<PAGE> 1
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
Date of Report (Date of earliest event reported): March 26, 1997
SIMULATION SCIENCES INC.
(Exact name of registrant as specified in its charter)
Delaware 000-21283 95-2487793
- ------------------------------- ------------------------ -------------------
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
601 Valencia Avenue, Suite 100
Brea, California 92823
(Address of principal executive offices)
(714) 579-0412
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Acquisition of Substantially All the Assets of Visual Solutions, Inc.
On March 26, 1997, Simulation Sciences Inc., a Delaware corporation
(the "Registrant"), completed the acquisition (the "Acquisition") of
substantially all the assets of Visual Solutions, Inc., a Texas corporation
("VSI"). The acquisition of substantially all the assets of VSI was
accomplished by means of an Asset Purchase Agreement dated March 24, 1997 among
the Registrant, VSI and John L. Dial, II, Mark G. Brosius, Donald L. Miller and
Christopher E. Glass (the "Agreement"). Pursuant to the Agreement, the
Registrant acquired substantially all of the tangible and intangible assets of
VSI, including its software product line, and certain specified obligations of
VSI. Registrant also assumed in connection with the Acquisition certain of
VSI's contractual obligations.
Prior to the Acquisition, VSI was engaged in the business of providing
commercial simulation software and related services to the process industries,
including the petroleum, petrochemical and industrial chemical process
industries. The Registrant and VSI had previously entered into a marketing
agreement whereby Registrant obtained the rights to market VSI's Visual Flare
software product to petroleum, petrochemical and industrial chemical
manufacturers. The marketing agreement was terminated in connection with the
Acquisition. Following the Acquisition, the Registrant intends to continue
producing and marketing certain of the VSI products, including Visual Flare,
and to implement many of the advanced features of those products into the
Registrant's other software programs. In connection with the Acquisition, the
shareholders and employees of VSI entered into Confirmation Agreements which
confirmed that none of these individuals claimed ownership rights in the VSI
software or any other VSI intellectual property, that to the best of their
knowledge such intellectual property was lawfully owned by VSI prior to the
Acquisition and that VSI had held the exclusive right to sell, convey,
transfer, assign and deliver such property to the Registrant.
The purchase price for VSI of approximately $6.2 million, which is
subject to certain post-closing adjustments, consisted of (i) a $1.6 million
cash payment paid out of general working capital of the Registrant and (ii) an
issuance of 379,789 unregistered shares of the Registrant's Common Stock (with
a value of approximately $4.6 million based on the average closing price per
share of the Registrant's Common Stock on the Nasdaq National Market for the
ten trading days ending March 19, 1997). All stock issued in connection with
the Acquisition is subject to a Registration Rights Agreement dated March 26,
1997 among the Registrant, VSI and John L. Dial, II, Mark G. Brosius, Donald L.
Miller and Christopher E. Glass. The amount of consideration paid by the
Registrant and the terms of the Acquisition were determined in arm's-length
negotiations with VSI and its principal shareholders.
Of the 379,789 shares of Registrant's Common Stock issued in connection
with the Acquisition, 250,661 of those shares were placed in escrow. Subject to
the terms of the escrow, approximately one-half of the shares held in escrow are
scheduled to be released on the first anniversary of the Acquisition, and the
remaining escrowed shares are scheduled to be released on the second anniversary
of the Acquisition. The Agreement contains a provision for early release of the
escrowed shares to VSI if certain adverse market conditions related to the per
share price of Registrant's Common Stock on the Nasdaq National Market develop.
In connection with the Acquisition, John L. Dial, II, VSI's founder
and Chief Executive Officer, entered into an employment agreement to serve as
Registrant's Director of Visual Solution Technology. In addition,
<PAGE> 3
VSI Vice President Donald L. Miller entered into an employment agreement to
serve in Registrant's sales and marketing department; fellow VSI Vice President
Christopher E. Glass entered into an employment agreement to serve in
Registrant's software development department; and fellow VSI Vice President
Mark G. Brosius entered into a consulting agreement with Registrant to provide
advice on certain services in connection with software development matters.
The remaining VSI employees have accepted at-will employment with Registrant.
The acquisition of VSI is intended to be treated as a purchase for
financial accounting purposes.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits:
2.1 Asset Purchase Agreement dated March 24, 1997 among
the Registrant, Visual Solutions, Inc. and John L.
Dial, II, Mark G. Brosius, Donald L. Miller and
Christopher E. Glass.
10.1 Registration Rights Agreement dated March 26, 1997
among the Registrant, Visual Solutions, Inc. and
John L. Dial, II, Mark G. Brosius, Donald L. Miller
and Christopher E. Glass.
<PAGE> 4
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.
SIMULATION SCIENCES INC.
Dated: April 10, 1997 By: /s/ L. Ronald Trepp
-----------------------------------
L. Ronald Trepp
Vice President, Finance and
Chief Financial Officer
<PAGE> 5
EXHIBIT INDEX
Exhibit
No. Document
2.1 Asset Purchase Agreement dated March 24, 1997 among
the Registrant, Visual Solutions, Inc. and John L.
Dial, II, Mark G. Brosius, Donald L. Miller and
Christopher E. Glass.
10.1 Registration Rights Agreement dated March 26, 1997
among the Registrant, Visual Solutions, Inc. an
John L. Dial, II, Mark G. Brosius, Donald L. Miller
and Christopher E. Glass.
<PAGE> 1
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
SIMULATION SCIENCES INC.,
VISUAL SOLUTIONS, INC.
AND
CERTAIN INDIVIDUALS
SPECIFIED HEREIN
Dated as of March 24, 1997
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TABLE OF CONTENTS
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ARTICLE I -THE ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purchase of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Escrow of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.4 Early Release of Escrowed Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.5 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.6 Post-Closing Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Organization of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Authority; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Tax and Other Returns and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Restrictions on Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Absence of Liens and Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.8 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.9 Agreements, Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.12 Brokers' and Finders' Fees; Third Party Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.13 Employee Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.14 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.15 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.16 Complete Copies of Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.17 Seller Financial Statements; Operations Since Balance Sheet Date . . . . . . . . . . . . . . . . . . 12
2.18 Representations Complete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER AND OWNERS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 No Public Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Access to Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.3 Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.4 Common Stock Offered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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ARTICLE V - RESTRICTIONS ON CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 Holdback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Restriction on Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VI - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.1 Protection of Assets by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.5 Public Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.6 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.7 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.8 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.9 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.10 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.11 Post-Closing Employment of the New Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.12 Invention Assignment and Confirmation Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.13 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.14 Operations Prior to the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.15 Dissolution of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.16 Termination of Marketing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.17 Tax Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII - CONDITIONS TO THE ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 Conditions to Obligations of Each Party to Effect the Acquisition. . . . . . . . . . . . . . . . . . 20
7.2 Additional Conditions to Obligations of Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.3 Additional Conditions to the Obligations of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IX - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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9.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.7 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.9 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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EXHIBIT DESCRIPTION
Exhibit A Owners
Exhibit B New Employees
Exhibit C Assets and Obligations
Exhibit D Form of Escrow Agreement
Exhibit E Visual Solutions, Inc. Balance Sheet as of February
28, 1997
Exhibit F Schedule of Exceptions
Exhibit G1 Form of Dial Employment Agreement
Exhibit G2 Form of Miller Employment Agreement
Exhibit G3 Form of Glass Employment Agreement
Exhibit G4 Form of Brosius Consulting Agreement
Exhibit H Form of Confidential Information and Invention
Assignment Agreement
Exhibit I Form of Confirmation Agreement
Exhibit J Form of Employment, Confidential Information and
Invention Assignment Agreement
Exhibit K Registration Rights Agreement
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of March 24, 1997 by and among Simulation Sciences Inc., a Delaware
corporation ("Buyer"), Visual Solutions, Inc., a Texas corporation ("Seller")
and the individuals named on Exhibit A (the "Owners") (Seller and Owners are
referred to collectively herein as the "Sellers").
RECITALS
A. Seller is engaged in the business of providing
commercial simulation software and related services to the process industries,
including the petroleum, petrochemical and industrial chemical process
industries, and is the owner of certain tangible and intangible assets, which
assets are used in such business and, except for the "Excluded Assets"
described in Exhibit C, hereto, together constitute the "Assets" as more fully
described on Exhibit C hereto. The Assets include without limitation certain
software including Visual Engineering Toolbox, Visual Flare, Visual Flash,
Visual Refinery, Visual Network, Visual Flow Suite, Component Manager,
Equipment Manager, RV Manager and Report Manager, which is useful to
increasing profitability by reducing capital investment costs, improving plant
yields and enhancing management decision making (the "Software"). The Assets,
together with all other elements, practices and personnel necessary to sustain
Seller as presently operated and as proposed by Seller's current management to
be operated together constitute the "Business."
B. The Boards of Directors of each of Seller and Buyer
believe it is in the best interests of each company and each company's
respective stockholders that Buyer acquire from Seller the Assets and assume
certain specified obligations of Seller (the "Acquisition").
AGREEMENT
NOW, THEREFORE, in consideration of the representations, warranties
and covenants set forth herein, the parties agree as follows:
ARTICLE I
THE ACQUISITION
1.1 Purchase of Assets.
(a) Purchase and Sale of Assets. On the terms and
subject to the conditions set forth in this Agreement, and on the Closing Date
(as defined in Section 1.5(a)), Seller will sell, convey, transfer, assign and
deliver to Buyer and Buyer will purchase and acquire from Seller, all of
<PAGE> 7
Seller's right, title and interest in and to the Assets as more fully described
in Exhibit C free and clear of all liens, pledges, charges, claims, security
interests or other encumbrances of any sort (collectively, "Liens"), except
such Liens as are set forth specifically on Exhibit C to this Agreement as
"Permitted Liens." The Assets include without limitation the following:
(i) all patents, patent applications, copyrights,
trademarks, service marks, trade names, trade secrets, proprietary
information, technology rights and licenses, all electronic rights, multimedia
rights, interactive rights, moral rights, new media rights, reacquisition
rights and publication rights, proprietary rights and processes, know-how,
research and development in progress, and any and all other intellectual
property including, without limitation, all things authored, discovered,
conceived or first reduced to practice by Seller or any of its employees in the
course of their employment by Seller that pertain to the Assets, whether
tangible or intangible, in any stage of development and all rights of any kind
in or to any of the foregoing (collectively, the "Intellectual Property");
(ii) all rights and ownership of the Software,
including but not limited to all versions of the Software, and all copies of
the Software (including revisions and updates in process), and all technical,
design, development, installation, operation and maintenance information
concerning the Software, including source code, source documentation, source
listings and annotations, engineering notebooks, test data and test results,
all in sufficient detail to permit a reasonably skilled software developer not
involved in the development of the Software to maintain, enhance and correct
errors in the Software without assistance from or reference to any other
persons or materials as well as all reference manuals and support materials
normally distributed to end-users and potential end-users in connection with
the distribution of the Software;
(iii) all of Seller's claims against any parties
relating to any Asset, the Business or any Contract (as defined below)
necessary to operate the Business or otherwise material to the Business,
including without limitation, unliquidated rights under manufacturers' and
vendors' warranties or guaranties. "Contracts" shall mean all agreements,
licenses and commitments, written or oral, relating to the Business or any of
the Assets to which Seller is a party, beneficiary or by which it is bound;
(iv) all of Seller's rights pertaining to the
Software under any software development, consulting and maintenance Contracts;
(v) all other Assets, including, without
limitation, litigation claims, customer lists, potential customer lists,
proposals, operating manuals, employee records, potential employee lists,
accounting records, business strategy plans, projects under development, lead
referral methods, co-selling arrangements, distribution methods and contacts,
management plans, related business opportunities and so on.
To the extent delivery of the Assets involves physical delivery,
Seller shall be required to so deliver the Assets at the Closing (as defined in
Section 1.5(a)).
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(b) Assumption of Obligations. Buyer shall assume only
such liabilities and obligations of Seller described on Exhibit C as "Assumed
Obligations" (collectively, the "Assumed Obligations"). Without limiting the
foregoing, it is expressly agreed that, as set forth in Exhibit C, other than
the Assumed Obligations, Buyer shall not assume any liabilities or obligations
for employment, income, sales, property or other Taxes incurred or accrued by
Seller or that would have accrued under generally accepted accounting
principles assuming Seller reports taxes on the accrual method of accounting.
(c) Risk of Loss. In the event any of the Assets are
unavailable for delivery to Buyer on the Closing Date as a result of risks for
which such Assets were insured by Seller, Buyer may at its option elect (i) to
require Seller to deliver to Buyer assignments of such Seller's rights or
proceeds under its insurance policies, if any, applicable to such Assets and to
close the Acquisition on that basis, or (ii) if such unavailable Assets are
material to the Business as determined by Buyer acting in good faith, to not
close due to the failure of a condition to the Closing.
1.2 Consideration.
(a) Consideration for Assets. On the terms and subject
to the conditions set forth in this Agreement, as full payment for the selling,
conveyance, transfer, assignment and delivery of the Assets by Seller to Buyer,
at the Closing Buyer shall pay to Seller the "Purchase Price" of $6,235,000,
subject to adjustment as herein provided. Such Purchase Price shall be paid in
the form of both a cash and common stock payment as set forth in this section:
(i) Cash Payment. The cash portion of the
Purchase Price (the "Cash Payment") shall equal $1,635,000, subject to
adjustment as set forth herein, and is payable by wire transfer of immediately
available funds.
(A) Buyer shall retain $100,000 of the
Cash Payment (the "Retained Cash") that may be used to satisfy a Purchase Price
Adjustment in favor of Buyer pursuant to Section 1.6.
(B) Sellers and Buyer acknowledge and
agree that Buyer has paid Seller $135,000 of the Cash Payment.
(ii) Common Stock Payment. The common stock
portion of the Purchase Price (the "Common Stock Payment") shall equal
$4,600,000 of Common Stock of Buyer (the "Stock") and shall be payable in
separate installments as set forth below.
(A) Valuation of Buyer's shares of
Common Stock shall be based on the average closing price per share of Buyer's
Common Stock on the Nasdaq National Market for the ten trading days ending on
the seventh day prior to the Closing Date. For example, if the Closing Date is
Wednesday, March 26, 1997, the average closing price per share of Buyer's
Common Stock is $12.11 based on the ten trading-day period ended on March 19,
1997.
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(B) At the Closing, the Buyer shall
deliver to Seller 34% of the Common Stock Payment by delivering a certificate
or certificates representing 34% of the shares of Stock.
(C) At the Closing, Buyer and Seller
will appoint an agent (the "Escrow Agent") to hold in escrow, as provided in
Section 1.3 of this Agreement, the remaining portion of the Common Stock
Payment (the "Unreleased Shares" or "Escrow Shares").
(D) On the terms and subject to the
conditions of the Escrow Agreement (as defined in Section 1.3 below), on the
first anniversary of the Closing Date, the Escrow Agent shall deliver to
Seller (or its assigns as permitted under the Escrow Agreement and Article III
of this Agreement) 50% of the Unreleased Shares then held in escrow.
(E) On the terms and subject to the
conditions of the Escrow Agreement, on the second anniversary of the Closing
Date (the "Release Date"), the Escrow Agent shall deliver to Seller (or its
assigns as permitted under the Escrow Agreement and Article III of this
Agreement) the remaining Unreleased Shares then held in escrow.
(b) Transaction Taxes.
(i) Sellers shall pay and promptly discharge when
due the first $1,800,000 of any and all Taxes (as defined in Section 2.3(a))
imposed or levied by reason of the sale of the Assets to Buyer (the
"Transaction Taxes"); provided, however, that the amount of the Transaction
Taxes shall not include Taxes related to any other income or revenue of the
Sellers. The amount of Transaction Taxes shall be equal to the aggregate
federal (but not California) income Taxes of all Owners plus the Texas
franchise Taxes of Seller, plus the California Taxes of Seller, in each case,
for the Tax periods or privilege period (with respect to Texas franchise Taxes)
encompassing the Closing (collectively, "Sellers' Aggregate Taxes") less the
amount of any such Taxes attributable to income or revenue of Sellers other
than the Purchase Price (the "Unrelated Taxes"). At Buyer's request, Sellers
shall deliver to Buyer copies of Sellers' Tax returns for applicable periods, a
proposed schedule of the Sellers' Aggregate Taxes, the Unrelated Taxes and the
Transaction Taxes and the manner in which such proposed amounts were
calculated, and such other information as Buyer shall reasonably request.
(ii) Of any Transaction Taxes in excess of
$1,800,000 imposed or levied by reason of the sale of the Assets to Buyer,
Buyer will indemnify and hold harmless the Sellers for any such excess up to an
aggregate of $150,000.
(iii) Sellers also shall pay and promptly discharge
when due all Transaction Taxes imposed or levied by reason of the sale of the
Assets to Buyer in excess of $1,950,000.
(c) Restrictions. Sellers acknowledge and agree that the
Stock shall be subject to the restrictions set forth in Article III and Section
5.1 below.
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1.3 Escrow of Shares. Buyer and Seller shall, upon execution of
this Agreement, appoint the Escrow Agent to hold the share certificates
representing the Unreleased Shares in escrow. The Escrow Agent, Buyer and
Sellers shall enter into an Escrow Agreement in substantially the form attached
hereto as Exhibit D (the "Escrow Agreement") which together with this Agreement
shall govern the Unreleased Shares.
1.4 Early Release of Escrowed Shares. Subject to the provisions
of the Escrow Agreement, and notwithstanding Section 1.2(a)(ii), if the average
closing price per share of the Buyer's Common Stock on the Nasdaq National
Market, adjusted for stock splits, dividends and the like for any ten
consecutive trading days after the Closing Date (the "Average Market Price"),
is lower than 70% of the price per share of Buyer's Common Stock determined
pursuant to Section 1.2(a)(ii)(A) for purposes of calculating the Common Stock
Payment, then 50% of the Unreleased Shares then held in escrow under the Escrow
Agreement shall be released to Seller. Subject to the provisions of the Escrow
Agreement, if the Average Market Price is lower than 30% of the per share price
of Buyer's Common Stock determined pursuant to Section 1.2(a)(ii)(A) for
purposes of calculating the Common Stock Payment, then 80% of the Unreleased
Shares then held in escrow shall be released to Seller.
1.5 Closing.
(a) Closing. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing of the transactions contemplated by this
Agreement (the "Closing") shall be held at the offices of Buyer, 601 Valencia
Avenue, Suite 100, Brea, California 92823, at 10:00 a.m. on the date which is
two business days following satisfaction or waiver of the last of the
conditions to the Closing as set forth in the Article VII hereof, or at such
other time or on such other date as the Buyer and Seller agree (the actual date
on which the Closing occurs is referred to herein as the "Closing Date");
provided that no party shall be obligated to close after May 31, 1997.
(b) Delivery. At the Closing:
(i) Buyer shall deliver to Seller an instrument
of assumption of obligations by which Buyer shall assume the Assumed
Obligations as of the Closing Date;
(ii) Sellers shall deliver to Buyer all bills of
sale, endorsements, assignments, consents to assignments that Seller has
obtained and other instruments and documents as Buyer may request to sell,
convey, assign, transfer and deliver to Buyer good and marketable title to all
the Assets free and clear of any and all Liens other than Permitted Liens; and
(iii) Sellers, on the one hand, and Buyer, on the
other hand, shall deliver or cause to be delivered to one another the
instruments and documents required under Article VII and such other instruments
and documents necessary or appropriate to evidence the due execution, delivery
and performance of this Agreement.
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(c) Taking of Necessary Action; Further Action. If, at
any time after the Closing Date, any further action is reasonably necessary or
desirable to carry out the purposes of this Agreement and to vest Buyer with
full right, title and possession to the Assets, as well as all property,
rights, privileges, powers and franchises of Seller relating to such Assets,
the officers and directors of Seller are fully authorized in the name of Seller
or otherwise to take, and will take, all such lawful and necessary or desirable
action.
1.6 Post-Closing Adjustment.
(a) Within twenty-one (21) days following the last day of
the month of the Closing Date, Seller shall, at its expense, prepare, or cause
to be prepared, and deliver to Buyer an unaudited Balance Sheet as of the close
of business on the Closing Date (the "Closing Balance Sheet") which shall be
prepared (i) in good faith and (ii) in a manner consistent with the preparation
of the Seller's Balance Sheet as of February 28, 1997 attached hereto as
Exhibit E (the "2/28/97 Balance Sheet").
(b) Buyer and Buyer's accountants shall, within sixty
(60) days after the delivery by Seller of the Closing Balance Sheet, complete
their review of the same. In the event that Buyer determines that the Closing
Balance Sheet has not been prepared in good faith and in a manner consistent
with the preparation of the 2/28/97 Balance Sheet then Buyer shall inform
Seller in writing ("Buyer's Objection"), setting forth a specific description
of the basis of Buyer's Objection and the adjustments which Buyer believes
should be made, on or before the last day of such 60-day period. Seller shall
then have thirty (30) days to review and respond to Buyer's Objection. If
Seller and Buyer are unable to resolve all of their disagreements with respect
to the determination of the foregoing items within thirty (30) days following
the completion of Seller's review of Buyer's Objection, they shall refer their
remaining differences to a "big six" accounting firm (not Seller's regular
outside auditors) as to which Seller and Buyer mutually agree (the "CPA Firm"),
which shall, acting as experts and not as arbitrators, determine, and only with
respect to the remaining differences so submitted, whether and to what extent,
if any, the Closing Balance Sheet requires adjustment; provided, however, that
no such adjustment shall exceed the maximum adjustment claimed in Buyer's
Objection. Seller and Buyer shall direct the CPA firm to use its best efforts
to render its determination within forty-five (45) days. The CPA Firm's
determination shall be conclusive and binding upon Buyer and Seller. The fees
and disbursements of the CPA Firm shall be shared equally by Buyer, on the one
hand, and Seller, on the other hand. Buyer and Seller shall make readily
available to the CPA Firm all relevant books and records and any work papers
(including those of the parties' respective accountants) relating to the
Closing Balance Sheet and all other items reasonably requested by the CPA Firm.
The "Adjusted Closing Balance Sheet" shall be (i) the Closing Balance Sheet in
the event that (A) no Buyer's Objection is delivered to Seller during the
60-day period specified above, or (B) Seller and Buyer so agree, (ii) the
Closing Balance Sheet, adjusted in accordance with Buyer's Objection in the
event that (A) Seller does not respond to Buyer's Objection within the 30-day
period following receipt by Seller of Buyer's Objection or (B) Seller and Buyer
so agree, or (iii) the Closing Balance Sheet, adjusted in accordance with the
mutual agreement of Seller and Buyer or (iv) the Closing Balance Sheet, as
adjusted by the CPA Firm.
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(c) Buyer shall provide Seller and its accountants full
access to the accounting records and any other information, including work
papers of its accountants, and to any employees to the extent reasonably
necessary for Seller to prepare the Closing Balance Sheet. Buyer and its
accountants shall have full access to all information used by Seller in
preparing the Closing Balance Sheet, including the work papers of its
accountants.
(d) Following finalization of the Adjusted Closing
Balance Sheet, the parties shall determine the "net value" of the following
items of Seller on its balance sheet as of the Closing Date: "Accounts
Receivable," "Computer Equipment" (less "Accumulated Depreciation" and
"Furniture and Fixtures" (less "Accumulated Depreciation). For the 2/28/97
Balance Sheet, this amount shall be referred to hereinafter as the "2/28/97 Net
Value," and is equal to $137,295. For the Closing Balance Sheet this amount
shall be referred to hereinafter as "Closing Net Value."
(e) In the event of a difference between the 2/28/97 Net
Value and Closing Net Value, a "Purchase Price Adjustment" shall be made as
follows:
(i) If the Closing Net Value is greater than the
2/28/97 Net Value, Buyer shall pay the difference to Seller within 10 days in
cash.
(ii) If the Closing Net Value is less
than the 2/28/97 Value, then Buyer shall be entitled to permanently retain
Retained Cash equal to (i) the lesser of such difference or (ii) the amount of
the Retained Cash. If a Purchase Price Adjustment in favor of Buyer is less
than the amount of Retained Cash, Buyer shall promptly pay the Seller the
remaining balance of Retained Cash after deducting the Purchase Price
Adjustment pursuant to this Section 1.6(e). If a Purchase Price Adjustment in
favor of Buyer exceeds the amount of Retained Cash, then Buyer shall provide
the Seller and Escrow Agent with a "Price Adjustment Notice" which shall
specify the amount to be paid by Seller to Buyer from the Escrow Shares held by
the Escrow Agent pursuant to Section 1.3 and such shares shall be released from
escrow to Buyer subject to the terms and conditions of the Escrow Agreement.
The per share price of the Escrow Shares to be paid Seller to satisfy the
amount owing under Price Adjustment Notice shall be determined pursuant to the
calculation set forth in Section 1.2(a)(ii)(A) for purposes of calculating the
Common Stock Payment.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the Sellers, jointly and severally, represents and warrants to
Buyer, subject to such exceptions as are specifically disclosed in Exhibit F
hereof (such disclosures reciting the paragraph numbers in this Agreement to
which they refer) (the "Disclosure Schedule"), as follows:
2.1 Organization of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. Seller has the corporate power to own its properties and to carry on
its business as now being conducted. Seller is duly qualified to do business
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and is in good standing in each jurisdiction in which failure to be so
qualified would have a material adverse effect on the Assets or Business
(hereinafter referred to as a "Material Adverse Effect").
2.2 Authority; Consents. Seller has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby and to own, license or lease the Assets and to operate and
use the Assets and to carry on its business as presently conducted. The
execution and delivery of this Agreement and Exhibits and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Seller. This Agreement and the
Exhibits hereto have been duly executed and delivered by Seller and are valid,
binding and enforceable obligations of Seller and constitute the valid and
binding obligations of Seller, enforceable in accordance with their terms
except as such enforceability may be limited by bankruptcy or similar laws and
general principles of equity. The execution and delivery of this Agreement and
the Exhibits hereto by the Sellers do not, and, as of the Closing, the
consummation of the transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or default under or give rise to
a right of termination or acceleration of any obligation or loss of any benefit
under (any such event, a "Conflict") (i) any provision of the Articles of
Incorporation or Bylaws of Seller or (ii) any agreement or instrument, permit,
judgment, statute, law, rule or regulation applicable to Sellers or their
respective properties or assets. No consent, waiver, approval, or
registration, declaration or filing with, any court, administrative agency or
other federal, state, county, local or foreign governmental authority, or
agency having jurisdiction over the Sellers ("Governmental Entity") or any
third party (so as to enable Sellers to assign Buyer the Assets and all of the
Sellers' rights and benefits under the Contracts), is required by or with
respect to any of the Sellers in connection with the execution and delivery of
this Agreement or the Exhibits or the consummation of the transactions
contemplated hereby or thereby.
2.3 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purposes of this
Agreement, except for the definition of "Transaction Taxes" in Section 1.2(b),
a reference to "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.
(i) To the extent the failure to do so would
adversely affect Seller's ability to deliver free and clear title to the Assets
or Buyer's right to hold, own or use the Assets, Seller has filed within the
time period for filing or any extension granted with respect thereto all
federal, state, local, foreign and other returns, estimates and reports
("Returns") which it is required to file relating or pertaining to any and all
Taxes attributable to, levied or imposed upon, or incurred in connection
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with the Assets and each portion of any Tax Return pertaining or related to the
Assets is, in all material respects, true and correct and has been completed in
accordance with applicable law. To the extent the failure to do so would
adversely affect Seller's ability to deliver free and clear title to the Assets
or Buyer's right to hold, own or use the Assets, Seller has paid all Taxes
relating to the Seller's business and all the Assets and has withheld with
respect to its employees and paid to the appropriate taxing authority all
federal, state and local income taxes, FICA, FUTA and any other Taxes required
to be withheld.
(ii) There are (and as of immediately following
the Closing there will be) no Liens on the Assets relating to or attributable
to Taxes.
2.4 Restrictions on Business Activities. There is no agreement,
commitment, judgment, injunction, order or decree binding upon the Sellers or
the Assets which has or could reasonably be expected to have the effect of
impairing any use by Buyer of the Assets or operations by Buyer of the Business
following the Closing.
2.5 Absence of Liens and Encumbrances. Seller has good and
marketable title to all of the Assets, free and clear of any Liens, except as
reflected in Exhibit F. Seller has full right and power to (and at the Closing
will) transfer and deliver to Buyer good and marketable title to all the Assets
free and clear of all Liens, except for statutory liens for taxes not yet due.
2.6 Intellectual Property.
(a) Exhibit F sets forth a complete and accurate schedule
of all Intellectual Property capable of being identified, identifying
specifically (i) all patents and patent applications owned by Seller, including
the country of filing, filing number, date of issue, expiration date and title;
(ii) all registered trademarks and service marks and all trademark and service
mark applications, including country of filing, filing number, date of issue
and expiration date; (iii) all common law trademarks, service marks and trade
names; (iv) all registered and unregistered copyrights; (v) all computer
software, documentation, proprietary information and trade secrets; (vi) all
license, option and other agreements pursuant to which Seller acquired rights
to any Intellectual Property and all license, option and other agreements, oral
or written, pursuant to which Seller is obligated to pay royalties or other
consideration to third parties with respect to any Intellectual Property; and
(vii) all license, option and other agreements, oral or written, pursuant to
which Seller has granted any third party any right to any Intellectual
Property. Complete and accurate copies of all written agreements referred to
in the foregoing clauses (vi) and (vii) have been provided to Buyer.
(b) Except as set forth on Exhibit F, (i) Seller has all
right, title and interest in and to the Intellectual Property; (ii) Seller has
neither incorporated into nor relied on any software, technology or proprietary
information of any third party in the creation of the Software, (iii) Seller
is not making use of any invention, software, technology or proprietary
information in connection with the Software in which any present or past
employee of Seller or any other person has or has claimed an interest, and
Seller has no knowledge of facts that could reasonably be expected to give rise
to such a claim; (iv) Seller is in full compliance with all agreements pursuant
to which it acquired any
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Intellectual Property; (v) the Intellectual Property does not infringe upon any
patent, trademark, trade name, copyright or other intellectual property right
of any third party; (vi) no third party has asserted or, to Seller's knowledge,
threatened to assert against Seller or any of its officers or directors any
conflicting rights to any Intellectual Property and Seller has no knowledge of
facts that could reasonably be expected to give rise to such a claim; (vii)
Seller has no knowledge that any third party is infringing upon any of the
Intellectual Property; (viii) the Intellectual Property will not be rendered
invalid or adversely affected in any way by virtue of the execution, delivery
or performance of this Agreement or the Exhibits or the occurrence of the
transactions contemplated hereby or thereby.
2.7 Employee Benefit Plans.
(a) Exhibit F lists all Employee Benefit Plans (as
defined below) that the Seller maintains, to which it contributes or has an
obligation to contribute, or with respect to which the Seller otherwise has any
liability or reasonable expectation of liability, including all Employee
Benefit Plans maintained or contributed to by members of the controlled group
of companies (within the meaning of Section 414 of the Internal Revenue Code,
hereafter the "Code") of which the Seller is or, within the five (5) year
period preceding the date of this Agreement, ever was a member. For purposes
of this Agreement, (i) the term "Employee Benefit Plan" means any employee
benefit plan (as such term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and any other
employee or fringe benefit plan, policy, program, or arrangement, whether or
not in writing, whether or not terminated, whether or not funded, whether or
not covering U.S. or non-U.S. employees and whether or not subject to ERISA and
(ii) the term "Plan" means each Employee Benefit Plan set forth on Exhibit F
and each other Employee Benefit Plan, if any, improperly omitted from such
Schedule.
(b) No Plan is (i) a defined benefit plan (as such term
is defined in Section 3(35) of ERISA) or defined contribution plan (as such
term is defined in Section 3(34) of ERISA) that is subject to the minimum
funding requirements of Section 412 of the Code or Section 302 of ERISA, (ii) a
multiemployer plan (as such term is defined in Section 3(37) of ERISA), (iii)
an Employee Benefit Plan of the type described in Sections 4063 and 4064 of
ERISA or in Section 413(c) of the Code (and regulations promulgated
thereunder), or (iv) an Employee Benefit Plan which provides health, life
insurance, accident or other "welfare-type" benefits to current or future
retirees or terminated employees, their spouses or dependents, other than in
accordance with Section 4980B of the Code, Part 6 of Subtitle B of Title I of
ERISA or applicable state continuation coverage law.
(c) The Plans (and all related trusts, insurance
contracts and funds) have been maintained, administered and funded in all
material respects in accordance with their terms and in material compliance
with the requirements of all applicable laws and regulations, including ERISA
and the Code and the reporting and disclosure and nondiscrimination rules
thereof. Each Plan that is an employee pension benefit plan intended to be
qualified meets the requirements of "qualified plans" under Section 401(a) of
the Code, and each such Plan, and each trust (if any) forming a part thereof,
has received a favorable determination letter from the Internal Revenue Service
as to the qualification under the Code of such Plan and the tax-exempt status
of such related trust, and nothing has occurred since the date of such
determination letter that could adversely affect the qualification of such Plan
or
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the tax-exempt status of such related trust. The Seller has complied in all
respects with the requirements of Section 4980B of the Code and Part 6 of
Subtitle B of Title I of ERISA.
(d) With respect to each Plan, (i) no transaction has
occurred that could subject the Seller, any administrator, trustee or other
party dealing with such Plan, or Buyer, to any material Tax or penalty,
including any Tax or penalty under ERISA or the Code or other material
liability, (ii) no fiduciary (as defined in Section 3(21) of ERISA) has, or is
expected to have, any material liability for breach of fiduciary duty or any
other failure to act or comply in connection with the administration or
investment of the assets of such plans, and (iii) no actions, investigations,
suits or claims (other than routine claims for benefits or routine actions
seeking qualified domestic relations orders) are pending or threatened, and the
Seller has no knowledge of any facts which would give rise to, or could
reasonably be expected to give rise to, any such actions, investigations, suits
or claims. No Plan has any material unfunded liabilities.
(e) Except as set forth on Exhibit F, none of the Plans
obligates the Seller to pay separation, severance, termination or similar-type
benefits solely as a result of any transaction contemplated by this Agreement
or the Exhibits or solely as a result of a "change in control."
(f) With respect to each Plan, the Seller has provided
Buyer with true, complete and correct copies, to the extent applicable, of (i)
all documents pursuant to which the Plans are maintained, funded and
administered (including, without limitation, plan and trust documents, summary
plan descriptions, summaries of material modifications, insurance contracts,
material employee communications and administrative services, record keeping,
investment management and other service-provider agreements), (ii) the three
most recent annual reports (Form 5500 series, with all schedules and
attachments), (iii) the three most recent actuarial reports, (iv) the three
most recent financial statements, and (v) all governmental rulings,
determinations, and opinions (and pending requests for governmental rulings,
determinations, and opinions).
2.8 Employee Relations. Seller has complied with all applicable
laws, rules and regulations which relate to employment and collective
bargaining (including pay and discrimination) and to the operation of its
business and is not liable for any arrears of wages or any taxes or penalties
for failure to comply with any of the foregoing. Sellers reasonably believe
that Seller's relations with the employees of Seller are satisfactory. Seller
is not a party to, and is not threatened with, any dispute or controversy with
a union or with respect to unionization or collective bargaining involving the
employees of Seller.
2.9 Agreements, Contracts and Commitments. Seller 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 Contract.
Each Contract is in full force and effect and, to the knowledge of Sellers, the
other party to such Contract has not breached, violated or defaulted under any
of the terms or conditions of any Contract. Seller has obtained, or will use
its good faith efforts consistent with good business practice to obtain prior
to the Closing Date, all necessary consents, waivers and approvals of parties
to any Contract as are required to assign all rights and benefits thereunder to
Buyer as of the Closing.
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2.10 Governmental Authorization. No consent, permit, or other
authorization by a Governmental Entity (as defined below) is required for the
use of the Assets, the holding of an interest in the Assets or transfer of the
Assets to Buyer or operation of the Business by the Buyer thereafter (herein
collectively called "Seller Authorizations").
2.11 Litigation. There is no action, suit or proceeding of any
nature pending or threatened against Seller, the Assets or any of Seller's
officers or directors in their respective capacities as such, nor, to the
knowledge of Seller, is there any basis therefor. No Governmental Entity has
at any time notified Seller of any challenge or question regarding the legal
right of Seller to manufacture, offer or sell any products relating to the
Assets or the Business in the present manner or style thereof.
2.12 Brokers' and Finders' Fees; Third Party Expenses. Seller 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 of the Exhibits or any transaction contemplated
hereby or thereby.
2.13 Employee Arrangements. No Owner or employee of Seller is
subject to any agreement or other arrangement that would in any manner hinder
or obstruct the employment by Buyer of such individual, or result in any
payments by Buyer in connection with such employment.
2.14 Environmental Laws. Seller has obtained all permits, consents
and authorizations required of them under applicable laws or regulations
relating to the protection of the environment or concerning the handling,
storage, disposal or discharge of toxic materials (collectively, "Environmental
Laws"), and any such permits, consents and authorizations remain in full force
and effect. Seller is in compliance with the Environmental Laws in all
respects, and there is no pending or, to Seller's knowledge, threatened, action
or proceeding against Seller alleging violations of the Environmental Laws.
2.15 Compliance with Laws. Seller has complied with and has not
received any notices of violation with respect to, any federal, state or local
statute, law or regulation, domestic or foreign applicable to Seller.
2.16 Complete Copies of Materials. Each copy of a document that
has been delivered to Buyer by Seller is a true and complete copy of the
document it purports to be.
2.17 Seller Financial Statements; Operations Since Balance Sheet
Date. Seller's unaudited balance sheet as of December 31, 1996 and the related
unaudited statements of operations, shareholders' equity and cash flows for the
year then ended as well as Seller's unaudited balance sheet as of February 28,
1997 (collectively, the "Seller Financials") have previously been delivered to
Buyer. There has been no material change since February 28, 1997, in the
assets, operations, liabilities, profits, prospects or condition of Seller and
Seller has not sold, leased, pledged or encumbered any of the assets reflected
on the Seller Financials or any of the Assets. The Seller Financials have been
prepared in good faith and consistent with each other and the manner of
preparation of the 2/28/97 Balance Sheet, as applicable. The Seller Financials
present fairly in all material respects the financial
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condition and operating results of Seller as of the dates and during the
periods indicated therein, subject to normal year-end adjustments, which will
not be material.
2.18 Representations Complete. There is no fact, circumstance or
condition of any kind or nature whatsoever known to the Sellers which
reasonably could be expected to have a Material Adverse Effect which has not
been set forth in this Agreement (including the Exhibits hereto).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND OWNERS
Seller and each of the Owners (each an "Investor") represents and
warrants to Buyer as follows:
3.1 Experience. Investor is able to assess the technology,
markets, management and strategy of Buyer and to fend for itself in
transactions such as the one contemplated by this Agreement, has such knowledge
and experience in financial and business matters that such Investor is capable
of evaluating the merits and risks inherent in holding stock of Buyer, and has
the ability to bear the economic risks of the investment.
3.2 Investment. Such Investor accepts the shares of Stock whether
received pursuant to the Common Stock Payment or upon a distribution in
connection with the dissolution of Seller or otherwise, as investment for such
Investor's own account and not with the view to, or for resale in connection
with, any distribution thereof. Such Investor understands that the Stock has
not been and no assurance can be given that the Stock will be registered under
the Securities Act of 1933, as amended (the "Securities Act") by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
as expressed herein. Such Investor further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to any third person with respect to any of the
Stock.
3.3 Rule 144. Such Investor acknowledges that the Stock must be
held indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Such Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions. Such Investor covenants that, in the
absence of an effective registration statement covering the Stock, such
Investor will sell, transfer, or otherwise dispose of the Stock only in a
manner consistent with such Investor's representations and covenants set forth
herein. In connection therewith, such Investor acknowledges that Buyer will
make a notation on its stock books regarding the restrictions on transfers set
forth in this Article and will transfer securities on the books of Buyer only
to the extent not inconsistent therewith.
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3.4 No Public Market. Such Investor understands that no public
market now exists for the Stock, and that no public market may ever exist for
such securities.
3.5 Access to Data. Such Investor has received and reviewed
information about Buyer and has had an opportunity to review and discuss
Buyer's business, management and financial affairs with its management. Such
Investor understands that such discussions, as well as any written information
issued by Buyer, were intended to describe the aspects of Buyer's business and
prospects which the Buyer believes to be material, but were not necessarily a
thorough or exhaustive description.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sellers as follows:
4.1 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. Buyer is duly qualified to do business
and is in good standing in each jurisdiction in which the failure to be so
qualified would have a material adverse effect on the ability of Buyer to
consummate the transactions contemplated hereby.
4.2 Authority; Consents. Buyer has all requisite corporate power
and authority to enter into this Agreement and the Exhibits and to consummate
the transactions contemplated hereby and thereby. The execution and delivery
of this Agreement and the Exhibits and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement and the Exhibits have
been duly executed and delivered by Buyer and constitutes the valid and binding
obligations of Buyer, enforceable in accordance with their terms except as such
enforceability may be limited by bankruptcy or similar laws and general
principles of equity. The execution and delivery of this Agreement and the
Exhibits and the by Buyer does not, and, as of the Closing, the consummation of
the transactions contemplated hereby and thereby will not, Conflict with (i)
any provision of the Certificate of Incorporation or Bylaws of Buyer or (ii)
any agreement or instrument, permit, judgment, statute, law, rule or regulation
applicable to Buyer. No consent, waiver, approval, or registration,
declaration or filing with, any Governmental Entity or any third party is
required by or with respect to Buyer in connection with the execution and
delivery of this Agreement or the Exhibits or the consummation of the
transactions contemplated hereby or thereby.
4.3 Cash Consideration. Buyer currently has available, and at the
Closing Date of the Acquisition will continue to have available, sufficient
cash to enable it to perform its obligations under this Agreement or the
Exhibits.
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4.4 Common Stock Offered. The issuance and delivery of the shares
of Stock representing the Common Stock Payment for the Assets have been duly
and validly authorized by all corporate action on the part of Buyer. Such
shares when issued in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable.
ARTICLE V
RESTRICTIONS ON CONSIDERATION
5.1 Holdback.
(a) Unreleased Shares. Sellers agree that the Unreleased
Shares held by the Escrow Agent pursuant to the Escrow Agreement may be used to
satisfy any losses resulting from breaches of the representations, warranties
and covenants of any of the Sellers contained herein and in the Escrow
Agreement, Confirmation Agreements, Registration Rights Agreements, and closing
certificates delivered by Sellers at Closing (the "Holdback"). The Holdback
shall take effect on the Closing Date and shall operate through the date of the
termination of the Escrow Agreement pursuant to the terms of this Section. The
Sellers' obligations to compensate Buyer for any losses resulting from breaches
of representations, warranties and covenants of any of the Sellers contained
herein, in the Escrow Agreement or in any other Exhibit to this Agreement shall
be effective only when the aggregate amount of such losses exceeds $50,000,
provided, that upon reaching such threshold, Buyer shall be entitled to recover
for all such losses including the first $50,000 of such losses.
(b) Released Shares. Escrow Shares released from escrow
shall remain subject to all other restrictions imposed by Section 3.
5.2 Restriction on Competition.
(a) Restricted Activities for Dial and Brosius. For a
period of three (3) years beginning on the Closing Date, neither John L. Dial,
II nor Mark G. Brosius shall:
(i) engage in, including as an employee,
consultant or otherwise, or own any interest (except as a passive investor of
less than five percent (5%) of total debt and equity of a publicly traded
company) in, any business or other activity that would compete with Buyer's; or
(ii) divert or attempt to divert any existing or
prospective business or customers of Buyer (including any affiliates of Buyer)
to any other person or entity, by direct or indirect inducement or otherwise,
or do or perform, directly or indirectly, any other act injurious or
prejudicial to the goodwill associated with Buyer or its affiliates; or
(iii) solicit any person for employment who is at
that time already employed by Buyer or any of its affiliates, or otherwise
directly or indirectly induce or seek to induce such person to leave his or her
employment.
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(b) Restricted Activities for Miller and Glass. For a
period of three (3) years beginning on the Closing Date, neither Donald L.
Miller nor Christopher E. Glass shall:
(i) solicit or participate in or assist in any
way in the solicitation of any customer of the Company to cease or decrease
doing business with Buyer or do business with any competitor of Buyer, except
that such Owner may utilize his general expertise in the industry, use any
properly licensed copy of software created by the Buyer, and call on entities
in the process industries to offer his services so long as such offer or
services do not use or disclose confidential information of the Company,
including but not limited to pricing and operational information.
(ii) solicit any person for employment who is at
that time already employed by Buyer or any of its affiliates, or otherwise
directly or indirectly induce or seek to induce such person to leave his or her
employment.
(c) Scope of Restriction.
(i) This Section constitutes a series of separate
covenants for each county, state (including the District of Columbia) and
country in which Buyer or an affiliate of Buyer transacts business.
(ii) In the event that any other provision of this
Section or the application of any such provision shall be held to be prohibited
or unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this covenant to refrain from
competition shall remain in full force and effect, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. The parties shall use
their best efforts to replace the provision that is contrary to law with a
legal one approximating to the extent possible the original intent of the
parties.
(d) Ancillary Agreement. Owners acknowledge that their
agreements in this Section 5.2 are ancillary to an otherwise enforceable
agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Protection of Assets by Seller. During the period from the
date of this Agreement and continuing through the earlier of the termination of
this Agreement or the Closing Date, Seller agrees not to take any actions which
would encumber the Assets, impair its Intellectual Property rights with respect
to the Assets, take any action which would interfere with Buyer's ability to
operate the Business or take any action reasonably likely to decrease the value
of the Business or negatively affect Seller's ability to perform its
obligations hereunder.
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6.2 Access to Information. Seller shall afford Buyer and its
accountants, counsel and other representatives reasonable access at Seller's
principal place of business during normal business hours during the period
prior to the Closing Date to (a) all of Seller's properties, books, contracts,
commitments and records relating to the Assets and the Business and (b) all
other information concerning the Assets and the Business, and related
properties and personnel (subject to restrictions imposed by applicable law) of
Seller as Buyer may reasonably request. Seller agrees to maintain and retain
any and all information regarding the Business and Assets on or prior to the
Closing Date which are reasonably necessary for Buyer to calculate the
availability to it of tax credits under the Internal Revenue Code of 1986, as
amended. No information or knowledge obtained in any investigation pursuant to
this Section 6.2 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties
to consummate the Acquisition.
6.3 Confidentiality. Each of the parties hereto hereby agrees to
keep such information or knowledge obtained pursuant to the negotiation and
execution of this Agreement and the Exhibits , or the effectuation of the
transactions contemplated hereby and thereby, confidential; provided, however,
that the foregoing shall not apply to information or knowledge which (a) a
party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is or becomes generally known to the
public and did not become so known through any violation of law or this
Agreement by the non-disclosing party, (c) is later lawfully acquired by such
party from other sources, (d) is required to be disclosed by order of court or
government agency after seeking any reasonably available protection against
general disclosure or (e) which is disclosed in the course of any litigation
between any of the parties hereto; it being understood that the parties may
disclose relevant information and knowledge to their respective employees and
agents on a need to know basis, provided that the parties cause such employees
and agents to treat such information and knowledge confidentially.
6.4 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 incurred by a party in connection
with the negotiation and effectuation of the terms and conditions of this
Agreement and the Exhibits and the transactions contemplated hereby and
thereby, shall be the obligation of the respective party incurring such fees
and expenses.
6.5 Public Disclosure. Unless otherwise required by law or any
applicable rule of a stock exchange or quotation system upon which a party's
securities are listed, prior to the Closing Date, no disclosure (whether or not
in response to an inquiry) of the subject matter of this Agreement shall be
made by any party hereto unless approved by Buyer and Seller prior to release,
provided that such approval shall not be unreasonably withheld, subject to
Buyer's and Seller's obligation to comply with applicable securities laws.
6.6 Best Efforts. Subject to the terms and conditions provided in
this Agreement and to the fiduciary duties of the board of directors of Seller
under applicable law as advised by outside counsel, each of the parties hereto
shall use its commercially reasonable best efforts to take promptly,
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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 and to effect all necessary
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 and the Exhibits for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement and
the Exhibits.
6.7 Notification of Certain Matters. Seller shall give prompt
notice to Buyer, and Buyer shall give prompt notice to Seller, 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 Sellers or
Buyer, respectively, contained in this Agreement or the Exhibits to be untrue
or inaccurate at or prior to the Closing Date and (ii) any failure of Seller 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 6.8 shall not limit or
otherwise affect any remedies available to the party receiving such notice.
6.8 Tax Returns. Seller shall be responsible for and pay when due
(i) all of Seller's Taxes attributable to or levied or imposed upon the Assets
relating or pertaining to the period (or that portion of any period) ending on
or prior to the Closing Date and (ii) all taxes attributable to, levied or
imposed upon, or incurred in connection with Seller's business operations on or
prior to the Closing Date. Seller shall continue to timely file within the
time period for filing, or any extension granted with respect thereto, all of
Seller's Tax Returns required to be filed in connection with the Assets and any
portion of any such Tax Returns connected therewith shall be true and correct
and completed in accordance with applicable laws.
6.9 Escrow Agreement. Each of the Owners shall enter into an
Escrow Agreement with the Escrow Agent, Buyer and Seller to become effective
upon the Closing in substantially the form attached hereto as Exhibit D.
6.10 Employment Agreements. Buyer and each of the Owners, except
Mark G. Brosius, shall each enter into an employment agreement to become
effective upon the Closing in the form of Exhibits G1-G3, and Buyer and Mark G.
Brosius shall enter into a consulting agreement to become effective upon the
Closing in substantially the form attached as Exhibit G4.
6.11 Post-Closing Employment of the New Employees. Seller shall
terminate each employee of Seller on and as of the Closing Date, effective as
of close of business on the Closing Date. Buyer will hire on the Closing Date,
effective as of the close of business on the Closing Date, on an "at will"
basis and subject to Buyer's terms, conditions and policies of employment, if
any, the employees listed on Exhibit B (the "New Employees") who are employed
by Seller and are terminated by Seller on the Closing Date pursuant to the
foregoing sentence. Nothing contained in this Section is intended or shall be
deemed to (a) require Buyer to employ such persons for any fixed or
pre-determined time after the Closing, or (b) confer upon any employee of
Seller, past, present, or future,
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any rights of employment of any nature, it being understood and agreed that the
provisions of this Section are intended to set forth an agreement among Buyer
and Seller, and are not intended to benefit any persons not party to this
Agreement, including such employees. Buyer and Seller hereby agree to adopt
the alternate procedure of Revenue Procedure 96-60 for tax purposes of employer
payroll withholding. Seller agrees to provide Buyer with all necessary
information and documentation to comply with such Revenue Procedure. The
Owners and the New Employees who become employees of Buyer within 10 days of
the Closing shall be given service credit for their respective periods of
employment with Seller under Buyer's benefit plans, except as prohibited by
applicable federal and state laws and regulations.
6.12 Invention Assignment and Confirmation Agreements. The Owners
shall each enter into a Confidential Information and Invention Assignment
Agreement and a Confirmation Agreement, in each case effective upon the
Closing, on substantially the terms set forth in Exhibit H and Exhibit I,
respectively.
6.13 Registration Rights Agreement. Buyer, Seller and each of the
Owners shall enter into a Registration Rights Agreement effective upon the
Closing in substantially the form attached hereto as Exhibit K.
6.14 Operations Prior to the Closing. Seller shall operate and
carry on its business only in the ordinary course and substantially as
presently operated. Consistent with the foregoing, Seller shall keep and
maintain the Assets in good operating condition and repair and shall use its
best efforts consistent with good business practice to maintain the business
organization of Seller intact and to preserve the goodwill of the suppliers,
contractors, licensors, employees, customers, distributors and others having
business relations with Seller.
6.15 Name of Seller. Sellers shall use their best efforts to cause
the name of Seller to change to SoftG, Inc. within fifteen (15) days following
the Closing.
6.16 Termination of Marketing Agreement. The Marketing Agreement
dated October 20, 1995 between Buyer and Seller (the "Marketing Agreement") is
terminated automatically upon the Closing effective as of January 1, 1997.
6.17 Tax Records. Seller shall retain ownership of its federal
income Tax records and its Texas franchise Tax records; provided, however, that
Seller shall deliver copies of such records to Buyer at the Closing and shall
allow Buyer access to and use of such records at any time reasonably requested
by Buyer. Seller shall preserve and maintain such records in order for at
least seven years following the Closing.
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ARTICLE VII
CONDITIONS TO THE ACQUISITION
7.1 Conditions to Obligations of Each Party to Effect the
Acquisition. The respective obligations of each party to this Agreement to
effect the Acquisition shall be subject to the satisfaction at or prior to the
Closing Date of the following conditions:
(a) Corporate Approvals. This Agreement, including the
Exhibits and Schedules hereto, and the Acquisition shall have been approved and
adopted to the extent required by law by the Boards of Directors and equity
owners of Seller and Buyer.
(b) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Acquisition shall be in effect,
nor shall any proceeding brought by an administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, seeking
any of the foregoing be pending; nor shall there be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Acquisition, which makes the consummation of the Acquisition
illegal.
7.2 Additional Conditions to Obligations of Sellers. The
obligations of Sellers to consummate and effect this Agreement and the Exhibits
and the transactions contemplated hereby and thereby shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Seller:
(a) Representations, Warranties and Covenants. The
representations and warranties of Buyer in this Agreement shall be true and
correct on and as of the Closing Date as though such representations and
warranties were made on and as of such time and Buyer shall have performed and
complied with all covenants, obligations and conditions of this Agreement and
the Exhibits required to be performed and complied with by it as of the Closing
Date.
(b) Certificate of Buyer. Seller shall have been
provided with a certificate duly executed on behalf of Buyer to the effect
that, as of the Closing Date:
(i) all representations and warranties made by
Buyer in this Agreement are true and complete; and
(ii) all covenants, obligations and conditions of
this Agreement to be performed by Buyer on or before such date have been so
performed.
(c) Claims. There shall not have occurred any claims
against Buyer (whether or not asserted in litigation) which would reasonably be
expected to materially and adversely affect the consummation of the
transactions contemplated hereby or the Stock.
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(d) No Material Adverse Changes. There shall not have
occurred any material adverse change in the financial condition of Buyer and
its subsidiaries taken as a whole.
7.3 Additional Conditions to the Obligations of Buyer. The
obligations of Buyer to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by Buyer:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Sellers in this Agreement shall be true
and correct on and as of the Closing Date as though such representations and
warranties were made on and as of such time and the Sellers shall have
performed and complied with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by them as of the Closing
Date.
(b) Certificate of Sellers. Buyer shall have been
provided with a certificate executed by and on behalf of Seller by its Chief
Executive Officer to the effect that, as of the Closing Date:
(i) all representations and warranties made by
the Sellers in this Agreement are true and complete; and
(ii) all covenants, obligations and conditions of
this Agreement to be performed by Sellers on or before such date have been so
performed.
(c) Claims. There shall not have occurred any claims
against the Seller (whether or not asserted in litigation) which would
reasonably be expected to materially and adversely affect the consummation of
the transactions contemplated hereby, the Assets or the Business.
(d) No Injunctions or Restraints on Conduct of Business.
No temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal or
regulatory restraint or provision challenging Buyer's proposed acquisition of
the Assets, or limiting or restricting Buyer's conduct or operation of any
business related to the Assets (or its own business) following the Acquisition
shall be in effect, nor shall any proceeding brought by an administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, seeking any of the foregoing be pending.
(e) No Material Adverse Changes. There shall not have
occurred any Material Adverse Effect in the Assets or the Business.
(f) Third Party Rights. No third party shall have any
right of any nature whatsoever (including, without limitation, any right to
receive royalty payments) in respect of any of the Assets, other than as
specifically set forth in Exhibit F.
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(g) Escrow Agent. The Escrow Agent, Buyer, Seller and
each of the Owners shall have entered into an Escrow Agreement in substantially
the form attached hereto as Exhibit D, which shall be in full force and effect.
(h) Employment Agreements. Buyer and each of the Owners,
except Mark G. Brosius shall have entered into the employment agreement in
substantially the form attached hereto as Exhibits G1-G3, and Buyer and Mark G.
Brosius shall have entered into the Consulting Agreement in substantially the
form attached as Exhibit G4, all of which shall be in full force and effect.
(i) Invention and Assignment Agreements; Confirmation
Agreements.
(i) Owners. Buyer and the Owners shall have each
entered into a Confidential Information and Invention Assignment Agreement and
a Confirmation Agreement on substantially the terms set forth in Exhibit H and
Exhibit I, respectively, which shall be in full force and effect.
(ii) New Employees. Buyer and each of the New
Employees and listed on Exhibit B shall each have entered into an Employment,
Confidential Information and Invention Assignment Agreement and a Confirmation
Agreement on substantially the terms set forth in Exhibit J and Exhibit I,
respectively, which shall be in full force and effect.
(j) Registration Rights Agreement. Buyer, Seller and
each of the Owners shall have entered into a Registration Rights Agreement in
substantially the form attached hereto as Exhibit K, which shall be in full
force and effect.
(k) Fairness Opinion. Buyer shall have received a
fairness opinion regarding the Acquisition reasonably acceptable to Buyer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided below, this Agreement may be
terminated and the Acquisition abandoned at any time prior to the Closing Date:
(a) by mutual consent of Seller and Buyer;
(b) by Buyer or Seller if: (i) the Closing has not
occurred by May 31, 1997; (ii) there shall be a final nonappealable order of a
federal or state court in effect preventing consummation of the Acquisition; or
(iii) there shall be any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Acquisition by any
Governmental Entity that would make consummation of the Acquisition illegal;
and
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(c) by Buyer if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Acquisition by any Governmental Entity, which would: (i)
prohibit Buyer's ownership of the Assets or operation of all or a portion of
the Business or (ii) compel Buyer to dispose of or hold separate all or a
portion of the Assets, the Business or other businesses or assets of Buyer as a
result of the Acquisition.
8.2 Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of Buyer or Seller, or
their respective officers, directors, shareholders or equity owners, provided
that each party shall remain liable for any breaches of this Agreement prior to
its termination; and provided further that, the provisions of Sections 6.3, 6.4
and Article IX of this Agreement shall remain in full force and effect and
survive any termination of this Agreement.
8.3 Amendment. This Agreement may be amended by the parties
hereto at any time by execution of an instrument in writing signed on behalf of
the Buyer and the Seller.
8.4 Extension; Waiver. At any time prior to the Closing Date,
Buyer on the one hand, and Seller, on the other, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations of
the other party hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Survival of Representations and Warranties. The
representations and warranties of Seller set forth in this Agreement (as
modified by Exhibit F) or in any instrument delivered pursuant to this
Agreement shall survive the Closing and continue as follows: representations
and warranties with respect to Taxes and Environmental Laws shall survive until
the expiration of the applicable statute of limitations, whereas the balance of
the representations, warranties and covenants shall survive until 5:00 p.m.
Pacific Standard Time on the third annual anniversary of the Closing Date but
shall not terminate as to any potential claim asserted in good faith prior to
such date. The representations and warranties of Buyer in this Agreement or in
any instrument delivered pursuant to this Agreement shall not survive the
Closing.
9.2 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 telecopy (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:
Simulation Sciences Inc.
601 Valencia Avenue, Suite 100
Brea, California 92823
Attention: Charles R. Harris
Telephone No.: (714) 579-0412
Telecopy No.: (714) 579-0951
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Mark Bonham, Esq.
Telephone No. (415) 493-9300
Telecopy No.: (415) 493-6811
(b) if to Sellers, to:
Visual Solutions Inc.
John L. Dial, II
730 North Post Oak Road, Suite 400
Houston, Texas 77024
Telephone No: (713) 681-4444
Telecopy No.: (713) 681-4197
with a copy to:
Winstead Sechrest & Minick P.C.
910 Travis Street, Suite 1700
Houston, Texas 77002
Attention: David M. Washburn, Esq.
Telephone No. (713) 650-2748
Telecopy No.: (713) 951-3800
9.3 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. References to "this Agreement" or "the Agreement" shall
mean the Agreement including all Exhibits unless otherwise provided herein. 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.
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9.4 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.
9.5 Entire Agreement. This Agreement and the Exhibits hereto,
each of which is hereby incorporated into this Agreement and made a part
hereof: (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, unless expressly provided otherwise; and (c)
shall not be assigned by operation of law (except in connection with a change
in the jurisdiction of incorporation of the Buyer) or otherwise except as
otherwise specifically provided.
9.6 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 (including, if applicable, one that limits the
scope or duration of the covenants contained herein) that will achieve, to the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
9.7 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. 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.
9.8 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.
9.9 Rules of Construction. The parties hereto agree that they
have been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
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IN WITNESS WHEREOF, Buyer and each of the Sellers have caused this
Agreement to be signed by themselves or their duly authorized respective
officers, all as of the date first written above.
"BUYER"
SIMULATION SCIENCES INC.
By: /s/ Charles R. Harris
----------------------------------
Name: Charles R. Harris
--------------------------------
Title: Chief Executive Officer
-------------------------------
"SELLER"
VISUAL SOLUTIONS, INC.
By: /s/ John L. Dial, II
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Name: John L. Dial, II
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Title: President
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"OWNERS"
/s/ John L. Dial, II
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Print name: John L. Dial, II
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Address:
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/s/ Mark G. Brosius
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Print name: Mark G. Brosius
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Address:
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[SIGNATURE PAGE TO SIMULATION SCIENCES ASSET PURCHASE AGREEMENT]
<PAGE> 32
"OWNERS" (Continued)
/s/ Donald L. Miller
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Print name: Donald L. Miller
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Address:
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/s/Christopher E. Glass
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Print name: Christopher E. Glass
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Address:
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<PAGE> 33
Omitted Exhibits to Exhibit 2.1
Pursuant to Item 601(b)(2) of Regulation S-K, the Registrant is omitting the
exhibits listed below to Exhibit 2.1 as such exhibits constitute schedules
which do not contain information which is material to an investment decision.
The Registrant hereby agrees to furnish such exhibits upon the request of the
Securities and Exchange Commission.
Exhibits
B List of Visual Solutions, Inc. employees other than the Owners
C List of Visual Solutions, Inc. assets and obligations being
acquired or assumed by Registrant, list of certain Visual
Solutions, Inc. obligations expressly not being assumed by
Registrant and list of permitted liens on the Visual
Solutions, Inc. assets being acquired.
E Visual Solutions, Inc. Balance Sheet as of February 28, 1997
F Schedule of Exceptions which includes list of contracts which
require consent of third party before Visual Solutions, Inc.
can assign agreement to Registrant; list of Visual Solutions,
Inc. intellectual property and related agreements; and list of
Visual Solutions, Inc employee benefit plans and programs.
<PAGE> 34
EXHIBIT D
FORM OF ESCROW AGREEMENT
<PAGE> 35
ESCROW AGREEMENT
This Escrow Agreement is made as of this _____ day of March 1997, by
and among Harris Trust Company of California ("Escrow Agent"), Simulation
Sciences Inc., a Delaware corporation ("Simulation Sciences"), and John L.
Dial, II, as agent ("Representative") of the Holders (as defined below).
RECITALS
A. Simulation Sciences, Visual Solutions, Inc., a Texas
corporation ("Visual Solutions") and the current shareholders of Visual
Solutions (the "Shareholders") have entered into an Asset Purchase Agreement
dated as of March 24, 1997 (the "Asset Purchase Agreement"), providing for the
acquisition of all or substantially all of the assets of Visual Solutions by
Simulation Sciences (the "Acquisition").
B. Terms not otherwise defined herein shall have the respective
meanings set forth in the Asset Purchase Agreement.
C. This Agreement and the escrow arrangements herein are part of
the terms and conditions of the Asset Purchase Agreement and have been entered
into for the purposes of carrying the Acquisition into effect.
D. Pursuant to Section 1.2 (a) (ii) (c) of the Asset Purchase
Agreement, Simulation Sciences is delivering _____ shares of Common Stock of
Simulation Sciences to be held by the Escrow Agent (the "Escrow Shares")
according to the terms of this Agreement and the Asset Purchase Agreement.
E. The parties anticipate that Visual Solutions shall distribute
to the Shareholders certain assets of Visual Solutions, including its rights to
the Escrow Shares. Accordingly, the Shareholders have joined this Agreement in
anticipation of becoming Holders upon such a distribution. References to a
"Holder" or the "Holders" shall mean the record holder or holders of the Escrow
Shares, provided such holder or holders shall have satisfied Section 4 hereof.
F. Visual Solutions shall be the initial Holder.
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants contained herein and in the Asset Purchase Agreement, and intending
to be legally bound, hereby agree as follows:
1. Appointment of Escrow Agent. The Escrow Agent is hereby
appointed by the other parties hereto act as escrow agent hereunder. The
Escrow Agent hereby accepts such appointment
<PAGE> 36
and agrees to hold and administer the Escrow Shares and any Proceeds (as such
term is defined in Section 3) in accordance with the terms and subject to the
conditions set forth herein.
2. Purpose. The Escrow Shares shall be held by the Escrow Agent
to satisfy any losses resulting from breaches of the representations,
warranties and covenants of the Sellers under Section 5.1 of the Asset Purchase
Agreement or to satisfy any Purchase Price Adjustment in favor of Simulation
Sciences as provided for in Section 16(e) (ii) of the Asset Purchase Agreement
and, subject to such losses, to ensure the availability of such shares upon
their release, if any, to the Holders pursuant to the terms and conditions of
this Agreement.
3. Establishment of Escrow. On the Closing Date, Simulation
Sciences and Visual Solutions shall jointly give written notice of such event
to Escrow Agent. Promptly but in no event later than five business days after
the Closing Date, Simulation Sciences shall then deliver to Escrow Agent one or
more stock certificates representing the Escrow Shares, issued in the name of
Visual Solutions. Escrow Agent agrees to accept delivery of the Escrow Shares
and any cash dividends, Common Stock dividends, dividends payable in securities
other than Simulation Sciences' Common Stock or other payments or distributions
of any kind made in respect of the Escrow Shares (the "Proceeds") and to hold
them in escrow subject to the terms and conditions of this Agreement.
4. Interests in Escrow Shares; Transfer. The Escrow Shares and
any Proceeds shall be received by Escrow Agent and recorded in an escrow
account. No Escrow Shares or Proceeds may be pledged, sold, assigned or
transferred by any Holder, except as expressly provided herein and unless such
pledgee, buyer, assignee or transferee acknowledges the existence of this
Escrow Agreement, agrees in writing to be bound by it as a Holder and appoints
the Representative to act as the Representative hereunder on behalf of such
pledgee, buyer, assignee or transferee.
5. Voting and Rights of Ownership. Each Holder will have voting
rights with respect to the Escrow Shares (and any Proceeds) attributable to
such Holder's interest in the Escrow Shares (and Proceeds). So long as such
Escrow Shares and any Proceeds are held in escrow, Simulation Sciences and
Escrow Agent will take all reasonable steps necessary to allow the exercise of
such rights. Additionally, for income tax reporting purposes, any income
earned on the Escrow Shares and the Proceeds (including earnings on any such
dividends) shall be considered earned by the Holders.
6. Post-Closing Adjustment.
(a) Upon receipt by the Escrow Agent from Simulation
Sciences of a "Price Adjustment Notice" as defined in the Asset Purchase
Agreement, Escrow Agent shall deliver to Simulation Sciences the amount of
Escrow Shares or Proceeds, if applicable, as stated in the "Price Adjustment
Notice," which shall equal the price to be paid by Visual Solutions to
Simulation Sciences pursuant to Section 1.6 (e) (ii) of the Asset Purchase
Agreement, and if such payment is made with any Escrow Shares, the per share
price of the Escrow shares shall be
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determined pursuant to the calculation set forth in Section 1.2(a)(ii)(A) of
the Asset Purchase Agreement for purposes of calculating the Common Stock
Payment under that agreement. The Escrow Agent shall have no duty or
obligation to calculate the amount of Escrow Shares or Proceeds to be paid, nor
shall it have any duty or obligation to verify the amount provided in the
"Price Adjustment Notice," or any other notice provided hereunder.
7. Claims.
(a) Upon receipt by the Escrow Agent and the
Representative of an Officer's Certificate, as defined in the Asset Purchase
Agreement (a "Claim Notice") from Simulation Sciences, that, pursuant to
Section 5.1 of the Asset Purchase Agreement, Simulation Sciences is asserting a
claim for damages (a "Claim"), which Claim Notice shall specify (i) the nature
and estimated amount of such damages (the "Claimed Amount"), (ii) that
Simulation Sciences' Claim is based on a good faith belief that Simulation
Sciences is entitled to remuneration for damages as provided in the Asset
Purchase Agreement and (iii) that the estimate of damages specified in the
Claim has been calculated in good faith, the Escrow Agent shall retain, set
aside and continue to hold the Escrow Shares and Proceeds, if applicable (or
such lesser portion of the Escrow Shares and Proceeds, if applicable, having a
value equal to 100% of the Claimed Amount using, for purposes of the Escrow
Shares, the per share price of Simulation Sciences' Common Stock as determined
pursuant to the calculation set forth in Section 1.2(a)(ii)(A) of the Asset
Purchase Agreement, as stated in the Claim Notice for purposes of calculating
the Common Stock Payment under that agreement), in escrow hereunder until
resolution of the Claim pursuant to this Agreement, subject to the further
provisions hereof.
(b) Within thirty (30) days after delivery of a Claim
Notice to the Escrow Agent and the Representative, the Representative shall
provide to Simulation Sciences, with a copy to the Escrow Agent, a written
response (a "Response Notice") in which the Representative shall either: (i)
agree that the full Claimed Amount may be released to Simulation Sciences from
the Escrow Shares or Proceeds, if applicable, (ii) agree that part, but not
all, of the Claimed Amount (the "Agreed Amount") may be released to Simulation
Sciences from the Escrow Shares or Proceeds, if applicable, and shall specify
the Agreed Amount, and contest the release to Simulation Sciences of the
balance or (iii) contest the release to Simulation Sciences of any part of the
Claimed Amount from the Escrow Shares or Proceeds, if applicable. The
Representative may contest the release of all or a portion of the Claimed
Amount only based upon a good faith belief that all or such portion of the
Claimed Amount does not constitute damages for which Simulation Sciences is
entitled to remuneration under Article V of the Asset Purchase Agreement. If
no Response Notice is received by the Escrow Agent within such 30-day period,
the Representative shall be deemed to have agreed that all of the Claim Amount
may be released to Simulation Sciences from the Escrow Shares or Proceeds, if
applicable, provided that the failure to deliver a Response Notice shall not be
deemed to be an admission of liability by the Representative.
(c) If the Representative in the Response Notice agrees
(or is deemed to have agreed) that the entire Claimed Amount may be released to
Simulation Sciences from the Escrow
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Shares or Proceeds, if applicable, the Escrow Agent shall within three (3)
business days following the required delivery date for the Response Notice,
transfer, deliver and assign to Simulation Sciences, free and clear of any
interests of the Holders therein, a portion of the Escrow Shares or Proceeds,
if applicable, having a value equal to the Claimed Amount. For purposes of the
Escrow Shares, the per share price shall be determined pursuant to the
calculation set forth in Section 1.2(a)(ii)(A) of the Asset Purchase Agreement
for purposes of calculating the Common Stock Payment under that agreement.
(d) If the Representative in the Response Notice agrees
that part, but not all, of the Claimed Amount may be released to Simulation
Sciences from the Escrow Shares or Proceeds, if applicable, the Escrow Agent
shall within three (3) business days following the required delivery date for
the Response Notice, transfer deliver and assign to Simulation Sciences, free
and clear of any interests of the Shareholders therein, the portion of the
Escrow Shares or Proceeds, if applicable, as specified in the Response Notice
having a value equal to the Agreed Amount (or such lesser amount of Escrow
Shares or Proceeds, if applicable, as is then held in escrow hereunder). For
purposes of the Escrow Shares, the per share price shall be determined pursuant
to the calculation set forth in Section 1.2(a)(ii)(A) of the Asset Purchase
Agreement for purposes of calculating the Common Stock Payment under that
agreement.
(e) If the Representative in the Response Notice contests
the release of all or part of the Claimed Amount (the "Contested Amount"),
Simulation Sciences and the Representative shall first make a good faith effort
to settle the matter themselves. If they do not settle the matter within
thirty (30) days of the delivery of the Representative's Response Notice
contesting the Claimed Amount, either Simulation Sciences or the Representative
shall have the right, by delivery of written notice thereof (the "Arbitration
Notice") to the other party, to submit the matter to binding arbitration in
Orange County, California. All matters so submitted to arbitration shall be
settled by three (except as otherwise provided below) arbitrators in accordance
with the Commercial Arbitration Rules then in effect of the American
Arbitration Association (the "AAA Rules"). The Representative and Simulation
Sciences shall each designate one arbitrator within ten (10) days of the
delivery of the Arbitration Notice. If either the Representative or Simulation
Sciences fails so to timely designated an arbitrator, the matter shall be
resolved by the one arbitrator timely designated. The Representative and
Simulation Sciences shall cause the designated arbitrator to mutually agree
upon and to designate a third arbitrator; provided, however, that failing such
agreement within thirty (30) days of delivery of the Arbitration Notice, the
third arbitrator shall be appointed in accordance with the AAA Rules. The
Holders and Simulation Sciences shall be responsible for the payment of the
fees and expenses of their respectively designated arbitrators and shall bear
equally the fees and expenses of the third arbitrator. The Representative and
Simulation Sciences shall cause the arbitrator to decide the matter to be
arbitrated pursuant hereto within sixty (60) days after the appointment of the
last arbitrator. The arbitrators' decision shall relate solely to whether
Simulation Sciences is entitled to receive the Claimed Amount of the Escrow
Shares or Proceeds, if applicable, pursuant to the applicable terms of the
Asset Purchase Agreement and this Escrow Agreement and, if so, the amount of
such Claimed Amount. The final decision of the majority of the arbitrators
shall be
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<PAGE> 39
furnished to the Representative, Simulation Sciences and the Escrow Agent in
writing and shall constitute a conclusive determination of the matter in
question, binding upon the Representative, the Holders, Simulation Sciences and
the Escrow Agent and shall not be contested by any of them. Such decision may
be used in a court of law only for the purpose of seeking enforcement of the
arbitrators' award. Notwithstanding any provision of this Escrow Agreement or
the Asset Purchase Agreement to the contrary, after receipt of a Response
Notice that the Claimed Amount is contested by the Representative, the Escrow
Agent, pursuant to this Section 7, shall continue to hold an amount of the
Escrow Shares and Proceeds, if applicable, as specified in the Response Notice,
which amount shall equal 100% of the Contested Amount using the per share price
of Simulation Sciences' Common stock as determined pursuant to the calculation
set forth in Section 1.2(a)(ii)(A) of the Asset Purchase Agreement for purposes
of calculating the Common Stock Payment under that agreement (up to the amount
of the Escrow Shares and Proceeds, if applicable, then held in escrow
hereunder), notwithstanding the occurrence of the Final Release Date, until (i)
delivery of a copy of a settlement agreement or joint escrow instructions
executed by Simulation Sciences and the Representative setting forth
instructions to the Escrow Agent as to the release of the Escrow Shares or
Proceeds, if applicable, if any, that shall be made with respect to the
Contested Amount or (ii) delivery of a copy of the final decision of the
majority of the arbitrators setting forth instructions to the Escrow Agent as
to the amount of the Escrow Shares or Proceeds, if applicable, to be released
if any, that shall be made with respect to the Contested Amount. If
applicable, the Escrow Agent shall thereupon release the Escrow Shares and
Proceeds, if applicable, from escrow (to the extent the Escrow Shares or
Proceeds, if applicable, are then held in escrow hereunder) in accordance with
such agreement or instructions. Except as otherwise set forth herein, all
costs and expenses of any proceeding described in this paragraph 7(e) including
any expenses of the arbitrator(s) shall be borne by the losing party in any
such proceeding (with costs and expenses to be assessed and assigned by the
arbitrator or arbitrators in the event of an arbitration in which there is no
losing party). Notwithstanding the foregoing provisions of this Section 7, it
is agreed that if a Contested Amount is less than $250,000, any arbitration
with respect to such Contested Amount shall be conducted by a single arbitrator
(rather than three arbitrators) appointed by mutual agreement of the
Representative and Simulation Sciences or, failing such agreement within thirty
(30) days of delivery of the Arbitration Notice, appointed in accordance with
the AAA Rules. In the event of arbitration by a single arbitrator, the Holders
and Simulation Sciences shall bear equally the fees and expenses of the
arbitrator and reference herein to a majority of the arbitrator shall instead
refer to such single arbitrator. The Escrow Agent shall be under no duty
whatsoever to institute or defend any proceedings which might in its judgment
involve expense or liability unless it shall have been furnished with indemnity
acceptable to it. The Escrow Agent shall have the right to interplead the
parties to any dispute in any court of competent jurisdiction and request that
such court determine the respective rights of the parties with respect to this
Escrow Agreement and, upon doing so, the Escrow Agent shall be release from any
obligations or liability as a consequence of such claims or demands.
8. Release of the Escrow Shares or Proceeds. The Escrow Agent
shall hold the Escrow Shares and Proceeds, if applicable, until authorized to
release any portion of the Escrow
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<PAGE> 40
Shares or Proceeds, if applicable, in accordance with this Section 8 or in
accordance with Sections 6, 7 or 9 of this Agreement.
(a) Release at First Anniversary of Closing Date. On the
terms and subject to the conditions set forth in Sections 6, 7 and 9 of this
Agreement, on the first anniversary of the Closing Date, the Escrow Agent
shall deliver to Holders (or their assigns as permitted under Article III of
the Asset Purchase Agreement and this Agreement) 50% of the Escrow Shares and
Proceeds, if applicable, then held in escrow.
(b) Release at Second Anniversary of Closing Date. On
the terms and subject to the conditions set forth in Sections 6, 7 and 9 of
this Agreement, on the second anniversary of the Closing Date (the "Final
Release Date"), the Escrow Agent shall deliver to Holders (or their assigns as
permitted under Article III of the Asset Purchase Agreement and this Agreement)
the remaining Escrow Shares and Proceeds, if applicable, then held in escrow.
9. Early Release of Escrow Shares. Subject to the provisions of
Section 7 of this Agreement, and notwithstanding the provisions of Section 8,
if the average closing price per share of Simulated Sciences' Common Stock on
the Nasdaq National Market, adjusted for stock splits, dividends and the like
for any ten consecutive trading days after the Closing Date (the "Average
Market Price"), is lower than 70% of the price per share of Simulated Sciences'
Common Stock as determined pursuant to the calculation set forth in Section
1.2(a)(ii)(A) of the Asset Purchase Agreement for purposes of calculating the
Common Stock Payment, then 50% of the Escrow Shares or Proceeds, if applicable,
then held in escrow under the Escrow Agreement shall be released to the Holders
promptly but in any event within one business day after the Escrow Agent's
receipt of (i) written request from the Representative and (ii) Simulation
Sciences' written instructions to the Escrow Agent to release such amount of
Unreleased Shares. If the Average Market Price is lower than 30% of the per
share price of Simulation Sciences' Common Stock determined pursuant to the
calculations set forth in Section 1.2(a)(ii)(A) of the Asset Purchase Agreement
for purposes of calculating the Common Stock Payment, then 80% of the Escrow
Shares and any Proceeds then held in escrow shall be released to the Holders
promptly but in any event within one business day after the Escrow Agent's
receipt of (i) written request from the Representative and (ii) Simulation
Sciences' written instructions to the Escrow Agent to release such amount of
Unreleased Shares. Simulation Sciences must deliver such written instructions
to Escrow Agent the first business day after receipt by Simulation Sciences'
Chief Executive Officer, Chief Financial Officer or Controller of a copy of the
Representative's request if the Representative's calculation of the Average
Market Price therein is correct in all material respects.
10. The Representative.
(a) The Representative is hereby appointed, authorized,
and designated by the Holders to act as the sole and exclusive agent,
attorney-in-fact and representative of the Holders and as such has been
authorized and directed to (i) take any and all actions (including without
limitation executing and delivering any documents, incurring any costs and
expenses for the
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<PAGE> 41
account of the Holders and making any and all determinations) which may be
required or permitted by this Escrow Agreement to be taken by the Holders or
the Representative, (ii) exercise such other rights, power and authority as are
authorized, delegated and granted to the Representative under this Escrow
Agreement in connection with the transactions contemplated hereby and thereby
and (iii) exercise such rights, power and authority as are incidental to the
foregoing. Any such actions taken, exercises of rights, power or authority,
and any decision or determination made by the Representative consistent
therewith shall be absolutely and irrevocably binding on each Holder as if such
Holder personally had taken such action, exercised such rights, power or
authority or made such decision or determination in such Holder's individual
capacity. The Representative hereby acknowledges that he has full power and
authority to act in the premises (including, without limitation, the power and
authority, on behalf of the Holders, to execute and deliver any certificate,
notice or instructions hereunder) and to designate and appoint a substitute or
substitutes to act hereunder with the same power and authority as the
Representative would have if personally acting.
(b) The Representative shall be permitted to retain
counsel, consultants and other advisors and shall promptly notify the Holders
after retaining any person. The Representative shall be entitled to
reimbursement by the Holders of his reasonable out-of-pocket expenses including
the reasonable, documented fees and expenses incurred by the Representative for
payment to, or in connection with, the retention of counsel, consultants or
other advisors incurred in the performance of his duties under this Agreement.
(c) The Representative shall not be liable to the Holders
for the performance of any act or the failure to act under or in connection
with this Escrow Agreement so long as he did so in good faith in what he
reasonably believed to be the scope of his authority and for a purpose which he
reasonably believed to be in the best interests of the Holders.
11. Consent to Jurisdiction. Subject to Section 7 hereof, with
respect to any dispute arising under this Agreement relating to (i) the
delivery, ownership or right of possession of the Escrow Shares or Proceeds or
any portion thereof, (ii) the facts forming the basis of any determination by
the Escrow Agent hereunder, (iii) the duties of the Escrow Agent hereunder or
(iv) any other question arising hereunder, the parties hereto irrevocably
submit to the exclusive jurisdiction of the United States District Court for
the Southern District of California. In any such litigation, each of the
parties hereto (a) waives personal service of any summons and complaint and
agrees that service thereof may be made by hand, by mail or by recognized
overnight delivery service in accordance with the provisions of Section 13
hereof, (b) agrees that it or he will not attempt to deny or defeat the
personal jurisdiction of such court by motion asserting lack of personal
jurisdiction or forum non conveniens or other request for leave from such court
and (c) agrees that it or he will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any
court or forum other than the court specified herein.
12. Limitation of Escrow Agent's Duties and Liability.
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(a) The duties and responsibilities of the Escrow Agent
hereunder shall be determined solely by the express provisions of this
Agreement, and Escrow Agent is not charged with any duties or responsibilities
in connection with any other document or agreement, including, without
limitation, the Asset Purchase Agreement, nor shall any other duties or
responsibilities be implied. The Escrow Agent shall not have any liability
under, nor duty to inquire into, the terms and provisions of any agreement or
instructions, other than as outlined in this Agreement.
(b) The Escrow Agent may rely and shall be protected in
acting or refraining from acting upon any written notice, instruction or
request furnished to it hereunder and believed by it to be genuine and to have
been signed or presented by the proper party or parties. The Escrow Agent
shall be under no duty to inquire into or investigate the validity, accuracy or
content of any such document. The Escrow Agent shall have no duty to solicit
any items that may be due it hereunder.
(c) The Escrow Agent shall not be liable for any action
taken or omitted by it in good faith unless a court of competent jurisdiction
determines that the Escrow Agent's willful misconduct or gross negligence was
the primary cause of any loss to any other party hereto. The Escrow Agent may
consult with counsel of its own choice and shall have full and complete
authorization and protection for any action taken or omitted by it hereunder in
good faith and in accordance with the opinion of such counsel.
(d) Simulation Sciences and the Representative, on behalf
of the Holders, hereby agree, jointly and severally, to indemnify the Escrow
Agent for, and to hold it harmless against, any loss, liability or expense
arising out of, or in connection with, this Agreement and carrying out its
duties hereunder, including the costs and expenses of defending itself against
any claim of liability, except in those cases where the Escrow Agent has been
guilty of gross negligence or willful misconduct. Anything in this Agreement
to the contrary notwithstanding, in no event shall the Escrow Agent be liable
for special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Escrow Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
action. This right of indemnification shall survive the termination of this
Agreement. The costs and expenses of enforcing this right of indemnification
shall also be paid by the parties pursuant to this Section.
(e) Each party hereto other than the Escrow Agent shall
provide the Escrow Agent with its respective tax identification number,
assigned by the Internal Revenue Service.
(f) In the event that the Escrow Agent is uncertain as to
its duties or rights hereunder or receives instructions, claims or demands from
any party hereto that, in its opinion, conflict with any of the provisions of
this Agreement, the Escrow Agent shall be entitled to refrain from taking any
action and its sole obligation shall be to keep safely the Escrow Shares and
any Proceeds in escrow until the Escrow Agent is directed otherwise in a
written instrument signed by each of the other parties hereto or, by a final
order or judgment of (i) an arbitrator pursuant to Section 7(e) hereof or (ii)
a court of competent jurisdiction.
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<PAGE> 43
13. Escrow Agent Expenses. The fees of the Escrow Agent are set
forth in Exhibit B hereto. All fees of the Escrow Agent for establishing and
holding in escrow and paying out the Escrow Shares and any Proceeds shall be
borne equally by Simulation Sciences and Holders.
14. Successor Escrow Agent.
(a) In the event the Escrow Agent becomes unavailable or
unwilling to continue in its appointed capacity hereunder, the Escrow Agent may
resign and be discharged from its duties or obligations hereunder by giving
notice of resignation to each of the parties hereto, specifying a date not less
than sixty (60) days following such notice date when such resignation will take
effect; provided, however, that such resignation shall in no event take effect
before the successor to the Escrow Agent shall have been appointed pursuant to
this Section 12. If a successor shall not have been appointed after such
60-day period, the Escrow Agent may, at the expense of Simulation Sciences and
the Representative, on behalf of the Holders, petition any court of competent
jurisdiction for the appointment of a successor escrow agent. Simulation
Sciences may appoint a successor to the Escrow Agent with the consent of the
Representative which consent shall not reasonably withheld. The Escrow Agent
shall promptly transfer the Escrow Shares and any Proceeds to such designated
successor.
(b) Any corporation into which the Escrow Agent in its
individual capacity may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all of the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Agreement without further act.
15. Notice. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such
notice, instruction or communication shall be sent either (i) by registered
mail, return receipt requested, postage prepaid, (ii) via a reputable
nationwide overnight courier service, (iii) by certified mail, return receipt
requested, postage prepaid, or (iv) by facsimile transmission (provided written
receipt of which is confirmed), in each case to the parties hereto at the
following addresses set forth below or at any such address as may be specified
by like notice by any of the parties.
If to the Escrow Agent, to:
Harris Trust Company of California
601 South Figueroa
Los Angeles, California 90017
Attn: Esther Cervantes
Telephone: (213) 239-0675
Facsimile: (213) 239-0631
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If to Simulation Sciences, to:
Simulation Sciences Inc.
601 Valencia Avenue, Suite 100
Brea, California 92823
Attn: Charles R. Harris
Telephone: (714) 579-0412
Facsimile: (714) 579-0951
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attn: Mark E. Bonham
Telephone: (415) 493-9300
Facsimile: (415) 493-6811
If to the Representative, to:
John L. Dial, II
730 North Post Oak Road, suite 400
Houston, Texas 77024
Telephone No: (713) 681-4444
Telecopy No.: (713) 681-4197
16. Governing Law. The construction and performance of this
Agreement shall be governed by and construed in accordance with the laws of the
State of California (without regard to the choice of law provisions thereof).
17. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of each party hereto, and its successors, assigns and
transferees. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto without
the prior written consent of the other parties; provided however, that pursuant
to the dissolution of Visual Solutions in accordance with applicable law,
Visual Solutions may assign its rights under this Escrow Agreement to the
Shareholders listed on Exhibit A where each such Shareholder agrees to be bound
by the provisions of this Agreement.
18. Amendment. This Agreement may be amended by the written
agreement of each of the parties hereto; provided, however, that in the event
the Escrow Agent does not agree to an
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amendment otherwise agreed by each of the other parties hereto, the Escrow
Agent shall resign and a successor escrow agent shall be appointed in
accordance with Section 14 hereof.
19. Termination. This Escrow Agreement shall terminate upon the
release by the Escrow Agent of all of the Escrow Shares in accordance with this
Escrow Agreement; provided that the provisions of Sections 12(c) and 12(d)
shall survive such termination, or the resignation or removal of the Escrow
Agent pursuant to Section 14 hereof.
20. Representations. Each of the parties represents and warrants
that he or it has all requisite power and authority (corporate or otherwise) to
execute and deliver this Escrow Agreement, to perform his or its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery by such party of this Escrow Agreement, the performance
by such party of its obligations hereunder and the consummation by such party
of the transactions contemplated hereby have been duly and validly authorized
by all necessary actions (corporate or otherwise) on the part of such party.
This Escrow Agreement has been duly and validly executed and delivered by such
party and constitutes a valid and binding obligation of such party, enforceable
against such party in accordance with its terms except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights in general and by general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
22. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings, written
or oral, between the parties hereto with respect to the subject matter hereof.
23. Waivers. No waiver by any party hereto of any condition or of
any breach of any provision of this Agreement shall be effective unless in
writing and signed by a duly authorized representative of the party granting
such waiver. No waiver by any party of any such condition or breach in any one
instance shall be deemed to be a further or continuing waiver of such condition
or breach or a waiver of any other condition or breach of any other provision
contained herein.
-11-
<PAGE> 46
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
HARRIS TRUST COMPANY OF CALIFORNIA
as ESCROW AGENT
By
--------------------------------------
Name:
Title:
SIMULATION SCIENCES INC.
By
--------------------------------------
Name:
Title:
REPRESENTATIVE
By
--------------------------------------
Name:
VISUAL SOLUTIONS, INC.
By
--------------------------------------
Name:
Title:
SHAREHOLDER
By
--------------------------------------
Name:
Address:
-----------------------------
-----------------------------
[SIGNATURE PAGE TO SIMULATION SCIENCES ESCROW AGREEMENT]
-12-
<PAGE> 47
EXHIBIT A
ESCROW AGENT FEES
SUBMITTED TO:
SIMULATION SCIENCES, INC.
BY:
HARRIS TRUST COMPANY OF CALIFORNIA
Escrow Agent Services
<TABLE>
<S> <C> <C>
- Set-up of Escrow Account . . . . . . . . . . . . . . . $1,500.00
- Annual Administration Fee . . . . . . . . . . . . . . . $3,500.00 per annum*
- Up to 5 distributions . . . . . . . . . . . . . . . . . Included
- Over 5 distributions . . . . . . . . . . . . . . . . . $ 25.00 per check/wire
- Out-of-pocket expenses will be billed at cost.
There are no such expenses associated with the
set-up of the Escrow Account.
</TABLE>
* Prorated on an annual basis. For example, if all of the Escrow Shares are
released from escrow on the second anniversary of the Escrow Agreement,
the annual fee for the third year shall be zero, and if all of the Escrow
Shares are released from escrow on the tenth day of the third year, the
annual fee for the third year shall be $95.89 (10 x 1/365 x $3,500).
-13-
<PAGE> 48
EXHIBITS G1-G3
FORM OF EMPLOYMENT AGREEMENT
<PAGE> 49
SIMULATION SCIENCES INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT, by and between _________________ (the "Employee") and
Simulation Sciences Inc., a Delaware corporation (the "Company"), shall become
effective as of the closing date (the "Effective Date") of the asset purchase
(the "Asset Purchase") contemplated by that certain Asset Purchase Agreement
dated as of _______, 1997, among the Company, Visual Solutions Inc. ("VSI"),
the Employee and others (the "Asset Purchase Agreement").
In consideration of the mutual covenants herein contained, and in
consideration of the employment of Employee by the Company, the parties agree
as follows:
Duties and Scope of Employment
Position. The Company agrees to employ the Employee under the
terms of this Agreement in the position of Director of
Research and Development.
Obligations. During the term of this Agreement, the Employee
shall devote Employee's full business efforts and time to the
Company. The foregoing, however, shall not preclude the
Employee from engaging in appropriate
<PAGE> 50
civic, charitable or religious activities or from devoting a
reasonable amount of time to private investments, as long as
such activities and service do not interfere or conflict with
Employee's responsibilities to the Company and do not
represent business conflicts with the Company's business.
Company Policies. Employee shall comply with all of the
Company's rules and policies applicable to the employees of
the Company or to directors of similar title and salary grade
within the Company.
Salary. Beginning on the Effective Date, the Employee shall be paid a
base salary (the "Salary") of $_________ monthly.
3. Bonus. Employee will be included in the Company bonus plan in
accordance with the bonus plan in effect at time of payment.
4. Remuneration on Sales of Products. Employee shall receive
remuneration equal to __% of the Company's then current, published list
price, including maintenance and support fees, for each Product [as
defined in 6(d)] sold while Employee is an employee of the Company;
provided, however, such remuneration right shall terminate upon the
termination of this Agreement. A Product shall be deemed to be
<PAGE> 51
"sold" as the Company recognizes revenue attributable to such Product
under the Company's then current revenue recognition policy.
Any amounts due to Employee under this Section 4 shall be subject to
offset by the Company for any losses, costs, or expenses of the
Company resulting from a breach of a representation, warranty or
covenant in the Asset Purchase Agreement provided however that the
Company shall not be entitled to exercise this remedy until it has
exhausted its remedies, if any, under Section 5.1 of the Asset
Purchase Agreement.
5. Benefits
(a) General. Employee shall be included in all employee
benefit plans, programs or arrangements, including,
without limitation, any plans, programs or
arrangements providing for retirement benefits,
incentive compensation, profit bonuses, disability
benefits, health and life insurance, vacation and
paid holidays, as applicable, which shall be
established by the Company for the benefit of
employees of similar salary and title grade.
Reimbursement of Expenses. The Company shall reimburse
Employee for all out-of-pocket expenses reasonably incurred
and paid by him in the performance of his duties pursuant to
this Agreement, in accordance with Company policies.
<PAGE> 52
6. Definitions. As used herein, the following definitions shall apply:
"Cause" shall mean (i) any act of personal dishonesty taken by
the Employee in connection with his responsibilities as an
employee and intended to result in substantial personal
enrichment of the Employee, (ii) the conviction of a felony,
(iii) a willful act by the Employee which constitutes gross
misconduct and which is injurious to the Company, and (iv)
following delivery to the Employee of a written demand for
performance from the Company which describes the basis for the
Company's belief that the Employee has not substantially
performed his duties, continued violations by the Employee of
the Employee's obligations to the Company which are
demonstrably willful and deliberate on the Employee's part.
(b) "Constructive Termination" shall mean a termination
of employment due to any of the following unless
agreed to by Employee (i) a reduction in Employee's
salary or benefits except in connection with a
decrease to be applied on an equal percentage basis
to all officers of the Company because the Company's
performance has decreased, and excluding the
substitution of substantially equivalent compensation
and benefits; or, (ii) a material diminution of
Employee's responsibilities (e.g. title, primary
duties, resources or assignment of duties
inconsistent with current position
<PAGE> 53
or requiring relocation or excessive travel, (defined
as), requiring Employee to stay overnight more than
40% of Employee's work time as measured over any
period of six (6) consecutive months during the term
of this Agreement). If any of the events set forth
above shall occur, Employee shall give prompt written
notice to the Company and shall have ninety (90) days
from the notice or one hundred and twenty (120) days
from the event, whichever is earlier, to exercise his
rights to terminate for Constructive Termination or
such right shall be deemed waived as to such event,
but not as to any future event.
(c) "Disability" shall mean that the Employee is unable
to perform his Company duties as the result of his
incapacity due to physical or mental illness, and
such inability, at least 26 weeks after its
commencement, is determined to be total and permanent
by a physician selected by the Employee or the
Employee's legal representative and acceptable to the
Company (such agreement as to acceptability not to be
unreasonably withheld). Termination resulting from
Disability may only be effected after at least 30
days' written notice by the Company of its intention
to terminate the Employee's employment. In the event
that the Employee resumes the performance of
substantially all of his duties hereunder before the
termination of his employment becomes effective, the
notice of intent to terminate shall automatically be
deemed to have been revoked.
<PAGE> 54
(d) "Products" shall mean that certain software known as
Component Manager, Equipment Manager, RV Manager,
Report Manager, Simply Visual, Visual Engineering
Toolbox, Visual Flare, Visual Flash, Visual Refinery,
Visual Network, and Visual Flow Suite.
7. Term of Employment.
Basic Rule. The Company agrees to continue Employee's
employment, and Employee agrees to remain in the employ of the
Company, during the term of this Agreement pursuant to the
provisions of this Agreement.
Termination by the Company. The Company may terminate
Employee's employment, with thirty (30) days advance notice in
writing, only in accordance with this Agreement or for Cause
or as a result of Death or Disability.
Termination Without Cause. If the Company terminates
Employee's employment during the term of this
Agreement for any reason whatsoever, including a
Constructive Termination, and other than voluntary
termination of employment by Employee or a
Termination for Cause, the provisions of Section 8(a)
shall apply.
<PAGE> 55
Termination for Cause. If the Company terminates
Employee's employment for Cause during the term of
this Agreement, the provisions of Section 8(b) shall
apply.
Termination on Death or Disability. If the Company
terminates Employee's employment as a result of
Employee's Death or Disability, the provisions of
Section 8(c) shall apply.
Voluntary Termination by the Employee. The Employee may
terminate Employee's employment voluntarily by giving the
Company thirty (30) days advance notice in writing, at which
time the provisions of Section 8(b) shall apply. However, if
the Employee terminates Employee's employment pursuant to this
Section 7(c) as a result of the occurrence of any of the
events set forth in the definition of a Constructive
Termination, the provisions of Section 8(a) shall apply,
provided the Employee has provided written notice to the
Company reasonably specifying the reasons why one of such
events in the definition of a Constructive Termination has
occurred and the Company has not cured such event within
twenty (20) days after receipt of such notice.
<PAGE> 56
Waiver of Notice. Any waiver of notice shall be valid only if it is
made in writing, delivered to an officer of the Company and expressly
refers to the applicable notice requirement in this Section 7.
8. Payments Upon Termination of Employment
Payments Upon Termination Pursuant to Section 7(b)(i) and Constructive
Termination. If, during the term of this Agreement, the Employee's
employment is terminated by the Company pursuant to Section 7(b)(i) or
voluntarily by the Employee under Section 7(c) as a result of a
Constructive Termination, the Employee shall be entitled to receive
the following:
Cash Severance Payments. The Company shall pay to Employee
severance payments of monthly Base Salary at the rate in
effect on the date of termination. The Cash Severance
Payments will be paid for the remaining term of this
agreement.
(ii) Continued Group Health and Insurance Benefits.
Continuation of the coverage of Employee and
Employee's spouse and dependents covered under any
group health plans or life insurance plans of the
Company on the date of such termination (the "Covered
<PAGE> 57
Dependents"), and payment by Employer, to the same
extent as paid prior to termination of employment,
all group health plan, life and other similar
insurance plans in which Employee or such Covered
Dependents participate on the date of the Employee's
termination, through the Severance Period (including
any extension thereof, as applicable).
(iii) Death During Severance Period. In the event of
Employee's death while receiving benefits pursuant to
Section 8(a)(ii) hereof, the Company shall use its
good faith efforts to continue providing and shall
continue paying for group health plan, life and
similar insurance plan coverage to the Covered
Dependents through the Term of the Agreement.
Termination by Company for Cause or Voluntary Termination. If the
Employee's employment is terminated pursuant to Section 7(b)(ii) or
voluntarily (other than a Constructive Termination) pursuant to
Section 7(c), no compensation or payments will be paid or provided to
Employee for the periods following the date when such a termination of
employment is effective. Notwithstanding the preceding sentence,
Employee's rights under the benefit plans and option agreements of the
Company shall be
<PAGE> 58
determined under the provisions of those plans and agreements,
provided Employee shall have ninety (90) days from the date of
termination of employment in which to exercise any stock option to the
extent such options are exercisable as of the date of termination.
Termination on Death or Disability. If Employee's employment is
terminated because of Employee's Death or Disability (as defined in
Section 6(d) herein), then no payments shall be owed under this
Agreement and Employee shall receive severance and disability payments
as provided in the Company's standard benefit plans. Employee's stock
options shall be exercisable as provided in agreements governing such
options.
9. Successors.
Company's Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's
business or assets shall assume this Agreement and agree expressly to
perform this Agreement in the same manner and to the same extent as
the Company would be required to perform it in the absence of a
succession. For all purposes under this Agreement, the term "Company"
shall include any successor to the Company's business or assets which
executes and
<PAGE> 59
delivers the assumption Agreement described in this subsection (a) or
which becomes bound by this Agreement or by operation of law.
Employee's Successors. This Agreement and all rights of the Employee
hereunder shall inure to the benefit of, and be enforceable by,
Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees.
10. Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or five days after being mailed by first class mail,
return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to Employee at the home address which
Employee most recently communicated to the Company in writing. In the case of
the Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of its Chief Executive
Officer.
11. Term of Agreement. This Agreement shall be for a term of thirty-six (36)
months following the Effective Date.
12. Miscellaneous Provisions.
<PAGE> 60
Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Employee and an officer or director of
the Company authorized by the Board of Directors. No waiver by either
party of any breach of, or of compliance with, any condition or
provision of this Agreement by the other party shall be considered a
waiver of any other condition or provision or of the same condition or
provision at another time.
Whole Agreement. No agreements, representations or understandings
(whether oral or written and whether express or implied) which are not
expressly set forth in this Agreement have been made or entered into
by either party with respect to the subject matter hereof. This
Agreement supersedes and replaces any and all previous agreements
between the Employee and VSI regarding compensation in terms of
employment (but not any non- competition, assignment of inventions or
confidentiality agreement).
Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of California.
<PAGE> 61
Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in
full force and effect.
Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in
Orange County, California, in accordance with the rules of the
American Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
No Assignment of Benefits. The rights of any person to payments or
employee benefits under this Agreement shall not be made subject to
option or assignment, either by voluntary or involuntary assignment or
by operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor's process, and any action in
violation of this subsection (f) shall be void.
Limitation of Remedies. If the Employee's employment terminates for
any reason, the Employee shall not be entitled to any payments,
benefits, damages, awards or compensation other than as provided by
this Agreement.
<PAGE> 62
Employment Taxes. All payments made pursuant to this Agreement will
be subject to withholding of applicable taxes.
Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together will
constitute one and the same instrument.
Representation by Counsel. Employee represents that Employee has had
the opportunity to seek independent legal counsel in connection with
entering into the Agreement.
Attorney's fees. In any action or arbitration brought under this
Agreement, the prevailing party shall be entitled to his attorney's
fees and costs.
[signature page follows]
<PAGE> 63
IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year first above written.
SIMULATION SCIENCES INC.
- ---------------------------- By:
Name of Employee --------------------------------
Print Name:
------------------------
Title:
----------------------------
<PAGE> 64
EXHIBIT G4
FORM OF CONSULTING AGREEMENT
<PAGE> 65
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is made and
entered into as of this ___ day of ______, 1997, by and between SIMULATION
SCIENCES INC., a California corporation and ____________________
("Consultant").
1. SCOPE OF AGREEMENT. The Company hereby retains Consultant and
Consultant hereby agrees to render services to the Company relating to
_____________________ products purchased by SIMULATION SCIENCES INC. from
Visual Solutions, Inc. set forth in the Asset Purchase Agreement between the
two companies dated March 24, 1997 upon the terms and conditions hereinafter
set forth.
2. TERM OF AGREEMENT. This Agreement shall remain in effect for
a period of _____ months from the date hereof, unless sooner terminated as
provided herein or Consultant completes his services under this Agreement.
3. DUTIES OF CONSULTANT. Consultant shall provide consulting
services described in Exhibit A attached hereto. Consultant shall be
responsible for the professional quality, technical accuracy and timely
completion of the services furnished under this Agreement and shall perform
such services in a diligent, professional and workmanlike manner.
4. INDEPENDENT CONTRACTOR. Consultant represents that Consultant
is an independent contractor and not the agent, employee or servant of the
Company, and that Consultant has and hereby retains full control of the
methods, details and means of performance of Consultant's obligations hereunder
and such control over any persons employed by Consultant for performing the
services hereunder. Consultant will be solely responsible for all matters
relating to such employees, if any, including compliance with Social Security,
withholding, unemployment and similar taxes. Consultant further agrees to hold
the Company free and harmless and to indemnify the company for any and all
claims arising from any of the following (1) the intentional, reckless or
negligent act or omission of the Consultant, his agents or employees; (2) a
determination by a court or agency that Consultant is not an Independent
Contractor; and (3) a breach by Consultant or Consultant's assistants, agents
or employees of a covenant of this Agreement. Consultant agrees that
Consultant shall not be entitled to any employment-related or company-sponsored
benefits from the Company including, but not limited to, health insurance,
disability insurance, workers' compensation insurance or unemployment
insurance. If Consultant is reclassified by a state or federal agency or a
court as an employee, Consultant will become a reclassified employee and will
receive no benefits except those mandated by state or federal law, even if the
terms of the Company's benefit plans in effect at the time of such
reclassification would otherwise make Consultant eligible for such benefits.
5. LOCATION OF WORK. The Company shall have access during
reasonable hours to the principal location(s) where the services under this
Agreement are performed and to all of the drawings, specifications, data,
calculations, models, test results and specimens, documents and other
<PAGE> 66
things related to the services to be performed under this Agreement or to the
Project as a whole. Consultant agrees to furnish the tools and materials
needed to perform Consultant's work.
6. OTHER WORK. During the term of this Agreement, Consultant may
render consulting services to others provided that the rendering of such
services does not violate or conflict with Consultant's duties or obligations
hereunder.
7. COMPENSATION. In consideration of the satisfactory
performance of the services to be provided hereunder, the Company shall pay
Consultant the amount of $________ per hour, payable within ______ days after
completion of project. The company shall reimburse Consultant for reasonable
travel and lodging expenses according to the Company's Travel Policy 2.10,
dated July 17, 1991. Consultant also agrees to report as income amounts
received by Consultant. Likewise Consultant agrees to pay all self-employment
and other taxes arising out of Consultant's work.
8. COMPANY REPRESENTATIVE. The Company from time to time shall
designate one or more representatives (collectively, the "Company
Representative") for the purpose of coordinating Consultant's services with the
other efforts of the Company related to the Project. The Company
Representative shall be available to Consultant for consultation or advice,
shall have reasonable access to Consultant's working premises during working
hours and shall be allowed to observe the work in progress. When approval or
authorization from the Company is required hereunder, such communication shall
be directed to the Company Representative, and shall only be approved or
authorized by the Company Representative, in writing if so required herein.
9. NONDISCLOSURE AND OWNERSHIP OF INTELLECTUAL PROPERTY.
a. NONDISCLOSURE OF SECRET OR CONFIDENTIAL INFORMATION.
Consultant shall hold in confidence for the benefit of the Company all secret,
confidential or proprietary information, knowledge and data (collectively,
"Confidential Information") of the Company and its affiliates to which
Consultant may have access during the term of this Agreement. Consultant shall
not, during the term of this Agreement or after termination thereof, directly
or indirectly use, communicate or divulge or enable another to use, communicate
or divulge any such Confidential Information, for Consultant's own or another's
benefit. Consultant makes the same commitment with respect to the Confidential
Information of all affiliates, clients, contractors and others with whom the
Company has a business relationship. Further, Consultant shall not divulge to
the Company or its affiliates the Confidential Information of any other party
the use, communication or disclosure of which is protected by comparable
confidentiality commitments.
b. DISCLOSURE OF INTELLECTUAL PROPERTY. Consultant
shall fully and promptly disclose to the Company or its affiliates, as the case
may be, and shall hold in trust for the benefit of the Company or its
affiliates, as the case may be, any and all Intellectual Property (as defined
below) which Consultant may solely or jointly conceive, design, develop, create
or suggest or cause to be conceived, designed, developed or created during the
term of this Agreement which relate, directly or indirectly, to the Project or
services provided for in this Agreement. For the purposes of this Agreement,
the term
<PAGE> 67
"Intellectual Property" shall include any ideas, concepts, materials, software
(whether written or machine-readable), code, discoveries, designs, drawings,
illustrations and photographs which may be protectable, in whole or in part,
under any patent, copyright, trademark, trade secret or other intellectual
property law.
c. PRIOR INVENTIONS. Attached hereto as Exhibit B is a
list describing Intellectual Property which was made by Consultant prior to
Consultant's service to the Company (the "Prior Inventions") which belongs to
Consultant and relates to the Project and which are not assigned to the Company
hereunder. The Company agrees to maintain the confidentiality of any
proprietary documents provided by Consultant regarding the Prior Inventions
which are marked "Confidential" or "Proprietary"; provided, however, that if
Consultant incorporates any Prior Inventions into the Project or any of the
Company's software or other products, the Company is hereby granted and shall
have a nonexclusive, royalty-free, irrevocable, perpetual worldwide license to
reproduce, modify, market, sell, and sublicense such incorporated Prior
Inventions.
d. OWNERSHIP OF INTELLECTUAL PROPERTY. All right, title
and interest in and to the Intellectual Property, referred to in Subparagraph
9b above shall be the sole and absolute property of the Company. Consultant
shall and hereby does assign to the Company any and all right, title and
interest of Consultant in and to the Intellectual Property referred to in
Subparagraph 9b above, including without limitation the right to make any
modifications, adjustments or additions thereto, the right to make and
distribute derivative works thereof and the right to all claims for past
infringements thereof. Consultant shall make all necessary disclosures,
execute, acknowledge and deliver all instruments and perform all acts necessary
or desired by the Company or its affiliates, as the case may be, to effectuate
the assignment provided for in this Subparagraph 9d.
e. USE OF CONFIDENTIAL INFORMATION OR INTELLECTUAL
PROPERTY. Consultant agrees not to use, copy or otherwise replicate any
Confidential Information or the assigned Intellectual Property referred to in
Subparagraph 9b unless so authorized by the Company in writing. Nothing herein
shall be construed as granting any right or license under any Confidential
Information or Intellectual Property hereafter owned or controlled by the
Company or its affiliates, as the case may be. Upon termination of this
Agreement for any reason or upon request of the Company, all Confidential
Information and Intellectual Property, together with all copies of the same,
shall be returned to the Company.
10. REASONABLE RESTRICTIONS. Consultant acknowledges that the
restrictions set forth in this Agreement are reasonable, and that such
restrictions will not prevent Consultant from earning a livelihood upon
expiration or termination of this Agreement for any reason.
11. REPRESENTATIONS AND WARRANTIES. Consultant hereby represents
and warrants that all works and materials or portions thereof delivered by
Consultant in connection with the services to be rendered hereunder shall be
solely of Consultant's authorship or design and shall not infringe upon the
rights of any other person or party.
<PAGE> 68
12. ASSIGNMENT. Any assignment or subcontract by Consultant of
the services or work to be performed under this Agreement, in whole or in part,
or any other interests hereunder, voluntarily, involuntarily or by operation of
law, without the Company's written consent, shall be void. The Company
reserves the right to assign this Agreement to any current or future parent or
affiliate or successor company of the Company.
13. TERMINATION. Either the Company or Consultant may terminate
this Agreement, in whole or in part, at any time and for any reason by giving
the other party __________ (__) days' prior written notice of such termination.
At the time of termination, the Company shall be released from any and all
obligations under this Agreement provided that Consultant shall be paid the
balance owing for any reimbursable expenses accrued to the date of termination
and shall be paid for services satisfactorily performed to the date of
termination. This provision shall not be construed to constitute Consultant as
an employee of the Company.
14. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on
the date of service if served personally, or within five days after mailing by
first class registered or certified mail, postage prepaid, and properly
addressed, or upon receipt if sent by telegraph or telephonic facsimile
transmission to the party to whom notice is to be given, at such party's
address or the telex or facsimile number set forth on the signature page of
this Agreement, or any other address or number that any party may designate by
written notice to the other.
15. EQUITABLE RELIEF. Consultant recognizes that the Company is
relying for its protection upon the existence and validity of the provisions
set forth in this Agreement and that monetary damages would not be an adequate
remedy for the Company if Consultant violated any of these provisions.
Therefore, Consultant agrees that in addition to any other rights or remedies
it may have, the Company shall have the right to equitable relief by way of
injunction for the violation of any provision of this Agreement.
16. ENFORCEMENT. The failure of any party in any one or more
instances to insist upon strict performance of any of the terms or provisions
of this Agreement, or to exercise any option herein conferred shall not be
construed as a waiver or relinquishment, to any extent, of the right to assert
or rely upon any such terms, provisions or options on any other occasion.
17. SEVERABILITY. Any provision of this Agreement which is
rendered unenforceable by a court of competent jurisdiction shall be
ineffective only to the extent of such prohibition or invalidity and shall not
invalidate or otherwise render ineffective any or all of the remaining
provisions of this Agreement.
18. ARBITRATION. In the event of any dispute or claim relating to
or arising out of the relationship between Consultant, his agents or employees
and the Company, its agents or employees, Consultant and the Company agree that
all such disputes shall be fully resolved by binding arbitration conducted by
the American Arbitration Association in Irvine, California, applying California
law.
<PAGE> 69
Consultant and the Company shall each pay one-half of the costs and expenses of
such arbitration and each party shall pay for his/her/its own attorneys' fees
and expenses, unless otherwise required by law. However, the parties agree
that they may apply to any court of competent jurisdiction for a temporary
restraining order, preliminary injunction or other interim relief, as
necessary, without breaching this arbitration agreement or abridging the powers
of the arbitrator.
19. EXPENSES. If any legal action or other proceeding is brought
by any party for the enforcement of this Agreement because of any alleged
breach, default, or misrepresentation in connection with any of the provisions
of this Agreement, the prevailing party shall be entitled to recover from the
non-prevailing party its reasonable attorney's fees and other costs and
expenses incurred in connection therewith in addition to any other relief to
which it might be entitled.
20. SUCCESSORS. This Agreement shall be binding upon the Company,
its successors and assigns, and upon Consultant and Consultant's heirs,
executors, administrators, successors and permitted assigns. In the event
Consultant is a corporation, Consultant represents and warrants that each
principal of Consultant, and each employee of Consultant who engages in the
performance of any portion of the services provided for herein, shall agree in
writing to be bound by the provisions of this Agreement.
21. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, U.S.A. The
parties hereto hereby submit to the personal jurisdiction of the courts of the
State of California, U.S.A. and the Federal District Court for the Central
District of California, U.S.A. regarding any legal action or claim arising in
connection with this Agreement.
22. EFFECT OF AGREEMENT. Consultant understands that Consultant's
obligations under Paragraph 9 or any provision of this Agreement relating to
nondisclosure or to disclosure or ownership of Intellectual Property shall
continue whether or not this Agreement is terminated voluntarily or
involuntarily, with or without cause. This Agreement constitutes the entire
agreement between the Company and Consultant with respect to the subject hereof
and thereof, and fully supersedes any prior agreements or understandings with
respect thereto. No provision of this Agreement shall be deemed waived,
amended or modified by any party, unless in writing and signed by the parties
hereto.
<PAGE> 70
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the dates set forth below their respective signatures.
"Company"
SIMULATION SCIENCES INC.,
a California corporation
By:
------------------------------------
Title:
---------------------------------
601 South Valencia Avenue
Brea, California 92621
Fax: (714) 579-7468
"Consultant"
------------------------------
------------------------------
------------------------------
Fax:
--------------------------
<PAGE> 71
EXHIBIT A
Services
<PAGE> 72
EXHIBIT B
Prior Inventions
<PAGE> 73
THIS PAGE MUST BE KEPT AS THE LAST PAGE OF THE DOCUMENT.
<PAGE> 74
EXHIBIT H
FORM OF CONFIDENTIAL INFORMATION
AND INVENTION ASSIGNMENT AGREEMENT
<PAGE> 75
SIMULATION SCIENCES INC.
CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
As a condition of my employment with Simulation Sciences Inc., its
subsidiaries, affiliates, successors or assigns (together, the "Company"), and
in consideration of my employment with the Company and my receipt of the
compensation now and hereafter paid to me by the Company, I agree to the
following:
1. CONFIDENTIAL INFORMATION.
(a) COMPANY INFORMATION. I agree at all times during the term
of my employment and thereafter, to hold in strictest confidence, and not to
use, except for the benefit of the Company, or to disclose to any person, firm
or corporation other than employees of the Company without written
authorization of the Board of Directors of the Company, any Confidential
Information of the Company. I understand that "Confidential Information" means
any Company proprietary information, technical data, trade secrets or know-how,
including, but not limited to, research, product plans, products, services,
customer lists and customers (including, but not limited to, customers of the
Company on whom I called or with whom I became acquainted during the term of my
employment), markets, software, developments, inventions, processes, formulas,
technology, designs, drawings, engineering, hardware configuration information,
marketing, finances or other business information disclosed to me by the
Company either directly or indirectly in writing, orally or by drawings or
observation of parts or equipment. I further understand that Confidential
Information does not include any of the foregoing items which has become
publicly known and made generally available through no wrongful act of mine or
of others who were under confidentiality obligations as to the item or items
involved.
(b) FORMER EMPLOYER INFORMATION. I agree that I will not,
during my employment with the Company, improperly use or disclose any
proprietary information or trade secrets of any former or concurrent employer
or other person or entity and that I will not bring onto the premises of the
Company any unpublished document or proprietary information belonging to any
such employer, person or entity unless consented to in writing by such
employer, person or entity.
(c) THIRD PARTY INFORMATION. I recognize that the Company has
received and in the future will receive from third parties their confidential
or proprietary information subject to a duty on the Company's part to maintain
the confidentiality of such information and to use it only for certain limited
purposes. I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the
Company consistent with the Company's agreement with such third party.
2. INVENTIONS.
(a) INVENTIONS RETAINED AND LICENSED. I have attached hereto,
as Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by me prior to my
employment with the Company (collectively referred to as "Prior
<PAGE> 76
Inventions"), which belong to me, which relate to the Company's proposed
business, products or research and development, and which are not assigned to
the Company hereunder, or, if no such list is attached, I represent that there
are no such Prior Inventions. If in the course of my employment with the
Company, I incorporate into a Company product, process or machine a Prior
Invention owned by me or in which I have an interest, the Company is hereby
granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual,
worldwide license to make, have made, modify, use and sell such Prior Invention
as part of or in connection with such product, process or machine.
(b) ASSIGNMENT OF INVENTIONS. I agree that I will promptly
make full written disclosure to the Company, will hold in trust for the sole
right and benefit of the Company, and hereby assign to the Company, or its
designee, all my right, title, and interest in and to any and all inventions,
original works of authorship, developments, concepts, improvements or trade
secrets, whether or not patentable or registrable under copyright or similar
laws, which I may solely or jointly conceive or develop or reduce to practice,
or cause to be conceived or developed or reduced to practice, during the
period of time I am in the employ of the Company (collectively referred to as
"Inventions"). I further acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of and
during the period of my employment with the Company and which are protectible
by copyright are "works made for hire," as that term is defined in the United
States Copyright Act.
(c) INVENTIONS ASSIGNED TO THE UNITED STATES. I agree to
assign to the United States government all my right, title and interest in and
to any and all Inventions whenever such full title is required to be in the
United States by a contract between the Company and the United States or any of
its agencies.
(d) MAINTENANCE OF RECORDS. I agree to keep and maintain
adequate and current written records of all Inventions made by me (solely and
jointly with others) during the term of my employment with the Company. The
records will be in the form of notes, sketches, drawings, and any other format
that may be specified by the Company. The records will be available to and
remain the sole property of the Company at all times.
(e) PATENT AND COPYRIGHT REGISTRATIONS. I agree to assist the
Company, or its designee, at the Company's expense, in every proper way to
secure the Company's rights in the Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto in any and
all countries, including the disclosure to the Company of all pertinent
information and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for and obtain such rights and in order
to assign and convey to the Company, its successors, assigns and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and
any copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or papers shall
continue after the termination of this Agreement. If the Company is unable
because of my mental or physical incapacity or for any other reason to secure
my signature to apply for or to pursue any application for any United States or
foreign patents or copyright registrations covering Inventions or original
works of authorship assigned to the Company as above, then I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents
as my agent and attorney-in-fact, to act for and in my behalf and stead
-2-
<PAGE> 77
to execute and file any such applications and to do all other lawfully
permitted acts to further the prosecution and issuance of letters patent or
copyright registrations thereon with the same legal force and effect as if
executed by me.
3. CONFLICTING EMPLOYMENT. I agree that, during the term of my
employment with the Company, I will not engage in any other employment,
occupation, consulting or other business activity directly related to the
business in which the Company is now involved or becomes involved during the
term of my employment, nor will I engage in any other activities that conflict
with my obligations to the Company.
4. RETURNING COMPANY DOCUMENTS. I agree that, at the time of leaving
the employ of the Company, I will deliver to the Company (and will not keep in
my possession, recreate or deliver to anyone else) any and all devices,
records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, materials, equipment, other
documents or property, or reproductions of any aforementioned items developed
by me pursuant to my employment with the Company or otherwise belonging to the
Company, its successors or assigns. In the event of the termination of my
employment, I agree to sign and deliver the "Termination Certification"
attached hereto as Exhibit B.
5. NOTIFICATION OF NEW EMPLOYER. In the event that I leave the
employ of the Company, I hereby grant consent to notification by the Company to
my new employer about my rights and obligations under this Agreement.
6. SOLICITATION OF EMPLOYEES. I agree that for a period of twelve
(12) months immediately following the termination of my relationship with the
Company for any reason, whether with or without cause, I shall not either
directly or indirectly solicit, induce, recruit or encourage any of the
Company's employees to leave their employment, or take away such employees, or
attempt to solicit, induce, recruit, encourage or take away employees of the
Company, either for myself or for any other person or entity.
7. REPRESENTATIONS. I agree to execute any proper oath or verify any
proper document required to carry out the terms of this Agreement. I represent
that my performance of all the terms of this Agreement will not breach any
agreement to keep in confidence proprietary information acquired by me in
confidence or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any oral or written agreement
in conflict herewith.
8. ARBITRATION AND EQUITABLE RELIEF.
(a) ARBITRATION. EXCEPT AS PROVIDED IN SECTION 10(b) BELOW, I
AGREE THAT ANY DISPUTE OR CONTROVERSY ARISING OUT OF, RELATING TO, OR
CONCERNING ANY INTERPRETATION, CONSTRUCTION, PERFORMANCE OR BREACH OF THIS
AGREEMENT, SHALL BE SETTLED BY ARBITRATION TO BE HELD IN ORANGE COUNTY,
CALIFORNIA, IN ACCORDANCE WITH THE RULES THEN IN EFFECT OF THE AMERICAN
ARBITRATION ASSOCIATION. THE ARBITRATOR MAY GRANT INJUNCTIONS OR OTHER RELIEF
IN SUCH DISPUTE OR CONTROVERSY. THE DECISION OF THE ARBITRATOR SHALL BE FINAL,
CONCLUSIVE AND BINDING ON THE PARTIES TO THE
-3-
<PAGE> 78
ARBITRATION. JUDGMENT MAY BE ENTERED ON THE ARBITRATOR'S DECISION IN ANY COURT
HAVING JURISDICTION. THE COMPANY AND I SHALL EACH PAY ONE-HALF OF THE COSTS
AND EXPENSES OF SUCH ARBITRATION, AND EACH OF US SHALL SEPARATELY PAY OUR
COUNSEL FEES AND EXPENSES.
THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A JURY
TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF
THE EMPLOYER/EMPLOYEE RELATIONSHIP (EXCEPT AS PROVIDED IN SECTION 10(b) BELOW,
INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:
i. ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF
EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE
COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR
INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL
MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR
PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION;
ii. ANY AND ALL CLAIMS FOR VIOLATION OF ANY
FEDERAL, STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII
OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT
OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND
HOUSING ACT, AND LABOR CODE SECTION 201, ET SEQ.;
iii. ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER
LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
(b) EQUITABLE REMEDIES. I AGREE THAT IT WOULD BE
IMPOSSIBLE OR INADEQUATE TO MEASURE AND CALCULATE THE COMPANY'S DAMAGES FROM
ANY BREACH OF THE COVENANTS SET FORTH IN SECTIONS 2, 3 AND 5 HEREIN.
ACCORDINGLY, I AGREE THAT IF I BREACH ANY OF SUCH SECTIONS, THE COMPANY WILL
HAVE AVAILABLE, IN ADDITION TO ANY OTHER RIGHT OR REMEDY AVAILABLE, THE RIGHT
TO OBTAIN AN INJUNCTION FROM A COURT OF COMPETENT JURISDICTION RESTRAINING SUCH
BREACH OR THREATENED BREACH AND TO SPECIFIC PERFORMANCE OF ANY SUCH PROVISION
OF THIS AGREEMENT. I FURTHER AGREE THAT NO BOND OR OTHER SECURITY SHALL BE
REQUIRED IN OBTAINING SUCH EQUITABLE RELIEF AND I HEREBY CONSENT TO THE
ISSUANCE OF SUCH INJUNCTION AND TO THE ORDERING OF SPECIFIC PERFORMANCE.
(c) CONSIDERATION. I UNDERSTAND THAT EACH PARTY'S
PROMISE TO RESOLVE CLAIMS BY ARBITRATION IN ACCORDANCE WITH THE PROVISIONS OF
THIS AGREEMENT, RATHER THAN THROUGH THE COURTS, IS CONSIDERATION FOR THE OTHER
PARTY'S LIKE PROMISE. I FURTHER UNDERSTAND THAT I AM OFFERED EMPLOYMENT IN
CONSIDERATION OF MY PROMISE TO ARBITRATE CLAIMS.
-4-
<PAGE> 79
9. GENERAL PROVISIONS.
(a) GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION.
This Agreement will be governed by the laws of the State of California. I
hereby expressly consent to the personal jurisdiction of the state and federal
courts located in California for any lawsuit filed there against me by the
Company arising from or relating to this Agreement.
(b) ENTIRE AGREEMENT. This Agreement sets forth the
entire agreement and understanding between the Company and me relating to the
subject matter herein and merges all prior discussions between us. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, will be effective unless in writing signed by the party
to be charged. Any subsequent change or changes in my duties, salary or
compensation will not affect the validity or scope of this Agreement.
(c) SEVERABILITY. If one or more of the provisions of
this Agreement are deemed void by law, then the remaining provisions will
continue in full force and effect.
(d) SUCCESSORS AND ASSIGNS. This Agreement will be
binding upon my heirs, executors, administrators and other legal
representatives and will be for the benefit of the Company, its successors and
its assigns.
Date:
-----------------------
--------------------------------------
Signature
--------------------------------------
Name of Employee (typed or printed)
- -------------------------------
Witness
-5-
<PAGE> 80
EXHIBIT A
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
<TABLE>
<CAPTION>
Identifying Number
Title Date or Brief Description
- --------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
No inventions or improvements
- ----
Additional Sheets Attached
- ----
Signature of Employee:
----------------------------------------
Print Name of Employee:
----------------------------------------
Date:
----------------------------
<PAGE> 81
EXHIBIT B
SIMULATION SCIENCES INC.
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I
failed to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to Simulation Sciences Inc., its subsidiaries, affiliates,
successors or assigns (together, the "Company").
I further certify that I have complied with all the terms of the
Company's Employment, Confidential Information and Invention Assignment
Agreement Signed by me, including the reporting of any inventions and original
works of authorship (as defined therein), conceived or made by me (solely or
jointly with others) covered by that agreement.
I further agree that, in compliance with the Employment, Confidential
Information and Invention Assignment Agreement, I will preserve as confidential
all trade secrets, confidential knowledge, data or other proprietary
information relating to products, processes, know-how, designs, formulas,
developmental or experimental work, computer programs, data bases, other
original works of authorship, customer lists, business plans, financial
information or other subject matter pertaining to any business of the Company
or any of its employees, clients, consultants or licensees.
I further agree that for twelve (12) months from this date, I will not
hire any employees of the Company and I will not solicit, induce, recruit or
encourage any of the Company's employees to leave their employment.
Date:
------------------------
--------------------------------------
(Employee's Signature)
--------------------------------------
(Type/Print Employee's Name)
<PAGE> 82
EXHIBIT I
FORM OF CONFIRMATION AGREEMENT
<PAGE> 83
CONFIRMATION AGREEMENT
This Agreement (the "Agreement") is entered into as of March __, 1997
(the "Effective Date") by and between Simulation Sciences Inc., a Delaware
corporation ("Simulation Sciences"), Visual Solutions, Inc., a Texas
Corporation ("Visual Solutions") and ____________________, an employee of
Visual Solutions ("Employee").
RECITALS
WHEREAS, Pursuant to an asset purchase agreement that will be entered
into between Visual Solutions and Simulation Sciences (the "Asset Purchase
Agreement"), Visual Solutions will sell to Simulation Sciences, and Simulation
Sciences will purchase, all of Visual Solutions's rights to the Software as
such term is defined herein; and
WHEREAS, Pursuant to this Agreement, Simulation Sciences, Visual
Solutions and Employee desire to confirm their understanding regarding
Employee's rights to the Software.
WHEREAS, a condition to closing the Asset Purchase Agreement is the
execution, delivery and performance of this Agreement.
WHEREAS, the Employee wishes to be considered for employment by
Simulation Sciences.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises contained herein, the parties hereby agree as follows:
1. Definitions.
(a) "Closing" means the closing of the Asset Purchase Agreement,
as defined therein.
(b) "Software" means that certain software known as Visual
Engineering Toolbox, Visual Flare, Visual Flash, Visual Flow Suite, Visual
Refinery, Visual Network, Component Manager, Equipment Manager, RV Manager and
Report Manager that was developed by Visual Solutions, as the same exists as of
Closing.
(c) "Intellectual Property Rights" means all current and future
worldwide patents and other patent rights, copyrights, trade secrets and other
intellectual property rights, including without limitation all applications and
registrations with respect thereto.
<PAGE> 84
(d) "Works" means all works of authorship, formulas, processes,
routines, subroutines, techniques, concepts, object code, flow charts,
diagrams, coding sheets, source code, listings and annotations, programmers'
notes, information, work papers, work product and other materials of any type
whatsoever used or held for use in connection with the Software.
2. Condition Precedent. A condition precedent for this Agreement shall
be the Closing of the Asset Purchase Agreement and a condition precedent of the
Closing is the execution, delivery and performance of this Agreement. In the
event that such Closing does not occur by May 31, 1997, then this Agreement
shall be null and void and of no further effect.
3. Confirmation of Rights.
(a) Ownership of the Software. To Employee's knowledge, Employee
acknowledges that Visual Solutions owns all rights, title and interest,
including all Intellectual Property Rights, in and to the Software. Employee
further acknowledges that to Employee's knowledge Visual Solutions has the
exclusive right to sell, convey, transfer, assign and deliver the Software and
all Intellectual Property Rights therein and thereto to Simulation Sciences.
Without limiting the generality of the foregoing, to Employee's knowledge
Visual Solutions has the exclusive right to convey to Simulation Sciences the
exclusive right to commercialize, prepare and sell products based upon,
sublicense, prepare derivative works from and otherwise use and exploit the
Software and to apply for or register patents, copyrights and other proprietary
protections.
(b) Rights to Works. All Works created by Employee for Visual
Solutions shall be considered "works for hire" within the meaning of the United
States Copyright Act. Visual Solutions shall own all Works and all right,
title and interest therein and thereto, including, without limitation, all
copyrights and extensions and renewals thereof under United States law and
treaties, throughout the world. If any of the Works are deemed not to be "work
for hire," Employee agrees to, and hereby does, irrevocably and absolutely
assign, set over and grant to Visual Solutions, its successors and assigns, the
Works, and all rights therein and thereto which Employee may have including any
copyrights and renewals and extensions thereof.
(c) Consideration. Simulation Sciences has no obligation
whatsoever to pay to Employee any consideration, monetary or otherwise, with
respect to the Software or otherwise, except as specifically contemplated by
the Asset Purchase Agreement.
(d) Waiver. With respect to the Software or derivative works of
the Software, Employee hereby waives any and all claims of any nature
whatsoever which Employee now or hereafter may have against Simulation Sciences
or its subsidiaries or affiliates, or its or their licensees, or the direct or
indirect customers of any of the foregoing, including but not limited to any
claims of infringement of any Intellectual Property Right of Employee.
(e) Further Assurances. Employee shall, upon the request of
Simulation Sciences, execute such additional documents and render such other
assistance as may be reasonably
-2-
<PAGE> 85
necessary to evidence and perfect the foregoing ownership rights. In the event
that Simulation Sciences is unable for any reason, after reasonable effort, to
secure Employee's execution on any document needed in connection with the
actions specified in this Section 3(e), Employee hereby irrevocably designates
and appoints Simulation Sciences and its duly authorized officers and agents as
its agent and attorney-in-fact, to act for and in Employee's behalf to execute,
verify and file any such documents and to do all other lawfully permitted acts
to further the purposes of the preceding paragraph with the same legal force
and effect as if executed by Employee.
4. Representations and Warranties. Employee hereby represents and
warrants to Simulation Sciences and Visual Solutions that Employee has all
requisite power and authority to enter into this Agreement; that this Agreement
constitutes the valid and binding obligation of Employee enforceable in
accordance with its terms; and that all Works which Employee has worked on,
directly or indirectly, have been and shall be Employee's original work and
that to Employee's knowledge such Works do not and shall not infringe the
rights, including without limitation the copyrights, of any person.
5. Miscellaneous.
(a) Assignment. No party may assign this Agreement or any rights
or obligations hereunder, without the prior written consent of the other
parties, and any attempted such assignment shall be void; provided, however,
that either party may assign this Agreement without such consent to an entity
that succeeds to all or substantially all of its business or assets to which
this Agreement relates. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns.
(b) Notices. All notices between the parties shall be in writing
and shall be deemed to have been given if personally delivered or sent by
certified or registered mail (return receipt) or telecopy to the addresses set
forth in the Asset Purchase Agreement, or such other address as is provided by
notice as set forth herein. Notices shall be deemed effective upon receipt or,
if delivery is not effected by reason of some fault of the addressee, when
tendered.
(c) Governing Law; Forum Selection. This Agreement shall be
governed by the laws of the State of California, as applied to contracts made
and to be performed in California. All disputes arising out of this Agreement
will be subject to the exclusive jurisdiction and venue of the California state
courts and federal courts located in the United Stated District Court for the
Southern District of California, and the parties consent to the personal and
exclusive jurisdiction of these courts.
(d) Severability. Any term or provision of this Agreement held to
be illegal or unenforceable shall, if possible, be interpreted so as to be
construed as valid, but in any event the validity or enforceability of the
remainder hereof shall not be affected. In such event, the parties agree to
negotiate, in good faith, a legal and enforceable substitute provision which
most nearly effects the parties' intent in entering into this Agreement.
-3-
<PAGE> 86
(e) Amendment. No alteration or amendment of this Agreement shall
be effective unless embodied in writing and executed by an authorized
representative of the party to be charged.
(f) Waiver. The waiver of, or failure to enforce, any breach or
default hereunder shall not constitute the waiver of any other or subsequent
breach or default.
(g) Entire Agreement. This Agreement, along with the attachment
attached hereto and incorporated herein by reference, sets forth the entire
agreement between the parties with respect to the subject matter hereof.
-4-
<PAGE> 87
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
SIMULATION SCIENCES INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Date:
----------------------------------
VISUAL SOLUTIONS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Date:
----------------------------------
EMPLOYEE
---------------------------------------
Signature
---------------------------------------
Print Name
---------------------------------------
Address
---------------------------------------
---------------------------------------
[SIGNATURE PAGE TO SIMULATION SCIENCES INC. CONFIRMATION AGREEMENT]
-5-
<PAGE> 88
EXHIBIT J
FORM OF EMPLOYMENT, CONFIDENTIAL INFORMATION
AND INVENTION ASSIGNMENT AGREEMENT
<PAGE> 89
SIMULATION SCIENCES INC.
EMPLOYMENT, CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
As a condition of my employment with Simulation Sciences Inc., its
subsidiaries, affiliates, successors or assigns (together, the "Company"), and
in consideration of my employment with the Company and my receipt of the
compensation now and hereafter paid to me by the Company, I agree to the
following:
1. AT-WILL EMPLOYMENT. I UNDERSTAND AND ACKNOWLEDGE THAT MY
EMPLOYMENT WITH THE COMPANY IS FOR AN UNSPECIFIED DURATION AND CONSTITUTES
"AT-WILL" EMPLOYMENT. I ACKNOWLEDGE THAT THIS EMPLOYMENT RELATIONSHIP MAY BE
TERMINATED AT ANY TIME, WITH OR WITHOUT GOOD CAUSE OR FOR ANY OR NO CAUSE, AT
THE OPTION EITHER OF THE COMPANY OR MYSELF, WITH OR WITHOUT NOTICE.
2. CONFIDENTIAL INFORMATION.
(a) COMPANY INFORMATION. I agree at all times during the
term of my employment and thereafter, to hold in strictest confidence, and not
to use, except for the benefit of the Company, or to disclose to any person,
firm or corporation other than employees of the Company without written
authorization of the Board of Directors of the Company, any Confidential
Information of the Company. I understand that "Confidential Information" means
any Company proprietary information, technical data, trade secrets or know-how,
including, but not limited to, research, product plans, products, services,
customer lists and customers (including, but not limited to, customers of the
Company on whom I called or with whom I became acquainted during the term of my
employment), markets, software, developments, inventions, processes, formulas,
technology, designs, drawings, engineering, hardware configuration information,
marketing, finances or other business information disclosed to me by the
Company either directly or indirectly in writing, orally or by drawings or
observation of parts or equipment. I further understand that Confidential
Information does not include any of the foregoing items which has become
publicly known and made generally available through no wrongful act of mine or
of others who were under confidentiality obligations as to the item or items
involved.
(b) FORMER EMPLOYER INFORMATION. I agree that I will
not, during my employment with the Company, improperly use or disclose any
proprietary information or trade secrets of any former or concurrent employer
or other person or entity and that I will not bring onto the premises of the
Company any unpublished document or proprietary information belonging to any
such employer, person or entity unless consented to in writing by such
employer, person or entity.
(c) THIRD PARTY INFORMATION. I recognize that the
Company has received and in the future will receive from third parties their
confidential or proprietary information subject to a duty on the Company's part
to maintain the confidentiality of such information and to use it only for
certain limited purposes. I agree to hold all such confidential or proprietary
information in the strictest confidence and
<PAGE> 90
not to disclose it to any person, firm or corporation or to use it except as
necessary in carrying out my work for the Company consistent with the Company's
agreement with such third party.
3. INVENTIONS.
(a) INVENTIONS RETAINED AND LICENSED. I have attached
hereto, as Exhibit A, a list describing all inventions, original works of
authorship, developments, improvements, and trade secrets which were made by me
prior to my employment with the Company (collectively referred to as "Prior
Inventions"), which belong to me, which relate to the Company's proposed
business, products or research and development, and which are not assigned to
the Company hereunder, or, if no such list is attached, I represent that there
are no such Prior Inventions. If in the course of my employment with the
Company, I incorporate into a Company product, process or machine a Prior
Invention owned by me or in which I have an interest, the Company is hereby
granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual,
worldwide license to make, have made, modify, use and sell such Prior Invention
as part of or in connection with such product, process or machine.
(b) ASSIGNMENT OF INVENTIONS. I agree that I will
promptly make full written disclosure to the Company, will hold in trust for
the sole right and benefit of the Company, and hereby assign to the Company, or
its designee, all my right, title, and interest in and to any and all
inventions, original works of authorship, developments, concepts, improvements
or trade secrets, whether or not patentable or registrable under copyright or
similar laws, which I may solely or jointly conceive or develop or reduce to
practice, or cause to be conceived or developed or reduced to practice, during
the period of time I am in the employ of the Company (collectively referred to
as "Inventions"). I further acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of and
during the period of my employment with the Company and which are protectible
by copyright are "works made for hire," as that term is defined in the United
States Copyright Act.
(c) INVENTIONS ASSIGNED TO THE UNITED STATES. I agree to
assign to the United States government all my right, title and interest in and
to any and all Inventions whenever such full title is required to be in the
United States by a contract between the Company and the United States or any of
its agencies.
(d) MAINTENANCE OF RECORDS. I agree to keep and maintain
adequate and current written records of all Inventions made by me (solely and
jointly with others) during the term of my employment with the Company. The
records will be in the form of notes, sketches, drawings, and any other format
that may be specified by the Company. The records will be available to and
remain the sole property of the Company at all times.
(e) PATENT AND COPYRIGHT REGISTRATIONS. I agree to
assist the Company, or its designee, at the Company's expense, in every proper
way to secure the Company's rights in the Inventions and any copyrights,
patents, mask work rights or other intellectual property rights relating
thereto in any and all countries, including the disclosure to the Company of
all pertinent information and data with respect thereto, the execution of all
applications, specifications, oaths, assignments and all other instruments
which the Company shall deem necessary in order to apply for and obtain such
rights and in order to assign and convey to the Company, its successors,
assigns and nominees the sole and exclusive
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<PAGE> 91
rights, title and interest in and to such Inventions, and any copyrights,
patents, mask work rights or other intellectual property rights relating
thereto. I further agree that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or papers shall
continue after the termination of this Agreement. If the Company is unable
because of my mental or physical incapacity or for any other reason to secure
my signature to apply for or to pursue any application for any United States or
foreign patents or copyright registrations covering Inventions or original
works of authorship assigned to the Company as above, then I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents
as my agent and attorney-in-fact, to act for and in my behalf and stead to
execute and file any such applications and to do all other lawfully permitted
acts to further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and effect as if executed by
me.
4. CONFLICTING EMPLOYMENT. I agree that, during the term of my
employment with the Company, I will not engage in any other employment,
occupation, consulting or other business activity directly related to the
business in which the Company is now involved or becomes involved during the
term of my employment, nor will I engage in any other activities that conflict
with my obligations to the Company.
5. RETURNING COMPANY DOCUMENTS. I agree that, at the time of
leaving the employ of the Company, I will deliver to the Company (and will not
keep in my possession, recreate or deliver to anyone else) any and all devices,
records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, materials, equipment, other
documents or property, or reproductions of any aforementioned items developed
by me pursuant to my employment with the Company or otherwise belonging to the
Company, its successors or assigns. In the event of the termination of my
employment, I agree to sign and deliver the "Termination Certification"
attached hereto as Exhibit B.
6. NOTIFICATION OF NEW EMPLOYER. In the event that I leave the
employ of the Company, I hereby grant consent to notification by the Company to
my new employer about my rights and obligations under this Agreement.
7. SOLICITATION OF EMPLOYEES. I agree that for a period of
twelve (12) months immediately following the termination of my relationship
with the Company for any reason, whether with or without cause, I shall not
either directly or indirectly solicit, induce, recruit or encourage any of the
Company's employees to leave their employment, or take away such employees, or
attempt to solicit, induce, recruit, encourage or take away employees of the
Company, either for myself or for any other person or entity.
8. REPRESENTATIONS. I agree to execute any proper oath or verify
any proper document required to carry out the terms of this Agreement. I
represent that my performance of all the terms of this Agreement will not
breach any agreement to keep in confidence proprietary information acquired by
me in confidence or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any oral or written agreement
in conflict herewith.
-3-
<PAGE> 92
9. ARBITRATION AND EQUITABLE RELIEF.
(a) ARBITRATION. EXCEPT AS PROVIDED IN SECTION 10(b)
BELOW, I AGREE THAT ANY DISPUTE OR CONTROVERSY ARISING OUT OF, RELATING TO, OR
CONCERNING ANY INTERPRETATION, CONSTRUCTION, PERFORMANCE OR BREACH OF THIS
AGREEMENT, SHALL BE SETTLED BY ARBITRATION TO BE HELD IN ORANGE COUNTY,
CALIFORNIA, IN ACCORDANCE WITH THE RULES THEN IN EFFECT OF THE AMERICAN
ARBITRATION ASSOCIATION. THE ARBITRATOR MAY GRANT INJUNCTIONS OR OTHER RELIEF
IN SUCH DISPUTE OR CONTROVERSY. THE DECISION OF THE ARBITRATOR SHALL BE FINAL,
CONCLUSIVE AND BINDING ON THE PARTIES TO THE ARBITRATION. JUDGMENT MAY BE
ENTERED ON THE ARBITRATOR'S DECISION IN ANY COURT HAVING JURISDICTION. THE
COMPANY AND I SHALL EACH PAY ONE-HALF OF THE COSTS AND EXPENSES OF SUCH
ARBITRATION, AND EACH OF US SHALL SEPARATELY PAY OUR COUNSEL FEES AND EXPENSES.
THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A
JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL
ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP (EXCEPT AS PROVIDED IN SECTION
10(b) BELOW, INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:
i. ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF
EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE
COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR
INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL
MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR
PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION;
ii. ANY AND ALL CLAIMS FOR VIOLATION OF ANY
FEDERAL, STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII
OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT
OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND
HOUSING ACT, AND LABOR CODE SECTION 201, ET SEQ.;
iii. ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER
LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
(b) EQUITABLE REMEDIES. I AGREE THAT IT WOULD BE
IMPOSSIBLE OR INADEQUATE TO MEASURE AND CALCULATE THE COMPANY'S DAMAGES FROM
ANY BREACH OF THE COVENANTS SET FORTH IN SECTIONS 2, 3 AND 5 HEREIN.
ACCORDINGLY, I AGREE THAT IF I BREACH ANY OF SUCH SECTIONS, THE COMPANY WILL
HAVE AVAILABLE, IN ADDITION TO ANY OTHER RIGHT OR REMEDY AVAILABLE, THE RIGHT
TO OBTAIN AN INJUNCTION FROM A COURT OF COMPETENT JURISDICTION RESTRAINING SUCH
BREACH OR THREATENED BREACH AND TO SPECIFIC PERFORMANCE OF ANY SUCH PROVISION
OF THIS AGREEMENT. I FURTHER AGREE
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<PAGE> 93
THAT NO BOND OR OTHER SECURITY SHALL BE REQUIRED IN OBTAINING SUCH EQUITABLE
RELIEF AND I HEREBY CONSENT TO THE ISSUANCE OF SUCH INJUNCTION AND TO THE
ORDERING OF SPECIFIC PERFORMANCE.
(c) CONSIDERATION. I UNDERSTAND THAT EACH PARTY'S
PROMISE TO RESOLVE CLAIMS BY ARBITRATION IN ACCORDANCE WITH THE PROVISIONS OF
THIS AGREEMENT, RATHER THAN THROUGH THE COURTS, IS CONSIDERATION FOR THE OTHER
PARTY'S LIKE PROMISE. I FURTHER UNDERSTAND THAT I AM OFFERED EMPLOYMENT IN
CONSIDERATION OF MY PROMISE TO ARBITRATE CLAIMS.
10. GENERAL PROVISIONS.
(a) GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION.
This Agreement will be governed by the laws of the State of California. I
hereby expressly consent to the personal jurisdiction of the state and federal
courts located in California for any lawsuit filed there against me by the
Company arising from or relating to this Agreement.
(b) ENTIRE AGREEMENT. This Agreement sets forth the
entire agreement and understanding between the Company and me relating to the
subject matter herein and merges all prior discussions between us. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, will be effective unless in writing signed by the party
to be charged. Any subsequent change or changes in my duties, salary or
compensation will not affect the validity or scope of this Agreement.
(c) SEVERABILITY. If one or more of the provisions of
this Agreement are deemed void by law, then the remaining provisions will
continue in full force and effect.
(d) SUCCESSORS AND ASSIGNS. This Agreement will be
binding upon my heirs, executors, administrators and other legal
representatives and will be for the benefit of the Company, its successors and
its assigns.
Date:
-------------------------
---------------------------------------
Signature
---------------------------------------
Name of Employee (typed or printed)
- -------------------------------
Witness
-5-
<PAGE> 94
EXHIBIT A
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
<TABLE>
<CAPTION>
Identifying Number
Title Date or Brief Description
- --------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
No inventions or improvements
- ----
Additional Sheets Attached
- ----
Signature of Employee:
---------------------------------
Print Name of Employee:
---------------------------------
Date:
-------------------------------
<PAGE> 95
EXHIBIT B
SIMULATION SCIENCES INC.
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I
failed to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to Simulation Sciences Inc., its subsidiaries, affiliates,
successors or assigns (together, the "Company").
I further certify that I have complied with all the terms of the
Company's Employment, Confidential Information and Invention Assignment
Agreement Signed by me, including the reporting of any inventions and original
works of authorship (as defined therein), conceived or made by me (solely or
jointly with others) covered by that agreement.
I further agree that, in compliance with the Employment, Confidential
Information and Invention Assignment Agreement, I will preserve as confidential
all trade secrets, confidential knowledge, data or other proprietary
information relating to products, processes, know-how, designs, formulas,
developmental or experimental work, computer programs, data bases, other
original works of authorship, customer lists, business plans, financial
information or other subject matter pertaining to any business of the Company
or any of its employees, clients, consultants or licensees.
I further agree that for twelve (12) months from this date, I will not
hire any employees of the Company and I will not solicit, induce, recruit or
encourage any of the Company's employees to leave their employment.
Date:
-------------------
--------------------------------------
(Employee's Signature)
--------------------------------------
(Type/Print Employee's Name)
<PAGE> 96
EXHIBIT K
FORM OF REGISTRATION RIGHTS AGREEMENT
Please see Exhibit 10.1 to Registrant's Form 8-K
<PAGE> 1
EXHIBIT 10.1
SIMULATION SCIENCES INC.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of March 26, 1997 by and among Simulation Sciences Inc., a
Delaware corporation (the "Company"), Visual Solutions, Inc., a Texas
Corporation ("VSI"), and each of the individuals set forth in the Schedule of
Stockholders attached as Exhibit A hereto (each, a "Stockholder").
RECITALS
A. The Company and the Stockholders are parties to an Asset
Purchase Agreement dated as of March 24, 1997 (the "Asset Purchase Agreement"),
pursuant to which the Company has issued to VSI shares of the Company's Common
Stock (the "Shares"). Upon the dissolution of VSI, the Shares will be
distributed to the Stockholders.
B. This agreement and the registration rights arrangements herein
are part of the terms and conditions of the Asset Purchase Agreement.
C. The Company has previously entered into a Registration Rights
Agreement, dated December 17, 1993 with certain individual and entities (the
"Existing Registration Rights Agreement"). Such agreement is attached hereto
as Exhibit B. Pursuant to Section 2.11 of the Existing Registration Rights
Agreement, the Company has agreed not to grant registration rights to entities
or individuals that are superior to the registration rights granted under that
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth and set forth in the Asset Purchase Agreement, the
parties, intending legally to be bound, hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings ascribed to them below:
(a) the terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act (and any post-effective
amendments filed or required to be filed) and the declaration or ordering of
effectiveness of such registration statement;
(b) "Registrable Securities" means (i) the Shares
received by VSI, or by the Stockholders to the extent VSI distributes such
Shares to them, that are not or no longer are "Escrow Shares" pursuant to the
Escrow Agreement among the Escrow Agent, Company and the representative for VSI
and the Stockholders and (ii) any securities issued or issuable in respect of
or in exchange for any
<PAGE> 2
of the Shares referred to in clause (i) above by way of a stock dividend or
stock split or in connection with a combination of shares of the Shares,
recapitalization, reclassification, merger, consolidation or exchange offer.
For purposes of this Agreement, a Registrable Security ceases to constitute a
Registrable Security upon the earliest to occur of (i) when such Registrable
Security shall have been effectively registered under the Securities Act of
pursuant to the Registration Statement, (ii) when such Registrable Security
shall have been sold pursuant to Rule 144 (or any successor provision) under
the Securities Act, (iii) when such Registrable Security shall have been
otherwise transferred and a new certificate for such Registrable Security not
bearing a legend restricting further transfer shall have been delivered by the
Company, (iv) with respect to a Stockholder, on the date, in the opinion of
counsel to the Company, on which all of such Stockholder's remaining
Registrable Securities could be sold in any 90-day period pursuant to Rule 144
under the Securities Act or pursuant to any similar or successor rule or
exemption from registration or (v) when such Registrable Security shall have
ceased to be outstanding;
(c) "Registration Expenses" shall mean all expenses
incurred by the Company in compliance with Section 6 or Section 7 of this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, fees and
expenses of one counsel in an amount not to exceed $15,000, blue sky fees and
expenses and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company); provided, however,
that the Company shall not be required to pay any Registration Expenses if, as
a result of the withdrawal of a request for registration under Section 6, the
registration statement does not become effective, in which case Stockholders
shall bear such Registration Expenses pro-rata based on the number of shares to
have been registered;
(d) "Registration Statement" shall mean the applicable
registration statement filed by the Company to effect the registration,
qualification or compliance contemplated herein; and
(e) "Restricted Securities" shall mean the securities of
the Company required to bear the legend set forth in Section 3 of this
Agreement;
(f) "Securities Act" shall mean the Securities Act of
1933, as amended.
2. RESTRICTIONS. The Shares shall not be sold, assigned,
transferred or pledged except upon the conditions specified in this Agreement,
which conditions are intended to ensure compliance with the provisions of the
Securities Act. The Stockholder will cause any proposed purchaser, assignee,
transferee or pledgee of the Shares to agree to take and hold such securities
subject to the provisions and upon the conditions specified in this Agreement.
3. RESTRICTIVE LEGEND. Each certificate representing (a) the
Shares and (b) any other securities issued in respect of the Shares upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of Section 4 below)
be stamped or otherwise imprinted with a legend in substantially the following
form (in addition to any legend required under applicable state securities
laws):
-2-
<PAGE> 3
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE
SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR
TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SAID ACT."
Each Stockholder consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Restricted
Securities in order to implement the restrictions on transfer established under
this agreement.
4. NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Agreement. Prior to any proposed
sale, assignment, transfer or pledge of any Restricted Securities, unless there
is in effect a registration statement under the Securities Act covering the
proposed transfer, the holder thereof shall give written notice to the Company
of such holder's intention to effect such transfer, sale, assignment or pledge.
Each such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied at such holder's expense by either (a) an unqualified written
opinion of legal counsel who shall, and whose legal opinion shall be,
reasonably satisfactory to the Company, addressed to the Company, to the effect
that the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (b) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, or (c) any other evidence reasonably
satisfactory to counsel to the Company, whereupon the holder of such Restricted
Securities shall be entitled to transfer such Restricted Securities in
accordance with the terms of the notice delivered by the holder to the Company.
Each certificate evidencing the Restricted Securities transferred as above
provided shall bear, except if such transfer is made pursuant to Rule 144, the
appropriate restrictive legends set forth in this Agreement, except that such
certificate shall not bear such restrictive legend if, in the opinion of
counsel for such holder and the Company, such legend is not required in order
to establish compliance with any provisions of the Securities Act.
5. SUBORDINATION OF REGISTRATION RIGHTS TO PRIOR AGREEMENT. The
parties to this Agreement agree that notwithstanding the provisions herein and
the rights and obligations hereunder, that the rights of registration described
under Section 6 or Section 7 of this Agreement shall be subordinate to the
rights granted to certain stockholders of the Company under the Existing
Registration Rights Agreement attached hereto as Exhibit B.
6. REQUESTED REGISTRATION. From the time the Company is first
eligible to use Form S-3 to register the Shares, the holders of a majority of
the Shares shall have the right to request that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3) for a public offering
of the Shares of the Registrable Securities, where the reasonably anticipated
aggregate price to
-3-
<PAGE> 4
the public of which, net of underwriting discounts and commissions, would
exceed $1,000,000. The Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form;
provided, however, that the Company shall not be required to effect more than
one registration pursuant to this Section 6. Upon receipt of such Stockholder
request, the Company will (i) promptly give written notice of the proposed
registration to all other Stockholders, and (ii) as soon as practicable, use
its best efforts to effect such registration (including, without limitation,
the execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any
Stockholder or Stockholders joining in such request as are specified in a
written request received by the Company within 30 days after receipt of written
notice from the Company. Provided, however, the Company shall not be
obligated to effect, or take any action to effect, any such registration
pursuant to this Section 6:
(a) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required
by the Securities Act or applicable rules or regulations thereunder;
(b) After the Company has effected a registration
pursuant to this Section 6 and such registration has been declared or ordered
effective and the sales of such Registrable Securities shall have closed;
(c) During the period starting with the date
sixty (60) days prior to the Company's good faith estimate of the date of
filing of, and ending on a date one hundred eighty (180) days after the
effective date of, a Company-initiated registration; or
(d) If (i) in the good faith judgment of the
Board of Directors of the Company, such registration would be seriously
detrimental to the Company, and the Board of Directors of the Company
concludes, as a result, that it is essential to defer the filing of such
registration statement at such time, and (ii) the Company shall furnish to the
Stockholder a certificate signed by the Chairman of the Board of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company for such registration
statement to be filed in the near future and that it is, therefore, essential
to defer the filing of such registration statement, then the Company shall have
the right to defer such filing for a period of not more than one hundred twenty
(120) days after receipt for the request of the Stockholder.
The registration statement filed pursuant to the request of
the Purchaser may include other securities of the Company which are held by
officers or directors of the Company, or which are held by persons who, by
virtue of agreements with the Company, are entitled to include their securities
in any such registration.
-4-
<PAGE> 5
7. COMPANY REGISTRATION.
(a) Notice of Registration. Subject to the terms of this
Agreement, if the Company shall determine to register any shares of its Common
Stock, either for its own account or the account of a security holder or
holders exercising their respective demand registration rights or otherwise,
other than: (i) a registration relating solely to employee benefit plans; or
(ii) a registration relating solely to a transaction pursuant to Rule 145
promulgated under the Securities Act; the Company will:
(i) promptly give to each Stockholder
written notice thereof; and
(ii) include in such registration (and
any related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within 10 days after receipt of such written
notice from the Company, by any Stockholder or Stockholders;
(b) Notice of Underwriting. If the registration of which
the Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Stockholders as a part of the
written notice given pursuant to Section 7(a). In such event, the right of any
Stockholder to registration shall be conditioned upon such underwriting and the
inclusion of the Registrable Securities held by such Stockholder in such
underwriting to the extent provided in this Section 7. All Stockholders
proposing to distribute their Registrable Securities through such underwriting
(together with the Company and the other stockholders distributing their
securities through such underwriting) shall enter into an underwriting
agreement with the Underwriter's Representative for such offering. The
Stockholders shall have no right to participate in the selection of the
underwriters for an offering pursuant to this Section 7.
(c) Underwriter's Representative. Notwithstanding any
other provision of this Section, if the Underwriter's Representative determines
that marketing factors require a limitation of the number of shares of Company
Common Stock to be underwritten, the Underwriter's Representative may limit the
number of Registrable Securities to be included in the registration and
underwriting. Where the Underwriter's Representative limits the number of
Registerable Securities to be included in the registration and underwriting,
the Company shall also advise all Stockholders of Registrable Securities which
would otherwise be registered and underwritten pursuant hereto, and the number
of shares of Registrable Securities that may be included in the registration
and underwriting shall be allocated among the Stockholders in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities
desired to be sold by such Stockholder. If any Stockholder disapproves of the
terms of any such underwriting, such Stockholder may elect to withdraw
therefrom by written notice to the Company and the Underwriter's
Representative. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration. Notwithstanding the
foregoing, to the extent such a reduction, or cut-back, is made by the
Underwriter's Representative, the Underwriter's Representative shall reduce the
number of shares of Registerable Securities under this Agreement to be included
in the registration and underwriting prior to any reduction, or cut-back, in
the shares registerable in such an offering pursuant to the Existing
Registration Rights Agreement.
-5-
<PAGE> 6
(d) Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section prior to the effectiveness of such registration whether or not any
Stockholder has elected to include securities in such registration.
8. REGISTRATION PROCEDURES.
(a) Company Procedures. In connection with the Company's
registration obligations pursuant to Section 6 or Section 7, the Company shall
keep such registration effective for the shorter of (i) ninety (90) days or
(ii) until Stockholder(s) has completed the distribution described in the
registration statement relating thereto; provided, however, that such 90-day
period shall be extended for a period of time equal to the period during which
Stockholder(s) refrains from selling any securities included in such
registration in accordance with provisions in Section 10 of this Agreement; and
subject to such limitation, in connection with the Company's registration
obligations pursuant to Section 6 or Section 7, the Company shall:
(i) keep each of the Stockholders whose
Registrable Securities are included in any registration advised as to the
initiation and completion of such registration;
(ii) deliver to each Stockholder, without
charge, as many copies of the then-effective Prospectus covering such
Registrable Securities and any amendments or supplements thereto as such
Stockholder may reasonably request;
(iii) cooperate with the Stockholders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold; and
(iv) prepare and file, if necessary, a
post-effective amendment or supplement to the Registration Statement or the
related Prospectus(es) or any document incorporated therein by reference or
file any other required document so that such Registration Statement and
Prospectus will not thereafter contain an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein not
misleading.
(b) Stockholder Procedures.
(i) The Company may require each
Stockholder to furnish to the Company in writing such information regarding
such Stockholder and the distribution of such Registrable Securities as the
Company may from time to time reasonably request in writing.
(ii) Each Stockholder agrees to use its
reasonable best efforts to cooperate with the Company in connection with the
preparation and filing of a Registration Statement.
-6-
<PAGE> 7
9. INDEMNIFICATION.
(a) Indemnification by the Company. The Company
will indemnify Stockholder with respect to any registration which has been
effected pursuant to Section 6 or Section 7 of this Agreement, and each
underwriter, if any, and each person who controls any underwriter, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse Stockholder, each such underwriter and each person who controls
any such underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating and defending any such claim, loss, damage,
liability or action; provided, however, that the Company will not be liable to
Stockholder in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by Stockholder
or any underwriter and stated to be specifically for use therein; provided,
further that the Company will not be liable to the underwriter in any such case
to the extent that any such claims, loss, damage, liability or expense arises
out of or is based on any untrue statement or omission based upon written
information furnished to the Company by the underwriter and stated to be
specifically for use therein.
(b) Indemnification by the Stockholders. Each
Stockholder will, if securities held by it are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors and officers and each underwriter,
if any, of the Company's securities covered by such a registration statement,
each person who controls the Company or such underwriter, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document made by such Stockholder or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements by such Stockholder therein not misleading,
and will reimburse the Company and directors, officers, partners, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement, prospectus,
offering curricular or other document in reliance upon and in conformity with
written information furnished to the Company by such Stockholder and stated to
be specifically for use therein; provided, however, that the obligations of
such Stockholder hereunder shall be limited to an amount equal to the net
proceeds to Stockholder of securities sold as contemplated herein.
(c) Conduct of Indemnification Proceedings. Each
party entitled to indemnification under this Section (the "Indemnified Party")
shall give notice to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought, and shall permit
the Indemnifying Party to assume the defense of any such claim or litigation
resulting therefrom; provided, however, that counsel
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for the Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld) and the Indemnified Party
may participate in such defense at such party's expense (unless the Indemnified
Party shall have reasonably concluded that there may be a conflict of interest
between the Indemnifying Party and the Indemnified Party in such action, in
which case the fees and expenses of counsel shall be at the expense of the
Indemnified Party); and provided further that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Section unless the Indemnifying Party is
materially prejudiced thereby. No Indemnifying Party, in the defense of any
such claim or litigation shall, except with the consent of each Indemnified
Party, shall consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
(d) Contribution.
(i) If the indemnification provided for
in this Section is held by a court of competent jurisdiction to be unavailable
to an Indemnified Party with respect to any loss, liability, claim, damage or
expenses referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such loss, liability,
claim, damage or expenses in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the Indemnified
Party on the other in connection with the statements or omissions which
resulted in such loss, liability, claim, damage or expense, as well as any
other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue (or alleged untrue)
statement of a material fact or the omission (or alleged omission) to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(ii) The foregoing indemnity agreement of
the Company and each Stockholder is subject to the condition that, insofar as
they relate to any loss, claim, liability or damage made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file with
the Securities and Exchange Commission (the "Commission") at the time the
registration statement in question becomes effective or the amended prospectus
filed with the Commission pursuant to Commission Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
underwriter if a copy of the Final Prospectus was furnished to the underwriter
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act.
(e) Other. Notwithstanding the foregoing, to the
extent that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection
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with any underwritten public offering contemplated by this Agreement are in
conflict with the foregoing provisions, the provisions in such underwriting
agreement shall be controlling.
10. "MARKET STAND-OFF" AGREEMENT. Each Stockholder agrees, if
requested by the Company or an underwriter of Common Stock (or other
securities) of the Company, not to sell or otherwise transfer or dispose of,
either directly or indirectly, any Common Stock (or other securities) of the
Company held by such holder during the 90-day period following the effective
date of a registration statement of the Company filed under the Securities Act.
If requested by the underwriters, each Stockholder shall
execute a separate agreement to the foregoing effect. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject
to the foregoing restriction until the end of said 90-day period. The
provisions of this Section shall be binding upon any transferee who acquires
Registrable Securities, whether or not such transferee is entitled to the
registration rights provided hereunder.
Notwithstanding the foregoing, this Section 10 shall apply to
only the first two registration statements filed by the Company in each
calendar year with respect to which the Company or an underwriter makes such
"lock-up" request.
11. NO SUPERIOR RIGHTS. The Company hereby agrees that it will
not grant registration rights in the future to any individual or entity that
are superior to the rights granted hereunder; provided however, the parties
agree that pursuant to Section 5, the rights of registration described under
Section 6 and Section 7 of this Agreement are subordinate to the registration
rights granted under the Existing Registration Rights Agreement.
12. MISCELLANEOUS.
(a) Further Assurances. The parties agree to execute
such further instruments and to take such further action as may reasonably be
necessary to carry out the intent of this Agreement.
(b) Governing Law. The construction and performance of
this Agreement shall be governed by and construed in accordance with the laws
of the State of California (without regard to the choice of law provisions
thereof).
(c) Notices. Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given upon personal
delivery (including by express courier) or upon deposit in the United States
Post Office, by First Class mail with postage and fees prepaid, addressed to
each individual Stockholder at his or her address shown on the Company's
employment records and to the Company at the address of its principal corporate
offices (attention: Secretary) or at such other address as such party may
designate by ten (10) days' advance written notice to the other party.
(d) Assignment. The Company may assign its rights and
delegate its duties under this Agreement. This Agreement shall inure to the
benefit of the successors and assigns of the Company and,
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<PAGE> 10
subject to the restrictions on transfer herein set forth, be binding upon
Stockholders, their heirs, executors, administrators, successors and assigns.
The rights of Stockholders under this Agreement may be assigned only with the
prior written consent of the Company.
(e) Waiver. Either party's failure to enforce any
provision or provisions of this Agreement shall not in any way be construed as
a waiver of any such provision or provisions, nor prevent that party thereafter
from enforcing each and every other provision of this Agreement. The rights
granted both parties herein are cumulative and shall not constitute a waiver of
either party's right to assert all other legal remedies available to it under
the circumstances.
(f) Advice of Counsel. Each Stockholder has reviewed
this Agreement in its entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Agreement and fully understands all provisions
hereof.
(g) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original and all of which
together shall constitute one instrument.
(h) Entire Agreement. This Agreement together with the
Asset Purchase Agreement represent the entire agreement between the parties
with respect to the registration rights of Stockholders for the Company's
Common Stock received by the Stockholders pursuant to the Asset Purchase
Agreement, may be modified or amended only in writing signed by the Company and
the Stockholders holding a majority of the Shares, and satisfies all of the
Company's obligations to Stockholders with regard to the issuance or sale of
securities.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
"COMPANY" SIMULATION SCIENCES INC.
By: /s/ L. Ronald Trepp
-----------------------------------------
Name: L. Ronald Trepp
---------------------------------------
Title: Vice President, Finance
--------------------------------------
"VISUAL SOLUTIONS" VISUAL SOLUTIONS, INC.
By: /s/ John L. Dial II
-----------------------------------------
Name: John L. Dial II
---------------------------------------
Title: President
--------------------------------------
"STOCKHOLDERS"
/s/ John L. Dial II, /s/ Donald L. Miller,
---------------------------------------------
/s/ Christopher E. Glass, /s/ Mark G. Brosius
---------------------------------------------
Signature
John L. Dial II, Donald L. Miller,
---------------------------------------------
Christopher E. Glass, Mark G. Brosius
---------------------------------------------
Print Name
---------------------------------------------
---------------------------------------------
Address
[SIMULATION SCIENCES INC. REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]
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EXHIBIT A
SCHEDULE OF STOCKHOLDERS
(1) John L. Dial, II
(2) Mark G. Brosius
(3) Donald L. Miller
(4) Christopher E. Glass
<PAGE> 13
EXHIBIT B
EXISTING REGISTRATION RIGHTS AGREEMENT
The Registrant hereby incorporates by reference its Exhibit 10.8 to its
Registration on Form S-1 filed with the Securities and Exchange Commission on
August 29, 1996, File Number 333-11017.
