STOCK PURCHASE AGREEMENT
among:
ZITEL WORLD TRADE
ZITEL CORPORATION
HELL SAILS B.V.;
and
PALMER & WEBB SYSTEMS B.V.
Dated as of June 30, 1997
TABLE OF CONTENTS
PAGE
SECTION 1. SALE AND PURCHASE OF SHARES; RELATED TRANSACTIONS . . . . . . . 1
1.1 Sale and Purchase of Shares . . . . . . . . . . . . . . . . . . 1
SECTION 2. PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . 1
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER. . . . . . . . . . . . 2
3.1 Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . . 4
3.5 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Articles of Association; Records. . . . . . . . . . . . . . . . 5
3.7 Capitalization, Etc.. . . . . . . . . . . . . . . . . . . . . . 5
3.8 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . 6
3.9 Absence of Undisclosed Liabilities. . . . . . . . . . . . . . . 7
3.10 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.11 Compliance With Laws. . . . . . . . . . . . . . . . . . . . . . 8
3.12 Title to and Condition of Properties. . . . . . . . . . . . . . 8
3.13 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.15 Contracts and Commitments . . . . . . . . . . . . . . . . . . . 10
3.16 Employees and Labor Matters . . . . . . . . . . . . . . . . . . 11
3.17 Sole Shareholder. . . . . . . . . . . . . . . . . . . . . . . . 12
3.18 No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . 12
3.19 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.20 Investment Representations. . . . . . . . . . . . . . . . . . . 12
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.. . . . . . . . . . . . 14
4.1 Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.3 Issuance and Registration of Shares . . . . . . . . . . . . . . 14
4.4 No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . 14
4.5 Financial Capacity. . . . . . . . . . . . . . . . . . . . . . . 14
i.
TABLE OF CONTENTS
(CONTINUED)
PAGE
5. FURTHER COVENANTS OF SELLER AND PWBV.. . . . . . . . . . . . . . . . . 15
5.1 Access to Information and Records . . . . . . . . . . . . . . . 15
5.2 Conduct of Business Pending the Closing . . . . . . . . . . . . 15
5.3 Other Action. . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.4 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. . . . . . . . . . . . . . 16
6.1 Representations and Warranties True on the Closing Date . . . . 16
6.2 Compliance With Agreement . . . . . . . . . . . . . . . . . . . 16
6.3 Absence of Suit . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4 Datametrics Transaction.. . . . . . . . . . . . . . . . . . . . 17
7. CONDITIONS PRECEDENT TO SELLER'S AND PWBV'S OBLIGATIONS. . . . . . . . 17
7.1 Representations and Warranties True on the Closing Date . . . . 17
7.2 Compliance With Agreement . . . . . . . . . . . . . . . . . . . 17
7.3 Absence of Suit . . . . . . . . . . . . . . . . . . . . . . . . 17
7.4 Datametrics Transaction.. . . . . . . . . . . . . . . . . . . . 17
7.5 UK Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.1 By Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.2 By Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.3 Indemnification of Third-Party Claims . . . . . . . . . . . . . 18
8.4 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.5 Deductible Amount . . . . . . . . . . . . . . . . . . . . . . . 20
8.6 Maximum Liability . . . . . . . . . . . . . . . . . . . . . . . 20
8.7 Treatment of Indemnification Payments . . . . . . . . . . . . . 20
8.8 Survival of Representations and Warranties; Claims for
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 21
8.9 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.1 Documents to be Delivered by Seller and PWBV. . . . . . . . . . 21
9.2 Documents to be Delivered by Buyer. . . . . . . . . . . . . . . 22
ii.
TABLE OF CONTENTS
(CONTINUED)
PAGE
10. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.1 Right of Termination Without Breach . . . . . . . . . . . . . . 23
10.2 Termination for Breach. . . . . . . . . . . . . . . . . . . . . 23
11. RESOLUTION OF DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . 24
11.1 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.2 Arbitrators . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.3 Procedures; No Appeal . . . . . . . . . . . . . . . . . . . . . 24
11.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.5 Entry of Judgment . . . . . . . . . . . . . . . . . . . . . . . 25
11.6 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 25
11.7 Continued Performance . . . . . . . . . . . . . . . . . . . . . 25
11.8 Tolling . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.1 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.2 Expenses to be Paid by Seller . . . . . . . . . . . . . . . . . 25
12.3 Expenses to be Paid by Buyer. . . . . . . . . . . . . . . . . . 26
12.4 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.5 Costs of Litigation or Arbitration. . . . . . . . . . . . . . . 26
13. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13.1 Materiality . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13.2 Announcements . . . . . . . . . . . . . . . . . . . . . . . . . 26
13.3 Assignment; Parties in Interest . . . . . . . . . . . . . . . . 26
13.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 27
13.5 Amendment and Modification. . . . . . . . . . . . . . . . . . . 27
13.6 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
13.7 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . 28
13.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 28
13.9 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13.10 Further Documents . . . . . . . . . . . . . . . . . . . . . . . 28
13.11 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
iii.
EXHIBITS
EXHIBIT A Definitions
EXHIBIT B Purchase Price and Indemnification Escrow Agreement
EXHIBIT C Balance Sheet
EXHIBIT D Certificate of Buruma Maris
EXHIBIT E Escrow Agreement
EXHIBIT F Opinion of Cooley Godward LLP
DISCLOSURE LETTER
Schedule 3.1.2 Corporate Existence
Schedule 3.1.4 Qualification
Schedule 3.1.6 No Dissolution
Schedule 3.3 No Violation
Schedule 3.4 Financial Statements
Schedule 3.5.2 Tax Returns Filed
Schedule 3.5.3 Tax Audits
Schedule 3.5.4 Consolidated Group
Schedule 3.5.5 Other Tax Disclosures
Schedule 3.7.1 Capitalization
Schedule 3.8 Absence of Certain Changes
Schedule 3.9 Absence of Undisclosed Liabilities
Schedule 3.10 No Litigation
Schedule 3.11.1 Compliance With Laws
Schedule 3.11.2 Licenses and Permits
Schedule 3.12.1 Marketable Title
Schedule 3.12.2 Condition
Schedule 3.12.3 Real Property
Schedule 3.13 Bank Accounts
Schedule 3.14 Insurance
Schedule 3.15.1 Real Property Leases
Schedule 3.15.2 Personal Property Leases
Schedule 3.15.4 Contracts With Affiliates
Schedule 3.15.6 Loan Agreements
Schedule 3.15.7 Guarantees
Schedule 3.15.8 Other Material Contracts
Schedule 3.16.1 Employment Compensation
Schedule 3.16.2 Employee Benefit Plans
[The schedules listed above have been omitted pursuant to Item 601(b)(2)
of Regulation S-K. Upon request, the Company agrees to furnish
supplementally, a copy of any of the omitted schedules to the Commission.]
iv.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of
June 30, 1997, by and among ZITEL CORPORATION, a California corporation
("PARENT"), ZITEL WORLD TRADE, a California corporation and wholly-owned
subsidiary of Parent ("BUYER"), HELL SAILS B.V., a private limited liability
company organized under the laws of the Kingdom of the Netherlands
("SELLER"), and PALMER & WEBB SYSTEMS B.V., a private limited liability
company organized under the laws of the Kingdom of the Netherlands and a
wholly-owned direct subsidiary of Seller ("PWBV"). Certain capitalized terms
used in this Agreement are defined on EXHIBIT A.
RECITALS
A. Seller owns 40 shares in the share capital of PWBV (the "SHARES"),
which constitute all of the issued and outstanding capital stock of PWBV.
B. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, the Shares according to the terms set forth in this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows.
SECTION 1. SALE AND PURCHASE OF SHARES; RELATED TRANSACTIONS
1.1 SALE AND PURCHASE OF SHARES. At the Closing, Seller shall sell,
assign, transfer and deliver the Shares to Buyer, and Buyer shall purchase and
accept the delivery of the Shares from Seller, on the terms and subject to the
conditions set forth in this Agreement.
SECTION 2. PURCHASE PRICE
2.1 PURCHASE PRICE. The aggregate purchase price payable by Buyer for
the Shares (the "PURCHASE PRICE") shall be Two Million Two Hundred Thousand
Dollars (USD $2,200,000) which shall consist of (i) One Million Dollars (USD
$1,000,000) in cash, and (ii) One Million Two Hundred Thousand Dollars (USD
$1,200,000) in common stock of Parent as determined in Section 2.2.2 below.
2.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by
Buyer as follows:
2.2.1 CASH TO SELLER. At the Closing, Buyer shall pay to Seller
Seven Hundred Eighty-Thousand Dollars (USD $780,000) and shall deliver to the
Escrow Agent USD $220,000 of the Indemnification Escrow Amount and the Purchase
Price Escrow Amount (as such terms
1.
are defined in the Purchase Price and Indemnification Escrow Agreement attached
as EXHIBIT B hereto (the "PURCHASE PRICE AND INDEMNIFICATION ESCROW
AGREEMENT")).
2.2.2 STOCK TO SELLER. At the Closing, Buyer shall deliver to
Seller the number of shares of common stock of Buyer equal to the quotient of
One Million Two Hundred Thousand Dollars (USD $1,200,000) DIVIDED by the average
closing price of Parent's common stock, as reported in the Wall Street Journal
(West Coast Edition), on June 12, 1997 through and including June 25, 1997 (the
"ZITEL STOCK CONSIDERATION").
2.2.3 METHOD OF PAYMENT. All payments to Seller under this
Section 2.2 shall be made by wire transfer of immediately available funds to an
account designated by the recipient not less than forty-eight (48) hours prior
to the time for payment specified herein.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller makes the following representations and warranties to Buyer, each of
which is true and correct on the date hereof, shall remain true and correct to
and including the Closing Date, shall be unaffected by any investigation
heretofore or hereafter made by Buyer, or any knowledge of Buyer other than as
specifically disclosed in a Schedule to the Disclosure Letter delivered
hereunder or in any document referenced in the Disclosure Letter, and shall
survive the Closing for a period of two (2) years, except with respect to those
warranties set forth in Section 3.5 relating to tax matters which shall survive
the Closing until the expiration of the applicable statute of limitations.
3.1 CORPORATE.
3.1.1 OWNERSHIP OF PWBV. Seller owns and has good and valid title
to all of the outstanding shares of the capital stock of PWBV, free of any liens
or encumbrances.
3.1.2 CORPORATE EXISTENCE. Each of Seller and PWBV is a
corporation duly incorporated, validly existing and duly registered under the
laws of its incorporation. Attached as SCHEDULE 3.1.2 of the Disclosure Letter
is a copy of the excerpt from the Commercial Register dated June 18, 1997, which
is true and complete in all respects.
3.1.3 CORPORATE POWER. Each of Seller and PWBV has all necessary
corporate power to enter into this Agreement and the other documents and
instruments to be executed and delivered pursuant hereto and to carry out the
transactions contemplated hereby and thereby. Each of Seller and PWBV has all
necessary corporate power to carry on its business substantially as it is being
conducted as of the date of this Agreement.
3.1.4 QUALIFICATION. Each of Seller and PWBV is duly licensed or
qualified to do business as a foreign corporation, and is in good standing, in
each jurisdiction wherein the character of the properties owned or leased by it,
or the nature of its business, makes such licensing or qualification necessary.
The countries and territories in which Seller and PWBV are licensed or qualified
to do business are listed in SCHEDULE 3.1.4 of the Disclosure Letter
2.
attached hereto. PWBV has not applied for a declaration of bankruptcy or a
moratorium of payments, nor has PWBV been declared bankrupt or been granted a
moratorium.
3.1.5 NO SUBSIDIARIES. PWBV does not own any interest in any
corporation, partnership or other entity.
3.1.6 NO DISSOLUTION; LIQUIDATION, ETC. Neither the Board of
Directors nor the holders of any class of outstanding capital stock of PWBV or
Seller has adopted any resolution or taken any other action with respect to
dissolution, liquidation or winding up of PWBV or Seller, no such resolution or
other action is proposed, under consideration or contemplated, and there is no
proceeding or other action pending or, to the knowledge of PWBV or Seller,
threatened, proposed or contemplated by any court, administrative or
governmental agency, instrumentality, commission, authority, board or body with
respect to any dissolution, liquidation or winding up of PWBV or Seller, nor, to
the Knowledge of Seller, is there any basis for any such proceeding or other
action. Except as set forth on SCHEDULE 3.1.6 of the Disclosure Letter attached
hereto, PWBV has never conducted any business under or otherwise used, for any
purpose or in any jurisdiction, any fictitious name, assumed name, trade name or
other name other than "PALMER & WEBB SYSTEMS B.V."
3.2 AUTHORITY. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered pursuant hereto and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by the Board of Directors and shareholders of Seller. No other
or further corporate act or proceeding on the part of Seller, its Board of
Directors or any of its shareholders is necessary to authorize this Agreement or
the other documents and instruments to be executed and delivered by Seller
pursuant hereto or the consummation of the transactions contemplated hereby and
thereby. This Agreement constitutes, and when executed and delivered, the other
documents and instruments to be executed and delivered by Seller pursuant hereto
will constitute, valid binding agreements of Seller, enforceable in accordance
with their respective terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally,
and by general equitable principles.
3.3 NO VIOLATION. Except as set forth on SCHEDULE 3.3 of the Disclosure
Letter attached hereto, to the Knowledge of Seller, the execution and delivery
of this Agreement and the other documents and instruments to be executed and
delivered by Seller pursuant hereto, and the consummation by Seller of the
transactions contemplated hereby and thereby (a) will not violate any statute or
law or any rule, regulation, order, writ, injunction or decree of any court or
governmental authority, (b) will not require any authorization, consent,
approval, exemption or other action by or notice to any court, administrative or
governmental agency, instrumentality, commission, authority, board or body, and
(c) subject to obtaining the consents referred to in SCHEDULE 3.3 of the
Disclosure Letter attached hereto, will not violate or conflict with, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default under, or result in the termination of, or accelerate
the performance required by, or result in the creation of any Lien (as defined
in Section 3.12.1 hereof) upon any of the assets of PWBV under, any term or
provision of the Articles of Association of PWBV or of any contract, commitment,
understanding, arrangement, agreement or restriction of any kind or
3.
character to which PWBV or any shareholder of PWBV is a party or by which PWBV,
any shareholder of PWBV or any of PWBV's assets or properties may be bound or
affected.
3.4 FINANCIAL STATEMENTS. Included as SCHEDULE 3.4 of the Disclosure
Letter attached hereto are true and complete copies of the audited financial
statements of PWBV consisting of balance sheets of PWBV as of December 31, 1996,
1995, and unaudited interim financial statements through April 30, 1997,
consisting of the balance sheets, and cash flow and income statements, and the
related statements of income and cash flows for the periods then ended
(including the notes contained therein or annexed thereto) (collectively,
including all notes and schedules contained therein or annexed thereto, the
"FINANCIAL STATEMENTS"). The balance sheet of PWBV dated as of April 30, 1997
in the form of EXHIBIT C attached hereto is referred to herein as the "BALANCE
SHEET". The Financial Statements have been reported on, and are accompanied by,
the signed, unqualified opinions of Van Doesburg & Partners, independent
auditors for PWBV for such years. The Financial Statements are true, complete
and accurate, have been prepared by the accrual method in accordance with GAAP
(except, in the case of unaudited statements, for the absence of footnote
disclosure) applied on a consistent basis, have been prepared in accordance with
the books and records of PWBV. The annual accounts of PWBV have always been
timely determined by its shareholders and timely filed with the Commercial
Register.
3.5 TAX MATTERS.
3.5.1 PROVISION FOR TAXES. The provision made for Taxes in the
Balance Sheet is sufficient for the payment of all social security contributions
on corporate income and wages and other income, ad valorem, excise, profits,
franchise, occupation, property, payroll, sales, use, gross receipts and other
taxes (and any interest and penalties) and assessments, whether or not disputed
at the Balance Sheet Date, and for all years and periods prior thereto. Since
the Balance Sheet Date, PWBV has not incurred any taxes other than taxes
incurred in the Ordinary Course of Business consistent in type and amount with
past practices of PWBV.
3.5.2 TAX RETURNS FILED. Except as set forth on SCHEDULE 3.5.2 of
the Disclosure Letter attached hereto, all tax returns required to be filed by
or on behalf of PWBV have been timely filed and when filed were true and correct
in all material respects, and the taxes shown as due thereon were paid or
adequately accrued. PWBV has duly withheld and paid all taxes which it is
required to withhold and pay relating to salaries, wages and other compensation,
remuneration or benefits paid to the employees of PWBV.
3.5.3 TAX AUDITS. The income tax returns of PWBV have been
audited by the appropriate authorities with regard to corporate income tax,
value added tax and wage tax for the periods and to the extent set forth in
SCHEDULE 3.5.3 of the Disclosure Letter attached hereto, and PWBV has not
received from the authorities of any jurisdiction any notice of underpayment of
taxes or other deficiency which has not been paid nor any objection to any
return or report filed by PWBV. There are outstanding no agreements or waivers
extending the statutory period of limitations applicable to any tax return or
report.
4.
3.5.4 CONSOLIDATED GROUP. SCHEDULE 3.5.4 of the Disclosure Letter
attached hereto lists every year PWBV was a member of an affiliated group of
corporations that filed a consolidated tax return on which the statute of
limitations does not bar a tax assessment, and each corporation that has been
part of such group.
3.5.5 OTHER. Except as set forth in SCHEDULE 3.5.5 of the
Disclosure Letter attached hereto, since December 31, 1996 PWBV has not applied
for any tax ruling.
3.6 ARTICLES OF ASSOCIATION; RECORDS.
3.6.1 Seller has delivered to Buyer with regard to PWBV accurate
and complete copies of:
(i) of its Articles of Association, including all
amendments thereof, and the deed of its incorporation;
(ii) its shareholders register and all deeds of transfer
relating to shares of its stock; and
(iii) the minutes and other records of the meetings and
other proceedings (including any actions taken by written consent or otherwise
without a meeting) of its shareholders, the board of directors and all
committees of its board of directors.
There have been no meetings or other proceedings of the shareholders of either,
the board of directors of or any committee of the board of directors of PWBV
that are not fully reflected in such minutes or other records.
3.6.2 There has not been any violation of any of the provisions of
PWBV's Articles of Association or of any resolution adopted by its shareholders,
board of directors or any committee of the board of directors; and no event has
occurred, and no condition or circumstance exists, that might (with or without
notice or lapse of time) constitute or result directly or indirectly in such a
violation.
3.6.3 The books of account, shareholders register, minute books
and other records of PWBV are accurate, up-to-date and complete, and have been
maintained in accordance with sound and prudent business practices. All of its
records are in its actual possession and direct control. PWBV has and at all
times had in place, an adequate and appropriate system of internal controls
which is at least as comprehensive and effective as the systems of internal
controls customarily maintained by Comparable Entities.
3.7 CAPITALIZATION, ETC.
3.7.1 The authorized capital stock of PWBV consists of 200 shares
of common stock and the issued and paid-up capital stock of PWBV consist of 40
shares of common stock (constituting all of the Shares). Seller has, and Buyer
will acquire at the Closing, good and valid title to the Shares free and clear
of any encumbrances. Seller owns all of the issued and
5.
outstanding capital stock of PWBV. All of the Shares: (i) have been duly
authorized and validly issued, (ii) are fully paid and non-assessable, and
(iii) have been issued in full compliance with all applicable laws. Except as
set forth on SCHEDULE 3.7.1 of the Disclosure Letter attached hereto, there are
no: (a) outstanding subscription, option, call, warrant or right (whether or
not currently exercisable) to acquire any shares of the authorized and/or issued
capital stock or other securities of PWBV; (b) outstanding security, instrument
or obligation that is or may become convertible into or exchangeable for any
shares of the capital stock or other securities of PWBV; (c) contract under
which PWBV is or may become obligated to sell or otherwise issue any shares of
its capital stock or any other securities. There have not been issued any
depositary receipts with respect to any shares of PWBV nor is there any
agreement, commitment or resolution to that effect.
3.8 ABSENCE OF CERTAIN CHANGES. Except as set forth in SCHEDULE 3.8 of
the Disclosure Letter attached hereto, since the Balance Sheet Date there has
not been:
3.8.1 NO ADVERSE CHANGE. Any material adverse change in the
financial condition, assets, liabilities, business or operations of PWBV.
3.8.2 NO DAMAGE. Any loss, damage or destruction, whether covered
by insurance or not, affecting PWBV's business or properties in excess of USD
$5,000.
3.8.3 NO INCREASE IN COMPENSATION. Any increase in the salaries,
wages or other remuneration or compensation, or in any benefits payable or to
become payable to any employee or agent of PWBV (including without limitation
any increase or change pursuant to any bonus, pension, profit sharing,
retirement or other plan or commitment), or any bonus or other employee benefit
granted, made or accrued.
3.8.4 NO LABOR DISPUTES. Any labor dispute or disturbance between
PWBV and any of PWBV's Employees (as hereinafter defined).
3.8.5 NO COMMITMENTS. Any commitment or transaction by PWBV in
excess of USD $5,000 (including without limitation any borrowing or capital
expenditure) other than in the Ordinary Course of Business.
3.8.6 NO DIVIDENDS. Any declaration, setting aside, or payment of
any dividend or any other distribution in respect of PWBV's capital stock, any
redemption, purchase or other acquisition by Seller of any capital stock of
PWBV, or any security relating thereto, or any other payment to any shareholder
of PWBV as such a shareholder.
3.8.7 NO ISSUANCE. Sold or otherwise issued any shares of capital
stock or any other securities of PWBV.
3.8.8 AMENDMENT. Any amendment to PWBV's Articles of Association
or any Acquisition Transaction, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction to which PWBV has been a
party.
6.
3.8.9 NO DISPOSITION OF PROPERTY. Any sale, lease or other
transfer or disposition of any properties or assets of PWBV worth in excess of
USD $5,000 in the aggregate, except for the sale of inventory items in the
Ordinary Course of Business.
3.8.10 NO INDEBTEDNESS. Any indebtedness for borrowed money
incurred, assumed or guaranteed by PWBV involving more than USD $5,000 in the
aggregate.
3.8.11 NO LIENS. Any mortgage, pledge, lien or encumbrance made on
any of the properties or assets of PWBV.
3.8.12 NO AMENDMENT OF CONTRACTS. Any entering into, amendment or
termination by PWBV of any contract, or any waiver of material rights
thereunder, other than in the Ordinary Course of Business.
3.8.13 LOANS AND ADVANCES. Any loan or advance (other than
advances to employees in the Ordinary Course of Business for travel and
entertainment in accordance with past practice) to any person including, but not
limited to, any officer, director or employee of Seller, or PWBV or any
Affiliate. For purposes of this Agreement, the term "AFFILIATE" shall mean and
include: (a) any current or former shareholder, director or officer of Seller
or PWBV; (b) any sibling, uncle, aunt, niece or nephew of any person described
in clause (a); (c) any ancestor or lineal descendant of any person described in
clauses (a) or (b); (d) any current or former spouse of any person described in
clauses (a), (b) or (c) or any person who is a member of the same household of
the person described in clauses (a), (b) or (c) or who has resided with such
person for more than ten (10) days in any calendar year; (v) any ancestor or
lineal descendant of any person described in clauses (a), (b), (c) or (d); and
(e) any entity or person in which any of the foregoing have a direct or indirect
interest (except through ownership of less than five percent (5%) of the
outstanding shares of any entity whose securities are listed on a national
securities exchange or traded in the national over-the-counter market).
3.8.14 OFFICERS, DIRECTORS, EMPLOYEES. Any Employee Benefit Plan
established or any bonus, profit-sharing or similar payment, or increase in
wages, salary, commission, fringe benefits or other compensation or remuneration
paid or accrued to any of PWBV's directors, officers or employees.
3.8.15 CREDIT. Other than in the Ordinary Course of Business, any
grant of credit by PWBV to any customer or distributor, any other change in the
terms of any credit heretofore extended, or any other change of PWBV's policies
or practices with respect to the granting of credit.
3.8.16 NO UNUSUAL EVENTS. Any other event or condition not in the
Ordinary Course of Business of PWBV.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
specifically disclosed in the Balance Sheet, or in SCHEDULE 3.9 of the
Disclosure Letter attached hereto, PWBV does not have any liabilities,
commitments or obligations (secured or unsecured, and whether accrued, absolute,
contingent, direct, indirect or otherwise), other than commercial
7.
liabilities and obligations incurred since the Balance Sheet Date in the
Ordinary Course of Business which in the aggregate have not and will not have a
material adverse effect on the business, financial condition or results of
operations of PWBV. Except as and to the extent described in the Balance Sheet
or in SCHEDULE 3.9 of the Disclosure Letter attached hereto, neither PWBV nor
Seller has Knowledge of any basis for the assertion against PWBV of any
liability and there are no circumstances, conditions, happenings, events or
arrangements, contractual or otherwise, which may give rise to liabilities,
except commercial liabilities and obligations incurred in the Ordinary Course of
Business.
3.10 NO LITIGATION. Except as set forth in SCHEDULE 3.10 of the
Disclosure Letter attached hereto, there is no action, suit, arbitration or
other proceeding, investigation or inquiry pending or threatened against PWBV,
its directors (in such capacity), shareholders (in such capacity), its business
or any of its assets, nor does Seller or PWBV know, of any basis for any such
proceedings, investigations or inquiries. SCHEDULE 3.10 of the Disclosure
Letter attached hereto also identifies all such actions, suits, proceedings,
investigations and inquiries to which PWBV, any of its directors or shareholders
have been parties since December 31, 1996. Except as set forth in SCHEDULE 3.10
of the Disclosure Letter attached hereto, neither PWBV nor its business or
assets is subject to any judgment, order, writ or injunction of any court,
arbitrator or federal, state, foreign, municipal or other governmental
department, commission, board, bureau, agency or instrumentality.
3.11 COMPLIANCE WITH LAWS.
3.11.1 COMPLIANCE. Except as set forth in SCHEDULE 3.11.1 of the
Disclosure Letter attached hereto, to the Knowledge of Seller, PWBV (including
each and all of its operations, practices, properties and assets) is in
compliance with all applicable local and foreign laws, ordinances, orders, rules
and regulations (collectively, "LAWS"), including without limitation, those
applicable to discrimination in employment, occupational safety and health,
trade practices, competition and pricing, product warranties, zoning, building
and sanitation, employment, retirement and labor relations, product advertising.
Except as set forth in SCHEDULE 3.11.1 of the Disclosure Letter attached hereto,
PWBV has not received notice of any violation or alleged violation of, and is
subject to no liability (whether accrued, absolute, contingent, direct or
indirect) for past or continuing violation of, any Laws. All reports and
returns required to be filed by PWBV with any governmental authority have been
filed, and were accurate and complete when filed.
3.11.2 LICENSES AND PERMITS. PWBV has all licenses, permits,
approvals, authorizations and consents of all governmental and regulatory
authorities and all certification organizations required for the conduct of the
business (as presently conducted and as proposed to be conducted) and operation
of the facilities located at Marten Meesweg, 97 3068 AV Rotterdam. All such
licenses, permits, approvals, authorizations and consents are described in
SCHEDULE 3.11.2 of the Disclosure Letter attached hereto and are in full force
and effect. Except as set forth in SCHEDULE 3.11.2 of the Disclosure Letter
attached hereto, PWBV (including its operations, properties and assets) is and
has been in compliance with all such permits and licenses, approvals,
authorizations and consents.
8.
3.12 TITLE TO AND CONDITION OF PROPERTIES.
3.12.1 MARKETABLE TITLE. PWBV has good and marketable title to all
assets purported to be owned by it, free and clear of all mortgages, liens
(statutory or otherwise), security interests, claims, pledges, licenses,
equities, options, conditional sales contracts, lease purchase agreements,
financing leases, assessments, levies, easements, covenants, reservations,
restrictions, rights-of-way, exceptions, limitations, charges or encumbrances of
any nature whatsoever (collectively, "LIENS") except those described in
SCHEDULE 3.12.1 of the Disclosure Letter attached hereto.
3.12.2 CONDITION. Except as set forth on SCHEDULE 3.12.2 of the
Disclosure Letter attached hereto, all tangible assets (real and personal)
constituting the assets of PWBV are in good operating condition and repair, free
from any defects (except such minor defects as do not interfere with the
continuing and safe use thereof in the conduct of the normal operations of
PWBV), have been maintained consistent with the standards generally followed in
the industry and applicable legal standards and are sufficient to carry on the
business of PWBV as conducted during the preceding twelve (12) months.
3.12.3 REAL PROPERTY. SCHEDULE 3.12.3 of the Disclosure Letter
attached hereto set forth all real property owned by, leased by or subleased to
PWBV (the "REAL PROPERTY"). Seller has delivered to Buyer correct and complete
copies of the leases and subleases listed on SCHEDULE 3.12.3 of the Disclosure
Letter attached hereto. To Seller's Knowledge, no portion of any of the Real
Property has been used as a landfill or for storage or landfill of hazardous or
toxic materials. Neither PWBV nor Seller has notice or Knowledge of any (a)
planned or proposed increase in assessed valuations of any Real Property, (b)
governmental agency or court order requiring repair, alteration, or correction
of any existing condition affecting any Real Property or the systems or
improvements thereat, (c) condition or defect which could give rise to an order
of the sort referred to in (b) above, or (d) underground storage tanks, or any
structural, mechanical, or other defects of material significance affecting any
Real Property or the systems or improvements thereat (including, but not limited
to, inadequacy for normal use of mechanical systems or disposal or water systems
at or serving the Real Property).
3.13 BANK ACCOUNTS. SCHEDULE 3.13 of the Disclosure Letter attached
hereto accurately sets forth (i) the names and locations of all banks and other
financial institutions at which PWBV maintains an account as of the date of this
Agreement, and (ii) the names of all individuals authorized to draw on or make
withdrawals from such account.
3.14 INSURANCE. Set forth in SCHEDULE 3.14 of the Disclosure Letter
attached hereto is a complete and accurate list and description of all policies
of fire, casualty, general liability, product liability, workers compensation,
health and other forms of insurance presently in effect with respect to the
business and properties of PWBV, true and correct copies of which have
heretofore been delivered to Buyer. SCHEDULE 3.14 of the Disclosure Letter
attached hereto includes any pending claims in excess of USD $5,000. All such
policies are valid, outstanding and enforceable policies and provide insurance
coverage for the properties, assets and operations of PWBV, of the kinds, in the
amounts and against the risks customarily maintained by organizations similarly
situated. No notice of cancellation or termination has been received with
9.
respect to any such policy, and neither PWBV nor Seller has knowledge of any act
or omission of PWBV which could result in cancellation of any such policy prior
to its scheduled expiration date. PWBV has not been refused any insurance with
respect to any aspect of the operations of the business nor has its coverage
been limited by any insurance carrier to which it has applied for insurance or
with which it has carried insurance during the last three years. PWBV has duly
and timely made all claims it has been entitled to make under each policy of
insurance. There is no claim by PWBV pending under any such policies as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies, and neither PWBV nor Seller knows of any basis for denial of any
claim under any such policy. PWBV has not received any written notice from or on
behalf of any insurance carrier issuing any such policy that insurance rates
therefor will hereafter be substantially increased (except to the extent that
insurance rates may be increased for all similarly situated risks) or that there
will hereafter be a cancellation or an increase in a deductible (or an increase
in premiums in order to maintain an existing deductible) or nonrenewal of any
such policy. Such policies are sufficient in all material respects for
compliance by PWBV with all requirements of law and with the requirements of all
contracts to which PWBV is a party.
3.15 CONTRACTS AND COMMITMENTS.
3.15.1 REAL PROPERTY LEASES. Except as set forth in
SCHEDULE 3.15.1 of the Disclosure Letter attached hereto, PWBV has no leases of
real property.
3.15.2 PERSONAL PROPERTY LEASES. Except as set forth in
SCHEDULE 3.15.2 of the Disclosure Letter attached hereto, PWBV has no leases of
personal property providing for lease payments in excess of USD $5,000 per
annum.
3.15.3 MAINTENANCE COMMITMENTS. Other than that General Terms of
Agreement effective from April 1, 1997 between Unisys Nederland N.V. and PWBV
(the "UNISYS AGREEMENT"), PWBV has no maintenance contracts or commitments to
customers or distributors which in the aggregate are in excess of USD $37,000.
3.15.4 CONTRACTS WITH AFFILIATES AND CERTAIN OTHERS. Except as
disclosed in SCHEDULE 3.15.4 of the Disclosure Letter attached hereto, PWBV has
no agreement, understanding, contract or commitment (written or oral) with any
Affiliate or any employee, agent, consultant, distributor, dealer or franchisee
that is not cancelable by PWBV on notice of not longer than thirty (30) days
without liability, penalty or premium of any nature or kind whatsoever. No
Affiliate has any direct or indirect interest in (a) any entity which does
business with PWBV or is competitive with PWBV's business, or (b) any property,
asset or right which is used by PWBV in the conduct of its business.
3.15.5 POWERS OF ATTORNEY. PWBV has not given a power of attorney,
which is currently in effect, to any person, firm or corporation for any purpose
whatsoever.
3.15.6 LOAN AGREEMENTS. Except as set forth in SCHEDULE 3.15.6 of
the Disclosure Letter attached hereto, PWBV is not obligated under any loan
agreement, promissory note, letter of credit, or other evidence of indebtedness
as a signatory, guarantor or otherwise.
10.
3.15.7 GUARANTEES. Except as disclosed on SCHEDULE 3.15.7 of the
Disclosure Letter attached hereto, PWBV has not guaranteed the payment or
performance of any person, firm or corporation, agreed to indemnify any person
or act as a surety, or otherwise agreed to be contingently or secondarily liable
for the obligations of any person.
3.15.8 OTHER MATERIAL CONTRACTS. PWBV has no lease, contract or
commitment of any nature involving consideration or other expenditure in excess
of USD $10,000, or involving performance over a period of more than three
months, or which is otherwise individually material to the operations of PWBV,
except as listed in SCHEDULE 3.15.8 of the Disclosure Letter attached hereto or
in any other Schedule of the Disclosure Letter attached hereto.
3.15.9 NO DEFAULT. PWBV is not in default under the Unisys
Agreement, or, to the Knowledge of Seller, under any other contract or
commitment, nor has any event or omission occurred which through the passage of
time or the giving of notice, or both, would constitute a default thereunder or
cause the acceleration of any of PWBV's obligations or result in the creation of
any Lien on any of the assets owned, used or occupied by PWBV. To the Knowledge
of Seller, no third party is in default under any lease, contract or commitment
to which PWBV is a party, nor has any event or omission occurred which, through
the passage of time or the giving of notice, or both, would constitute a default
thereunder or give rise to an automatic termination, or the right of
discretionary termination, thereof.
3.16 EMPLOYEES AND LABOR MATTERS.
3.16.1 EMPLOYMENT COMPENSATION. SCHEDULE 3.16.1 of the Disclosure
Letter attached hereto contains a true and correct list of all employees to whom
PWBV is paying compensation, including bonuses and incentives, at an annual rate
in excess of NLG 50,000 for services rendered or otherwise; and in the case of
salaried employees such list identifies the current annual rate of compensation
for each employee and in the case of hourly or commission employees identifies
certain reasonable ranges of rates and the number of employees falling within
each such range.
3.16.2 EMPLOYEE BENEFIT PLANS.
(a) DISCLOSURE. PWBV has no "defined benefit" plan.
SCHEDULE 3.16.2 of the Disclosure Letter attached hereto sets forth all pension,
thrift, savings, profit sharing, retirement, incentive bonus or other bonus,
medical, dental, life, accident insurance, benefit, employee welfare,
disability, group insurance, stock purchase, stock option, stock appreciation,
stock bonus, executive or deferred compensation, hospitalization and other
similar fringe or employee benefit plans, programs and arrangements, and any
employment or consulting contracts, "golden parachutes," collective bargaining
agreements, severance agreements or plans, vacation and sick leave plans,
programs, arrangements and policies. SCHEDULE 3.16.2 of the Disclosure Letter
attached hereto also lists and contains those provisions of all employee
manuals, and all written or binding oral statements of policies, practices or
understandings relating to employment, which are provided to, for the benefit
of, or relate to, any persons employed by PWBV ("PWBV'S EMPLOYEES") with respect
to intellectual property
11.
developed by PWBV or PWBV's Employees, or with respect to obligations of
confidentiality related to PWBV's affairs or property.
(b) PREMIUMS ADEQUATELY FUNDED. All pension premiums due
have been paid and all pension obligations have been adequately insured and
fully funded, including for the increase in pension obligations relating to the
period prior to the Closing resulting from indexation or subsequent salary
increase ("COMING BACK SERVICE").
(c) PAYMENTS AND COMPLIANCE. With respect to each
employee benefit plan, (i) all payments due from PWBV to date have been made and
all amounts properly accrued to date as liabilities of PWBV which have not been
paid have been properly recorded on the books of PWBV and are reflected in the
Balance Sheet; (ii) PWBV has complied with, and each such employee benefit plan
conforms in form and operation to, all applicable laws and regulations, in all
respects and all reports and if required information relating to such employee
benefit plan required to be filed, and (iii) all untaken holidays have been
adequately accrued and provided for in the Balance Sheet.
(d) NO TRIGGERING OF OBLIGATIONS. The consummation of
the transactions contemplated by this Agreement will not (i) entitle any current
or former employee of PWBV to severance pay, unemployment compensation or any
other payment, except as expressly provided in this Agreement, (ii) accelerate
the time of payment or vesting, or increase the amount of compensation due to
any such employee or former employee or (iii) result in Buyer being or becoming
liable to any PWBV's Employee or liable for any amount owed to any employee
benefit plan.
3.17 SOLE SHAREHOLDER. Seller owns one hundred percent (100%) of the
issued and outstanding capital stock of PWBV.
3.18 NO BROKERS OR FINDERS. Neither Seller or PWBV nor any of their
directors, officers, employees, shareholders or agents have retained, employed
or used any broker or finder in connection with the transaction provided for
herein or in connection with the negotiation thereof.
3.19 DISCLOSURE. No representation or warranty by Seller in this
Agreement, nor any statement, certificate, schedule or exhibit hereto furnished
or to be furnished by or on behalf of Seller pursuant to this Agreement, nor any
document or certificate delivered to Buyer pursuant to this Agreement or in
connection with transactions contemplated hereby, contains or shall contain any
untrue statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not misleading. All
statements and information contained in any officer's certificate, the
Disclosure Letter or agreement described in Section 6 herein delivered by or on
behalf of Seller and/or PWBV shall be deemed representations and warranties by
Seller.
3.20 INVESTMENT REPRESENTATIONS. Seller understands that following the
Closing, Parent will file a registration on Form S-3, or any successor to Form
S-3 ("FORM S-3") or any similar short-form registration statement as would
permit or facilitate the sale and distribution by Seller
12.
of the Zitel Stock Consideration. Seller understands and acknowledges that
until the effectiveness of the Form S-3, the Zitel Stock Consideration has not
been registered under the United States Securities Act of 1933, as amended (the
"SECURITIES ACT"). Seller also understands and acknowledges that the Zitel
Stock Consideration is being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon Seller's
representations contained in this Agreement. Seller hereby represents and
warrants as follows:
3.20.1 SELLER BEARS ECONOMIC RISK. Seller has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to Parent so that it is capable of evaluating
the merits and risks of its investment in Parent and has the capacity to protect
its own interests. Seller must bear the economic risk of this investment
indefinitely unless the Zitel Stock Consideration is registered pursuant to the
Securities Act, or an exemption from registration is available. Seller also
understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such
exemption may not allow Seller to transfer all or any portion of the Zitel Stock
Consideration under the circumstances, in the amounts or at the times Seller
might propose.
3.20.2 ACQUISITION FOR OWN ACCOUNT. Seller is acquiring the Zitel
Stock Consideration for Seller's own account for investment only, and not with a
view towards their distribution.
3.20.3 SELLER CAN PROTECT ITS INTEREST. Seller represents that by
reason of its, or of its management's, business or financial experience, Seller
has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement. Further, Seller is aware of no
publication of any advertisement in connection with the transactions
contemplated in this Agreement.
3.20.4 ACCREDITED INVESTOR. Seller represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
3.20.5 PARENT INFORMATION. Seller has received and read Parent's
Form 10-K for the fiscal year ended December 31, 1996 and Form 10-Q for the
quarter ended March 31, 1997 and has had an opportunity to discuss Parent's
business, management and financial affairs with directors, officers and
management of Parent and has had the opportunity to review Parent's operations
and facilities. Seller has also had the opportunity to ask questions of and
receive answers from, Parent and its management regarding the terms and
conditions of this investment.
3.20.6 RULE 144. Seller acknowledges and agrees that the Zitel
Stock Consideration must be held indefinitely unless it is subsequently
registered under the Securities Act or an exemption from such registration is
available. Seller has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act, as in effect from time to time, which
permits limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about Parent, the resale
occurring following the required holding period under Rule
13.
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Each of Parent and Buyer, where appropriate, make the following
representations and warranties to Seller and PWBV, each of which is true and
correct on the date hereof, shall remain true and correct to and including the
Closing Date, shall be unaffected by any investigation heretofore or hereafter
made by Seller or any notice to Seller, and shall survive the Closing of the
transactions provided for herein.
4.1 CORPORATE.
4.1.1 ORGANIZATION. It is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
4.1.2 CORPORATE POWER. It has all requisite corporate power to
enter into this Agreement and the other documents and instruments to be executed
and delivered by Buyer and Parent to carry out the transactions contemplated
hereby and thereby.
4.2 AUTHORITY. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by it pursuant
hereto and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by its Board of Directors. No other corporate act or
proceeding on the part of Buyer or Parent or its shareholders is necessary to
authorize this Agreement or the other documents and instruments to be executed
and delivered by it pursuant hereto or the consummation of the transactions
contemplated hereby and thereby. This Agreement constitutes, and when executed
and delivered, the other documents and instruments to be executed and delivered
by Buyer and Parent pursuant hereto will constitute, valid and binding
agreements of Buyer and Parent, enforceable in accordance with their respective
terms, except as such may be limited by bankruptcy, insolvency, reorganization
or other laws affecting creditors' rights generally, and by general equitable
principles.
4.3 ISSUANCE AND REGISTRATION OF SHARES. The Zitel Stock Consideration
will be duly authorized and, upon issuance in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable. Within sixty
(60) days from the Closing Date, Parent shall file a Form S-3 covering the Zitel
Stock Consideration with the SEC.
4.4 NO BROKERS OR FINDERS. Neither Buyer nor Parent nor any of its
directors, officers, employees or agents have retained, employed or used any
broker or finder in connection with the transaction provided for herein or in
connection with the negotiation thereof.
4.5 FINANCIAL CAPACITY. Buyer has the financial means necessary to
consummate the transactions contemplated hereunder.
14.
5. FURTHER COVENANTS OF SELLER AND PWBV.
Each of Seller and PWBV covenant and agree as follows:
5.1 ACCESS TO INFORMATION AND RECORDS. During the period prior to the
Closing, PWBV shall give Buyer, its counsel, accountants and other
representatives (a) reasonable access during normal business hours to all of the
properties, books, records, contracts and documents of PWBV for the purpose of
such inspection, investigation and testing as Buyer deems appropriate (and PWBV
shall furnish or cause to be furnished to Buyer and its representatives all
information with respect to the business and affairs of PWBV as Buyer may
reasonably request); (b) access to employees, agents and representatives for the
purposes of such meetings and communications as Buyer reasonably desires; and
(c) with the prior consent of PWBV in each instance (which consent shall not be
unreasonably withheld), access to vendors, customers, manufacturers of its
machinery and equipment, and others having business dealings with PWBV.
5.2 CONDUCT OF BUSINESS PENDING THE CLOSING. From the date hereof until
the Closing, except as otherwise approved in writing by Buyer, such approval not
to be unreasonably withheld:
5.2.1 NO CHANGES. PWBV will use its best efforts to carry on its
business diligently and in the same manner as heretofore and will not make or
institute any changes in its methods of purchase, sale, management, accounting
or operation.
5.2.2 MAINTAIN ORGANIZATION. PWBV will use its best efforts to
take such action as may be necessary to maintain, preserve, renew and keep in
favor and effect the existence, rights and franchises of PWBV and will use its
best efforts to preserve the business organization of PWBV intact, to keep
available to Buyer the present officers and employees, and to preserve for Buyer
its present relationships with suppliers and customers and others having
business relationships with PWBV.
5.2.3 NO BREACH. PWBV will not do or omit any act, or permit any
omission to act, which may cause a breach of any material contract, commitment
or obligation, or any breach of any representation, warranty, covenant or
agreement made by Seller herein, or which would have required disclosure on
SCHEDULE 3.8 of the Disclosure Letter attached hereto had it occurred after the
Balance Sheet Date and prior to the date of this Agreement.
5.2.4 NO MATERIAL CONTRACTS. No contract or commitment will be
entered into, and no purchase of raw materials or supplies and no sale of assets
(real, personal, or mixed, tangible or intangible) will be made, by or on behalf
of PWBV, except contracts, commitments, purchases or sales which (a) are (1)
contracts or commitments for the purchase of, and purchases of, raw materials
and supplies made in the Ordinary Course of Business, (2) contracts or
commitments for the sale of, and sales of, product or inventory in the Ordinary
Course of Business, or (3) other contracts, commitments, purchases or sales in
the Ordinary Course of Business, AND (b) are not material to PWBV (individually
or in the aggregate) and would not have been required to be disclosed in the
Disclosure Letter had they been in existence on the date of this Agreement.
15.
5.2.5 NO CORPORATE CHANGES. Seller shall not amend the Articles
of Association of PWBV, make any changes in authorized or issued capital stock,
or take or commence the taking of any action with respect to the dissolution,
liquidation or winding up of PWBV or Seller.
5.2.6 MAINTENANCE OF INSURANCE. PWBV shall maintain all of the
insurance in effect as of the date hereof.
5.2.7 MAINTENANCE OF PROPERTY. PWBV shall use, operate, maintain
and repair all property of PWBV in a normal business manner.
5.2.8 NO NEGOTIATIONS. Neither Seller nor PWBV will directly or
indirectly (through a representative or otherwise) solicit or furnish any
information to any prospective buyer, commence, or conduct presently ongoing,
negotiations with any other party or enter into any agreement with any other
party concerning the sale of PWBV or Seller, the assets of PWBV or Seller or
business or any part thereof or any equity securities of PWBV or Seller (an
"ACQUISITION PROPOSAL"), and Seller and PWBV shall immediately advise Buyer of
the receipt of any Acquisition Proposal.
5.3 OTHER ACTION. Seller and PWBV shall use their best efforts to cause
the fulfillment at the earliest practicable date of all of the conditions to the
parties' obligations to consummate the transactions contemplated in this
Agreement.
DISCLOSURE. Seller and PWBV shall have a continuing obligation to
promptly notify Buyer in writing with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Disclosure Letter, but no such
update shall be deemed to supplement or amend any Schedule for the purpose of
determining whether any of the conditions set forth in Section 6 have been
satisfied.
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
6.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE. Each of
the representations and warranties made by Seller in this Agreement, and the
statements contained in the Disclosure Letter or in any instrument, list,
certificate or writing delivered by Seller pursuant to this Agreement, shall be
true and correct in all material respects when made and shall be true and
correct in all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date
without giving effect to any update of the Disclosure Letter, except for any
changes permitted by the terms of this Agreement or consented to in writing by
Buyer.
6.2 COMPLIANCE WITH AGREEMENT. Seller and PWBV shall have in all
material respects performed and complied with all of their agreements and
obligations under this
16.
Agreement which are to be performed or complied with by them prior to or on the
Closing Date, including the delivery of the closing documents specified in
Section 9.1 hereof.
6.3 ABSENCE OF SUIT. No action, suit or proceeding before any court or
any governmental authority shall have been commenced or threatened, and no
investigation by any governmental or regulating authority shall have been
commenced, against Buyer, Seller or PWBV or any of the affiliates, officers or
directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
6.4 DATAMETRICS TRANSACTION. All conditions to Buyer's obligation to
consummate the transactions between Buyer and Datametrics System Corporation
("DATAMETRICS") described in that certain Asset Purchase Agreement between Buyer
and Datametrics shall have been satisfied or waived by Buyer.
7. CONDITIONS PRECEDENT TO SELLER'S AND PWBV'S OBLIGATIONS.
Each and every obligation of Seller and PWBV to be performed on the Closing
Date shall be subject to the satisfaction prior to or at the Closing of the
following conditions:
7.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE. Each of
the respective representations and warranties made by Buyer and Parent in this
Agreement shall be true and correct in all material respects when made and shall
be true and correct in all material respects at and as of the Closing Date as
though such representations and warranties were made or given on and as of the
Closing Date.
7.2 COMPLIANCE WITH AGREEMENT. Buyer and Parent shall have in all
material respects performed and complied with all agreements and obligations
under this Agreement which are to be performed or complied with by Buyer and/or
Parent prior to or on the Closing Date, including the delivery of the closing
documents specified in Section 9.2 hereof.
7.3 ABSENCE OF SUIT. No action, suit or proceeding before any court or
any governmental authority shall have been commenced or threatened, and no
investigation by any governmental or regulating authority shall have been
commenced, against Buyer, Seller or PWBV or any of the affiliates, officers or
directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
7.4 DATAMETRICS TRANSACTION. All conditions to Buyer's obligation to
consummate the transactions between Buyer and Datametrics described in that
certain Asset Purchase Agreement between Buyer and Datametrics shall have been
satisfied or waived by Buyer.
7.5 UK CLOSING. All conditions to the obligation of the parties to
consummate the transactions between Zitel Limited, Palmer & Webb Systems Ltd.
and Moebius Business
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Training Ltd. described in that certain Asset Purchase Agreement between Buyer
and such parties (the "UK ASSET PURCHASE AGREEMENT") shall have been satisfied
or waived by such parties.
8. INDEMNIFICATION.
8.1 BY SELLER. Subject to the terms and conditions of this Article 8,
Seller hereby indemnifies, defends and holds harmless Buyer, and its directors,
officers, employees and controlled and controlling persons ("BUYER'S
AFFILIATES"), from and against all Claims asserted against, resulting to,
imposed upon, or incurred by Buyer or Buyer's Affiliates, directly or
indirectly, by reason of, arising out of or resulting from (a) the inaccuracy or
breach of any representation or warranty of Seller contained in or made pursuant
to this Agreement or in any officer's certificate, the Disclosure Letter or
agreement described in Section 6 herein (regardless of whether such breach is
deemed "material"); (b) the breach of any covenant of Seller or PWBV contained
in this Agreement or in any officer's certificate, the Disclosure Letter or
agreement described in Section 6 herein (regardless of whether such breach is
deemed "material"); (c) any Claim of or against Seller or PWBV. As used in this
Article 8, the term "CLAIM" shall include (a) all debts, liabilities and
obligations; (b) all losses, damages (including without limitation consequential
damages), judgments, awards, settlements, costs and expenses (including without
limitation interest (including prejudgment interest in any litigated matter),
penalties, court costs and reasonable attorneys fees and expenses) and shall be
net of any insurance or tax recoveries by Buyer of the amount of any such Claim;
and (c) all demands, claims, suits, actions, costs of investigation, causes of
action, proceedings and assessments, whether or not ultimately determined to be
valid. Seller acknowledges and agrees that, if there is any Claim relating to
PWBV's business, condition, assets, liabilities, operations, financial
performance, net income (or any aspect or portion thereof), then Buyer shall be
deemed, by virtue of its ownership of the Shares, to have incurred damages as a
result of such Claim.
8.2 BY BUYER. Subject to the terms and conditions of this Article 8,
Buyer hereby agrees to indemnify, defend and hold harmless Seller, its
directors, officers, employees and controlling persons, and shareholders from
and against all Claims asserted against, resulting to, imposed upon or incurred
by any such person, directly or indirectly, by reason of or resulting from (a)
the inaccuracy or breach of any representation or warranty of Buyer contained in
or made pursuant to this Agreement (regardless of whether such breach is deemed
"material"); or (b) the breach of any covenant of Buyer contained in this
Agreement or in any agreement, document or instrument executed and delivered
pursuant hereto or in connection with the transactions contemplated hereby
(regardless of whether such breach is deemed "material").
8.3 INDEMNIFICATION OF THIRD-PARTY CLAIMS. The obligations and
liabilities of any party to indemnify any other under this Article 8 with
respect to Claims relating to third parties shall be subject to the following
terms and conditions:
8.3.1 NOTICE AND DEFENSE. The party or parties to be indemnified
(whether one or more, the "INDEMNIFIED PARTY") will give the party from whom
indemnification is sought (the "INDEMNIFYING PARTY") written notice of any such
Claim, and the Indemnifying Party will undertake the defense thereof by
representatives chosen by the Indemnified Party. Failure to
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give such notice shall not affect the Indemnifying Party's duty or obligations
under this Article 8, except to the extent the Indemnifying Party is prejudiced
thereby. So long as the Indemnifying Party is defending any such Claim actively
and in good faith, the Indemnified Party shall not compromise or settle such
Claim. The Indemnified Party shall make available to the Indemnifying Party or
its representatives all records and other materials required by them and in the
possession or under the control of the Indemnified Party, or its representatives
for the use of the Indemnifying Party and its representatives in defending any
such Claim, and shall in other respects give reasonable cooperation in such
defense.
8.3.2 FAILURE TO DEFEND. If the Indemnifying Party, within a
reasonable time after notice of any such Claim, fails to defend such Claim
actively and in good faith, the Indemnified Party will (upon further notice)
have the right to undertake the defense, compromise or settlement of such Claim
or consent to the entry of a judgment with respect to such Claim, on behalf of
and for the account and risk of the Indemnifying Party, and the Indemnifying
Party shall thereafter have no right to challenge the Indemnified Party's
defense, compromise, settlement or consent to judgment.
8.3.3 INDEMNIFIED PARTY'S RIGHTS. Anything in this Section 8 to
the contrary notwithstanding, (a) if there is a reasonable probability that a
Claim may materially and adversely affect Buyer other than as a result of money
damages or other money payments for such Claim, or if the amount of the Claim
being asserted exceeds (in Buyer's judgment) by more than USD $200,000 the
insurance coverage which has been admitted by the applicable insurance carriers,
Buyer shall have the sole right to defend, compromise or settle such Claim and
shall be entitled to recover from Seller for such amounts, (b) the Indemnifying
Party shall not, without the written consent of the Indemnified Party, settle or
compromise any Claim or consent to the entry of any judgment which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in respect of
such Claim, and (c) Buyer shall have the exclusive right to defend and settle
breach of warranty claims for products.
8.4 PAYMENT. Subject to the terms of the Purchase Price and
Indemnification Escrow Agreement, the Indemnifying Party shall promptly pay the
Indemnified Party any amount due under this Article 8, which payment may be
accomplished in whole or in part, to the extent that the Indemnified Party owes
any amount to the Indemnifying Party, at the option of the Indemnified Party, by
the Indemnified Party setting off any amount owed to the Indemnifying Party by
the Indemnified Party. To the extent set-off is made by an Indemnified Party in
satisfaction or partial satisfaction of an indemnity obligation under this
Article 8 that is disputed by the Indemnifying Party, upon a subsequent
determination by final judgment not subject to appeal that all or a portion of
such indemnity obligation was not owed to the Indemnified Party, the Indemnified
Party shall pay the Indemnifying Party the amount which was set off and not owed
together with interest from the date of set-off until the date of such payment
at the Prime Rate set by Comerica Bank - California at its San Francisco,
California office. Upon judgment, determination, settlement or compromise of
any third party Claim, the Indemnifying Party shall pay promptly on behalf of
the Indemnified Party, and/or to the Indemnified Party in reimbursement of any
amount theretofore required to be paid by it, the amount so determined by
judgment, determination, settlement or compromise and all other Claims of the
Indemnified
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Party with respect thereto, unless in the case of a judgment an appeal is made
from the judgment. If the Indemnifying Party desires to appeal from an adverse
judgment, then the Indemnifying Party shall post and pay the cost of the
security or bond to stay execution of the judgment pending appeal. Upon the
payment in full by the Indemnifying Party of such amounts, the Indemnifying
Party shall succeed to the rights of such Indemnified Party, to the extent not
waived in settlement, against the third party who made such third party Claim.
8.5 DEDUCTIBLE AMOUNT. Without limiting the effect of any of the other
limitations set forth herein, Seller shall not be required to make any
indemnification payment hereunder with respect to any breach of any of its
representations and warranties, except to the extent that the cumulative amount
of the Damages actually incurred by Buyer as a direct result of all such
breaches of such representations and warranties during the period from (a) the
Closing Date until 5:00 p.m. (Pacific Standard Time) on the first anniversary of
the Closing Date (the "FIRST ANNIVERSARY DATE") (such period being referred to
as the "FIRST PERIOD") actually exceeds the First Period Deductible Amount, and
(b) the first day following the First Anniversary Date until 5:00 p.m. (Pacific
Standard Time) on the second anniversary of the Closing Date (such period being
referred to as the "SECOND PERIOD") actually exceeds the Second Period
Deductible Amount; and Seller shall only be required to pay, and shall only be
liable for, the amount by which the cumulative amount of the Damages actually
incurred by Buyer as a direct result of all such breaches of such
representations and warranties actually exceeds the First Period Deductible
Amount or the Second Period Deductible Amount, as appropriate. The "FIRST
PERIOD DEDUCTIBLE AMOUNT" shall be USD $37,500 and the "SECOND PERIOD
DEDUCTIBLE AMOUNT" shall be USD $6,250.
8.6 MAXIMUM LIABILITY. The total amount of the payments that Seller can
be required to make under or in connection with this Agreement (including all
indemnification payments required to be made to Buyer and all amounts payable to
any counsel retained by Seller in accordance with Section 8.3), excluding Claims
arising solely from software produced by Datametrics (the determination of which
shall be in the sole discretion of Buyer) where Seller has acted only as a
distributor of such software, shall be limited in the aggregate (including the
Indemnification Escrow Amount) to a maximum of: (a) USD $312,500 during the
First Period; (b) USD $125,000, less any amount paid by Seller during the First
Period, during the Second Period; and (c) Zero Dollars (USD $0) thereafter.
8.7 TREATMENT OF INDEMNIFICATION PAYMENTS. The parties shall treat all
indemnification payments as either a reimbursement to the party making the
original payment or as a reduction in the Purchase Price paid by Buyer, as
appropriate, to achieve the most beneficial tax and accounting treatment for
both parties. In the event that treating the payment as either reimbursement or
a reduction of the Purchase Price will have a positive tax and accounting effect
for one of the parties and no negative tax or accounting effect for the other
party, the payment shall be so treated. If one party will benefit from one form
of treatment at the expense of the other, the parties shall treat the payment
for tax and accounting purposes to minimize taxes and in a manner which favors
the Indemnified Party.
8.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; CLAIMS FOR
INDEMNIFICATION. All representations and warranties made by Seller or by Buyer
in this Agreement, or in any officer's
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certificate, the Disclosure Letter or agreement described in Sections 6 or 7
herein, shall survive the Closing and any investigation at any time made by or
on behalf of Seller or Buyer, as the case may be. All such representations and
warranties shall expire on the second anniversary of the Closing Date, except
with respect to claims, if any, (a) asserted in writing prior to such second
anniversary identified as a Claim for indemnification pursuant to this
Section 8, or (b) which are based upon the representations and warranties of
Seller relating to taxes, which shall survive until the applicable statute of
limitations has expired.
8.9 NO WAIVER. The closing of the transactions contemplated by this
Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification has knowledge of the breach, violation or failure of condition
constituting the basis of the Claim at or before the Closing, and regardless of
whether such breach, violation or failure is deemed to be "material".
9. CLOSING.
The closing of this transaction (the "CLOSING") shall take place at the
offices of Cooley Godward LLP, One Maritime Plaza, 20th Floor, San Francisco,
California, at 7:00 a.m. (Pacific Standard Time) on June 30, 1997, or at such
other time and place as the parties hereto shall agree upon (the "CLOSING
DATE").
9.1 DOCUMENTS TO BE DELIVERED BY SELLER AND PWBV. At the Closing,
Seller and PWBV shall deliver to Buyer the following documents, in each case
duly executed or otherwise in proper form:
9.1.1 POWERS OF ATTORNEY. Irrevocable powers of attorney, duly
executed, authorizing any employer of Ekelmans Den Hollander to execute the deed
of transfer relating to the Shares.
9.1.2 COMPLIANCE CERTIFICATE. A certificate signed by the chief
executive officer of Seller that each of the representations and warranties made
by Seller in this Agreement is true and correct in all material respects on and
as of the Closing Date with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date (except for any
changes permitted by the terms of this Agreement or consented to in writing by
Buyer), and that Seller has performed and complied with all of its obligations
under this Agreement which are to be performed or complied with on or prior to
the Closing Date. A certificate signed by the managing director of PWBV that
PWBV has performed and complied with all of its obligations under this Agreement
which are to be performed and complied with on or prior to the Closing Date.
9.1.3 CERTIFIED RESOLUTIONS. A certified copy of the resolutions
of the Board of Directors and shareholders of Seller authorizing and approving
this Agreement and the consummation of the transactions contemplated by this
Agreement.
9.1.4 ARTICLES. A copy of the certified Articles of Association
of Seller and PWBV.
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9.1.5 INCUMBENCY CERTIFICATE. Incumbency certificates relating to
each person executing any document executed and delivered by Seller or PWBV
hereunder.
9.1.6 SELLER CERTIFICATE. A written certificate prepared by
Buruma Maris, addressed to Buyer and dated as of the Closing Date relating to
Seller, substantially in the form of EXHIBIT D hereto.
9.1.7 PWBV CERTIFICATE. A written certificate prepared by
Ekelmans Den Hollander, addressed to Buyer and dated as of the Closing Date
relating to the sale of the Shares.
9.1.8 ESCROW AGREEMENT. The Escrow Agreement duly executed by
Seller and PWBV and the Escrow Agent in the form of EXHIBIT E hereto.
9.1.9 PURCHASE PRICE AND INDEMNIFICATION ESCROW AGREEMENT. The
Purchase Price and Indemnification Escrow Agreement duly executed by Seller and
PWBV.
9.1.10 OTHER DOCUMENTS. All other documents, instruments or
writings required to be delivered to Buyer at or prior to the Closing pursuant
to this Agreement and such other certificates of authority and documents as
Buyer may reasonably request.
9.2 DOCUMENTS TO BE DELIVERED BY BUYER. At the Closing, Buyer shall
deliver to Seller and PWBV the following documents, in each case duly executed
or otherwise in proper form:
9.2.1 CASH PURCHASE PRICE. To Seller and Escrow Agent wire
transfers as required by Section 2.2.3 hereof.
9.2.2 POWERS OF ATTORNEY. Irrevocable powers of attorney, duly
executed, authorizing any employer of Ekelmans Den Hollander to execute the deed
of transfer relating to the Shares.
9.2.3 COMPLIANCE CERTIFICATE. A certificate signed by the chief
executive officer of Buyer and Parent that the representations and warranties
made by Buyer and Parent in this Agreement are true and correct on and as of the
Closing Date with the same effect as though such representations and warranties
had been made or given on and as of the Closing Date (except for any changes
permitted by the terms of this Agreement or consented to in writing by Seller),
and that Buyer and Parent have performed and complied with all of Buyer's
obligations under this Agreement which are to be performed or complied with on
or prior to the Closing Date.
9.2.4 CERTIFIED RESOLUTIONS. A certified copy of the resolutions
of the Board of Directors of Parent and Buyer authorizing and approving this
Agreement and the other agreements, documents and instruments described herein
and the consummation of the transactions contemplated by this Agreement.
22.
9.2.5 INCUMBENCY CERTIFICATE. Incumbency certificates relating to
each person executing any document executed and delivered by Buyer hereunder.
9.2.6 OPINION OF COUNSEL. A written opinion of Cooley Godward
LLP, counsel to Buyer and Parent, dated as of the Closing Date, addressed to
Seller, in substantially the form of EXHIBIT F hereto.
9.2.7 ESCROW AGREEMENT. The Escrow Agreement duly executed by
Buyer and the Escrow Agent in the form of EXHIBIT E hereto.
9.2.8 OTHER DOCUMENTS. All other documents, instruments or
writings required to be delivered to Seller at or prior to the Closing pursuant
to this Agreement and such other certificates of authority and documents as
Seller may reasonably request.
10. TERMINATION.
10.1 RIGHT OF TERMINATION WITHOUT BREACH. This Agreement may be
terminated without further liability of any party at any time prior to the
Closing:
10.1.1 by the mutual written agreement of Buyer and Seller; or
10.1.2 by either Buyer or Seller if the Closing shall not have
occurred on or before that date which is thirty (30) days after the date of this
Agreement, or if such date is not a Business Day, the first Business Day
thereafter, provided the terminating party has not, through breach of a
representation, warranty or covenant, prevented the Closing from occurring on or
before such date.
10.2 TERMINATION FOR BREACH.
10.2.1 TERMINATION BY BUYER. If (a) there has been a material
violation or breach by Seller or PWBV of any of the agreements, representations
or warranties contained in this Agreement which has not been waived in writing
by Buyer, or (b) there has been a failure of satisfaction of a condition to the
obligations of Buyer which has not been so waived, or (c) Seller shall have
attempted to terminate this Agreement under this Article 10 or otherwise without
grounds to do so, then Buyer may, by written notice to Seller at any time prior
to the Closing that such violation, breach, failure or wrongful termination
attempt is continuing, terminate this Agreement with the effect set forth in
Section 10.2.3 hereof.
10.2.2 TERMINATION BY SELLER. If (a) there has been a material
violation or breach by Buyer or Parent of any of the agreements, representations
or warranties contained in this Agreement which has not been waived in writing
by Seller, or (b) there has been a failure of satisfaction of a condition to the
obligations of Seller which has not been so waived, or (c) Buyer shall have
attempted to terminate this Agreement under this Article 10 or otherwise without
grounds to do so, then Seller may, by written notice to Buyer at any time prior
to the Closing that such violation, breach, failure or wrongful termination
attempt is continuing, terminate this Agreement with the effect set forth in
Section 10.2.3 hereof.
23.
10.2.3 EFFECT OF TERMINATION. Termination of this Agreement
pursuant to this Section 10.2 shall not in any way terminate, limit or restrict
the rights and remedies of any party hereto against any other party which has
violated, breached or failed to satisfy any of the representations, warranties,
covenants, agreements, conditions or other provisions of this Agreement prior to
termination hereof. In addition to the right of any party under common law to
redress for any such breach or violation, each party whose breach or violation
has occurred prior to termination shall jointly and severally indemnify each
other party for whose benefit such representation, warranty, covenant, agreement
or other provision was made ("indemnified party") from and against all losses,
damages (including without limitation consequential damages), costs and expenses
(including without limitation interest (including prejudgment interest in any
litigated matter), penalties, court costs, and attorneys fees and expenses)
asserted against, resulting to, imposed upon, or incurred by the indemnified
party, directly or indirectly, by reason of, arising out of or resulting from
such breach or violation. Subject to the foregoing, the parties' obligations
under Article 12 of this Agreement shall survive termination.
11. RESOLUTION OF DISPUTES.
11.1 ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement or any contract or agreement entered into pursuant
hereto or the performance by the parties of its or their terms, or any claim
that the execution and delivery of such agreements constituted a violation of
the securities laws of any state or the United States or any claim for damages
or rescission of this Agreement for fraud, misrepresentation or violation of any
such securities laws, shall be settled by binding arbitration held in San
Francisco, California, accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect, except as specifically
otherwise provided in this Article 11.
11.2 ARBITRATORS. If the matter in controversy (exclusive of attorney
fees and expenses) shall appear, as at the time of the demand for arbitration,
to exceed USD $250,000, then the panel to be appointed shall consist of three
neutral arbitrators; otherwise, one neutral arbitrator.
11.3 PROCEDURES; NO APPEAL. The arbitrator(s) shall allow such discovery
as the arbitrator(s) determine appropriate under the circumstances and shall
resolve the dispute as expeditiously as practicable, and if reasonably
practicable, within one hundred twenty (120) days after the selection of the
arbitrator(s). The arbitrator(s) shall give the parties written notice of the
decision, with the reasons therefor set out, and shall have thirty (30) days
thereafter to reconsider and modify such decision if any party so requests
within ten (10) days after the decision. Thereafter, the decision of the
arbitrator(s) shall be final, binding, and nonappealable with respect to all
persons, including (without limitation) persons who have failed or refused to
participate in the arbitration process.
11.4 AUTHORITY. The arbitrator(s) shall have authority to award relief
under legal or equitable principles, including interim or preliminary relief,
and to allocate responsibility for the costs of the arbitration and to award
recovery of attorneys fees and expenses in such manner as is determined to be
appropriate by the arbitrator(s).
24.
11.5 ENTRY OF JUDGMENT. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and subject matter
jurisdiction. Seller, Buyer, PWBV, Parent and the shareholders of each entity
hereby submit to the in personam jurisdiction of the Federal and State courts in
California, for the purpose of confirming any such award and entering judgment
thereon.
11.6 CONFIDENTIALITY. All proceedings under this Article 11, and all
evidence given or discovered pursuant hereto, shall be maintained in confidence
by all parties.
11.7 CONTINUED PERFORMANCE. The fact that the dispute resolution
procedures specified in this Article 11 shall have been or may be invoked shall
not excuse any party from performing its obligations under this Agreement and
during the pendency of any such procedure all parties shall continue to perform
their respective obligations in good faith, subject to any rights to terminate
this Agreement that may be available to any party and to the right of setoff
provided in Section 8.4 hereof.
11.8 TOLLING. All applicable statues of limitation shall be tolled while
the procedures specified in this Article 11 are pending. The parties will take
such action, if any, required to effectuate such tolling.
12. EXPENSES.
Regardless of whether or not the transactions contemplated hereby are
consummated:
12.1 BROKERAGE. Seller, PWBV, Buyer and Parent each represent and
warrant to each other that there is no broker involved or in any way connected
with the transfer provided for herein. Buyer agrees to hold Seller and PWBV
harmless from and against all claims for brokerage commissions or finder's fees
incurred through any act of Buyer in connection with the execution of this
Agreement or the transactions provided for herein. Seller and PWBV jointly and
severally, agree to hold Buyer harmless from and against all claims for
brokerage commissions or finder's fees incurred through any act of any Seller or
PWBV in connection with the execution of this Agreement or the transactions
provided for herein.
12.2 EXPENSES TO BE PAID BY SELLER. Seller shall pay, and shall
indemnify, defend and hold Buyer harmless from and against, each of the
following:
12.2.1 TRANSFER TAXES. Any sales, use, excise, transfer, income or
other similar tax imposed upon Seller with respect to the transactions provided
for in this Agreement, and any interest or penalties related thereto.
12.2.2 PROFESSIONAL FEES. All fees and expenses of Seller's legal,
accounting, investment banking and other professional counsel in connection with
the transactions contemplated hereby. Buyer acknowledges that Seller will pay
for such transaction expenses from Seller's operating accounts.
25.
12.3 EXPENSES TO BE PAID BY BUYER. Buyer shall pay, and shall indemnify,
defend and hold Seller harmless from and against, each of the following:
12.3.1 STAMP DUTY/FILING FEES. Any stamp duty, filing fees and
windup costs imposed with respect to the transactions provided for in this
Agreement, and any interest or penalties related thereto.
12.3.2 PROFESSIONAL FEES. All fees and expenses of Buyer's legal,
accounting, investment banking and other professional counsel in connection with
the transactions contemplated hereby.
12.4 OTHER. Except as otherwise provided herein, each of the parties
shall bear its own expenses and the expenses of its counsel and other agents in
connection with the transactions contemplated hereby.
12.5 COSTS OF LITIGATION OR ARBITRATION. The parties agree that (subject
to the discretion, in an arbitration proceeding, of the arbitrator as set forth
in Section 11.4 hereof) the prevailing party in any action brought with respect
to or to enforce any right or remedy under this Agreement shall be entitled to
recover from the other party or parties all reasonable costs and expenses of any
nature whatsoever incurred by the prevailing party in connection with such
action, including without limitation attorneys' fees and prejudgment interest.
13. MISCELLANEOUS.
13.1 MATERIALITY. For purposes of Sections 3, 5, 6, and 8.1 of this
Agreement and for purposes of EXHIBIT A to this Agreement, a contract,
obligation, liability, transaction, change, breach, encumbrance, proceeding or
other matter or event shall not be deemed to be "material" unless the existence
or occurrence of such matter or event would, by itself, (a) cause a reasonable
purchaser to reverse its decision to enter into a transaction of the type
contemplated by this Agreement.
13.2 ANNOUNCEMENTS. Announcements concerning the transactions provided
for in this Agreement by either Seller or Buyer shall be subject to the approval
of the other in all essential respects, except that Seller's approval shall not
be required as to any statements and other information which Buyer may submit to
the SEC, the California Securities Commission or be required to make pursuant to
any rule or regulation of the SEC or any state or local securities regulatory
board, or otherwise required by law.
13.3 ASSIGNMENT; PARTIES IN INTEREST. Except as expressly provided
herein, the rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the other
parties. Notwithstanding the foregoing, Buyer may, without consent of any other
party, cause one or more subsidiaries of Buyer to carry out all or part of the
transactions contemplated hereby; provided, however, that Buyer shall,
nevertheless, remain liable for all of its obligations, and those of any such
subsidiary, to Seller hereunder. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by the respective successors and permitted
assigns of the parties hereto. Nothing contained herein shall
26.
be deemed to confer upon any other person any right or remedy under or by reason
of this Agreement.
13.4 GOVERNING LAW. This Agreement shall be construed and interpreted
according to the internal laws of the State of California, excluding any choice
of law rules that may direct the application of the laws of another
jurisdiction.
13.5 AMENDMENT AND MODIFICATION. Buyer, Parent, Seller and PWBV may
amend, modify and supplement this Agreement in such manner as may be agreed upon
by them in writing.
13.6 NOTICE. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by registered or certified international courier
service. The respective addresses to be used for all such notices, demands or
requests are as follows:
(a) If to Buyer or PWBV, to:
Zitel Corporation
47211 Bayside Parkway
Fremont, CA 94538
Attention: Mr. Henry C. Harris
Telephone: (510) 440-9600
Telecopier: (510) 440-9696
(with a copy to)
Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Attention: John L. Cardoza, Esq.
Telephone: (415) 693-2000
Telecopier: (415) 951-3699
or to such other person or address as Buyer shall furnish to Seller in writing.
27.
(b) If to Seller, to:
Palmer & Webb Systems Ltd.
Fountain House, Cleave Road
Leatherhead
Surrey KT22 7LX
United Kingdom
Attention: Julian Palmer
Phone: 011-44-137-2378899
Fax: 011-44-137-2378845
(with a copy to)
Brobeck Hale and Dorr
Hasilwood House
60 Bishopsgate
London EC2N 4AJ
Attention: David Ayres
Telephone: 011-44-1716386688
Telecopier: 011-44-1716385888
or to such other person or address as Seller shall furnish to Buyer in writing.
If personally delivered, such communication shall be deemed delivered upon
actual receipt; if electronically transmitted pursuant to this paragraph, such
communication shall be deemed delivered the next Business Day after transmission
(and sender shall bear the burden of proof of delivery); if sent by overnight
courier pursuant to this paragraph, such communication shall be deemed delivered
upon receipt. Any party to this Agreement may change its address for the
purposes of this Agreement by giving notice thereof in accordance with this
Section.
13.7 ENTIRE AGREEMENT. This instrument embodies the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and there have been and are no agreements, representations or warranties between
the parties other than those set forth or provided for herein.
13.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.9 HEADINGS. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
13.10 FURTHER DOCUMENTS. Buyer, Seller and PWBV each agree to execute all
other documents and to take such other action or corporate proceedings as may be
necessary or desirable to carry out the terms hereof.
28.
13.11 SURVIVAL. All provisions of this Agreement shall survive the
Closing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
"BUYER"
ZITEL WORLD TRADE
By: /s/ Jack H. King
----------------------------------------
Jack H. King, CEO
----------------------------------------
[Print Name and Title]
"PARENT"
ZITEL CORPORATION
By: /s/ Jack H. King
----------------------------------------
Jack H. King, CEO
----------------------------------------
[Print Name and Title]
"SELLER"
HELL SAILS B.V.
By: /s/ J. H. Van Bergen
----------------------------------------
J. H. Van Bergen
----------------------------------------
[Print Name and Title]
"PWBV"
PALMER & WEBB SYSTEMS B.V.
By: /s/ J. Fortgens, Managing Director
----------------------------------------
/s/ M. L. Schuurkes, Managing Director
----------------------------------------
[Print Name and Title]
29.
EXHIBIT A
DEFINITIONS
As used in the Agreement the following terms shall have the following
respective meanings:
"ACQUISITION PROPOSAL" shall have the meaning specified in Section 5.2.8 of
the Agreement.
"AFFILIATE" shall have the meaning specified in Section 3.8.13 of the
Agreement.
"AGREEMENT" shall have the meaning specified in the preamble to the
Agreement.
"BALANCE SHEET" shall have the meaning specified in Section 3.4 of the
Agreement.
"BALANCE SHEET DATE" shall mean April 30, 1997.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or any
weekday on which Comerica Bank - California in San Francisco, California is not
open for business.
"BUYER" shall have the meaning specified in the preamble to the Agreement.
"BUYER'S AFFILIATES" shall have the meaning specified in Section 8.1 of the
Agreement.
"CLAIM" shall have the meaning specified in Section 8.1 of the Agreement.
"CLOSING" and "CLOSING DATE" shall have the meanings specified in Section 9
of the Agreement.
"COMING BACK SERVICE" shall have the meaning specified in Section 3.16.2(b)
of the Agreement.
"DATAMETRICS" shall have the meaning specified in Section 6.4 of the
Agreement.
"DISCLOSURE LETTER" shall mean that disclosure letter, together with the
Schedules contained therein, attached and forming a part of the Agreement.
"ESCROW AGENT" shall mean Comerica Bank - California.
"ESCROW AGREEMENT" shall mean that certain agreement between the parties to
the Agreement and the Escrow Agent in the form of EXHIBIT E to the Agreement.
"FINANCIAL STATEMENTS" shall have the meaning specified in Section 3.4 of
the Agreement.
1.
"FIRST ANNIVERSARY DATE" shall have the meaning specified in Section 8.5 of
the Agreement.
"FIRST PERIOD" shall have the meaning specified in Section 8.5 of the
Agreement.
"FIRST PERIOD DEDUCTIBLE AMOUNT" shall have the meaning specified in
Section 8.5 of the Agreement.
"FORM S-3" shall have the meaning specified in Section 3.21 of the
Agreement.
"GAAP" shall mean generally accepted accounting principles in the relevant
jurisdiction.
"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" shall have the meanings
specified in Section 8.3.1 of the Agreement.
"KNOWLEDGE," "KNOWN," "AWARENESS" and "AWARE" shall mean the combined
actual knowledge of any director or officer of Seller and any director or
officer of Seller shall be deemed to have such knowledge as he or she would have
after having made all due, diligent and careful inquiries and after having
received full disclosure in response to such inquiries.
"LAWS" shall have the meaning specified in Section 3.11.1 of the Agreement.
"LIENS" shall have the meaning specified in Section 3.12.1 of the
Agreement.
"ORDINARY COURSE OF BUSINESS" shall mean the ordinary course of PWBV's
business consistent with past custom and practice (including with respect to
quantity and frequency).
"PARENT" shall have the meaning specified in the preamble to the Agreement.
"PERSON" means any individual, corporation, limited liability corporation,
association, general partnership, limited partnership, limited liability
partnership, venture, trust, association, firm, organization, company, business,
entity, union, society, government (or political subdivision thereof) or
governmental agency, authority or instrumentality.
"PURCHASE PRICE" shall have the meaning specified in Section 2.1 of the
Agreement.
"PURCHASE PRICE AND INDEMNIFICATION ESCROW AGREEMENT" shall have the
meaning specified in Section 2.2.1 of the Agreement.
"PWBV" shall have the meaning specified in the preamble to the Agreement.
"REAL PROPERTY" shall have the meaning specified in Section 3.12.3 of the
Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall have the meaning specified in Section 3.21 of the
Agreement.
2.
"PWBV'S EMPLOYEES" shall have the meaning specified in Section 3.16.2(a) of
the Agreement.
"SECOND PERIOD" shall have the meaning specified in Section 8.5 of the
Agreement.
"SECOND PERIOD DEDUCTIBLE AMOUNT" shall have the meaning specified in
Section 8.5 of the Agreement.
"SELLER" shall have the meaning specified in the preamble to the Agreement.
"TAXES" shall mean any and all forms of direct and indirect taxation levied
from or imposed on or to be withheld by the MeesPierson Group under any tax laws
or regulations, whether national or foreign, including without limiting the
generality of the foregoing, corporate income tax, capital tax, wage tax, real
estate property tax, transfer taxes, registration tax, sales tax, value added
tax, withholding tax, divestment payments (such as repayment or recapture of
investment premiums, subsidies, investment credits, allowances or deductions),
custom duties, stock exchange tax, excise tax or gift tax and all social
security contributions and any interest and penalties due in respect thereof or
in connection therewith.
"UNISYS AGREEMENT" shall have the meaning specified in Section 3.15.3 of
the Agreement.
"UK ASSET PURCHASE AGREEMENT" shall have the meaning specified in
Section 7.5 of the Agreement.
"ZITEL STOCK CONSIDERATION" shall have the meaning specified in
Section 2.2.2 of the Agreement.
3.
Exhibit B
PURCHASE PRICE AND
INDEMNIFICATION ESCROW AGREEMENT
THIS PURCHASE PRICE AND INDEMNIFICATION ESCROW AGREEMENT (this "AGREEMENT")
is dated as of June 30, 1997, by and among ZITEL LIMITED, a company incorporated
in England and Wales ("ZITEL U.K."), and ZITEL WORLD TRADE, a California
corporation ("ZITEL WORLD TRADE") (Zitel U.K. and Zitel World Trade are
hereinafter collectively referred to as "BUYER"), PALMER & WEBB SYSTEMS LTD., a
company incorporated in England and Wales ("PWUK"), REGINALD WEBB and JULIAN
PALMER, as the sole shareholders of PWUK (individually, a "PWUK SHAREHOLDER" and
collectively, the "PWUK SHAREHOLDERS"), MOEBIUS BUSINESS TRAINING LTD., a
company incorporated in England and Wales ("MOEBIUS"), and PWUK, as the sole
shareholder of Moebius (the "MOEBIUS SHAREHOLDER"), HELL SAILS B.V., a private
limited liability company organized under the laws of the Kingdom of the
Netherlands ("HELL SAILS"), and PALMER & WEBB SYSTEMS B.V., a private limited
liability company organized under the laws of the Kingdom of the Netherlands
("PWBV"), and COMERICA BANK - CALIFORNIA (the "ESCROW AGENT"). (PWUK, Moebius
and Hell Sails are sometimes hereinafter individually referred to as a "SELLER"
and collectively as the "SELLERS") (The PWUK Shareholders and the Moebius
Shareholder are sometimes hereinafter individually referred to as a
"SHAREHOLDER" and collectively as the "SHAREHOLDERS").
RECITALS
A. Pursuant to that certain Asset Purchase Agreement dated the date
hereof (the "ASSET PURCHASE AGREEMENT") between Zitel U.K., PWUK, Moebius, the
PWUK Shareholders and the Moebius Shareholder, Zitel U.K. is purchasing
substantially all of the assets, and assuming certain of the liabilities, of
PWUK and Moebius.
B. Pursuant to that certain Stock Purchase Agreement dated the date
hereof (the "STOCK PURCHASE AGREEMENT") between Zitel World Trade, Hell Sails
and PWBV, Zitel World Trade is purchasing all of the outstanding and issued
stock of PWBV from Hell Sails. The Asset Purchase Agreement and the Stock
Purchase Agreement are hereinafter collectively referred to as the "AGREEMENTS".
C. A condition precedent to the consummation of the Agreements is the
execution and delivery of this Agreement by the parties hereto. Certain
capitalized terms used in this Agreement are defined in the Agreements.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows.
1.
1. ESTABLISHMENT OF ESCROW ACCOUNTS.
1.1 PURCHASE PRICE ADJUSTMENT ESCROW. At the Closing (as defined in the
Agreements), Buyer shall deliver the amount of One Hundred Fifty Thousand
Dollars ($150,000) (the "PURCHASE PRICE ADJUSTMENT ESCROW AMOUNT") to Comerica
Bank - California (the "ESCROW AGENT") to be held in a segregated interest-
bearing account as provided for in this Section 1.1 (the "PURCHASE PRICE
ADJUSTMENT ESCROW"). On or before the fifth (5th) day following the final
determination of the Second Quarter Balance Sheets (as defined below) (such date
being hereinafter referred to as the "SETTLEMENT DATE"): (a) if the total
assets reflected in the Second Quarter Balance Sheets less the total assets
reflected in the balance sheets of PWUK, Moebius and PWBV, each dated as of
April 30, 1997 (collectively, the "APRIL 30 BALANCE SHEETS") is less than Fifty
Thousand Dollars ($50,000), no adjustment shall be made to the Purchase Price in
both Agreements and the entire Purchase Price Adjustment Escrow Amount shall be
paid to PWUK on behalf of all Sellers promptly thereafter; and (b) if the total
assets reflected in the Second Quarter Balance Sheets less the total assets
reflected in the April 30 Balance Sheets is equal to or greater than Fifty
Thousand Dollars ($50,000), the excess, together with actual interest earned
thereon paid from the Closing Date (as defined in the Agreements) to the
Settlement Date (the "PURCHASE PRICE ADJUSTMENT"), shall be deducted equally
from the Purchase Price paid under both Agreements and paid to Buyer from the
Purchase Price Adjustment Escrow and the remaining Purchase Price Adjustment
Escrow Amount, together with actual interest earned thereon, shall be paid to
PWUK on behalf of all Sellers promptly thereafter.
1.2 INDEMNIFICATION ESCROW. At the Closing, Buyer shall deliver the
amount of One Hundred Fifty Thousand Dollars ($150,000) (the "INDEMNIFICATION
ESCROW AMOUNT") to the Escrow Agent to be held in a segregated interest-bearing
account as provided for in this Section 1.2 (the "INDEMNIFICATION ESCROW"). The
Escrow Agent shall hold the Indemnification Escrow Amount until 5:00 p.m.
(Pacific Standard Time) on the first anniversary of the Closing Date (the "FIRST
ANNIVERSARY DATE") for the purpose of paying for: (a) any claims for indemnity
made by Buyer pursuant to Section 11 of the Asset Purchase Agreement or Section
8 of the Stock Purchase Agreement; and (b) any claim for a Warranty Credit made
by Buyer pursuant to Section 3.3 of the Asset Purchase Agreement. In the event
that no such claim(s) are made by Buyer by the First Anniversary Date, the
Indemnification Escrow Amount, together with any interest earned thereon, shall
be paid by the Escrow Agent to PWUK on behalf of all Sellers promptly
thereafter. In the event that Buyer makes one or more such claim(s) by the
First Anniversary Date: (a) the amount of such claim(s) shall continue to be
held in the Indemnification Escrow and the Indemnification Escrow shall be
extended after the First Anniversary Date until such time as such claim(s) is
finally resolved; and (b) the difference between the Indemnification Escrow
Amount and the amount of such claim(s), together with any interest earned
thereon, shall be paid by the Escrow Agent to PWUK on behalf of all Sellers
promptly thereafter.
1.3 METHOD OF PAYMENT. All payments under this Article 1 shall be made by
wire transfer of immediately available funds to an account designated by the
recipient not less than forty-eight (48) hours prior to the time for payment
specified herein.
2.
2. SECOND QUARTER BALANCE SHEETS.
2.1 PREPARATION. Within sixty (60) days after the Closing Date, Buyer
shall deliver to PWUK on behalf of all Sellers a balance sheet of each of PWUK,
Moebius and PWBV as of July 31, 1997, prepared in accordance with generally
accepted accounting principles from the books and records of each of PWUK,
Moebius and PWBV, on a basis consistent with generally accepted accounting
principles ("GAAP") theretofore followed by each of PWUK, Moebius and PWBV in
the preparation of the April 30 Balance Sheets and in accordance with this
Section 2.1, and fairly presenting the financial position of each of PWUK,
Moebius and PWBV as of July 31, 1997. Such balance sheets shall be accompanied
by detailed schedules of the Purchased Assets and Assumed Liabilities together
with a report prepared by Buyer stating that such balance sheets have been
prepared in accordance with GAAP, on a basis consistent with the accounting
principles theretofore followed by each of PWUK, Moebius and PWBV, except as
otherwise provided in this Section 2.1 and setting forth the amount of any
adjustment to the Purchase Price under the Agreements.
2.2 RIGHT TO OBJECT. Within thirty (30) days following the delivery of
such balance sheets, only PWUK, or the Sellers' independent accountants (MP
Saunders & Company with respect to PWUK and Moebius and Van Doesburg & Partners
with respect to PWBV ("SELLERS' ACCOUNTANTS")), on behalf of any or all Sellers,
may object to any of the information contained in such balance sheets. Any such
objection shall be made in writing. PWUK and the applicable Sellers'
Accountant, on the one hand, and Buyer and Coopers & Lybrand L.L.P. ("BUYER'S
ACCOUNTANT"), on the other hand, shall use their best efforts to reasonably
resolve such dispute(s) in a timely fashion.
2.3 APPOINTMENT OF THIRD AUDITOR. In the event of a dispute or
disagreement relating to the balance sheets which Buyer and Seller(s) are unable
to resolve, any party may elect to have all such disputes or disagreements
resolved by an accounting firm of nationally recognized standing (the "THIRD
ACCOUNTING FIRM") to be mutually selected by the applicable Seller and Buyer or,
if no agreement is reached, by the applicable Sellers' Accountant and Buyer's
Accountant. The Third Accounting Firm shall make a resolution of the balance
sheet of the applicable Seller as of July 31, 1997, which shall be final and
binding for purposes of this Article 2. The Third Accounting Firm shall be
instructed to use every reasonable effort to perform its services within fifteen
(15) days of its hiring and, in any case, as soon as practicable after such
date. The fees and expenses for the services of the Third Accounting Firm shall
be shared by Buyer and the applicable Seller as follows:
The applicable Seller shall pay a percentage of such fees and expenses
equal to A/(A+B) and Buyer shall pay a percentage of such fees and expenses
equal to B/(A+B), where A is equal to the absolute value of the difference (in
dollars) between assets as finally determined by the Third Accounting Firm and
assets as reflected in the objection prepared and delivered by the applicable
Seller in accordance with Section 2.2 hereof, and B is equal to the absolute
value of the difference (in dollars) between assets as finally determined by the
Third Accounting Firm and assets as reflected in the report prepared and
delivered by Buyer in accordance with Section 2.1 hereof. As used in this
Agreement, the term "SECOND
3.
QUARTER BALANCE SHEETS" shall mean the balance sheets of each of PWUK, Moebius
and PWBV as of July 31, 1997 as finally determined for purposes of this
Article 2, whether by acquiescence of Sellers in the figures supplied by Buyer
in accordance with Section 2.1 hereof, by negotiation and agreement of the
parties or by the Third Accounting Firm in accordance with this Section 2.3.
2.4 ACCESS. Buyer agrees to permit Sellers, the applicable Sellers'
Accountant, and their respective representatives, during normal business hours,
to have reasonable access to, and to examine and make copies of, all books and
records of Seller, including but not limited to, the books, records, schedules,
work papers and audit programs of Buyer and Buyer's Accountant and access to
representatives of Buyer's Accountant, which documents and access are necessary
to review the balance sheet delivered by Buyer in accordance with Section 2.1
hereof. Sellers similarly agree to permit Buyer's Accountant and their
respective representatives, during normal business hours, to have reasonable
access to any books and records of Sellers which do not constitute Purchased
Assets, in order to enable them to prepare such balance sheet.
3. REPRESENTATIONS AND WARRANTIES.
Each of Zitel U.K., Zitel World Trade, PWUK, Moebius, Hell Sails, PWBV and
Escrow Agent hereby makes the following representations and warranties to every
other party hereto, each of which is true and correct on the date hereof, shall
remain true and correct to and including the Closing Date, shall be unaffected
by any investigation heretofore or hereafter made by any other party hereto, or
any knowledge of any other party and shall survive the Closing.
3.1 CORPORATE. It is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation. It has all
requisite corporate power to enter into this Agreement and the other documents
and instruments to be executed and delivered by it and to carry out the
transactions contemplated hereby and thereby.
3.2 AUTHORITY. The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by it pursuant hereto and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by its board of directors. No other corporate act or proceeding
on the part of it or its shareholders is necessary to authorize this Agreement
or the other documents and instruments to be executed and delivered by it
pursuant hereto or the consummation of the transactions contemplated hereby and
thereby. This Agreement constitutes, and when executed and delivered, the other
documents and instruments to be executed and delivered by it pursuant hereto
will constitute, valid and binding agreements of it, enforceable in accordance
with their respective terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally,
and by general equitable principles.
4.
4. TERMINATION. This Agreement shall terminate upon the earlier of: (a) that
date when the amount in both the Purchase Price Adjustment Escrow and the
Indemnification Escrow is Zero Dollars ($0); or (b) the written agreement of all
parties hereto.
5. RESOLUTION OF DISPUTES.
5.1 ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement or any contract or agreement entered into pursuant
hereto or the performance by the parties of its or their terms, or any claim
that the execution and delivery of such agreements constituted a violation of
the securities laws of any state or the United States or any claim for damages
or rescission of this Agreement for fraud, misrepresentation or violation of any
such securities laws, shall be settled by binding arbitration held in San
Francisco, California, accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect, except as specifically
otherwise provided in this Article 5. The panel to be appointed shall consist
of one neutral arbitrator.
5.2 PROCEDURES; NO APPEAL. The arbitrator shall allow such discovery as
he or she determines appropriate under the circumstances and shall resolve the
dispute as expeditiously as practicable, and if reasonably practicable, within
one hundred twenty (120) days after the selection of the arbitrator. The
arbitrator shall give the parties written notice of the decision, with the
reasons therefor set out, and shall have thirty (30) days thereafter to
reconsider and modify such decision if any party so requests within ten (10)
days after the decision. Thereafter, the decision of the arbitrator shall be
final, binding, and nonappealable with respect to all persons, including
(without limitation) persons who have failed or refused to participate in the
arbitration process.
5.3 AUTHORITY. The arbitrator shall have authority to award relief under
legal or equitable principles, including interim or preliminary relief, and to
allocate responsibility for the costs of the arbitration and to award recovery
of attorneys fees and expenses in such manner as is determined to be appropriate
by the arbitrator.
5.4 ENTRY OF JUDGMENT. Judgment upon the award rendered by the arbitrator
may be entered in any court having in personam and subject matter jurisdiction.
Sellers, Buyer and Shareholders hereby submit to the in personam jurisdiction of
the Federal and State courts in California, for the purpose of confirming any
such award and entering judgment thereon.
5.5 CONFIDENTIALITY. All proceedings under this Article 5, and all
evidence given or discovered pursuant hereto, shall be maintained in confidence
by all parties.
5.6 CONTINUED PERFORMANCE. The fact that the dispute resolution
procedures specified in this Article 5 shall have been or may be invoked shall
not excuse any party from performing its obligations under this Agreement and
during the pendency of any such procedure all parties shall continue to perform
their respective obligations in good faith.
5.
5.7 TOLLING. All applicable statues of limitation shall be tolled while
the procedures specified in this Article 5 are pending. The parties will take
such action, if any, required to effectuate such tolling.
5.8 EXPENSES. The parties agree that (subject to the discretion, in an
arbitration proceeding, of the arbitrator as set forth in Section 5.3 hereof)
the prevailing party in any action brought with respect to or to enforce any
right or remedy under this Agreement shall be entitled to recover from the other
party or parties all reasonable costs and expenses of any nature whatsoever
incurred by the prevailing party in connection with such action, including
without limitation attorneys' fees and prejudgment interest.
6. MISCELLANEOUS.
6.1 ASSIGNMENT; PARTIES IN INTEREST. Except as expressly provided herein,
the rights and obligations of a party hereunder may not be assigned, transferred
or encumbered without the prior written consent of the other parties.
Notwithstanding the foregoing, Buyer may, without consent of any other party,
cause one or more subsidiaries of Buyer to carry out all or part of the
transactions contemplated hereby; provided, however, that Buyer shall,
nevertheless, remain liable for all of its obligations, and those of any such
subsidiary, to Sellers hereunder. This Agreement shall be binding upon, inure
to the benefit of, and be enforceable by the respective successors and permitted
assigns of the parties hereto. Nothing contained herein shall be deemed to
confer upon any other person any right or remedy under or by reason of this
Agreement.
6.2 GOVERNING LAW. This Agreement shall be construed and interpreted
according to the internal laws of the State of California, excluding any choice
of law rules that may direct the application of the laws of another
jurisdiction.
6.3 AMENDMENT AND MODIFICATION. This Agreement may not be amended,
modified or supplemented without the prior written consent of all parties
hereto.
6.4 NOTICE. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated in the Agreements (or, with respect to the Escrow Agent, to
the address indicated on the signature page hereto), by registered or certified
international courier service. If personally delivered, such communication
shall be deemed delivered upon actual receipt; if electronically transmitted
pursuant to this Section, such communication shall be deemed delivered the next
business day after transmission (and sender shall bear the burden of proof of
delivery); if sent by overnight courier pursuant to this Section, such
communication shall be deemed delivered upon receipt. Any party to this
Agreement may change its address for the purposes of this Agreement by giving
notice thereof to each other party hereto.
6.
6.5 ENTIRE AGREEMENT. This instrument embodies the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and there have been and are no agreements, representations or warranties between
the parties other than those set forth or provided for herein.
6.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.7 HEADINGS. The headings in this Agreement are inserted for convenience
only and shall not constitute a part hereof.
6.8 FURTHER DOCUMENTS. The parties hereto each agree to execute all other
documents and to take such other action or corporate proceedings as may be
necessary or desirable to carry out the terms hereof.
6.9 SURVIVAL. All provisions of this Agreement shall survive the Closing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
"BUYERS"
ZITEL LIMITED
By: /s/ Jack H. King
------------------------------------
Jack H. King, CEO
------------------------------------
[Print Name and Title]
ZITEL WORLD TRADE
By: /s/ Jack H. King
------------------------------------
Jack H. King, CEO
------------------------------------
[Print Name and Title]
7.
"SELLERS"
PALMER & WEBB SYSTEMS LTD.
By: /s/ Julian C. C. Palmer
-----------------------------------
Julian C. C. Palmer, Director
-----------------------------------
[Print Name and Title]
MOEBIUS BUSINESS TRAINING LTD.
By: /s/ R. H. W. Webb
-----------------------------------
R. H. W. Webb, Director
-----------------------------------
[Print Name and Title]
HELL SAILS B.V.
By: /s/ J. H. Van Bergen
-----------------------------------
J. H. Van Bergen
-----------------------------------
[Print Name and Title]
"SHAREHOLDERS"
/s/ Reginald Webb
----------------------------------------
REGINALD WEBB
/s/ Julian Palmer
----------------------------------------
JULIAN PALMER
8.
PALMER & WEBB SYSTEMS, LTD.
By: /s/ R. H. W. Webb
-----------------------------------
R. H. W. Webb, Director
-----------------------------------
[Print Name and Title]
"PWBV"
PALMER & WEBB SYSTEMS B.V.
By: /s/ T. Fortgens, Managing Director
-----------------------------------
/s/ M. L. Schuurkes, Managing Director
-----------------------------------
[Print Name and Title]
9.
EXHIBIT C
PALMER & WEBB SYSTEMS INTERNATIONAL B.V.
BALANCE SHEET
APRIL 30, 1997
(FIGURES ARE IN DUTCH GUILDERS) PWBV
FIXED ASSETS 6,547
CURRENT ASSETS:
Trade 394,882
Stock 8,708
Prepayments 0
Other Debtors 0
Bad Debt Provision 0
Cash in Bank 703,228
----------
TOTAL CURRENT ASSETS 1,106,818
----------
----------
CURRENT LIABILITIES:
Trade Creditors 1,000,079
Sales in Advance 0
Accruals 0
Other Creditors 0
VAT Liability 0
Paye/NIC Creditor 0
Expense Accounts 0
----------
TOTAL CURRENT LIABILITIES 1,000,079
NET WORKING CAPITAL 106,739
----------
NET ASSETS 113,286
----------
----------
CAPITAL & RESERVES:
Ordinary Shares 40,000
Share Premium Account 0
Reserves 0
P & L Prior 266,094
P & L Current -192,808
Dividends Paid Current 0
TOTAL CAPITAL AND RESERVES 113,286
----------
----------
Buruma Maris
EXHIBIT D
CERTIFICATE
THE UNDERSIGNED:
Mr. Onno Berend Okkinga, civil-law notary, practising at Rotterdam;
herewith certifies:
THAT Hell Salls B.V., a limited liability company established in the
Netherlands, hereinafter also referred to as the "Company", has been
incorporated on 20th August 1984;
THAT the Company has been duly incorporated, is legally existing under the laws
of the Netherlands and that as per the date hereof the Company is not declared
bankrupt or liquidated;
THAT the Company is registered with the Trade Registry of the Chamber of
Commerce and industry at Middelburg (The Netherlands) under file number
22026154;
THAT as per 27th June 1997 the sole managing director of the Company is Mr.
Johannes Henricus van Bergen, born at Dordrecht 5th October 1960, residing
Vrouwesteeg 7, 2801 EK Goude, The Netherlands, who has individual power to
represent the Company and to bind the Company towards third parties;
THAT the Company's objects' clause includes the authority for the Company to
acquire and to dispose of subsidiaries and in general shares in other companies
and that the intended sale and transfer of shares in the capital of Palmer &
Webb Systems B.V. is within the scope of the Company's objectives;
Duly signed this 27th day of June, 1997.
/s/ O. B. Okkinga
O.B. Okkinga, notary and partner of Buruma Maris.
2.
Exhibit E
ESCROW AGREEMENT
INSTITUTIONAL TRUST DEPARTMENT
This Agreement made this 30th day of June 1997 between the parties listed on
Exhibit Attached hereto, a corporation (herein called the "Depositor"), and
parties listed on Exhibit A attached (herein called the "Other Party") and
COMERICA BANK, a California banking corporation (herein called the "Agent")
whose address is 250 Lytton Avenue, Palo Alto, CA 94301.
WITNESSETH
The Agent acknowledges receipt in Escrow from Depositor of the following:
$300,000.00 (herein called "Property").
1. The Agent is hereby authorized and instructed to either:
a. Deliver the Property to the Other Party in strict compliance with the
following Condition(s), or,
b. Failing strict compliance with the Condition(s), re-deliver the
Property to Depositor; whereupon in either event, Agent's duties and
liabilities in connection with this Escrow shall terminate.
c. The Conditions are: See the Purchase Price and Indemnification Escrow
Agreement attached as Exhibit B hereto.
2. The duties and obligations of Agent hereunder shall be determined solely by
the express provision of this Agreement. Agent shall not be liable or
responsible for any act done, or step taken or omitted by it, or any
mistake of fact or law, or for anything which it may do or refrain from
doing, except for its gross negligence, willful default or failure in the
performance of any obligation imposed upon it hereunder.
Agent is authorized to act in reliance upon the sufficiency, correctness,
genuineness or validity of any instrument or document or other writing
submitted to it hereunder, and shall have no liability with respect to said
matters.
3. Any funds held by Agent hereunder shall be held and invested by Agent as
specified in written instructions, Agent may deposit said funds in an
interest bearing deposit account with other similar funds. All proxies
will be voted by the Agent. Agent is not obligated to render any
statements or notices of non-performance hereunder to any party hereto but
may in its discretion inform any party hereto, or his authorized
representative, of any matters pertaining to this Escrow.
Rule 14b-1(c) of the Securities and Exchange Commission enables
corporations to learn the identity of their security holders whose
securities are held by the Bank and registered in "nominee" or "street"
name unless the beneficial owner specifically indicates its objection to
such disclosure. The Depositor hereby indicates its objection to
disclosure by the Bank of Depositor's name, address and security position
to all companies whose securities are held in this Account and are
registered in "nominee" or "street" name.
1.
4. Agent's fee in the amount of 50 basis points shall be automatically
deducted from the Escrow. The Depositor and Other Party agree, jointly and
severally, to indemnify and hold harmless the Agent from any costs,
damages, expenses or claims, including attorney's fees, which Agent may
incur or sustain as a result of or arising out of this Escrow Agreement or
Agent's duties relating thereto, and will apply them on demand, and the
Agent is hereby given a lien upon, and security interest in, the Property
deposited in this escrow to secure Agent's right to payment or
reimbursement.
Agent shall be reimbursed $25 for all wire or check disbursements and
actual cost for any termination expenses made or incurred hereunder, and if
it shall be required to perform extraordinary services not contemplated
herein, it shall receive reasonable additional compensation therefor.
Agent shall not be required to institute or maintain litigation unless
indemnified to its satisfaction for its counsel fees, costs, disbursements
and all other costs, expenses and liabilities to which it may in its
judgment be subjected in connection with such action.
5. In the event of any disagreement or the presentation of adverse claims or
demands in connection with the Property, Agent shall, at its option, be
entitled to refuse to comply with any claims or demands during the
continuance of such disagreement and may refrain from delivering any item
affected thereby, and in so doing, Agent shall not become liable to
Depositor or Other Party, or any of them, or to any other person, due to
its failure to comply with any such adverse claim or demand. Agent shall
be entitled to continue, without liability, to refrain and refuse to act:
a. Until all the rights of the adverse claimants have been finally
adjudicated by a court having jurisdiction of the parties and the
items affected thereby, after which time the Agent shall be entitled
to act in conformity with such adjudication; or
b. Until all differences shall have been adjusted by agreement and Agent
shall have been notified thereof and shall have been directed in
writing, signed jointly or in counterpart by Depositor and Other Party
and by all persons making adverse claims or demands, at which time
agent shall be protected in acting in compliance therewith.
The parties agree that the Agent may seek adjudication of any adverse claim
or demands in an appropriate County Court, or the United States Federal
District Court, agree to the jurisdiction of either of said Courts over
their persons as well as the Property, waive personal service of any
process, and agree that service of process by certified or registered mail,
return receipt requested, to the address set forth below each party's
signature to this Agreement shall constitute adequate service.
6. The entire agreement of the parties is contained herein; any change in
terms or conditions herein may only be made in writing signed by all
parties hereto. Agent shall not be charged with knowledge of any fact,
including but not limited to performance or non-performance of any
Condition, unless it has actually received written notice hereof from one
of the parties by certified or registered mail, return receipt requested,
addressed to Agent's address shown at the top of this Agreement, such
notice clearly referring to this Agreement.
7. This Escrow Agreement shall be deemed to have been made under and shall be
governed by the laws of the State of California in all respects, including
matters of construction, validity and performances.
2.
8. Agent may consult with legal counsel to be selected and employed by it and
shall be fully protected with respect to any action or inaction under this
Agreement taken or suffered in good faith by Agent in accordance with the
opinion of such counsel.
9. Agent may resign as such following the giving of thirty (30) days prior
written notice to the other parties hereto. Similarly, Agent may be
removed and replaced following the giving of thirty (30) days prior written
notice to Agent by the other parties hereto. In either event, the duties
of the Agent shall terminate thirty (30) days after the date of such notice
(or at such earlier date as may be manually agreeable); and Agent shall
then delivery the balance of the escrow deposit then in its possession to a
successor escrow agent as shall be appointed by Other Party hereto, as
evidenced by a written notice filed with Agent, or if no successor escrow
agent has been so appointed, the then acting Agent shall deliver the
balance of the escrow deposit then in its possession to (indicate
disposition of escrow deposit) ____________________________________________.
10. It is the intention of the parties hereto that Agent shall never be
required to use or advance its own funds or otherwise incur personal
financial liability in the performance of any of its duties or the exercise
of any of its rights and powers hereunder.
11. No waiver nor any past agreement or condition hereunder by any party hereto
shall operate as a continuing waiver of any agreement or condition under
this Agreement. Each party shall have the right to waive and/or nullify,
in writing, any condition or term of this Agreement which is for its or his
benefit.
12. If any provision or clause in this Agreement or application thereof to any
person or circumstances is held invalid or unenforceable, such invalidity
or unenforceability shall not affect other provisions or applications of
this Agreement which can be given effect without the invalid or
unenforceable provision or application, and to this end the provisions of
this Agreement are declared to be severable.
See the signature page attached as Exhibit C hereto.
DEPOSITOR: OTHER PARTY:
--------------------- -------------------------------
By: By:
---------------------------- ----------------------------------------
(Name & Title) (Name & Title)
- ------------------------------- -------------------------------------------
(Signature) (Signature)
- ------------------------------- -------------------------------------------
(Date) (Date)
- ------------------------------- -------------------------------------------
(Address) (Address)
3.
COMERICA BANK:
By: /s/ illegible
---------------------------------
(Name & Title)
- -------------------------------
(Signature)
- -------------------------------
(Date)
4.
EXHIBIT A TO ESCROW AGREEMENT
PARTIES TO ESCROW AGREEMENT:
the "Depositor":
ZITEL LIMITED, a company incorporated in England and Wales, and
ZITEL WORLD TRADE, a California corporation
the "Other Party":
PALMER & WEBB SYSTEMS LTD., a company incorporated in England and Wales,
MOEBIUS BUSINESS TRAINING LTD., a company incorporated in England and Wales,
HELL SAIS B.V., a private limited liability company organized under the laws of
the Kingdom of the Netherlands,
PALMER & WEBB SYSTEMS B.V., a private limited liability company organized under
the laws of the Kingdom of the Netherlands, and
REGINALD WEBB AND JULIAN PALMER, individually
1.
EXHIBIT B TO ESCROW AGREEMENT
Purchase Price and Indemnification Escrow Agreement
(attached)
1.
EXHIBIT C TO ESCROW AGREEMENT
SIGNATURE PAGE TO ESCROW AGREEMENT:
THE "DEPOSITOR"
ZITEL LIMITED
By: /s/ Jack H. King
--------------------------------------
Jack H. King, CEO
--------------------------------------
[Print Name and Title]
ZITEL WORLD TRADE
By: /s/ Jack H. King
--------------------------------------
Jack H. King, CEO
--------------------------------------
[Print Name and Title]
THE "OTHER PARTY"
PALMER & WEBB SYSTEMS LTD.
By: /s/ Julian C. C. Palmer
--------------------------------------
Julian C. C. Palmer, Director
--------------------------------------
[Print Name and Title]
MOEBIUS BUSINESS TRAINING LTD.
By: /s/ R. H. W. Webb
--------------------------------------
R. H. W. Webb, Director
--------------------------------------
[Print Name and Title]
HELL SAILS B.V.
1.
By: /s/ J. H. Van Bergen
--------------------------------------
J. H. Van Bergen
--------------------------------------
[Print Name and Title]
PALMER & WEBB SYSTEMS B.V.
By: /s/ T. Fortgens, Managing Director
--------------------------------------
/s/ M. L.Schuurkes, Managing Director
--------------------------------------
[Print Name and Title]
/s/ Reginald Webb
-------------------------------------------
REGINALD WEBB
/s/ Julian Palmer
-------------------------------------------
JULIAN PALMER
2.
Exhibit F
[COOLEY GODWARD LLP LETTERHEAD]
June 30, 1997
Hell Sails B.V.
Fountain House, Cleave Road
Leatherhead
Surrey KT22 7LX
United Kingdom
Ladies & Gentlemen:
We have acted as counsel for Zitel Corporation, a California corporation
("Zitel"), and Zitel World Trade, a California corporation ("Zitel Subcorp"), in
connection with the purchase of all of the issued and outstanding shares of
capital stock of Palmer & Webb Systems B.V., a private limited liability company
organized under the laws of the Kingdom of the Netherlands ("PWBV"), from Hell
Sails B.V., a private limited liability company organized under the laws of the
Kingdom of the Netherlands ("Seller"), pursuant to that Stock Purchase Agreement
dated June 30, 1997, by and among Zitel, Zitel Subcorp, PWBV and you (the
"Purchase Agreement"), the Escrow Agreement (the "Escrow Agreement") and the
Purchase Price Adjustment and Indemnification Escrow Agreement (the "Purchase
Price Escrow Agreement") (the Purchase Agreement, the Escrow Agreement and the
Purchase Price Escrow Agreement are hereinafter collectively referred to as the
"Agreements"). We are rendering this opinion pursuant to Section 9.2.6 of the
Purchase Agreement. Except as otherwise defined herein, capitalized terms used
but not defined herein have the respective meanings given to them in the
Purchase Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreements by the various parties and originals or copies
certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by Zitel and Zitel Subcorp of the Agreements), where authorization, execution
and delivery are prerequisites to the effectiveness of such documents. We have
also assumed: that all individuals executing and delivering documents had the
legal capacity to so execute and deliver; that you have received
Hell Sails B.V.
June 30, 1997
Page 2
all documents you were to receive under the Agreements; that the Agreements are
obligations binding upon each of the parties thereto other than Zitel and Zitel
Subcorp; that each of the parties thereto other than Zitel and Zitel Subcorp
have filed any required California franchise or income tax returns and have paid
any required California franchise or income taxes; and that there are no
extrinsic agreements or understandings among the parties to the Agreements that
would modify or interpret the terms of the Agreements or the respective rights
or obligations of the parties thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the State of California. We express no
opinion as to whether the laws of any particular jurisdiction apply, and no
opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof. We are not
rendering any opinion as to compliance with any antifraud law, rule or
regulation relating to securities, or to the sale or issuance thereof.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. Each of Zitel and Zitel Subcorp has been duly incorporated and is a
validly existing corporation in good standing under the laws of the State of
California.
2. The shares of Zitel Stock Consideration (as defined in the Purchase
Agreement) to be issued and delivered to Seller pursuant to Section 2.2.2 of the
Purchase Agreement, will, when issued in accordance with the terms of the
Purchase Agreement, be validly issued, fully paid and nonassessable.
3. Each of Zitel and Zitel Subcorp has all requisite corporate power and
authority to enter into the Agreements, and to issue the Zitel Stock
Consideration, in accordance with the terms thereof. The Agreements have been
duly and validly authorized, executed and delivered by Zitel and Zitel Subcorp
and constitute valid and binding agreements of Zitel and Zitel Subcorp
enforceable against Zitel and Zitel Subcorp in accordance with their respective
terms, except as rights to indemnity under Section 8 of the Purchase Agreement
may be limited by applicable laws and except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar laws affecting creditors' rights, and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance.
Hell Sails B.V.
June 30, 1997
Page 3
This opinion is intended solely for your benefit and is not to be made available
to, or be relied upon by, any other person, firm, or entity without our prior
written consent.
Very truly yours,
Cooley Godward LLP
By: /s/ John L. Cardoza
-------------------------------
John L. Cardoza