Performance. The parties hereto acknowledge that damages
would be an inadequate remedy for any breach of the provisions of this Agreement
and agree that the obligations of the parties hereunder shall be specifically
enforceable.
11.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to
applicable principles of conflicts of laws thereof, except to the extent the
conflicts of laws provisions of any other jurisdiction require application of
the substantive laws of such jurisdiction.
11.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
11.10 English Language. The parties hereto agree that the transactions
contemplated by this Agreement shall be conducted in the English language, that
this Agreement, the schedules and Exhibits hereto, and the documents and
instruments and other agreements among the parties hereto referenced herein
shall be written in English and that all financial information and notices
provided by the parties pursuant to this Agreement, the schedules and Exhibits
hereto, and the documents and instruments and other agreements among the parties
hereto referenced herein shall be in English.
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IN WITNESS WHEREOF, Parent, Acquisition Sub and the Company have caused this
Stock Purchase Agreement to be signed by their duly authorized respective
officers and the Selling Stockholders have signed this Stock Purchase Agreement,
all as of the date first written above.
"THE COMPANY"
NETCS INFORMATIONSTECHNIK GMBH
By:____________________________________
Name:__________________________________
Title:_________________________________
"PARENT"
ISOCOR
By:____________________________________
Name:__________________________________
Title:_________________________________
"ACQUISITION SUB"
ISOCOR B.V.
By:____________________________________
Name:__________________________________
Title:_________________________________
"SELLING STOCKHOLDERS"
_______________________________________
Carsten Bormann
_______________________________________
Marco Brueders
_______________________________________
Stefan Kohler
_______________________________________
Clemens Schrimpe
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_______________________________________
Jochen Roehrig
NETCS MITARBEITER GBR
By:____________________________________
Name:__________________________________
Title__________________________________
_______________________________________
Jens-Peter Haack
_______________________________________
Oliver Korfmacher
_______________________________________
Cornelia Sternke
_______________________________________
Thomas Schaefer
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SCHEDULE 1.1
SELLING STOCKHOLDER SHARES OF COMPANY CAPITAL STOCK
------------------- -------------------------------
Carsten Bormann 20,000 (consisting of quotas
of 10,000 and 10,000)
Marco Brueders 15,000 (consisting of quotas
of 6,000 and 9,000)
Stefan Koehler 25,000 (consisting of quotas
of 12,000, 8,000, 4,000 and
1,000)
Jochen Roehrig 10,000 (consisting of quotas
of 4,000, 4,000, 1,000 and
1,000)
Clemens Schrimpe 19,000
NetCS Mitarbeiter GbR 11,000
48
SCHEDULE 1.2
SELLING STOCKHOLDER APPLICABLE PERCENTAGE
------------------- ---------------------
Carsten Bormann 20%
Marco Brueders 15%
Stefan Koehler 25%
Jochen Roehrig 10%
Clemens Schrimpe 19%
NetCS Mitarbeiter GbR 11%
PARTNERS OF NetCS MITARBEITER GbR APPLICABLE PERCENTAGE OF THE COMPANY
--------------------------------- ------------------------------------
Jens Peter Haack 5%
Oliver Korfmacher 5%
Cornelia Sternke 0.5%
Thomas Schaefer 0.5%