SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
February 28, 1998
Date of Report (Date of earliest event reported)
ADVENT SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
94-2901952
(I.R.S. Employer Identification No.)
0-26994
(Commission File Number)
301 Brannan Street
San Francisco, California 94107
(Address of principal executive offices)
(415) 543-7696
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
On February 28, 1998, Advent Software, Inc., a Delaware corporation (the
"Registrant" or "Advent Software") acquired (the "Acquisition") all of the
outstanding capital stock of MicroEdge, Inc., a New York corporation
("MicroEdge"), from Ximena Florez and Dov Torenberg, the sole shareholders of
MicroEdge (the "Sellers"), for a total purchase price of $9,093,250 worth of
Registrant's stock as priced on the date of closing. As a result of the
Acquisition, MicroEdge became a wholly-owned subsidiary of the Registrant.
In connection with the Acquisition, Nine Hundred Nine Thousand
Three Hundred Twenty- Five Dollars ($909,325) of the consideration payable in
connection with the Acquisition (the "Escrow Amount") was placed into escrow, to
be held as security for any losses incurred by the Registrant in the event of
certain breaches by MicroEdge of covenants, representations and warranties
contained in the Stock Purchase Agreement dated February 28, 1998 by and between
the Registrant, MicroEdge, and the Sellers. A copy of the Stock Purchase
Agreement is filed as Exhibit 2.1 to this report and is incorporated herein by
this reference.
The Acquisition will be treated as a pooling for financial
accounting purposes.
Item 7. Financial Statements and Exhibits.
The following financial statements and exhibits are filed as
part of this report, where indicated.
(a) Financial statements of business acquired, prepared pursuant to
Rule 3.05 of Regulation S-X:
Not applicable.
(b) Pro forma financial information required pursuant to Article 11 of
Regulation S-X:
Not applicable.
(c) Exhibits in accordance with Item 601 of Regulation S-K:
Exhibits.
2.1 Stock Acquisition Agreement, dated as of February 28,
1998, by and among Advent Software, Inc., a Delaware
corporation, MicroEdge, Inc., a New York corporation,
and the Sellers.
4.1 Form of Declaration of Registration Rights.
The Registrant agrees to supplementally furnish the Securities and Exchange
Commission with a copy of any other exhibits or schedules upon request.
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INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
NUMBER
2.1 Stock Purchase Agreement, dated as of February 28, 1998, by and
among Advent Software, Inc., a Delaware corporation, MicroEdge,
Inc., a New York corporation, and Ximena Florez and Dov
Torenberg, sole shareholders of MicroEdge, Inc.
4.1 Form of Declaration of Registration Rights.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ADVENT SOFTWARE, INC.
Dated: February 28, 1998 By: /s/ Irv H. Lichtenwald
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Irv H. Lichtenwald
Senior Vice President, Chief Financial
Officer and Secretary
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of February 28, 1998 by and among Advent Software, Inc., a Delaware
corporation ("Buyer"), MicroEdge, Inc., a New York corporation ("Company"), and
all of the holders of the outstanding securities of the Company, which holders
are listed on Exhibit A hereto (individually a "Seller" and collectively the
"Sellers").
RECITALS
A. Sellers own all of the issued and outstanding shares of the
Company's Common Stock (the "Shares"), which constitute all of the issued and
outstanding securities of the Company.
B. Sellers desire to sell the Shares, and Buyer desires to purchase all
of the Shares. The parties hereto are entering into this Agreement to provide
for Buyer's acquisition of the Shares and Company thereby becoming a
wholly-owned subsidiary of Buyer, and to establish various rights, obligations
and conditions in connection therewith (the "Acquisition"). It is intended by
the parties hereto that the Acquisition shall qualify for accounting treatment
as a pooling of interests.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE ACQUISITION OF SHARES
1.1 Purchase and Sale of Shares. In consideration of the
representations, warranties and other agreements of the Company and the Sellers
set forth in or otherwise contemplated by this Agreement, and on the terms and
subject to the conditions of this Agreement, Buyer will purchase the Shares,
constituting all of the issued and outstanding securities of the Company, from
Sellers for the consideration set forth in Section 1.2, and Sellers hereby sell,
transfer, assign and deliver all of their respective rights, title and interest
in and to the Shares to Buyer.
1.2 Consideration.
(a) Issuance of Buyer Common Stock. As consideration (the
"Consideration") for the sale, transfer, assignment and delivery of all of
Sellers' right, title and interest in and to the Shares to Buyer, Buyer will, at
the Closing (defined below), on the terms and subject to the conditions of this
Agreement, issue to Sellers a number of shares of Buyer Common Stock (the "Buyer
Share Number") equal to (i) the Conversion Ratio (defined below) multiplied by
the Aggregate Company Common
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Number (defined below), rounded down to eliminate any fractional shares, less
(ii) the Escrow Amount (defined below).
(b) Deposit of Escrow Amount. At the Closing, Buyer will
deposit into an escrow account, as set forth in Article V, a number of shares of
Buyer Common Stock equal to the Escrow Amount.
(c) Adjustments to Conversion Ratio. The Conversion Ratio
shall be adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities convertible
into Company Common Stock), reorganization, recapitalization or other like
change with respect to Company Common Stock occurring after the date hereof and
prior to the Closing.
(d) Determination of Conversion Ratio and Escrow Amount. The
"Conversion Ratio" shall refer to the quotient obtained by dividing the
Aggregate Buyer Common Number (defined below) by the Aggregate Company Common
Number. The "Escrow Amount" shall refer to the product obtained by multiplying
the Aggregate Buyer Common Number by 0.10. The "Aggregate Company Common Number"
shall equal 100. The "Aggregate Buyer Common Number" shall be determined as
follows: (i) in the event that the average closing price of Buyer's Common Stock
for the five trading days ending two trading days before the date on which the
Closing occurs (the "Average Price") is less than $22.00, the Aggregate Buyer
Common Number shall equal the quotient obtained by dividing $6,600,000 by the
Average Price, provided, however, that in the event such quotient is greater
than 350,000, the Aggregate Buyer Common Number shall be deemed to be equal to
350,000; (ii) in the event the Average Price is greater than or equal to $22.00
but less than $28.00, the Aggregate Buyer Common Number shall equal 300,000; and
(iii) in the event the Average Price is greater than or equal to $28.00, the
Aggregate Buyer Common Number shall equal the quotient obtained by dividing
$8,400,000 by the Average Price, provided, however, that in the event such
quotient is less than 250,000, the Aggregate Buyer Common Number shall be deemed
to be equal to 250,000.
1.3 Closing; Delivery.
(a) Closing. The closing of the Acquisition (the "Closing")
will take place concurrently with the execution hereof at the offices of Wilson
Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California and
MicroEdge, Inc., 619 West 54th Street, 10th Floor, New York, New York. The date
upon which the Closing actually occurs is herein referred to as the "Closing
Date."
(b) Delivery at Closing. At the Closing:
(i) Each Seller will deliver to Buyer all stock certificates, stock powers,
endorsements, assignments and other instruments and documents necessary or
appropriate to sell, convey, assign and deliver the Shares to Buyer.
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(ii) Buyer will deliver to each Seller documentation in a form reasonably
satisfactory to the Company evidencing Buyer's instructions to its transfer
agent to deliver to each Seller a certificate representing a number of shares of
its Common Stock equal to (A) the product of (x) the number of Shares owned by
such Seller, as set forth in Schedule 2.2(a), and (y) the Conversion Ratio, less
(B) a portion of the Escrow Amount equal to the proportion of Buyer Common Stock
which such Seller would otherwise be entitled to receive under Section 1.2 by
virtue of his or her ownership of outstanding Shares.
(iii) The Company shall deliver to Buyer evidence reasonably satisfactory
to it that the Agreement and the Acquisition shall have been adopted and
approved by the stockholders of the Company by the requisite vote under
applicable law and the Company's Articles of Incorporation.
(iv) Buyer shall deliver to the Company evidence reasonably satisfactory to
it that the shares of Buyer Common Stock issuable to stockholders of the Company
pursuant to this Agreement and such other shares required to be reserved for
issuance in connection with the Acquisition shall have been authorized for
listing on The Nasdaq National Market upon official notice of issuance.
(v) The Company shall deliver to Buyer evidence satisfactory to it that the
Company has obtained the consents, approvals and waivers set forth in Schedule
1.3(b)(v) (including, without limitation, any consents, waivers or approvals
required under any contract or agreement to which the Company is a party or by
which it is bound and which are necessary in connection with the Acquisition to
transfer to the Surviving Corporation all rights of the Company thereunder).
(vi) The Company shall deliver to Buyer a legal opinion in substantially
the form attached hereto as Exhibit B from Moskowitz, Altman & Hughes, LLP,
legal counsel to the Company.
(vii) Buyer shall deliver to the Company a legal opinion in substantially
the form attached hereto as Exhibit C from Wilson Sonsini Goodrich & Rosati,
legal counsel to the Buyer.
(viii) The Company shall deliver an executed Affiliate Agreement, which
shall be in full force and effect, executed by each of the parties identified by
the Company as being an Affiliate of the Company.
(ix) Each of the Sellers shall deliver to Buyer an executed Stockholder's
Certificate which shall be in full force and effect.
(x) Each of the Sellers shall, and the Sellers shall cause Ephy Torenberg
to, deliver to Buyer an Employment and Employment and Non-Competition Agreement
pursuant to Section 4.15 hereof, which Employment and Non-Competition Agreements
shall not have been terminated or repudiated by either Seller, and shall be in
full force and effect.
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(xi) The Company shall deliver to Buyer evidence reasonably satisfactory to
it that the directors of the Company in office immediately prior to the Closing
have resigned as directors of the Company effective immediately following the
Closing.
1.4 Directors and Officers. At the Closing, Stephanie G. DiMarco and
Irv H. Lichtenwald of Buyer shall become the directors of the Company, each to
hold office in accordance with the Articles of Incorporation and Bylaws of the
Company. At the Closing, Dov Torenberg shall become President, Ximena Florez
shall become Vice President, Sales, Marketing and Professional Services, Ephy
Torenberg shall become Vice President, Operations and Irv H. Lichtenwald shall
become Chief Financial Officer and Secretary, each to hold office in accordance
with the Bylaws of the Company.
1.5 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, the Buyer's transfer agent shall issue in exchange for such
lost, stolen or destroyed certificates, upon the making of an affidavit of that
fact by the holder thereof, such shares of Buyer Common Stock as may be required
pursuant to Section 1.2; provided, however, that Buyer may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Buyer
or its transfer agent with respect to the certificates alleged to have been
lost, stolen or destroyed.
1.6 Tax and Accounting Consequences. It is intended by the parties
hereto that the Acquisition shall (i) constitute a reorganization within the
meaning of Section 368 of the Code and (ii) qualify for accounting treatment as
a pooling of interests.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in a document dated as of the date hereof referring
specifically to the representations, warranties or covenants in this Agreement
which reasonably identifies the basis for an exception to a representation,
warranty or covenant in this Agreement and which is delivered by the Company to
Buyer prior to the execution of this Agreement (the "Company Schedules"), the
Company represents and warrants to Buyer as set forth below.
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. The Company has the corporate power to own its properties and to carry
on its business as now being conducted. The Company is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would have, or would reasonably be expected
to have, a material adverse effect on the business, financial condition, results
of operations, assets (including intangible assets), liabilities or prospects of
the Company (hereinafter referred to as a "Material Adverse Effect"). The
Company
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has delivered a true and correct copy of its Articles of Incorporation and
Bylaws, each as amended to date, to Buyer.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of
1,000 shares of authorized Common Stock, no par value, of which 100 shares are
issued and outstanding. The Company Capital Stock is held of record by the
persons, with the addresses of record and in the amounts, set forth on Schedule
2.2(a). All outstanding shares of Company Capital Stock are duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights created by statute, the Articles of Incorporation or Bylaws of the
Company or any agreement to which the Company is a party or by which it is
bound.
(b) There are no options, warrants, calls, rights, commitments
or agreements of any character, written or oral, to which either the Company or
a Seller is a party or by which either is bound obligating either the Company or
either Seller to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of the capital
stock of the Company or obligating Company to grant, extend, accelerate the
vesting of, change the price of, otherwise amend or enter into any such option,
warrant, call, right, commitment or agreement. As a result of this Acquisition,
Buyer will be the record and sole beneficial owner of all outstanding capital
stock of the Company and rights to acquire or receive capital stock of the
Company.
2.3 Subsidiaries. Except as set forth in Schedule 2.3, the Company does
not have and has never had any subsidiaries or affiliated companies and does not
otherwise own and has never otherwise owned any shares of capital stock or any
interest in, or control, directly or indirectly, any other corporation,
partnership, association, joint venture or other business entity.
2.4 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and the agreements attached hereto as
exhibits to which it is a party (the "Related Agreements") and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Related Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company. The Company's Board of Directors
has unanimously approved the Acquisition and this Agreement. This Agreement and
the Related Agreements have been duly executed and delivered by the Company and
each Seller and constitute the valid and binding obligation of the Company and
each Seller, enforceable in accordance with their respective terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies. Except as set forth
on Schedule 2.4, the execution and delivery of this Agreement by the Company and
each Seller does not, and, as of the Closing Date, the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (any such
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event, a "Conflict") (i) any provision of the Articles of Incorporation or
Bylaws of the Company or (ii) any mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or its properties or assets. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other federal, state, county, local or
foreign governmental authority, instrumentality, agency or commission
("Governmental Entity") or any third party (so as not to trigger any Conflict)
is required by or with respect to the Company or any Seller in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws and (ii) such
other consents, waivers, authorizations, filings, approvals and registrations
which are set forth on Schedule 2.4.
2.5 Company Financial Statements.
(a) Schedule 2.5 sets forth the Company's unaudited, reviewed
balance sheet as of December 31, 1997 (the "Balance Sheet") and the related
unaudited, reviewed statements of operations, stockholders' equity and cash
flows for the year then ended and the footnotes thereto (collectively, the
"Company Financials"). The Company Financials are correct in all material
respects and have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a basis consistent throughout the periods
indicated and consistent with each other. The Company Financials present fairly
the financial condition and operating results of the Company as of the dates and
during the periods indicated therein.
2.6 No Undisclosed Liabilities. Except as set forth in Schedule 2.6,
the Company does not have any liability, indebtedness, obligation, expense,
claim, deficiency, guaranty or endorsement of any type, whether accrued,
absolute, contingent, matured, unmatured or other (whether or not required to be
reflected in financial statements in accordance with generally accepted
accounting principles), which individually or in the aggregate, has not been
reflected in the Balance Sheet.
2.7 No Changes. Except as set forth in Schedule 2.7, since the date of the
Balance Sheet, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course
of business as conducted on the date of the Balance Sheet and consistent with
past practices;
(b) amendments or changes to the Articles of Incorporation or Bylaws of the
Company;
(c) capital expenditure or commitment by the Company outside
the ordinary course of business, either individually or in the aggregate,
exceeding $10,000;
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(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or
other distribution with respect to the capital stock of the Company, or any
direct or indirect redemption, purchase or other acquisition by the Company of
any Company Capital Stock;
(i) increase in the salary or other compensation payable or to
become payable to any of its officers, directors, employees or advisors, or the
declaration, payment or commitment or obligation of any kind for the payment of
a bonus or other additional salary or compensation to any such person except as
otherwise contemplated by this Agreement;
(j) sale, lease, license or other disposition of any of the
assets or properties of the Company, except in the ordinary course of business
as conducted on that date and consistent with past practices;
(k) amendment or termination of any material contract,
agreement or license to which the Company is a party or by which it is bound;
(l) loan by the Company to any person or entity, incurring by
the Company of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others, except for advances to employees
for travel and business expenses in the ordinary course of business, consistent
with past practices;
(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company;
(n) commencement or notice or threat of commencement of any
lawsuit or proceeding against or investigation of the Company or its affairs;
(o) notice of any claim of ownership by a third party of
Company Intellectual Property (as defined in Section 2.11 below) or of
infringement by the Company of any third party's intellectual property rights;
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(p) issuance or sale by the Company of any of its shares of
its capital stock, or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities;
(q) change in pricing or royalties set or charged by the
Company to its customers or licensees or in pricing or royalties set or charged
by persons who have licensed Company Intellectual Property to the Company;
(r) event or condition of any character that has or could be
reasonably expected to have a Material Adverse Effect on the Company; or
(s) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (r) (other than negotiations with Buyer and its representatives
regarding the transactions contemplated by this Agreement).
2.8 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes," means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in
Schedule 2.8:
(i) The Company as of the Closing will have prepared and
filed all required federal, state, local and foreign returns,
estimates, information statements and reports ("Returns")
relating to any and all Taxes concerning or attributable to the
Company or its operations and such Returns have been prepared
using the accrual method of accounting, are true and correct and
have been completed in accordance with applicable law.
(ii) The Company as of the Closing: (A) will have paid or
accrued all Taxes it is required to pay or accrue and (B) will
have withheld with respect to its employees all federal and state
income taxes, FICA, FUTA and other Taxes required to be withheld.
(iii) The Company has not been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding, proposed or
assessed against the Company, nor has the Company executed any
waiver of any statute of limitations on or extending the period
for the assessment or collection of any Tax.
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(iv) No audit or other examination of any Return of the
Company is currently in progress, nor has the Company been
notified of any request for such an audit or other examination.
(v) The Company does not have any liabilities for unpaid
federal, state, local and foreign Taxes which have not been
accrued or reserved against in accordance with GAAP on the
Balance Sheet, whether asserted or unasserted, contingent or
otherwise, and the Company has no knowledge of any basis for the
assertion of any such liability attributable to the Company, its
assets or operations.
(vi) The Company has provided to Buyer copies of all federal
and state income and all state sales and use Tax Returns for all
periods since the date of the Company's incorporation.
(vii) There are (and as of immediately following the Closing
there will be) no liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("Liens") on the
assets of the Company relating to or attributable to Taxes.
(viii) The Company has no knowledge of any basis for the
assertion of any claim relating or attributable to Taxes which,
if adversely determined, would result in any Lien on the assets
of the Company.
(ix) None of the Company's assets are treated as "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
(x) As of the Closing, there will not be any contract,
agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former
employee of the Company that, individually or collectively, could
give rise to the payment of any amount that would not be
deductible pursuant to Section 280G or 162 of the Code.
(xi) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under
any such agreement.
(xiii) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Code.
(xiv) The Company has qualified as an S Corporation for
federal and state income tax purposed since its inception.
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2.9 Restrictions on Business Activities. Except as set forth in
Schedule 2.9, there is no agreement (non-compete or otherwise), commitment,
judgment, injunction, order or decree to which the Company is a party or
otherwise binding upon the Company which has or reasonably could be expected to
have the effect of prohibiting or impairing any business practice of the
Company, any acquisition of property (tangible or intangible) by the Company or
the conduct of business by the Company. Without limiting the foregoing, the
Company has not entered into any agreement under which the Company is restricted
from selling, licensing or otherwise distributing any of its products to any
class of customers, in any geographic area, during any period of time or in any
segment of the market.
2.10 Title to Properties; Absence of Liens and Encumbrances.
(a) The Company owns no real property, nor has it ever owned
any real property. Schedule 2.10(a) sets forth a list of all real property
currently, or at any time in the past, leased by the Company, the name of the
lessor, the date of the lease and each amendment thereto and, with respect to
any current lease, the aggregate annual rental and/or other fees payable under
any such lease. All such current leases are in full force and effect, are valid
and effective in accordance with their respective terms, and there is not, under
any of such leases, any existing default or event of default (or event which
with notice or lapse of time, or both, would constitute a default).
(b) The Company has good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in its business, free and clear of any Liens (as defined in Section
2.8(b)(vii)), except as reflected in the Company Financials or in Schedule
2.10(b) and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the value,
or materially interfere with the present use, of the property subject thereto or
affected thereby.
2.11 Intellectual Property.
(a) For the purposes of this Agreement, the following terms
have the following definitions:
"Intellectual Property" means any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States and
foreign patents and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part thereof
("Patents"); (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and all documentation relating to any of the
foregoing; (iii) all copyrights, copyrights registrations and applications
therefor and all other rights corresponding thereto throughout the world; (iv)
all mask works, mask work registrations and applications therefor; (v) all
industrial designs and any registrations and applications therefor throughout
the world; (vi) all trade names, logos, common law trademarks and service marks;
trademark and service mark registrations and applications therefor and all
goodwill associated therewith throughout the world; (vii) all databases and data
collections and all rights therein throughout the world; and
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(viii) all computer software including all source code, object code, firmware,
development tools, files, records and data, all media on which any of the
foregoing is recorded; (ix) any similar, corresponding or equivalent rights to
any of the foregoing and (x) all documentation related to any of the foregoing.
"Company Intellectual Property" shall mean any Intellectual Property
that is (i) owned by (ii) exclusively licensed to or (iii) was developed or
created by the Company or any subsidiary of the Company.
"Registered Intellectual Property" shall mean all United States,
international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; (iv) any mask work registrations and applications to
register mask works; and (v) any other Company Intellectual Property that is
subject of an application, certificate, filing, registration or other document
issued by, filed with, or recorded by, any state, government or other public
legal authority.
(b) Schedule 2.11(b) lists all Registered Intellectual
Property owned by, or filed in the name of, the Company or the Subsidiary (the
"Company Registered Intellectual Property") and lists any proceedings or actions
before any court, tribunal (including the United States Patent and Trademark
Office (the "PTO") or equivalent authority anywhere in the world) related to any
of the Company Registered Intellectual Property.
(c) Each item of Company Intellectual Property, including all
Company Registered Intellectual Property listed in Schedule 2.11(b), is free and
clear of any Liens. The Company (i) to its knowledge is the exclusive owner of
all trademarks and trade names used in connection with the operation or conduct
of the business of the Company, including the sale of any products or technology
or the provision of any services by the Company and (ii) owns exclusively, and
has good title to, all copyrighted works that are Company products or other
works of authorship that the Company otherwise purports to own.
(d) Except as set forth in Schedule 2.11(d), to the extent
that any Intellectual Property has been developed or created by any person other
than the Company for which the Company has, directly or indirectly, paid, the
Company has a written agreement with such person with respect thereto and the
Company thereby has obtained ownership of, and is the exclusive owner of, all
such Intellectual Property by operation of law or by valid assignment.
(e) Except as set forth in Schedule 2.11(e), the Company has
not transferred ownership of or granted any license of or right to use or
authorized the retention of any rights to use any Intellectual Property that is
or was Company Intellectual Property, to any other person.
(f) The Company owns or has a written license to all
Intellectual Property used in and/or necessary to the conduct of its business as
it currently is conducted including, without limitation,
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products, technology or services currently under development and the design,
development, manufacture, use, import and sale of the products, technology and
services of the Company.
(g) Other than "shrink-wrap" and similar widely available
commercial end-user licenses, the contracts, licenses and agreements listed in
Schedule 2.11(g) include all contracts, licenses and agreements, to which the
Company is a party with respect to any Intellectual Property of any person other
than the Company. No person other than the Company has ownership rights to
improvements made by the Company in Intellectual Property which has been
licensed to the Company.
(h) Schedule 2.11(h) lists all contracts, licenses and
agreements between the Company and any other person wherein or whereby the
Company has agreed to, or assumed, any material obligation or duty to warrant,
indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur any
material obligation or liability or provide a right of rescission with respect
to the infringement or misappropriation by the Company or such other person of
the Intellectual Property of any person other than the Company.
(i) (X) The operation of the business of the Company as it is
currently conducted (including, without limitation, products, technology or
services currently under development and the design, development, manufacture,
use, import and sale of the products, technology and services of the Company)
does not infringe or misappropriate the Intellectual Property (other than
Patents) of any person, violate the rights of any person (including rights to
privacy or publicity), or constitute unfair competition or trade practices under
the laws of any jurisdiction, and the Company has not received notice from any
person claiming that such operation or any act, product, technology or service
(including products, technology or services currently under development) of the
Company infringes or misappropriates the Intellectual Property (other than
Patents) of any person or constitutes unfair competition or trade practices
under the laws of any jurisdiction (nor is the Company aware of any basis
therefor).
(Y) The operation of the Company's Business (as defined
below) does not and will not infringe or misappropriate the
Patents of any person, and the Company has not received notice
from any person claiming that such operation or any act, product,
technology or service (including products, technology or services
currently under development) of the Company infringes or
misappropriates the Patents of any person (nor is the Company
aware of any basis therefor). The representations and warranties
of this Section 2.11(i)(Y) shall only apply to claims of
infringement or misappropriation or violations arising from (i)
the products or technology of the Company existing as of the
Closing Date and (ii) products or technology under development as
of the Closing Date up to and including the first commercial
release of any such products or technology. The term "Business"
means the operations of the Company as conducted as of the
Closing Date, including the manufacture, sale, licensing,
copying, distribution or other exploitation of any product or
technology under development as of such dates.
(j) To the Company's knowledge after reasonable investigation,
each item of Company Registered Intellectual Property is valid and subsisting,
all necessary registration, maintenance
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and renewal fees in connection with such Registered Intellectual Property have
been paid and all necessary documents and certificates in connection with such
Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. Schedule 2.11(j) lists all actions that must
be taken by the Company within sixty (60) days of the Closing Date, including
the payment of any registration, maintenance or renewal fees or the filing of
any documents, applications or certificates for the purposes of maintaining,
perfecting or preserving or renewing any Company Intellectual Property. In each
case in which the Company has acquired ownership of any Intellectual Property
rights from any person, the Company has obtained a valid and enforceable
assignment sufficient to irrevocably transfer all rights in such Intellectual
Property (including the right to seek past and future damages with respect to
such Intellectual Property) to the Company. To the maximum extent provided for
by, and in accordance with, applicable laws and regulations, the Company has
recorded each such assignment with the relevant governmental authorities,
including the United States Copyright Office, or their respective equivalents in
any relevant foreign jurisdiction, as the case may be except to the extent such
failure would not have a Material Adverse Effect. Notwithstanding the foregoing,
the Company has recorded with the PTO, or its equivalent in any foreign
jurisdiction, each such assignment.
(k) There are no contracts, licenses or agreements between the
Company and any other person with respect to Company Intellectual Property under
which there is any dispute known to the Company regarding the scope of such
agreement, or performance under such agreement including with respect to any
payments to be made or received by the Company thereunder.
(l) To the knowledge of the Company, no person is infringing
or misappropriating any Company Intellectual Property.
(m) The Company has taken reasonable steps in accordance with
normal industry practice to protect the Company's rights in confidential
information and trade secrets of the Company or provided by any other person to
the Company. Without limiting the foregoing, the Company has and enforces a
policy requiring each employee, consultant and contractor to execute proprietary
information, confidentiality and assignment agreements substantially in the
Company's standard forms, and all current and former employees, consultants and
contractors of the Company have executed such an agreement.
(n) No Company Intellectual Property or product, technology or
service of the Company is subject to any proceeding or outstanding decree,
order, judgment, agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
(o) To the knowledge of the Company, no (i) product,
technology, service or publication of the Company, (ii) material published or
distributed by the Company or (iii) conduct or statement of the Company,
constitutes obscene material, a defamatory statement or material, false
advertising or otherwise violates any law or regulation.
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(p) The Company has taken reasonable steps to ensure that its
products (including existing products and technology and products and technology
currently under development) will record, store, process, calculate and present
calendar dates falling on and after (and if applicable, spans of time including)
January 1, 2000, and will calculate any information dependent on or relating to
such dates in the same manner, and with the same functionality, data integrity
and performance, as the products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such dates (collectively, "Year 2000 Compliant").
The Company has taken reasonable steps to ensure that its products (i) will lose
no functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000. All of the Company's internal computer and
technology products and systems are Year 2000 Compliant.
2.12 Agreements, Contracts and Commitments. Except as set forth on Schedule
2.12(a), the Company does not have, is not a party to nor is it bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance pay or
post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements,
(iv) any employment or consulting agreement, contract or commitment with an
employee or individual consultant or salesperson or any consulting or sales
agreement, contract or commitment under which any firm or other organization
provides services to the Company,
(v) any agreement or plan, including, without limitation, any stock option
plan, stock appreciation rights plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value individually in excess
of $25,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment containing any covenant limiting
the freedom of the Company to engage in any line of business or to compete with
any person,
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(x) any agreement, contract or commitment relating to capital expenditures
and involving future payments in excess of $10,000,
(xi) any agreement, contract or commitment relating to the disposition or
acquisition of assets or any interest in any business enterprise outside the
ordinary course of the Company's business,
(xii) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit, including guaranties referred to in clause (viii)
hereof,
(xiii) any purchase order or contract for the purchase of raw materials
involving $25,000 or more,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development agreement,
(xvi) any agreement pursuant to which the Company has granted or may grant
in the future, to any party, a source-code license or option or other right to
use or acquire source- code, or
(xvii) any other agreement, contract or commitment that involves $10,000 or
more or is not cancelable without penalty within thirty (30) days.
Except for such alleged breaches, violations and defaults, and events
that would constitute a breach, violation or default with the lapse of time,
giving of notice, or both, as are all noted in Schedule 2.12(b), the Company has
not breached, violated or defaulted under, or received notice that it has
breached, violated or defaulted under, any of the terms or conditions of any
agreement, contract or commitment required to be set forth on Schedule 2.12(a),
Schedule 2.11(e), Schedule 2.11(g) or Schedule 2.11(h) (each such agreement,
contract or commitment listed on Schedule 2.12(a), Schedule 2.11(e), Schedule
2.11(g) or Schedule 2.11(h), a "Contract"). Each Contract is in full force and
effect and, except as otherwise disclosed in Schedule 2.12(b), is not subject to
any default thereunder of which the Company has knowledge by any party obligated
to the Company pursuant thereto.
2.13 Interested Party Transactions. Except as set forth on Schedule
2.13, no officer, director or stockholder of the Company (nor any ancestor,
sibling, descendant or spouse of any of such persons, or any trust, partnership
or corporation in which any of such persons has or has had an interest), has or
has had, directly or indirectly, (i) an economic interest in any entity which
furnished or sold, or furnishes or sells, services or products that the Company
furnishes or sells, or proposes to furnish or sell, (ii) an economic interest in
any entity that purchases from or sells or furnishes to, the Company, any goods
or services or (iii) a beneficial interest in any contract or agreement set
forth in Schedule 2.12(a) or Schedule 2.11(b); provided, that ownership of no
more than one percent (1%) of the outstanding voting
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stock of a publicly traded corporation shall not be deemed an "economic interest
in any entity" for purposes of this Section 2.13.
2.14 Compliance with Laws. The Company has complied in all material
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any foreign, federal, state or local statute, law
or regulation.
2.15 Litigation. Except as set forth in Schedule 2.15, there is no
action, suit or proceeding of any nature pending or threatened against the
Company, its properties or any of its officers or directors, in their respective
capacities as such. Except as set forth in Schedule 2.15, there is no
investigation pending or threatened against the Company, its properties or any
of its officers or directors by or before any Governmental Entity. Schedule 2.15
sets forth, with respect to any pending or threatened action, suit, proceeding
or investigation, the forum, the parties thereto, the subject matter thereof and
the amount of damages claimed or other remedy requested. No governmental entity
has at any time challenged or questioned the legal right of the Company to
manufacture, offer or sell any of its products in the present manner or style
thereof.
2.16 Insurance. The Company maintains valid and enforceable insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company, and
such insurance policies and fidelity bonds, which are identified in Schedule
2.16, contain provisions which are reasonable and customary in the Company's
industry, and there is no claim by the Company pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies and bonds have been paid and the Company is otherwise in
material compliance with the terms of such policies and bonds (or other policies
and bonds providing substantially similar insurance coverage). The Company has
no knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
2.17 Minute Books. The minute books of the Company made available to
counsel for Buyer are the only minute books of the Company and contain a
reasonably accurate summary of all meetings of directors (or committees thereof)
and stockholders or actions by written consent since the time of incorporation
of the Company.
2.18 Environmental Matters.
(a) Hazardous Materials. The Company has not operated any
underground storage tanks, and has no knowledge of the existence, at any time,
of any underground storage tank (or related piping or pumps), at any property
that the Company has at any time owned, operated, occupied or leased. No
Hazardous Materials (as defined below) are present as a result of the actions or
omissions of the Company, or, to the Company's knowledge, as a result of any
actions of any third party or otherwise, in, on or under any property, including
the land and the improvements, ground water and surface water thereof, that the
Company has at any time owned, operated, occupied or leased.
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(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing, nor has the Company disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (any or all of the
foregoing being collectively referred to as "Hazardous Materials Activities") in
violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and businesses
are currently being conducted.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the Company's knowledge, threatened concerning any Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of the Company.
The Company is not aware of any fact or circumstance which could involve the
Company in any environmental litigation or impose upon the Company any
environmental liability.
(e) Definition of "Hazardous Materials". As used herein,
"Hazardous Materials" shall mean any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, oil and petroleum
products, urea-formaldehyde and all substances listed as a "hazardous
substance," "hazardous waste," "hazardous material" or "toxic substance" or
words of similar import, under any law, including but not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended; the Resource Conservation and Recovery Act of 1976, as amended; the
Federal Water Pollution Control Act, as amended; the Clean Air Act, as amended,
and the regulations promulgated pursuant to such laws.
2.19 Brokers' and Finders' Fees; Third Party Expenses. Except as set
forth on Schedule 2.19, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby. Schedule 2.19 sets forth the principal terms
and conditions of any agreement, written or oral, with respect to such fees.
Schedule 2.19 sets forth the Company's current reasonable estimate of all Third
Party Expenses (as defined in Section 4.4) expected to be incurred by the
Company in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby.
2.20 Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.20(a)(i) below (which definition shall apply
only to this Section 2.20), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
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(i) "Affiliate" shall mean any other person or entity under common control
with the Company within the meaning of Section 414(b), (c), (m) or (o) of the
Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended;
(iv) "Company Employee Plan" shall refer to any plan, program, policy,
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits or remuneration of any kind, whether
formal or informal, funded or unfunded and whether or not legally binding,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is maintained, contributed to, or required to be
contributed to, by the Company or any Affiliate for the benefit of any
"Employee" (as defined below), or pursuant to which the Company or any Affiliate
has or may have any material liability contingent or otherwise;
(v) "FMLA" shall mean the Family Medical Leave Act of 1993, as amended;
(vi) "Employee" shall mean any current, former, or retired employee,
consultant, or director of the Company or any Affiliate;
(vii) "Employee Agreement" shall refer to each management, employment,
stock purchase, severance, separation, consulting, relocation, loan,
repatriation, expatriation, visas, work permit or similar agreement, contract or
arrangement between the Company or any Affiliate and any Employee or consultant;
(viii) "IRS" shall mean the Internal Revenue Service;
(ix) "Multiemployer Plan" shall mean any "Pension Plan" (as defined below)
which is a "multiemployer plan", as defined in Section 3(37) of ERISA; and
(x) "Pension Plan" shall refer to each Company Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
(b) Schedule. Schedule 2.20(b) contains an accurate and
complete list of each Company Employee Plan and each Employee Agreement,
together with a schedule of all liabilities, whether or not accrued, under each
such Company Employee Plan or Employee Agreement. The Company does not have any
plan or commitment, whether legally binding or not, to establish any new Company
Employee Plan or Employee Agreement, to modify any Company Employee Plan or
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Employee Agreement (except to the extent required by law or to conform any such
Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Buyer in writing, or as
required by this Agreement), or to enter into any Company Employee Plan or
Employee Agreement, nor does it have any intention or commitment to do any of
the foregoing.
(c) Documents. The Company has provided to Buyer (i) correct
and complete copies of all documents embodying or relating to each Company
Employee Plan and each Employee Agreement including all amendments thereto and
written interpretations thereof; (ii) the most recent annual actuarial
valuations, if any, prepared for each Company Employee Plan; (iii) the three
most recent annual reports (Series 5500 and all schedules thereto), if any,
required under ERISA or the Code in connection with each Company Employee Plan
or related trust; (iv) if the Company Employee Plan is funded, the most recent
annual and periodic accounting of Company Employee Plan assets; (v) the most
recent summary plan description together with the most recent summary of
material modifications, if any, required under ERISA with respect to each
Company Employee Plan; (vi) all IRS determination letters and rulings relating
to Company Employee Plans and copies of all applications and correspondence to
or from the IRS or the Department of Labor ("DOL") with respect to any Company
Employee Plan; (vii) all communications material to any Employee or Employees
relating to any Company Employee Plan and any proposed Company Employee Plans,
in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material liability to the
Company; and (viii) all registration statements and prospectuses prepared in
connection with each Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
2.20(d), (i) the Company has performed in all material respects all obligations
required to be performed by it under each Company Employee Plan, and each
Company Employee Plan has been established and maintained in all material
respects in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code; (ii) no "prohibited transaction," within the meaning of
Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to
any Company Employee Plan; (iii) there are no actions, suits or claims pending,
or, to the knowledge of the Company, threatened or anticipated (other than
routine claims for benefits) against any Company Employee Plan or against the
assets of any Company Employee Plan; and (iv) each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Closing in accordance
with its terms, without liability to the Company, Buyer or any of its Affiliates
(other than ordinary administration expenses typically incurred in a termination
event); (v) there are no inquiries or proceedings pending or, to the knowledge
of the Company or any affiliates, threatened by the IRS or DOL with respect to
any Company Employee Plan; and (vi) neither the Company nor any Affiliate is
subject to any penalty or tax with respect to any Company Employee Plan under
Section 402(i) of ERISA or Section 4975 through 4980 of the Code.
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(e) Pension Plans. Neither the Company nor any Affiliate has
ever maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company or any
Affiliate contributed to or been requested to contribute to any Multiemployer
Plan.
(g) No Post-Employment Obligations. Except as set forth in
Schedule 2.20(g), no Company Employee Plan provides, or has any liability to
provide, life insurance, medical or other employee benefits to any Employee upon
his or her retirement or termination of employment for any reason, except as may
be required by statute, and the Company has never represented, promised or
contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s) would be provided
with life insurance, medical or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
statute.
(h) COBRA. Neither the company nor any affiliate has, prior to
the Closing and in any material respect, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of state law applicable to its Employees.
(i) Effect of Transaction.
(i) Except as set forth on Schedule 2.20(i)(i), the
execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon
the occurrence of any additional or subsequent events) constitute
an event under any Company Employee Plan, Employee Agreement,
trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(ii) Except as set forth on Schedule 2.20(i)(ii), no payment
or benefit which will or may be made by the Company or its
Affiliates or by Buyer or any of its affiliates with respect to
any Employee as a result of the transactions contemplated by this
Agreement or otherwise will be characterized as "parachute
payment", within the meaning of Section 280G(b)(2) of the Code
(but without regard to clause (ii) thereof).
(j) Employment Matters. The Company (i) is in compliance in
all material respects with all applicable foreign, federal, state and local
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees
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(other than routine payments to be made in the normal course of business and
consistent with past practice).
(k) Labor. No work stoppage or labor strike against the
Company is pending or, to the best knowledge of the Company, threatened. Except
as set forth in Schedule 2.20(k), the Company is not involved in or, to the
knowledge of the Company, threatened with, any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters involving any
Employee, including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in liability to the Company. Neither the Company nor
any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act which would, individually or in the
aggregate, directly or indirectly result in a liability to the Company. Except
as set forth in Schedule 2.20(k), the Company is not presently, nor has it been
in the past, a party to, or bound by, any collective bargaining agreement or
union contract with respect to Employees and no collective bargaining agreement
is being negotiated by the Company.
2.21 Employees. To the best of the Company's knowledge, no employee of
the Company (i) is in violation of any term of any employment contract, patent
disclosure agreement, non-competition agreement, or any restrictive covenant to
a former employer relating to the right of any such employee to be employed by
the Company because of the nature of the business conducted or presently
proposed to be conducted by the Company or to the use of trade secrets or
proprietary information of others and (ii) has given notice to the Company, nor
is the Company otherwise aware, that any employee intends to terminate his or
her employment with the Company.
2.22 Governmental Authorizations and Licenses. The Company possesses
all consents, licenses, permits, grants or other authorizations issued to the
Company by a governmental entity (i) pursuant to which the Company currently
operates or holds any interest in any of its properties or (ii) which is
required for the operation of its business or the holding of any such interest
therein (collectively called "Company Authorizations"), except for those Company
Authorizations which the Company's failure to possess would not constitute a
Material Adverse Effect, which Company Authorizations are in full force and
effect and constitute all Company Authorizations required to permit the Company
to operate or conduct its business or hold any interest in its properties or
assets.
2.23 Pooling of Interests. To the Company's knowledge, based on
consultation with its independent accountants, neither the Company nor any of
its directors or officers, nor any Seller, has taken any action which would
interfere with Buyer's ability to account for the Acquisition as a pooling of
interests.
2.24 Representations Complete. None of the representations or
warranties made by the Company or the Sellers (as modified by the Company
Schedules), nor any statement made in any schedule or certificate furnished by
the Company or a Seller pursuant to this Agreement, contains or will contain at
the Closing, any untrue statement of a material fact, or omits or will omit at
the Closing to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which made,
not misleading.
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2.25 Representations of each Seller. Each Seller represents and
warrants as follows:
(a) This Agreement has been duly authorized, executed and
delivered by and constitutes a valid and binding obligation of Seller.
(b) The execution and delivery by Seller of, and the
performance by Seller of his or her obligations under this Agreement, does not
and will not contravene any provision of applicable law, or any agreement or
other instrument binding upon Seller or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over Seller, and no
consent, approval, authorization or order of or qualification with any
governmental body or agency is required for the performance by Seller of his or
her obligations under this Agreement.
(c) Seller has valid marketable title to the Shares and the
legal right and power, and all authorization and approval required by law, to
enter into this Agreement, and to sell, transfer and deliver the Shares to
Buyer.
(d) Delivery of the certificates for the Shares pursuant to
this Agreement will pass valid and marketable title to such Shares free and
clear of any security interests, claims, liens, equities and other encumbrances.
(e) Seller understands that the Buyer Common Stock being
issued pursuant to this Agreement will not be registered under the Securities
Act of 1933, as amended, on the basis that the issuance of securities hereunder
is exempt from registration under the Securities Act pursuant to section 4(2)
and/or Rule 506 thereof, and that Advent's reliance on such exemption is based
on Seller's representations set forth in the Stockholder's Certificate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company and the Sellers as
follows:
3.1 Organization, Standing and Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has the corporate power to own its properties and to carry on
its business as now being conducted and is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified would have a material adverse effect on Buyer as a
whole.
3.2 Authority. Buyer has all requisite corporate power and authority to
enter into this Agreement and the exhibits attached hereto to which it is a
party (the "Buyer Related Agreements") and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Buyer Related Agreements and the consummation of the transactions
contemplated
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hereby and thereby have been duly authorized by all necessary corporate action
on the part of Buyer. Each of this Agreement and the Buyer Related Agreements
has been duly executed and delivered by Buyer and constitutes the valid and
binding obligations of Buyer, enforceable in accordance with its terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.
3.3 Capital Structure.
(a) The authorized stock of Buyer consists of 40,000,000
shares of Common Stock, of which 7,582,000 shares were issued and outstanding as
of December 31, 1997, and 2,000,000 shares of Preferred Stock, none of which is
issued or outstanding. All such shares have been duly authorized, and all such
issued and outstanding shares have been validly issued, are fully paid and
nonassessable and are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof.
(b) The shares of Buyer Common Stock to be issued in
connection with the Acquisition, when issued, will be duly authorized, validly
issued, fully paid and non-assessable.
3.4 SEC Documents; Buyer Financial Statements. Buyer has furnished or
made available to the Company true and complete copies of all reports or
registration statements filed by it with the United States Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") for all periods since January 1, 1997, all in the
form so filed (all of the foregoing being collectively referred to as the "SEC
Documents"). As of their respective filing dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act") or the Exchange Act, as the case may be, and none
of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected by a document
subsequently filed with the SEC. The financial statements of Buyer, including
the notes thereto, included in the SEC Documents (the "Buyer Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP consistently
applied (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10- Q of the SEC) and present fairly
the consolidated financial position of Buyer at the dates thereof and the
consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal audit adjustments).
There has been no change in Buyer accounting policies except as described in the
notes to the Buyer Financial Statements.
3.5 No Material Adverse Change. Since the date of the balance sheet
included in the Buyer's most recently filed report on Form 10-Q or Form 10-K,
Buyer has conducted its business in the ordinary course and there has not
occurred: (a) any material adverse change in the financial condition,
liabilities, assets or business of Buyer; (b) any amendment or change in the
Certificate of Incorporation or Bylaws
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of Buyer, or (c) any damage to, destruction or loss of any assets of the Buyer
(whether or not covered by insurance) that materially and adversely affects the
financial condition or business of Buyer.
3.6 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Buyer has received any
notice of assertion against Buyer, which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Sale and Registration of Shares; Stockholder Matters.
(a) Sale of Shares. The parties hereto acknowledge and agree
that the shares of Buyer Common Stock issuable to the stockholders pursuant to
Section 1.2 hereof shall constitute "restricted securities" within the meaning
of the Securities Act of 1933, as amended (the "Securities Act"). The
certificates for shares of Buyer Common Stock to be issued in connection with
the Acquisition shall bear appropriate legends to identify such privately placed
shares as being restricted under the Securities Act, to comply with applicable
state securities laws and, if applicable, to notice the restrictions on transfer
pursuant to the Affiliate Agreement (as defined below). It is acknowledged and
understood that Buyer is relying upon certain written representations made by
each stockholder.
(b) Stockholder's Certificate. The Company will cause each
stockholder of the Company to execute and deliver to Buyer a Stockholder's
Certificate in the form attached hereto as Exhibit D (the "Stockholder's
Certificate").
(c) Registration Rights. Buyer shall grant each Seller limited
demand registration rights and participation rights with respect to certain
registrations of equity securities effected by Buyer, as set forth in the
Declaration of Registration Rights attached hereto as Exhibit E. Participation
by Sellers in any such registration shall be subject to the terms and conditions
set forth in the Declaration of Registration Rights attached hereto as Exhibit
E.
4.2 Access to Information. Each party shall afford the others and their
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Closing to (a) all of its
properties, books, contracts, commitments and records, and (b) all other
information concerning its business, properties and personnel (subject to
restrictions imposed by applicable law) as the others may reasonably request,
subject, in the case of Buyer, to reasonable limits on access to its technical
and other nonpublic information. No information or knowledge obtained in any
investigation pursuant to this Section 4.2 shall affect or be deemed to modify
any representation or warranty contained herein.
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4.3 Confidentiality. Each of the parties hereto hereby agrees to keep
such information or knowledge obtained in any investigation pursuant to Section
4.2, or pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential, and also
agrees not to use such knowledge or information; provided, however, that the
foregoing shall not apply to information or knowledge which (a) a party can
demonstrate was already lawfully in its possession on a non-confidential basis
prior to the disclosure thereof by the other party, (b) is generally known to
the public and did not become so known through any violation of law, (c) became
known to the public through no fault of such party, (d) is later lawfully
acquired by such party from other sources, (e) is required to be disclosed by
order of court or government agency with subpoena powers or (f) which is
disclosed in the course of any litigation between any of the parties hereto.
4.4 Expenses. Whether or not the Acquisition is consummated, all fees
and expenses incurred in connection with the Acquisition including, without
limitation, all legal, accounting, financial advisory, consulting and all other
fees and expenses of third parties ("Third Party Expenses") incurred by a party
in connection with the negotiation and effectuation of the terms and conditions
of this Agreement and the transactions contemplated hereby shall be the
obligation of the respective party incurring such fees and expenses; provided,
however, that no later than thirty (30) days after the Closing, the Sellers
shall pay to Buyer a value equal to the amount by which all broker and finder
fees incurred by the Company and all fees and expenses payable to any legal
advisor, accountant, consultant or other third party retained by the Company on
its own behalf or on behalf of such Sellers prior to the Closing (excluding
expenses of financial advisors) exceed in the aggregate $30,000.
4.5 Public Disclosure. Unless otherwise required by law (including,
without limitation, federal and state securities laws) or, as to Buyer, by the
rules and regulations of The Nasdaq Stock Market, Inc. prior to the Closing, no
disclosure (whether or not in response to an inquiry) of the subject matter of
this Agreement shall be made by any party hereto unless approved by Buyer and
the Company prior to release, provided that such approval shall not be
unreasonably withheld.
4.6 Consents. The Company shall use its best efforts to obtain the
consents, waivers and approvals under any of the Contracts as may be required in
connection with the Acquisition (all of such consents, waivers and approvals are
set forth in Company Schedules) so as to preserve all rights of and benefits to
the Company thereunder.
4.7 FIRPTA Compliance. On or prior to the Closing Date, the Company
shall deliver to Buyer a properly executed statement in a form reasonably
acceptable to Buyer for purposes of satisfying Buyer's obligations under
Treasury Regulation Section 1.1445-2(c)(3).
4.8 Commercially Reasonable Efforts. Subject to the terms and
conditions provided in this Agreement, each of the parties hereto shall use its
commercially reasonable efforts to ensure that its representations and
warranties remain true and correct in all material respects, and to take
promptly, or cause to be taken, all actions, and to do promptly, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby, to obtain all necessary waivers, consents and approvals, to effect all
necessary
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registrations and filings, and to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement; provided that Buyer
shall not be required to agree to any divestiture by Buyer or the Company or any
of Buyer's subsidiaries or affiliates of shares of capital stock or of any
business, assets or property of Buyer or its subsidiaries or affiliates or the
Company or its affiliates, or the imposition of any material limitation on the
ability of any of them to conduct their businesses or to own or exercise control
of such assets, properties and stock.
4.9 Notification of Certain Matters. The Company shall give prompt
notice to Buyer, and Buyer shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company or Buyer,
respectively, contained in this Agreement to be untrue or inaccurate at or prior
to the Closing and (ii) any failure of the Company or Buyer, as the case may be,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 4.9 shall not limit or otherwise affect any
remedies available to the party receiving such notice.
4.10 Pooling Accounting. The Company and the Sellers shall use their
best efforts to cause the business combination to be effected by the Acquisition
to be accounted for as a pooling of interests. Each of the Company and the
Sellers shall use its respective best efforts to cause (as applicable) its
respective employees, directors and affiliates not to take any action that would
adversely affect the ability of Buyer to account for the business combination to
be effected by the Acquisition as a pooling of interests.
4.11 Affiliate Agreements. Schedule 4.11 sets forth those persons who,
in the Company's reasonable judgment, are or may be "affiliates" of the Company
within the meaning of Rule 145 (each such person an "Affiliate") promulgated
under the Securities Act ("Rule 145"). The Company shall provide Buyer such
information and documents as Buyer shall reasonably request for purposes of
reviewing such list. The Company has delivered or shall cause to be delivered to
Buyer, concurrently with the execution of this Agreement from its Affiliates, an
executed Affiliate Agreement in the form attached hereto as Exhibit F. Buyer
shall be entitled to place appropriate legends on the certificates evidencing
any Buyer Common Stock to be received by such Affiliates pursuant to the terms
of this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for Buyer Common Stock, consistent with the terms of such
Affiliate Agreements.
4.12 Additional Documents and Further Assurances. Each party hereto, at
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
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4.13 Nasdaq National Market Listing. Buyer shall authorize for listing
on The Nasdaq National Market the shares of Buyer Common Stock issuable, and
those required to be reserved for issuance, in connection with the Acquisition,
upon official notice of issuance.
4.14 Company's Auditors. The Company will use its commercially
reasonable efforts to cause its management and its independent accountants to
facilitate on a timely basis (i) the preparation of financial statements
(including pro forma financial statements if required) as required by Buyer to
comply with applicable SEC regulations, and (ii) the review of the Company's
audit work papers for up to the past three years, including the examination of
selected interim financial statements and data.
4.15 Employment and Non-Competition Agreements. Concurrently with the
execution of this Agreement, each Seller will deliver an executed Employment and
Non-Competition Agreement in substantially the form attached hereto as Exhibit
G, and the Sellers shall cause Ephy Torenberg to deliver an executed Employment
and Non-Competition Agreement in substantially the form attached hereto as
Exhibit H.
4.16 Indemnification for Not Constituting a Reorganization. In the
event that the Acquisition is determined not to constitute a reorganization
within the meaning of Section 368(a) of the Code solely and exclusively as a
result of an action or omission on the part of Buyer, Buyer agrees to indemnify
and hold Sellers harmless for, from and against any Loss as defined in Section
5.1 directly associated with that determination, up to a maximum of $1,000,000.
4.17 Tax Filings. The Company shall be responsible for filing all
federal and state income tax returns of the Company for taxable periods ending
on the day before the Closing or thereafter; however, the Shareholders shall
have the right to review and comment on all tax returns for all periods in which
the Company is taxed as an S Corporation. Such returns shall be prepared and
filed in accordance with applicable law and in a manner consistent with past
practices. After the Closing, Buyer and the Company, on the one hand, and the
Shareholders, on the other hand, will make available to the other, as reasonably
requested, all information, records or documents relating to the liability for
Taxes of the Company for all periods ending on or prior to the Closing and will
preserve such information, records or documents until the expiration of any
applicable statute of limitations or extensions thereof.
ARTICLE V
INDEMNIFICATION; ESCROW
5.1 Indemnification. The Sellers, jointly and severally, agree to
indemnify and hold Buyer, its officers, directors, and affiliates (including the
Company) harmless for, from and against any claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses, and expenses of investigation and defense (hereinafter
individually a "Loss" and collectively "Losses") incurred by Buyer, its
officers, directors, or affiliates (including the Company) directly or
indirectly as a result of any inaccuracy or breach of a representation or
warranty of the Company or the
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Sellers contained in Article II herein (as modified by the Company Schedules,
without giving effect to any update thereto), or any failure by the Company to
perform or comply with any covenant contained herein; provided, however, that
the Seller's joint and several liability hereunder shall not exceed an amount
equal to fifty percent of the value of the Consideration (as determined by
multiplying the Buyer Share Number by the Average Price). Buyer and the Company
each acknowledge that such Losses, if any, would relate to unresolved
contingencies existing at the Closing, which if resolved at the Closing, would
have led to a reduction in the aggregate Consideration. Nothing herein shall
limit the liability of the Company for any breach of any representation,
warranty or covenant if the Acquisition does not close.
5.2 Escrow Period. Subject to the following requirements, the Escrow
Fund (as defined in Section 5.3(a) below) shall be in existence immediately
following the Closing and shall terminate at 5:00 p.m., California time, on the
date of the auditor's report for the audit of Buyer's financial statements for
the year ending December 31, 1998 which includes the results of the Company (the
"Escrow Period"); provided that the Escrow Period shall not terminate with
respect to such amount (or some portion thereof) that is necessary (as defined
in Section 5.3(a) below) in the reasonable judgment of Buyer, subject to the
objection of the Securityholder Agent (as defined below) and the subsequent
arbitration of the matter in the manner provided in Section 5.3(f) hereof, to
satisfy any unsatisfied claims concerning facts and circumstances existing prior
to the termination of such Escrow Period specified in any Officer's Certificate
(as defined in Section 5.3(d) below) delivered to the Escrow Agent prior to
termination of such Escrow Period; provided further that the Escrow Fund will
terminate in full upon final and complete resolution of all disputed matters.
5.3 Escrow Arrangements.
(a) Escrow Fund. At the Closing, as partial security for the
indemnity provided in Section 5.1, the Sellers will be deemed to have received
and deposited with the Escrow Agent (as defined below) the Escrow Amount (plus
any additional shares as may be issued upon any stock split, stock dividend or
recapitalization effected by Buyer after the Closing) without any act of any
stockholder. As soon as practicable after the Closing, the Escrow Amount,
without any act of any Seller, will be deposited with an institution acceptable
to Buyer and the Securityholder Agent (as defined in Section 5.3(g) below)) as
Escrow Agent (the "Escrow Agent"), such deposit to constitute an escrow fund
(the "Escrow Fund") to be governed by the terms set forth herein and at Buyer's
cost and expense. The portion of the Escrow Amount contributed on behalf of each
stockholder of the Company shall be in proportion to the aggregate amount of
Buyer Common Stock which such holder would otherwise be entitled under Section
1.2. The Escrow Fund shall be available to compensate Buyer and its affiliates
for any Losses incurred by Buyer, its officers, directors, or affiliates
(including the Company) directly or indirectly as a result of any inaccuracy or
breach of a representation or warranty of the Company contained in Article II
herein (as modified by the Company Schedules, without giving effect to any
update thereto), or any failure by the Company to perform or comply with any
covenant contained herein; provided, however, that Buyer may not receive any
shares from the Escrow Fund unless and until such Losses exceed in the aggregate
$100,000, in which event Buyer shall receive shares equal in value to the full
amount of such Losses. Buyer and the Company each acknowledge that such Losses,
if any,
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would relate to unresolved contingencies existing at the Closing, which if
resolved at the Closing would have led to a reduction in the aggregate
Consideration. Nothing herein shall limit the liability of the Company for any
breach of any representation, warranty or covenant if the Acquisition does not
close.
(b) Distribution upon Termination of Escrow Period. Upon
termination of the Escrow Period, (i) the Company shall notify the Escrow Agent
of such termination, and (ii) the Escrow Agent shall deliver to the stockholders
of the Company that portion of the Escrow Fund that is not required to satisfy
any claims made by Buyer pursuant to Section 5.3(d) hereof. Deliveries of Escrow
Amounts to the stockholders of the Company pursuant to this Section 5.3(b) shall
be made in proportion to their respective original contributions to the Escrow
Fund.
(c) Protection of Escrow Fund.
(i) The Escrow Agent shall hold and safeguard the
Escrow Fund during the Escrow Period, shall treat such fund
as a trust fund in accordance with the terms of this
Agreement and not as the property of Buyer or the Company's
stockholders and shall hold and dispose of the Escrow Fund
only in accordance with the terms hereof.
(ii) Any shares of Buyer Common Stock or other equity
securities issued or distributed by Buyer (including shares
issued upon a stock split) ("New Shares") in respect of
Buyer Common Stock in the Escrow Fund which have not been
released from the Escrow Fund shall be added to the Escrow
Fund and become a part thereof. New Shares issued in respect
of shares of Buyer Common Stock which have been released
from the Escrow Fund shall not be added to the Escrow Fund
but shall be distributed to the recordholders thereof. Cash
dividends on Buyer Common Stock shall not be added to the
Escrow Fund but shall be distributed to the recordholders
thereof.
(iii) Each stockholder shall have voting rights with
respect to the shares of Buyer Common Stock contributed to
the Escrow Fund by such stockholder (and on any New Shares
added to the Escrow Fund in respect of such shares of Buyer
Common Stock).
(d) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on or
before the last day of the Escrow Period of a certificate
signed by any officer of Buyer (an "Officer's Certificate"):
(A) stating that Buyer has paid or properly accrued or
reasonably anticipates that it will have to pay or accrue
Losses caused directly or indirectly by any inaccuracy, or
breach of a representation or warranty of the Company or a
Seller contained in Article II hereof (as modified by the
Company Schedules, without giving effect to any update
thereto) or any failure by the Company to perform or comply
with any covenant contained therein, and (B) specifying in
reasonable detail the individual items of Losses included in
the amount so stated, the date each such item was paid or
properly accrued, or the basis for such anticipated
liability, and the nature of the misrepresentation, breach
of warranty or covenant to which such item is related, the
Escrow Agent shall, subject to the provisions of Section
5.3(e) hereof,
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deliver to Buyer out of the Escrow Fund, as promptly as
practicable, shares of Buyer Common Stock held in the Escrow
Fund in an amount equal to any Losses incurred or accrued by
Buyer.
(ii) For the purposes of determining the number of
shares of Buyer Common Stock to be delivered to Buyer out of
the Escrow Fund pursuant to Section 5.3(d)(i) hereof, each
share of Buyer Common Stock shall be valued at the average
of the closing prices of Buyer's Common Stock on the
principal securities exchange on which Buyer's Common Stock
is then traded, or if not so traded, The Nasdaq National
Market, in either case as reported in The Wall Street
Journal for the twenty (20) consecutive trading days ending
on the date that is one (1) trading day prior to the Closing
Date. Buyer and the Securityholder Agent shall certify such
fair market value in a certificate signed by both Buyer and
the Securityholder Agent, and shall deliver such certificate
to the Escrow Agent.
(e) Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered to the Securityholder Agent and for a period of thirty (30)
days after such delivery, the Escrow Agent shall make no delivery to Buyer of
any Escrow Amounts pursuant to Section 5.3(d) hereof unless the Escrow Agent
shall have received written authorization from the Securityholder Agent to make
such delivery. After the expiration of such thirty (30) day period, the Escrow
Agent shall make delivery of shares of Buyer Common Stock from the Escrow Fund
in accordance with Section 5.3(d) hereof, provided that no such payment or
delivery may be made if the Securityholder Agent shall object in a written
statement to the claim made in the Officer's Certificate, and such statement
shall have been delivered to the Escrow Agent prior to the expiration of such
thirty (30) day period.
(f) Resolution of Conflicts; Arbitration.
(i) In case the Securityholder Agent shall so object in
writing to any claim or claims made in any Officer's
Certificate, the Securityholder Agent and Buyer shall
attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims. If
the Securityholder Agent and Buyer should so agree, a
memorandum setting forth such agreement shall be prepared
and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on
any such memorandum and distribute shares of Buyer Common
Stock from the Escrow Fund in accordance with the terms
thereof.
(ii) If no such agreement can be reached after good
faith negotiation, either Buyer or the Securityholder Agent
may demand arbitration of the matter unless the amount of
the damage or loss is at issue in pending litigation with a
third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties
agree to arbitration; and in either such event the matter
shall be settled by arbitration conducted by one arbitrator.
Buyer and the Securityholder Agent shall agree on such
arbitrator; provided that if Buyer and the Securityholder
Agent cannot agree on such arbitrator, either Buyer or the
Securityholder Agent can request that the Judicial
Arbitration and Mediation Services ("JAMS") select the
arbitrator. The arbitrator selected shall determine the
dispute in accordance with Article V of this Agreement. The
arbitrator shall set a limited time period and
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establish procedures designed to reduce the cost and time
for discovery while allowing the parties an opportunity,
adequate in the sole judgment of the arbitrator, to discover
relevant information from the opposing parties about the
subject matter of the dispute. The arbitrator shall rule
upon motions to compel or limit discovery and shall have the
authority to impose sanctions, including attorneys' fees and
costs, to the same extent as a court of competent law or
equity, should the arbitrator determine that discovery was
sought without substantial justification or that discovery
was refused or objected to without substantial
justification. The decision of the arbitrator as to the
validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties
to this Agreement, and notwithstanding anything in Section
5.3(e) hereof, the Escrow Agent shall be entitled to act in
accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance therewith. Such
decision shall be written and shall be supported by written
findings of fact and conclusions which shall set forth the
award, judgment, decree or order awarded by the arbitrator.
(iii) Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction.
Any such arbitration shall be held in Santa Clara County,
California under the rules then in effect of the American
Arbitration Association. For purposes of this Section
5.3(f), in any arbitration hereunder in which any claim or
the amount thereof stated in the Officer's Certificate is at
issue, Buyer shall be deemed to be the Non-Prevailing Party
in the event that the arbitrators award Buyer less than the
sum of one-half (1/2) of the disputed amount plus any
amounts not in dispute; otherwise, the stockholders of the
Company as represented by the Securityholder Agent shall be
deemed to be the Non-Prevailing Party. The Non-Prevailing
Party to an arbitration shall pay its own expenses, the fees
of each arbitrator, the administrative costs of the
arbitration and the expenses, including without limitation,
reasonable attorneys' fees and costs, incurred by the other
party to the arbitration.
(g) Securityholder Agent of the Stockholders;
Power of Attorney.
(i) Upon Closing, and without further act of any
stockholder, Dov Torenberg shall be appointed as agent and
attorney-in-fact (the "Securityholder Agent") for each
stockholder of the Company (except such stockholders, if
any, as shall have perfected their appraisal or dissenters'
rights under California Law), for and on behalf of
stockholders of the Company, to give and receive notices and
communications, to authorize delivery to Buyer of shares of
Buyer Common Stock from the Escrow Fund in satisfaction of
claims by Buyer, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and
demand arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims, and to
take all actions necessary or appropriate in the judgment of
Securityholder Agent for the accomplishment of the
foregoing. Such agency may be changed by the stockholders of
the Company from time to time upon not less than thirty (30)
days prior written notice to Buyer; provided that the
Securityholder Agent may not be removed unless holders of a
two-thirds interest of the Escrow Fund agree to such removal
and to the identity of the substituted agent. Any vacancy in
the position of Securityholder Agent may be filled by
approval of the holders of a majority in interest of the
Escrow Fund. No bond shall be required of the Securityholder
Agent, and the Securityholder Agent shall not receive
compensation for his or her
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services. Notices or communications to or from the
Securityholder Agent shall constitute notice to or from each
of the stockholders of the Company.
(ii) The Securityholder Agent shall not be liable for
any act done or omitted hereunder as Securityholder Agent
while acting in good faith and in the exercise of reasonable
judgment. The stockholders of the Company on whose behalf
the Escrow Amount was contributed to the Escrow Fund shall
severally indemnify the Securityholder Agent and hold the
Securityholder Agent harmless against any loss, liability or
expense incurred without negligence or bad faith on the part
of the Securityholder Agent and arising out of or in
connection with the acceptance or administration of the
Securityholder Agent's duties hereunder, including the
reasonable fees and expenses of any legal counsel retained
by the Securityholder Agent.
(h) Actions of the Securityholder Agent. A decision, act,
consent or instruction of the Securityholder Agent shall constitute a decision
of all the stockholders for whom a portion of the Escrow Amount otherwise
issuable to them are deposited in the Escrow Fund and shall be final, binding
and conclusive upon each of such stockholders, and the Escrow Agent and Buyer
may rely upon any such decision, act, consent or instruction of the
Securityholder Agent as being the decision, act, consent or instruction of each
every such stockholder of the Company. The Escrow Agent and Buyer are hereby
relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the Securityholder
Agent.
(i) Third-Party Claims. In the event Buyer becomes aware of a
third-party claim which Buyer intends to assert for a demand against the Escrow
Fund, Buyer shall notify the Securityholder Agent of such claim. Buyer shall
have the right in its sole discretion to settle any such claim; provided,
however, that except with the consent of the Securityholder Agent, no settlement
of any such claim with third-party claimants shall alone be determinative of the
amount of any claim against the Escrow Fund.
(j) Escrow Agent's Duties.
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth
herein, and as set forth in any additional written escrow
instructions which the Escrow Agent may receive after the
date of this Agreement which are signed by an officer of
Buyer and the Securityholder Agent, and may rely and shall
be protected in relying or refraining from acting on any
instrument reasonably believed to be genuine and to have
been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for any act done or omitted
hereunder as Escrow Agent while acting in good faith and in
the exercise of reasonable judgment, and any act taken,
suffered, or permitted pursuant to the advice of counsel
shall be conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to
comply with and obey orders, judgments or decrees of any
court of law, notwithstanding any notices, warnings or other
communications from any of the parties hereto or any other
person to the contrary. In case the
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Escrow Agent obeys or complies with any such order, judgment
or decree of any court, the Escrow Agent shall not be liable
to any of the parties hereto or to any other person by
reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified,
annulled, set aside, vacated or found to have been entered
without jurisdiction.
(iii) The Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of
the parties executing or delivering or purporting to execute
or deliver this Agreement or any documents or papers
deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations
with respect to this Agreement or any documents deposited
with the Escrow Agent.
(v) In performing any duties under the Agreement, the
Escrow Agent shall not be liable to any party for damages,
losses, or expenses, except for gross negligence or willful
misconduct on the part of the Escrow Agent. The Escrow Agent
shall not incur any such liability for (A) any act or
failure to act made or omitted in good faith, or (B) any
action taken or omitted in reliance upon any instrument,
including any written statement or affidavit provided for in
this Agreement that the Escrow Agent shall in good faith
believe to be genuine, nor will the Escrow Agent be liable
or responsible for forgeries, fraud, impersonations, or
determining the scope of any representative authority. In
addition, the Escrow Agent may consult with legal counsel in
connection with Escrow Agent's duties under this Agreement.
The Escrow Agent is not responsible for determining and
verifying the authority of any person acting or purporting
to act on behalf of any party to this Agreement.
(vi) If any controversy arises between the parties to
this Agreement, or with any other party, concerning the
subject matter of this Agreement, its terms or conditions,
the Escrow Agent will not be required to determine the
controversy or to take any action regarding it. The Escrow
Agent may hold all documents and shares of Buyer Common
Stock and may wait for settlement of any such controversy by
final appropriate legal proceedings or other means as, in
the Escrow Agent's discretion, the Escrow Agent deems may be
required, despite what may be set forth elsewhere in this
Agreement. In such event, the Escrow Agent will not be
liable for damages.
(vii) The parties and their respective successors and
assigns agree jointly and severally to indemnify and hold
Escrow Agent harmless against any and all losses, claims,
damages, liabilities, and expenses, including reasonable
costs of investigation, counsel fees, and disbursements that
may be imposed on Escrow Agent or incurred by Escrow Agent
in connection with the performance of his/her duties under
this Agreement, including but not limited to any litigation
arising from this Agreement or involving its subject matter.
(viii) The Escrow Agent may resign at any time upon
giving at least thirty (30) days written notice to the
parties; provided, however, that no such resignation shall
become effective until the appointment of a successor escrow
agent which shall be accomplished as follows: the parties
shall use their best efforts to mutually agree on a
successor escrow agent within thirty (30) days
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after receiving such notice. If the parties fail to agree
upon a successor escrow agent within such time, the Escrow
Agent shall have the right to appoint a successor escrow
agent authorized to do business in the State of California.
The successor escrow agent shall execute and deliver an
instrument accepting such appointment in form and substance
acceptable to Buyer and Securityholder Agent and it shall,
without further acts, be vested with all the estates,
properties, rights, powers, and duties of the predecessor
escrow agent as if originally named as escrow agent. The
predecessor escrow agent shall be discharged from any
further duties and liability under this Agreement upon the
execution by such successor of such agreement.
(k) Fees. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Buyer. It is understood that the fees and
usual charges agreed upon for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this Agreement. In the
event that the conditions of this Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in this Agreement, or if
the parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to this escrow or its subject matter, the Escrow Agent
shall be reasonably compensated for such extraordinary services and reimbursed
for all costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or litigation. Buyer promises to pay these sums upon demand.
ARTICLE VI
GENERAL PROVISIONS
6.1 Survival of Representations, Warranties and Agreements. All
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall (except to the extent
that survival is necessary to effectuate the intent of such provisions) not
survive the consummation of the Acquisition and shall terminate at the Closing;
provided, however, that, notwithstanding the foregoing, the representations and
warranties of the Company and the Sellers set forth in Article II hereof shall
survive the Closing and terminate two (2) years after the Closing Date.
6.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
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(a) if to Buyer to:
Advent Software, Inc.
301 Brannan Street
San Francisco, California 94107
Attention: Irv Lichtenwald
Telephone No.: (415) 543-7696
Facsimile No.: (415) 777-0794
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Mark A. Bertelsen, Esq.
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
(b) if to the Company, to:
MicroEdge, Inc.
619 West 54th St., 10th Floor
New York, New York 10019
Attention: Dov Torenberg
Telephone No.: (212) 757-1522
Facsimile No.: (212) 757-1713
with a copy to:
Moskowitz Altman & Hughes LLP
11 East 44th Street
New York, New York 10017
Attention: John J. Hughes, Esq.
Telephone No.: (212) 953-1121
Facsimile No.: (212) 953-2437
(c) if to the Securityholder Agent:
Dov Torenberg
147 Chestnut Street
Englewood, NJ 07631
Telephone No.:
Facsimile No.:
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(d) if to the Escrow Agent:
First Trust of California, N.A.
1 California Street, 4th Floor
San Francisco, CA 94111
Attention: Barbara Wise
Telephone No.: 415-273-4530
Facsimile No.: 415-273-4593
6.3 Interpretation. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
6.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
6.5 Entire Agreement; Assignment. This Agreement, the Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided, except
that Buyer may assign its rights and delegate its obligations hereunder to its
affiliates.
6.6 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
6.7 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
6.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon
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them in any manner authorized by the laws of the State of California for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction and such process.
6.9 Arbitration.
(a) The parties shall attempt in good faith to agree upon the
rights of the respective parties with respect to any dispute or controversy
arising out of, relating to, or in connection with this Agreement or the
interpretation, validity, construction, performance, breach or complete
termination thereof.
(b) If no such agreement can be reached after good faith
negotiation, either of the parties may demand arbitration of the matter (except
any such dispute or controversy related to Article V or Section 2.11 or 2.15 of
this Agreement) and the matter shall be settled by arbitration conducted by one
arbitrator. Buyer and the Company shall agree on the arbitrator; provided that
if Buyer and the Company cannot agree on one arbitrator, either Buyer or the
Company can request that the JAMS select the arbitrator. The arbitrator selected
by the JAMS shall determine the dispute in accordance with Section 6.9. The
arbitrator shall set a limited time period and establish procedures designed to
reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrator, to discover
relevant information from the opposing parties about the subject matter of the
dispute. The arbitrator shall rule upon motions to compel or limit discovery and
shall have the authority to impose sanctions, including attorneys' fees and
costs, to the same extent as a court of competent law or equity, should the
arbitrator determine that discovery was sought without substantial justification
or that discovery was refused or objected to without substantial justification.
The decision of the arbitrator shall be final, conclusive and binding upon the
parties to this Agreement. Such decision shall be written and shall be supported
by written findings of fact and conclusions which shall set forth the award,
judgment, decree or order awarded by the arbitrator.
(c) Judgment upon any award rendered by the arbitrator may be
entered in any court having jurisdiction. In the event that any such arbitration
is requested by Buyer, such arbitration shall be held in New York, New York, and
in the event that any such arbitration is requested by any Seller, the Company,
or the Escrow Agent, such arbitration shall be held in San Francisco,
California, in any case under the rules then in effect of JAMS. For purposes of
this Section 6.9, in any arbitration hereunder, the non-prevailing Party to an
arbitration shall pay its own expenses, the fees of the arbitrator, the
administrative costs of the arbitration and the expenses, including without
limitation, reasonable attorneys' fees and costs, incurred by the other party to
the arbitration.
6.10 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
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6.11 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Buyer, each Seller, the Company and the
Securityholder Agent (but only as to Articles V and VI for Securityholder Agent)
and have caused this Agreement to be signed by their duly authorized respective
officers, all as of the date first written above.
BUYER COMPANY
By: By:
Name: Name:
Title: Title:
SECURITYHOLDER AGENT SELLERS
By: By:
Name: Name:
Title: Title:
ESCROW AGENT
By:
Name:
Title:
[Signature Page to Reorganization Agreement]
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EXHIBIT A
THE SELLERS
Dov Torenberg
Ximena Florez
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<PAGE>
STOCK PURCHASE AGREEMENT
BY AND AMONG
ADVENT SOFTWARE, INC.,
MICROEDGE, INC.,
AND
THE SELLERS
Dated as of February 28, 1998
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TABLE OF CONTENTS
Page
ARTICLE I THE ACQUISITION OF SHARES..........................................1
1.1 Purchase and Sale of Shares.........................................1
1.2 Consideration.......................................................1
1.3 Closing; Delivery...................................................2
1.4 Directors and Officers..............................................4
1.5 Lost, Stolen or Destroyed Certificates..............................4
1.6 Tax and Accounting Consequences.....................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY .................. 4
2.1 Organization of the Company........................................4
2.2 Company Capital Structure..........................................5
2.3 Subsidiaries.......................................................5
2.4 Authority..........................................................5
2.5 Company Financial Statements.......................................6
2.6 No Undisclosed Liabilities.........................................6
2.7 No Changes.........................................................6
2.8 Tax and Other Returns and Reports..................................8
2.9 Restrictions on Business Activities...............................10
2.10 Title to Properties; Absence of Liens and Encumbrances............10
2.11 Intellectual Property.............................................10
2.12 Agreements, Contracts and Commitments.............................14
2.13 Interested Party Transactions.....................................15
2.14 Compliance with Laws..............................................16
2.15 Litigation........................................................16
2.16 Insurance.........................................................16
2.17 Minute Books......................................................16
2.18 Environmental Matters.............................................16
2.19 Brokers' and Finders' Fees; Third Party Expenses..................17
2.20 Employee Matters and Benefit Plans................................17
2.21 Employees.........................................................21
2.22 Governmental Authorizations and Licenses..........................21
2.23 Pooling of Interests..............................................21
2.24 Representations Complete..........................................21
2.25 Representations of each Seller....................................22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER.......................22
3.1 Organization, Standing and Power..................................22
3.2 Authority.........................................................22
3.3 Capital Structure.................................................23
3.4 SEC Documents; Buyer Financial Statements.........................23
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3.5 No Material Adverse Change........................................23
3.6 Litigation........................................................24
ARTICLE IV ADDITIONAL AGREEMENTS..........................................24
4.1 Sale and Registration of Shares; Stockholder Matters..............24
4.2 Access to Information.............................................24
4.3 Confidentiality...................................................25
4.4 Expenses..........................................................25
4.5 Public Disclosure.................................................25
4.6 Consents..........................................................25
4.7 FIRPTA Compliance.................................................25
4.8 Commercially Reasonable Efforts...................................25
4.9 Notification of Certain Matters...................................26
4.10 Pooling Accounting................................................26
4.11 Affiliate Agreements..............................................26
4.12 Additional Documents and Further Assurances.......................26
4.13 Nasdaq National Market Listing....................................27
4.14 Company's Auditors................................................27
4.15 Employment and Non-Competition Agreements.........................27
4.16 Indemnification for Not Constituting a Reorganization.............27
4.17 Tax Filings.......................................................27
ARTICLE V INDEMNIFICATION; ESCROW.........................................27
5.1 Indemnification. ................................................27
5.2 Escrow Period.....................................................28
5.3 Escrow Arrangements...............................................28
ARTICLE VI GENERAL PROVISIONS.............................................34
6.1 Survival of Representations, Warranties and Agreements............34
6.2 Notices...........................................................34
6.3 Interpretation....................................................36
6.4 Counterparts......................................................36
6.5 Entire Agreement; Assignment......................................36
6.6 Severability......................................................36
6.7 Other Remedies....................................................36
6.8 Governing Law.....................................................36
6.9 Arbitration.......................................................37
6.10 Rules of Construction.............................................37
6.11 Specific Performance..............................................38
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INDEX OF EXHIBITS
Exhibit Description
Exhibit A Holders of Company Securities
Exhibit B Form of Legal Opinion of Counsel to the Company
Exhibit C Form of Legal Opinion of Counsel to Buyer
Exhibit D Form of Stockholder's Certificate
Exhibit E Form of Declaration of Registration Rights
Exhibit F Form of Company Affiliate Agreement
Exhibit G Form of Employment and Non-Competition Agreement for Sellers
Exhibit H Form of Employment and Non-Competition Agreement for Ephy
Torenberg
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INDEX OF SCHEDULES
Schedule Description
1.3(b)(vi) Third Party Consents Required of Company
2.2(a) Stockholder List
2.3 Affiliated Companies and Subsidiaries
2.4 Governmental and Third Party Consents
2.5 Company Financials
2.6 Undisclosed Liabilities
2.7 No Changes
2.8 Tax Returns and Audits
2.9 Restrictions on Business Activities
2.10(a) Leased Real Property
2.10(b) Liens on Property
2.11(b) Company Registered Intellectual Property
2.11(c) Title to Company Intellectual Property
2.11(d) Written Agreements Relating to Intellectual Property
Development
2.11(e) Transferred Intellectual Property
2.11(g) Incoming Intellectual Property Licenses
2.11(h) Obligations Regarding Intellectual Property
2.11(j) Necessary Actions to Preserve Intellectual Property Rights
2.12(a) Agreements, Contracts and Commitments
2.12(b) Breaches
2.13 Interested Party Transactions
2.15 Litigation
2.16 Insurance
2.19 Brokers/Finders Fees; Expenses of Transaction
2.20(b) Employee Benefit Plans and Employee Agreements
2.20(d) Employee Plan Compliance
2.20(g) Post Employment Obligations
2.20(i)(i) Effect of Transaction
2.20(i)(ii) Excess Parachute Payments
2.20(k) Labor 4.11 Company Affiliate List
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EXHIBIT 4.1
ADVENT SOFTWARE, INC.
DECLARATION OF REGISTRATION RIGHTS
This Declaration of Registration Rights ("Declaration") is made as of
the Closing Date by Advent Software, Inc., a Delaware corporation ("Buyer"), for
the benefit of shareholders of MicroEdge, Inc., a New York corporation (the
"Company"), acquiring shares of Common Stock of Buyer pursuant to that certain
Stock Purchase Agreement dated as of February 28, 1998 (the "Purchase
Agreement"), between Buyer and the Company. Each capitalized term used but not
otherwise defined herein shall have the meaning ascribed to it in the Purchase
Agreement.
1. Definitions. As used in this Declaration:
a. "Buyer Consideration Shares" means for a given Holder the
shares of Buyer Common Stock issued to stock Holder pursuant to the Purchase
Agreement.
b. "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
c. "Securities Act" means the Securities Act of 1933, as
amended.
d. "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the Commission which similarly permits inclusion or
incorporation of substantial information by reference to other documents filed
by Buyer with the Commission.
e. "Holder" means: (i) a shareholder of the Company to whom
shares of Registrable Securities are issued pursuant to the Purchase Agreement,
for so long as such holder continues to hold such shares, or (ii) a transferee
of Registrable Securities by a Holder, to whom registration rights under this
Declaration are assigned pursuant to Section 10 of this Declaration.
f. "Registrable Securities" means (a) for each Holder the sum
of (i) a number of shares of Buyer Common Stock equal to thirty percent of the
Buyer Consideration Shares, together with all other shares of Buyer Common Stock
issued in respect thereof (by way of stock split, dividend or otherwise) and
(ii) a number of shares of Buyer Common Stock equal to the product of (A) the
percentage of her total holdings of Buyer Common Stock sold by Stephanie DiMarco
in any Buyer Registration (as defined in Section 4) effected prior to May 31,
1998, and (B) the number of Buyer Consideration Shares issued to such Holder,
and (b) for all Holders the aggregate of all Registrable Securities held by all
such Holders.
g. "SEC" means the Securities and Exchange Commission.
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2. Registration at Request of the Holders. Buyer shall use its
commercially reasonable efforts to cause the Registrable Securities to be held
by each Holder following the Acquisition to be registered under the Securities
Act so as to permit the resale thereof, and in connection therewith shall use
all commercially reasonable efforts to prepare and file with the SEC promptly
after Closing, and shall use its commercially reasonable efforts to cause to
become effective by not later than April 30, 1998, a registration statement on
Form S-3 or on such other form as is then available under the Securities Act
covering the Registrable Securities; provided, however, that each Holder shall
provide all such information and materials to Buyer and take all such action as
may be required in order to permit Buyer to comply with all applicable
requirements of the SEC and to obtain any desired acceleration of the effective
date of such registration statement. Such provision of information and materials
is a condition precedent to the obligations of Buyer pursuant to this
Declaration. Buyer shall not be required to effect more than one (1)
registration under this Declaration. The offering made pursuant to such
registration shall not be underwritten.
3. Postponement of Registration. Notwithstanding Section 2 above, Buyer
shall be entitled to postpone the declaration of effectiveness of the
registration statement prepared and filed pursuant to Section 2 for a reasonable
period of time, but not in excess of sixty (60) calendar days after the
applicable deadline, if the Board of Directors of Buyer, acting in good faith,
determines that there exists material nonpublic information about Buyer which
the Board does not wish to disclose in a registration statement (due to the fact
that such disclosure may not be in the best interests of Buyer or Buyer's
stockholders) which information would otherwise be required by the Securities
Act to be disclosed in the registration statement to be filed pursuant to
Section 2 above.
4. Buyer Registration.
a. Notice of Registration. If at any time prior to April 30,
1998, Buyer shall determine, in its sole discretion, to register any of its
equity securities, either for its own account or the account of a security
holder or holders (any such registration by Buyer constituting a "Buyer
Registration"), other than (i) a registration relating solely to employee
benefit plans, (ii) a registration relating solely to a Rule 145 transaction, or
(iii) a registration in which the only equity security being registered is
capital stock issuable upon conversion of convertible (or exchange of
exchangeable) debt securities which are also being registered, Buyer will:
(1) promptly give Holder written notice thereof; and
(2) include in any registration (and any related
qualification under blue sky laws or other compliance), and
in any underwriting involved therein, all the Registrable
Securities not sold pursuant to Section 2 hereof ("Eligible
Registrable Securities") specified in a written request,
made within 10 days after receipt of such written notice
from Buyer, by Holder.
b. Underwriting. If the registration of which Buyer gives
notice is for a registered public offering involving an underwriting, Buyer
shall so advise Holder as a part of the written notice given pursuant to Section
4.a. In such event, the right of Holder to registration pursuant to Section 4
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of Eligible
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Registrable Securities in the underwriting shall be limited to the extent
provided herein. Further, Holder shall (together with Buyer and any other
holders distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by Buyer. Notwithstanding any other provision of this
Section 4.b, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the Eligible Registrable Securities to be included in such
registration to zero.
If Holder disapproves of the terms of any such underwriting,
he may elect to withdraw therefrom by written notice to Buyer and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration, and shall not be transferred in a public
distribution prior to 180 days after the effective date of the registration
statement relating thereto, or such other shorter period of time as the
underwriters may require.
c. Right to Terminate Registration. Buyer is not obligated to
initiate any registration and shall have the right to terminate or withdraw any
registration initiated by it under this Section 4.a prior to the effectiveness
of such registration whether or not Holder has elected to include securities in
such registration.
5. Obligations of Buyer. Subject to the limitations of Sections 3, and
12, Buyer shall (i) keep the registration statement filed in accordance with
Section 2 hereof effective until the earlier of (A) ninety (90) days after the
Closing of the Acquisition or (B) such time as all Registrable Securities have
been sold hereunder; (ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all securities proposed to
be registered in such registration statement; (iii) furnish to each Holder such
number of copies of any prospectus (including any preliminary prospectus and any
amended or supplemented prospectus) in conformity with the requirements of the
Securities Act, and such other documents, as each Holder may reasonably request
in order to effect the offering and sale of the shares of the Registrable
Securities to be offered and sold, but only while Buyer shall be required under
the provisions hereof to cause the registration statement to remain current; and
(iv) use its commercially reasonable efforts to register or qualify the shares
of the Registrable Securities covered by such registration statement under the
securities or blue sky laws of such jurisdictions as each Holder shall
reasonably request (provided that Buyer shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such jurisdiction where it has not
been qualified).
6. Selling Procedures. Any sale of Registrable Securities pursuant to
the registration statement filed in accordance with Section 2 hereof shall be
subject to the following conditions and procedures:
a. Stockholder Notice: The selling Holder shall provide
written notice ("Stockholder Notice") to Buyer no less than six (6) business
days prior to such Holder's intended sale. Within five (5) business days of
receipt of the Stockholder Notice, Buyer will inform such Holder in
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writing if the registration statement and final prospectus then on file with the
SEC is current and otherwise complies with the Securities Act such that sales
may be made thereunder. Beginning immediately upon receipt of notice from Buyer
that the registration statement is current and complies with the Securities Act,
such Holder shall then have ten (10) business days to sell the Registrable
Securities proposed to be sold, unless the notice from Buyer specifies that no
sale may be made until the date of intended sale, as specified in the
Stockholder Notice, in which case the Holders must wait until the date of the
intended sale to make such sale and Holder shall have ten (10) business days
thereafter to make such sale. After such ten (10) day period, the seller shall
once again comply with the procedures set forth in this Section 5.a prior to any
further sales;
b. Updating the Prospectus: If Buyer informs the selling
Holder that the registration statement or final prospectus then on file with the
SEC is not current or otherwise does not comply with the Securities Act, Buyer
shall use commercially reasonable efforts to provide to the selling Holder a
current prospectus that complies with the Securities Act on or before the date
of the intended sale of the Registrable Securities as disclosed in the
Stockholder Notice; provided, however, that for a period of not more than one
hundred twenty (120) days (or any number of lesser periods which total not more
than one hundred twenty (120) days) during any twelve-month period, Buyer shall
have the right to delay the preparation of a current prospectus that complies
with the Securities Act without explanation to such Holder;
c. Blackout Periods: Holders who become employees of Buyer
agree to be bound by Buyer's Insider Trading Policy as such may be in effect
from time to time for so long as such Holders remain employees of Buyer;
d. General: Notwithstanding the foregoing, Buyer shall notify
each Holder (i) of any request by the SEC or any other federal or state
governmental authority during the period of effectiveness of the registration
statement for amendments or supplements to the registration statement or related
prospectus or for additional information relating to the registration statement,
(ii) of the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose, (iii) of the
receipt by Buyer of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, or (iv) of the happening of any event which makes
any statement made in the registration statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or which requires the making of any changes in the
registration statement or prospectus so that, in the case of the registration
statement, it will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the prospectus, it
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. Advent may, upon
the happening of any event (x) described in subparagraph (i), (ii), (iii) or
(iv) above, or (y) that, in the good faith judgment of Advent's Board of
Directors, renders it advisable to suspend use of the prospectus for no more
than sixty (60) days due to pending corporate developments, suspend use of the
prospectus on written notice to each Holder, in which case each Holder
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shall not dispose of Registrable Securities covered by the registration
statement or prospectus until copies of a supplemented or amended prospectus are
distributed to the Holders or until the Holders are advised in writing by Buyer
that the use of the applicable prospectus may be resumed. Buyer shall use its
commercially reasonable efforts to ensure that the use of the prospectus may be
resumed as soon as practicable. Buyer shall use its commercially reasonable
efforts to obtain the withdrawal of any order suspending the effectiveness of
the registration statement, or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the securities for
sale in any jurisdiction, at the earliest practicable moment. Buyer shall, upon
the occurrence of any event contemplated by clause (iv), prepare a supplement or
post-effective amendment to the registration statement or a supplement to the
related prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Securities being sold thereunder, such prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
7. Availability of Form S-3. Buyer represents that it is currently
eligible to utilize Form S-3 and agrees that, for a period of one (1) year from
the Closing, Buyer will not intentionally take any action which would preclude
Buyer's eligibility to use Form S-3.
8. Expenses. Buyer shall pay all of the out-of-pocket expenses
incurred, other than underwriting or selling discounts and commissions, in
connection with the registration of Registrable Securities pursuant to this
Declaration, including, without limitation, all SEC, National Association of
Securities Dealers, Inc. and blue sky registration and filing fees, printing
expenses, transfer agents' and registrars' fees, and the reasonable fees and
disbursements of Buyer's outside counsel and independent accountants.
9. Reports Under Securities Exchange Act of 1934. Buyer agrees to:
a. use all commercially reasonable efforts to file with the SEC in a timely
manner all reports and other documents required of Buyer under the Securities
Act and the Exchange Act; and
b. furnish to each Holder forthwith upon request (i) a written
statement by Buyer that it has complied with the reporting requirements of the
Securities Act and the Exchange Act, or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time that it so
qualifies), (ii) a copy of the most recent annual or quarterly report of Buyer
and (iii) such other information as may be reasonably requested in availing each
Holder of any rule or regulation of the SEC which permits the selling of any
such securities pursuant to Form S-3.
10. Assignment of Registration Rights. The rights of a Holder pursuant
to this Declaration shall not be assignable, except for a transfer by operation
of law to his or her heirs and successors.
11. Amendment of Registration Rights. The Holders of a majority of the
Registrable Securities then outstanding may, with the consent of Buyer, amend
the registration rights granted hereunder.
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12. Termination. The registration rights set forth in this Declaration
shall terminate with respect to a Holder (and the shares held by such Holder
shall cease to constitute Registrable Securities) upon the earlier of (i) the
date which is one year following the Closing of the Acquisition, and (ii) the
sale of all of such Holder's Registrable Securities.
13. Obligations of Holders. By exercising any rights hereunder, each
Holder shall be deemed to assume all obligations of a Holder hereunder as though
such Holder were a signatory hereto. Buyer may require Holders to execute an
instrument whereby such Holders expressly assume all obligations of Holders
hereunder as a condition precedent to any obligations of Buyer hereunder.
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