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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NEW ERA OF NETWORKS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-1234845
(State of incorporation) (I.R.S. Employer Identification No.)
7400 EAST ORCHARD ROAD, SUITE 230
ENGLEWOOD, CO 80111
(303) 694-3933
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
GEORGE F. (RICK) ADAM, JR.
CHIEF EXECUTIVE OFFICER
NEW ERA OF NETWORKS, INC.
7400 EAST ORCHARD ROAD, SUITE 230
ENGLEWOOD, CO 80111
(303) 694-3933
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
MARK A. BERTELSEN, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(650) 493-9300
Approximate date of commencement of proposed sale to the public:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SHARE(1) PRICE(1) FEE
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Common Stock, par value $0.0001 1,515,123 $13.31 $20,170,075 $5,610
per share
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(1) Estimated solely for the purpose of computing the registration fee
required by Section 6(b) of the Securities Act and computed pursuant to
Rule 457(c) under the Securities Act based upon the average of the high
and low prices of the Common Stock on July 28, 1999, as reported on The
Nasdaq National Market.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRATION
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(a), MAY DETERMINE.
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PROSPECTUS
(Subject to completion, dated August 4, 1999)
1,515,123 Shares
NEW ERA OF NETWORKS, INC.
Common Stock
---------------
This prospectus is part of a registration statement that we filed with the
SEC relating to the public offering of 1,515,123 shares (the "Shares") of our
common stock that are held by some of our current stockholders. We issued such
shares to these selling stockholders in connection with the acquisitions of D&M
(Asia) Ltd., a Hong Kong corporation, Database & Management (S) Pte. Ltd., a
Singapore corporation, SLI International AG, a Swiss corporation, Convoy
Corporation, a Delaware corporation and Microscript, Inc., a Massachusetts
corporation. The sale of the Shares is not being underwritten.
Our common stock is listed on The Nasdaq Stock Market's National Market
under the symbol "NEON." On August 2, 1999, the last sale price of our common
stock was $14.4375 per share.
THIS OFFERING INVOLVES MATERIAL RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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Prospectus dated August 4, 1999
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TABLE OF CONTENTS
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WHERE YOU CAN FIND MORE INFORMATION ............................. 2
FORWARD-LOOKING STATEMENTS ...................................... 3
THE COMPANY ..................................................... 4
RISK FACTORS .................................................... 5
USE OF PROCEEDS ................................................. 11
SELLING STOCKHOLDERS ............................................ 11
PLAN OF DISTRIBUTION ............................................ 13
LEGAL MATTERS ................................................... 14
EXPERTS ......................................................... 14
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND IN ANY ACCOMPANYING PROSPECTUS SUPPLEMENT. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
THE SHARES OF COMMON STOCK ARE NOT BEING OFFERED IN ANY JURISDICTION
WHERE AN OFFER IS NOT PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THE DOCUMENTS.
WHERE YOU CAN FIND MORE INFORMATION
o GOVERNMENT FILINGS. We file annual, quarterly and special reports and
other information with the Securities and Exchange Commission (the
"SEC"). You may read and copy any document that we file at the SEC's
public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also
available to you free of charge at the SEC's web site at
http://www.sec.gov.
o STOCK MARKET. The common stock is traded on The Nasdaq Stock Market's
National Market. Material filed by NEON can be inspected at the offices
of The Nasdaq Stock Market, Reports Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
o INFORMATION INCORPORATED BY REFERENCE. The SEC allows us to
"incorporate by reference" the information we file with them, which
means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file
later with the SEC will automatically update and supersede previously
filed information, including information contained in this document.
We incorporate by reference the documents listed below and any future
filings we will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, until this
offering has been completed:
1. Our Annual Report on Form 10-K for the fiscal year
ended December 31, 1998.
2. Our Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1999.
3. Our Current Report on Form 8-K/A filed on November
18, 1998.
4. Our Current Report on Form 8-K filed on June 24,
1999.
5. Our Current Report on Form 8-K filed on July 13,
1999.
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6. The description of our common stock, which is
contained in our registration statement on Form 8-A
filed on January 23, 1997 and amended by our
registration statement on Form 8-A/A filed on June 5,
1997.
7. The description of our preferred shares rights, which
is contained in our registration statement on Form
8-A filed on August 14, 1998 and amended by our
registration statement on Form 8-A/A filed on August
17, 1998.
You may request free copies of these filings by writing or telephoning
us at the following address:
New Era of Networks, Inc.
7400 East Orchard Road, Suite 230
Englewood, CO, 80111
Attention: Investor Relations
(303) 694-3933
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated into this prospectus by
reference contain forward-looking statements. Such forward-looking statements
are not historical facts but rather are based on current expectations, estimates
and projections about NEON's industry, management's beliefs, and assumptions
made by management. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates" and variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and other factors, some of which are beyond our control,
that are difficult to predict and could cause actual results to differ
materially from those expressed or forecasted in such forward-looking
statements. Such risks and uncertainties include those described in "Risk
Factors" in this prospectus and in the documents incorporated into this
prospectus by reference. You are cautioned not to place undue reliance on these
forward-looking statements which reflect management's view only as of the date
of this prospectus. We undertake no obligation to update such statements or
publicly release the result of any revisions to these forward-looking statements
which it may make to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
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THE COMPANY
New Era of Networks, Inc. ("NEON") develops, markets and supports
enterprise application integration ("EAI") software and services. Our
architectural platform provides organizations with a structured software
platform for the rapid and efficient integration and ongoing maintenance of
disparate systems and applications across the enterprise. Our packaged software
solutions support EAI across popular hardware platforms, operating systems, and
database types. NEON has four product offerings: MQSeries Integrator, NEON
Integration Adapters, NEON Integration Options and NEON Integration
Applications.
RECENT EVENTS
Second Quarter Results. On July 20, 1999, we announced that our
second-quarter revenues were $26.1 million, compared to revenues of $11.5
million for the same period last year. We reported a per-share loss of 28 cents,
compared to a loss of 11 cents for the second quarter of 1998. Excluding
acquisition-related charges and amortization, our loss for the quarter, net of
tax effect, was 19 cents, compared to earnings of 5 cents in the second quarter
of 1998. After our July 6, 1999 announcement of anticipated second-quarter
results, several lawsuits alleging violation of federal securities laws have
been filed against the Company and various officers. The Company believes that
these lawsuits are without merit, and we will respond appropriately.
Acquisitions. We announced in April the acquisition of VIE Systems, a
privately held EAI company with a strong presence in travel and transportation,
financial services and retail markets. Also in April, we announced the
acquisition of SLI International AG, a worldwide provider of SAP R/3
implementation, training, support and business consulting services. In June, we
announced the acquisitions of Convoy Corporation and MicroScript Inc. Convoy
Corporation is a worldwide provider of application integration software and
professional services for PeopleSoft applications. MicroScript Inc. is the
leading supplier of application integration software on the Microsoft platforms.
Their primary markets are healthcare and hospitality. In connection with the
acquisitions we have made in the last nine months, we are re-assessing our cost
structure. We have already consolidated certain of our offices and have
terminated a number of employees in connection with those consolidations, and
expect this to continue. As a result of these efforts, we plan to take a
restructuring charge in the range of $3-$4 million in the third quarter of 1999.
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RISK FACTORS
As described by the following factors, past financial performance
should not be considered a reliable indicator of future performance and
investors should not use historical trends to anticipate results or trends in
future periods.
OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY AND WE MAY NOT BE ABLE TO MAINTAIN
OUR HISTORICAL GROWTH RATES.
Although we have had significant revenue growth in recent quarters,
such growth rates may not be sustainable, and you should not use these past
results to predict future operating margins and results. Our quarterly operating
results have fluctuated significantly in the past and may vary significantly in
the future. Our future operating results will depend on many factors, including
the following:
- the continued growth of the Enterprise Application Integration
("EAI") software market;
- the size of the orders for our products, and the timing of
such orders;
- potential delays in our implementations at customer sites;
- continued development of indirect distribution channels;
- increased demand for our products;
- the timing of our product releases;
- competition;
- the effects of global economic uncertainty on capital
expenditures for software;
- the effects of Year 2000 issues on software purchases.
Quarterly revenues and operating results depend upon the volume and
timing of customer contracts received during a given quarter, and the percentage
of each contract which we are able to recognize as revenue during each quarter,
each of which is difficult to forecast. In addition, as is common in the
software industry, a substantial portion of our revenues in a given quarter
historically have been recorded in the third month of that quarter, with a
concentration of such revenues in the last two weeks of the third month. If this
trend continues, any failure or delay in the closing of orders during the last
part of a quarter will have a material adverse effect on our business.
As a result of these and other factors, we believe that
period-to-period comparisons of our historical results of operations are not a
good predictor of our future performance. If our future operating results are
below the expectations of stock market analysts, our stock price may decline.
SOFTWARE LICENSE REVENUE GROWTH IS INCREASINGLY DEPENDENT ON OUR RELATIONSHIP
WITH IBM.
Our revenue growth for 1998 and the first quarter of 1999 reflected
strong sales of MQIntegrator through IBM's distribution and reseller channel.
For the first quarter of 1999, royalty revenue from IBM sales of MQIntegrator
accounted for a significant portion of our total software license revenue. In
the first quarter, IBM adopted MQIntegrator as an IBM-branded product known as
MQSeries Integrator. As an IBM-branded product, IBM has assumed production and
fulfillment obligations which is reflected in the royalty structure. IBM
distributors and resellers will sell MQSeries Integrator and we will resell it
both directly and through our indirect channels. We expect that IBM will account
for an increasing percentage of our software license revenue in the remainder of
1999. Accordingly, we are more dependent on IBM's management of the MQSeries
Integrator product, and any delay or shortfall in revenues from IBM, or in our
ability to report revenue, could have a material adverse effect on our business
and operating results.
IF OUR SALES CYCLE IS LONGER THAN WE ANTICIPATE, OUR OPERATING RESULTS MAY
SUFFER.
Our customers typically take a long time to evaluate our products.
Therefore the timing of license revenue is difficult to predict. A sale of our
products to a customer typically involves a significant technical evaluation and
a commitment of capital and other resources by the customer. This evaluation
process frequently results in a sales cycle that lasts several months.
Additional delays are caused by customers' internal procedures to approve large
capital expenditures and to test, implement and accept new technologies that
affect key operations within their organization. Our operating expense levels
are relatively fixed in the short-term and are based in part on expectations of
future revenues.
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Consequently, any delay in the recognition of revenue due to a longer sales
cycle caused by these factors could result in operating losses.
WE HAVE A SHORT OPERATING HISTORY AND A HISTORY OF OPERATING LOSSES.
An investor in our common stock must evaluate the risks, uncertainties,
expenses and difficulties frequently encountered by early stage companies in
rapidly evolving markets. We have had only a limited operating history upon
which an evaluation of our Company and its prospects can be based. Prior to
1996, we recorded only nominal product revenue, and we have not been profitable
on an annual basis. At December 31, 1998, our Company had an accumulated deficit
of approximately $20 million (which includes acquisition-related costs). To
address these risks and uncertainties, we must do the following:
- successfully implement our sales and marketing strategy;
- expand our direct sales channels;
- further develop our indirect distribution channels;
- respond to competition;
- continue to attract and retain qualified personnel;
- continue to develop and upgrade our products and technology
more rapidly than competitors;
- commercialize our products and services with future
technologies.
We may not successfully implement any of our strategies or successfully
address these risks and uncertainties. Even if we accomplish these objectives we
may not be profitable in the future.
FAILURE TO ADD CUSTOMERS OR EXPAND INTO NEW MARKETS MAY HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS.
A significant portion of our revenue has come from a small number of
large purchasers. For example, in 1998 our top ten customers accounted for 38%
of total revenues. In 1998, Industrial Bank of Japan accounted for approximately
10% of our total revenues. Historically, our revenues have been derived
primarily from sales to large banks and financial institutions. For example,
sales to large banks and financial institutions accounted for 57% of total
revenues in 1998 and approximately 72% of total revenues in 1997. These
customers or other customers may not continue to purchase our products. Our
failure to add new customers that make significant purchases of our products and
services would have a material adverse effect on our business, financial
condition and results of operations.
While we have developed experience marketing our products to financial
institutions, we have less experience with other vertical market segments. New
market segments that we are currently targeting are likely to have significantly
different characteristics than the financial institutions segment. As a result,
we may change our pricing structures, sales methods, sales personnel, consulting
services and customer support. We may not be successful in selling our products
and services to the additional segments targeted. Our inability to expand sales
of our products and services into these additional markets will materially
adversely affect our business.
OUR GROWTH IS DEPENDENT UPON THE SUCCESSFUL DEVELOPMENT OF OUR DIRECT AND
INDIRECT SALES CHANNELS.
We sell our products primarily through our direct sales force and we
support our customers with our internal technical and customer support staff. We
will continue to rely on our ability to recruit and train additional sales
people and qualified technical support personnel. Our ability to achieve
significant revenue growth in the future will greatly depend on our ability to
recruit and train sufficient technical, customer and direct sales personnel,
particularly additional sales personnel focusing on the new vertical market
segments that we target. We have in the past and may in the future experience
difficulty in recruiting qualified sales, technical and support personnel. Our
inability to rapidly and effectively expand our direct sales force and our
technical and support staff could materially adversely affect our business.
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We believe that future growth also will depend on developing and
maintaining successful strategic relationships with distributors, resellers, and
systems integrators. Our strategy is to continue to increase the proportion of
customers served through these indirect channels. We are currently investing,
and plan to continue to invest, significant resources to develop these indirect
channels. This could adversely affect our operating results if these efforts do
not generate license and service revenues necessary to offset such investment.
Also, our inability to recruit and retain qualified distributors, resellers and
systems integrators could adversely affect our results of operations. Another
risk is that because lower unit prices are typically charged on sales made
through indirect channels, increased indirect sales could adversely affect our
average selling prices and result in lower gross margins.
OUR OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON OUR SUITE OF EAI PRODUCTS.
A substantial majority of our revenues come from the NEON EAI suite of
products and related services, and we expect this pattern to continue.
Accordingly, our future operating results will depend on the demand for our
suite of EAI products and related services by future customers, including new
and enhanced releases that are subsequently introduced. There can be no
assurance that the market will continue to demand our current products or that
we will be successful in marketing any new or enhanced products. If our
competitors release new products that are superior to our products in
performance or price, demand for our products may decline. A decline in demand
for NEON as a result of competition, technological change or other factors would
have a material adverse effect on our business, financial condition and results
of operations.
INABILITY TO INTEGRATE ACQUIRED COMPANIES MAY INCREASE THE COSTS OF RECENT
ACQUISITIONS.
We may from time to time acquire companies with complementary products
and services in the application integration or other related software markets.
Between September 1997 and June 1999, we acquired eight companies.
These acquisitions will expose us to increased risks and costs, including the
following:
- assimilating new operations, systems, technology and
personnel;
- diverting financial and management resources from existing
operations.
We may not be able to generate sufficient revenues from any of these
acquisitions to offset the associated acquisition costs. We will also be
required to maintain uniform standards of quality and service, controls,
procedures and policies. Our failure to achieve any of these standards may hurt
relationships with customers, employees, and new management personnel. In
addition, our future acquisitions may result in additional stock issuances which
could be dilutive to our stockholders.
We may also evaluate joint venture relationships with complementary
businesses. Any joint venture we enter into would involve many of the same risks
posed by acquisitions, particularly those risks associated with the diversion of
resources, the inability to generate sufficient revenues, the management of
relationships with third parties, and potential additional expenses, any of
which could have a material adverse effect on our financial condition and
results of operations.
THERE ARE MANY RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.
We continue to expand our international operations, and these efforts
require significant management attention and financial resources. Each version
of our product also has to be localized within each country. We have committed
resources to the opening and integration of additional international sales
offices and the expansion of international sales and support channels. Our
efforts to develop and expand international sales and support channels may not
be successful. International sales are subject to a number of risks, including
the following:
- longer payment cycles;
- unexpected changes in regulatory requirements;
- difficulties and expenses associated with complying with a
variety of foreign laws;
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- import and export restrictions and tariffs;
- difficulties in staffing and managing foreign operations;
- difficulty in accounts receivable collection and potentially
adverse tax consequences;
- currency fluctuations;
- currency exchange or price controls;
- political and economic instability abroad.
Additionally, intellectual property may be more difficult to protect
outside of the United States. International sales can also be affected to a
greater extent by seasonal fluctuations resulting from the lower sales that
typically occur during the summer months in Europe and other parts of the world.
In addition, the market for our products is not as developed outside of North
America. We may not be able to successfully penetrate international markets or
if we do, there can be no assurance that we will grow these markets at the same
rate as in North America.
OUR FAILURE TO MANAGE GROWTH OF OPERATIONS MAY ADVERSELY AFFECT US.
We must plan and manage effectively in order to successfully offer
products and services and implement our business plan in a rapidly evolving
market. We continue to increase the scope of our operations domestically and
internationally and have grown our headcount substantially. For example, at
January 1, 1996, we had a total of 35 employees and at July 27, 1999 we had a
total of 1050 employees. We may further expand domestically or internationally
through internal growth or through acquisitions of related companies and
technologies. This growth will continue to place a significant strain on our
management systems and resources.
For us to effectively manage our growth, we must continue to enact the
following measures:
- improve our operational, financial and management controls;
- improve our reporting systems and procedures;
- install new management and information control systems;
- expand, train and motivate our workforce.
In particular, we are currently migrating our existing accounting
software to a packaged application that will allow greater flexibility in
reporting and tracking results. If we fail to install this software in an
efficient and timely manner or if the new systems fail to adequately support our
level of operations, then we could incur substantial additional expenses to
remedy such failure.
WE MUST KEEP PACE WITH TECHNOLOGICAL CHANGE TO REMAIN COMPETITIVE.
The market for our products is characterized by rapid technological
change, frequent new product introductions and enhancements, changes in customer
demands and evolving industry standards. Our existing products could be rendered
obsolete if we fail to keep up in any of these ways. We have also found that the
technological life cycles of our products are difficult to estimate, partially
because they may vary according to the particular application or vertical market
segment. We believe that our future success will depend upon our ability to
continue to enhance our current product line while we concurrently develop and
introduce new products that keep pace with competitive and technological
developments. These developments require us to continue to make substantial
product development investments.
Existing Products. We currently serve a customer base with a wide
variety of hardware, software, database, and networking platforms. To gain broad
market acceptance, we believe that we will have to support our products on a
variety of platforms. Our success will depend, among others, on the following
factors:
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- our ability to integrate our products with multiple platforms,
especially relative to our competition;
- the portability of our products, particularly the number of
hardware platforms, operating systems and databases that our
products can source or target;
- the integration of additional software modules under
development with existing products;
- our management of software development being performed by
third-party developers.
Future Products. There can be no assurance that we will be successful
in developing and marketing future product enhancements or new products that
respond to technological changes, shifting customer preferences, or evolving
industry standards. We may experience difficulties that could delay these
products. If we are unable to develop and introduce new products or enhancements
of existing products in a timely manner or if we experience delays in the
commencement of commercial shipments of new products and enhancements, then
customers may forego purchases of our products and purchase those of our
competitors.
OUR FAILURE TO MAINTAIN CLOSE RELATIONSHIPS WITH KEY SOFTWARE VENDORS WILL
ADVERSELY AFFECT OUR PRODUCT OFFERING.
We believe that in order to provide competitive solutions for
heterogeneous, open computing environments, it is necessary to develop, maintain
and enhance close relationships with a wide range of vendors, including
database, Enterprise Resource Planning, supply chain and Electronic Data
Interchange software vendors, as well as hardware and operating system vendors.
There can be no assurance that we will be able to maintain our existing
relationships or develop additional relationships with such vendors. Our failure
to do so could adversely affect the portability of our products to existing and
new platforms and databases and the timing of the release of new and enhanced
products.
OUR INABILITY TO ATTRACT AND RETAIN PERSONNEL MAY ADVERSELY AFFECT US.
Our success greatly depends on the continued service of our key
technical, sales and senior management personnel. None of these persons are
bound by an employment agreement. The loss of any of our senior management or
other key research, development, sales and marketing personnel, particularly if
lost to competitors, could have a material adverse effect on our future
operating results. In particular George F. (Rick) Adam, our Chief Executive
Officer, and Harold A. Piskiel, our Chief Technology Officer, would be difficult
to replace. Our future success will depend in large part upon our ability to
attract, retain and motivate highly skilled employees. We face significant
competition for individuals with the skills required to perform the services we
offer. We cannot assure that we will be able to retain sufficient numbers of
these highly skilled employees. Because of the complexity of the EAI software
market, we have in the past experienced a significant time lag between the date
on which technical and sales personnel are hired and the time at which such
persons become fully productive, and we expect this pattern to continue.
OUR FAILURE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS MAY ADVERSELY AFFECT
US.
Our success and ability to compete is dependent in part upon our
proprietary technology. We rely on a combination of copyright, trademark and
trade secret laws, as well as confidentiality agreements and licensing
arrangements, to establish and protect our proprietary rights. We presently have
no patents, but we have three patent applications pending. Despite our efforts
to protect our proprietary rights, existing copyright, trademark and trade
secret laws afford only limited protection. In addition, the laws of certain
foreign countries do not protect our rights to the same extent as do the laws of
the United States. Attempts may be made to copy or reverse engineer aspects of
our products or to obtain and use information that we regard as proprietary.
Accordingly, there can be no assurance that we will be able to protect our
proprietary rights against unauthorized third-party copying or use. Any
infringement of our proprietary rights could materially adversely affect our
future operating results. Furthermore, policing the unauthorized use of our
products is difficult and litigation may be necessary in the future to enforce
our intellectual property rights, to protect our trade secrets or to determine
the validity and scope of the proprietary rights of others. Such litigation
could result in substantial costs and diversion of resources and could have a
material adverse effect on our future operating results.
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INTELLECTUAL PROPERTY CLAIMS CAN BE COSTLY AND RESULT IN THE LOSS OF SIGNIFICANT
RIGHTS.
It is also possible that third parties will claim that we have
infringed their current or future products. We expect that EAI software
developers will increasingly be subject to infringement claims as the number of
products in different industry segments overlap. Any claims, with or without
merit, could be time-consuming, result in costly litigation, cause product
shipment delays, or require us to enter into royalty or licensing agreements,
any of which could have a material adverse effect upon our operating results.
There can also be no assurance that such royalty or licensing agreements, if
required, would be available on terms acceptable to us, if at all. There can be
no assurance that legal action claiming patent infringement will not be
commenced against us, or that we would prevail in such litigation given the
complex technical issues and inherent uncertainties in patent litigation. In the
event a patent claim against us was successful and we could not obtain a license
on acceptable terms or license a substitute technology or redesign to avoid
infringement, our business, financial condition and results of operations would
be materially adversely affected.
GLOBAL ECONOMIC UNCERTAINTY MAY AFFECT THE CAPITAL EXPENDITURES OF OUR
CUSTOMERS.
The EAI software market could be negatively impacted by certain generic
factors, including global economic difficulties and uncertainty, reductions in
capital expenditures by large customers, and increasing competition. These
factors could in turn give rise to longer sales cycles, deferral or delay of
customer purchasing decisions, and increased price competition. The presence of
such factors in the EAI software market could adversely affect our operating
results.
YEAR 2000 RISKS MAY RESULT IN MATERIAL ADVERSE EFFECTS ON OUR BUSINESS.
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. Beginning in the
year 2000, these code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, in a little
over a year, computer systems and/or software products used by many companies
may need to be upgraded to comply with such year 2000 requirements. While we
have assessed our products, services and internal systems, certain internal
financial packages have not yet been implemented and may require further
assessment by us. We believe we are currently expending sufficient resources to
review our products and services, as well as our internal management information
system in order to remedy those products, services and systems that are not year
2000 compliant. We expect such modifications will be made on a timely basis and
we do not believe that the cost of such modifications will have a material
effect on our operating results. There can be no assurance, however, that we
will be able to modify such products, services and systems in a timely and
successful manner to comply with the year 2000 requirements, which could have a
material adverse effect on our operating results. Moreover, we believe that some
customers may be purchasing our products as an interim solution to their year
2000 needs until their current suppliers reach compliance. Conversely, year 2000
issues could cause a significant number of companies, including our current
customers, to reevaluate their current system needs and as a result consider
switching to other systems and suppliers. Any of the foregoing could result in a
material adverse effect on our business, operating results and financial
condition. Additionally, during the next twelve months there is likely to be an
increased customer focus on addressing year 2000 issues, creating the risk that
customers may reallocate capital expenditures to fix year 2000 problems of
existing systems. If customers defer purchases of our software because of such a
reallocation, it could adversely affect our operating results. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
OUR STOCK PRICE HAS BEEN HIGHLY VOLATILE.
The trading price of our common stock has fluctuated significantly
since our initial public offering in June 1997. In addition, the trading price
of our common stock could be subject to wide fluctuations in response to
quarterly variations in operating results, announcements of technological
innovations or new products by us or our competitors, developments with respect
to patents or proprietary rights, changes in financial estimates by securities
analysts and other events or factors. In addition, the stock market has
experienced volatility that has particularly affected the market prices of
equity securities of many high technology companies and that often has been
unrelated or disproportionate to the operating performance of such companies.
These broad market fluctuations may adversely affect the market price of our
common stock.
10
<PAGE> 12
ADOPTION OF THE EURO PRESENTS UNCERTAINTIES FOR OUR COMPANY.
In January 1999, the new "Euro" currency is scheduled to be introduced
in certain European countries that are part of the European Monetary Union, or
EMU. During 2002, all EMU countries are expected to be operating with the Euro
as their single currency. A significant amount of uncertainty exists as to the
effect the Euro will have on the marketplace generally and, additionally, all of
the final rules and regulations have not yet been defined and finalized by the
European Commission with regard to the Euro currency. We are currently assessing
the effect the introduction of the Euro will have on our internal accounting
systems and the sales of our products. We are not aware of any material
operational issues or costs associated with preparing our internal systems for
the Euro. However, we do utilize third party vendor equipment and software
products that may or may not be EMU compliant. Although we are currently taking
steps to address the impact, if any, of EMU compliance for such third party
products, the failure of any critical components to operate properly post-Euro
may have an adverse effect on the business or results of operations of our
Company or require us to incur expenses to remedy such problems.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock by
the Selling Stockholders. All net proceeds from the sale of the common stock
covered by this prospectus will go to the Selling Stockholders who offer and
sell their shares.
SELLING STOCKHOLDERS
The following table sets forth the number of shares owned by each of
the Selling Stockholders as of July 27, 1999. None of the Selling Stockholders
has had a material relationship with NEON within the past three years other than
as described below or as a result of the ownership of the shares or other
securities of NEON. None of the Selling Stockholders holds a number of shares
that exceeds 1% of NEON's outstanding capitalization. No estimate can be given
as to the amount of shares that will be held by the Selling Stockholders after
completion of this offering because the Selling Stockholders may offer all or
some of the shares and because there currently are no agreements, arrangements
or understandings with respect to the sale of any of the shares. The shares
offered by this prospectus may be offered from time to time by the Selling
Stockholder named below.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SHARES WHICH
SHARES MAY BE SOLD PURSUANT TO
NAME OF SELLING STOCKHOLDER BENEFICIALLY OWNED THIS PROSPECTUS (1)
- --------------------------- ------------------ -----------------------
<S> <C> <C>
Paul Actis......................... 292 225
Phillip Ciolfi..................... 222,832 42,197
26 Frost Street Trust.............. 222,832 102,025
ALCE Partners...................... 52,018 46,817
Gayla Barger....................... 197 178
Bay Partners....................... 134,350 120,915
Rod Beckstrom...................... 5,588 5,030
Tom J. Bjornson.................... 58,642 52,778
Draper & Associates II............. 130,518 117,467
Draper & Associates II............. 2,735 2,462
Timothy Draper Living Trust........ 5,007 4,507
Demian Entrekin.................... 23,603 21,243
Steve M. Entrekin.................. 7,751 6,976
Caleb E. Entrekin.................. 9,581 8,623
Charles Entrekin Trust............. 125,218 112,697
Charles Entrekin Trust............. 1,367 1,231
John Fisher........................ 10,014 9,013
Chris Herron....................... 8,568 7,712
Imperial Bank Warrant.............. 1,072 965
Steve Jurvetson.................... 2,002 1,802
Larry Kubal........................ 3,338 3,005
Labrador Ventures II............... 36,683 33,015
Evelyn Lewin....................... 146 132
</TABLE>
11
<PAGE> 13
<TABLE>
<S> <C> <C>
Eric Loos.......................... 13,716 12,345
Lysander, LLC...................... 6,676 6,009
M. Petruzzelli Trust............... 888 800
Mary Lou MacArthur................. 204 184
Katie MacKrill..................... 3,271 2,944
Mike McConnell..................... 5,628 5,066
Rich McGillicuddy.................. 886 798
Neil McGovern...................... 7,011 6,310
Oasis Ventures LLC................. 10,186 9,168
Warren Packard..................... 166 150
Jerrold Petruzzelli................ 9,366 8,430
Constantino Quintong............... 2,375 2,138
Ezra J. Roizen..................... 20,565 18,509
Charles Schuman.................... 63 57
Margaret Shiner.................... 350 315
Tina Singh......................... 630 567
Jim Smith.......................... 2,337 2,104
Carl Soane......................... 3,739 3,366
John Valencia...................... 42,269 38,043
Woodside Fund III SBIC............. 132,664 119,398
Lane Yago.......................... 387 349
Christopher F. DiTota.............. 13,845 12,461
Franz Koepper...................... 106,193 95,573
Christian Schuler.................. 18,414 16,573
Andrew Street...................... 36,705 15,600
Michael Eugene Tinworth............ 12,235 5,200
</TABLE>
- ----------
(1) Does not include an aggregate of 431,651 shares of common stock
beneficially owned by the Selling Stockholders that have been deposited
in escrow to secure the indemnification obligations of the Selling
Stockholders. A number of shares equivalent to these escrow shares have
been included in this registration statement, but they are not included
in this column of the table. A prospectus supplement will be filed to
reflect any change in the number of shares offered by the individual
selling stockholders as a result of the expiration of the escrow.
12
<PAGE> 14
PLAN OF DISTRIBUTION
We are registering all 1,515,123 shares of common stock (the "Shares")
on behalf of the Selling Stockholders. As used in this prospectus, "Selling
Stockholders" includes the pledgees, donees, transferees or other successors in
interest that receive such shares as a gift, partnership distribution or other
non-sale related transfer. The Shares may be offered and sold from time to time
by the Selling Stockholders. The Selling Stockholders will act independently of
NEON in making decisions with respect to the timing, manner and size of each
sale.
The Selling Stockholders may sell the Shares in the over-the-counter
market or otherwise, at (1) market prices prevailing at the time of sale, (2)
prices related to the prevailing market prices or (3) negotiated prices. The
Selling Stockholders may sell some or all of their Shares through:
o a block trade in which a broker-dealer may resell a portion of
the block, as principal, in order to facilitate the
transaction;
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account;
o an over-the-counter distribution in accordance with the rules
of the Nasdaq National Market;
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers; or
o in privately negotiated transactions.
To the extent required, this prospectus may be amended and supplemented from
time to time to describe a specific plan of distribution.
In connection with the distribution of the Shares, the Selling
Stockholders may also enter into hedging transactions with broker-dealers or
other financial institutions. In connection with such transactions,
broker-dealers or other financial institutions may engage in short sales of
NEON's common stock in the course of hedging the positions they assume with the
Selling Stockholders. The Selling Stockholders may also:
o sell NEON common stock short and redeliver the Shares to close
out such short positions;
o enter into option or other types of transactions that require
the Selling Stockholder to deliver the Shares to a
broker-dealer, who will then resell or transfer the Shares
pursuant to this prospectus (as supplemented or amended to
reflect such transaction); or
o loan or pledge the Shares to a broker-dealer, who may sell the
loaned shares or, in the event of default, sell the pledged
shares pursuant to this prospectus (as supplemented or amended
to reflect such transaction).
In addition, any Shares that qualify for sale pursuant to Rule 144 may
be sold under Rule 144 rather than pursuant to this prospectus.
The Selling Stockholders may negotiate and pay broker-dealers
commissions, discounts or concessions for their services. Broker-dealers engaged
by the Selling Stockholders may allow other broker-dealers to participate in
resales. However, the Selling Stockholders and any broker-dealers involved in
the sale or resale of the Shares may qualify as "underwriters" within the
meaning of the Securities Act. In addition, the broker-dealers' commissions,
discounts or concessions may qualify as underwriters' compensation under the
Securities Act. If the Selling Stockholders qualify as "underwriters," they will
be subject to the prospectus delivery requirements of Section 153 of the Act,
which may include delivery through the facilities of the NASD. NEON will pay all
expenses incident to the offering and sale of the Shares to the public other
than any commissions and discounts of underwriters, dealers or agents and any
transfer taxes.
We have advised the Selling Stockholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of Shares in the
market and to the activities of the Selling Stockholders and their affiliates.
In addition, we will make copies of this prospectus available to the Selling
Stockholders, and we have informed them of the need for delivery of copies of
this prospectus to purchasers at or prior to the time of any sale of the Shares
offered hereby. The Selling Stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.
At the time a particular offer of Shares is made, if required, a
Prospectus Supplement will be distributed that will set forth the number of
Shares being offered and the terms of the offering, including the name of any
underwriter, dealer or agent, the purchase price paid by any underwriter, any
discount, commission and other item constituting compensation,
13
<PAGE> 15
any discount, commission or concession allowed or reallowed or paid to any
dealer, and the proposed selling price to the public.
The sale of Shares by the Selling Stockholders is subject to compliance
by the Selling Stockholders with certain contractual restrictions they have with
us. There can be no assurance that the Selling Stockholders will sell all or any
of the Shares.
NEON has agreed to indemnify certain Selling Stockholders against
certain liabilities, including liabilities under the Securities Act. In return,
certain Selling Stockholders have agreed to indemnify NEON and certain related
persons against certain liabilities, including liabilities under the Securities
Act.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
NEON by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California.
EXPERTS
The financial statements of NEON as of December 31, 1996, 1997 and 1998
and for each of the three years in the period ended December 31, 1998
incorporated by reference in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
report.
The financial statements of Century Analysis Inc. as of and for the
years ended December 31, 1997 and 1996 incorporated by reference in this
prospectus from the Current Report on Form 8-K/A of New Era of Networks, Inc.
filed on November 18, 1998 have been audited by Deloitte & Touche LLP,
independent auditors as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
14
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company will pay all expenses incident to the offering and sale to the
public of the shares being registered other than any commissions and discounts
of underwriters, dealers or agents and any transfer taxes. Such expenses are set
forth in the following table. All of the amounts shown are estimates except the
Securities and Exchange Commission ("SEC") registration fee.
<TABLE>
<CAPTION>
AMOUNT TO BE
PAID BY
REGISTRANT
------------
<S> <C>
SEC registration fee .............................. $ 5,715
Legal fees and expenses ........................... 15,000
Accounting fees and expenses ...................... 10,000
Miscellaneous expenses ............................ 4,285
============
Total ................................... $ 35,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law Code authorizes a court
to award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act"). Article VII of the Registrant's Certificate of Incorporation and Article
VI of the Registrant's Bylaws provide for mandatory indemnifications of its
directors and officers and permissible indemnifications of employees and offer
agents to the maximum extent permitted by the Delaware General Corporation Law.
In addition, the Registrant has entered into Indemnification Agreements with its
officers and directors.
II-1
<PAGE> 17
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
2.1 Share Acquisition Agreement dated February 19, 1999 by and among
Registrant, D&M (Asia) Ltd., Andrew Street and Michael Eugene Tinworth.
2.2 Share Acquisition Agreement dated February 19, 1999 by and among
Registrant, Database & Management (S) Pte. Ltd., Andrew Street and
Michael Eugene Tinworth.
2.3 Share Acquisition Agreement by and among Registrant, Franz Koepper and
the Shareholders of SLI International AG dated as of April 15, 1999.
2.4 Agreement and Plan of Reorganization dated June 2, 1999 by and among
the Registrant, Convoy Corporation and Cobra Acquisition Corporation
(which is incorporated herein by reference to the exhibit filed with
the Registrant's Report on Form 8-K dated June 9, 1999).
2.5 Agreement and Plan of Reorganization dated June 15, 1999 (as amended
effective June 28, 1999) by and among Registrant, Microscript, Inc. and
NEON Acquisition Corporation (which is incorporated herein by reference
to the exhibit filed with the Registrant's Report on Form 8-K dated
June 28, 1999).
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
regarding the legality of the securities being registered.
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Deloitte & Touche LLP.
24.1 Power of Attorney (which is included on page II-3, herein).
</TABLE>
(b) Financial Statement Schedules -- NONE
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
(iii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the
maximum
II-2
<PAGE> 18
aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement.
(iv) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 19
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF DENVER, STATE OF COLORADO, ON AUGUST 4, 1999.
New Era of Networks, Inc.
By: /s/ Leonard M. Goldstein
----------------------------------------
Leonard M. Goldstein
Senior Vice President and Senior Counsel
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE
APPEARS BELOW CONSTITUTES AND APPOINTS LEONARD M. GOLDSTEIN, AS HIS TRUE AND
LAWFUL ATTORNEY-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND
RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL
CAPACITIES, TO SIGN ANY AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS)
TO THIS REGISTRATION STATEMENT, AND TO FILE SAME, WITH ALL EXHIBITS THERETO, AND
OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE
COMMISSION, GRANTING UNTO SAID ATTORNEY-IN-FACT AND AGENTS FULL POWER AND
AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY
TO BE DONE IN CONNECTION THEREWITH, AS FULLY TO ALL INTENTS AND PURPOSES AS HE
MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEY-IN-FACT AND AGENTS, OR HIS SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE
DONE BY VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/ George F. Adam, Jr. Chairman of the Board, Chief Executive July 31, 1999
- --------------------------------- Officer, President and Director (Principal
George F. Adam, Jr. Executive Officer)
/s/ Patrick Fortune President, Chief Operating Officer and Director July 31, 1999
- ---------------------------------
Patrick Fortune
/s/ Stephen E. Webb Senior Vice President and Chief Financial July 31, 1999
- --------------------------------- Officer (Principal Financial Officer)
Stephen E. Webb
/s/ Thomas P. Wilkas Vice President and Corporate Controller July 31, 1999
- --------------------------------- (Principal Accounting Officer)
Thomas P. Wilkas
/s/ Harold A. Piskiel Executive Vice President, Chief Technology July 31, 1999
- --------------------------------- Officer and Director
Harold A. Piskiel
/s/ Steven Lazarus Director July 31, 1999
- ---------------------------------
Steven Lazarus
/s/ Mark L. Gordon Director July 31, 1999
- ---------------------------------
Mark L. Gordon
/s/ Elisabeth W. Ireland Director July 31, 1999
- ---------------------------------
Elisabeth W. Ireland
/s/ Joseph E. Kasputys Director July 31, 1999
- ---------------------------------
Joseph E. Kasputys
</TABLE>
II-4
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
2.1 Share Acquisition Agreement dated February 19, 1999 by and among
Registrant, D&M (Asia) Ltd., Andrew Street and Michael Eugene Tinworth.
2.2 Share Acquisition Agreement dated February 19, 1999 by and among
Registrant, Database & Management (S) Pte. Ltd., Andrew Street and
Michael Eugene Tinworth.
2.3 Share Acquisition Agreement by and among Registrant, Franz Koepper and
the Shareholders of SLI International AG dated as of April 15, 1999.
2.4 Agreement and Plan of Reorganization dated June 2, 1999 by and among
the Registrant, Convoy Corporation and Cobra Acquisition Corporation
(which is incorporated herein by reference to the exhibit filed with
the Registrant's Report on Form 8-K dated June 9, 1999).
2.5 Agreement and Plan of Reorganization dated June 15, 1999 (as amended
effective June 28, 1999) by and among Registrant, Microscript, Inc. and
NEON Acquisition Corporation
(which is incorporated herein by reference to the exhibit filed with
the Registrant's Report on Form 8-K dated June 28, 1999).
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
regarding the legality of the securities being registered.
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Deloitte & Touche LLP.
24.1 Power of Attorney (which is included on page II-3, herein).
</TABLE>
II-5
<PAGE> 1
EXHIBIT 2.1
SHARE ACQUISITION AGREEMENT
BY AND AMONG
NEW ERA OF NETWORKS, INC.,
ANDREW STREET
AND
MICHAEL EUGENE TINWORTH
DATED AS OF FEBRUARY 19, 1999
<PAGE> 2
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
Exhibit A Form of Confidential Information and Non-Competition Agreement
Exhibit B Form of Escrow Agreement
Exhibit C Form of Shareholder Agreement
Exhibit D Form of Deed of Indemnity
Exhibit E Form of Option Agreement
<CAPTION>
SCHEDULE DESCRIPTION
- -------- -----------
<S> <C>
1.1 Shareholders; Share Capital Ownership; Allocation of Purchase Price
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I PURCHASE AND SALE OF COMPANY SHARE CAPITAL..................................................................2
1.1 Purchase and Sale...................................................................................2
1.2 Consideration.......................................................................................2
1.3 Closing.............................................................................................5
1.4 Definitions.........................................................................................5
1.5 No Further Ownership Rights in Shares...............................................................5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AS TO THE COMPANY ......................................5
2.1 Organization of the Company.........................................................................5
2.2 Subsidiaries........................................................................................6
2.3 Company Capital Structure...........................................................................6
2.4 Authority...........................................................................................7
2.5 No Conflict.........................................................................................7
2.6 Consents............................................................................................7
2.7 Company Financial Statements; Material Agreements...................................................7
2.8 No Undisclosed Liabilities..........................................................................8
2.9 No Changes..........................................................................................8
2.10 Tax Matters........................................................................................10
2.11 Restrictions on Business Activities................................................................12
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition of Equipment.....................12
2.13 Intellectual Property..............................................................................13
2.14 Agreements, Contracts and Commitments..............................................................14
2.15 Interested Party Transactions......................................................................16
2.16 Governmental Authorization.........................................................................16
2.17 Litigation.........................................................................................17
2.18 Accounts Receivable................................................................................17
2.19 Minute Books.......................................................................................17
2.20 Environmental Matters..............................................................................18
2.21 Brokers' and Finders' Fees; Third Party Expenses...................................................18
2.22 Employee Benefit Plans and Compensation............................................................18
2.23 Insurance..........................................................................................22
2.24 Compliance with Laws...............................................................................22
2.25 Warranties; Indemnities............................................................................22
2.26 Complete Copies of Materials.......................................................................23
2.27 Proprietary Information Agreements.................................................................23
2.28 Solvency...........................................................................................23
2.29 Representations Complete...........................................................................23
</TABLE>
-i-
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE II A VENDOR PROTECTION CLAUSES..............................................................................24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.......................................................25
3.1 Ownership of Shares................................................................................25
3.2 Tax Matters........................................................................................25
3.3 Absence of Claims by the Shareholders..............................................................25
3.4 Authority..........................................................................................25
3.5 No Conflict........................................................................................26
3.6 Consents...........................................................................................26
3.7 Unregistered Shares................................................................................26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEON....................................................................26
4.1 Organization, Standing and Power...................................................................26
4.2 Authority..........................................................................................26
4.3 Capital Structure..................................................................................27
4.4 SEC Documents; NEON Financial Statements...........................................................27
4.5 Litigation.........................................................................................27
ARTICLE V ADDITIONAL AGREEMENTS......................................................................................28
5.1 Expenses...........................................................................................28
5.2 Public Disclosure..................................................................................28
5.3 Additional Documents and Further Assurances........................................................28
ARTICLE VI SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY ESCROW .............................................28
6.1 Survival of Representations and Warranties.........................................................28
6.2 Indemnity; Escrow Arrangements.....................................................................28
ARTICLE VII GENERAL PROVISIONS.......................................................................................29
7.1 Notices............................................................................................29
7.2 Interpretation.....................................................................................30
7.3 Counterparts.......................................................................................30
7.4 Entire Agreement; Assignment.......................................................................30
7.5 Severability.......................................................................................30
7.6 Other Remedies.....................................................................................31
7.7 Governing Law......................................................................................31
7.8 Rules of Construction..............................................................................31
</TABLE>
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<PAGE> 5
SHARE ACQUISITION AGREEMENT
This SHARE ACQUISITION AGREEMENT (the "Agreement") is made and entered into
as of February 19, 1999 by and among New Era of Networks, Inc., a Delaware
corporation ("NEON"), Andrew Street and Michael Eugene Tinworth (each directly
or indirectly a shareholder of the Company hereinafter referred to individually
as a "Shareholder" and collectively as the "Shareholders") and, with respect to
Articles VI and VII, Andrew Street (in his capacity as the "Shareholder
Representative").
RECITALS
A. The Board of Directors of NEON believes it is in the best interests of
NEON and its shareholders that NEON acquire all of the issued and outstanding
share capital of D&M (Asia) Ltd., a corporation organized under the laws of Hong
Kong (the "Company"), owned or held of record by the Shareholders (the
"Acquisition") such that upon consummation of the acquisition NEON will be the
sole beneficial owner of all of the issued and outstanding share capital of the
Company and, in furtherance thereof, has approved the Acquisition.
B. The Shareholders desire to sell all of the share capital of the Company
owned or held of record by them to NEON, all upon the terms and subject to the
conditions set forth herein.
C. As an inducement for NEON to consummate the Acquisition, the Company and
the Shareholders agree to make certain representations, warranties, covenants
and other agreements in connection with the Acquisition.
D. A portion of the consideration otherwise payable by NEON in connection
with the Acquisition shall be placed in escrow by NEON for the purposes of
satisfying damages, losses, expenses and other similar charges which result from
breaches of representations, warranties and covenants.
E. As an inducement for NEON to consummate the Acquisition, each of the
Shareholders have agreed to enter into Confidential Information and
Non-Competition Agreements of even date herewith (the "Confidentiality
Agreement") in substantially the form attached hereto as Exhibit A, which
Non-Competition Agreements shall be effective only upon the closing of the
Acquisition.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
<PAGE> 6
ARTICLE I
PURCHASE AND SALE OF COMPANY SHARE CAPITAL
1.1 Purchase and Sale. At the Closing (as defined in Section 1.3) NEON is
purchasing, upon the terms of this Agreement, from each Shareholder and each
Shareholder is selling, conveying, transferring, assigning and delivering to
NEON, free and clear of all liens, encumbrances or other defects of title, all
of the issued and outstanding shares of share capital of the Company
beneficially owned or held of record by the Shareholders at the Closing (the
"Shares"), including all property or rights issued by the Company with respect
to the Shares. The name and address of each Shareholder and the number and
description of such Shares being sold by such Shareholder pursuant hereto, and
the consideration payable in connection there are set forth in Schedule 1.1
hereto.
1.2 Consideration. At Closing, NEON is paying to the Shareholders (i) cash
in the amount of $2,400,000 (the "Cash Consideration") and (ii) that number of
shares of Common Stock of NEON valued at $2,320,000 at signing based on the
average closing sale price of a share of NEON Common Stock, as reported on The
Nasdaq National Market, for the ten (10) most recent trading days ending on the
third trading day immediately preceding the Closing Date and rounded to the
nearest whole share (the "Stock Consideration," and, collectively with the Cash
Consideration, the "Purchase Price"); provided, however, that NEON shall
withhold that number of shares equal to 15% of the Stock Consideration (the
"Escrow Shares") and 15% of the Cash Consideration (the "Escrow Cash", and,
together with the Escrow Shares, the "Escrow Fund"), for deposit with NEON (the
"Escrow Agent") as collateral for the indemnification obligations of the
Shareholders under Article VI hereof pursuant to the provisions of an escrow
agreement substantially in the form of Exhibit B (attached) hereto (the "Escrow
Agreement").
1.3 Closing.
(a) The closing of the Acquisition (the "Closing") is taking place
concurrently with the execution and delivery hereof at the offices of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo
Alto, California 94304, unless another time or place is agreed to in writing by
NEON and the Shareholders. The date upon which the Closing occurs is herein
referred to as the "Closing Date."
(b) At the Closing, the Shareholders shall deliver or cause to be
delivered to NEON the following:
(i) duly executed transfers of the Shares by the Shareholders
being in favour of NEON and/or its nominee together with the relevant share
certificates;
(ii) a certified copy of the Board Minutes of the Company
("Completion Board Minutes") approving the sale and transfer of the Shares;
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<PAGE> 7
(iii) in relation to the matters referred to the Completion
Board Minutes the Shareholders have:
a. procured the written resignations of the directors and any other
officers of the Company referred therein (if any), and deliver such
resignations to NEON together with a written acknowledgement from each
such director and officer (as applicable) acknowledging that he has no
outstanding claim whatsoever from or against the Company other than
salary and expenses in the ordinary course of business;
b. procured the revocation of all authorities to the bankers of the
Company relating to the bank accounts of the Company, giving authority
to such persons as NEON may nominate to operate the same;
c. procured the written resignation of the auditors of the Company
together with a written acknowledgment by such auditors that they have
no outstanding claims of any kind from or against the Company;
d. the appropriate forms to amend the bank mandates to be given to the
bankers of the Company;
(iv) a duly executed Deed of Indemnity by each Shareholder in
the form attached hereto as Exhibit D;
(v) Company documents, including:
a. the company chop, the company seal and the certificate of
incorporation of the Company;
b. the current business registration certificate of the Company;
c. the statutory books and records of the Company, being complete and
duly written up-to-date;
(vi) any and all consents and waivers from third parties to
the Company's contracts and other instruments shall have been obtained by the
Company, set forth in Section 2.6 of the Company Disclosure Schedule;
(vii) the Shareholder Agreement which shall have executed and
delivered by the Shareholders in substantially the form attached hereto as
Exhibit C; and
(viii) the Confidentiality Agreement which shall have been
executed and delivered by the persons set forth in Section 1.1 hereto.
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<PAGE> 8
(c) At the Closing, NEON is delivering or causing to be delivered to
each Shareholder the following:
(i) subject to Section 1.2 regarding the Escrow Shares,
certificates representing each Shareholder's respective portion of the Stock
Consideration in the amount set forth on Schedule 1.1;
(ii) subject to Section 1.2 regarding the Escrow Cash, check,
wire transfer or any other form mutually agreed upon by the parties representing
each Shareholder's respective portion of the Cash Consideration in the amount
set forth on Schedule 1.1;
(iii) all other documents, agreements, certificates or writings
required to be delivered by NEON on or prior to the Closing Date pursuant to
this Agreement or as may be reasonably requested by any party in order to
consummate the transactions contemplated by this Agreement;
(iv) Confidentiality Agreements with Andrew Street and Michael
Eugene Tinworth in substantially the form attached hereto as Exhibit A;
(v) Shareholder's Agreements with Andrew Street and Michael
Eugene Tinworth in substantially the form attached hereto as Exhibit C; and
(vi) Option Agreements with Andrew Street and Michael Eugene
Tinworth in substantially the form attached hereto as Exhibit E.
(d) At the Closing, each of the Shareholders and NEON is delivering or
causing to be delivered the following:
(i) all authorizations, consents, permits and approvals of all
federal, state and local governmental agencies and authorities required to be
obtained in order to permit consummation of the transactions contemplated by
this Agreement shall have been obtained.
(ii) the Escrow Agreement, executed and delivered by NEON, the
Shareholder Representative and the Escrow Agent, which Escrow Agreement shall be
in full force and effect.
(e) At the Closing, or as soon thereafter as practicable, NEON shall
deliver to the Escrow Agent the Escrow Cash and the Escrow Shares in accordance
with Section 1.2 and the Escrow Agreement.
(f) Within 15 days of the Closing, Michael Eugene Tinworth shall
deliver a Statutory Declaration in reference to the share certificate of
Katherine Lo in a form reasonably acceptable to NEON.
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<PAGE> 9
1.4 Definitions.
"Company Share Capital" shall mean (i) shares of Company Ordinary Shares
(as hereinafter defined) and (ii) any other share capital of the Company.
"Company Ordinary Shares" shall mean all ordinary shares of the Company,
with nominal value of HK $1.00 each.
"Dollars" or "$" shall mean U.S. dollars.
"GAAP" shall mean Hong King generally accepted accounting principles
consistently applied.
"NEON Common Stock" shall mean unregistered shares of the common stock,
$.0001 par value per share, of NEON.
"US GAAP" shall mean U.S. generally accepted accounting principles
consistently applied.
1.5 No Further Ownership Rights in Shares. All cash paid and NEON Common
Stock issued in respect of the surrender for exchange of the Shares in
accordance with the terms hereof, shall be deemed to be full satisfaction of all
of the Shareholders' rights pertaining to such Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS AS TO THE COMPANY
Except as disclosed in the disclosure schedule dated as of the date hereof
referring specifically to the representations or warranties in this Agreement
and delivered by the Shareholders to NEON immediately prior to the execution of
this Agreement (the "Company Disclosure Schedule"), each of the Shareholders,
severally and not jointly (except as to the Escrow Fund indemnification
provisions set forth in the Escrow Agreement, in which case liability shall be
joint and several), represents and warrants to NEON as set forth below.
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and subsisting under the laws of Hong Kong. The
Company has the corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified or licensed to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure to be so qualified or licensed would have a material
adverse effect on the business, assets (including intangible assets), condition
(financial or otherwise), or results of operations of the Company (hereinafter
referred to as a "Material Adverse Effect"); provided, however, that a Material
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<PAGE> 10
Adverse Effect shall not include any adverse effect following the date of this
Agreement on the business, assets, condition or results of operations of the
Company that is attributable to the transactions contemplated by this Agreement
or the announcement of such transactions. A true and correct copy of the
Company's Memorandum of Association and Articles of Association, each as amended
to date, has been made available to NEON. Section 2.1 of the Company Disclosure
Schedule lists the directors and officers of the Company. The operations now
being conducted by the Company have not been conducted under any other name.
2.2 Subsidiaries. The Company does not have any subsidiaries and does not
otherwise own or control, directly or indirectly, any corporation, limited
liability company, partnership, association, joint venture or other business
entity.
2.3 Company Capital Structure.
(a) The authorized share capital of the Company is HK$10,000.00 divided
into 10,000 ordinary shares of HK$1.00 each, of which 100 shares are issued and
outstanding. The shares are held by the persons, with the domicile addresses and
in the amounts set forth in Section 2.3(a) of the Company Disclosure Schedule.
The Shares are all the issued and outstanding shares of the Company and are
fully paid, and have been duly and validly issued, except as set forth in
Section 2.3(a) of the Company Disclosure Schedule, and are not subject to any
pre-emptive rights created by statute, the Memorandum and Articles of
Association of the Company or any agreement to which the Company and/or any
Shareholder is a party or by which it or he is bound and have been duly and
validly issued in compliance with the laws of Hong Kong [Singapore] and the
Memorandum and Articles of Association of the Company, except as set forth in
Section 2.3(a) of the Company Disclosure Schedule.
(b) There are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which the Company is a party or
by which it is bound obligating the Company to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of the Company or obligating the Company to grant,
extend, accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement. The Company
does not have any stock option plan or other plan providing for equity
compensation of any person. There is no outstanding Company Share Capital which
is subject to vesting. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or other similar rights with
respect to the Company. Except as contemplated hereby, there are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting stock of the Company. There is no restriction which has not been complied
with on the sale or transfer of the Shares to NEON.
(c) Upon payment of the Purchase Price in the manner set forth in
Section 1.2 hereof, the Shareholders shall have transferred to NEON and its
designee one hundred percent
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<PAGE> 11
(100%) of the outstanding share capital of the Company together with all rights
and interests attaching thereto, free and clear of all liens, encumbrances or
other defects of title.
2.4 Authority. The Shareholders have the legal capacity to enter into this
Agreement and to consummate the transactions contemplated hereby. The transfer
of the shares pursuant to this Agreement has been duly and validly approved and
authorized by the Board of Directors of the Company. This Agreement has been
duly executed and delivered by the Shareholders, and, assuming the due
authorization, execution and delivery by the other parties hereto, constitutes
the valid and binding obligation of the Shareholders, enforceable in accordance
with its terms, except as such enforceability may be limited by principles of
public policy and subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and laws of general application
including enforcement of creditors' rights generally and to rules of law
governing specific performance, injunctive relief or other equitable remedies.
2.5 No Conflict. Except as set forth in Section 2.5 of the Company
Disclosure Schedule, the execution and delivery by the Company of this Agreement
and the consummation of the transactions contemplated hereby will not materially
conflict with, or result in any material violation of, or material default under
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation, modification or acceleration of any material
obligation or loss of any material benefit under (any such event, a "Conflict")
(i) any provision of the constitutional documents of the Company, (ii) any
mortgage, indenture, lease, material contract or other material agreement or
instrument, permit, concession, franchise or license to which the Company or any
of its properties or assets are subject, or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or its
properties or assets.
2.6 Consents. Except as set forth in Section 2.6 of the Company Disclosure
Schedule, no consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
third party, (so as not to trigger any Conflict), is required by or with respect
to the Company in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, except for (i) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable securities laws
thereby, and (ii) where the failure to obtain or make such consent, waiver,
approval, order, authorization, registration, declaration or filing would not
have a Material Adverse Effect.
2.7 Company Financial Statements; Material Agreements. Section 2.7 of the
Company Disclosure Schedule sets forth the Company's balance sheets as of June
30, 1997 and June 30, 1998 and the related audited statements of income and cash
flow for the six-month periods ended June 30, 1997 and June 30, 1998 (the
"Year-End Financials") and the Company's unaudited balance sheet as of December
31, 1998 and the related unaudited statements of income and cash flow for the
six months then ended (the "Interim Financials"). The Year-End Financials and
the Interim Financials
-7-
<PAGE> 12
are correct and have been prepared in accordance with GAAP applied on a basis
consistent throughout the periods indicated except that Interim Financials are
not audited and do not contain footnotes. The Year-End Financials and Interim
Financials present fairly in all material respects the financial condition,
operating results and cash flows of the Company as of the dates and during the
periods indicated therein, subject in the case of the Interim Financials, to
normal year-end adjustments, which are not expected to be material in amount or
significance. The Company's unaudited Balance Sheet as of December 31, 1998
shall be referred to as the "Current Balance Sheet." The Company has provided to
NEON all written contracts with a term of over one year or a value of more than
$2,500 to which the Company is a party and which have been entered into between
June 30, 1998 and the Closing Date. The Company has provided to NEON all
contracts with a value of more than $10,000 which have been entered into between
July 1, 1997 and June 30, 1998.
2.8 No Undisclosed Liabilities. Except as set forth in Section 2.8 of the
Company Disclosure Schedule, the Company does not have any liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other
(whether or not required to be reflected in financial statements in accordance
with U.S. GAAP or GAAP), which, individually or in the aggregate (i) has not
been reflected in or reserved against in the Current Balance Sheet, (ii) has not
arisen in the ordinary course of business consistent with past practices since
December 31, 1998, (iii) is in excess of $10,000 or (iv) would result,
individually or in aggregate, in a Material Adverse Effect.
2.9 No Changes. Except in connection with the consummation of the
transactions contemplated by this Agreement, or as set forth in Section 2.9 of
the Company Disclosure Schedule, since December 31, 1998, there has not been,
occurred or arisen any:
(a) agreement, contract or transaction by the Company except in the
ordinary course of business as conducted on that date and consistent with past
practices;
(b) amendments or changes to the Memorandum of Association or Articles
of Association of the Company;
(c) capital expenditure or commitment by the Company in the aggregate
exceeding $10,000;
(d) destruction of, damage to or loss of any material assets, material
business or material customer of the Company (whether or not covered by
insurance), which damage or loss has had or would have a Material Adverse
Effect;
(e) claim of wrongful discharge or other unlawful labor practice or
action;
(f) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company other than
required by GAAP;
-8-
<PAGE> 13
(g) revaluation by the Company of any of its material assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the Company Share Capital, or any direct or
indirect redemption, purchase or other acquisition by the Company of its Share
Capital;
(i) increase in the salary or other compensation payable or to become
payable by the Company to any of its officers, directors, employees or advisors,
or the declaration, payment or commitment or obligation of any kind for the
payment, by the Company, of a bonus or other additional salary or compensation
to any such person, except for adjustments in compensation in accordance with
annual performance reviews or other increases in compensation made in the normal
course of business (none of which exceed 10% of the previous year's or current
base salary) or as otherwise contemplated by this Agreement;
(j) any termination, extension, amendment or modification of the terms
of any agreement, contract, covenant, instrument, lease, license or commitment
to which the Company is a party or by which it or any of its assets is bound
which has had a Material Adverse Effect;
(k) sale, lease, license or other disposition of any of the material
assets or properties of the Company, or any creation of any security interest in
such assets or properties;
(l) loan by the Company to any person or entity, incurring by the
Company of any indebtedness for money borrowed, guaranteeing by the Company of
any indebtedness for money borrowed, issuance or sale of any debt securities of
the Company or guaranteeing of any debt securities of others;
(m) waiver or release of any material right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company, except in the ordinary course of business, consistent with past
practices;
(n) notice of any claim or potential claim of ownership by any person
other than the Company of the Company Intellectual Property (as defined in
Section 2.13) owned by or developed or created by the Company or of infringement
by the Company of any other person's Intellectual Property rights;
(o) issuance or sale, or contract to issue or sell, by the Company of
any shares of Company Capital Stock, or securities exchangeable, convertible or
exercisable therefor, or any securities, warrants, options or rights to purchase
any of the foregoing;
(p) material change in pricing or royalties set or charged by the
Company to its customers or licensees or in pricing or, to its knowledge, in the
pricing of royalties set or charged by persons who have licensed Intellectual
Property (as defined in Section 2.13) to the Company;
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<PAGE> 14
(q) any event or condition of any character that has had a Material
Adverse Effect on the Company; or
(r) agreement by the Company to do any of the things described in the
preceding clauses (a) through (q) (other than negotiations with NEON and its
representatives regarding the transactions contemplated by this Agreement).
2.10 Tax Matters.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or,
collectively, "Taxes", means (i) any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use 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; (ii) any liability for the payment of any amounts of the type
described in clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any period; and (iii) any liability
for the payment of any amounts of the type described in clause (i) or (ii) as a
result of any express or implied obligation to indemnify any other person or as
a result of any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Section 2.10 of the
Company Disclosure Schedule:
(i) The Company as of the Closing will have prepared and timely
filed all required federal, and state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to any and all Taxes
concerning or attributable to the Company or its operations and such Returns are
true and correct and have been completed in accordance with applicable law.
(ii) The Company as of the Closing (A) will have paid all Taxes
it is required to pay and will have withheld with respect to its employees all
federal and state income taxes, FICA, FUTA and other Taxes required to be
withheld, and (B) will have paid or have accrued on the Current Balance Sheet
all Taxes attributable to the periods covered by the Current Balance Sheet and
will not have incurred any liability for Taxes for the period from the date
after the Current Balance Sheet through to the Closing other than in the
ordinary course of business.
(iii) There is no material Tax deficiency outstanding, assessed
or proposed against the Company, and the Company has not executed any waiver of
any statute of limitations on or extending the period for the assessment or
collection of any Tax.
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<PAGE> 15
(iv) No audit or other examination of any Return of the Company
is presently in progress, nor has the Company been notified of any request for
such an audit or other examination.
(v) The Company has made available to NEON or its legal counsel
upon their request, copies of all foreign, federal, state and local income and
all state and local sales and use Returns for the Company filed for all periods
since its inception.
(vi) There are no liens, pledges, charges, claims, restrictions
on transfer, mortgages, security interests or other encumbrances of any sort
(collectively, "Liens") on the assets of the Company relating to or attributable
to Taxes other than Liens for Taxes not yet due and payable.
(vii) The Company is not a party to any tax sharing,
indemnification or allocation agreement nor does the Company owe any amount
under any such agreement, other than this Agreement.
(viii) The Company is not engaged in any trade or business within
the United States.
(ix) The Shareholders do not have knowledge of any basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company other than
Liens for Taxes not yet due and payable.
(x) The Company's tax basis in its assets is accurately reflected
on the Company's tax books and records.
(xi) The Company has maintained sufficient and accurate records
and all other information required by law to support all Returns which have been
lodged.
(xii) The Company has since its incorporation carried out, or
been engaged in, any transaction or arrangement in respect of which there may be
substituted for the consideration given or received by the Company a different
consideration for purposes of Taxes.
(xiii) The Company has not at any time entered into or been a
party to a transaction or series of transactions containing steps inserted
without any commercial or business purpose, which may directly or indirectly in
anyway result in the Company being liable for the payment of any Taxes which is
not disclosed and appropriate provisions not having been made in the Year-End
Financials.
(xiv) The Company has not been a party to any material
transactions which has not been of entirely arm's length nature.
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<PAGE> 16
2.11 Restrictions on Business Activities. Except as set forth in Section
2.11 of the Company Disclosure Schedule, there is no agreement (noncompete or
otherwise), commitment, judgment, injunction, order or decree to which the
Company is a party or otherwise binding upon the Company which has the effect of
prohibiting or impairing any line of business or business practice (including
without limitation the licensing of any product) of the Company, any acquisition
of property (tangible or intangible) by the Company or the conduct of business
by the Company which has a Material Adverse Effect. The Company is not a party
to and is not currently bound by any agreement under which the Company is
restricted from selling, licensing or otherwise distributing any of its
technology or products to or providing services to, customers or potential
customers or any class of customers, in any geographic area, during any period
of time or in any segment of the market which has or would reasonably be
expected to have a Material Adverse Effect.
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition of
Equipment.
(a) The Company does not own any real property, nor has it ever owned
any real property. Section 2.12(a) of the Company Disclosure Schedule sets forth
a list of all real property leased by the Company as of the Closing, the name of
the lessor, the date of the lease and each amendment thereto and, with respect
to any current lease, the aggregate annual rental and/or other fees payable
under any such lease. All such current leases are in full force and effect, and
there is not, under any of such leases, any existing material default or event
of default by the Company (or event which with notice or lapse of time, or both,
would constitute a default by the Company); provided, however, that any material
adverse financial impact on the Company of such breach shall constitute a
material default.
(b) The Company has good and valued title to, or in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except as set forth in Section 2.14 of
the Company Disclosure Schedule or as reflected in the Current Balance Sheet,
and except for Liens for Taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which are not material in character, amount or
extent, and which do not materially detract from the value, or materially
interfere with the present use, of the property subject thereto or affected
thereby.
(c) Section 2.12(c) of the Company Disclosure Schedule lists all
material items of equipment (the "Equipment") owned or leased by the Company and
such Equipment is, (i) adequate for the conduct of the business of the Company
as currently conducted and (ii) in good operating condition, regularly and
properly maintained, subject to normal wear and tear.
(d) The Company has sole and exclusive ownership, free and clear of any
Liens, of all customer files and other proprietary customer information in its
possession relating to its current and former customers (the "Customer
Information"). No person other than the Company possesses any claims or rights
with respect to use of the Customer Information.
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2.13 Intellectual Property.
(a) The Company owns, or is licensed or otherwise possesses legally
enforceable rights to use, all registered and unregistered trademarks, trade
names, service marks, trade secrets, copyrights, and any applications therefor,
schematics, technology, know-how, computer software programs or applications (in
both source code and object code form), and tangible or intangible proprietary
information or material that are required for the conduct of business of the
Company as currently conducted by the Company or as such rights relate to
services offered or products currently under development (the "Company
Intellectual Property").
(b) Schedule 2.13(a) sets forth a complete list of all registered and
unregistered trademarks, registered copyrights, trade names and service marks,
and any applications therefor, included in the Company Intellectual Property,
and specifies, where applicable, the jurisdictions in which such Company
Intellectual Property has been issued or registered or in which an application
for such issuance and registration has been filed, including the respective
registration or application numbers and the names of all registered owners.
Schedule 2.13(b) sets forth a complete list of all material licenses,
sublicenses and other agreements to which the Company is a party and pursuant to
which the Company or any other person is authorized to use any Company
Intellectual Property or trade secret of the Company, and includes the identity
of all parties thereto, a description of the nature and subject matter thereof,
the applicable royalty or other fees and the term thereof. The execution and
delivery of this Agreement by the Company, and the consummation of the
transactions contemplated hereby, will neither cause the Company to be in
violation or default under any such license, sublicense or agreement, nor
entitle any other party to any such license, sublicense or agreement to
terminate or modify such license, sublicense or agreement. Except as set forth
in Schedules 2.13(a) or 2.13(b), the Company is the sole and exclusive owner or
licensee of, with all right, title and interest in and to (free and clear of any
liens or encumbrances but subject to the license rights of customers under
customer agreements, which customer agreements have been disclosed in the
Company Schedules to the extent required elsewhere herein), the Company
Intellectual Property, and has sole and exclusive rights (and is not
contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which the Company Intellectual Property
is being used.
(c) No claims with respect to the Company Intellectual Property have
been asserted or, to the Shareholder's knowledge, threatened by any person, nor,
to the Shareholder's knowledge, has any other person made an assertion (i)
against the use by the Company of any trademarks, service marks, trade names,
trade secrets, copyrights, patents, technology, know-how or computer software
programs and applications used in the Company's business as currently conducted
by the Company, or (ii) challenging the ownership by the Company, validity or
effectiveness of any of the Company Intellectual Property. All registered
trademarks, service marks and copyrights held by the Company are valid and
subsisting. To the best of the Shareholder's knowledge, the Company has not
infringed, and the business of the Company as currently conducted
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<PAGE> 18
or as currently proposed to be conducted does not infringe, any copyright,
patent, trademark, service mark, trade secret or other proprietary right of any
third party. There is no material unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property by any third party,
including any employee or former employee of the Company. No Company
Intellectual Property is subject to any outstanding decree, order, judgment, or
stipulation restricting in any material manner the use or licensing thereof by
the Company. Each employee, consultant or contractor of the Company has executed
a proprietary information and confidentiality agreement substantially in the
Company's standard forms.
(d) Section 2.13(d) of the Company Disclosure Schedule lists all
contracts, licenses and agreements between the Company and any other person
wherein or whereby the Company has agreed to, or assumed, any material
obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or
otherwise assume or incur any material obligation or liability with respect to
the infringement or misappropriation by the Company or such other person of the
intellectual property of any person or entity other than the Company.
(e) The Company has taken reasonable steps to ensure that any products,
software programs or technology developed (or currently being developed) for its
customers and other third parties, whether as "work-for-hire" or otherwise, will
accurately record, store, process, calculate and present calendar dates falling
on and after (and if applicable, spans of time including) January 1, 2000, and
will calculate any information dependent on or relating to such dates in the
same manner, and with the same functionality, data integrity and performance, as
the products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates (collectively, "Year 2000 Compliant"). The Company has taken
reasonable steps to ensure that such products and programs will lose no
functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000. All of the Company's internal computer and
technology products and systems are Year 2000 Compliant.
2.14 Agreements, Contracts and Commitments. Except as set forth in Sections
2.13(b), 2.13(d) or 2.14(a) of the Company Disclosure Schedule, the Company is
not a party to nor is it bound by:
(i) any agreements or arrangements that contain any severance pay
or post-employment liabilities or obligations exceeding $10,000,
(ii) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements,
(iii) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, whether written or oral, involving payments in
excess of $5,000,
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<PAGE> 19
(iv) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(v) any fidelity or surety bond or completion bond,
(vi) any lease of personal property having a value individually
in excess of $15,000,
(vii) any agreement of indemnification or guaranty,
(viii) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $10,000 individually or
$20,000 in the aggregate,
(ix) any agreement, contract or commitment relating to the
disposition or acquisition of material assets or any material interest in any
business enterprise outside the ordinary course of the Company's business,
(x) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money by the Company or extension of credit to the Company in excess of
$10,000 individually or $20,000 in the aggregate or any guarantee, indemnity,
performance bond, letter of comforts or any other security or securety ship or
agreements to give any of the same,
(xi) any purchase order or contract for the purchase of materials
involving in excess of $10,000 individually or $20,000 in the aggregate,
(xii) any construction contracts,
(xiii) any power of attorney,
(xiv) any oral contract which has created a receivable to the
Company in excess of $5,000 which is not collectible and enforceable,
(xv) any outstanding indebtedness or other liability (actual or
contingent) owing by the Company to any of the Shareholders, nor any
indebtedness owing to the Company by any of the Shareholders; and no promise or
representation has been made to any of the Shareholders in connection with any
representations, warranties or other provisions in this Agreement (including
without limitation, the Company Disclosure Letter) in respect of which the
Company may be liable,
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<PAGE> 20
(xvi) any distribution, joint marketing or development agreement
which is not cancelable without penalty within thirty (30) days, or
(xvii) any other agreement, contract or commitment, whether
written or oral, that involves $10,000 individually or $20,000 in the aggregate
or more which is not cancelable without penalty within thirty (30) days and
which was not entered into in the ordinary course of business.
(b) The Company is in compliance with and is not in breach of,
violation of or default under, and has not received notice that it has
materially breached, violated or defaulted under, any of the terms or conditions
of any agreement, contract, covenant, instrument, lease, license or commitment,
whether written or oral, to which the Company is a party or by which it or its
properties is bound which is required to be set forth in Schedule 2.13(b),
2.13(d) or 2.14(a) (collectively a " Contract"), nor is any Shareholder aware of
any event that would constitute such a breach, violation or default with the
lapse of time, giving of notice or both (except for notices relating to
breaches, violations or defaults that have been cured in all material respects).
Each Contract is in full force and effect and, except as otherwise disclosed in
Section 2.14(b) of the Company Disclosure Schedule, is not subject to any
default thereunder of which either Shareholder has knowledge by any party
obligated to the Company pursuant thereto. Following the Closing, the Company
will be permitted to exercise all of the Company's rights under the Contracts
without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company would otherwise be
required to pay had the transactions contemplated by this Agreement not
occurred. There are no restrictions whatsoever under any agreement, the
Memorandum and Articles of Association of the Company or otherwise, on or for
the sale or transfer of the Shares to Neon and/or its nominees pursuant to this
Agreement other than the requirement under the Articles of Association of the
Company for the Company's directors' consent to the registration of the transfer
of the Shares.
2.15 Interested Party Transactions. Except as set forth in Section 2.15 of
the Disclosure Schedule, no officer, director or shareholder of the Company (nor
any ancestor, sibling, descendant or spouse of any of such persons, or any
trust, partnership or corporation in which any of such persons has or has had an
interest), has or has had, directly or indirectly, (i) an interest in any entity
which furnished or sold, or furnishes or sells, services, products or technology
that the Company furnishes or sells, or proposes to furnish or sell, or (ii) any
interest in any entity that purchases from or sells or furnishes to the Company,
any material quantity goods or services or (iii) a material beneficial interest
in any Contract; provided, that ownership of no more than one percent (1%) of
the outstanding voting stock of a publicly traded corporation shall not be
deemed an "interest in any entity" for purposes of this Section 2.15.
2.16 Governmental Authorization. The Company possesses all material
consent, license, permit, grant or other authorization issued to the Company by
a Governmental Entity (i) pursuant to which the Company currently operates or
holds any interest in any of its properties or (ii) which is
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required for the operation of its business or the holding of any such interest
(herein collectively called "Company Authorizations"). The Company
Authorizations are in full force and effect and to either Shareholder's
knowledge constitute all Company Authorizations required to permit the Company
to operate or conduct its business or hold any interest in its properties or
assets.
2.17 Litigation. There is no action, suit or proceeding of any nature
pending, or, to either Shareholder's knowledge, threatened, against the Company,
its properties or any of its officers or directors, nor, to the knowledge of any
Shareholder, is there any reasonable basis therefor which has or could
reasonably be expected to have a Material Adverse Effect. There is no
investigation pending or, to or any Shareholder's knowledge threatened, against
the Company, its properties or any of its officers or directors (nor, to the
knowledge of either Shareholder, is there any reasonable basis therefor) by or
before any Governmental Entity. No Governmental Entity has at any time
challenged or questioned the legal right of the Company to conduct its
operations as presently or previously conducted. Section 2.17 of the Company
Disclosure Schedule sets forth, with respect to any pending or threatened
action, suit, proceeding or investigation, the forum, the parties thereto, the
subject matter thereof and the amount of damages claimed or other remedy
requested.
2.18 Accounts Receivable.
(a) The Company has made available to NEON a list of all material
accounts receivable of the Company ("Accounts Receivable") as of December 31,
1998 along with a range of days elapsed since invoice.
(b) All Accounts Receivable of the Company arose in the ordinary course
of business, are carried at values determined in accordance with GAAP and are,
to the knowledge of the Shareholders, collectible except to the extent of
reserves therefor set forth in the Current Balance Sheet. Except as set forth in
Section 2.14 of the Disclosure Schedule, no person has any Lien on any of such
Accounts Receivable, and no request or agreement for deduction or discount has
been made with respect to any of such Accounts Receivable.
2.19 Minute Books. The minutes of the Company made available to counsel for
NEON are the only minutes of the Company and contain a reasonably accurate
summary of all meetings of the Board of Directors (or committees thereof) of the
Company and its shareholders or actions by written consent since the time of
incorporation of the Company. The register of members, the register of directors
and secretary, register of directors' and shareholders' resolutions, register of
charges and any other statutory books, books of account and other records which
the Company may from time to time required to keep, of the Company have been
properly and duly kept and contain true, accurate and complete records of all
matters with which they should deal or record and are in its possession or under
its control, and no notice or allegation of whatsoever nature from whomsoever,
that any of them is incorrect or should be rectified, has been received.
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<PAGE> 22
2.20 Environmental Matters.
(a) Hazardous Materials Activities. The Company has not transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to hazardous materials in violation of any law in effect on or before the
Closing, nor has the Company disposed of, transported, sold, or manufactured any
product containing a hazardous material (any or all of the foregoing being
collectively referred to as "Hazardous Materials Activities") in material
violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control hazardous materials or any hazardous material activity.
(b) Permits. To the extent legally required, the Company currently
holds all environmental approvals, permits, licenses, clearances and consents
(the "Environmental Permits") necessary for the conduct of the Company's
Hazardous Material Activities and other businesses of the Company as such
activities and businesses are currently being conducted, the absence of which
would be reasonably likely to result in fines to the Company in excess of
$10,000 individually or $20,000 in the aggregate.
(c) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Shareholder's knowledge, threatened concerning any Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of the Company. The
Shareholders are not aware of any fact or circumstance which could involve the
Company in any environmental litigation or impose upon the Company any
environmental liability which would be reasonably likely to exceed $10,000
individually or $20,000 in the aggregate.
2.21 Brokers' and Finders' Fees; Third Party Expenses. Except as set forth
in Section 2.21 of the Company Disclosure Schedule, the Company has not
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby. Section 2.21 of the
Company Disclosure Schedule sets forth the principal terms and conditions of any
agreement, written or oral, with respect to such fees. Section 2.21 of the
Company Disclosure Schedule sets forth the Company's current reasonable estimate
of all Third Party Expenses (as defined in Section 5.2) expected to be incurred
by the Company in connection with the negotiation and effectuation of the terms
and conditions of this Agreement and the transactions contemplated hereby, which
amount shall be the sole responsibility of the Shareholders.
2.22 Employee Benefit Plans and Compensation.
(a) For purposes of this Section 2.22, the following terms shall have
the meanings set forth below:
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(i) "Affiliate" shall mean any other person or entity under
common control with the Company.
(ii) "Employee Plan" shall refer to any plan, program, policy,
practice, contract, agreement or other arrangement providing for bonuses,
severance, termination pay, deferred compensation, pensions, profit sharing,
performance awards, stock or stock-related awards, fringe benefits or other
employee benefits of any kind, whether formal or informal, written or otherwise,
funded or unfunded and whether or not legally binding, including without
limitation, any plan which is or has been maintained, contributed to, or
required to be contributed to, by the Company or any Affiliate for the benefit
of any "Employee" (as defined below), and pursuant to which the Company or any
Affiliate has or may have any material liability, contingent or otherwise; and
(iii) "Employee" shall mean any current, former, or retired
employee, consultant, officer, or director of the Company or any Affiliate.
(iv) "Employee Agreement" shall refer to each employment,
severance, consulting or similar agreement or contract between the Company or
any Affiliate and any Employee;
(b) Schedule. Section 2.22(b) of the Company Disclosure Schedule
contains a list of each Employee Plan and each Employee Agreement, together with
a schedule of all liabilities, whether or not accrued, under each such Employee
Plan. The Company does not have any plan or commitment, whether legally binding
or not, to establish any new Employee Plan or Employee Agreement, to modify any
Employee Plan or Employee Agreement (except to the extent required by law or to
conform any such Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to NEON in writing, or as
required by this Agreement), or to enter into any Employee Plan or Employee
Agreement, nor does it have any intention or commitment to do any of the
foregoing.
(c) Documents. The Company has made available to NEON, (i) correct and
complete copies of all documents embodying any Employee Plan and any Employee
Agreement including all amendments thereto and copies of all forms of agreement
and enrollment used therewith; (ii) the most recent annual actuarial valuations,
if any, prepared for each Employee Plan; (iii) the three most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA or
the Code in connection with each Employee Plan or related trust; (iv) the most
recent summary plan description together with the most recent summary of
material modifications, if any, required under ERISA with respect to each
Employee Plan; (v) all IRS determination letters and rulings, if any, relating
to Company Employee Plans and copies of all applications and correspondence to
or from the IRS or the Department of Labor ("DOL") with respect to any Employee
Plan; (vi) if the Employee Plan is funded, the most recent annual and periodic
accounting of Employee Plan assets; (vii) all material agreements and contracts
relating to each Employee Plan,
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<PAGE> 24
including but not limited to, administrative service agreements, group annuity
contracts and group insurance contracts; and (viii) all communications material
to any Employee or Employees relating to any Employee Plan and any proposed
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any liability to the
Company.
(d) Employee Plan Compliance. (i) The Company has performed in all
material respects all obligations required to be performed by it under each
Employee Plan and each Employee Plan has been established and maintained in all
material respects in accordance with its terms and in compliance in all material
respects with all applicable laws, statutes, orders, rules and regulations,
including ERISA and the Code; (ii) each Employee Plan intended to qualify under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code has either received a favorable determination letter with
respect to each such Plan from the IRS, has timely applied for such a
determination or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a determination
letter and make any amendments necessary to obtain a favorable determination;
(iii) there are no material actions, suits or claims pending, or, to the
knowledge of the Company threatened or anticipated (other than routine claims
for benefits) against any Employee Plan or against the assets of any Employee
Plan; (iv) each Employee Plan can be amended, terminated or otherwise
discontinued after the Closing in accordance with its terms, without liability
to the Company, NEON or any Affiliate (other than ordinary administration
expenses typically incurred in a termination event); (v) there are no inquiries
or proceedings pending or, to the knowledge of the Company, threatened by the
IRS or DOL with respect to any Employee Plan; and (vi) neither the Company nor
any Affiliate is, to the knowledge of the Company, subject to any penalty or tax
with respect to any Employee Plan under Section 402(i) of ERISA or Section 4975
through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed to or
been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Employee Plan provides, or has
any liability to provide, life insurance, medical or other employee benefits to
any Employee upon his or her retirement or termination of employment for any
reason, except as may be required by statute, and the Company has not
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) that such Employee(s)
would be provided with life insurance, medical or other employee welfare
benefits or severance pay upon their retirement or termination of employment,
except to the extent required by statute.
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(h) No COBRA Violation. Neither the Company nor any Affiliate has,
prior to the Closing and in any material respect, violated any of the health
care continuation requirements of COBRA or any similar provisions of state law
applicable to its employees.
(i) Effect of Transaction. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Employee Plan, Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(j) Employment Matters. The Company (i) is in compliance with all
applicable laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
with respect to Employees in all material respects; (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages, salaries
and other payments to Employees or other persons who by virtue of their
activities performed on behalf of the Company may be deemed employees within the
meaning of applicable law; (iii) is not liable for any arrears of wages or any
taxes or any penalty for failure to comply with any of the foregoing; and (iv)
is not liable for any payment to any trust or other fund or to any governmental
or administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Employees or other persons
who by virtue of their activities performed on behalf of the Company may be
deemed employees within the meaning of applicable law (other than routine
payments to be made in the normal course of business and consistent with past
practice). The Company is in material compliance with all applicable federal
laws, rules and regulations that govern the employment and consulting
relationships of the Company's workers as they pertain to immigration matters.
(k) Labor. No work stoppage or labor strike against the Company is
pending, or to the knowledge of either Shareholder, threatened. The Company is
not involved in nor is being threatened with any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters involving any
Employee, including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in a material liability to the Company. The Company
has not engaged in any unfair labor practices which could, individually or in
the aggregate directly or indirectly result in a material liability to the
Company. The Company is not presently, nor has it in the past, been a party to,
or bound by, any collective bargaining agreement or union contract with respect
to Employees and no collective bargaining agreement is being negotiated by the
Company.
(l) No Interference or Conflict. To the knowledge of either
Shareholder, no shareholder, officer, employee or consultant of the Company is
obligated under any contract or agreement or subject to any judgement, decree or
order of any court or administrative agency, that would interfere with such
person's efforts to promote the interests of the Company or that would
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<PAGE> 26
materially interfere with the Company's business. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business as
presently conducted or proposed to be conducted nor any activity of such
officers, directors, employees or consultants in connection with the carrying on
of the Company's business as presently conducted or proposed to be conducted,
will, to either Shareholder's knowledge, conflict with or result in a breach of
the terms, conditions or provisions of, or constitute a default under, any
contract or agreement under which any of such officers, directors, employees or
consultants is now bound. Neither Shareholder has received notice of or is
currently aware of any senior employee or key personnel who intends to terminate
his/her employment with the Company.
2.23 Insurance. Section 2.23 of the Company Disclosure Schedule lists all
insurance policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company or any
Affiliate. There is no material claim by the Company or any Affiliate pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid or accrued, and
the Company and its Affiliates are otherwise in material compliance with the
terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). Neither the Company nor any
Shareholder has knowledge of any threatened termination of, or premium increase
with respect to, any of such policies. The Company is now and has at all
material times taken out all necessary insurance which it is required to take
out by law and otherwise normally taken out against risks normally insured
against by persons carrying on the same business as that carried on by it. All
assets as disclosed in the Year End Financials are adequately insured in
accordance with prudent business practice in the relevant country and there has
been no failure by the Company to comply with any conditions in any relevant
policies.
2.24 Compliance with Laws. The Company has materially complied with, is not
in material violation of, and has not received any notices of violation with
respect to, any foreign, federal, state or local statute, law or regulation
(except for notices of violations which have been cured in all material
respects). All annual returns and other returns, particulars, resolutions and
documents required to be filed with the Registrar of Companies of Hong Kong or
to any other authority under any relevant legislation in Hong Kong or any other
applicable jurisdiction in respect of the Company have been duly filed within
any applicable time limit and were correct and all legal requirements relating
to the formation of the Company and the issue of the Shares have been duly
complied with in a timely manner. The Company has complied with its Memorandum
and Articles of Association in all respects and none of the activities,
agreements, commitments or rights of the Company (including without limitation,
its execution and delivery of this Agreement and the performance of its
obligations under this Agreement) is ultra vires, unauthorised or otherwise in
breach of any legal provisions.
2.25 Warranties; Indemnities. Except in the ordinary course of business or
as listed in Section 2.13(d) of the Company Disclosure Schedule or as set forth
in a Contract, the Company has
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not given any warranties or indemnities relating to products or technology sold
or services rendered by the Company.
2.26 Complete Copies of Materials. The Company has delivered or made
available true and complete copies of each document (or summaries of same) that
has been requested in writing by NEON or its counsel.
2.27 Proprietary Information Agreements. Each employee listed on Section
2.27 of the Company Disclosure Schedule and presently employed by the Company
has executed a proprietary information agreement substantially in the Company's
standard form (as revised or modified, from time to time) samples of which are
attached hereto as part of Section 2.27 of the Company Disclosure Schedule. Such
proprietary information agreements constitute valid and binding obligations of
the Company.
2.28 Solvency.
(a) The Company is not in receivership or liquidation or any similar
state or position.
(b) No meeting has been convened, resolution proposed, petition
presented or other steps taken or proposed to be taken or pending or threatened
by any person or, order made or pending to be made for the winding up of the
Company.
(c) No receiver, administrator, provisional liquidator, liquidator or
other officer of the court has been appointed or threatened to be appointed in
relation to the Company or any part of its undertakings or assets and no action
has been taken or pending to be taken or is threatened to be taken to seize or
taken possession of any of the Company's undertakings or assets.
(d) The Company has not stopped payment nor is insolvent nor is unable
to pay its debts within the meaning of section 178 of the Companies Ordinance
(Cap 32) of the laws of Hong Kong.
(e) No unsatisfied judgment is outstanding against the Company.
2.29 Representations Complete. Without limiting in any way any
representations or warranties made by the Shareholders, none of the
representations or warranties made by the Shareholders (as modified by the
Company Disclosure Schedule), nor any statement made in any Schedule or
certificate furnished by any Shareholder pursuant to this Agreement contains or
will contain at the Closing, any untrue statement of a material fact or omits or
will omit to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which made,
not misleading.
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ARTICLE II A
VENDOR PROTECTION CLAUSES
2A.1 The representations, warranties and undertakings contained in Articles
II and/or III in this Agreement (together the "Warranties") are in all respects
qualified and limited by the provisions of this Article IIA to the extent that
none of the Shareholders shall be liable in any way under the Warranties or for
any claim under the Warranties nor under any indemnity contained herein
(together the "Indemnities"):
(a) to the extent that the subject of the claim is provided for or
reserved in the Year-End Financials, Interim Financials or Current Balance Sheet
or Audited Financials; or
(b) to the extent that a claim arises:
(i) as a result of an act occurring at the request of or with the
written consent of NEON or (on or after the date hereof) the Company provided
that such written consent was given with full knowledge of the applicable facts
and circumstances so as to be able to make an informed decision; or
(ii) as a result of any increase in rates of taxation since the
Closing Date; or
(iii) as a result of the passing of an enactment or other
government regulation with retroactive effect; or
(c) for any liability for taxation which arises as a result of
transactions in the ordinary course of business of the Company effective since
the Closing Date; or
(d) in respect of any claim to the extent to which it would not have
arisen but for any matter or thing done or omitted to be done by the Company or
NEON or persons deriving title therefrom on or after the Closing Date and based
on facts and circumstances that exist on or after the Closing Date (other than
the purchase of the Sale Shares by NEON) unless such matter or thing is
necessarily done or necessarily omitted to be done as a direct consequence of
breach of any of the Warranties.
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<PAGE> 29
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each Shareholder, severally but not jointly, represents and warrants to
NEON as follows:
3.1 Ownership of Shares. Such Shareholder is the sole legal and beneficial
owner of the Shares designated as being owned by such Shareholder opposite such
Shareholder's name in Schedule 3.1. Such Shares are not subject to any Liens or
to any rights of first refusal of any kind, and such Shareholder has not granted
any rights to purchase such Shares to any other person or entity. Such
Shareholder has the sole right to transfer such Shares to NEON. Such Shares
constitute all of the Company Share Capital owned, beneficially or of record, by
such Shareholder, and such Shareholder has no other rights to acquire Company
Share Capital. Upon payment of the Purchase Price in the manner set forth in
Section 1.2, the Shareholders will transfer to NEON and its designee good title
to all of the Shares of the Company, subject to no Liens retained, granted or
permitted by such Shareholder or the Company (except for the Memorandum and
Articles of Association as to the Company).
3.2 Tax Matters. Such Shareholder has had an opportunity to review with its
own tax advisors the tax consequences to such Shareholder of the Acquisition and
the transactions contemplated by this Agreement. Such Shareholder understands
that it must rely solely on its advisors and not on any statements or
representations by NEON, the Company or any of their agents. Such Shareholder
understands that it (and not NEON or the Company) shall be responsible for its
own tax liability that may arise as a result of the Acquisition or the
transactions contemplated by this Agreement.
3.3 Absence of Claims by the Shareholders. Such Shareholder does not have
any present claim against the Company and does not have knowledge of the basis
for any future claim against the Company whether, contingent or unconditional,
fixed or variable under any contract or on any other legal basis whatsoever
whether in the capacity as a shareholder, a director, or an officer of the
Company or otherwise.
3.4 Authority. Such Shareholder has the legal capacity to enter into this
Agreement and the Shareholders Agreement in the form attached hereto as Exhibit
C and to consummate the transactions contemplated hereby and thereby, and no
further action is required on the part of such Shareholder to execute this
Agreement and the Shareholders Agreement. This Agreement and the Shareholders
Agreement have been duly executed and delivered by such Shareholder and,
assuming the due authorization, execution and delivery by the other parties
thereto, constitute the valid and binding obligations of each such Shareholder,
enforceable in accordance with their terms, except as such enforceability may be
limited by principles of public policy and subject to the laws of general
-25-
<PAGE> 30
application relating to bankruptcy, insolvency and the relief of debtors and to
rules of law governing specific performance, injunctive relief or other
equitable remedies.
3.5 No Conflict. The execution and delivery by such Shareholder of this
Agreement and the Shareholders Agreement and the consummation of the
transactions contemplated hereby and thereby will not conflict with (ii) any
mortgage, indenture, lease, material contract or other material agreement or
instrument, permit, concession, franchise or license to which such Shareholder
or any of its properties or assets are subject (a "Shareholder Conflict"), or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to such Shareholder or its properties or assets.
3.6 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any third
party (so as not to trigger any Shareholder Conflict), is required by or with
respect to such Shareholder in connection with the execution and delivery of
this Agreement or the Shareholders Agreement or the consummation of the
transactions contemplated hereby or thereby except for such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable securities laws thereby.
3.7 Unregistered Shares. Shareholder understands that the NEON Common Stock
being issued pursuant to this Agreement will not be registered under the
Securities Act of 1933, as amended, on the basis that the issuance of securities
hereunder is exempt from registration under said Act pursuant to Regulation S
and section 4(2) and/or Rule 506 thereof, and that NEON's reliance on such
exemption is based on Shareholder's representations set forth in the Stockholder
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEON
NEON hereby represents and warrants to the Company and each of the
Shareholders as follows:
4.1 Organization, Standing and Power. NEON is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
NEON has the corporate power to own its properties and to carry on its business
as now being conducted and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a material adverse effect on NEON as a whole.
4.2 Authority. NEON has all requisite corporate power and authority to
enter into this Agreement and the exhibits attached hereto to which it is a
party (the "NEON Related Agreements") and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and NEON Related Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the
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<PAGE> 31
part of NEON. Each of this Agreement and NEON Related Agreements has been duly
executed and delivered by NEON and constitutes the valid and binding obligations
of NEON, enforceable in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
4.3 Capital Structure. The authorized stock of NEON consists of 45,000,000
shares of Common Stock, of which 30,333,778 shares were issued and outstanding
as of December 31, 1998, and 2,000,000 shares of Preferred Stock, none of which
is issued or outstanding. No shares of NEON Common Stock were held by NEON in
its treasury, and no shares of NEON Preferred Stock were outstanding. All the
outstanding shares of NEON Common Stock are validly issued, fully paid,
nonassessable and free of preemptive rights. The shares of NEON Common Stock
issuable in connection with the Acquisition have been duly authorized and
reserved for issuance and, when issued in accordance with the terms of this
Agreement, will be validly issued, fully paid, nonassessable and free of
preemptive rights.
4.4 SEC Documents; NEON Financial Statements. NEON has furnished or made
available to the Company and the Shareholders true and complete copies of all
reports or registration statements filed by it with the Securities and Exchange
Commission ("SEC") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") for all periods since January 1, 1998, all in the form so filed
(all of the foregoing being collectively referred to as the "SEC Documents"). As
of their respective filing dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Securities Act") or the Exchange Act, as the case may be, and none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a document subsequently filed
with the SEC. The financial statements of NEON, including the notes thereto,
included in the SEC Documents (the "NEON Financial Statements") comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) and present fairly the consolidated financial
position of NEON at the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal audit adjustments).
4.5 Litigation. There is no action, suit proceeding, claim, arbitration or
investigation pending, or as to which NEON has received any notice of assertion
against NEON, which in any manner challenges or seeks to prevent, enjoin, alter
or materially delay any of the transactions contemplated by this Agreement.
-27-
<PAGE> 32
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Expenses. All fees and expenses incurred in connection with the
Acquisition including, without limitation, all legal, accounting, financial
advisory, consulting and all other fees and expenses of third parties ("Third
Party Expenses") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby shall be the obligation of the respective party incurring
such fees and expenses, except for stamp duty. NEON agrees to bear all stamp
duty payable or assessed in connection with this agreement and the transfer of
shares to NEON.
5.2 Public Disclosure. Unless otherwise required by law, or by the rules
and regulations of the SEC or Nasdaq Stock Market, no disclosure (whether or not
in response to an inquiry) of the subject matter of this Agreement shall be made
by any party hereto without the prior approval of NEON.
5.3 Additional Documents and Further Assurances. Each party hereto, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of the Closing and the
transactions contemplated hereby.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY AND ESCROW
6.1 Survival of Representations and Warranties. The Shareholders' and
NEON's representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Closing and shall
terminate on the first anniversary of the Closing (the "Expiration Date");
provided, however, that (i) the representations and warranties and covenants of
the Shareholders relating or pertaining to any Tax or Returns related to such
Tax set forth in Section 2.10 hereof, shall survive until the expiration of all
applicable statutes of limitations, or extensions thereof, governing each Tax or
Returns related to such Tax and (ii) the representations and warranties of the
Shareholders set forth in Section 2.3 and Article III hereof shall survive the
Closing and shall terminate on the fourth anniversary of the Closing. Each
shareholder, jointly and severally, shall indemnify and hold harmless NEON and
its affiliates for any Loss (as defined in the Escrow Agreement) incurred by
NEON, its officers, directors or affiliates, related to or arising, directly or
indirectly, out of any breach of the representations and warranties set forth in
Sections 2.10, 2.3 and Article III of this Agreement.
6.2 Indemnity and Escrow Agreement. At the Closing each Shareholder will be
deemed to have received and consented to the deposit with the Escrow Agent of
the Escrow Cash and the Escrow Shares (plus any additional shares as may be
issued upon any stock split, stock dividend or
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<PAGE> 33
recapitalization effected by NEON after the Closing) pursuant to the terms of
the Escrow Agreement attached hereto as Exhibit B, without any act required on
the part of the Shareholders. At the Closing, the Escrow Cash and the Escrow
Shares, without any act required on the part of the Shareholders, are being
deposited with the Escrow Agent, such deposit to constitute the Escrow Fund to
be governed by the terms set forth in the Escrow Agreement and at NEON's cost
and expense. The Escrow Fund and the related indemnification obligations of the
Shareholders shall be governed by the terms of the Escrow Agreement.
ARTICLE VII
GENERAL PROVISIONS
7.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice), provided, however,
that notices sent by mail will not be deemed given until received:
(a) if to NEON, to:
New Era of Networks, Inc.
7400 East Orchard Road, Suite 230
Englewood, CO 80111
Attention: Leonard M. Goldstein, Esq.
Telephone No.: (303) 694-3933
Facsimile No.: (303) 694-3885
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Mark A. Bertelsen, Esq.
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
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<PAGE> 34
(b) if to the Company, the Shareholders or the Shareholder
Representative, to:
D&M (Asia)
8th Floor, Tien Chu Commercial Building
173-174 Gloucester Road
Attention: Andrew Street
Telephone No.: 011-852-2893-6699
Facsimile No.: 011-852-2573-3524
with a copy to:
Haldanes
4F Ruttonjee House
11 Duddell Street
Central Hong Kong
Attention: Steven Terry
Telephone No.: 011-852-2868-1234
Facsimile No.: 011-852-2845-1637
7.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All dollar amounts in this Agreement shall
refer to amounts in U.S. dollars unless otherwise indicated.
7.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
7.4 Entire Agreement; Assignment. This Agreement, the Exhibits hereto, the
Company Disclosure Schedule and other schedules hereto, the Nondisclosure
Agreement, and the documents and instruments and other agreements among the
parties hereto referenced herein: (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise, except that NEON may assign its rights and
delegate its obligations hereunder to its affiliates as long as NEON remains
ultimately liable for all of NEON's obligations hereunder.
7.5 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application
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<PAGE> 35
of such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
7.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
7.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, U.S.A., regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
7.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefor, 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 36
IN WITNESS WHEREOF, NEON, the Shareholders and the Shareholder
Representative have caused this Share Acquisition Agreement to be signed, all as
of the date first written above.
NEW ERA OF NETWORKS, INC.
By: /s/ LEONARD M. GOLDSTEIN
-------------------------------
Name: Leonard M. Goldstein
-------------------------------
Title: SR VP and Counsel
-----------------------------
SHAREHOLDER REPRESENTATIVE:
/s/ ANDREW STREET
- -----------------------------------
Name: Andrew Street
-------------------------------
-------------------------------
-------------------------------
SHAREHOLDERS:
ANDREW STREET
By: /s/ ANDREW STREET
-------------------------------
Name: Andrew Street
-------------------------------
Title:
-----------------------------
MICHAEL EUGENE TINWORTH
By: /s/ MICHAEL EUGENE TINWORTH
-------------------------------
Name: Michael Eugene Tinworth
-------------------------------
Title:
-----------------------------
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<PAGE> 37
SCHEDULE 1.1
<TABLE>
<CAPTION>
Shareholder Stock Consideration Cash Consideration Escrow Fund Cash Escrow Fund Shares
- ----------- ------------------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C>
Andrew Street 29,364 $1,800,000 $ 270,000 5,873
Flat B3, 17th Floor
Block B, Elizabeth House
Causeway Bay
Hong Kong
Michael Eugene Tinworth 9,788 $ 600,000 $ 90,000 1,468
D2 Goodwood
52 Chung Hom Kok Road
Chung HomKok
Hong Kong
</TABLE>
<PAGE> 1
EXHIBIT 2.2
SHARE ACQUISITION AGREEMENT
BY AND AMONG
NEW ERA OF NETWORKS, INC.,
ANDREW STREET
AND
MICHAEL EUGENE TINWORTH
DATED AS OF FEBRUARY 19, 1999
<PAGE> 2
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
Exhibit A Form of Confidential Information and Non-Competition Agreement
Exhibit B Form of Escrow Agreement
Exhibit C Form of Shareholder Agreement
Exhibit D Form of Deed of Indemnity
Exhibit E Form of Option Agreement
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
- -------- -----------
<S> <C>
1.1 Shareholders; Share Capital Ownership; Allocation of Purchase Price
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I PURCHASE AND SALE OF COMPANY SHARE CAPITAL.......................................2
1.1 Purchase and Sale..........................................................2
1.2 Consideration..............................................................2
1.3 Closing....................................................................2
1.4 Definitions................................................................5
1.5 No Further Ownership Rights in Shares......................................5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AS TO THE COMPANY.............5
2.1 Organization of the Company................................................5
2.2 Subsidiaries...............................................................6
2.3 Company Capital Structure..................................................6
2.4 Authority..................................................................6
2.5 No Conflict................................................................7
2.6 Consents...................................................................7
2.7 Company Financial Statements; Material Agreements..........................7
2.8 No Undisclosed Liabilities.................................................8
2.9 No Changes.................................................................8
2.10 Tax Matters...............................................................10
2.11 Restrictions on Business Activities.......................................12
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition of
Equipment.................................................................12
2.13 Intellectual Property.....................................................13
2.14 Agreements, Contracts and Commitments.....................................14
2.15 Interested Party Transactions.............................................16
2.16 Governmental Authorization................................................16
2.17 Litigation................................................................17
2.18 Accounts Receivable.......................................................17
2.19 Minute Books..............................................................17
2.20 Environmental Matters.....................................................18
2.21 Brokers' and Finders' Fees; Third Party Expenses..........................18
2.22 Employee Benefit Plans and Compensation...................................18
2.23 Insurance.................................................................22
2.24 Compliance with Laws......................................................22
2.25 Warranties; Indemnities...................................................22
2.26 Complete Copies of Materials..............................................23
2.27 Proprietary Information Agreements........................................23
2.28 Solvency..................................................................23
2.29 Representations Complete..................................................23
</TABLE>
-i-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE II A VENDOR PROTECTION CLAUSES....................................................24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.............................24
3.1 Ownership of Shares.......................................................24
3.2 Tax Matters...............................................................25
3.3 Absence of Claims by the Shareholders.....................................25
3.4 Authority.................................................................25
3.5 No Conflict...............................................................25
3.6 Consents..................................................................26
3.7 Unregistered Shares.......................................................26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEON..........................................26
4.1 Organization, Standing and Power..........................................26
4.2 Authority.................................................................26
4.3 Capital Structure.........................................................26
4.4 SEC Documents; NEON Financial Statements..................................27
4.5 Litigation................................................................27
ARTICLE V ADDITIONAL AGREEMENTS...........................................................27
5.1 Expenses..................................................................27
5.2 Public Disclosure.........................................................28
5.3 Additional Documents and Further Assurances...............................28
ARTICLE VI SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY ESCROW....................28
6.1 Survival of Representations and Warranties................................28
6.2 Indemnity; Escrow Arrangements............................................28
ARTICLE VII GENERAL PROVISIONS..............................................................29
7.1 Notices...................................................................29
7.2 Interpretation............................................................30
7.3 Counterparts..............................................................30
7.4 Entire Agreement; Assignment..............................................30
7.5 Severability..............................................................30
7.6 Other Remedies............................................................30
7.7 Governing Law.............................................................31
7.8 Rules of Construction.....................................................31
</TABLE>
ii
<PAGE> 5
SHARE ACQUISITION AGREEMENT
This SHARE ACQUISITION AGREEMENT (the "Agreement") is made and entered
into as of February 19, 1999 by and among New Era of Networks, Inc., a Delaware
corporation ("NEON"), Andrew Street and Michael Eugene Tinworth (each directly
or indirectly a shareholder of the Company hereinafter referred to individually
as a "Shareholder" and collectively as the "Shareholders") and, with respect to
Articles VI and VII, Andrew Street (in his capacity as the "Shareholder
Representative").
RECITALS
A. The Board of Directors of NEON believes it is in the best interests
of NEON and its shareholders that NEON acquire all of the issued and outstanding
share capital of Database & Management (S) Pte. Ltd., a corporation organized
under the laws of Singapore (the "Company"), owned or held of record by the
Shareholders (the "Acquisition") such that upon consummation of the acquisition
NEON will be the sole beneficial owner of all of the issued and outstanding
share capital of the Company and, in furtherance thereof, has approved the
Acquisition.
B. The Shareholders desire to sell all of the share capital of the
Company owned or held of record by them to NEON, all upon the terms and subject
to the conditions set forth herein.
C. As an inducement for NEON to consummate the Acquisition, the Company
and the Shareholders agree to make certain representations, warranties,
covenants and other agreements in connection with the Acquisition.
D. A portion of the consideration otherwise payable by NEON in
connection with the Acquisition shall be placed in escrow by NEON for the
purposes of satisfying damages, losses, expenses and other similar charges which
result from breaches of representations, warranties and covenants.
E. As an inducement for NEON to consummate the Acquisition, each of the
Shareholders have agreed to enter into Confidential Information and
Non-Competition Agreements of even date herewith (the "Confidentiality
Agreement") in substantially the form attached hereto as Exhibit A, which
Non-Competition Agreements shall be effective only upon the closing of the
Acquisition.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
<PAGE> 6
ARTICLE I
PURCHASE AND SALE OF COMPANY SHARE CAPITAL
1.1 Purchase and Sale. At the Closing (as defined in Section 1.3) NEON
is purchasing, upon the terms of this Agreement, from each Shareholder and each
Shareholder is selling, conveying, transferring, assigning and delivering to
NEON, free and clear of all liens, encumbrances or other defects of title, all
of the issued and outstanding shares of share capital of the Company
beneficially owned or held of record by the Shareholders at the Closing (the
"Shares"), including all property or rights issued by the Company with respect
to the Shares. The name and address of each Shareholder and the number and
description of such Shares being sold by such Shareholder pursuant hereto, and
the consideration payable in connection there are set forth in Schedule 1.1
hereto.
1.2 Consideration. At Closing, NEON is paying to the Shareholders (i)
cash in the amount of $600,000 (the "Cash Consideration") and (ii) that number
of shares of Common Stock of NEON valued at $580,000 at signing based on the
average closing sale price of a share of NEON Common Stock, as reported on The
Nasdaq National Market, for the ten (10) most recent trading days ending on the
third trading day immediately preceding the Closing Date and rounded to the
nearest whole share (the "Stock Consideration," and, collectively with the Cash
Consideration, the "Purchase Price"); provided, however, that NEON shall
withhold that number of shares equal to 15% of the Stock Consideration (the
"Escrow Shares") and 15% of the Cash Consideration (the "Escrow Cash", and,
together with the Escrow Shares, the "Escrow Fund"), for deposit with NEON (the
"Escrow Agent") as collateral for the indemnification obligations of the
Shareholders under Article VI hereof pursuant to the provisions of an escrow
agreement substantially in the form of Exhibit B (attached) hereto (the "Escrow
Agreement").
1.3 Closing.
(a) The closing of the Acquisition (the "Closing") is taking place
concurrently with the execution and delivery hereof at the offices of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo
Alto, California 94304, unless another time or place is agreed to in writing by
NEON and the Shareholders. The date upon which the Closing occurs is herein
referred to as the "Closing Date."
(b) At the Closing, the Shareholders shall deliver or cause to be
delivered to NEON the following:
(i) duly executed transfers of the Shares by the Shareholders
being in favour of NEON and/or its nominee together with the relevant share
certificates;
(ii) a certified copy of the Board Minutes of the Company
("Completion Board Minutes") approving the sale and transfer of the Shares;
-2-
<PAGE> 7
(iii) in relation to the matters referred to the Completion
Board Minutes the Shareholders have:
a. procured the written resignations of the directors and any other
officers of the Company referred therein (if any), and deliver
such resignations to NEON together with a written acknowledgement
from each such director and officer (as applicable) acknowledging
that he has no outstanding claim whatsoever from or against the
Company other than salary and expenses in the ordinary course of
business;
b. procured the revocation of all authorities to the bankers of the
Company relating to the bank accounts of the Company, giving
authority to such persons as NEON may nominate to operate the
same;
c. procured the written resignation of the auditors of the Company
together with a written acknowledgment by such auditors that they
have no outstanding claims of any kind from or against the
Company;
d. the appropriate forms to amend the bank mandates to be given to
the bankers of the Company;
(iv) a duly executed Deed of Indemnity by each Shareholder in
the form attached hereto as Exhibit D;
(v) Company documents, including:
a. the company chop, the company seal and the certificate of
incorporation of the Company;
b. the current business registration certificate of the Company;
c. the statutory books and records of the Company, being complete
and duly written up-to-date;
(vi) any and all consents and waivers from third parties to the
Company's contracts and other instruments shall have been obtained by the
Company, set forth in Section 2.6 of the Company Disclosure Schedule;
(vii) the Shareholder Agreement which shall have executed and
delivered by the Shareholders in substantially the form attached hereto as
Exhibit C; and
(viii) the Confidentiality Agreement which shall have been
executed and delivered by the persons set forth in Section 1.1 hereto.
-3-
<PAGE> 8
(c) At the Closing, NEON is delivering or causing to be delivered
to each Shareholder the following:
(i) subject to Section 1.2 regarding the Escrow Shares,
certificates representing each Shareholder's respective portion of the Stock
Consideration in the amount set forth on Schedule 1.1;
(ii) subject to Section 1.2 regarding the Escrow Cash, check,
wire transfer or any other form mutually agreed upon by the parties representing
each Shareholder's respective portion of the Cash Consideration in the amount
set forth on Schedule 1.1;
(iii) all other documents, agreements, certificates or writings
required to be delivered by NEON on or prior to the Closing Date pursuant to
this Agreement or as may be reasonably requested by any party in order to
consummate the transactions contemplated by this Agreement;
(iv) Confidentiality Agreements with Andrew Street and Michael
Eugene Tinworth in substantially the form attached hereto as Exhibit A;
(v) Shareholder's Agreements with Andrew Street and Michael
Eugene Tinworth in substantially the form attached hereto as Exhibit C; and
(vi) Option Agreements with Andrew Street and Michael Eugene
Tinworth in substantially the form attached hereto as Exhibit E.
(d) At the Closing, each of the Shareholders and NEON is delivering
or causing to be delivered the following:
(i) all authorizations, consents, permits and approvals of all
federal, state and local governmental agencies and authorities required to be
obtained in order to permit consummation of the transactions contemplated by
this Agreement shall have been obtained.
(ii) the Escrow Agreement, executed and delivered by NEON, the
Shareholder Representative and the Escrow Agent, which Escrow Agreement shall be
in full force and effect.
(e) At the Closing, or as soon thereafter as practicable, NEON
shall deliver to the Escrow Agent the Escrow Cash and the Escrow Shares in
accordance with Section 1.2 and the Escrow Agreement.
(f) Within 15 days of the Closing, Michael Eugene Tinworth shall
deliver a Statutory Declaration in reference to the share certificate of
Katherine Lo in a form reasonably acceptable to NEON.
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1.4 Definitions.
"Company Share Capital" shall mean (i) shares of Company Ordinary
Shares (as hereinafter defined) and (ii) any other share capital of the Company.
"Company Ordinary Shares" shall mean all ordinary shares of the
Company, with nominal value of HK $1.00 each.
"Dollars" or "$" shall mean U.S. dollars.
"GAAP" shall mean Hong King generally accepted accounting principles
consistently applied.
"NEON Common Stock" shall mean unregistered shares of the common stock,
$.0001 par value per share, of NEON.
"US GAAP" shall mean U.S. generally accepted accounting principles
consistently applied.
1.5 No Further Ownership Rights in Shares. All cash paid and NEON
Common Stock issued in respect of the surrender for exchange of the Shares in
accordance with the terms hereof, shall be deemed to be full satisfaction of all
of the Shareholders' rights pertaining to such Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS AS TO THE COMPANY
Except as disclosed in the disclosure schedule dated as of the date
hereof referring specifically to the representations or warranties in this
Agreement and delivered by the Shareholders to NEON immediately prior to the
execution of this Agreement (the "Company Disclosure Schedule"), each of the
Shareholders, severally and not jointly (except as to the Escrow Fund
indemnification provisions set forth in the Escrow Agreement, in which case
liability shall be joint and several), represents and warrants to NEON as set
forth below.
2.1 Organization of the Company. The Company is a corporation duly
incorporated and, validly existing and subsisting under the laws of Singapore.
The Company has the corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified or licensed to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure to be so qualified or licensed would have a material
adverse effect on the business, assets (including intangible assets), condition
(financial or otherwise), or results of operations of the Company (hereinafter
referred to as a "Material Adverse Effect"); provided, however, that a Material
Adverse Effect shall not include any adverse effect following the date of this
Agreement on the business, assets, condition or results of operations of the
Company that is
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<PAGE> 10
attributable to the transactions contemplated by this Agreement or the
announcement of such transactions. A true and correct copy of the Company's
Memorandum of Association and Articles of Association, each as amended to date,
has been made available to NEON. Section 2.1 of the Company Disclosure Schedule
lists the directors and officers of the Company. The operations now being
conducted by the Company have not been conducted under any other name.
2.2 Subsidiaries. The Company does not have any subsidiaries and does
not otherwise own or control, directly or indirectly, any corporation, limited
liability company, partnership, association, joint venture or other business
entity.
2.3 Company Capital Structure.
(a) The authorized capital stock of the Company consists of 100,000
shares of authorized Ordinary Shares of which 100,000 are issued and
outstanding. The shares are held by the persons, with the domicile addresses and
in the amounts set forth in Section 2.3(a) of the Company Disclosure Schedule.
The Shares are all the issued and outstanding shares of the Company and are
fully paid, and have been duly and validly issued, except as set forth in
Section 2.3(a) of the Company Disclosure Schedule, and are not subject to any
pre-emptive rights created by statute, the Memorandum and Articles of
Association of the Company or any agreement to which the Company and/or any
Shareholder is a party or by which it or he is bound and have been duly and
validly issued in compliance with the laws of Singapore and the Memorandum and
Articles of Association of the Company, except as set forth in Section 2.3(a) of
the Company Disclosure Schedule.
(b) There are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which the Company is a party or
by which it is bound obligating the Company to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of the Company or obligating the Company to grant,
extend, accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement. The Company
does not have any stock option plan or other plan providing for equity
compensation of any person. There is no outstanding Company Share Capital which
is subject to vesting. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or other similar rights with
respect to the Company. Except as contemplated hereby, there are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting stock of the Company. There is no restriction which has not been complied
with on the sale or transfer of the Shares to NEON.
(c) Upon payment of the Purchase Price in the manner set forth in
Section 1.2 hereof, the Shareholders shall have transferred to NEON and its
designee one hundred percent (100%) of the outstanding share capital of the
Company together with all rights and interests attaching thereto, free and clear
of all liens, encumbrances or other defects of title.
2.4 Authority. The Shareholders have the legal capacity to enter into
this Agreement and to consummate the transactions contemplated hereby. The
transfer of the shares pursuant to this
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<PAGE> 11
Agreement has been duly and validly approved and authorized by the Board of
Directors of the Company. This Agreement has been duly executed and delivered by
the Shareholders, and, assuming the due authorization, execution and delivery by
the other parties hereto, constitutes the valid and binding obligation of the
Shareholders, enforceable in accordance with its terms, except as such
enforceability may be limited by principles of public policy and subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and laws of general application including enforcement of creditors'
rights generally and to rules of law governing specific performance, injunctive
relief or other equitable remedies.
2.5 No Conflict. Except as set forth in Section 2.5 of the Company
Disclosure Schedule, the execution and delivery by the Company of this Agreement
and the consummation of the transactions contemplated hereby will not materially
conflict with, or result in any material violation of, or material default under
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation, modification or acceleration of any material
obligation or loss of any material benefit under (any such event, a "Conflict")
(i) any provision of the constitutional documents of the Company, (ii) any
mortgage, indenture, lease, material contract or other material agreement or
instrument, permit, concession, franchise or license to which the Company or any
of its properties or assets are subject, or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or its
properties or assets.
2.6 Consents. Except as set forth in Section 2.6 of the Company
Disclosure Schedule, no consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other Singapore or other foreign governmental authority,
instrumentality, agency or commission ("Governmental Entity") or any third
party, (so as not to trigger any Conflict), is required by or with respect to
the Company in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for (i) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable securities laws
thereby, and (ii) where the failure to obtain or make such consent, waiver,
approval, order, authorization, registration, declaration or filing would not
have a Material Adverse Effect.
2.7 Company Financial Statements; Material Agreements. Section 2.7 of
the Company Disclosure Schedule sets forth the Company's balance sheets as of
June 30, 1997 and June 30, 1998 and the related audited statements of income and
cash flow for the six-month periods ended June 30, 1997 and June 30, 1998 (the
"Year-End Financials") and the Company's unaudited balance sheet as of
December 31, 1998 and the related unaudited statements of income and cash flow
for the six months then ended (the "Interim Financials"). The Year-End
Financials and the Interim Financials are correct and have been prepared in
accordance with GAAP applied on a basis consistent throughout the periods
indicated except that Interim Financials are not audited and do not contain
footnotes. The Year-End Financials and Interim Financials present fairly in all
material respects the financial condition, operating results and cash flows of
the Company as of the dates and during the periods indicated therein, subject in
the case of the Interim Financials, to normal year-end
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<PAGE> 12
adjustments, which are not expected to be material in amount or significance.
The Company's unaudited Balance Sheet as of December 31, 1998 shall be referred
to as the "Current Balance Sheet." The Company has provided to NEON all written
contracts with a term of over one year or a value of more than $2,500 to which
the Company is a party and which have been entered into between June 30, 1998
and the Closing Date. The Company has provided to NEON all contracts with a
value of more than $10,000 which have been entered into between July 1, 1997 and
June 30, 1998.
2.8 No Undisclosed Liabilities. Except as set forth in Section 2.8 of
the Company Disclosure Schedule, the Company does not have any liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other
(whether or not required to be reflected in financial statements in accordance
with U.S. GAAP or GAAP), which, individually or in the aggregate (i) has not
been reflected in or reserved against in the Current Balance Sheet, (ii) has not
arisen in the ordinary course of business consistent with past practices since
December 31, 1998, (iii) is in excess of $10,000 or (iv) would result,
individually or in aggregate, in a Material Adverse Effect.
2.9 No Changes. Except in connection with the consummation of the
transactions contemplated by this Agreement, or as set forth in Section 2.9 of
the Company Disclosure Schedule, since December 31, 1998, there has not been,
occurred or arisen any:
(a) agreement, contract or transaction by the Company except in the
ordinary course of business as conducted on that date and consistent with past
practices;
(b) amendments or changes to the Memorandum of Association or
Articles of Association of the Company;
(c) capital expenditure or commitment by the Company in the
aggregate exceeding $10,000;
(d) destruction of, damage to or loss of any material assets,
material business or material customer of the Company (whether or not covered by
insurance), which damage or loss has had or would have a Material Adverse
Effect;
(e) claim of wrongful discharge or other unlawful labor practice or
action;
(f) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company other than
required by GAAP;
(g) revaluation by the Company of any of its material assets;
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<PAGE> 13
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the Company Share Capital, or any direct or
indirect redemption, purchase or other acquisition by the Company of its Share
Capital;
(i) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment, by the Company, of a bonus or other additional salary or
compensation to any such person, except for adjustments in compensation in
accordance with annual performance reviews or other increases in compensation
made in the normal course of business (none of which exceed 10% of the previous
year's or current base salary) or as otherwise contemplated by this Agreement;
(j) any termination, extension, amendment or modification of the
terms of any agreement, contract, covenant, instrument, lease, license or
commitment to which the Company is a party or by which it or any of its assets
is bound which has had a Material Adverse Effect;
(k) sale, lease, license or other disposition of any of the
material assets or properties of the Company, or any creation of any security
interest in such assets or properties;
(l) loan by the Company to any person or entity, incurring by the
Company of any indebtedness for money borrowed, guaranteeing by the Company of
any indebtedness for money borrowed, issuance or sale of any debt securities of
the Company or guaranteeing of any debt securities of others;
(m) waiver or release of any material right or claim of the
Company, including any write-off or other compromise of any account receivable
of the Company, except in the ordinary course of business, consistent with past
practices;
(n) notice of any claim or potential claim of ownership by any
person other than the Company of the Company Intellectual Property (as defined
in Section 2.13) owned by or developed or created by the Company or of
infringement by the Company of any other person's Intellectual Property rights;
(o) issuance or sale, or contract to issue or sell, by the
Company of any shares of Company Capital Stock, or securities exchangeable,
convertible or exercisable therefor, or any securities, warrants, options or
rights to purchase any of the foregoing;
(p) material change in pricing or royalties set or charged by the
Company to its customers or licensees or in pricing or, to its knowledge, in the
pricing of royalties set or charged by persons who have licensed Intellectual
Property (as defined in Section 2.13) to the Company;
(q) any event or condition of any character that has had a Material
Adverse Effect on the Company; or
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<PAGE> 14
(r) agreement by the Company to do any of the things described in
the preceding clauses (a) through (q) (other than negotiations with NEON and its
representatives regarding the transactions contemplated by this Agreement).
2.10 Tax Matters.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
or, collectively, "Taxes", means (i) any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use 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; (ii) any liability for the payment of any amounts of
the type described in clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any period; and (iii) any liability
for the payment of any amounts of the type described in clause (i) or (ii) as a
result of any express or implied obligation to indemnify any other person or as
a result of any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Section 2.10 of
the Company Disclosure Schedule:
(i) The Company as of the Closing will have prepared and timely
filed all required federal, and state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to any and all Taxes
concerning or attributable to the Company or its operations and such Returns are
true and correct and have been completed in accordance with applicable law.
(ii) The Company as of the Closing (A) will have paid all Taxes
it is required to pay and will have withheld with respect to its employees all
federal and state income taxes, FICA, FUTA and other Taxes required to be
withheld, and (B) will have paid or have accrued on the Current Balance Sheet
all Taxes attributable to the periods covered by the Current Balance Sheet and
will not have incurred any liability for Taxes for the period from the date
after the Current Balance Sheet through to the Closing other than in the
ordinary course of business.
(iii) There is no material Tax deficiency outstanding, assessed
or proposed against the Company, and the Company has not executed any waiver of
any statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Return of the Company
is presently in progress, nor has the Company been notified of any request for
such an audit or other examination.
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<PAGE> 15
(v) The Company has made available to NEON or its legal counsel
upon their request, copies of all foreign, federal, state and local income and
all state and local sales and use Returns for the Company filed for all periods
since its inception.
(vi) There are no liens, pledges, charges, claims, restrictions
on transfer, mortgages, security interests or other encumbrances of any sort
(collectively, "Liens") on the assets of the Company relating to or attributable
to Taxes other than Liens for Taxes not yet due and payable.
(vii) The Company is not a party to any tax sharing,
indemnification or allocation agreement nor does the Company owe any amount
under any such agreement, other than this Agreement.
(viii) The Company is not engaged in any trade or business
within the United States.
(ix) The Shareholders do not have knowledge of any basis for
the assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company other than
Liens for Taxes not yet due and payable.
(x) The Company's tax basis in its assets is accurately
reflected on the Company's tax books and records.
(xi) The Company has maintained sufficient and accurate records
and all other information required by law to support all Returns which have been
lodged.
(xii) The Company has since its incorporation carried out, or
been engaged in, any transaction or arrangement in respect of which there may be
substituted for the consideration given or received by the Company a different
consideration for purposes of Taxes. (xiii) The Company has not at any time
entered into or been a party to a transaction or series of transactions
containing steps inserted without any commercial or business purpose, which may
directly or indirectly in anyway result in the Company being liable for the
payment of any Taxes which is not disclosed and appropriate provisions not
having been made in the Year-End Financials.
(xiv) The Company has not been a party to any material
transactions which has not been of entirely arm's length nature.
(xv) All documents to which the Company is a party or which
form part of the Company's title to any asset owned or possessed by it or which
the Company may need to enforce or produce in evidence in the courts of
Singapore have been duly stamped and (where appropriate) adjudicated.
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2.11 Restrictions on Business Activities. Except as set forth in
Section 2.11 of the Company Disclosure Schedule, there is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has the
effect of prohibiting or impairing any line of business or business practice
(including without limitation the licensing of any product) of the Company, any
acquisition of property (tangible or intangible) by the Company or the conduct
of business by the Company which has a Material Adverse Effect. The Company is
not a party to and is not currently bound by any agreement under which the
Company is restricted from selling, licensing or otherwise distributing any of
its technology or products to or providing services to, customers or potential
customers or any class of customers, in any geographic area, during any period
of time or in any segment of the market which has or would reasonably be
expected to have a Material Adverse Effect.
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition
of Equipment.
(a) The Company does not own any real property, nor has it ever
owned any real property. Section 2.12(a) of the Company Disclosure Schedule sets
forth a list of all real property leased by the Company as of the Closing, the
name of the lessor, the date of the lease and each amendment thereto and, with
respect to any current lease, the aggregate annual rental and/or other fees
payable under any such lease. All such current leases are in full force and
effect, and there is not, under any of such leases, any existing material
default or event of default by the Company (or event which with notice or lapse
of time, or both, would constitute a default by the Company); provided, however,
that any material adverse financial impact on the Company of such breach shall
constitute a material default.
(b) The Company has good and valued title to, or in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except as set forth in Section 2.14 of
the Company Disclosure Schedule or as reflected in the Current Balance Sheet,
and except for Liens for Taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which are not material in character, amount or
extent, and which do not materially detract from the value, or materially
interfere with the present use, of the property subject thereto or affected
thereby.
(c) Section 2.12(c) of the Company Disclosure Schedule lists all
material items of equipment (the "Equipment") owned or leased by the Company and
such Equipment is, (i) adequate for the conduct of the business of the Company
as currently conducted and (ii) in good operating condition, regularly and
properly maintained, subject to normal wear and tear.
(d) The Company has sole and exclusive ownership, free and clear
of any Liens, of all customer files and other proprietary customer information
in its possession relating to its current and former customers (the "Customer
Information"). No person other than the Company possesses any claims or rights
with respect to use of the Customer Information.
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2.13 Intellectual Property.
(a) The Company owns, or is licensed or otherwise possesses
legally enforceable rights to use, all registered and unregistered trademarks,
trade names, service marks, trade secrets, copyrights, and any applications
therefor, schematics, technology, know-how, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material that are required for the conduct
of business of the Company as currently conducted by the Company or as such
rights relate to services offered or products currently under development (the
"Company Intellectual Property").
(b) Schedule 2.13(a) sets forth a complete list of all registered
and unregistered trademarks, registered copyrights, trade names and service
marks, and any applications therefor, included in the Company Intellectual
Property, and specifies, where applicable, the jurisdictions in which such
Company Intellectual Property has been issued or registered or in which an
application for such issuance and registration has been filed, including the
respective registration or application numbers and the names of all registered
owners. Schedule 2.13(b) sets forth a complete list of all material licenses,
sublicenses and other agreements to which the Company is a party and pursuant to
which the Company or any other person is authorized to use any Company
Intellectual Property or trade secret of the Company, and includes the identity
of all parties thereto, a description of the nature and subject matter thereof,
the applicable royalty or other fees and the term thereof. The execution and
delivery of this Agreement by the Company, and the consummation of the
transactions contemplated hereby, will neither cause the Company to be in
violation or default under any such license, sublicense or agreement, nor
entitle any other party to any such license, sublicense or agreement to
terminate or modify such license, sublicense or agreement. Except as set forth
in Schedules 2.13(a) or 2.13(b), the Company is the sole and exclusive owner or
licensee of, with all right, title and interest in and to (free and clear of any
liens or encumbrances but subject to the license rights of customers under
customer agreements, which customer agreements have been disclosed in the
Company Schedules to the extent required elsewhere herein), the Company
Intellectual Property, and has sole and exclusive rights (and is not
contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which the Company Intellectual Property
is being used.
(c) No claims with respect to the Company Intellectual Property
have been asserted or, to the Shareholder's knowledge, threatened by any person,
nor, to the Shareholder's knowledge, has any other person made an assertion (i)
against the use by the Company of any trademarks, service marks, trade names,
trade secrets, copyrights, patents, technology, know-how or computer software
programs and applications used in the Company's business as currently conducted
by the Company, or (ii) challenging the ownership by the Company, validity or
effectiveness of any of the Company Intellectual Property. All registered
trademarks, service marks and copyrights held by the Company are valid and
subsisting. To the best of the Shareholder's knowledge, the Company has not
infringed, and the business of the Company as currently conducted
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<PAGE> 18
or as currently proposed to be conducted does not infringe, any copyright,
patent, trademark, service mark, trade secret or other proprietary right of any
third party. There is no material unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property by any third party,
including any employee or former employee of the Company. No Company
Intellectual Property is subject to any outstanding decree, order, judgment, or
stipulation restricting in any material manner the use or licensing thereof by
the Company. Each employee, consultant or contractor of the Company has executed
a proprietary information and confidentiality agreement substantially in the
Company's standard forms.
(d) Section 2.13(d) of the Company Disclosure Schedule lists all
contracts, licenses and agreements between the Company and any other person
wherein or whereby the Company has agreed to, or assumed, any material
obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or
otherwise assume or incur any material obligation or liability with respect to
the infringement or misappropriation by the Company or such other person of the
intellectual property of any person or entity other than the Company.
(e) The Company has taken reasonable steps to ensure that any
products, software programs or technology developed (or currently being
developed) for its customers and other third parties, whether as "work-for-hire"
or otherwise, will accurately record, store, process, calculate and present
calendar dates falling on and after (and if applicable, spans of time including)
January 1, 2000, and will calculate any information dependent on or relating to
such dates in the same manner, and with the same functionality, data integrity
and performance, as the products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such dates (collectively, "Year 2000 Compliant").
The Company has taken reasonable steps to ensure that such products and programs
will lose no functionality with respect to the introduction of records
containing dates falling on or after January 1, 2000. All of the Company's
internal computer and technology products and systems are Year 2000 Compliant.
2.14 Agreements, Contracts and Commitments. Except as set forth in
Sections 2.13(b), 2.13(d) or 2.14(a) of the Company Disclosure Schedule, the
Company is not a party to nor is it bound by:
(i) any agreements or arrangements that contain any severance
pay or post-employment liabilities or obligations exceeding $10,000,
(ii) any bonus, deferred compensation, pension, profit sharing
or retirement plans, or any other employee benefit plans or arrangements,
(iii) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, whether written or oral, involving payments in
excess of $5,000,
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(iv) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(v) any fidelity or surety bond or completion bond,
(vi) any lease of personal property having a value individually
in excess of $15,000,
(vii) any agreement of indemnification or guaranty,
(viii) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $10,000
individually or $20,000 in the aggregate,
(ix) any agreement, contract or commitment relating to the
disposition or acquisition of material assets or any material interest in any
business enterprise outside the ordinary course of the Company's business,
(x) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money by the Company or extension of credit to the Company in excess of
$10,000 individually or $20,000 in the aggregate or any guarantee, indemnity,
performance bond, letter of comforts or any other security or securety ship or
agreements to give any of the same,
(xi) any purchase order or contract for the purchase of
materials involving in excess of $10,000 individually or $20,000 in the
aggregate,
(xii) any construction contracts,
(xiii) any power of attorney,
(xiv) any oral contract which has created a receivable to the
Company in excess of $5,000 which is not collectible and enforceable,
(xv) any outstanding indebtedness or other liability (actual or
contingent) owing by the Company to any of the Shareholders, nor any
indebtedness owing to the Company by any of the Shareholders; and no promise or
representation has been made to any of the Shareholders in connection with any
representations, warranties or other provisions in this Agreement (including
without limitation, the Company Disclosure Letter) in respect of which the
Company may be liable,
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<PAGE> 20
(xvi) any distribution, joint marketing or development
agreement which is not cancelable without penalty within thirty (30) days, or
(xvii) any other agreement, contract or commitment, whether
written or oral, that involves $10,000 individually or $20,000 in the aggregate
or more which is not cancelable without penalty within thirty (30) days and
which was not entered into in the ordinary course of business.
(b) The Company is in compliance with and is not in breach of,
violation of or default under, and has not received notice that it has
materially breached, violated or defaulted under, any of the terms or conditions
of any agreement, contract, covenant, instrument, lease, license or commitment,
whether written or oral, to which the Company is a party or by which it or its
properties is bound which is required to be set forth in Schedule 2.13(b),
2.13(d) or 2.14(a) (collectively a " Contract"), nor is any Shareholder aware of
any event that would constitute such a breach, violation or default with the
lapse of time, giving of notice or both (except for notices relating to
breaches, violations or defaults that have been cured in all material respects).
Each Contract is in full force and effect and, except as otherwise disclosed in
Section 2.14(b) of the Company Disclosure Schedule, is not subject to any
default thereunder of which either Shareholder has knowledge by any party
obligated to the Company pursuant thereto. Following the Closing, the Company
will be permitted to exercise all of the Company's rights under the Contracts
without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company would otherwise be
required to pay had the transactions contemplated by this Agreement not
occurred. There are no restrictions whatsoever under any agreement, the
Memorandum and Articles of Association of the Company or otherwise, on or for
the sale or transfer of the Shares to Neon and/or its nominees pursuant to this
Agreement other than the requirement under the Articles of Association of the
Company for the Company's directors' consent to the registration of the transfer
of the Shares.
2.15 Interested Party Transactions. Except as set forth in Section 2.15
of the Disclosure Schedule, no officer, director or shareholder of the Company
(nor any ancestor, sibling, descendant or spouse of any of such persons, or any
trust, partnership or corporation in which any of such persons has or has had an
interest), has or has had, directly or indirectly, (i) an interest in any entity
which furnished or sold, or furnishes or sells, services, products or technology
that the Company furnishes or sells, or proposes to furnish or sell, or (ii) any
interest in any entity that purchases from or sells or furnishes to the Company,
any material quantity goods or services or (iii) a material beneficial interest
in any Contract; provided, that ownership of no more than one percent (1%) of
the outstanding voting stock of a publicly traded corporation shall not be
deemed an "interest in any entity" for purposes of this Section 2.15.
2.16 Governmental Authorization. The Company possesses all material
consent, license, permit, grant or other authorization issued to the Company by
a Governmental Entity (i) pursuant to which the Company currently operates or
holds any interest in any of its properties or (ii) which is
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required for the operation of its business or the holding of any such interest
(herein collectively called "Company Authorizations"). The Company
Authorizations are in full force and effect and to either Shareholder's
knowledge constitute all Company Authorizations required to permit the Company
to operate or conduct its business or hold any interest in its properties or
assets.
2.17 Litigation. There is no action, suit or proceeding of any nature
pending, or, to either Shareholder's knowledge, threatened, against the Company,
its properties or any of its officers or directors, nor, to the knowledge of any
Shareholder, is there any reasonable basis therefor which has or could
reasonably be expected to have a Material Adverse Effect. There is no
investigation pending or, to or any Shareholder's knowledge threatened, against
the Company, its properties or any of its officers or directors (nor, to the
knowledge of either Shareholder, is there any reasonable basis therefor) by or
before any Governmental Entity. No Governmental Entity has at any time
challenged or questioned the legal right of the Company to conduct its
operations as presently or previously conducted. Section 2.17 of the Company
Disclosure Schedule sets forth, with respect to any pending or threatened
action, suit, proceeding or investigation, the forum, the parties thereto, the
subject matter thereof and the amount of damages claimed or other remedy
requested.
2.18 Accounts Receivable.
(a) The Company has made available to NEON a list of all material
accounts receivable of the Company ("Accounts Receivable") as of December 31,
1998 along with a range of days elapsed since invoice.
(b) All Accounts Receivable of the Company arose in the ordinary
course of business, are carried at values determined in accordance with GAAP and
are, to the knowledge of the Shareholders, collectible except to the extent of
reserves therefor set forth in the Current Balance Sheet. Except as set forth in
Section 2.14 of the Disclosure Schedule, no person has any Lien on any of such
Accounts Receivable, and no request or agreement for deduction or discount has
been made with respect to any of such Accounts Receivable.
2.19 Minute Books. The minutes of the Company made available to counsel
for NEON are the only minutes of the Company and contain a reasonably accurate
summary of all meetings of the Board of Directors (or committees thereof) of the
Company and its shareholders or actions by written consent since the time of
incorporation of the Company. The register of members, the register of directors
and secretary, register of directors' and shareholders' resolutions, register of
charges and any other statutory books, books of account and other records which
the Company may from time to time required to keep, of the Company have been
properly and duly kept and contain true, accurate and complete records of all
matters with which they should deal or record and are in its possession or under
its control, and no notice or allegation of whatsoever nature from whomsoever,
that any of them is incorrect or should be rectified, has been received.
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2.20 Environmental Matters.
(a) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to hazardous materials in violation of any law in effect on
or before the Closing, nor has the Company disposed of, transported, sold, or
manufactured any product containing a hazardous material (any or all of the
foregoing being collectively referred to as "Hazardous Materials Activities") in
material violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control hazardous materials or any hazardous material activity.
(b) Permits. To the extent legally required, the Company currently
holds all environmental approvals, permits, licenses, clearances and consents
(the "Environmental Permits") necessary for the conduct of the Company's
Hazardous Material Activities and other businesses of the Company as such
activities and businesses are currently being conducted, the absence of which
would be reasonably likely to result in fines to the Company in excess of
$10,000 individually or $20,000 in the aggregate.
(c) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Shareholder's knowledge, threatened concerning any Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of the Company. The
Shareholders are not aware of any fact or circumstance which could involve the
Company in any environmental litigation or impose upon the Company any
environmental liability which would be reasonably likely to exceed $10,000
individually or $20,000 in the aggregate.
2.21 Brokers' and Finders' Fees; Third Party Expenses. Except as set
forth in Section 2.21 of the Company Disclosure Schedule, the Company has not
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby. Section 2.21 of the
Company Disclosure Schedule sets forth the principal terms and conditions of any
agreement, written or oral, with respect to such fees. Section 2.21 of the
Company Disclosure Schedule sets forth the Company's current reasonable estimate
of all Third Party Expenses (as defined in Section 5.2) expected to be incurred
by the Company in connection with the negotiation and effectuation of the terms
and conditions of this Agreement and the transactions contemplated hereby, which
amount shall be the sole responsibility of the Shareholders.
2.22 Employee Benefit Plans and Compensation.
(a) For purposes of this Section 2.22, the following terms shall
have the meanings set forth below:
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<PAGE> 23
(i) "Affiliate" shall mean any other person or entity under
common control with the Company.
(ii) "Employee Plan" shall refer to any plan, program, policy,
practice, contract, agreement or other arrangement providing for bonuses,
severance, termination pay, deferred compensation, pensions, profit sharing,
performance awards, stock or stock-related awards, fringe benefits or other
employee benefits of any kind, whether formal or informal, written or otherwise,
funded or unfunded and whether or not legally binding, including without
limitation, any plan which is or has been maintained, contributed to, or
required to be contributed to, by the Company or any Affiliate for the benefit
of any "Employee" (as defined below), and pursuant to which the Company or any
Affiliate has or may have any material liability, contingent or otherwise; and
(iii) "Employee" shall mean any current, former, or retired
employee, consultant, officer, or director of the Company or any Affiliate.
(iv) "Employee Agreement" shall refer to each employment,
severance, consulting or similar agreement or contract between the Company or
any Affiliate and any Employee;
(b) Schedule. Section 2.22(b) of the Company Disclosure Schedule
contains a list of each Employee Plan and each Employee Agreement, together with
a schedule of all liabilities, whether or not accrued, under each such Employee
Plan. The Company does not have any plan or commitment, whether legally binding
or not, to establish any new Employee Plan or Employee Agreement, to modify any
Employee Plan or Employee Agreement (except to the extent required by law or to
conform any such Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to NEON in writing, or as
required by this Agreement), or to enter into any Employee Plan or Employee
Agreement, nor does it have any intention or commitment to do any of the
foregoing.
(c) Documents. The Company has made available to NEON, (i) correct
and complete copies of all documents embodying any Employee Plan and any
Employee Agreement including all amendments thereto and copies of all forms of
agreement and enrollment used therewith; (ii) the most recent annual actuarial
valuations, if any, prepared for each Employee Plan; (iii) the three most recent
annual reports (Series 5500 and all schedules thereto), if any, required under
ERISA or the Code in connection with each Employee Plan or related trust; (iv)
the most recent summary plan description together with the most recent summary
of material modifications, if any, required under ERISA with respect to each
Employee Plan; (v) all IRS determination letters and rulings, if any, relating
to Company Employee Plans and copies of all applications and correspondence to
or from the IRS or the Department of Labor ("DOL") with respect to any Employee
Plan; (vi) if the Employee Plan is funded, the most recent annual and periodic
accounting of Employee Plan assets; (vii) all material agreements and contracts
relating to each Employee Plan,
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<PAGE> 24
including but not limited to, administrative service agreements, group annuity
contracts and group insurance contracts; and (viii) all communications material
to any Employee or Employees relating to any Employee Plan and any proposed
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any liability to the
Company.
(d) Employee Plan Compliance. (i) The Company has performed in all
material respects all obligations required to be performed by it under each
Employee Plan and each Employee Plan has been established and maintained in all
material respects in accordance with its terms and in compliance in all material
respects with all applicable laws, statutes, orders, rules and regulations,
including ERISA and the Code; (ii) each Employee Plan intended to qualify under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code has either received a favorable determination letter with
respect to each such Plan from the IRS, has timely applied for such a
determination or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a determination
letter and make any amendments necessary to obtain a favorable determination;
(iii) there are no material actions, suits or claims pending, or, to the
knowledge of the Company threatened or anticipated (other than routine claims
for benefits) against any Employee Plan or against the assets of any Employee
Plan; (iv) each Employee Plan can be amended, terminated or otherwise
discontinued after the Closing in accordance with its terms, without liability
to the Company, NEON or any Affiliate (other than ordinary administration
expenses typically incurred in a termination event); (v) there are no inquiries
or proceedings pending or, to the knowledge of the Company, threatened by the
IRS or DOL with respect to any Employee Plan; and (vi) neither the Company nor
any Affiliate is, to the knowledge of the Company, subject to any penalty or tax
with respect to any Employee Plan under Section 402(i) of ERISA or Section 4975
through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed to
or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Employee Plan provides, or
has any liability to provide, life insurance, medical or other employee benefits
to any Employee upon his or her retirement or termination of employment for any
reason, except as may be required by statute, and the Company has not
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) that such Employee(s)
would be provided with life insurance, medical or other employee welfare
benefits or severance pay upon their retirement or termination of employment,
except to the extent required by statute.
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(h) No COBRA Violation. Neither the Company nor any Affiliate has,
prior to the Closing and in any material respect, violated any of the health
care continuation requirements of COBRA or any similar provisions of state law
applicable to its employees.
(i) Effect of Transaction. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Employee Plan, Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(j) Employment Matters. The Company (i) is in compliance with all
applicable laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
with respect to Employees in all material respects; (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages, salaries
and other payments to Employees or other persons who by virtue of their
activities performed on behalf of the Company may be deemed employees within the
meaning of applicable law; (iii) is not liable for any arrears of wages or any
taxes or any penalty for failure to comply with any of the foregoing; and (iv)
is not liable for any payment to any trust or other fund or to any governmental
or administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Employees or other persons
who by virtue of their activities performed on behalf of the Company may be
deemed employees within the meaning of applicable law (other than routine
payments to be made in the normal course of business and consistent with past
practice). The Company is in material compliance with all applicable federal
laws, rules and regulations that govern the employment and consulting
relationships of the Company's workers as they pertain to immigration matters.
(k) Labor. No work stoppage or labor strike against the Company is
pending, or to the knowledge of either Shareholder, threatened. The Company is
not involved in nor is being threatened with any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters involving any
Employee, including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in a material liability to the Company. The Company
has not engaged in any unfair labor practices which could, individually or in
the aggregate directly or indirectly result in a material liability to the
Company. The Company is not presently, nor has it in the past, been a party to,
or bound by, any collective bargaining agreement or union contract with respect
to Employees and no collective bargaining agreement is being negotiated by the
Company.
(l) No Interference or Conflict. To the knowledge of either
Shareholder, no shareholder, officer, employee or consultant of the Company is
obligated under any contract or agreement or subject to any judgement, decree or
order of any court or administrative agency, that would interfere with such
person's efforts to promote the interests of the Company or that would
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<PAGE> 26
materially interfere with the Company's business. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business as
presently conducted or proposed to be conducted nor any activity of such
officers, directors, employees or consultants in connection with the carrying on
of the Company's business as presently conducted or proposed to be conducted,
will, to either Shareholder's knowledge, conflict with or result in a breach of
the terms, conditions or provisions of, or constitute a default under, any
contract or agreement under which any of such officers, directors, employees or
consultants is now bound. Neither Shareholder has received notice of or is
currently aware of any senior employee or key personnel who intends to terminate
his/her employment with the Company.
2.23 Insurance. Section 2.23 of the Company Disclosure Schedule lists
all insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of the
Company or any Affiliate. There is no material claim by the Company or any
Affiliate pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid or accrued, and the Company and its Affiliates are otherwise in material
compliance with the terms of such policies and bonds (or other policies and
bonds providing substantially similar insurance coverage). Neither the Company
nor any Shareholder has knowledge of any threatened termination of, or premium
increase with respect to, any of such policies. The Company is now and has at
all material times taken out all necessary insurance which it is required to
take out by law and otherwise normally taken out against risks normally insured
against by persons carrying on the same business as that carried on by it. All
assets as disclosed in the Year End Financials are adequately insured in
accordance with prudent business practice in the relevant country and there has
been no failure by the Company to comply with any conditions in any relevant
policies.
2.24 Compliance with Laws. The Company has materially complied with, is
not in material violation of, and has not received any notices of violation with
respect to, any foreign, federal, state or local statute, law or regulation
(except for notices of violations which have been cured in all material
respects). All annual returns and other returns, particulars, resolutions and
documents required to be filed with the Registrar of Companies of Hong Kong or
to any other authority under any relevant legislation in Hong Kong or any other
applicable jurisdiction in respect of the Company have been duly filed within
any applicable time limit and were correct and all legal requirements relating
to the formation of the Company and the issue of the Shares have been duly
complied with in a timely manner. The Company has complied with its Memorandum
and Articles of Association in all respects and none of the activities,
agreements, commitments or rights of the Company (including without limitation,
its execution and delivery of this Agreement and the performance of its
obligations under this Agreement) is ultra vires, unauthorised or otherwise in
breach of any legal provisions.
2.25 Warranties; Indemnities. Except in the ordinary course of business
or as listed in Section 2.13(d) of the Company Disclosure Schedule or as set
forth in a Contract, the Company has
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not given any warranties or indemnities relating to products or technology sold
or services rendered by the Company.
2.26 Complete Copies of Materials. The Company has delivered or made
available true and complete copies of each document (or summaries of same) that
has been requested in writing by NEON or its counsel.
2.27 Proprietary Information Agreements. Each employee listed on
Section 2.27 of the Company Disclosure Schedule and presently employed by the
Company has executed a proprietary information agreement substantially in the
Company's standard form (as revised or modified, from time to time) samples of
which are attached hereto as part of Section 2.27 of the Company Disclosure
Schedule. Such proprietary information agreements constitute valid and binding
obligations of the Company.
2.28 Solvency.
(a) The Company is not in receivership or liquidation or any
similar state or position.
(b) No meeting has been convened, resolution proposed, petition
presented or other steps taken or proposed to be taken or pending or threatened
by any person or, order made or pending to be made for the winding up of the
Company.
(c) No receiver, administrator, provisional liquidator, liquidator
or other officer of the court has been appointed or threatened to be appointed
in relation to the Company or any part of its undertakings or assets and no
action has been taken or pending to be taken or is threatened to be taken to
seize or taken possession of any of the Company's undertakings or assets.
(d) The Company has not stopped payment nor is insolvent nor is
unable to pay its debts within the meaning of section 178 of the Companies
Ordinance (Cap 32) of the laws of Hong Kong.
(e) No unsatisfied judgment is outstanding against the Company.
2.29 Representations Complete. Without limiting in any way any
representations or warranties made by the Shareholders, none of the
representations or warranties made by the Shareholders (as modified by the
Company Disclosure Schedule), nor any statement made in any Schedule or
certificate furnished by any Shareholder pursuant to this Agreement contains or
will contain at the Closing, any untrue statement of a material fact or omits or
will omit to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which made,
not misleading.
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ARTICLE II A
VENDOR PROTECTION CLAUSES
2A.1 The representations, warranties and undertakings contained in
Articles II and/or III in this Agreement (together the "Warranties") are in all
respects qualified and limited by the provisions of this Article IIA to the
extent that none of the Shareholders shall be liable in any way under the
Warranties or for any claim under the Warranties nor under any indemnity
contained herein (together the "Indemnities"):
(a) to the extent that the subject of the claim is provided for or
reserved in the Year-End Financials, Interim Financials or Current Balance Sheet
or Audited Financials; or
(b) to the extent that a claim arises:
(i) as a result of an act occurring at the request of or with
the written consent of NEON or (on or after the date hereof) the Company
provided that such written consent was given with full knowledge of the
applicable facts and circumstances so as to be able to make an informed
decision; or
(ii) as a result of any increase in rates of taxation since the
Closing Date; or
(iii) as a result of the passing of an enactment or other
government regulation with retroactive effect; or
(c) for any liability for taxation which arises as a result of
transactions in the ordinary course of business of the Company effective since
the Closing Date; or
(d) in respect of any claim to the extent to which it would not
have arisen but for any matter or thing done or omitted to be done by the
Company or NEON or persons deriving title therefrom on or after the Closing Date
and based on facts and circumstances that exist on or after the Closing Date
(other than the purchase of the Sale Shares by NEON) unless such matter or thing
is necessarily done or necessarily omitted to be done as a direct consequence of
breach of any of the Warranties.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each Shareholder, severally but not jointly, represents and warrants to
NEON as follows:
3.1 Ownership of Shares. Such Shareholder is the sole legal and
beneficial owner of the Shares designated as being owned by such Shareholder
opposite such Shareholder's name in
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Schedule 3.1. Such Shares are not subject to any Liens or to any rights of first
refusal of any kind, and such Shareholder has not granted any rights to purchase
such Shares to any other person or entity. Such Shareholder has the sole right
to transfer such Shares to NEON. Such Shares constitute all of the Company Share
Capital owned, beneficially or of record, by such Shareholder, and such
Shareholder has no other rights to acquire Company Share Capital. Upon payment
of the Purchase Price in the manner set forth in Section 1.2, the Shareholders
will transfer to NEON and its designee good title to all of the Shares of the
Company, subject to no Liens retained, granted or permitted by such Shareholder
or the Company (except for the Memorandum and Articles of Association as to the
Company).
3.2 Tax Matters. Such Shareholder has had an opportunity to review with
its own tax advisors the tax consequences to such Shareholder of the Acquisition
and the transactions contemplated by this Agreement. Such Shareholder
understands that it must rely solely on its advisors and not on any statements
or representations by NEON, the Company or any of their agents. Such Shareholder
understands that it (and not NEON or the Company) shall be responsible for its
own tax liability that may arise as a result of the Acquisition or the
transactions contemplated by this Agreement.
3.3 Absence of Claims by the Shareholders. Such Shareholder does not
have any present claim against the Company and does not have knowledge of the
basis for any future claim against the Company whether, contingent or
unconditional, fixed or variable under any contract or on any other legal basis
whatsoever whether in the capacity as a shareholder, a director, or an officer
of the Company or otherwise.
3.4 Authority. Such Shareholder has the legal capacity to enter into
this Agreement and the Shareholders Agreement in the form attached hereto as
Exhibit C and to consummate the transactions contemplated hereby and thereby,
and no further action is required on the part of such Shareholder to execute
this Agreement and the Shareholders Agreement. This Agreement and the
Shareholders Agreement have been duly executed and delivered by such Shareholder
and, assuming the due authorization, execution and delivery by the other parties
thereto, constitute the valid and binding obligations of each such Shareholder,
enforceable in accordance with their terms, except as such enforceability may be
limited by principles of public policy and subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors and to
rules of law governing specific performance, injunctive relief or other
equitable remedies.
3.5 No Conflict. The execution and delivery by such Shareholder of this
Agreement and the Shareholders Agreement and the consummation of the
transactions contemplated hereby and thereby will not conflict with (ii) any
mortgage, indenture, lease, material contract or other material agreement or
instrument, permit, concession, franchise or license to which such Shareholder
or any of its properties or assets are subject (a "Shareholder Conflict"), or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to such Shareholder or its properties or assets.
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3.6 Consents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity or any
third party (so as not to trigger any Shareholder Conflict), is required by or
with respect to such Shareholder in connection with the execution and delivery
of this Agreement or the Shareholders Agreement or the consummation of the
transactions contemplated hereby or thereby except for such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable securities laws thereby.
3.7 Unregistered Shares. Shareholder understands that the NEON Common
Stock being issued pursuant to this Agreement will not be registered under the
Securities Act of 1933, as amended, on the basis that the issuance of securities
hereunder is exempt from registration under said Act pursuant to Regulation S
and section 4(2) and/or Rule 506 thereof, and that NEON's reliance on such
exemption is based on Shareholder's representations set forth in the Stockholder
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEON
NEON hereby represents and warrants to the Company and each of the
Shareholders as follows:
4.1 Organization, Standing and Power. NEON is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. NEON has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the failure
to be so qualified would have a material adverse effect on NEON as a whole.
4.2 Authority. NEON has all requisite corporate power and authority to
enter into this Agreement and the exhibits attached hereto to which it is a
party (the "NEON Related Agreements") and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and NEON Related Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of NEON. Each of this Agreement and NEON Related
Agreements has been duly executed and delivered by NEON and constitutes the
valid and binding obligations of NEON, enforceable in accordance with its terms
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
4.3 Capital Structure. The authorized stock of NEON consists of
45,000,000 shares of Common Stock, of which 30,333,778 shares were issued and
outstanding as of December 31, 1998, and 2,000,000 shares of Preferred Stock,
none of which is issued or outstanding. No shares of NEON
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<PAGE> 31
Common Stock were held by NEON in its treasury, and no shares of NEON Preferred
Stock were outstanding. All the outstanding shares of NEON Common Stock are
validly issued, fully paid, nonassessable and free of preemptive rights. The
shares of NEON Common Stock issuable in connection with the Acquisition have
been duly authorized and reserved for issuance and, when issued in accordance
with the terms of this Agreement, will be validly issued, fully paid,
nonassessable and free of preemptive rights.
4.4 SEC Documents; NEON Financial Statements. NEON has furnished or
made available to the Company and the Shareholders true and complete copies of
all reports or registration statements filed by it with the Securities and
Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") for all periods since January 1, 1998, all in the
form so filed (all of the foregoing being collectively referred to as the "SEC
Documents"). As of their respective filing dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act") or the Exchange Act, as the case may be, and none
of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected by a document
subsequently filed with the SEC. The financial statements of NEON, including the
notes thereto, included in the SEC Documents (the "NEON Financial Statements")
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP consistently applied
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) and present fairly the
consolidated financial position of NEON at the dates thereof and the
consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal audit adjustments).
4.5 Litigation. There is no action, suit proceeding, claim, arbitration
or investigation pending, or as to which NEON has received any notice of
assertion against NEON, which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated by this
Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Expenses. All fees and expenses incurred in connection with the
Acquisition including, without limitation, all legal, accounting, financial
advisory, consulting and all other fees and expenses of third parties ("Third
Party Expenses") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby shall be the obligation of the respective party incurring
such fees and expenses,
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<PAGE> 32
except for stamp duty. NEON agrees to bear all stamp duty payable or assessed in
connection with this agreement and the transfer of shares to NEON.
5.2 Public Disclosure. Unless otherwise required by law, or by the
rules and regulations of the SEC or Nasdaq Stock Market, no disclosure (whether
or not in response to an inquiry) of the subject matter of this Agreement shall
be made by any party hereto without the prior approval of NEON.
5.3 Additional Documents and Further Assurances. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of the Closing and the
transactions contemplated hereby.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY AND ESCROW
6.1 Survival of Representations and Warranties. The Shareholders' and
NEON's representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Closing and shall
terminate on the first anniversary of the Closing (the "Expiration Date");
provided, however, that (i) the representations and warranties and covenants of
the Shareholders relating or pertaining to any Tax or Returns related to such
Tax set forth in Section 2.10 hereof, shall survive until the expiration of all
applicable statutes of limitations, or extensions thereof, governing each Tax or
Returns related to such Tax and (ii) the representations and warranties of the
Shareholders set forth in Section 2.3 and Article III hereof shall survive the
Closing and shall terminate on the fourth anniversary of the Closing. Each
shareholder, jointly and severally, shall indemnify and hold harmless NEON and
its affiliates for any Loss (as defined in the Escrow Agreement) incurred by
NEON, its officers, directors or affiliates, related to or arising, directly or
indirectly, out of any breach of the representations and warranties set forth in
Sections 2.10, 2.3 and Article III of this Agreement.
6.2 Indemnity and Escrow Agreement. At the Closing each Shareholder
will be deemed to have received and consented to the deposit with the Escrow
Agent of the Escrow Cash and the Escrow Shares (plus any additional shares as
may be issued upon any stock split, stock dividend or recapitalization effected
by NEON after the Closing) pursuant to the terms of the Escrow Agreement
attached hereto as Exhibit B, without any act required on the part of the
Shareholders. At the Closing, the Escrow Cash and the Escrow Shares, without any
act required on the part of the Shareholders, are being deposited with the
Escrow Agent, such deposit to constitute the Escrow Fund to be governed by the
terms set forth in the Escrow Agreement and at NEON's cost and expense. The
Escrow Fund and the related indemnification obligations of the Shareholders
shall be governed by the terms of the Escrow Agreement.
-28-
<PAGE> 33
ARTICLE VII
GENERAL PROVISIONS
7.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice), provided, however,
that notices sent by mail will not be deemed given until received:
(a) if to NEON, to:
New Era of Networks, Inc.
7400 East Orchard Road, Suite 230
Englewood, CO 80111
Attention: Leonard M. Goldstein, Esq.
Telephone No.: (303) 694-3933
Facsimile No.: (303) 694-3885
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Mark A. Bertelsen, Esq.
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
(b) if to the Company, the Shareholders or the Shareholder
Representative, to:
Database & Management (S) Pte. Ltd.
2nd Floor
38 Duxton Hill
Singapore
Attention: Andrew Street
Telephone No.: 011-65-324-5914
Facsimile No.: 011-65-324-5916
-29-
<PAGE> 34
with a copy to:
Haldanes
4F Ruttonjee House
11 Duddell Street
Central Hong Kong
Attention: Steven Terry
Telephone No.: 011-852-2868-1234
Facsimile No.: 011-852-2845-1637
7.2 Interpretation. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All dollar amounts in this
Agreement shall refer to amounts in U.S. dollars unless otherwise indicated.
7.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
7.4 Entire Agreement; Assignment. This Agreement, the Exhibits hereto,
the Company Disclosure Schedule and other schedules hereto, the Nondisclosure
Agreement, and the documents and instruments and other agreements among the
parties hereto referenced herein: (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise, except that NEON may assign its rights and
delegate its obligations hereunder to its affiliates as long as NEON remains
ultimately liable for all of NEON's obligations hereunder.
7.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
7.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
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<PAGE> 35
7.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, U.S.A., regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
7.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefor, 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 36
IN WITNESS WHEREOF, NEON, the Shareholders and the Shareholder
Representative have caused this Share Acquisition Agreement to be signed, all as
of the date first written above.
NEW ERA OF NETWORKS, INC.
By: /s/ LEONARD M. GOLDSTEIN
---------------------------------
Name: Leonard M. Goldstein
-------------------------------
Title: Sr. VP & Counsel
------------------------------
SHAREHOLDER REPRESENTATIVE:
/s/ ANDREW STREET
- ------------------------------------
Name: Andrew Street
-------------------------------
- ------------------------------------
- ------------------------------------
SHAREHOLDERS:
ANDREW STREET
By: /s/ ANDREW STREET
---------------------------------
Name: Andrew Street
-------------------------------
Title:
------------------------------
MICHAEL EUGENE TINWORTH
By: /s/ MICHAEL EUGENE TINWORTH
---------------------------------
Name: Michael Eugene Tinworth
-------------------------------
Title:
------------------------------
-32-
<PAGE> 37
SCHEDULE 1.1
<TABLE>
<CAPTION>
Stock Cash Escrow Fund Escrow Fund
Shareholder Consideration Consideration Cash Shares
- ----------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Andrew Street
Flat B3, 17th Floor 7,341 $ 450,000 $ 67,500 1,468
Block B, Elizabeth House
Causeway Bay
Hong Kong
Michael Eugene Tinworth
D2 Goodwood 2,447 $ 150,000 $ 22,500 367
52 Chung Hom Kok Road
Chung HomKok
Hong Kong
</TABLE>
<PAGE> 1
EXHIBIT 2.3
SHARE ACQUISITION AGREEMENT
BY AND AMONG
NEW ERA OF NETWORKS, INC.,
FRANZ KOEPPER
AND
THE SHAREHOLDERS OF SLI INTERNATIONAL AG
DATED AS OF APRIL 15, 1999
<PAGE> 2
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
Exhibit A Form of Non-Competition Agreement
Exhibit B Form of Shareholder Agreement
Exhibit C Form of Escrow Agreement
SCHEDULE DESCRIPTION
1.1 Shareholders; Allocation of Purchase Price
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - PURCHASE AND SALE OF COMPANY STOCK.............................. 2
1.1 Purchase and Sale................................................. 2
1.2 Consideration..................................................... 2
1.3 Closing........................................................... 4
1.4 Definitions....................................................... 5
1.5 No Further Ownership Rights in Shares............................. 6
1.6 Taking of Necessary Action; Further Action........................ 6
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS............. 6
2.1 Organization of the Company....................................... 6
2.2 Subsidiaries...................................................... 6
2.3 Company Capital Structure......................................... 7
2.4 Authority......................................................... 7
2.5 No Conflict....................................................... 7
2.6 Consents.......................................................... 8
2.7 Company Financial Statements...................................... 8
2.8 No Undisclosed Liabilities........................................ 8
2.9 No Changes........................................................ 9
2.10 Tax Matters; Definition of Taxes................................. 10
2.11 Restrictions on Business Activities.............................. 12
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition
of Equipment..................................................... 12
2.13 Intellectual Property............................................ 13
2.14 Agreements, Contracts and Commitments............................ 13
2.15 Interested Party Transactions.................................... 15
2.16 Governmental Authorization....................................... 15
2.17 Litigation....................................................... 15
2.18 Accounts Receivable.............................................. 15
2.19 Minute Books..................................................... 16
2.20 Environmental Matters Hazardous Material......................... 16
2.21 Brokers' and Finders' Fees; Third Party Expenses................. 16
2.22 Employee Benefit Plans and Compensation.......................... 17
2.23 Insurance........................................................ 19
2.24 Compliance with Laws............................................. 19
2.25 Warranties; Indemnities.......................................... 19
2.26 Complete Copies of Materials..................................... 19
2.27 Proprietary Information Agreements............................... 19
2.28 Representations Complete......................................... 20
</TABLE>
-i-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE III - FURTHER REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS................................................. 20
3.1 Ownership of Shares.............................................. 21
3.2 Tax Matters...................................................... 21
3.3 Absence of Claims by the Shareholders............................ 21
3.4 Authority........................................................ 21
3.5 No Conflict...................................................... 21
3.6 Consents......................................................... 22
3.7 Unregistered Shares.............................................. 22
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF NEON........................ 22
4.1 Organization, Standing and Power................................. 22
4.2 Authority........................................................ 22
4.3 Capital Structure................................................ 22
4.4 No Conflict...................................................... 23
4.5 Consents......................................................... 23
4.6 SEC Documents; NEON Financial Statements......................... 23
ARTICLE V - CONDUCT PRIOR TO THE CLOSING................................... 24
5.1 Conduct of Business of the Company............................... 24
5.2 No Solicitation.................................................. 26
ARTICLE VI - ADDITIONAL AGREEMENTS......................................... 26
6.1 Access to Information............................................ 26
6.2 Confidentiality.................................................. 27
6.3 Expenses......................................................... 27
6.4 Public Disclosure................................................ 27
6.5 Consents......................................................... 27
6.6 Reasonable Efforts............................................... 27
6.7 Tax Matters...................................................... 28
6.8 Employees; NEON Stock Options.................................... 28
6.9 Additional Documents and Further Assurances...................... 28
6.10 Suspension and Termination of Memorandum of Understanding........ 29
ARTICLE VII - CONDITIONS TO THE CLOSING.................................... 29
7.1 Conditions to Obligations of Each Party to Consummate the
Acquisition...................................................... 29
7.2 Conditions to Obligations of the Shareholders.................... 29
7.3 Conditions to the Obligations of NEON............................ 30
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE VIII - SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNITY AND ESCROW........................................ 31
8.1 Survival of Representations and Warranties; Indemnity............ 31
8.2 Indemnity; Escrow Arrangements................................... 31
ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER............................. 35
9.1 Termination...................................................... 35
9.2 Effect of Termination............................................ 36
9.3 Amendment........................................................ 36
9.4 Extension; Waiver................................................ 36
9.5 Termination Payment.............................................. 36
ARTICLE X - GENERAL PROVISIONS............................................. 37
10.1 Notices.......................................................... 37
10.2 Interpretation................................................... 38
10.3 Counterparts..................................................... 38
10.4 Entire Agreement................................................. 38
10.5 Severability..................................................... 38
10.6 Other Remedies................................................... 38
10.7 Specific Performance............................................. 39
10.8 Governing Law.................................................... 39
10.9 Assignment....................................................... 39
10.10 Absence of Third-Party Beneficiary Rights....................... 39
10.11 Waiver of Jury Trial............................................ 39
10.12 Rules of Construction........................................... 39
10.13 U.S. Currency................................................... 39
</TABLE>
-iii-
<PAGE> 6
SHARE ACQUISITION AGREEMENT
This SHARE ACQUISITION AGREEMENT (the "Agreement") is made and entered
into as of April 15, 1999 by and among New Era of Networks, Inc., a Delaware
corporation ("NEON"), Franz Koepper (the "Holding Shareholder") as the sole
shareholders of Koepper Holdings AG ("KH"), and the shareholders (the "SLI
Shareholders," and, along with the Holding Shareholder, the "Shareholders") set
forth on Schedule 1.1 attached hereto of SLI INTERNATIONAL AG, a Swiss
corporation incorporated in the Canton of Thurgau as the holding company of SLI
Consulting AG (Switzerland) (additionally, SLI Systemhaus AG (Switzerland) is a
50% owned subsidiary of SLI Consulting AG), SLI Consulting Inc. (United
States), SLI Consulting Ltd. (United Kingdom), SLI Consulting SDN BHD
(Malaysia) (additionally, SLI Consulting Pte. Ltd. (Singapore) and SLI
Consulting Limited (Hong Kong) are both wholly-owned subsidiaries of SLI
Consulting SDN BHD), (hereafter "SLI," and, together with the other companies
listed above, the "Company"), and, with respect to Article VIII, Franz Koepper
(in his capacity as the "Shareholder Representative"). All references to the
"Shareholders" shall be deemed to include both the SLI Shareholders and the
Holding Shareholder unless otherwise indicated. All references to "the Company"
shall include SLI and all of the other companies listed above unless otherwise
indicated.
RECITALS
A. The SLI Shareholders and KH own all of the issued and outstanding
capital stock of SLI and the Holding Shareholder owns all of the issued and
outstanding capital stock of KH. NEON desires to acquire all of the issued and
outstanding capital stock of SLI owned or held of record or to be owned or held
of record by the Shareholders and all of the issued and outstanding capital
stock of KH owned by the Holding Shareholder (together the "Acquisition") such
that upon consummation of the acquisition NEON will own (i) all of the issued
and outstanding capital stock of the Company owned by the Shareholders, and
(ii) all of the issued and outstanding capital stock of KH owned by the Holding
Shareholder.
B. The Shareholders desire to sell all of the capital stock of SLI
owned or held of record or to be owned or held of record by them to NEON, and
the Holding Shareholder desires to sell all of the capital stock of KH owned by
him to NEON, upon the terms and subject to the conditions set forth herein.
C. As an inducement for NEON to consummate the Acquisition, the
Shareholders agree to make certain representations, warranties, covenants and
other agreements in connection with the Acquisition.
D. Ten percent (10%) of the consideration payable by NEON in
connection with the Acquisition shall be placed in escrow by NEON for the
purposes of satisfying damages, losses, expenses and other similar charges that
result from breaches of representations, warranties and
<PAGE> 7
covenants and shall be subject to an Escrow Agreement in substantially the form
attached hereto as Exhibit C.
E. As an inducement for NEON to enter into this Agreement and to
consummate the Acquisition, Franz Koepper has agreed to enter into a
Non-Competition Agreement of even date herewith, in substantially the form
attached hereto as Exhibit A, which Non-Competition Agreements shall be
effective only upon the closing of the Acquisition.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the parties agree as follows:
<PAGE> 8
ARTICLE I
PURCHASE AND SALE OF COMPANY STOCK
1.1 Purchase and Sale. At the Closing (as defined in Section 1.3) and
subject to and upon the terms and conditions of this Agreement:
(a) NEON shall purchase from each Shareholder and each
Shareholder shall sell, convey, transfer, assign and deliver to NEON, free and
clear of all liens, encumbrances or other defects of title, all of the issued
and outstanding shares of capital stock of the Company now beneficially owned
or held of record and to be beneficially owned or held of record by each
Shareholder at the Closing (the "SLI Shares"), including all property or rights
issued by the Company with respect to the SLI Shares. The name and address of
the Shareholders and the number of such SLI Shares being sold by the
Shareholders pursuant hereto are set forth in Schedule 1.1 attached hereto.
(b) NEON shall purchase from the Holding Shareholder and the
Holding Shareholder shall sell, convey, transfer, assign and deliver to NEON,
free and clear of all liens, encumbrances or other defects of title, all of the
issued and outstanding shares of capital stock of KH now beneficially owned or
held of record by the Holding Shareholder at the Closing (the "KH Shares"),
including all property or rights issued by KH with respect to the KH Shares.
The SLI Shares and KH Shares are sometimes collectively referred to herein as
the "Shares".
1.2 Consideration.
(a) Subject to the terms and conditions of this Agreement, on
the Closing Date, in consideration of the sale, transfer and delivery of all of
each Shareholder's right, title and interest in and to the Company Stock to
NEON, and all of the Holding Shareholder's right, title and interest in and to
the KH Shares to NEON, NEON shall (i) pay to the SLI Shareholders and the
Holding Shareholder cash in the aggregate amount of $16.5 million (the "Cash
Consideration"), and (ii) issue to the SLI Shareholders and the Holding
Shareholder, as set forth below, that number of shares of Common Stock of NEON
valued at $5.5 million at the Closing based on the lower of (i) the average
closing sale price of a share of NEON Common Stock, as reported on the Nasdaq
National Market, for the twenty (20) most recent trading days ending on the
third trading day immediately preceding the Closing Date and (ii) the average
closing sale price of a share of NEON Common Stock, as reported on the Nasdaq
National Market, for the five (5) most recent trading days ending on the third
-2-
<PAGE> 9
trading day immediately preceding the Closing Date (the "Stock Consideration"
and, together with the Cash Consideration, the "Purchase Price"); provided,
however, that NEON shall withhold $1.65 million of Cash Consideration (the
"Escrow Cash"), together with that number of shares of Common Stock of NEON
valued at $550,000 at the Closing based on the lower of (i) the average closing
sale price of a share of NEON Common Stock, as reported on the Nasdaq National
Market, for the twenty (20) most recent trading days ending on the third
trading day immediately preceding the Closing Date and (ii) the average closing
sale price of a share of NEON Common Stock, as reported on the Nasdaq National
Market, for the five (5) most recent trading days ending on the third trading
day immediately preceding the Closing Date (the "Escrow Shares," and, together
with the Escrow Cash, the "Escrow Amount") into an escrow account established
in the joint names of NEON and the Shareholder Representative, for deposit (the
"Escrow Fund") as collateral for the indemnification obligations of the
Shareholders under Article VIII hereof pursuant to the provisions of an escrow
agreement substantially in the form of Exhibit C attached hereto (the "Escrow
Agreement") to be entered into at the Closing by and among NEON, the
Shareholder Representative and Credit Suisse Trust (the "Escrow Agent").
Schedule 1.1 sets forth the pro rata allocation of the consideration among the
SLI Shareholders and the Holding Shareholder (including the allocation of the
Escrow Fund and the Incentive Shares, if any, among the SLI Shareholders and
the Holding Shareholder).
(b) In addition, NEON shall issue to the Shareholders up to
that number of shares of Common Stock of NEON valued at $3 million at the
Incentive Share Issuance Date and at Subsequent Incentive Share Issuance Dates
based on the lower of (i) the average closing sale price of a share of NEON
Common Stock, as reported on the Nasdaq National Market, for the twenty (20)
most recent trading days ending on the third day immediately preceding the
Closing Date and (ii) the average closing sale price as reported on the Nasdaq
National Market for the five (5) most recent trading days ending on the third
trading date immediately preceding the Closing as incentive consideration (the
"Incentive Shares"), subject to the following provisions:
(i) As used herein, "Incentive Product Revenue"
shall mean the net revenues recognized by NEON from the license of NEON's
software products where one or more SLI employees materially participated in
the sale and/or implementation services of such NEON software product. The
Incentive Product Revenue shall be determined in accordance with U.S. GAAP and
SOP 97-2 and NEON's revenue recognition policies (as determined by NEON's
independent auditors, Arthur Andersen LLP, whose determination shall be final
and conclusive).
(ii) NEON shall issue Incentive Shares having a
value of $1.5 million, if any, within thirty (30) days after the Incentive
Product Revenue reaches an aggregate of $5 million (the "Incentive Share
Issuance Date"), but only in the event that the Incentive Product Revenue
reaches an aggregate of $5 million on or before June 30, 2000. Additional
Incentive Shares in an amount valued at $1.00 shall be issued for each $3.00 of
Incentive Product Revenue in excess of $5 million attained prior to June 30,
2000. The issuance of additional Incentive Shares shall be evaluated quarterly
after Incentive Product Revenues have surpassed $5 million and the additional
Incentive Shares, if any, shall be issued within 30 days following the end of
each such quarter (the "Subsequent Incentive Share Issuance Dates"). The
Incentive Shares, if any, shall be issued to the Shareholders pro rata in
accordance with Schedule 1.1.
(iii) At the time of issuance of Incentive Shares,
if any, pursuant to this Section 1.2, NEON shall provide to each Shareholder a
report containing a statement of the Incentive Product Revenue and the number
of Incentive Shares earned pursuant to this Section 1.2, and the basis of such
determination.
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<PAGE> 10
(iv) NEON shall maintain adequate books and records
relating to the calculation of the Incentive Product Revenues through June 30,
2000 for a period of one (1) year following the June 30, 2000 date and the
Shareholders shall have the right to inspect, audit and receive copies of such
information during normal business hours. The Shareholders shall be required to
bear the reasonable fees and costs of such audit unless the results of the
audit indicate an underpayment by NEON equal to or in excess of 10% of the
payment due, in which case NEON shall bear the reasonable fees and costs of the
audit. NEON shall be required to make any underpayments shown by the audit. The
Shareholders shall be required to pay to NEON any overpayments shown by the
audit. In the event of any dispute, the determination of such firm shall be
final and binding on all parties.
(c) The shares of NEON Common Stock (including any Incentive
Shares) issuable hereunder shall be subject to a Shareholder Agreement
substantially in the form of Exhibit B attached hereto (the "Shareholder
Agreement") to be executed by and between each Shareholder and NEON.
(d) No fraction of a share of NEON Common Stock will be
issued, but, after aggregating all fractional shares of NEON Common Stock to be
received by such holder, such number shall be rounded to the nearest whole
number of shares of NEON Common Stock.
1.3 Closing.
(a) The closing of the Acquisition (the "Closing") will take
place at or about 9:00 a.m. Denver, Colorado time on or before May 16, 1999,
provided that satisfaction or waiver of the conditions set forth in Article VII
has occurred, simultaneously at the offices of Wilson, Sonsini, Goodrich &
Rosati, 650 Page Mill Road, Palo Alto, CA 94304, USA and SLI International AG,
Walzmuhlestrausse 60, Frauenfeld, Switzerland 8501, unless another time or
place is agreed to in writing by NEON and the Shareholders. The date upon which
the Closing actually occurs is herein referred to as the "Closing Date."
(b) At the Closing, the Company and each Shareholder and the
Holding Shareholder shall deliver or cause to be delivered to NEON the
following:
(i) as to the Shareholders, certificate(s)
representing the SLI Shares duly endorsed or accompanied by stock powers duly
endorsed in blank;
(ii) as to the Holding Shareholder, certificate(s)
representing the KH Shares duly endorsed or accompanied by stock powers duly
endorsed in blank;
(iii) an executed Shareholder Agreement;
(iv) with regard to Koepper, an executed
Non-Competition Agreement; and
(v) all other documents, agreements, certificates,
instruments or writings required to be delivered by the Shareholders on or
prior to the Closing Date pursuant to this Agreement
-4-
<PAGE> 11
or as may be reasonably requested by any party in order to consummate the
transactions contemplated by this Agreement.
(c) At the Closing, NEON shall deliver or cause to be
delivered to the Shareholders the following:
(i) for each Shareholder, that amount of Cash
Consideration payable to such Shareholder pursuant to Section 1.2 hereof and
set forth on Schedule 1.1 hereto, payable by certified or cashier's check or by
wire transfer to an account designated by such Shareholder;
(ii) for each Shareholder, a certificate or
certificates representing that number of shares of the Stock Consideration
payable to such Shareholder pursuant to Section 1.2 hereof and set forth on
Schedule 1.1 hereto; and
(iii) all other documents, agreements, certificates
or writings required to be delivered by NEON on or prior to the Closing Date
pursuant to this Agreement or as may be reasonably requested by any party in
order to consummate the transactions contemplated by this Agreement.
(d) At the Closing or prior to the Closing, NEON shall
deliver to the Escrow Agent the Escrow Amount in accordance with Section 8.2.
1.4 Definitions.
"Aggregate Company Shares" shall mean the aggregate number of
shares of Company Stock outstanding immediately prior to the Closing Date.
"Cash Consideration" shall mean $16.5 million.
"Company Stock" shall mean all shares of stock capital of
SLI, par value CHF 100 per share.
"Material Adverse Effect" shall mean any event, circumstance
or condition that could have a material adverse effect on the business, assets
(including intangible assets), condition (financial or otherwise), results of
operations or prospects of the Company.
"NEON Common Stock" shall mean unregistered shares of NEON
Common Stock, $.0001 par value per share.
"Swiss GAAP" shall mean Swiss generally accepted accounting
principles, consistently applied.
"US GAAP" shall mean United States generally accepted
accounting principles, consistently applied.
-5-
<PAGE> 12
1.5 No Further Ownership Rights in Shares. All consideration paid in
respect of the surrender for exchange of the Shares in accordance with the
terms hereof, shall be deemed to be full satisfaction of the Shareholders'
rights pertaining to such Shares.
1.6 Taking of Necessary Action; Further Action. If, at any time after
the Closing Date, any such further action is necessary or desirable to carry
out the purposes of this Agreement, the transfer, sale, assignment and
conveyance of all shares of the capital stock of the Company, and to ensure
that the Company retains full right, title and possession to all of its assets,
property, rights, privileges, powers and franchises, NEON, the Shareholders and
the officers and directors of the Company are fully authorized in the name of
their respective corporations or otherwise to take, and will take, all such
lawful and necessary action to the extent permissible by law.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
A. Each of the Shareholders hereby, jointly and severally in the case
of the Holding Shareholder and severally in the case of the other Shareholders,
except as to the Escrow Amount, in which case liability shall be joint and
several as to all of the Shareholders, represents and warrants to NEON, subject
to such exceptions as are specifically and accurately disclosed in the
disclosure schedule (referencing the appropriate section and paragraph numbers)
supplied by the Shareholders to NEON (the "Company Disclosure Schedule") and
dated as of the date hereof, as follows:
2.1 Organization of the Company. SLI is a corporation duly organized,
validly existing and in good standing under the laws of Canton of Thurgau,
Switzerland, and each country jurisdiction where registered. The Company has
the corporate power to own its properties and to carry on its business as now
being conducted. The Company is duly qualified or licensed to do business and
in good standing in each jurisdiction in which the failure to be so qualified
or licensed could have a Material Adverse Effect on the Company. A true and
correct copy of SLI's Certificate of Incorporation and Bylaws, each as amended
to date, has been made available to NEON. Section 2.1 of the Company Disclosure
Schedule lists the directors and officers of the Company. Except as set forth
in Section 2.1 of the Company Disclosure Schedule, the operations now being
conducted by the Company have not been conducted under any other name.
2.2 Subsidiaries. The Company does not have, and has never had, any
subsidiaries and does not otherwise own, and has not otherwise owned, any
shares in the capital of or any interest in, or control, directly or
indirectly, any corporation, limited liability company, partnership,
association, joint venture or other business entity other than as set forth in
the Recital to this Agreement (the "Subsidiaries"). Each of the Subsidiaries is
duly organized, validly existing and in good standing in its respective
jurisdiction of organization. Each Subsidiary has the corporate power to own
its properties and to carry on its business as now being conducted. Each
Subsidiary is duly qualified or licensed to do business and in good standing as
a foreign corporation in each jurisdiction in which the failure to be so
qualified or licensed could have a Material Adverse Effect on the Company.
SLI's ownership of the shares of the Subsidiaries will not be negatively
impacted or interfered with
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as a result of the Acquisition. The execution and delivery by SLI of this
Agreement and the consummation of the transactions contemplated hereby will not
create any rights in any third party with respect to the Company's shares or
otherwise.
2.3 Company Capital Structure.
(a) The authorized capital stock of SLI consists of
registered shares of authorized Company Stock with par value of CHF 100,
representing a total nominal value of CHF 100,000, all of which are issued. All
of the issued and outstanding Company Stock is held by the Shareholders. All
outstanding shares of Company Stock are duly authorized, validly issued, fully
paid and non-assessable and not subject to preemptive rights created by
statute, the Certificate of Incorporation or Bylaws of SLI or any agreement to
which the Company is a party or by which it is bound and have been issued in
compliance with all applicable laws. SLI has no other capital stock authorized,
issued or outstanding.
(b) There are no options, warrants, calls, rights,
commitments or agreements of any character, written or oral, to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of the Company or
obligating the Company to grant, extend, accelerate the vesting of, change the
price of, otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. The Company does not have any stock option plan or
other plan providing for equity compensation of any person. There is no
outstanding Company capital stock that is subject to vesting. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to the Company. Except as
contemplated hereby, there are no voting trusts, proxies, or other agreements
or understandings with respect to the voting stock of the Company.
(c) Upon completion of the Acquisition hereunder, NEON will
own one hundred percent (100%) of the capital stock of the Company and any
rights to acquire or receive such capital stock, free and clear of all liens,
encumbrances or other defects of title.
2.4 Authority. The Shareholders have all requisite power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly approved and
authorized by the Board of Directors of the Company and all other necessary
corporate action on the part of the Company has been taken. This Agreement has
been duly executed and delivered by the Shareholders, and, assuming the due
authorization, execution and delivery by the other parties hereto, constitutes
the valid and binding obligation of the Shareholders, enforceable in accordance
with its terms, except as such enforceability may be limited by principles of
public policy and subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and to rules of law governing
specific performance, injunctive relief or other equitable remedies.
2.5 No Conflict. Except as set forth in Section 2.5 of the Company
Disclosure Schedule, the execution and delivery by the Shareholders of this
Agreement and the consummation of the
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<PAGE> 14
transactions contemplated hereby will not conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation, modification or
acceleration of any obligation or loss of any benefit under (any such event, a
"Conflict") (i) any provision of the charter documents and Bylaws of the
Company, (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise or license to which the Company or
any of its properties or assets are subject, or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company
or its properties or assets.
2.6 Consents. Except as set forth in Section 2.6 of the Company
Disclosure Schedule, no consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency
or commission or other federal, state, county, local or other foreign
governmental authority, instrumentality, agency or commission ("Governmental
Entity") or any third party, including a party to any agreement with the
Company (so as not to trigger any Conflict), is required by or with respect to
the Company in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for (i) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable laws thereby, and
(ii) such filings as are required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act").
2.7 Company Financial Statements. Section 2.7 of the Company
Disclosure Schedule sets forth the Company's audited balance sheets as of
December 31, 1996, December 31, 1997 and December 31, 1998, and the related
audited statements of operation, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1998 together with the
report thereon of ATAG Ernst & Young independent auditors, and the Company's
unaudited balance sheet as of March 31, 1999 and the related unaudited
statements of income and cash flow for the three months then ended
(collectively, the "Financial Statements"). The Financial Statements are
accurate, correct and complete in all material respects and have been prepared
in accordance with Swiss GAAP applied on a basis consistent throughout the
periods indicated. The Financial Statements present fairly in all material
respects the financial condition, consolidated operating results and
consolidated cash flows of the Company as of the dates and for the periods
indicated therein. The Company's balance sheet as of March 31, 1999 shall be
referred to as the "Current Balance Sheet."
2.8 No Undisclosed Liabilities. Except as set forth in Section 2.8 of
the Company Disclosure Schedule, the Company does not have any liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement
of any type, whether accrued, absolute, contingent, matured, unmatured or other
(whether or not required to be reflected in financial statements in accordance
with Swiss GAAP) that in the aggregate exceeds $60,000 and (i) has not been
reflected on or reserved against in the Current Balance Sheet, or (ii) has not
arisen in the ordinary course of business consistent with past practices since
December 31, 1998.
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2.9 No Changes. Except as set forth in Section 2.9 of the Company
Disclosure Schedule, since December 31, 1998, there has not been, occurred or
arisen any:
(a) transaction by the Company except in the ordinary course
of business as conducted on that date and consistent with past practices;
(b) amendments or changes to the Certificate of Incorporation
or Bylaws of the Company;
(c) capital expenditure or commitment by the Company that
exceeds $25,000 individually or $60,000 in the aggregate;
(d) destruction of, damage to or loss of any assets with
aggregate value in excess of $50,000, or customers with aggregate revenue in
excess of $50,000 of the Company (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company other
than required by Swiss GAAP;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or
other distribution with respect to the Company Stock, or any direct or indirect
redemption, purchase or other acquisition by the Company of the Company Stock;
(i) increase in the salary or other compensation payable or
to become payable by the Company to any of its officers, directors, employees
or advisors, or the declaration, payment or commitment or obligation of any
kind for the payment, by the Company, of a bonus or other additional salary or
compensation to any such person, except for adjustments in compensation in
accordance with annual performance reviews or other increases in compensation
made in the normal course of business (none of which exceed 20% of the previous
year's or current base salary);
(j) other than customer contracts and/or business operations
entered into in the ordinary course of business, any agreement, contract,
covenant, instrument, lease, license or commitment to which the Company is a
party or by which it or any of its assets is bound or any termination,
extension, amendment or modification of the terms of any agreement, contract,
covenant, instrument, lease, license or commitment to which the Company is a
party or by which it or any of its assets is bound;
(k) sale, lease, license or other disposition of any of the
assets or properties in excess of $50,000 of the Company, or any creation of
any security interest in such assets or properties;
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(l) loan by the Company to any person or entity, incurring by
the Company of any indebtedness for money borrowed, guaranteeing by the Company
of any indebtedness for money borrowed, issuance or sale of any debt securities
of the Company or guaranteeing of any debt securities of others;
(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company in an aggregate of $50,000;
(n) notice of any claim or potential claim of ownership by
any person other than the Company of the Company Intellectual Property (as
defined in Section 2.13) owned by or developed or created by the Company or of
infringement by the Company of any other person's Intellectual Property rights;
(o) issuance or sale, or contract to issue or sell, by the
Company of any shares of Company Stock, or securities exchangeable, convertible
or exercisable therefor, or any securities, warrants, options or rights to
purchase any of the foregoing;
(p) change in pricing or royalties set or charged by the
Company to its customers or licensees not in the ordinary course of business;
(q) any event or condition of any character that has had a
Material Adverse Effect on the Company; or
(r) any promise or agreement, whether written or oral, by the
Company or any Shareholder, director or officer thereof to do any of the things
described in the preceding clauses (a) through (q) (other than negotiations
with NEON and its representatives regarding the transactions contemplated by
this Agreement).
2.10 Tax Matters; Definition of Taxes.
(a) For the purposes of this Agreement, "Tax" or,
collectively, "Taxes", means (i) any and all Swiss federal, cantonal, 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; (ii) any liability for the payment of any
amounts of the type described in clause (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any period; and (iii)
any liability for the payment of any amounts of the type described in clause
(i) or (ii) as a result of any express or implied obligation to indemnify any
other person or as a result of any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any liability for taxes of a predecessor entity.
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(b) Tax Returns and Audits. Except as set forth in Section
2.10 of the Company Disclosure Schedule:
(i) The Company as of the Closing will have prepared
and timely filed all required tax returns, estimates, information statements
and reports ("Returns") relating to any and all Taxes concerning or
attributable to the Company or its operations and will have paid all Taxes as
shown as owing on such Returns and such Returns are true and correct and have
been completed in accordance with applicable law.
(ii) The Company as of the Closing (A) will have
paid all Taxes it is required to pay and will have withheld with respect to its
employees all taxes required to be withheld, and (B) will have paid or have
accrued on the Current Balance Sheet all Taxes attributable to the periods
covered by the Current Balance Sheet and will not have incurred any liability
for Taxes for the period from the date of the Current Balance Sheet through the
Closing other than in the ordinary course of business.
(iii) There is no material Tax deficiency
outstanding, assessed or proposed against the Company, and the Company has not
executed any waiver of any statute of limitations on or extending the period
for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of
the Company is presently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(v) The Company does not have any liabilities for
unpaid federal, or material state, local and foreign Taxes which have not been
accrued or reserved against in accordance with Swiss GAAP on the Current
Balance Sheet, whether asserted or unasserted, contingent or otherwise.
(vi) The Company has made available to NEON or its
independent public accountants copies, of all foreign, federal, state and local
income and all state and local sales and use Returns for the Company filed for
all periods since its inception.
(vii) There are (and immediately following the
Closing there will be) no liens, pledges, charges, claims, restrictions on
transfer, mortgages, security interests or other encumbrances of any sort
(collectively, "Liens") on the assets of the Company relating to or
attributable to Taxes other than Liens for Taxes not yet due and payable.
(viii) The Shareholders have no knowledge of any
basis for the assertion of any claim relating or attributable to Taxes that, if
adversely determined, would result in any Lien on the assets of the Company.
(ix) None of the Company's assets used or located in
its United States operations are treated as "tax-exempt use property" within
the meaning of Section 168(h) of the Code.
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(x) As of the Closing, there will not be any
contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could be treated as an excess
parachute payment within the meaning of Section 280G of the Code or could
otherwise give rise to the payment of any amount to such employee or former
employee that would not be deductible by the Company as an expense under
applicable law.
(xi) The Company is not a party to any tax sharing,
tax indemnification or tax allocation agreement nor does the Company owe any
amount under any such agreement, other than this Agreement.
(xii) Each of the Company's tax basis in its assets
for purposes of determining its future amortization, depreciation and other
applicable income tax deductions is accurately reflected on the Company's tax
books and records.
(xiii) As it relates to assets used or located in
the United States, the Company is not, and has not been at any time, a "United
States Real Property Holding Corporation" within the meaning of Section
897(c)(2) of the Code.
2.11 Restrictions on Business Activities. Except as set forth in
Section 2.11 of the Company Disclosure Schedule, there is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company that has or
reasonably could be expected to have the effect of prohibiting or impairing any
line of business or business practice of the Company or the conduct of business
by the Company. The Company is not a party to and is not currently bound by any
agreement under which the Company is restricted from selling, licensing or
otherwise distributing any of its products or technology on providing services
to customers or potential customers or any class of customers, in any
geographic area, during any period of time or in any segment of the market.
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition
of Equipment.
(a) The Company does not own any real property. Section
2.12(a) of the Company Disclosure Schedule sets forth a list of all real
property currently leased by the Company, the name of the lessor, the date of
the lease and each amendment thereto and, with respect to any current lease,
the aggregate annual rental and/or other fees payable under any such lease. All
such current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing material default or material event of default (or event
that with notice or lapse of time, or both, would constitute a material
default). The lessor can, however, always give notice according to the terms of
the lease.
(b) The Company has good and valid title to, or in the case
of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in its business, free and clear of any Liens, except as reflected in the
Current Balance Sheet and except for Liens for Taxes not yet due and payable
and such imperfections of title and encumbrances, if any, that are not material
in character, amount or extent, and that
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<PAGE> 19
do not materially detract from the value, or materially interfere with the
present use, of the property subject thereto or affected thereby.
(c) Section 2.12(c) of the Company Disclosure Schedule lists
all material items of equipment having a book value equal to or greater than
$20,000 (the "Equipment") owned or leased by the Company and such Equipment is,
(i) adequate for the conduct of the business of the Company as currently
conducted and (ii) in good operating condition, properly maintained, subject to
normal wear and tear.
(d) The Company has sole and exclusive custody and/or access,
free and clear of any Liens, of all customer files and other customer
information in its possession relating to its current and former customers (the
"Customer Information"). No person other than the Company possesses any claims
or rights with respect to use of the Customer Information.
2.13 Intellectual Property. The Company and its Subsidiaries own,
possess or can acquire on reasonable terms, adequate trademarks, trade names
and other rights to inventions, know-how, patents, copyrights, confidential
information and other intellectual property (collectively, "Intellectual
Property Rights") necessary to conduct the business now operated by them, or
presently employed by them, and have not received any notice of infringement of
or conflict with asserted rights of others with respect to any intellectual
property rights that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material Adverse
Effect. The Company has taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and its proprietary
rights in, all Intellectual Property Rights and the intellectual property
rights of third parties entrusted to them. Except as set forth in Schedule
2.13, all of the Company's internal computer and technology products and
systems are Year 2000 Compliant.
2.14 Agreements, Contracts and Commitments.
(a) Except as set forth in Sections 2.13(e) or 2.14(a) of the
Company Disclosure Schedule, the Company is not a party to nor is it bound by:
(i) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations exceeding $40,000,
(ii) any bonus, deferred compensation, pension,
profit sharing or retirement plans, or any other employee benefit plans or
arrangements,
(iii) any employment or consulting agreement,
contract or commitment with an employee or individual consultant or salesperson
or consulting agreement,
(iv) any agreement or plan, including without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting
of benefits of which will be accelerated, by the occurrence of any of the
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transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions
contemplated by this Agreement,
(v) any fidelity or surety bond or completion bond,
(vi) any lease of personal property having a value
individually in excess of $20,000,
(vii) any agreement, contract or commitment
containing any covenant limiting the freedom of the Company to engage in any
line of business or to compete with any person,
(viii) any agreement of indemnification or guaranty
out of the ordinary course of business or caused by mandatory law,
(ix) any agreement, contract or commitment relating
to capital expenditures and involving future payments in excess of $30,000
individually or $60,000 in the aggregate,
(x) any agreement, contract or commitment relating
to the disposition or acquisition of assets or any interest in any business
enterprise outside the ordinary course of the Company's business,
(xi) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit in excess of $30,000 individually
or $60,000 in the aggregate,
(xii) any purchase order or contract for the
purchase of materials involving in excess of $30,000 individually or $50,000 in
the aggregate,
(xiii) any agreement, contract or commitment
containing any representation, warranty or covenant to the effect that products
or programs developed by the Company, or services performed by the Company, are
Year 2000 Compliant,
(xiv) any distribution, joint marketing or
development agreement, or
(xv) any other agreement, contract or commitment
that involves $30,000 individually or $50,000 in the aggregate or more or is
not cancelable without penalty within thirty (30) days or has not been entered
into in the ordinary course of business.
(b) The Company is in compliance with and has not breached,
violated or defaulted under, or received notice that it has materially
breached, violated or defaulted under, any of the terms or conditions of any
agreement, contract, covenant, instrument, lease, license or commitment to
which the Company is a party or by which it or its properties is bound
(collectively a "Contract"), nor is the Company or the Shareholders aware of
any event that would constitute such a breach, violation or default with the
lapse of time, giving of notice or both. Each Contract is in full force and
effect and, except as otherwise disclosed in Section 2.14(b) of the Company
Disclosure
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Schedule, is not subject to any default thereunder by any party obligated to
the Company pursuant thereto. The Company has obtained, or will use reasonable
best efforts to obtain prior to the Closing Date, all necessary consents,
waivers and approvals of parties to any Contract as are required thereunder in
connection with the Acquisition for such Contracts to remain in effect without
modification after the Closing. Following the Closing, the Company will be
permitted to exercise all of the Company's rights under the Contracts without
the payment of any additional amounts or consideration other than ongoing fees,
royalties or payments that the Company would otherwise be required to pay had
the transactions contemplated by this Agreement not occurred.
2.15 Interested Party Transactions. Except as set forth in Schedule
2.15, no officer, director or shareholder of the Company has or has had,
directly or indirectly, (i) any material personal interest in any entity that
furnished or sold, or furnishes or sells, services, products or technology that
the Company furnishes or sells, or proposes to furnish or sell, (ii) any
material personal interest in any entity that purchases from or sells or
furnishes to the Company, any goods or services or (iii) a beneficial personal
interest in any Contract; provided, however, that ownership of no more than one
percent (1%) of the outstanding voting stock of a publicly traded corporation
shall not be deemed an "interest in any entity" for purposes of this Section
2.15.
2.16 Governmental Authorization. Section 2.16 of the Company
Disclosure Schedule lists each material consent, license, permit, grant or
other authorization issued to the Company by a Governmental Entity (i) pursuant
to which the Company currently operates or holds any interest in any of its
properties or (ii) that is required for the operation of its business or the
holding of any such interest (herein collectively called "Company
Authorizations"). The Company Authorizations are in full force and effect and,
to the knowledge of the Company and the Shareholders, constitute all Company
Authorizations required to permit the Company to operate or conduct its
business or hold any interest in its properties or assets.
2.17 Litigation. Except as described in Section 2.17 of the Company
Disclosure Schedule, there is no action, suit or proceeding of any nature
pending, or, to the knowledge of the Shareholders, threatened, against the
Company, its properties or any of its officers or directors, nor, to the
knowledge of the Shareholders, is there any reasonable basis therefor. There is
no investigation pending or, to the knowledge of the Shareholders threatened,
against the Company, its properties or any of its officers or directors (nor,
to the knowledge of the Shareholders, is there any basis therefor) by or before
any Governmental Entity. No Governmental Entity has at any time challenged or
questioned the legal right of the Company to conduct its operations as
presently or previously conducted. Section 2.17 of the Company Disclosure
Schedule sets forth, with respect to any pending or threatened action, suit,
proceeding or investigation, the forum, the parties thereto, the subject matter
thereof and the amount of damages claimed or other remedy requested.
2.18 Accounts Receivable.
(a) The Company has made available to NEON a list of all
material accounts receivable of the Company ("Accounts Receivable") as of March
31, 1999 along with a range of days elapsed since invoice.
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(b) All Accounts Receivable of the Company arose in the
ordinary course of business, are carried at values determined in accordance
with Swiss GAAP and are, to the knowledge of the Company and the Shareholders,
collectible except to the extent of reserves therefor set forth in the Current
Balance Sheet. No person has any Lien on any of such Accounts Receivable, and
no request or agreement for deduction or discount has been made with respect to
any of such Accounts Receivable.
2.19 Minute Books. The minutes of the Company made available to
counsel for NEON are the only minutes of the Company and contain a reasonably
accurate summary of all meetings of the Board of Directors (or committees
thereof) of the Company and its shareholders or actions by written consent
since the time of incorporation of the Company.
2.20 Environmental Matters Hazardous Material.
(a) The Company has not stored or illegally released any
material amount of any substance that has been designated by any Governmental
Entity or by applicable law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment (a "Hazardous Material"), but excluding
office and janitorial supplies properly and safely maintained. No Hazardous
Materials are present as a result of the deliberate actions of the Company or,
to the Company's or the Shareholders' knowledge, as a result of any actions of
any other person or otherwise, in, on or under any property, including the land
and the improvements, ground water and surface water thereof, that the Company
has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials or products containing Hazardous
Materials in violation of any law, regulation, treaty or statute in effect on
or before the Closing (any or all of the foregoing being collectively referred
to as "Hazardous Materials Activities").
(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents necessary for the conduct
of the business of the Company as currently being conducted.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the Company's or the Shareholders' knowledge, threatened
concerning any Environmental Permit, Hazardous Material or any Hazardous
Materials Activity of the Company. Neither the Company nor the Shareholders is
aware of any fact or circumstance that could involve the Company in any
environmental litigation or impose upon the Company any environmental
liability.
2.21 Brokers' and Finders' Fees; Third Party Expenses. Except as set
forth in Section 2.21 of the Company Disclosure Schedule, the Company has not
incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby. Section
2.21 of the Company Disclosure Schedule sets forth the principal terms and
conditions of any agreement,
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written or oral, with respect to such fees, and that all such fees shall be
paid by the Shareholders. Section 2.21 of the Company Disclosure Schedule sets
forth the Company's current reasonable estimate of all Third Party Expenses (as
defined in Section 6.3) expected to be incurred by the Company in connection
with the negotiation and effectuation of the terms and conditions of this
Agreement and the transactions contemplated hereby.
2.22 Employee Benefit Plans and Compensation. All of the
representation set forth in this section shall be qualified as set forth in
Section 2.22 of the Company Disclosure Schedule.
(a) For purposes of this Section 2.22, the following terms
shall have the meanings set forth below:
(i) "Employee Plan" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for bonuses, severance, termination pay, deferred compensation, pensions,
profit sharing, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits of any kind, whether formal or informal,
written or otherwise, funded or unfunded and whether or not legally binding,
including without limitation, any plan which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
affiliate for the benefit of any "Employee" (as defined below), and pursuant to
which the Company or any affiliate has or may have any material liability,
contingent or otherwise.
(ii) "Employee" shall mean any current, former, or
retired employee, consultant, officer, or director of the Company or any
affiliate.
(iii) "Employee Agreement" shall refer to each
employment, severance, consulting or similar agreement or contract between the
Company or any affiliate and any Employee.
(b) Schedule. The Company does not have any Employee Plans.
Section 2.22(b) of the Company Disclosure Schedule contains a list of each
Employee Agreement. The Company does not have any plan or commitment, whether
legally binding or not, to establish any new Employee Agreement, to modify any
Employee Agreement (except to the extent required by law or to conform any such
Employee Agreement to the requirements of any applicable law, in each case as
previously disclosed to NEON in writing, or as required by this Agreement), or
to enter into any Employee Plan or Employee Agreement, nor does it have any
intention or commitment to do any of the foregoing.
(c) Documents. The Company has made available to NEON, (i)
correct and complete copies of all documents embodying any Employee Agreement
including all amendments thereto.
(d) Pension Plans. The Company complies with all government
regulations regarding minimum pension or retirement plan contributions for all
of its employees regardless of location, including employees of all
subsidiaries, whether such plans are government sponsored or affiliated, or
privately sponsored or affiliated. The Company maintains a 401-k plan for its
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employees in the United States and is in full compliance with all U.S.
requirements regarding such plans.
(e) Multiemployer Plans. At no time has SLI Consulting Inc.
contributed to or been requested to contribute to any Multiemployer Plan.
(f) No Post-Employment Obligations. The Company has not
promised or contracted (whether in oral or written form) to any Employee
(either individually or to Employees as a group) that such Employee(s) would be
provided with life insurance, medical or other employee welfare benefits or
severance pay upon their retirement or termination of employment, except to the
extent required by law.
(g) No COBRA Violation. Neither SLI Consulting Inc. nor any
affiliate has, prior to the Closing and in any material respect, violated any
of the health care continuation requirements of COBRA or any similar provisions
of state law applicable to its employees.
(h) Effect of Transaction. The execution of this Agreement
and the consummation of the transactions contemplated hereby will not (either
alone or upon the occurrence of any additional or subsequent events) constitute
an event under any Employee Agreement, trust or loan that will or may result in
any payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any Employee.
(i) Employment Matters. The Company (i) is in compliance with
all applicable laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each
case, with respect to Employees in all material respects; (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages, salaries
and other payments to Employees or other persons who by virtue of their
activities performed on behalf of the Company may be deemed employees within
the meaning of applicable law; (iii) is not liable for any arrears of wages or
any taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees or other persons who by virtue of their activities performed on
behalf of the Company may be deemed employees within the meaning of applicable
law (other than routine payments to be made in the normal course of business
and consistent with past practice). The Company is in compliance with all
applicable federal laws, rules and regulations that govern the employment and
consulting relationships of the Company's workers as they pertain to
immigration matters. The Company's workers, where applicable, are authorized to
work in the United States, and the Acquisition shall not affect their
authorization to work in the United States.
(j) Labor. No work stoppage or labor strike against the
Company is pending, or to the knowledge of the Company or the Shareholders,
threatened. The Company is not involved in nor has it been threatened with any
labor dispute, grievance, or litigation relating to labor, safety or
discrimination matters involving any Employee, including without limitation
charges of unfair labor
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<PAGE> 25
practices or discrimination complaints that, if adversely determined, would,
individually or in the aggregate, result in a material liability to the
Company. The Company has not engaged in any unfair labor practices that could,
individually or in the aggregate directly or indirectly result in a material
liability to the Company. The Company is not presently, nor has it in the past,
been a party to, or bound by, any collective bargaining agreement or union
contract with respect to Employees and no collective bargaining agreement is
being negotiated by the Company.
(k) No Interference or Conflict. To the knowledge of the
Shareholders, no shareholder, officer, employee or consultant of the Company is
obligated under any contract or agreement or subject to any judgement, decree
or order of any court or administrative agency, that would interfere with such
person's efforts to promote the interests of the Company or that would
interfere with the Company's business. Neither the execution nor delivery of
this Agreement, nor the carrying on of the Company's business as presently
conducted or proposed to be conducted nor any activity of such officers,
directors, employees or consultants in connection with the carrying on of the
Company's business as presently conducted or proposed to be conducted, will, to
the Shareholders' knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract or
agreement under which any of such officers, directors, employees or consultants
is now bound.
2.23 Insurance. Section 2.23 of the Company Disclosure Schedule lists
all insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of the
Company or any affiliate. There is no material claim by the Company or any
affiliate pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid, and the Company and its affiliates are otherwise in material compliance
with the terms of such policies and bonds (or other policies and bonds
providing substantially similar insurance coverage). Neither the Company nor
the Shareholders has knowledge of any threatened termination of, or premium
increase with respect to, any of such policies.
2.24 Compliance with Laws. The Company has materially complied with,
is not in material violation of, and has not received any notices of violation
with respect to, any foreign, federal, state or local statute, law or
regulation applicable to the Company's business.
2.25 Warranties; Indemnities. Except in the ordinary course of
business or as listed in Section 2.13(e) of the Company Disclosure Schedule,
the Company has not given any warranties or indemnities relating to products or
technology sold, software programming or other "work-for-hire" performed, or
other services rendered by the Company.
2.26 Complete Copies of Materials. The Company has delivered or made
available true and complete copies of each document (or summaries of same) that
has been requested by NEON or its counsel.
2.27 Proprietary Information Agreements. Each employee listed on
Section 2.27 of the Company Disclosure Schedule and presently employed by the
Company has executed a proprietary
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<PAGE> 26
information agreement in the Company's standard form, a copy of which is
attached hereto as part of Section 2.27 of the Company Disclosure Schedule.
Such proprietary information agreements constitute valid and binding
obligations of the Company. Neither the execution or delivery of such
agreements, nor the carrying on of the Company's business as employees by such
persons, nor the conduct of the Company's business as currently proposed, will
conflict with or result in a breach of the terms, conditions or provisions of
or constitute a default under any contract, covenant or instrument under which
any such employee is now obligated.
2.28 Representations Complete. Without limiting in any way any
representations or warranties made by the Shareholders, none of the
representations or warranties made by the Shareholders (as modified by the
Company Disclosure Schedule), nor any statement made in any schedule or
certificate furnished by the Shareholders pursuant to this Agreement contains
or will contain at the Closing, any untrue statement of a material fact or
omits or will omit to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
B. The Holding Shareholder represents and warrants to NEON as follows:
2.29 Koepper Holdings.
(a) KH is a corporation duly organized, validly existing and
in good standing under the laws of Canton of Thurgau, Switzerland. The
authorized capital stock of KH consists of 1,000 registered shares with par
value of CHF 100, all of which are issued and outstanding and owned of record
and beneficially by the Holding Shareholder. KH owns 600 shares of the SLI
Shares. KH is a holding company and at the Closing will have no assets or
liabilities, other than its ownership of the SLI Shares, and KH has no current
operations except the ordinary legal activities of a Swiss holding company and
has conducted no other business since its inception.
(b) The representations and warranties regarding the Company
set forth in Sections 2.1, 2.3(b), 2.4, 2.5, 2.6, 2.8, 2.10, 2.11, 2.12, 2.14,
2.15, 2.16, 2.17, 2.19, 2.21, 2.22, 2.24, 2.26 and 2.28, are hereby made to
NEON by the Holding Shareholder with respect to KH.
(c) The Holding Shareholder shall be solely liable for any
Taxes prior to or following the Closing Date attributable to the ownership of
KH in SLI, acquisition of KH, or disposition of shares of KH held by SLI,
including the disposition of investments held by KH, but except for that
restructuring of KH initiated by NEON.
ARTICLE III
FURTHER REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder represents and warrants to NEON as follows:
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<PAGE> 27
3.1 Ownership of Shares. Such Shareholder is the sole record and
beneficial owner of the Shares designated as being owned by such Shareholder
opposite such Shareholder's name in Schedule 1.1, and such Shares are to be
sold pursuant to this Agreement. Such Shares are not subject to any Liens or to
any rights of first refusal of any kind, and such Shareholder has not granted
any rights to purchase such Shares to any other person or entity. Such
Shareholder has the sole right to transfer such Shares to NEON. Such Shares
constitute all of the Company Stock owned, beneficially or of record, by such
Shareholder, and such Shareholder has no other rights to acquire Company Stock.
Upon the Closing, NEON will receive good title to such Shares, subject to no
Liens retained, granted or permitted by such Shareholder or the Company. Such
Shareholder has not engaged in any sale or other transfer of any Company Stock
in contemplation of the Acquisition.
3.2 Tax Matters. Such Shareholder has had an opportunity to review
with its own tax advisors the tax consequences to such Shareholder of the
Acquisition and the transactions contemplated by this Agreement. Such
Shareholder understands that it must rely solely on its advisors and not on any
statements or representations made by NEON, the Company or any of their agents.
Such Shareholder understands that it (and not NEON or the Company) shall be
responsible for its own tax liability that may arise as a result of the
Acquisition or the transactions contemplated by this Agreement.
3.3 Absence of Claims by the Shareholders. Except as set forth in
Schedule 3.3, such Shareholder does not have any present claim against the
Company and does not have knowledge of the basis for any future claim against
the Company whether, contingent or unconditional, fixed or variable under any
contract or on any other legal basis whatsoever.
3.4 Authority. Such Shareholder has the legal capacity to enter into
this Agreement and the Shareholder Agreement in the form attached hereto as
Exhibit B and to consummate the transactions contemplated hereby and thereby.
No further action is required on the part of such Shareholder to authorize this
Agreement and the Shareholder Agreement and the transactions contemplated
hereby and thereby. This Agreement and the Shareholder Agreement have been duly
executed and delivered by such Shareholder and, assuming the due authorization,
execution and delivery by the other parties thereto, constitute the valid and
binding obligations of such Shareholder, enforceable in accordance with their
terms, except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and to rules of law governing
enforceability of contracts, specific performance, injunctive relief or other
equitable remedies.
3.5 No Conflict. The execution and delivery by such Shareholder of
this Agreement and the Shareholder Agreement and the consummation of the
transactions contemplated hereby and thereby will not conflict with (i) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise or license to which such Shareholder or any of his or her
properties or assets are subject (a "Shareholder Conflict"), or (ii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to such Shareholder or his or her properties or assets.
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<PAGE> 28
3.6 Consents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity or any
third party, including a party to any agreement with such Shareholder (so as
not to trigger any Shareholder Conflict), is required by or with respect to
such Shareholder in connection with the execution and delivery of this
Agreement or the Shareholder Agreement or the consummation of the transactions
contemplated hereby or thereby except for (i) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable securities laws thereby and (ii) notification
requirements of the HSR Act, if any, to the extent applicable.
3.7 Unregistered Shares. Such Shareholder understands that the NEON
Company Stock being issued pursuant to this Agreement will not be registered
under the Securities Act of 1933, as amended (the "Securities Act"), on the
basis that the issuance of securities hereunder is exempt from registration
under said Act pursuant to section 4(2) and/or Regulation S thereof, and that
NEON's reliance on such exemption is based on such Shareholder's
representations set forth in the Shareholder Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEON
NEON hereby represents and warrants to the Company and the
Shareholders as follows:
4.1 Organization, Standing and Power. NEON is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. NEON has the corporate power to own its properties and to carry on
its business as now being conducted and is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the failure to
be so qualified or licensed would have a material adverse effect on the ability
of NEON to consummate the transactions contemplated hereby.
4.2 Authority. NEON has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of NEON. This Agreement has been duly executed and
delivered by NEON and constitutes the valid and binding obligation of NEON,
enforceable in accordance with its terms, except as such enforceability may be
limited by principles of public policy and subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
4.3 Capital Structure. The authorized capital stock of NEON consists
of 45,000,000 shares of Company Stock, $.0001 par value per share, of which
30,918,040 shares were issued and outstanding as of March 31, 1999, and
2,000,000 shares of Preferred Stock, $.0001 par value per share, none of which
is issued or outstanding. All the outstanding shares of NEON Company Stock are
validly issued, fully paid, nonassessable and free of preemptive rights. The
shares of NEON
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<PAGE> 29
Company Stock issuable in connection with the Acquisition have been duly
authorized and reserved for issuance and, when issued in accordance with the
terms of this Agreement, will be validly issued, fully paid, nonassessable and
free of preemptive rights.
4.4 No Conflict. The execution and delivery of this Agreement does
not, and, the consummation of the transactions contemplated hereby will not,
Conflict with, (i) any provision of the charter documents and Bylaws of NEON,
(ii) any mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise or license to which NEON or any of its properties
or assets are subject and which have been filed as an exhibit to NEON's filings
under the Securities Act, or the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to NEON or its properties or assets.
4.5 Consents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity, or any
third party, including a party to any agreement with NEON (so as not to trigger
any Conflict), is required by or with respect to NEON in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable securities laws thereby, and (ii) such filings
as are required under the HSR Act.
4.6 SEC Documents; NEON Financial Statements. NEON has furnished or
made available to the Company and the Shareholders true and complete copies of
NEON's Prospectus dated December 4, 1998 and all reports or registration
statements filed by it with the Securities and Exchange Commission ("SEC")
under the Exchange Act for all periods since January 1, 1998, all in the form
so filed (all of the foregoing being collectively referred to as the "SEC
Documents"). As of their respective filing dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading, except
to the extent corrected by a document subsequently filed with the SEC. The
financial statements of NEON, including the notes thereto, included in the SEC
Documents (the "NEON Financial Statements") comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with U.S. GAAP consistently applied (except as may be indicated in
the notes thereto or, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) and present fairly the consolidated financial position of NEON
at the dates thereof and the consolidated results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal audit adjustments.)
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ARTICLE V
CONDUCT PRIOR TO THE CLOSING
5.1 Conduct of Business of the Company. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Closing, the Company agrees (except to the extent that
NEON shall otherwise consent in writing), to carry on the Company's business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay the debts and Taxes of the Company when due, to
pay or perform other obligations when due, and to use its best efforts to
preserve intact the Company's present business organization, keep available the
services of the Company's present officers and key employees and preserve the
Company's relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, all with the goal of
preserving unimpaired the Company's goodwill and ongoing businesses at the
Closing. The Company shall promptly notify NEON of any event or occurrence or
emergency not in the ordinary course of business of the Company, and any
material event involving the Company. Except as expressly contemplated by this
Agreement, the Company shall not, without the prior written consent of NEON:
(a) Enter into any commitment or transaction not in the
ordinary course of business and consistent with past practice or any commitment
or transaction of any type whatsoever involving aggregate expense in excess of
$30,000;
(b) Enter into any agreement with respect to the Company
Intellectual Property with any person or entity or with respect to the
intellectual property of any person or entity;
(c) Transfer to any person or entity any rights to the
Company Intellectual Property;
(d) Enter into or amend any Contract pursuant to which any
other party is granted marketing, distribution or similar rights of any type or
scope with respect to any products or technology of the Company or the
Subsidiary;
(e) Amend or otherwise modify (or agree to do so), except in
the ordinary course of business, or violate the terms of, any of the Contracts
set forth or described in the Company Disclosure Schedule;
(f) Commence or settle any litigation;
(g) Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any of
its capital stock, or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of capital stock of the Company, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares of
the capital stock of the Company;
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<PAGE> 31
(h) Issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue or purchase any such shares
or other convertible securities;
(i) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws;
(j) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any assets or equity securities of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof;
(k) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business and consistent
with past practices;
(l) Incur any indebtedness for borrowed money in excess of
$30,000 (other than increases under existing equipment leases in the ordinary
course of business) or guarantee any such indebtedness or issue or sell any
debt securities or guarantee any debt securities of others;
(m) Grant any loans to others or purchase debt securities of
others or amend the terms of any outstanding loan agreement;
(n) Grant any severance or termination pay (i) to any
director or officer or (ii) to any other employee except payments made pursuant
to standard written agreements outstanding on the date hereof;
(o) Adopt or amend any Employee Plan, or enter into any
Employee Agreement, pay or agree to pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage
rates of its employees;
(p) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
(q) Pay, discharge or satisfy, in an amount in excess of
$30,000 (in any one case) or $50,000 (in the aggregate), any claim, liability
or obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in the Current
Balance Sheet;
(r) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(s) Enter into any strategic alliance or joint marketing
arrangement or agreement; or
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<PAGE> 32
(t) Take, or agree in writing or otherwise to take, any of
the actions described in Sections 5.1(a)-(s) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder.
5.2 No Solicitation. Until the earlier of (i) the Closing or (ii) the
date of termination of this Agreement pursuant to the provisions of Section 9.1
hereof, neither the Company nor the Shareholders will (nor will the Company or
the Shareholders permit any of the Company's officers, directors, agents,
representatives or affiliates to) directly or indirectly, take any of the
following actions with any party other than NEON and its designees: (a)
solicit, conduct acquisition discussions with or engage in negotiations with
any person, relating to the possible acquisition of the Company (whether by way
of merger, purchase of capital stock, purchase of assets or otherwise) or any
portion of the Company Stock (whether or not currently outstanding) or the
Company's assets, (b) provide information with respect to it to any person,
other than to NEON or in response to existing or prospective customers' or
employees' questions relating to the possible acquisition of the Company
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise) or any portion of the Company Stock (whether or not currently
outstanding) or the Company's assets, (c) enter into an agreement with any
person, other than NEON, providing for the acquisition of the Company (whether
by way of merger, purchase of capital stock, purchase of assets or otherwise)
or any portion of the Company Stock (whether or not currently outstanding) or
the Company's assets or (d) make or authorize any statement, recommendation or
solicitation in support of any possible acquisition of the Company (whether by
way of merger, purchase of capital stock, purchase of assets or otherwise) or
any portion of the Company Stock (whether or not currently outstanding) or the
Company's assets by any person, other than by NEON.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Information. The Company shall afford NEON and its
accountants, counsel and other representatives, reasonable access upon
reasonable notice during normal business hours during the period prior to the
Closing to (i) all of the Company's properties, financial statements, tax
returns, books, contracts, commitments and records, (ii) all other information
concerning the business, properties and personnel (subject to restrictions
imposed by applicable law) of the Company as NEON may reasonably request and
(iii) all key employees of the Company as identified by NEON. NEON agrees to
provide to the Company and its accountants, counsel and other representatives
copies of publicly available documents filed by NEON under the Exchange Act as
the Company may request and shall provide the Company and the Shareholders with
reasonable access to members of its management regarding the business and
financial condition of NEON. No information or knowledge obtained in any
investigation pursuant to this Section 6.1 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Acquisition.
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6.2 Confidentiality. Each of the parties hereto hereby agrees to keep
such information or knowledge obtained in any investigation pursuant to Section
6.1, or pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential; provided,
however, that the foregoing shall not apply to information or knowledge that
(a) a party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is generally known to the public and
did not become so known through any violation of law, (c) became known to the
public through no fault of such party, (d) is later lawfully acquired by such
party from other sources, (e) is required to be disclosed by order of court or
government agency with subpoena powers or (f) is disclosed in the course of any
litigation between any of the parties hereto.
6.3 Expenses. Whether or not the Acquisition is consummated, except as
specifically provided in this Section 6.3, all fees and expenses incurred in
connection with the Acquisition including, without limitation, all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties ("Third Party Expenses") incurred by a party in connection with
the negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby shall be the obligation of the
respective party (NEON, on the one hand, and the Shareholders, pro rata, on the
other) incurring such fees and expenses except that in the event that the
Acquisition is consummated, NEON shall pay up to $100,000 of the Third Party
Expenses of the Company and/or the Shareholders.
6.4 Public Disclosure. Unless otherwise required by law, by a court
order or a judgement rendered in arbitration, no disclosure (whether or not in
response to an inquiry) of the subject matter of this Agreement shall be made
by any party hereto without the prior written consent of NEON.
6.5 Consents. The Company has obtained the consents, waivers and
approvals under any of the Contracts as may be required in connection with the
Acquisition (all of such consents, waivers and approvals are set forth in
Section 6.5 of the Company Disclosure Schedule) so as to preserve all rights
of, and benefits to, the Company thereunder.
6.6 Reasonable Efforts. Subject to the terms and conditions provided
in this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do
promptly, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals 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
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement; provided that NEON shall not be required to agree to any
divestiture by NEON or the Company or any of NEON's subsidiaries or affiliates
of shares of capital stock or of any business, assets or property of NEON or
its subsidiaries or affiliates or of the Company, its affiliates, or the
imposition of any material limitation on the ability of any of them to conduct
their businesses or to own or exercise control of such assets, properties and
stock. Each of NEON, the Company and the Shareholders shall promptly (a) supply
all other parties hereto with any information which may be
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required or which the other party reasonably believes is material in order to
effectuate any required submissions and filings with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") and (b) supply any additional information that
reasonably may be required by the FTC, the DOJ or any Swiss or other foreign
authorities or other relevant government authority, to such government
authority.
6.7 Tax Matters. NEON shall cause the Company to prepare and file, at
the sole cost and expense of the Company, all Tax Returns required by law of
the Company for all taxable periods ending on or before the Closing Date (the
"Pre-Closing Periods") and the Shareholders shall be responsible for, and
indemnify NEON against, the payment of all Taxes of the Company attributable to
such periods, whenever incurred or assessed except if such tax liabilities are
fully and properly accrued on the financial statement balance sheet. For
purposes of this Section 6.7, when the taxable period ends after the Closing
Date, the Tax that is attributable to the Pre-Closing Period (and payable by
the Shareholders) shall be (i) in the case of a Tax that is not based on net
income, gross income, premiums or gross receipts, the total amount of such Tax
for the period in question multiplied by a fraction, the numerator of which is
the number of days in such period, and (ii) in the case of a Tax that is based
on nay of net income, gross income, premiums or gross receipts, the Tax that
would be due with respect to the Pre-Closing Period if such Pre-Closing Period
were a separate taxable period, except that exemptions, allowances, deductions
or credits that are calculated on an annual basis (such as deductions for
depreciation or capital allowances) shall be apportioned on a per diem basis.
Such Returns shall be made available to the Shareholders no less than 21
calendar days prior to the filing thereof with the appropriate governmental
authority for review by the Shareholders. From and after the Closing Date, NEON
and the Company, on the one hand, and the Shareholders, on the other hand,
shall make available to the other, as reasonably requested, all information,
records or documents relating to the Tax liabilities of the Company for all
periods ending on or prior to the Closing Date, and will preserve such
information, records or documents until the expiration of any applicable
statute of limitations or extensions thereof.
6.8 Employees; NEON Stock Options.
(a) As soon as practicable after the date the Closing and in
any event not later than ten (10) business days after such date, the Chief
Executive Officer of the Company and the Vice President Human Resources of NEON
will use their best efforts to agree upon the guidelines within which the
Company will proceed with recruitment and compensation of new and existing
employees.
(b) As soon as practicable after the Closing, subject to the
approval of its Board of Directors, NEON will grant stock options to purchase
shares of its Company Stock to the employees of the Company listed on Schedule
6.9 hereto, consistent with standard NEON hiring practices.
6.9 Additional Documents and Further Assurances. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary
or desirable for effecting completely the consummation of the Closing and the
transactions contemplated hereby.
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6.10 Suspension and Termination of Memorandum of Understanding. The
Shareholders shall cause the Company to suspend any and all actions and/or
obligations under the memorandum of understanding between the Company and
Compaq Computer AG dated 2-3-99 (the "Compaq MOU") on or before April 23, 1999.
The Company will terminate the Compaq MOU prior to the Closing Date. Neither
the Company nor NEON shall accrue any liability, cost, nor other negative
impact, whether financial or otherwise, in connection with such suspension or
termination.
ARTICLE VII
CONDITIONS TO THE CLOSING
7.1 Conditions to Obligations of Each Party to Consummate the
Acquisition . The obligations of each party to this Agreement to consummate the
Acquisition shall be subject to the satisfaction at or prior to the Closing of
the following conditions:
(a) Government Approvals. All authorizations, consents,
permits and approvals of all federal, state and local governmental agencies and
authorities required to be obtained in order to permit consummation of the
transactions contemplated by this Agreement shall have been obtained.
(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 that makes the consummation of the Acquisition or the
transactions contemplated thereby illegal.
(c) No Litigation. There shall be no litigation pending or
threatened by any regulatory body or private party in which (i) an injunction
is or may be sought against any of the transactions contemplated by this
Agreement, or (ii) relief is or may be sought against any party hereto as a
result of this Agreement and in which, in the good faith judgment of the Board
of Directors of either the Company or NEON (relying on the advice of their
respective legal counsel), such regulatory body or private party has the
probability of prevailing and such relief would have a material adverse effect
upon such party.
(d) Escrow Agreement. NEON, the Company, the Shareholder
Representative and the Escrow Agent shall have executed and delivered the
Escrow Agreement incorporating the provisions of Section 8.2 in substantially
the form attached hereto as Exhibit C, which Escrow Agreement shall be in full
force and effect.
7.2 Conditions to Obligations of the Shareholders. The obligations of
the Shareholders to consummate the Acquisition and to effect the transactions
to be performed by them at the Closing
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are, at the option of the Shareholders, subject to the satisfaction at or prior
to the Closing Date of each of the following additional conditions:
(a) Representations and Warranties. The representations and
warranties of NEON contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date, except for changes
contemplated by this Agreement and except for those representations and
warranties that address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date; except, in all such cases, for such
breaches, inaccuracies or omissions of such representations and warranties that
have neither had nor reasonably would be expected to have a material adverse
effect on NEON. The Company shall have received a certificate to such effect
extended on behalf of NEON by its Chief Financial Officer or Senior Counsel.
(b) Third Party Consents. NEON shall have obtained all
consents required, if any, to consummate the transactions contemplated by this
Agreement.
7.3 Conditions to the Obligations of NEON. The obligation of NEON to
consummate the Closing shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived, in
writing, exclusively by NEON:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Shareholders contained in this Agreement
shall be true and correct in all material respects on and as of the Closing
Date, except for changes contemplated by this Agreement and except for those
representations and warranties that address matters only as of a particular
date (which shall remain true and correct as of such date), with the same force
and effect as if made on and as of the Closing Date, except, in all such cases,
for such breaches, inaccuracies or omissions of such representations and
warranties that have neither had nor reasonably would be expected to have a
Material Adverse Effect on the Company. NEON shall have received a certificate
to such effect executed by the Shareholders and executed on behalf of the
Company by its Chief Executive Officer.
(b) Third Party Consents. Any and all consents and waivers
from third parties to the Company's contracts and other instruments required to
allow the consummation of the transactions contemplated by this Agreement shall
have been obtained by the Company, and shall be set forth in Section 2.6 of the
Company Disclosure Schedule.
(c) Claims. There shall not have occurred any claims (whether
or not asserted in litigation) other than those, if any, as set forth in the
Company Disclosure Schedule that may materially and adversely affect the
consummation of the transactions contemplated hereby or may have a Material
Adverse Effect.
(d) Shareholder Agreement. Each of the Shareholders shall
have executed and delivered the Shareholder Agreement in substantially the form
attached hereto as Exhibit B.
(e) Non-Competition Agreements. Franz Koepper shall have
executed and delivered the Non-Competition Agreements in the form attached
hereto as Exhibit A.
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(f) Material Adverse Change. There shall not have occurred
any material adverse change in the business, assets (including intangible
assets), liabilities, financial condition, results of operations or prospects
of the Company since December 31, 1998.
(g) Comfort Letter. Prior to the Closing, NEON shall have
received a letter from Arthur Andersen LLP stating that the Company's Financial
Statements are sufficient and in appropriate form for inclusion in NEON's
filings under the Securities Act and the Exchange Act as applicable.
(h) Termination of MOU. Prior to the Closing, the Company
shall have terminated the compaq MOU pursuant to the terms set forth in Section
6.10 herein.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY AND ESCROW
8.1 Survival of Representations and Warranties; Indemnity. The
representations and warranties of the Shareholders in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Closing and
shall terminate twelve (12) months after the Closing (the "Expiration Date");
provided, however, that (i) the representations and warranties and covenants
relating or pertaining to any Tax or Returns related to such Tax set forth in
Section 2.10, Section 2.29(c) and Section 6.7 hereof, shall survive until the
expiration of all applicable statutes of limitations, or extensions thereof,
governing each Tax or Returns related to such Tax and (ii) the representations
and warranties set forth in Section 2.3, Section 2.29(a) and Article III hereof
shall survive the Closing and continue for a period of four (4) years after the
Closing, except for Section 3.7, which shall survive until the last issuance of
Incentive Stock pursuant to Section 1.2(b). The Shareholders shall, jointly and
severally in the case of the Holding Shareholder and severally in the case of
the other Shareholders, except as to the Escrow Amount, in which case liability
shall be joint and several as to all of the Shareholders, indemnify and hold
harmless NEON and its affiliates for any claims, losses, liabilities, damages,
deficiencies, costs and expenses, including reasonable attorneys' fees and
expenses, and expenses of investigation and defense (hereinafter individually a
"Loss" and collectively "Losses"), incurred by NEON, its officers, directors,
or affiliates, related to or arising out of any inaccuracy or breach of the
representations, warranties, and covenants specified in clauses (i) and (ii)
hereof. Such indemnity shall be limited to a maximum of $16.5 million for the
Holding Shareholder and for the other Shareholders such indemnity shall be
limited to a maximum of their portion of the Shareholder consideration set
forth in Section 1.2. NEON's representations and warranties contained in this
Agreement shall terminate at the Closing.
8.2 Indemnity; Escrow Arrangements.
(a) Escrow Fund. At the Closing each Shareholder will be
deemed to have received and consented to the deposit with the Escrow Agent of
the Escrow Amount pursuant to the Escrow Agreement attached hereto as Exhibit
C, without any act required on the part of the Shareholders. As soon as
practicable after the Closing, the Escrow Amount, without any act
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required on the part of the Shareholders, will be deposited with the Escrow
Agent into an interest-bearing account, such deposit to constitute the Escrow
Fund to be governed by the terms set forth herein and at NEON's cost and
expense. The Shareholders shall bear the tax for all interest attributable to
the Escrow Account. The Escrow Fund shall be comprised entirely of the Escrow
Amount. The Escrow Fund is available to indemnify and compensate NEON and its
affiliates for any Losses incurred by NEON, its officers, directors, or
affiliates directly or indirectly as a result of any inaccuracy or breach of a
representation or warranty or covenant of the Shareholders, contained in
Articles II and III and VI herein, or any failure by the Shareholders to
perform or comply with any covenant contained herein. NEON shall not be
entitled to recover any amount from the Escrow Fund until its Losses exceed
$50,000 in the aggregate, at which time NEON may recover all of its Losses
including the first $50,000; provided, however, that any Losses incurred by
NEON relating to any representation, warranty or covenant related to Taxes set
forth in Sections 2.10 and 6.7 or to Section 2.3 or Article III hereof shall
not be subject to such minimum amount. NEON and the Shareholders each
acknowledge that such Losses, if any, would relate to unasserted contingent
liabilities existing at the Closing, which if resolved at the Closing would
have led to a reduction in the aggregate Purchase Price.
(b) Escrow Period; Distribution. Subject to the following
requirements, the Escrow Fund shall be in existence immediately following the
Closing and shall terminate on the Expiration Date (the "Escrow Period");
provided that the Escrow Period shall not terminate with respect to such amount
(or some portion thereof), that together with the aggregate amount remaining in
the Escrow Fund is necessary in the reasonable judgment of NEON (subject to
such reduction as may be determined by arbitration as provided in Section
8.2(f) hereof in the event of the objection of the Shareholder Representative
as provided in Section 8.2(e) hereof) to satisfy any unsatisfied claims
concerning facts and circumstances existing prior to the termination of the
Expiration Date during such Escrow Period. As soon as all such claims have been
resolved, the parties shall transfer to the Shareholders the remaining portion
of the Escrow Fund not required to satisfy such claims.
(c) Protection of the Escrow Fund. The Shareholder
Representatives and NEON jointly, and/or their appointed representatives, shall
be the only individuals who have the authority to authorize withdrawals from
the account.
(d) Claims Upon Escrow Fund. In the event that NEON suffers
any Losses, it shall deliver to the Shareholder Representative at any time on
or before the last day of the Escrow Period a certificate signed by any officer
of NEON: (A) stating that NEON has paid or properly accrued or reasonably
anticipates that it will have to pay or accrue Losses, and (B) specifying in
reasonable detail the individual items of Losses included in the amount so
stated, the date each such item was paid or properly accrued, or the basis for
such anticipated liability, and the nature of the misrepresentation, breach of
warranty or covenant to which such item is related. NEON and the Shareholder
Representative shall then, subject to the provisions of Section 8.2(e) and
Section 8.2(f) hereof, promptly transfer or cause the transfer agent of NEON
Company Stock to transfer to NEON out of the Escrow Fund an aggregate amount
equal to such Losses. Such payments of Escrow Amount from the Escrow Fund will
be made pro rata in proportion to the Shareholders original
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contributions to the Escrow Fund. Withdrawals shall be comprised of 75% Escrow
Cash and 25% Escrow Shares.
(e) For the purposes of determining the number of shares of
NEON Company Stock to be delivered to NEON out of the Escrow Fund pursuant to
Section 8.2 hereof, the shares of NEON Company Stock shall be valued at the
average closing price of NEON's Company Stock for the twenty (20) consecutive
trading days ending on the third trading day immediately prior to the Closing
Date, as reported on the Nasdaq National Market.
(f) Objections to Claims In the event that NEON and the
Shareholder Representative cannot agree as to the propriety of a withdrawal
from the account the matter will be decided according to the arbitration
provisions set forth in Section 8.2(g) below.
(g) Resolution of Conflicts; Arbitration.
(i) In case the Shareholder Representative shall
object to any claim or claims made against the Escrow Fund by NEON, the
Shareholder Representative and NEON shall attempt in good faith to agree upon
the rights of the respective parties with respect to each of such claims.
(ii) If no such agreement can be reached after good
faith negotiation, either NEON or the Shareholder Representative may demand
arbitration of the matter unless the amount of the damage or loss is at issue
in pending litigation with a third party, in which event arbitration shall not
be commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by
arbitration conducted by three arbitrators. NEON and the Shareholder
Representative shall each select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator. The English language shall be used
for the arbitration. The arbitrators shall set a limited time period and
establish procedures designed to reduce the cost and time for discovery while
allowing the parties an opportunity, adequate in the sole judgment of the
arbitrators, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrators shall rule upon motions to
compel or limit discovery and shall have the authority to impose sanctions,
including attorneys' fees and costs, to the same extent as a court of competent
law or equity, should the arbitrators determine that discovery was sought
without substantial justification or that discovery was refused or objected to
without substantial justification. The decision of a majority of the three
arbitrators as to the validity and amount of any claim of NEON shall be binding
and conclusive upon the parties to this Agreement. Such decision shall be
written and shall be supported by written findings of fact and conclusions
which shall set forth the award, judgment, decree or order awarded by the
arbitrators.
(iii) Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be held in Geneva, Switzerland, using the English language
and either U.S. federal law for securities and tax issues or Delaware state law
for all other issues, whichever is more appropriate. The arbitration shall be
conducted under the rules then in effect of the Rules of Arbitration of the
Chamber of Commerce and Industry of Geneva. For purposes of this Section
8.2(f), in any arbitration hereunder in which any claim or the amount
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thereof stated in the Officer's Certificate is at issue, NEON shall be deemed
to be the Prevailing Party in the event that the arbitrators award NEON an
amount equal to at least the sum of one half (1/2) of the disputed amount plus
any amounts not in dispute; otherwise, the Shareholders as represented by the
Shareholder Representative shall be deemed to be the Prevailing Party. If NEON
acts as the Plaintiff in an arbitration, NEON shall pay the first $100,000 of
the costs and expenses of the arbitrators in such action. If the Shareholders
act as the Plaintiff in an arbitration, the Shareholders shall pay the first
$100,000 of the costs and expenses of the arbitration in such action. If NEON
acts as the Plaintiff in an arbitration, NEON shall pay the first $50,000 of
the Shareholders' attorneys fees and attorneys expenses. The non-prevailing
party in any arbitration shall reimburse the prevailing party for the
prevailing party's attorneys fees and attorneys expenses, such reimbursement
not to exceed $100,000. In addition, if NEON is the prevailing party, the
Shareholders shall reimburse NEON for any amount of Shareholder's attorneys
fees and attorney expenses previously paid by NEON.
(h) Shareholder Representative of the Shareholders; Power of
Attorney.
(i) Upon the Closing, and without further act of any
Shareholders, Franz Koepper shall be appointed as agent and attorney-in-fact
(the "Shareholder Representative") for each Shareholder, for and on behalf of
the Shareholders, to give and receive notices and communications, to authorize
delivery to NEON of Escrow Shares or Escrow Cash from the Escrow Fund in
satisfaction of claims by NEON, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Shareholder Representative for the accomplishment of the foregoing. Such agency
may be changed by a majority in interest of the Shareholders from time to time
upon not less than thirty (30) days prior written notice to NEON; provided that
the Shareholder Representative may not be removed unless holders of a
two-thirds interest of the Escrow Fund agree to such removal and to the
identity of the substituted agent. Any vacancy in the position of the
Shareholder Representative may be filled by approval of the holders of a
majority in interest of the Escrow Fund. No bond shall be required of the
Shareholder Representative, and the Shareholder Representative shall not
receive compensation for his or her services. Notices or communications to or
from the Shareholder Representative shall constitute notice to or from each of
the Shareholders.
(ii) The Shareholder Representative shall not be
liable for any act done or omitted hereunder as Shareholder Representative
while acting in a manner he or she believes in good faith to be in the best
interests of the Company. The Shareholders on whose behalf the Escrow Amount
were contributed to the Escrow Fund shall severally indemnify the Shareholder
Representative and hold the Shareholder Representative harmless against any
loss, liability or expense incurred without gross negligence or bad faith on
the part of the Shareholder Representative and arising out of or in connection
with the acceptance or administration of the Shareholder Representative's
duties hereunder, including the reasonable fees and expenses of any legal
counsel retained by the Shareholder Representative.
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(i) Actions of the Shareholder Representative. A decision,
act, consent or instruction of the Shareholder Representative shall constitute
a decision of all the Shareholders for whom a portion of the Escrow Amount
otherwise issuable to them are deposited in the Escrow Fund and shall be final,
binding and conclusive upon each of such Shareholders, and the Escrow Agent and
NEON may rely upon any such decision, act, consent or instruction of the
Shareholder Representative as being the decision, act, consent or instruction
of each every such Shareholder of the Company. NEON is hereby relieved from any
liability to any person for any acts done by them in accordance with any
decision, act, consent or instruction of the Shareholder Representative.
(j) Third-Party Claims. In the event NEON becomes aware of a
third-party claim that NEON believes may result in a demand against the Escrow
Fund, NEON shall promptly notify the Shareholder Representative of such claim
in accordance with Section 8.2(d), and the Shareholder Representative, as
representative of the Shareholders, shall be entitled, at his expense, to
participate in any defense of such claim. NEON shall have the right in its sole
discretion to control the defense of all such claims and to settle any such
claim; provided, however, that no settlement of any such claim with third-party
claimants in excess of $100,000 in a single matter shall permit any claim
against the Escrow Fund, except with the consent of the Shareholder
Representative, which consent shall not be unreasonably withheld. In the event
that the Shareholder Representative has consented to any such settlement and
acknowledged that the claim is a valid claim against the Escrow Fund, the
Shareholder Representative shall be deemed to have agreed to the claim by NEON
against the Escrow Fund in an amount equal to such settlement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. Except as provided in Section 9.2, this Agreement may
be terminated and the Acquisition abandoned at any time prior to the Closing:
(a) by mutual agreement of the Shareholders and NEON;
(b) by NEON or the Shareholders if: (i) the Acquisition has
not occurred by May 16, 1999; (ii) there shall be a final nonappealable order
of a 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 Closing by any Governmental Entity that would make
consummation of the Closing illegal;
(c) by NEON 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 NEON's ownership or operation of any portion of the business of the
Company or (ii) compel NEON or the Company to dispose of or hold separate all
or a portion of the business or assets of the Company or NEON as a result of
the Acquisition;
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(d) by NEON, if it is not in material breach of its
obligations under this Agreement, and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Company or Shareholders and such breach has not been cured
within five (5) calendar days after written notice to the Company and the
Shareholders; provided, however, that, no cure period shall be required for a
breach that by its nature cannot be cured;
(e) by the Company or the Shareholders if neither the Company
nor the Shareholders are in material breach of their respective obligations
under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of NEON and such breach has not been cured within five (5) calendar
days after written notice to NEON; provided, however, that no cure period shall
be required for a breach which by its nature cannot be cured;
Where action is taken to terminate this Agreement pursuant to this
Section 9.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
9.2 Effect of Termination. In the event of termination of this
Agreement, at any time prior to Closing, as provided in Section 9.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of NEON or the Company, or their respective officers,
directors or shareholders, provided that the breaching party shall remain
liable for all costs or expenses, including legal and financial services,
incurred by the non-breaching party relating to this Agreement prior to its
termination; and provided further that the provisions of Sections 6.2, 6.3 and
6.4, Article X and this Section 9.2 shall remain in full force and effect and
survive any termination of this Agreement.
9.3 Amendment. This Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed on behalf of each of
the parties hereto.
9.4 Extension; Waiver. At any time prior to the Closing, NEON, on the
one hand, and the Company and the Shareholders, on the other hand, 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.
9.5 Termination Payment. In the event that the Company fails to comply
with its obligations under Sections 5.2 or 6.10 hereof, then the Company shall
promptly pay to NEON, as compensation to NEON for the anticipated transaction
expenses and opportunity costs of NEON, the sum of $750,000.
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ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice), provided, however,
that notices sent by mail will not be deemed given until received:
if to NEON, to:
New Era of Networks, Inc.
7400 East Orchard Road, Suite 230
Englewood, Colorado 80111
Attention: Leonard M. Goldstein, Esq.
Telephone No.: (303) 694-3933
Facsimile No.: (303) 409-9677
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Mark A. Bertelsen, Esq.
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
(a) if to the Shareholders or the Shareholder Representative, to:
Franz Koepper
Rheinweg 25
CH-8274 Gottlieben
Attention: Franz Koepper
Telephone No.: 71-667-00-69
Facsimile No.: 71-667-00-68
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with a copy to:
Suter
Stampfenbachstrasse 52
Postfach
CH-8035 Zurich
Attention: Urs Suter
Telephone No.: 01-630-48-11
Facsimile No.: 01-630-48-15
10.2 Interpretation. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The word "agreement" when used herein shall be deemed in
each case to mean any contract, commitment or other agreement, whether oral or
written, that is legally binding. 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. When reference is made
herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
Reference to the subsidiaries of an entity shall be deemed to include all
direct and indirect subsidiaries of such entity.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.4 Entire Agreement. This Agreement, the Exhibits hereto, the
Company Disclosure Schedule and the other schedules hereto, and the documents
and instruments and other agreements among the parties hereto referenced
herein: (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings
both written and oral, among the parties with respect to the subject matter
hereof; (b) are not intended to confer upon any other person any rights or
remedies hereunder.
10.5 Severability. In the event that any provision of this Agreement
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
10.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy.
-38-
<PAGE> 45
10.7 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of Switzerland or
country having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
10.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof;
provided that issues involving the corporate governance or relating to the
issue and/or transfer of shares of any of the parties hereto shall be governed
by their respective jurisdictions of incorporation. Each of the parties hereto
agrees that process may be served upon them in any manner authorized by the
laws of Delaware for such persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
such process.
10.9 Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the of the other party. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
10.10 Absence of Third-Party Beneficiary Rights. No provisions of this
Agreement are intended, nor shall be interpreted, to provide or create any
third-party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, partner of any party hereto or any other person or entity
unless specifically provided otherwise herein.
10.11 Waiver of Jury Trial. Each of NEON and the Shareholders hereby
irrevocably waives all right to trial by jury in any action, proceeding or
counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to this Agreement or the actions of NEON, Company and the Shareholders
in the negotiation, administration, performance and enforcement hereof.
10.12 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefor, 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.
10.13 U.S. Currency. All references to dollars in this Agreement shall
be to U.S. currency unless otherwise indicated.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-39-
<PAGE> 46
IN WITNESS WHEREOF, NEON, the Shareholders and the Shareholder
Representative have caused this Agreement to be signed, all as of the date first
written above.
NEW ERA OF NETWORKS, INC.
By: /s/ LEONARD M. GOLDSTEIN
----------------------------------
Name: Leonard M. Goldstein
-------------------------------
Title: SR VP, Counsel and Secretary
------------------------------
SHAREHOLDER REPRESENTATIVE
/s/ FRANZ KOEPPER
- -------------------------------------
Name: Franz Koepper
SHAREHOLDERS
/s/ KOEPPER HOLDING AG
- -------------------------------------
Name: Koepper Holding AG
/s/ FRANZ KOEPPER
- -------------------------------------
Name: Franz Koepper
/s/ CHRISTIAN SCHULER
- -------------------------------------
Name: Christian Schuler
/s/ CHRISTOPHER F. DITORA
- -------------------------------------
Name: Christopher F. Ditora
[COUNTERPART SIGNATURE PAGE TO SHARE ACQUISITION AGREEMENT]
<PAGE> 47
<TABLE>
<CAPTION>
SCHEDULE 1.1 SHARES PERCENTAGE
------------ ------ ----------
<S> <C> <C>
Shareholders of Koepper Holding AG
Franz Koepper 1,000 100.0%
1,000 100.0%
========== ==========
Shareholders of SLI International AG*
Koepper Holding AG 600 60.0%
Franz Koepper 167 16.7%
Christian Schuler 133 13.3%
Christopher F. DiTota 100 10.0%
---------- ----------
1,000 100.0%
========== ==========
</TABLE>
* For purposes of payment of the Purchase Price and the Incentive Shares
referenced under Section 1.2 of the agreement, any payment due to Koepper
Holding AG shall be paid directly to Franz Koepper in full satisfaction of the
consideration due Koepper Holding AG as an SLI Shareholder under the Agreement.
<PAGE> 1
EXHIBIT 5.1
July __, 1999
New Era of Networks, Inc.
7400 East Orchard Parkway, Suite 230
Englewood, CO 80111
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by
you with the Securities and Exchange Commission on or about the date hereof (the
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of up to 1,515,123 shares of your Common
Stock (the "Shares"). All of the Shares are issued and outstanding and may be
offered for sale for the benefit of the selling stockholders named in the
Registration Statement. We understand that the Shares are to be sold from time
to time in the over-the-counter-market at prevailing prices or as otherwise
described in the Registration Statement. As your legal counsel, we have also
examined the proceedings taken by you in connection with the issuance of the
Shares.
It is our opinion that the Shares are validly issued, fully paid and
non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
Sincerely,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
II-6
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of New Era of
Networks, Inc. on Form S-3 of our report dated January 26, 1999, appearing in
the Annual Report on Form 10-K for the year ended December 31, 1998 of New Era
of Networks, Inc. filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934.
/s/ ARTHUR ANDERSEN LLP
Denver, Colorado
July 29, 1999
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this registration
statement of New Era of Networks, Inc. on Form S-3 of our report dated September
30, 1998 (relating to the financial statements of Century Analysis Inc. as of
and for the years ended December 31, 1997 and 1996), appearing in the Current
Report of New Era of Networks, Inc. on Form 8-K/A and to the reference to us
under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
July 29, 1999
