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As filed with the Securities and Exchange Commission on April 26, 2000
Registration No. 333-____________
===============================================================================
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 OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
6550 SOUTH GREENWOOD PLAZA BOULEVARD
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.
6550 SOUTH GREENWOOD PLAZA BOULEVARD
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.[ ]
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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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER SHARE AGGREGATE OFFERING PRICE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) (1) REGISTRATION FEE
- ------------------------------------- ------------------ ---------------------------- ---------------------------- ----------------
<S> <C> <C> <C> <C>
Common Stock par value $0.0001 754,417 $20.16 $15,209,046.72 $4,016
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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 April 17, 2000, 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 April 26, 2000)
754,417 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 754,417 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
SECCO Software-Engineering Computing and Consulting Gmbh, a German corporation,
and PaperFree Systems, Inc., a Delaware 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 April 24, 2000, the last sale price of our common
stock was $27.44 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.
----------------------
Prospectus dated April __, 2000
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TABLE OF CONTENTS
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PAGE
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WHERE YOU CAN FIND MORE INFORMATION.................................................................................2
FORWARD-LOOKING STATEMENTS..........................................................................................3
THE COMPANY.........................................................................................................4
RISK FACTORS........................................................................................................5
USE OF PROCEEDS....................................................................................................12
SELLING STOCKHOLDERS...............................................................................................12
PLAN OF DISTRIBUTION...............................................................................................13
LEGAL MATTERS......................................................................................................15
EXPERTS............................................................................................................15
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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.
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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, 1999.
2. Our Current Report on Form 8-K filed on April 7, 2000.
3. 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.
4. 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.
6550 South Greenwood Plaza Boulevard
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" or the "Company") is a leading supplier
of Internet infrastructure software and services. Specifically, NEON helps
automate e-Business by providing a range of products and services, which
integrate Internet-facing applications with core operational systems for goods
and services providers, and which facilitate the creation of Net markets. By
enabling information sharing between systems, businesses can automate end-to-end
processes, such as fulfilling an order, at the speed and volume required in the
e-Business environment. NEON products enable e-markets by routing messages and
transforming information at the needed speed and volume. NEON's software
solutions support integration of leading Internet and core business packaged
applications, application server platforms, industry standard protocols, and
proprietary systems. Additionally, the Company provides design, development and
implementation services through its Professional Services organization.
To date, over 2,500 customers worldwide, spanning all major industries
including financial services, healthcare, insurance, manufacturing, and
telecommunications, use NEON products. Various customers of the Company include
ADP, Citibank, GTE Corporation, IBM, JP Morgan & Company, Monsanto Company, Open
Interactive, Primark Financial Services, Sumitomo Bank of California and The
Street.com. As part of its strategy, NEON has established reseller and joint
marketing relationships with complementary e-Business entities such as BEA,
BroadVision, Commerce One, IBM, Microsoft and Sun Microsystems, Inc.
RECENT EVENTS
Acquisitions. We announced the March 2000 acquisition of PaperFree Systems,
Inc. in our Current Report on Form 8-K filed April 7, 2000. In April 2000 we
acquired SECCO Software-Engineering Computing and Consulting Gmbh, located in
Frankfurt, Germany ("SECCO"). Pursuant to this acquisition, SECCO stockholders
received a total of approximately 86,925 shares of our common stock and
$12,000,000 in cash in exchange for their interests in SECCO. This summary
description of the SECCO acquisition is qualified in its entirety by reference
to the full text of the SECCO acquisition agreement, a copy of which is attached
hereto as Exhibit 2.2.
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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.
o the continued growth of the e-Business Integration and Enterprise
Application Integration ("EAI") software markets;
o the size of the orders for our products, and the timing of such
orders;
o potential delays in our implementations at customer sites;
o continued development of indirect distribution channels;
o increased demand for our products;
o the timing of our product releases;
o competition;
o the effects of global economic uncertainty on capital expenditures for
software.
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 DEPENDENT ON OUR RELATIONSHIP WITH IBM AND
OTHER PARTNERS.
Our revenue growth in 1998, and in particular the fourth quarter, reflected
strong sales of the MQIntegrator and MQSeries Integrator through IBM's
distribution and reseller channel. In 1999 and 1998, royalty revenue from IBM
sales of MQIntegrator and MQSeries Integrator accounted for between 10% and 20%
of our total software license revenues. We expect that IBM and our other
partners will account for a
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material percentage of our software license revenue in 2000. Any delay or
shortfall in such revenues from our partners 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.
Although our sales cycles have shortened in the e-Business marketplace,
historically our customers typically have taken 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. 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, including
acquisition-related charges, we have not been profitable on an annual basis. At
December 31, 1999, our Company had an accumulated deficit of approximately $66.3
million (which includes acquisition-related costs). To address these risks and
uncertainties, we must do the following:
o successfully implement our sales and marketing strategy;
o expand our direct sales channels;
o further develop our indirect distribution channels;
o respond to competition;
o continue to attract and retain qualified personnel;
o continue to develop and upgrade our products and technology more
rapidly than competitors;
o 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.
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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 March 2000, we acquired eight companies. These
acquisitions will expose us to increased risks and costs, including the
following:
o assimilating new operations, systems, technology and personnel;
o 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 harmful effect on our business, financial condition and
results of operations.
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 December 31, 1999 we had
a total of 975 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:
o improve our operational, financial and management controls;
o improve our reporting systems and procedures;
o install new management and information control systems;
o 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 accounting and forecasting software
in an efficient and timely manner or if the new systems fail to adequately
support our levels of operations, then we could incur substantial additional
expenses to remedy such failure.
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OUR OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON OUR SUITE OF E-BUSINESS AND
EAI PRODUCTS.
A substantial majority of our revenues come from the NEON e-Business and
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 e-Business and 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 harmful effect on our business, financial condition and
results of operations.
FAILURE TO ADD CUSTOMERS OR EXPAND INTO NEW MARKETS MAY BE HARMFUL TO OUR
BUSINESS.
A significant portion of our revenue has come from a small number of large
purchasers. For example, in 1999 our top ten customers accounted for 38% of
total revenues. In 1999, Industrial Bank of Japan accounted for approximately 7%
of our total revenues. Historically, our revenues have been derived primarily
from sales to large banks and financial institutions. Sales to large banks and
financial institutions accounted for 32% of total revenues in 1999 and
approximately 57% of total revenues in 1998. 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 harmful
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 would have a harmful
effect on our business, financial condition and results of operations.
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 harm our business, financial condition and
results of operations.
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 harm 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 harm our results of operations. Another risk is that because
lower unit prices are typically charged on sales made
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through indirect channels, increased indirect sales could harm our average
selling prices and result in lower gross margins.
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:
o longer payment cycles;
o unexpected changes in regulatory requirements;
o difficulties and expenses associated with complying with a variety of
foreign laws;
o import and export restrictions and tariffs;
o difficulties in staffing and managing foreign operations;
o difficulty in accounts receivable collection and potentially adverse
tax consequences;
o currency fluctuations;
o currency exchange or price controls;
o 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.
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
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support our products on a variety of platforms. Our success will depend, among
others, on the following factors:
o our ability to integrate our products with multiple platforms,
especially relative to our competition;
o the portability of our products, particularly the number of hardware
platforms, operating systems and databases that our products can
source or target;
o the integration of additional software modules under development with
existing products;
o 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 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
three patents and one patent application 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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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.
OUR INABILITY TO ATTRACT AND RETAIN PERSONNEL MAY ADVERSELY AFFECT US.
Our success 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 harmful effect on our future operating results. In
particular George F. (Rick) Adam, our Chief Executive 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
e-Business and EAI software and Internet integration markets, 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.
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 e-Business and 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 harmful 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 harmed.
GLOBAL ECONOMIC UNCERTAINTY MAY AFFECT THE CAPITAL EXPENDITURES OF OUR
CUSTOMERS.
The e-Business and EAI software and Internet integration markets 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 e-Business and
EAI software market could harm our operating results.
11
<PAGE> 13
ADOPTION OF THE EURO PRESENTS UNCERTAINTIES FOR OUR COMPANY.
In the first part of 1999, the new "Euro" currency was introduced in
certain European countries that are part of the European Monetary Union, or EMU.
By 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 could have a
harmful effect on the business, financial condition and 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 April 26, 2000. 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 SHARES WHICH
NUMBER OF SHARES MAY BE SOLD PURSUANT TO
NAME OF SELLING STOCKHOLDER BENEFICIALLY OWNED(1) THE PROSPECTUS (2)
--------------------------- --------------------- ------------------------
<S> <C> <C>
Ira A. Apatoff ............... 104,872 81,276
Albert F. Cameron ............ 647 501
Michele J. Darnell ........... 20,715 16,054
Don M. Honeycutt ............. 194 150
Guy M. Jillings .............. 647 501
Zari Karimi .................. 161 125
Daniel Kazzaz ................ 137,052 106,215
Eric Leibowitz ............... 194 150
Nikoleta Lelis ............... 323 250
Patrick J. Lynch ............. 161 125
Robert A. McNeece ............ 2,136 1,655
James M. Miller .............. 161 125
Eric G. Nilson ............... 15,536 12,040
Boris J. Shur ................ 80 62
David Sien ................... 194 150
John C. Tantaro .............. 161 125
Christine A. Whalen .......... 647 501
Maik Thurm ................... 52,155 46,939
Goetz Nourney ................ 34,770 31,293
</TABLE>
12
<PAGE> 14
- --------------
(1) Does not include an aggregate of 383,611 shares of common stock that the
Company anticipates that it will distribute to the Selling Stockholders
pursuant to certain "make whole" provisions contained in the acquisition
agreements pursuant to which the Selling Stockholders received their
shares. A number of shares which are, in the Company's best estimation,
equivalent to these shares have been included in this registration
statement, but they are not included in either column of the table. We
intend to file a prospectus supplement to reflect any change in the number
of shares offered by the individual Selling Stockholders as a result of
these provisions.
(2) Does not include an aggregate of 72,569 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. We intend to file a prospectus supplement to reflect any change
in the number of shares offered by the individual selling stockholders as a
result of the expiration of the escrow or the effect of the provisions
described in the prior footnote.
PLAN OF DISTRIBUTION
We are registering all 754,417 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.
13
<PAGE> 15
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, 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.
14
<PAGE> 16
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, 1997, 1998 and 1999 and
for each of the three years in the period ended December 31, 1999 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.
15
<PAGE> 17
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 ................. $ 4,016
Legal fees and expenses .............. 15,000
Accounting fees and expenses ......... 10,000
Miscellaneous expenses ............... $10,984
-------
Total ...................... $40,000
</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.
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES
(a) Exhibits:
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
*2.1 Agreement and Plan of Reorganization dated March 21, 2000 by and
among Registrant, NEON Acquisition One Corporation and PaperFree
Systems, Inc. (which is incorporated herein by reference to the
exhibit filed with the Registrant's Report on Form 8-K dated
March 24, 2000).
2.2 Share Acquisition Agreement by and among Registrant, SECCO
Software-Engineering, Computing and Consulting Gmbh, Maik Thrum
and Goetz Nourney dated April 7, 2000.
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.
II-1
<PAGE> 18
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
* 24.1 Power of Attorney (which is included on page II-3, herein).
* Previously filed
(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 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.
II-2
<PAGE> 19
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> 20
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 APRIL 26, 2000.
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 Officer April 26, 2000
- ------------------------------------------------- and Director (Principal Executive Officer)
George F. Adam, Jr.
/s/ Patrick Fortune President, Chief Operating Officer and Director April 26, 2000
- -------------------------------------------------
Patrick Fortune
/s/ Stephen E. Webb Senior Vice President and Chief Financial Officer April 26, 2000
- ------------------------------------------------- (Principal Financial Officer)
Stephen E. Webb
/s/ Lonnie S. Clark Director of Accounting and Financial Reporting April 26, 2000
- ------------------------------------------------- (Principal Accounting Officer)
Lonnie S. Clark
/s/ Harold A. Piskiel Director April 26, 2000
- -------------------------------------------------
Harold A. Piskiel
/s/ Steven Lazarus Director April 26, 2000
- -------------------------------------------------
Steven Lazarus
/s/ Mark L. Gordon Director April 26, 2000
- -------------------------------------------------
Mark L. Gordon
/s/ Elisabeth W. Ireland Director April 26, 2000
- -------------------------------------------------
Elisabeth W. Ireland
/s/ Joseph E. Kasputys Director April 26, 2000
- -------------------------------------------------
Joseph E. Kasputys
/s/ Melvyn E. Bergstein Director April 26, 2000
- -------------------------------------------------
Melvyn E. Bergstein
</TABLE>
II-4
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
<S> <C>
*2.1 Agreement and Plan of Reorganization dated March 21, 2000 by and
among Registrant, NEON Acquisition One Corporation and PaperFree
Systems, Inc. (which is incorporated herein by reference to the
exhibit filed with the Registrant's Report on Form 8-K dated
March 24, 2000).
2.2 Share Acquisition Agreement by and among Registrant, SECCO
Software-Engineering, Computing and Consulting Gmbh, Maik Thrum
and Goetz Nourney dated April 7, 2000.
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.
*24.1 Power of Attorney (which is included on page II-3, herein).
</TABLE>
* Previously filed
<PAGE> 1
EXHIBIT 2.2
SHARE ACQUISITION AGREEMENT
This SHARE ACQUISITION AGREEMENT (the "Agreement") is made and entered
into as of April 7, 2000 by and among New Era of Networks, Inc., a Delaware
corporation ("NEON"), Goetz Nourney and Maik Thurm, the sole shareholders of
SECCO Software-Engineering, Computing and Consulting GmbH (the "Shareholders"),
SECCO Software-Engineering, Computing and Consulting GmbH (the "Company"), and,
with respect to Article VIII, Maik Thurm (in his capacity as the "Shareholder
Representative").
RECITALS
A. The Shareholders own all of the issued and outstanding capital stock
of the Company. Throughout this agreement, the term "Shareholders" shall include
all persons and entities with an ownership interest in the Company however
defined. NEON desires to acquire all of the issued and outstanding capital stock
of the Company owned or held of record or to be owned or held of record by the
Shareholders (the "Acquisition") such that upon consummation of the acquisition
NEON will own (i) all of the issued and outstanding capital stock of the
Company.
B. The Shareholders desire to sell all of the capital stock of the
Company owned or held of record or to be owned or held of record by them 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 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, the Shareholders have 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> 2
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, 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
"Company Shares"), including all property or rights issued by the Company with
respect to the Company Shares. The name and address of the Shareholders and the
number of such Company Shares being sold by the Shareholders pursuant hereto are
set forth in Schedule 1.1 attached hereto.
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,
NEON shall (i) pay to the Company Shareholders cash in the aggregate amount of
$11.7 million, and (ii) issue to the Company Shareholders , as set forth below,
that number of shares of Common Stock of NEON valued at $3 million at the
Closing (the "Aggregate NEON Share Number"), based on the lower of (A) the
average closing sale price of a share of NEON Common Stock, as reported on the
Nasdaq National Market, for the forty (40) most recent trading days ending on
the second trading day immediately preceding the Closing Date and (B) 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
second trading day immediately preceding the Closing Date (the "Closing Stock
Price") provided, however, that NEON shall withhold $1.2 million of Cash
Consideration (the "Escrow Cash"), together with that number of shares of Common
Stock of NEON valued at $300,000 at the Closing based on the Closing Stock Price
(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 Company Shareholders (including the allocation of
the Escrow Fund, among the Company Shareholders ). The $11.7 million cash
consideration and the $3 million stock consideration are together referred to as
the "Purchase Price".
(b) The shares of NEON Common Stock 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.
- 2 -
<PAGE> 3
(c) 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
on or before 10:00 a.m. Denver, Colorado time April 7, 2000, provided that
satisfaction or waiver of the conditions set forth in Article VII has occurred,
simultaneously at the offices of NEON, 6550 Greenwood Plaza Boulevard,
Englewood, Colorado 80111, U.S.A. and at the offices of Mr. Konrad Adenauer,
Notare Rodert & Adenauer, Hohenstaufenring 57, 50674 Koln, Germany 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 shall deliver
or cause to be delivered to NEON the following:
(i) certificate(s) representing the Company Shares duly
endorsed or accompanied by stock powers duly endorsed in blank;
(ii) an executed Shareholder Agreement;
(iii) with regard to each Shareholder, an executed
Non-Competition Agreement; and
(iv) 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 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.
- 3 -
<PAGE> 4
(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 $11.7 million.
"Company Stock" shall mean all shares of stock capital of the
Company, par value DM 60,000. The term "Company Stock" shall include whatever
form of ownership interest in the Company as may exist.
"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.
"US GAAP" shall mean United States generally accepted accounting
principles, consistently applied.
"German GoB" shall mean German generally accepted accounting
principles, consistently applied.
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.
1.7 Additional Consideration.
(a) In the event that the First Measurement Date Average Price (as
defined below) is less than 90% of the Closing Stock Price set forth in Section
1.2(a), then NEON shall promptly issue and deliver to the former stockholders of
the Company on a pro rata basis such number of additional shares of NEON Common
Stock valued at the First Measurement Date Average Price
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<PAGE> 5
equal to $1,350,000 minus the product of (x) one half of the Aggregate NEON
Share Number and (y) First Measurement Date Average Price.
(b) In the event that the Second Measurement Date Average Price
(as defined below) is less than 90% of the Closing Stock Price set forth in
Section 1.2(a), then NEON shall promptly issue and deliver to the former
stockholders of the Company on a pro rata basis (and based on the number of
shares of NEON Common Stock issued to each stockholder pursuant to the
Acquisition that remain unsold as of the Second Measurement Date (as defined
below)) such number of additional shares of NEON Common Stock valued at the
Second Measurement Date Average Price equal to (x) $1,350,000 minus the product
of (A) one half of the Aggregate NEON Share Number and (B) Second Measurement
Date Average Price.
(c) The "First Measurement Date Average Price" shall be the
average closing sale price of a share of NEON Common Stock, as reported on The
Nasdaq National Market, for the five (5) trading days following the day that the
Form S-3 Registration Statement covering the resale of the NEON Common Stock
issued in the Acquisition is effective (the "First Measurement Date").
(d) The "Second Measurement Date Average Price" shall be the
average closing sale price of a share of NEON Common Stock, as reported on The
Nasdaq National Market, for the five (5) trading days following the 90th day
after the day that the Form S-3 Registration Statement covering the resale of
the NEON Common Stock issued in the Acquisition is effective (the "Second
Measurement Date").
(e) The First Measurement Date Average Price and the Second
Measurement Date Average Price shall be adjusted to reflect fully the effect of
any stock split, stock dividend (including any dividend or distribution of
securities convertible into NEON Common Stock), recapitalization or other like
change with respect to NEON Common Stock that occurs or has a record date on or
after the date hereof.
(f) The right of a former Company stockholder to receive
additional shares of NEON Common Stock under this Section 1.7 arises solely from
this transaction and cannot be transferred or assigned.
(g) No additional shares of NEON Common Stock issued under this
Section 1.7 shall be subject to or deposited in the Escrow Fund.
(h) At NEON's discretion, rather than solely using NEON Common
Stock, NEON shall be entitled to use any combination of NEON Common Stock and
cash, or solely cash, to satisfy NEON's obligations under Section 1.7.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
A. Each of the Shareholders hereby, jointly and severally, 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. The Company is a Gesellschaft mit
beschrankter Haftung (GmbH) (english translation: commercial partnership with
limited liability), duly organized, validly existing and in good standing under
the laws of Germany 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.
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. The Company's
ownership of the shares of the Subsidiaries will not be negatively impacted or
interfered with as a result of the Acquisition. The execution and delivery by
the Company 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.
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<PAGE> 7
2.3 Company Capital Structure.
(a) The authorized capital stock of the Company immediately prior
to closing consists of unregistered shares of authorized Company Stock with par
value of DM 60,000, comprised of one share of a par value of DM 36,000 issued to
Maik Thurm and one share of a par value of DM 24,000 issued to Goetz Nourney.
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 the Company 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. The Company 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 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
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<PAGE> 8
"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 (a) the Company's reviewed balance sheet as of March 31,
1998, and the related reviewed statements of operation, shareholders' equity and
cash flows for the year ended 1998, which review was conducted by the Company's
tax accountants, Cloos & Weyer (b) the Company's reviewed balance sheet as of
March 31, 1999, and the related reviewed statements of operation, shareholders'
equity and cash flows for the year ended 1999, which review was conducted by the
Company's tax accountants, Cloos & Weyer and (3) the Company's unaudited balance
sheet as of January 31, 2000 and the related unaudited statements of income and
cash flow for the ten (10) 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 German GoB 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 January 31,
2000 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 German GoB) that exceeds $15,000 individually or $40,000 in the aggregate
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 January 31, 2000
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<PAGE> 9
2.9 No Changes. Except as set forth in Section 2.9 of the Company
Disclosure Schedule, since January 31, 2000 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 German GoB;
(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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<PAGE> 10
(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 German 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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<PAGE> 11
(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 German GoB 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 are used or located in its
United States.
(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
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<PAGE> 12
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 do not materially detract from the value,
or materially interfere with the present use, of the property subject thereto or
affected thereby.
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<PAGE> 13
(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 $20,000,
(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 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,
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<PAGE> 14
(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 $20,000 individually or
$40,000 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 $10,000 individually or $20,000 in
the aggregate,
(xii) any purchase order or contract for the purchase of
materials involving in excess of $20,000 individually or $40,000 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
$20,000 individually or $40,000 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 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
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<PAGE> 15
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 January 31,
2000 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 German
GoB 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
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<PAGE> 16
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, 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
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<PAGE> 17
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
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 the Company 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)
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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 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.
(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
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
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<PAGE> 19
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 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.
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<PAGE> 20
2.28 Representations Complete. (a) 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.
ARTICLE III
FURTHER REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder represents and warrants to NEON as follows:
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
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<PAGE> 21
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.
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.
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<PAGE> 22
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
200,000,000 shares of Company Stock, $.0001 par value per share, of which
34,776,490 shares were issued and outstanding as of February 29, 2000, 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 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, and the
Ancillary Exhibits and Agreements, 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 Annual Report on Form 10-K for the year ended December 31, 1999 and Proxy
Statement filed on or about March 31, 2000 as filed by it with the Securities
and Exchange Commission ("SEC") under the Exchange Act (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
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<PAGE> 23
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.)
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 individual expense in excess of
$30,000 and aggregate expense in excess of $100,000;
(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;
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<PAGE> 24
(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;
(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;
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<PAGE> 25
(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
(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
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<PAGE> 26
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.
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).
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
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<PAGE> 27
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 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 German 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
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<PAGE> 28
acts and things as may be necessary or desirable for effecting completely the
consummation of the Closing and the transactions contemplated hereby.
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.
(e) Transfer Agreement. NEON and the Shareholders shall have
executed a Transfer Agreement for the transfer of the Company Stock with respect
to and in accordance with Section 15(3) Gesetz betreffend die Gesellschaften mit
beschrankter Haftung - GmbHG (law concerning commercial partnerships with
limited liability) in substantially the form attached hereto as Exhibit D.
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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<PAGE> 29
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. Each of the Shareholders shall
have executed and delivered the Non-Competition Agreements in the form attached
hereto as Exhibit A.
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<PAGE> 30
(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 January 31, 2000.
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 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 and Article III hereof shall survive the Closing and
continue for a period of four (4) years after the Closing. The Shareholders
shall severally, but not jointly, 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 Shareholder
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 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 $100,000 in the aggregate, at which time NEON may recover all of
its Losses including the first $100,000, 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
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<PAGE> 31
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.
(i) Subject to the following requirements and to the exception
set forth in Section 8.2(b)(ii) below,, the Escrow Fund shall be in existence
immediately following the Closing and shall terminate on the first anniversary
of Closing (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.
(ii) On the first anniversary of Closing, the parties shall
transfer the remaining portion of the Escrow Fund to the Shareholders except for
$500,000, which shall be maintained in the Escrow Fund until the second
anniversary of Closing, and except for such amount (or some portion thereof),
that 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 second anniversary of Closing.
(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 contributions to the
Escrow Fund. Withdrawals shall be comprised of 80% Escrow Cash and 20% Escrow
Shares.
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<PAGE> 32
(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. For purposes of this Section 8.2(f), in any
arbitration hereunder in which any claim or the amount 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
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<PAGE> 33
the first $20,000 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 $20,000 of the costs and expenses of the arbitrators in such
action.. 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 $50,000. 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, Maik Thurm 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.
(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.
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<PAGE> 34
(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 against the Escrow Fund,
shall be permitted 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 April 7, 2000 (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;
(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
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<PAGE> 35
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 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 $100,000.
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:
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<PAGE> 36
if to NEON, to:
New Era of Networks, Inc.
6550 Greenwood Plaza Boulevard
Englewood, Colorado 80111
Attention: Leonard M. Goldstein, Esq.
Telephone No.: (303) 694-3933
Facsimile No.: (303) 409-8677
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> 37
(a) if to the Shareholders or the Shareholder Representative, to:
SECCO Software-Engineering, Computing and Consulting GmbH
Frankfurter Str. 63-69
65760 Eschborn
Germany
with a copy to:
Maik Thurm
Wilhelm-Bonn Str. 6
61476 Kronberg, Germany
Telephone: 0172 911 7882
Goetz Nourney
Liederbach Str. 10
61462 Konigstein, Germany
Telephone: 0172 901 6969
Bonnie M. Steiner
Suter, Attorneys at Law
Rue Vallin 2
1211 Geneva 11
Switzerland
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.
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<PAGE> 38
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.
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 Colorado 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. The parties irrevocably consent to arbitration of
claims as set forth in Section 8.2 (g). This Agreement shall be governed by and
construed in accordance with the laws of the State 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. For the
purposes of injunctive relief and matters otherwise not subject to arbitration,
each of the parties hereto irrevocably consents to the exclusive jurisdiction of
the Delaware Chancery Court and the United States District Court for the
District of Delaware, in connection with any matter based upon or arising out of
this Agreement or the matters contemplated herein, and further agrees that
process may be served upon them in any manner authorized by the laws of the
State 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.
- 38 -
<PAGE> 39
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> 40
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. SECCO SOFTWARE-ENGINEERING,
COMPUTING AND CONSULTING GMBH
By: /s/ Franz Koepper By: /s/ Maik Thurm
---------------------------- ---------------------------
Name: Franz Koepper Name: Maik Thurm
---------------------------- ---------------------------
Title: Vice President Title: Director
--------------------------- --------------------------
SHAREHOLDER REPRESENTATIVE
/s/ Maik Thurm
- ---------------------------------
Name: Maik Thurm
----------------------------
SHAREHOLDERS
/s/ Maik Thurm
- ---------------------------------
Name: Maik Thurm
/s/ Goetz Nourney
- ---------------------------------
Name: Goetz Nourney
<PAGE> 1
EXHIBIT 5.1
April 26, 2000
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 754,417 shares of your Common Stock
$.0001 par value (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
<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, 2000, appearing in the Annual Report on Form
10-K for the year ended December 31, 1999 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
April 25, 2000
