<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): October 31, 1997
APERTUS TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 0-12378 41-1349953
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
7275 Flying Cloud Drive, Eden Prairie, Minnesota 55344
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 828-0300
Not Applicable
(Former name or former address, if changed since last report.)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
------------------------------------
a. Acquisition of Carleton Corporation
On October 31, 1997, Apertus Technologies Incorporated (the "Company")
acquired Carleton Corporation, a Massachusetts corporation ("Carleton"),
pursuant to an Agreement and Plan of Merger dated October 24, 1997 between the
Company and Carleton (the "Merger Agreement"), for approximately 2.8 million
shares of the Company's common stock plus accreting notes ("Notes") issued by
the Company with an aggregate initial principal amount of approximately $2.0
million. Pursuant to the Merger Agreement, each share of Carleton's issued and
outstanding capital stock was converted into a combination of a Note and Company
common stock, except that stockholders holding 20,000 shares or less of Carleton
common stock received $1.06 per share in cash in lieu of such Note and Company
common stock. The final principal amounts of the Notes are subject to reduction
and provide a source of offset to the Company for certain indemnification
obligations as set forth in the Merger Agreement. As of October 31, 1997 (the
effective date of the merger as set forth in the Merger Agreement), Carleton was
merged with and into the Company, and the separate existence of Carleton ceased.
A copy of the Merger Agreement, including the form of Note, is included as
Exhibit 2.1 hereto.
The purchase price was arrived at by arms-length negotiations between
the Company and Carleton. Prior to the effective date of the merger, no
affiliate of Carleton was an affiliate of the Company. As of the effective date
of the merger, Paul Fluckiger (President of Carleton) became an officer and a
director of the Company, and Michael Dexter-Smith (a director of Carleton)
became a director of the Company. The Company financed the cash payments made
pursuant to the Merger Agreement with cash on hand, and the Company anticipates
that any payments to be made under the Notes will be paid by funds generated
from operations.
Carleton was a leading provider of advanced data warehousing
management software solutions. The Company intends to continue such operations.
b. Sale of Internet Solutions Division
On October 31, 1997, the Company also completed the sale of its
Internet Solutions Division to a wholly owned subsidiary of Computer Network
Technology Corporation, a Minnesota corporation ("CNT"), pursuant to an Asset
Purchase Agreement dated October 24, 1997 among CNT, a subsidiary of CNT and the
Company and certain of its subsidiaries. The purchase price was approximately
$11.4 million in cash plus the assumption of what is expected to be
approximately $5.9 million of balance sheet liabilities (of which approximately
$3.2 million represents deferred maintenance revenues) and certain other
liabilities. As a result of the sale, CNT acquired the assets, including
technology, intellectual property, hardware, software and goodwill, related to
the Company's Internet Solutions Division, which provides Internet-to-mainframe
-2-
<PAGE>
connectivity products and Web access-to-legacy applications. A copy of the Asset
Purchase Agreement is included as Exhibit 2.2 hereto.
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Financial statements of businesses acquired
-------------------------------------------
The following financial statements of Carleton are included on
pages F2-F20 of this Current Report on Form 8-K:
Report of Independent Public Accountants
Balance Sheets as of February 28, 1997 and February 29, 1996
Statements of Operations for the Years Ended February 28, 1997
and February 29, 1996
Statements of Stockholders' Equity (Deficit) for the Years Ended
February 28, 1997 and February 29, 1996
Statements of Cash Flows for the Years Ended February 28, 1997
and February 29, 1996
Notes to Financial Statements
Balance Sheet as of August 31, 1997 (unaudited)
Statements of Operations for the Six Months Ended August 31, 1997
and August 31, 1996 (unaudited)
Statements of Cash Flows for the Six Months Ended August 31, 1997
and August 31, 1996 (unaudited)
(b) Pro forma financial information
-------------------------------
The Company will file the pro forma information called for
under Item 7 of Form 8-K as soon as practicable, but not later than 60 days
after the date upon which this Current Report on Form 8-K is required to be
filed.
(c) Exhibits
--------
2.1 Agreement and Plan of Merger between the Company and
Carleton Corporation, dated as of October 24, 1997,
including form of Note.
2.2 Asset Purchase Agreement between CNT Acquisition I
Corporation, Computer Network Technology Corporation
and the Company and certain of its subsidiaries, dated
as of October 24, 1997.
4.1 Form of Promissory Note to be issued to certain
stockholders of Carleton Corporation (included as
Exhibit B to Exhibit 2.1 hereto)
23.1 Consent of Independent Public Accountants
-3-
<PAGE>
The following schedules and exhibits to the Merger Agreement have been
omitted, and the Company will file supplementally any such schedules or exhibits
to the Commission upon request:
Schedules:
3.01 List of Jurisdictions in which Carleton is Qualified to
do Business
3.04 Third Party Consents
3.05 Governmental Authorities, Consents
3.06(a) Capital Stockholders
3.06(b) Outstanding Stock Option and Warrant Holders
3.07 Subsidiaries
3.09 Absence of Undisclosed Liabilities
3.10 Material Adverse Changes since February 28, 1997
3.11 Certain Developments
3.12 Title to Properties
3.13 Accounts Receivable
3.14 Tax Matters
3.15 Contracts and Commitments
3.16 Intellectual Property Rights
3.17 Litigation
3.18 Product Commitments
3.19 Employees
3.20 Employee Benefit Plans
3.21 Insurance
3.23 Customers
3.24 Officers and Directors
3.25 Permits
3.27 Covington Associates Fee Schedule
9.03 Employment Agreements
Exhibits:
A-1 Articles of Merger (Minnesota)
A-2 Articles of Merger (Massachusetts)
C Opinion of Counsel for Carleton
D Officers' Certificate of Carleton
E Opinion of Counsel for Apertus
F Officer's Certificate of Apertus
G Exchange Agent Agreement
The following schedules and exhibits to the Asset Purchase Agreement
have been omitted, and the Company will file supplementally any such schedules
or exhibits to the Commission upon request:
Schedules:
1.1(a) Description of Products
1.1(e) Personal Property
1.1(g) Prepaid Expenses
1.1(i) Contracts
1.2 Excluded Assets
-4-
<PAGE>
2.2(a) Agreed Upon Procedures
3.1(d) Leases
3.1(e) Assumed Liabilities
4.5 Exceptions to Representations
4.6 Government Authority
4.7 Financial Statements
4.11 Subsequent Events
4.12 Commitments
4.15 Intellectual Property
4.17 Litigation
4.18 Customers and Vendors
4.20 Employment Matters
4.21 Benefit Plans
4.22 Product Defects
4.25 Employees
4.27 Governmental Authorizations
4.29 Accounts Receivable and Accounts Payable
4.30 UK Transferring Employees
6.4 Transition Services
Exhibits:
A Noncompetition Agreements
B Opinion of Counsel (Seller)
C Opinion of Counsel (Buyer)
-5-
<PAGE>
Signature
- ---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 10, 1997
APERTUS TECHNOLOGIES INCORPORATED
By /s/ Steven L. Thimjon
-------------------------------
Steven L. Thimjon
Vice President and Chief Financial
Officer
-6-
<PAGE>
CARLETON CORPORATION
Financial Statements
as of February 28, 1997 and February 29, 1996
Together with Auditors' Report
<PAGE>
CARLETON FINANCIAL STATEMENTS
-----------------------------
The financial statements of Carleton as of February 28, 1997 and
February 29, 1996 and for each of the years then ended, included herein, have
been audited by Arthur Andersen LLP, as indicated in their report dated April
24, 1997.
The condensed financial statements of Carleton as of August 31, 1997
and 1996 and for the six months ended August 31, 1997 and 1996, included herein,
have not been audited but in the opinion of Carleton's management contain all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of such financial statements.
Report of Independent Public Accountants................... F-1
Balance Sheets as of February 28, 1997 and
February 29, 1996................................ F-2
Statements of Operations for the Years Ended
February 28, 1997 and February 29, 1996.......... F-3
Statements of Stockholders' Equity (Deficit)
for the Years Ended February 28, 1997
and February 29, 1996............................ F-4
Statements of Cash Flows for the Years Ended
February 28, 1997 and February 29, 1996.......... F-5
Notes to Financial Statements.............................. F-6
Balance Sheet as of August 31, 1997 (unaudited)............ F-15
Statements of Operations for the Six Months Ended
August 31, 1997 and August 31, 1996 (unaudited).. F-16
Statements of Cash Flows for the Six Months Ended
August 31, 1997 and August 31, 1996 (unaudited).. F-17
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
Report of Independent Public Accountants
To the Stockholders and Board of Directors of
Carleton Corporation:
We have audited the accompanying balance sheets of Carleton Corporation (a
Massachusetts corporation) as of February 28, 1997 and February 29, 1996, and
the related statements of operations, stockholders' equity (deficit) and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Carleton Corporation as of
February 28, 1997 and February 29, 1996, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Boston, Massachusetts
April 24, 1997 (except with respect to
the matters discussed in Notes 2 and 10,
as to which the date is May 29, 1997, and
the matter discussed in Note 11, as to
which the date is October 31, 1997)
F-1
<PAGE>
CARLETON CORPORATION
Balance Sheets--February 28, 1997 and February 29, 1996
<TABLE>
<CAPTION>
Assets 1997 1996
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 667,785 $1,139,390
Accounts receivable, less reserves of approximately
$66,000 238,054 350,271
Prepaid expenses and other current assets 84,400 3,719
Note receivable from officer/stockholder 16,876 33,875
----------- ----------
Total current assets 1,007,115 1,527,255
----------- ----------
Property and Equipment, at cost:
Computer equipment 394,362 263,373
Furniture, fixtures and office equipment 86,100 48,361
----------- ----------
480,462 311,734
Less--Accumulated depreciation 155,216 83,024
----------- ----------
325,246 228,710
----------- ----------
Capitalized Software Development Costs, net of accumulated
amortization of approximately $369,000 and $284,000 in
1997 and 1996, respectively 109,569 190,120
Other Assets 4,881 27,447
----------- ----------
$1,446,812 $1,973,532
=========== ==========
Liabilities and Stockholders' Equity(Deficit) 1997 1996
Current Liabilities:
Note payable to a bank $ 325,000 $ 325,000
Note payable - 15,003
Accounts payable 219,616 175,126
Accrued expenses 402,308 195,840
Deferred revenue 514,152 411,232
----------- -----------
Total current liabilities 1,461,076 1,122,201
----------- -----------
Deferred Revenue, net of current portion 70,000 -
Commitments and Contingencies (Notes 4 and 9)
Stockholders' Equity (Deficit):
Series A convertible preferred stock, $.01 par value--
Authorized--353,000 shares
Issued and outstanding--352,941 shares (preference
in liquidation of $441,176) 409,724 387,224
Series B convertible preferred stock, $.01 par value--
Authorized--532,000 shares
Issued and outstanding--531,226 shares (preference
in liquidation of $664,033) 616,692 582,828
Common stock, $.01 par value--
Authorized--10,500,000 shares
Issued and outstanding--1,534,989 shares and 1,276,428
shares at February 28, 1997 and February 29, 1996,
respectively 15,350 12,764
Class B common stock, $.01 par value--
Authorized--485,000 shares
Issued and outstanding--484,818 shares 4,848 4,848
Additional paid-in capital 4,215,798 4,272,162
Accumulated deficit (5,346,675) (4,408,495)
----------- -----------
Total stockholders' equity (deficit) (84,263) 851,331
----------- -----------
$ 1,446,812 $ 1,973,532
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
CARLETON CORPORATION
Statements of Operations
for the Years Ended February 28, 1997 and February 29, 1996
1997 1996
Revenue:
License $2,298,986 $ 339,973
Maintenance 813,416 596,428
Consulting and other 864,433 823,151
Royalty 420,120 427,200
---------- -----------
4,396,955 2,186,753
Cost of Revenue 879,528 810,065
---------- -----------
Gross profit 3,517,427 1,376,688
---------- -----------
Operating Expenses:
Research and development 1,794,862 1,135,174
Sales and marketing 1,801,339 1,069,206
General and administrative 857,100 641,541
---------- -----------
Total operating expenses 4,453,301 2,845,921
---------- -----------
Loss from operations (935,874) (1,469,233)
Interest and Other Income, net 2,306 48,205
---------- -----------
Net loss $ (938,180) $(1,421,028)
========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
CARLETON CORPORATION
Statements of Stockholders' Equity (Deficit)
for the Years Ended February 28, 1997 and February 29, 1996
<TABLE>
<CAPTION>
Series A Series B
Convertible Preferred Convertible Preferred
Stock Stock Common Stock Class B Common Stock
Number Number Number $.01 Number $.01
of Shares Amount of Shares Amount of Shares Par Value of Shares Par Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, February 28, 1995 - $ - - $ - 1,276,428 $ 12,764 - $ -
Conversion of debt into 300,000 300,000 451,542 451,542 - - - -
equity
Sale of stock (Note 5(b)) 52,941 66,176 79,684 99,605 - - 484,818 4,848
Accretion of redeemable
preferred stock - 21,048 - 31,681 - - - -
Net loss - - - - - - - -
-------- -------- -------- -------- --------- -------- -------- --------
Balance, February 29, 1996 352,941 387,224 531,226 582,828 1,276,428 12,764 484,818 4,848
Exercise of stock options - - - - 258,561 2,586 - -
Accretion of redeemable
preferred stock - 22,500 - 33,864 - - - -
Net loss - - - - - - - -
-------- -------- -------- -------- --------- -------- -------- --------
Balance, February 28, 1997 352,941 $409,724 $531,226 $616,692 1,534,989 $ 15,350 484,818 $ 4,848
======== ======== ======== ======== ========= ======== ======== ========
Total
Additional Stockholders'
Paid-in Accumulated Equity
Capital Deficit (Deficit)
<S> <C> <C> <C>
Balance, February 28, 1995 $ 1,995,520 $ (2,987,467) $ (979,183)
Conversion of debt into
equity - - 751,542
Sale of stock (Note 5(b)) 2,329,371 - 2,500,000
Accretion of redeemable
preferred stock (52,729) - -
Net loss - (1,421,028) (1,421,028)
----------- ------------ -----------
Balance, February 29, 1996 4,272,162 (4,408,495) 851,331
Exercise of stock options - - 2,586
Accretion of redeemable
preferred stock (56,364) - -
Net loss - (938,180) (938,180)
----------- ------------ -----------
Balance, February 28, 1997 $ 4,215,798 $ (5,346,675) $ (84,263)
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
CARLETON CORPORATION
Statements of Cash Flows
for the Years Ended February 28, 1997 and February 29, 1996
1997 1996
Cash Flows from Operating Activities:
Net loss $ (938,180) $(1,421,028)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 157,732 182,375
Changes in current assets and liabilities
Accounts receivable 112,217 44,697
Prepaid expenses and other current assets (80,681) 3,355
Accounts payable 44,488 (192,271)
Accrued expenses 206,468 -
Deferred revenue 172,920 224,342
----------- -----------
Net cash used in operating activities (325,036) (1,158,530)
----------- -----------
Cash Flows from Investing Activities:
Purchases of property and equipment (168,728) (191,436)
Decrease (increase) in note receivable
from officer/stockholder 16,999 (21,875)
Increase in capitalized software (4,989) -
Decrease (increase) in other assets 22,566 (23,131)
----------- -----------
Net cash used in investing activities (134,152) (236,442)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from sale of stock - 2,500,000
Proceeds from exercise of stock options 2,586 -
Principal payments on notes payable (15,003) (85,409)
----------- -----------
Net cash (used in) provided by
financing activities (12,417) 2,414,591
----------- -----------
Net (Decrease) Increase in Cash and
Cash Equivalents (471,605) 1,019,619
Cash and Cash Equivalents, beginning of year 1,139,390 119,771
----------- -----------
Cash and Cash Equivalents, end of year $ 667,785 $ 1,139,390
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 24,679 $ 30,772
=========== ===========
Supplemental Disclosure of Noncash Investing
and Financing Activities:
Conversion of debt to equity $ - $ 751,542
=========== ===========
Accretion of dividends on Series A and B
redeemable convertible preferred stock $ 56,364 $ 52,729
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
CARLETON CORPORATION
Notes to Financial Statements
February 28, 1997
(1) Operations and Significant Accounting Policies
Carleton Corporation (the Company) is engaged in the development and
marketing of advanced data warehouse management software primarily in the
United States to both end users and distributors.
The Company is subject to a number of risks associated with emerging,
technology-oriented companies, including continued market acceptance of
the Company's products, competition from substitute products and larger
companies, and the continued ability to finance the Company's projected
future growth.
The accompanying financial statements reflect the application of certain
significant accounting policies as described below:
(a) Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(b) Revenue Recognition
The Company recognizes revenue from software license arrangements
upon the acceptance of its product by the customer. The Company has
no other significant vendor obligations or collectibility risk
associated with its product sales. The Company recognizes
maintenance revenue over the period of the maintenance arrangement
and royalty revenue as the royalties are earned. The Company
recognizes consulting and other revenue as the services are
performed.
(c) Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less at the date of purchase to be cash
equivalents.
F-6
<PAGE>
CARLETON CORPORATION
Notes to Financial Statements
February 28, 1997
(Continued)
(d) Depreciation
The Company provides for depreciation by charges to operations in
amounts estimated to allocate the cost of the assets ratably over
their estimated useful lives, as follows:
Estimated
Asset Classification Useful Lives
Computer equipment 5 years
Furniture, fixtures and office
equipment 5-7 years
(e) Capitalized Software Development Costs
In accordance with Statement of Financial Accounting Standards
(SFAS) No. 86, Accounting for the Costs of Computer Software To Be
Sold, Leased or Otherwise Marketed, certain software development
costs are capitalized in the accompanying balance sheet.
Capitalization of software development costs begins upon the
determination of technological feasibility and continues until the
first product shipment. Amortization of capitalized software
development costs is computed using the straight-line method over
the remaining estimated economic life of the product, not to exceed
five years. Total amortization expense charged to operations was
approximately $85,000 and $145,000 in fiscal 1997 and 1996,
respectively.
(f) Financial Instruments
SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure about fair value of financial instruments.
Financial instruments consist of cash and cash equivalents, note
receivable and notes payable. The estimated fair value of these
financial instruments approximates their carrying value.
(g) Reclassifications
Certain amounts in prior period financial statements have been
reclassified to conform to the current periods presentation.
(h) Concentration of Credit Risk
SFAS No. 105, Disclosure of Information About Financial Instruments
with Off-Balance-Sheet Risk and Financial Instruments with
Concentrations of Credit Risk, requires disclosure of any
significant off-balance-sheet and credit risk concentrations.
Financial instruments, which potentially subject the Company to
concentrations of credit risk, are principally cash and cash
equivalents and accounts receivable. Concentration of credit risk,
with respect to cash and cash equivalents, is limited because the
Company places its investments in highly rated institutions.
Concentration of credit risk with respect to accounts receivable is
limited to certain customers (end users and distributors) to whom
the Company makes substantial sales. To reduce risk, the
F-7
<PAGE>
CARLETON CORPORATION
Notes to Financial Statements
February 28, 1997
(Continued)
Company routinely assesses the financial strength of its customers
and, as a consequence, believes that its accounts receivable credit
risk exposure is limited. The Company maintains an allowance for
potential credit losses but historically has not experienced any
significant losses related to individual customers or groups of
customers in any particular industry or geographic area.
As of February 28, 1997 and February 29, 1996, approximately 34% and
46% of the Company's gross accounts receivable is due from one
customer and two customers, respectively.
(i) Impairment of Long-Lived Assets
In March 1995, the Financial Accounting Standards Board (FASB)
issued SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets To Be Disposed Of, which is
effective for fiscal years beginning after December 15, 1995. The
Company has adopted SFAS No. 121, effective March 1, 1996. The
adoption of this standard did not have a material effect on the
Company's financial position or results of operations. The Company
evaluated its long-lived assets and determined that no material
adjustment was required.
(2) Note Payable to a Bank and Line of Credit
The Company has a $325,000 demand note payable with a bank which bears
interest at the bank's prime rate (8.25% at February 28, 1997). The note
payable is secured by substantially all of the Company's assets and
collateralized by a U.S. treasury bill held by a stockholder of the
Company. This note payable matures on May 31, 1997. On May 29, 1997, the
bank extended the maturity date on the note to March 31, 1998.
In December 1996, the Company entered into a $500,000 line of credit with
a bank. The line bears interest at the prime rate (8.25% at February 28,
1997) plus 1-1/2% and is secured by substantially all of the Company's
assets. The agreement provides for borrowings based upon 80% of eligible
accounts receivable, as defined. There were no borrowings outstanding on
this line at February 28, 1997. On May 29, 1997, the bank agreed to
increase the available borrowings for this line to $1,000,000, extend its
maturity through March 31, 1998 and provide a $200,000 equipment line of
credit bearing interest at prime plus 2%, repayable over 36 months.
(3) Income Taxes
The Company provides for income taxes in accordance with the provisions
of SFAS No. 109, Accounting for Income Taxes. Under SFAS No. 109,
deferred tax assets or liabilities are computed based on the differences
between the financial statement and income tax bases of assets and
liabilities using the enacted tax rate.
F-8
<PAGE>
CARLETON CORPORATION
Notes to Financial Statements
February 28, 1997
(Continued)
The approximate tax effect of each type of temporary difference and
carryforward that gives rise to the Company's deferred tax asset as of
February 28, 1997 and February 29, 1996 is as follows:
1997 1996
Net operating loss carryforward $ 1,664,000 $ 1,400,000
Other temporary differences 190,000 147,000
Valuation allowance (1,854,000) (1,547,000)
----------- -----------
$ - $ -
=========== ===========
The Company has provided a valuation allowance equal to its net deferred
tax assets due to the uncertainty surrounding the timing of realizing the
benefits of its favorable tax attributes in future tax returns.
The net operating loss carryforwards of approximately $4,133,000 expire
through fiscal 2012. The United States Tax Reform Act of 1986 contains
provisions which may limit the net operating loss and credit carryforwards
available to be used in any given year in the event of significant changes
in ownership, as defined.
(4) Commitments
The Company leases its facility and certain equipment under operating lease
agreements expiring through September 2001. Approximate future minimum
rental payments due under these agreements are approximately as follows:
Fiscal Year Amount
1998 $200,000
1999 178,000
2000 167,000
2001 162,000
2002 95,000
--------
$802,000
========
Total rental expense for the years ended February 28, 1997 and February 29,
1996 was approximately $167,000 and $137,000, respectively.
F-9
<PAGE>
CARLETON CORPORATION
Notes to Financial Statements
February 28, 1997
(Continued)
(5) Stockholders' Equity
(a) Convertible Preferred Stock
On March 24, 1995, the Company entered into agreements with several
individuals to convert debt obligations totaling $751,542 into
300,000 shares of Series A convertible preferred stock and 451,542
shares of Series B convertible preferred stock. In May 1995, the
Company entered into an investment agreement with a significant
customer for the sale of 52,941 shares of Series A preferred stock
and 79,684 shares of Series B preferred stock (see Note 5(b) for
additional discussion). The rights and preferences of Series A and
Series B convertible preferred stock are as follows:
Conversion
The Series A and B preferred stock is convertible, at any time at
the option of the holder, into shares of the Company's $.01 par
value common stock at a conversion rate which initially shall be
approximately 5.5627 (Series A Applicable Conversion Rate) for
Series A preferred stock and 1.8357 (Series B Applicable
Conversion Rate) for Series B preferred stock. These rates are
subject to change upon certain changes in equity, as defined. The
Series A and B preferred stock automatically converts to common
stock upon the closing of an underwritten public offering
providing the Company with net proceeds of at least $5 million and
an initial public offering price of at least $.50 per share.
Dividends
The holders of the Series A and B preferred stock are entitled to
the same dividends per share of preferred stock as would be
declared payable on the shares of common stock into which each
share of preferred stock is convertible.
Redemption
Commencing June 30, 1998, any holder of Series A or B preferred
stock may require redemption of such shares at $1.25 per share.
Liquidation
Upon liquidation of the Company, the Series A preferred
stockholders are entitled, before any distribution is made to the
Series B preferred stockholders and common stockholders, to be
paid $1.25 per share. After payments to the Series A preferred
stockholders have been made in full, the Series B preferred
stockholders are entitled, before any distribution is made to the
common stockholders, to be paid $1.25 per share. Upon payment in
full to the Series B preferred stockholders, the common
stockholders are entitled to be paid an amount per share equal to
$1.25 divided by the then Series A Applicable Conversion Rate.
F-10
<PAGE>
CARLETON CORPORATION
Notes to Financial Statements
February 28, 1997
(Continued)
After all such payments have been made, the Series A preferred
stockholders and common stockholders are entitled to be paid an
amount equal to the difference between $1.25 divided by the then
Series B Applicable Conversion Rate and the payments previously
made to the common stockholders.
Voting
Convertible preferred stockholders are entitled to the number of
votes equal to the number of shares of common stock into which
each share of preferred stock is then convertible.
(b) Class B Common Stock
On May 5, 1995, the Company entered into an investment agreement
with a significant customer, whereby the customer paid $2.5 million
for 15% of the authorized and issued voting shares of all classes of
the Company's outstanding stock on that date. The Company issued
52,941, 79,684 and 484,818 shares of $.01 par value Series A
preferred stock, Series B preferred stock and Class B common stock,
respectively, to the customer. Holders of Class B common stock have
the same rights as the holders of the other common stock of the
Company except that they are entitled to vote separately as a class
to elect one director of the Company. In addition, the Class B
common stock is convertible into shares of ordinary common stock on
a share-for-share basis at the option of the holder and such
conversion shall be mandatory when such shares are no longer held by
the customer.
(6) Stock Option Plan
During fiscal 1994, the Company's stockholders voted to approve the
Carleton Corp 1994 Stock Option Plan (the 1994 Plan). The 1994 Plan
became effective on the date of its adoption by the Board of Directors
and remains in effect until the tenth anniversary of the date of its
adoption. Under the 1994 Plan, the Company may grant options to eligible
participants, including employees, consultants, directors and officers as
of the date of grant. The aggregate number of options that may be issued
pursuant to the 1994 Plan cannot exceed 1,940,645. Options vest generally
over three years and expire ten years from the date of grant.
F-11
<PAGE>
CARLETON CORPORATION
Notes to Financial Statements
February 28, 1997
(Continued)
The following schedule summarizes the activity under the Company's stock
option plan for the two years ended February 28, 1997.
<TABLE>
<CAPTION>
Weighted
Number of Exercise Price Average
Shares per Share Option Price
<S> <C> <C> <C>
Outstanding, February 28, 1995 1,471,211 $ .01 $ .01
Granted - - -
Exercised - - -
Canceled - - -
--------- ----------------- --------
Outstanding, February 29, 1996 1,471,211 .01 .01
Granted 171,000 1.00 1.00
Exercised 258,561 .01 .01
Canceled (11,500) 1.00 1.00
--------- ----------------- --------
Outstanding, February 28, 1997 1,372,150 $ .01 - $ 1.00 $ .13
========= ================= ========
Exercisable, February 28, 1997 1,265,817 $ .01 - $ 1.00 $ .05
========= ================= ========
</TABLE>
During 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation, which defines a fair value based method of accounting for an
employee stock option or similar equity instrument and encourages all
entities to adopt that method of accounting for all of their employee stock
compensation plans. However, it also allows an entity to continue to
measure compensation cost for those plans using the method of accounting
prescribed in Accounting Principles Board (APB) Opinion No. 25. Entities
electing to remain with the accounting required by APB Opinion No. 25 must
make pro forma disclosures of net income (loss) and, if presented, earnings
per share, as if the fair value based method of accounting defined in the
statement had been applied.
F-12
<PAGE>
CARLETON CORPORATION
Notes to Financial Statements
February 28, 1997
(Continued)
The Company has elected to continue to account for its stock-based
compensation plans under APB No. 25. However, the Company has computed,
for pro forma disclosure purposes only, the value of all options granted
during fiscal 1997 using the Black-Scholes option-pricing model as
prescribed by SFAS No. 123, using the following weighted average
assumptions for grants in fiscal 1997 (there were no option grants in
1996):
1997
Risk-free interest rate 6.25%
Expected dividend yield -
Expected life 7 years
Expected volatility -
Weighted average value of grants .35
Weighted average remaining contractual
life of options outstanding 9 years
Weighted average exercise price of
1,265,817 and 1,471,211 options
exercisable at February 28, 1997 and
February 29, 1996, respectively .05
Had compensation cost for the Company's stock option plan been determined
consistent with SFAS No. 123, pro forma net loss would have been as
follows:
1997
Net loss as reported $ (938,180)
Pro forma net loss (957,020)
(7) 401(k) Plan
In fiscal 1996, the Company established the Carleton Corporation 401(k)
Plan (the 401(k) Plan) for its employees. The 401(k) Plan allows
employees to make pretax contributions up to the allowable amount set by
the Internal Revenue Code. Under the 401(k) Plan, the Company may, but is
not obligated to, provide profit sharing to employees. No profit sharing
contribution were made in 1997 or 1996.
(8) Significant Customers
In fiscal 1997, the Company had two significant customers that accounted
for approximately 28% of its total revenue and five customers that
accounted for approximately 71% of total revenue in fiscal 1996.
(9) Litigation
In September 1996, a civil complaint was filed by an individual against
the Company alleging that the Company has misappropriately used an
individual's name in its advertising. The complaint is
F-13
<PAGE>
CARLETON CORPORATION
Notes to Financial Statements
February 28, 1997
(Continued)
scheduled for trial in January 1998. The lawsuit is in the early stages
of discovery and no adjustment has been made to the financial statements
due to the uncertainty surrounding the outcome of this complaint.
(10) Subsequent Event
On May 29, 1997, the Company issued a convertible promissory note for gross
proceeds of $500,000, repayable May 29, 1998. The note is non-interest-
bearing if paid in full or converted to equity securities (as defined)
prior to the maturity date. Conversion is automatic upon an equity
financing of at least $500,000 at the then current stock value. If all
amounts payable under this note are not repaid on or before the maturity
date, interest shall accrue on the unpaid balance of this note at a rate of
8% per annum.
In connection with the issuance of the convertible promissory note, the
Company issued warrants to purchase shares of the Company's common stock
representing 0.88% of the fully-diluted common stock of the Company for an
aggregate exercise price of $150,000. The warrants are currently
exercisable and expire on May 29, 2002.
(11) Sale of the Company
On October 31, 1997, the Company was acquired by Apertus Technologies
Incorporated (Apertus) for approximately 2.8 million shares of Apertus
stock valued at approximately $5.6 million and accreting notes, as defined,
with an aggregate initial principal amount of $2.0 million. As a result of
the acquisition, the Company was merged with and into Apertus and the
separate existence of the Company ceased.
F-14
<PAGE>
CARLETON CORPORATION
BALANCE SHEET - AUGUST 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
August 31, 1997
----------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 172,442
Accounts receivable 1,296,317
Prepaid expenses and other current assets 111,395
-----------
Total Current Assets 1,580,154
PROPERTY AND EQUIPMENT
Property and equipment 543,306
Accumulated depreciation (201,808)
-----------
Net Property and Equipment 341,498
Capitalized Software (net) 80,304
-----------
$ 2,001,956
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Note payable to bank $ 775,000
Accounts payable 335,924
Accrued expenses 217,432
Deferred revenue 608,000
Notes payable to Pioneer Capital 1,400,000
-----------
Total Current Liabilities 3,336,356
STOCKHOLDERS' EQUITY (DEFICIT)
Series A convertible preferred stock 409,724
Series B convertible preferred stock 616,692
Common stock 15,350
Class B common stock 4,848
Additional paid-in capital 4,215,798
Accumulated deficit (6,596,812)
-----------
Total Stockholders' equity (deficit) (1,334,400)
-----------
$ 2,001,956
===========
</TABLE>
F-15
<PAGE>
CARLETON CORPORATION
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED
AUGUST 31, 1997 AND 1996
(Unaudited)
Six Months Ended August 31,
---------------------------
1997 1996
---- ----
REVENUE:
License $ 627,482 $ 680,000
Maintenance 471,204 333,453
Consulting and other 646,195 532,852
Royalty 121,000
---------------------------
Total Revenue 1,865,881 1,546,306
COST OF REVENUE 605,965 486,758
---------------------------
Gross profit 1,259,916 1,059,549
OPERATING EXPENSES:
Research and development 788,952 791,913
Sales and marketing 1,142,906 696,282
General and administrative 579,318 313,275
---------------------------
Total operating expenses 2,511,176 1,801,470
---------------------------
Loss from operations (1,251,260) (741,921)
---------------------------
INTEREST AND OTHER INCOME, NET 1,123 14,436
---------------------------
Net loss $(1,250,137) $ (727,485)
===========================
F-16
<PAGE>
CARLETON CORPORATION
STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED
AUGUST 31, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended August 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(1,250,137) $(727,485)
Adjustment to reconcile net loss to
loss to net cash used in
operating activities:
Depreciation and amortization 89,362 73,796
Accounts receivable (1,058,263) 44,362
Prepaid expenses and other
current assets (10,119) (41,282)
Accounts payable 116,308 41,414
Accrued expenses (184,875) (189,219)
Deferred revenue (23,848) 164,085
-----------------------
Net cash used in operating activities (2,273,876) (634,329)
INVESTING ACTIVITIES
Purchases of property and equipment (62,844) (66,935)
Increase in capitalized software 13,505 -
Decrease in other assets 4,882 27,447
-----------------------
Net cash used in investing activities (71,467) (39,488)
FINANCING ACTIVITIES
Payment of note - (15,003)
Proceeds from bank debt 450,000 -
Proceeds from Pioneer debt 1,400,000 -
-----------------------
Net cash provided by (used in)
financing activities 1,850,000 (15,003)
-----------------------
Net decrease in cash and
cash equivalent (495,343) (688,820)
Beginning cash and cash equivalent 667,785 1,139,390
-----------------------
Ending cash and cash equivalent $ 172,442 $ 450,570
=======================
</TABLE>
F-17
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibits Page No.
- --------- --------
2.1 Agreement and Plan of Merger between the Filed
Company and Carleton Corporation, dated Electronically
as of October 24, 1997, including form
of Note as Exhibit B thereto.
2.2 Asset Purchase Agreement between CNT Filed
Acquisition I Corporation, Computer Electronically
Network Technology Corporation, and the
Company and certain of its subsidiaries,
dated as of October 24, 1997.
23.1 Consent of Independent Public Accountants Filed
Electronically
<PAGE>
Exhibit 2.1
-----------
AGREEMENT AND PLAN OF MERGER
BETWEEN
APERTUS TECHNOLOGIES INCORPORATED
AND
CARLETON CORPORATION
October 24, 1997
<PAGE>
TABLE OF CONTENTS
RECITALS 1
ARTICLE I -- THE MERGER....................................... 2
1.01 The Merger......................................... 2
1.02 Effect of the Merger............................... 3
1.03 Effective Time..................................... 3
1.04 Directors and Officers............................. 3
1.05 Articles of Incorporation; Bylaws.................. 3
1.06 The Closing........................................ 3
1.07 Tax Consequences................................... 4
1.08 Taking of Necessary Action; Further Action......... 4
ARTICLE II -- CONVERSION OF SECURITIES; MERGER CONSIDERATION.. 4
2.01 Conversion of Securities........................... 4
2.02 No Fractional Shares............................... 6
2.03 Dissenting Shares.................................. 6
2.04 Notes.............................................. 7
2.05 Procedure for Exchange of Stock.................... 8
2.06 Company Expenses................................... 10
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY.. 10
3.01 Incorporation and Corporate Power.................. 11
3.02 Execution, Delivery; Valid and Binding Agreement... 11
3.03 Approval of this Agreement......................... 11
3.04 No Breach.......................................... 11
3.05 Governmental Authorities; Consents................. 12
3.06 Capital Stock...................................... 12
3.07 Subsidiaries....................................... 13
3.08 Financial Statements............................... 13
3.09 Absence of Undisclosed Liabilities................. 14
3.10 No Material Adverse Changes........................ 14
3.11 Absence of Certain Developments.................... 14
3.12 Title to Properties................................ 16
3.13 Accounts Receivable................................ 16
3.14 Tax Matters........................................ 16
3.15 Contracts and Commitments.......................... 19
3.16 Intellectual Property Rights....................... 20
3.17 Litigation......................................... 24
3.18 Warranties......................................... 24
3.19 Employees.......................................... 24
3.20 Employee Benefit Plans............................. 25
3.21 Insurance.......................................... 26
3.22 Affiliate Transactions............................. 26
3.23 Customers and Suppliers............................ 27
3.24 Officers and Directors; Bank Accounts.............. 27
<PAGE>
3.25 Compliance with Laws; Permits........................ 27
3.26 Environmental Matters................................ 28
3.27 Brokerage............................................ 29
3.28 Disclosure........................................... 30
3.29 Information Statement................................ 30
3.30 Definition of Company's Knowledge.................... 30
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OFAPERTUS........ 30
4.01 Incorporation and Corporate Power.................... 30
4.02 Execution, Delivery; Valid and Binding Agreement..... 30
4.03 No Breach............................................ 31
4.04 Apertus Common Stock; Notes.......................... 31
4.05 Governmental Authorities; Consents................... 31
4.06 SEC Documents........................................ 31
4.07 Brokerage............................................ 32
4.08 Ownership of the Company's Stock..................... 32
4.09 Approval of this Agreement........................... 32
4.10 Continuity of Business Enterprise.................... 32
ARTICLE V -- COVENANTS OF THE COMPANY......................... 32
5.01 Conduct of the Business.............................. 32
5.02 Access to Books and Records.......................... 34
5.03 Meeting of Stockholders.............................. 34
5.04 Demands.............................................. 35
5.05 Conditions........................................... 35
5.06 No Shop.............................................. 35
5.07 Information Statement................................ 35
5.08 Confidentiality...................................... 35
ARTICLE VI -- COVENANTS OF APERTUS............................ 35
6.01 Information Statement................................. 35
6.02 Conditions............................................ 36
6.03 Payment of Loans...................................... 36
6.04 Apertus Board of Directors............................ 36
6.05 Blue Sky Permits...................................... 36
6.06 Form S-8.............................................. 36
6.07 Confidentiality....................................... 36
6.08 Continuity of Business Enterprises.................... 36
6.09 Carleton Line of Credit............................... 36
ARTICLE VII -- CONDITIONS TO CLOSING.......................... 37
7.01 Conditions to Apertus's Obligations................... 37
7.02 Conditions to the Company's Obligations............... 40
ARTICLE VIII -- TERMINATION................................... 41
8.01 Termination........................................... 41
8.02 Effect of Termination................................. 42
-ii-
<PAGE>
ARTICLE IX -- ADDITIONAL AGREEMENTS........................... 42
9.01 Registration Rights................................... 42
9.02 Employee Benefits..................................... 44
9.03 Severance Benefits and Costs.......................... 44
9.04 Indemnification....................................... 44
9.05 Reorganization........................................ 44
ARTICLE X -- SURVIVAL AND OFFSET.............................. 45
10.01 Survival of Representations and Warranties............ 45
10.02 Right of Offset....................................... 45
10.03 Stockholders' Representatives......................... 49
ARTICLE XI -- MISCELLANEOUS................................... 50
11.01 Press Releases and Announcements...................... 50
11.02 Expenses.............................................. 50
11.03 Amendment and Waiver.................................. 51
11.04 Notices............................................... 51
11.05 Assignment............................................ 52
11.06 Severability.......................................... 52
11.07 Complete Agreement.................................... 52
11.08 Counterparts.......................................... 52
11.09 Governing Law......................................... 52
11.10 Jurisdiction; Service of Process...................... 52
SIGNATURES.................................................... 53
EXHIBIT A-1 -- Articles of Merger (Minnesota)
EXHIBIT A-2 -- Articles of Merger (Massachusetts)
EXHIBIT B -- Form of Note
EXHIBIT C -- Opinion of Company Counsel
EXHIBIT D -- Officers' Certificate of the Company
EXHIBIT E -- Opinion of Apertus Counsel
EXHIBIT F -- Officer's Certificate of Apertus
EXHIBIT G -- Exchange Agent Agreement
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") dated October 24,
1997, is entered into between Apertus Technologies Incorporated, a Minnesota
corporation ("Apertus"), and Carleton Corporation, a Massachusetts corporation
(the "Company").
WHEREAS, the respective Boards of Directors of Apertus and the Company
have determined that it is advisable and in the best interests of the respective
corporations and their shareholders that they enter into this Agreement,
pursuant to which the Company would be merged with and into Apertus in
accordance with the Minnesota Business Corporation Act (the "Minnesota Act"),
the Massachusetts Business Corporation Law (the "Massachusetts Law") and the
terms of this Agreement and the separate existence of the Company would cease
(the "Merger");
WHEREAS, the Agreement has been duly and validly approved by the
respective Boards of Directors of Apertus and the Company;
WHEREAS, the Board of Directors of the Company has recommended that
the stockholders of the Company vote to approve the Agreement;
WHEREAS, the parties intend that the aggregate consideration to be
paid in respect of the Merger shall consist of cash, shares of common stock,
$.05 par value, of Apertus ("Apertus Common Stock") and accreting notes (as
hereinafter described, the "Notes") issued by Apertus ("Aggregate Merger
Consideration");
WHEREAS, the Company has outstanding, as of the date of this
Agreement, 2,434,466 shares of common stock, $.01 par value ("Company Common
Stock"), 484,818 shares of Class B common stock, $.01 par value ("Class B Common
Stock"), 352,941 shares of convertible preferred stock, Series A, $.01 par value
("Series A Preferred Stock"), 531,226 shares of convertible preferred stock,
Series B, $.01 par value ("Series B Preferred Stock"), options exercisable for
an aggregate of 928,173 shares of Common Stock, and warrants held by Pioneer
Capital Corporation exercisable for 358,505 shares of Common Stock (the "Pioneer
Warrants");
WHEREAS, each share of the Company's issued and outstanding capital
stock ("Capital Stock") would be converted into a combination of a Note and
Apertus Common Stock as follows:
Note (Initial Apertus
Class/Series Principal Amount) Common Stock
------------------- ----------------- ---------------
Common $0.328326 0.3769744 shs.
Class B Common $0.328326 0.3769744 shs.
Series A Preferred $1.82637 2.0970 shs.
Series B Preferred $0.6027 0.6920 shs.
<PAGE>
(the Notes and Apertus Common Stock to be paid in respect of each share of
Capital Stock of each class and series being referred to as the "Merger
Consideration" as may be appropriate in the circumstances), except that
stockholders holding 20,000 shares or less of Company Common Stock ("Minority
Stockholders") would receive $1.06 per share in cash in lieu of the Merger
Consideration, determined by the Board of Directors of the Company to be not
less than the fair market value of the Merger Consideration to be received;
WHEREAS, any option issued pursuant to the Company's stock option
plans and outstanding immediately prior to the effectiveness of the Merger (an
"Outstanding Stock Option") would be converted into and become an option to
purchase shares of Apertus Common Stock on terms set forth herein;
WHEREAS, the Pioneer Warrants would be converted into warrants to
purchase a combination of Apertus Common Stock and a Note on the same basis as
the Merger Consideration for Company Common Stock;
WHEREAS, Apertus and Paul Fluckiger, the President and Chief Executive
Officer of Carleton, are entering into an employment agreement concurrently
herewith, which agreement will be effective upon the effectiveness of the
Merger;
WHEREAS, the Company has received an investment letter with
appropriate voting lock-up provisions from each holder of Class B Common Stock,
Series A Preferred Stock, Series B Preferred Stock and each other holder of more
than 20,000 shares of Company Common Stock; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth in this Agreement, the parties hereto hereby
agree as follows:
ARTICLE I
THE MERGER
----------
1.01 The Merger. At the Effective Time (as defined in
Section 1.03 hereof) in accordance with this Agreement, the Minnesota Act and
the Massachusetts Law, the Company shall be merged with and into Apertus, the
separate existence of the Company shall cease, and Apertus shall continue as the
surviving corporation under the corporate name it possesses immediately prior to
the Effective Time.
-2-
<PAGE>
1.02 Effect of the Merger. The effect of the Merger shall
be as set forth in Section 302A.641 of the Minnesota Act and Section 80 of the
Massachusetts Law and Apertus shall succeed to and possess all the properties,
rights, privileges, immunities, powers, franchises and purposes, and be subject
to all the duties, liabilities, debts, obligations, restrictions and
disabilities, of the Company, all without further act or deed.
1.03 Effective Time. The parties hereto will cause Articles
of Merger in the forms attached hereto as Exhibits A-1 and A-2 (the "Articles of
Merger") to be executed, delivered and filed with the respective Secretaries of
State of the State of Minnesota and the Commonwealth of Massachusetts in
accordance with the Minnesota Act and the Massachusetts Law, respectively, and
will make all other filings or recordings required by the Minnesota Act and the
Massachusetts Law in connection with the Merger and the transactions
contemplated by this Agreement. The Merger shall become effective at the time
and date of the filing of the respective Articles of Merger with the Secretary
of State of the State of Minnesota and the Secretary of State of the
Commonwealth of Massachusetts. The time at which the Merger shall become
effective is referred to herein as the "Effective Time." The day during which
the Effective Time shall occur is referred to herein as the "Effective Date."
1.04 Directors and Officers. From and after the Effective
Time, the directors of Apertus shall be the persons who were the directors of
Apertus immediately prior to the Effective Time; provided, however, that as of
the Effective Date, Apertus shall increase the size of its Board of Directors by
two members and appoint Paul Fluckiger and another director to be selected by
Mr. Fluckiger to fill such vacancies. From and after the Effective Time, the
officers of Apertus shall be (i) the persons who were the officers of Apertus
immediately prior to the Effective Time and (ii) Paul Fluckiger, who will become
the President and Chief Operating Officer of Apertus at the Effective Time.
Said directors and officers of Apertus shall hold office for the term specified
in, and subject to the provisions contained in, the Articles of Incorporation
and Bylaws of Apertus and applicable law.
1.05 Articles of Incorporation; Bylaws. From and after the
Effective Time and until further amended in accordance with applicable law, the
Articles of Incorporation of Apertus as in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of Apertus. From and
after the Effective Time and until further amended in accordance with law, the
Bylaws of Apertus as in effect immediately prior to the Effective Time shall be
the Bylaws of Apertus.
1.06 The Closing.
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") will take place at the offices of Dorsey & Whitney LLP, 220
South Sixth Street, Minneapolis, Minnesota 55402, within three business days
after the meeting of stockholders referred to in Section 5.03 (the
"Stockholders' Meeting") and will be effective as of the Effective Time.
-3-
<PAGE>
(b) The parties shall deliver to each other the documents required to
be delivered pursuant to Article VII hereof at the Closing.
1.07 Tax Consequences. The parties hereto intend that the Merger
shall constitute a reorganization within the meaning of Section 368 of the
Code. Apertus shall not take any position in any tax return or other filing
that is inconsistent with this intent. Notwithstanding the foregoing, neither
the Company nor Apertus makes any representation or warranty whether the
transactions contemplated by this Agreement qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Code. The Company
acknowledges that it and its stockholders have had the opportunity to obtain
their own advice regarding the tax consequences of the Merger, and neither the
Company nor its stockholders are relying on Apertus concerning such matters.
1.08 Taking of Necessary Action; Further Action. Each of Apertus and
the Company shall use its best efforts to take all such action as may be
necessary or appropriate to effectuate the Merger under the Minnesota Act and
the Massachusetts Law. If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this Agreement
and to vest Apertus with full right, title and possession to all properties,
rights, privileges, immunities, powers and franchises of the Company, the
officers of Apertus are fully authorized in the name of the Company or
otherwise to take, and shall take, all such lawful and necessary action.
ARTICLE II
CONVERSION OF SECURITIES; MERGER CONSIDERATION
----------------------------------------------
2.01 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Apertus, the Company or the
holder of any of the following securities:
(a) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than (i) shares of Company
Common Stock owned by Apertus, the Company or any direct or indirect
subsidiary of Apertus or the Company and (ii) any Dissenting Shares (as
defined in Section 2.03 hereof)) shall be canceled and extinguished and
be converted into and become a right to receive a combination of
0.3769744 shares of Apertus Common Stock and $0.328326 payable pursuant
to an accreting note issued by Apertus (with terms described in Section
2.04 hereof, a "Note"), without interest (except as specifically set
forth in the Note); provided, however, that any Minority Stockholder
shall receive in lieu of a Note and Apertus Common Stock cash based on a
value of $1.06 per share of Company Common Stock;
(b) each share of Class B Common Stock issued and outstanding
immediately prior to the Effective Time (other than (i) shares of Class B
-4-
<PAGE>
Common Stock owned by Apertus or the Company or any direct or indirect
subsidiary of Apertus or the Company and (ii) any Dissenting Shares)
shall be canceled and extinguished and be converted into and become a
right to receive a combination of 0.3769744 shares of Apertus Common
Stock and $0.328326 payable pursuant to a Note, without interest (except
as specifically set forth in the Note);
(c) each share of Series A Preferred Stock issued and outstanding
immediately prior to the Effective Time (other than (i) shares of Series
A Preferred Stock owned by Apertus or the Company or any direct or
indirect subsidiary of Apertus or the Company and (ii) any Dissenting
Shares) shall be canceled and extinguished and be converted into and
become a right to receive a combination of 2.097 shares of Apertus Common
Stock and $1.82637 payable pursuant to a Note, without interest (except
as specifically set forth in the Note);
(d) each share of Series B Preferred Stock issued and outstanding
immediately prior to the Effective Time (other than (i) shares of Series
B Preferred Stock owned by Apertus or the Company or any direct or
indirect subsidiary of Apertus or the Company and (ii) any Dissenting
Shares) shall be canceled and extinguished and be converted into and
become a right to receive a combination of 0.692 shares of Apertus Common
Stock and $0.6027 payable pursuant to a Note, without interest (except as
specifically set forth in the Note);
(e) each share of Capital Stock issued and outstanding immediately
prior to the Effective Time and owned by Apertus or the Company or any
direct or indirect subsidiary of Apertus or the Company shall be canceled
and extinguished, and no payment shall be made with respect thereto;
(f) any Outstanding Stock Option shall fully vest immediately prior
to the Effective Time and be, in connection with the Merger, assumed by
Apertus; each Outstanding Stock Option so assumed by Apertus shall
continue to have and be subject to the same terms and conditions set
forth in the respective Company stock option plan and/or as provided in
the respective option agreements governing such Outstanding Stock Option
immediately prior to the Effective Time, except that (i) any shares of
Apertus Common Stock received upon exercise of such Outstanding Stock
Option may not be sold until at least six months following the Effective
Time, (ii) such Outstanding Stock Option shall be exercisable for that
number of whole shares of Apertus Common Stock equal to the number of
shares of Company Common Stock that were issuable upon exercise of such
Outstanding Stock Option immediately prior to the Effective Time
multiplied by 0.54263 rounded down to the nearest whole number of shares
of Apertus Common Stock, and (iii) the per share exercise price for the
shares of Apertus Common Stock issuable upon exercise of such assumed
Outstanding Stock Option shall be equal to the exercise price per share
of Company Common Stock at which
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such Outstanding Stock Option was exercisable immediately prior to the
Effective Time divided by 0.54263, rounded up to the nearest whole cent;
provided, however, that in the case of any option to which Section 421 of
the Code applies by reason of its qualification under Section 422 of the
Code ("incentive stock option"), the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with
Section 424(a) of the Code; and
(g) the Pioneer Warrants shall be, in connection with the Merger,
assumed by Apertus and shall continue to have and be subject to the same
terms and conditions set forth in the Pioneer Warrants immediately prior
to the Effective Time, except that (i) such Pioneer Warrants shall be
converted into and become warrants to purchase in lieu of each share of
Company Common Stock a combination of 0.3769744 shares of Apertus Common
Stock (where the total number of shares underlying each warrant is
rounded down to the nearest whole number of shares of Apertus Common
Stock) and $0.328326 principal amount of Notes, which numbers reflect the
special doubling adjustment included in Section 4.4 of that certain
Pioneer Warrant dated May 29, 1997 (the "Doubling Adjustment"), and (ii)
the Doubling Adjustment shall be eliminated.
2.02 No Fractional Shares. Fractional shares of Apertus
Common Stock shall not be issued upon the surrender for exchange of certificates
representing shares of Capital Stock. Instead, any fractional portion of a
share of Apertus Common Stock shall be paid out in cash at a value of $1.95 per
share.
2.03 Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary, if
Section 86 of the Massachusetts Law shall be applicable to the Merger, shares of
Capital Stock that are issued and outstanding immediately prior to the Effective
Time and which are held by stockholders who have not voted such shares in favor
of the Merger, who have delivered, prior to any vote on the Merger, a written
notice objecting to the proposed Merger and stating an intention to demand
payment for the fair value of such shares if the Merger is consummated in the
manner provided in Section 86 of the Massachusetts Law and who, as of the
Effective Time, shall not have effectively withdrawn or lost such appraisal
rights ("Dissenting Shares") shall not be converted into or represent a right to
receive Notes and Apertus Common Stock pursuant to Section 2.01 hereof, but the
holders thereof shall be entitled only to such rights as are granted by Sections
86-97 of the Massachusetts Law. Each holder of Dissenting Shares who becomes
entitled to payment for such shares pursuant to Sections 86-97 of the
Massachusetts Law shall receive payment therefor from Apertus in accordance with
the Massachusetts Law; provided, however, that if any such holder of Dissenting
Shares shall have effectively withdrawn such holder's demand for appraisal of
such shares or lost such holder's right to appraisal and payment of such shares
under Section 86 of the Massachusetts Law, such holder or
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holders (as the case may be) shall forfeit the right to appraisal of such
shares and each such share shall thereupon be deemed to have been canceled,
extinguished and converted, as of the Effective Time, into and represent the
right to receive payment from Apertus, as provided in Section 2.01 hereof.
(b) If the holder of any shares of Capital Stock shall become entitled
to receive payment for such shares pursuant to Sections 86-97 of the
Massachusetts Law, such payment shall be made by Apertus in accordance
therewith.
2.04 Notes.
(a) Each holder of shares of Capital Stock entitled to receive shares
of Apertus Common Stock shall receive a Note with an initial principal amount
set forth in Section 2.01 ("Initial Principal Amount"). The final principal
amount ("Final Amount") of the Note is subject to reduction as described below.
Such Notes shall also provide a source of offset to Apertus pursuant to Article
X hereof. Each Note issued by Apertus shall be in substantially the form of
Exhibit B hereto.
(b) The Final Amount of the Note will be the Reduced Principal Amount
(as defined below) multiplied by the Accretion Ratio (as defined below), less
the pro rata portion of (i) the amount of cash payments made by Apertus in
respect of Company Common Stock, (ii) Apertus Losses (excluding Carleton Europe
Losses) (as such terms are defined in Section 10.02) and (iii) the expenses
incurred by the Stockholders' Representatives and paid by Apertus in accordance
with Section 10.03(c). The "Reduced Principal Amount" shall equal the Initial
Principal Amount less the pro rata portion of (i) the amount by which Carleton's
expenses relating to legal, investment banking and accounting professional
services fees and similar out-of-pocket fees and expenses in connection with the
negotiation of this Agreement exceed $300,000, as described in Section 2.06,
(ii) the amount of severance benefits and related costs arising within six
months of Closing and paid by Apertus pursuant to those individual employment or
severance agreements between Carleton and its employees set forth on Schedule
9.03, (iii) Carleton Europe Losses and (iv) the "Revenue Adjustment," which
shall be determined based on the total revenues (determined in accordance with
generally accepted accounting principles) of Apertus's data warehousing
business, including the business and assets of the Company acquired by Apertus
hereunder together with all product-related revenues of Apertus other than
revenues derived directly from Apertus's Internet Services Division (or the sale
of such Division by Apertus), between September 29, 1997 and March 28, 1998 as
follows:
Carleton/Apertus Revenues Revenue Adjustment
------------------------- ------------------
$3,500,000 or less $1,000,000
$3,750,000 $ 800,000
$4,000,000 $ 600,000
$4,250,000 $ 300,000
$4,500,000 or more $ 0
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provided, that the Revenue Adjustment between the designated Carleton/Apertus
revenue intervals shall be prorated on a linear basis between the corresponding
intervals. The "Accretion Ratio" shall be the ratio that the Fair Market Value
on the date that is three years from the date of the Note (the "Maturity Date")
bears to the Fair Market Value on the date of the Note; provided, however, that
the Accretion Ratio shall not be greater than 200% nor less than 50%. "Fair
Market Value" will be the average last sale price (unweighted), as reported on
the Nasdaq Stock Market, of the shares of Apertus Common Stock for the 60-day
calendar day period ending the business day prior to the date of determination.
The "pro rata portion" shall be based upon the ratio that the Initial Principal
Amount of the Note bears to the aggregate Initial Principal Amount of all Notes
issued pursuant to the Merger, and for this purpose, the Initial Principal
Amount of all Notes issuable upon the exercise of Outstanding Warrants (as
defined in Section 3.06) shall be deemed to be outstanding.
(c) The Final Amount of this Note is payable in full on the Maturity
Date. All accrued interest shall be due and payable on the same day as such
principal is payable. However, Apertus will have the option to pay that portion
of the Final Amount exceeding the Reduced Principal Amount (the "Accretion") on
a date that is two years from the Maturity Date without interest or penalty upon
making a payment equal to 5% of the Accretion on the Maturity Date to the holder
thereof.
2.05 Procedure for Exchange of Stock.
(a) As soon as reasonably practicable after the Effective Time, an
exchange agent appointed by Apertus (the "Exchange Agent," which shall be
Norwest Bank Minnesota, National Association), shall mail to each record holder
of a certificate or certificates holders that immediately prior to the Effective
Time represented outstanding shares of Capital Stock (the "Certificates"), (i) a
letter of transmittal (which shall be in customary form) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for such
holder's Merger Consideration. The letter of transmittal shall specify that
delivery of Certificates shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent.
(b) Subject to Section 2.05(d), upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, and such other documents as may be required pursuant to such
instructions, the Exchange Agent shall distribute in exchange therefor, (i) in
the case of any Minority Stockholder, the cash to which such holder is entitled
under the Dissenting Shares proviso to Section 2.01(a), and (ii) in the case of
any other holder of Capital Stock, (X) a Note issuable to such holder pursuant
to Section 2.01, (Y) a certificate or certificates representing the number of
whole shares of Apertus Common Stock issuable to such holder pursuant to
Section 2.01 and (Z) cash in lieu of any fractional share thereof in accordance
with Section 2.02, and the Certificate so surrendered shall forthwith be
canceled.
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(c) Subject to Section 2.05(g), until surrendered and exchanged as
contemplated by this Section 2.05, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive the Merger
Consideration with respect to the shares of Capital Stock formerly represented
by such Certificate, and until such surrender and exchange, (i) no portion of
the Merger Consideration shall be paid to the holder of such Certificate in
respect thereof and (ii) the holder of such Certificate shall not be entitled to
vote the shares of Apertus Common Stock into which the shares of Capital Stock
will be converted upon surrender and exchange. Shares of Apertus Common Stock
issuable upon such surrender and exchange shall not be deemed outstanding unless
and until such surrender and exchange.
(d) Notwithstanding any other provision of this Agreement, if Apertus
determines that issuance of Apertus Common Stock and Note to any holder of
Company Common Stock could affect the exemption from registration of the Apertus
Common Stock under the Securities Act of 1933, as amended ("Securities Act"),
then such holder shall instead receive cash in lieu of Notes and Apertus Common
Stock based upon a value of $1.06 per share of Company Common Stock.
(e) If payment of the Merger Consideration is to be made to a person
other than the person in whose name the Certificate surrendered in exchange
therefor is registered, it shall be a condition to such payment that the
Certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer, and that the person requesting such payment shall pay to
Apertus any transfer and other taxes required by reason of such payment in any
name other than that of the registered holder of the Certificate surrendered or
shall have established to the satisfaction of Apertus that such tax either has
been paid or is not payable.
(f) Except as specifically set forth in the Notes, no interest shall
accrue or be payable with respect to any amounts which any holder of shares of
Capital Stock shall be so entitled to receive.
(g) Apertus shall pay the Merger Consideration attributable to any
Certificate theretofore issued which has been lost or destroyed, upon receipt of
satisfactory evidence of ownership of the shares of Capital Stock represented
thereby and of appropriate indemnification.
(h) After the Effective Time, there shall be no transfers on the stock
transfer books of Apertus of the shares of Capital Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates representing such shares are presented to Apertus, they shall be
canceled and exchanged for the Merger Consideration as provided in this
Section 2.05, subject to applicable law in the case of Dissenting Shares. From
and after the Effective Time, the holders of Certificates shall cease to have
any rights with respect to such shares of Capital Stock except as otherwise
provided in this Agreement or by law.
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<PAGE>
(i) Apertus will pay no dividends and make no other distributions with
respect to Apertus Common Stock with a record date after the Effective Time to
the holder of any unsurrendered Certificate evidencing shares of Capital Stock,
and Apertus will make no cash payment in lieu of fractional shares to any such
holder pursuant to Section 2.02 until the holder of such Certificate surrenders
such Certificate. Following surrender of any such Certificate, the Exchange
Agent, on behalf of Apertus, shall pay to the record holder of the certificate
representing whole shares of Apertus Common Stock issued in exchange for such
Certificate, without interest, (i) at the time of such surrender, the amount of
any cash payable in lieu of a fractional share of Apertus Common Stock to which
such holder is entitled pursuant to Section 2.02 and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Apertus Common Stock and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to such surrender and a payment
date subsequent to such surrender payable with respect to such whole shares of
Apertus Common Stock.
(j) The Merger Consideration delivered upon the surrender for exchange
of shares of Capital Stock in accordance with the terms hereof (including any
cash paid pursuant to Section 2.01 or 2.02) shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares.
(k) None of Apertus, the Company or the Exchange Agent shall be liable
to any person in respect of any shares of Apertus Common Stock (or dividends or
distributions with respect thereto) delivered to a public official pursuant to
any applicable abandoned property, escheat, or similar law.
2.06 Company Expenses. For purposes of determining the Merger
Consideration, the Company's expenses relating to legal, investment banking and
accounting professional services fees and similar out-of-pocket fees and
expenses in connection with the negotiation of this Agreement have been assumed
to be $300,000. To the extent that such expenses exceed $300,000, Apertus shall
be entitled to reduce the aggregate Initial Principal Amounts of the Notes by an
amount equal to such excess on a pro rata basis. The payments required by this
Section 2.06 are in addition to the indemnification provided in Section 10.02
and accordingly shall be deducted from the Notes without regard to the
provisions of Section 10.02(e)(iii) establishing a threshold amount.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to Apertus that,
except as set forth in the Schedules hereto:
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3.01 Incorporation and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts and has the requisite corporate
power to execute and deliver this Agreement and to perform its obligations
hereunder. The Company has the corporate power and authority and all
authorizations, licenses, permits and certifications necessary to own and
operate its properties and to carry on its business as now conducted and
presently proposed to be conducted. The copies of the Company's Articles of
Organization and Bylaws which have been furnished by the Company to Apertus
prior to the date hereof reflect all amendments made thereto and are correct
and complete as of the date hereof. Schedule 3.01 contains a correct and
complete list of each jurisdiction in which the conduct of the Company's
business or the ownership, leasing or operation of its properties and assets
requires the Company to be qualified to do business, and the Company is
qualified to do business and is in good standing as a foreign corporation
under the laws of each of those jurisdictions.
3.02 Execution, Delivery; Valid and Binding Agreement. Subject to
the approval of the Company's stockholders, the execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action, and no other corporate proceedings on its part are
necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly executed and delivered by the Company
and, except to the extent that the validity and effectiveness of the Merger
and the other transactions taking place at the Closing are subject to the
approval of the Company's stockholders, constitutes the valid and binding
obligation of the Company, enforceable in accordance with its terms, and the
Articles of Merger, when executed and filed by the Company, will be effective
in accordance with its terms.
3.03 Approval of this Agreement. The Company's Board of
Directors has, by resolutions duly adopted at a meeting held on October 23,
1997, approved this Agreement and the transactions contemplated hereby, and
resolved to recommend approval of this Agreement by the Company's stockholders.
None of the resolutions described in this Section 3.03 has been amended or
otherwise modified in any respect since the date of adoption thereof and all
such resolutions remain in full force and effect.
3.04 No Breach. Except as set forth in Schedule 3.04, the
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby do not
conflict with or result in any breach of any of the provisions of, constitute a
default under, result in a violation of, result in the creation of a right of
termination or acceleration under, result in any lien, security interest, charge
or encumbrance upon any assets of the Company, or require any authorization,
consent, approval, exemption or other action by or notice to any court, other
governmental body or other "Person" (such term shall mean an individual,
corporation, partnership, association, joint-stock company, trust,
unincorporated organization, or
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government or political subdivision thereof), under the provisions of the
Articles of Organization or Bylaws of the Company or any indenture, mortgage,
lease, loan agreement or other agreement or instrument by which the Company is
bound or affected, or any law, statute, rule or regulation or order, judgment
or decree to which the Company is subject.
3.05 Governmental Authorities; Consents. Except for the filing
of the Articles of Merger with the Secretary of State of the Commonwealth of
Massachusetts, the Company is not required to submit any notice, report or other
filing with any governmental authority in connection with the execution or
delivery by it of this Agreement or the consummation of the transactions
contemplated hereby. Except as set forth in Schedule 3.05, no consent, approval
or authorization of any governmental or regulatory authority or any other party
or person (except the approval of this Agreement by the stockholders of the
Company) is required to be obtained by the Company in connection with its
execution, delivery and performance of this Agreement or the transactions
contemplated hereby.
3.06 Capital Stock. The authorized capital stock of the Company
is shown below:
Class and Series Authorized Outstanding
------------------------ ---------- -----------
Common Stock 10,500,000 2,434,466
Class B Common Stock 485,000 484,818
Series A Preferred Stock 353,000 352,941
Series B Preferred Stock 532,000 531,226
All of such outstanding shares of Capital Stock have been duly authorized, are
validly issued, fully paid and nonassessable and were not issued in violation of
or subject to any preemptive rights or other rights to subscribe for or purchase
securities created by statute, the Articles of Organization or Bylaws of the
Company or any agreement to which the Company is a party or by which it is
bound. Schedule 3.06(a) shows the names of all holders of Capital Stock, their
last known address and the number of shares of Company Common Stock, Class B
Common Stock, Series A Preferred Stock and Series B Preferred Stock held of
record by each. There are Outstanding Stock Options to purchase 928,173 shares
of Company Common Stock. Schedule 3.06(b) shows the names of holders of
Outstanding Stock Options, their last known address, the number of shares of
Capital Stock for which the option is exercisable, the exercise price and the
expiration date. The Company has issued warrants to purchase 358,505 shares of
Company Common Stock outstanding ("Outstanding Warrants"), which number reflects
the Doubling Adjustment. All Outstanding Warrants are held by Pioneer Capital
Corporation ("Pioneer"). Schedule 3.06(b) shows such holder's last known
address, the number of shares of Capital Stock for which each Outstanding
Warrant is exercisable, the exercise price and the expiration date. The Company
has no other equity securities or securities containing any equity features
authorized, issued or outstanding. There are no agreements or other rights or
arrangements existing which provide for the sale or issuance of Capital Stock by
the Company and, except for the Series A
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Preferred Stock, the Series B Preferred Stock, Outstanding Stock Options,
Outstanding Warrants and the conversion rights of the holder under certain
Promissory Notes dated May 29, 1997, July 24, 1997 and August 22, 1997 issued to
Pioneer (the "Pioneer Notes"), there are no rights, subscriptions, warrants,
options, conversion rights or agreements of any kind outstanding to purchase or
otherwise acquire from the Company any shares of capital stock or other
securities of the Company of any kind. Except with respect to the liquidation
preferences of holders of Series A Preferred Stock and Series B Preferred Stock,
as provided in the Company's Articles of Organization, there are no agreements
or other obligations (contingent or otherwise) which may require the Company to
repurchase or otherwise acquire any shares of its capital stock.
3.07 Subsidiaries. Except as set forth in Schedule 3.07,
the Company does not have and has never had any subsidiaries and does not
otherwise own any stock, partnership interest, joint venture interest or any
other security of, or ownership interest or investment in, any other
corporation, organization, partnership or other business entity. Except as set
forth in Schedule 3.07, the subsidiary described in Schedule 3.07 (the
"Subsidiary") has no assets or liabilities. Prior to Closing, all issued and
outstanding shares of capital stock of the Subsidiary will be owned by the
Company free and clear of all liens, charges, encumbrances, claims and options
of any nature. All of the outstanding shares of capital stock of the Subsidiary
have been duly and validly authorized and issued, and are fully paid and
nonassessable. For purposes of the representations and warranties in this
Article III, the Company shall be deemed to include the Subsidiary.
3.08 Financial Statements. The Company has delivered to
Apertus copies of (a) the unaudited balance sheet, as of September 30, 1997 (the
"Balance Sheet Date"), of the Company (the "Latest Balance Sheet") and the
unaudited statements of earnings, stockholders' equity and cash flows of the
Company for the seven-month period ended September 30, 1997 (such statements and
the Latest Balance Sheet being herein referred to as the "Latest Financial
Statements") and (b) the audited balance sheets, as of February 29, 1996 and
February 28, 1997 of the Company and the audited statements of earnings,
stockholders' equity and cash flows of the Company for each of the two years
ended February 28, 1997 (collectively, the "Annual Financial Statements"). The
Latest Financial Statements and the Annual Financial Statements are based upon
the information contained in the books and records of the Company and fairly
present the financial condition of the Company as of the dates thereof and
results of operations for the periods referred to therein. The Annual Financial
Statements have been prepared in accordance with generally accepted accounting
principles, consistently applied throughout the periods indicated. The Latest
Financial Statements have been prepared in accordance with generally accepted
accounting principles applicable to unaudited interim financial statements (and
thus may not contain all notes and may not contain prior period comparative data
which are required to be prepared in accordance with generally accepted
accounting principles) consistently with the Annual Financial Statements and
reflect all adjustments necessary to a fair statement of the results for the
interim period(s) presented.
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3.09 Absence of Undisclosed Liabilities. The Company has no
liabilities or obligations (whether accrued, absolute, contingent, unliquidated
or otherwise, whether due or to become due, whether known or unknown, and
regardless of when asserted) arising out of transactions or events heretofore
entered into, or any action or inaction, or any state of facts existing, with
respect to or based upon transactions or events heretofore occurring, except (i)
as reflected in the Latest Balance Sheet, (ii) liabilities which have arisen
after the Balance Sheet Date in the ordinary course of business, (iii)
liabilities not required to be reflected on the face of a balance sheet or in
the notes thereto prepared in accordance with generally accepted accounting
principles, and (iv) as otherwise set forth in Schedule 3.09.
3.10 No Material Adverse Changes. Except as set forth on
Schedule 3.10, since February 28, 1997, there has been no material adverse
change in the assets or liabilities, the business, the financial condition, the
results of operations or the prospects (collectively, the "Condition") of the
Company (a "Material Adverse Change").
3.11 Absence of Certain Developments. Except as set forth
on Schedule 3.11, since the Balance Sheet Date, the Company has not:
(a) borrowed any amount or incurred or become subject to any liability
in excess of $10,000 except (i) current liabilities incurred in the ordinary
course of business and (ii) liabilities under contracts entered into in the
ordinary course of business;
(b) mortgaged, pledged or subjected to any lien, charge or any other
encumbrance any of its assets with a fair market value in excess of $10,000,
except (i) liens for current property taxes not yet due and payable, (ii) liens
imposed by law and incurred in the ordinary course of business for obligations
not yet due to carriers, warehousemen, laborers, materialmen and the like, (iii)
liens in respect of pledges or deposits under workers' compensation laws or (iv)
liens set forth on Schedule 3.11;
(c) discharged or satisfied any lien or encumbrance or paid any
liability, in each case with a value in excess of $10,000, other than current
liabilities paid in the ordinary course of business;
(d) sold, assigned or transferred (including, without limitation,
transfers to any employee, affiliate or stockholder) any tangible assets with a
fair market value in excess of $10,000 or canceled or forgiven any debt, claim
or receivable in excess of $10,000, except in the ordinary course of business;
(e) sold, assigned or transferred ownership of (including, without
limitation, transfers to any employee, affiliate or stockholder) any patent,
trademark, trade name, copyright, trade secret or other intangible asset;
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(f) disclosed to any person other than Apertus and authorized
representatives of Apertus any proprietary confidential information, other than
pursuant to (i) a confidentiality agreement prohibiting the use or further
disclosure of such information, each of which agreement is identified in the
Schedule 3.11 and is in full force and effect on the date hereof;
(g) waived any rights of value or suffered any extraordinary
losses or adverse changes in collection loss experience;
(h) declared or paid any dividends or other distributions with respect
to the Capital Stock or redeemed or purchased, directly or indirectly, any
shares of the Capital Stock or any equity securities, securities convertible
into or exchangeable for its equity securities or warrants, options or other
rights to acquire its equity securities, or any bonds or debt securities;
(i) issued, sold or transferred any of its equity securities,
securities convertible into or exchangeable for its equity securities or
warrants, options or other rights to acquire its equity securities, or any bonds
or debt securities;
(j) taken any other action or entered into any other transaction other
than in the ordinary course of business and in accordance with past custom and
practice, or entered into any transaction with any "insider" (as defined in
Section 3.22 hereof) other than employment arrangements disclosed on
Schedule 3.11;
(k) assumed, guaranteed, endorsed or otherwise become liable
for the obligation of any person;
(l) suffered any theft, damage, destruction or loss of or to any
property or properties owned or used by it in excess of $10,000, whether or not
covered by insurance;
(m) except as set forth in Schedule 3.11, made or granted any bonus or
any wage, salary or compensation increase to any director, officer, employee who
earns more than $75,000 per year, or consultant or other agent or made or
granted any increase in any employee benefit plan or arrangement, or amended or
terminated any existing employee benefit plan or arrangement, or adopted any new
employee benefit plan or arrangement or made any commitment or incurred any
liability to any labor organization;
(n) made any single capital expenditure or commitment therefor in
excess of $10,000;
(o) made any loan, advance or capital contribution to, or
investment in, any person in excess of $10,000;
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(p) made charitable contributions or pledges which in the
aggregate exceed $1,000; or
(q) made any change in accounting principles or practices from those
utilized in the preparation of the Annual Financial Statements.
3.12 Title to Properties.
(a) The Company does not own any real property. The leases (the
"Leases") described on Schedule 3.12 constitute all of the real property used or
occupied by the Company and are in full force and effect, and the Company holds
a valid and existing leasehold interest under each of the Leases. The Company
has delivered to Apertus complete and accurate copies of each of the Leases, and
none of the Leases has been modified in any respect, except to the extent that
such modifications are disclosed by the copies delivered to Apertus. The
Company is not in default, and no circumstances exist which, if unremedied,
would, either with or without notice or the passage of time or both, result in
such default under any of the Leases; nor is any other party to any of the
Leases in default.
(b) Except as set forth in Schedule 3.12, the Company owns good and
marketable title to each of the tangible properties and tangible assets
reflected on the Latest Balance Sheet or acquired since the date thereof, free
and clear of all liens and encumbrances, except for (i) liens for current taxes
not yet due and payable, (ii) liens set forth on Schedule 3.12, (iii) assets
disposed of since the date of the Latest Balance Sheet in the ordinary course of
business, (iv) liens imposed by law and incurred in the ordinary course of
business for obligations not yet due to carriers, warehousemen, laborers and
materialmen and (v) liens in respect of pledges or deposits under workers'
compensation laws.
(c) The Company is not in violation of any applicable zoning ordinance
or other law, regulation or requirement relating to the operation of any
properties used in the operation of its business, and the Company has not
received any notice of any such violation.
3.13 Accounts Receivable. The accounts receivable reflected
on the Latest Balance Sheet are valid receivables, except to the extent to which
revenue has not been recognized.
3.14 Tax Matters.
(a) Except as set forth in Schedule 3.14, each of the Company and any
subsidiary, any affiliated, combined or unitary group of which the Company is or
was a member, and any "Plans" (as defined in Section 3.20 hereof), as the case
may be, has: (i) properly filed (or has had properly filed on its behalf) all
returns, declarations, reports, estimates, information returns, and statements
("Returns") required to be filed or sent by it in respect of any "Taxes" (as
defined in subsection (o) below) or required to be filed or sent by it by any
taxing authority having jurisdiction, and all such Returns are true and correct
in all material respects; (ii)
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properly paid (or has had paid on its behalf) all Taxes shown to be due and
payable on such Returns; (iii) established on the Latest Balance Sheet, in
accordance with generally accepted accounting principles, accounts that are
adequate for the payment of any Taxes not yet due and payable for all Tax
periods or portions thereof ending on or prior to the Closing Date; (iv)
complied with all applicable laws, rules and regulations relating to the
withholding of Taxes and the payment thereof (including, without limitation,
withholding of Taxes under Sections 1441 and 1442 of the Internal Revenue Code
of 1986, as amended (the "Code"), or similar provisions under any foreign
laws), and timely and properly withheld from individual employee wages and
paid over to the proper governmental authorities all amounts required to be so
withheld and paid over under all applicable laws.
(b) There are no liens for Taxes upon any assets of the Company,
except liens for Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted or
assessed against the Company that has not been resolved or paid in full. No
waiver, extension or comparable consent given by the Company regarding the
application of the statute of limitations with respect to any Taxes or Returns
is outstanding, nor, to the Company's knowledge, is any request for any such
waiver or consent pending. There has been no Tax audit or other administrative
proceeding or court proceeding with regard to any Taxes or Returns, nor, to the
Company's knowledge, is any such Tax audit or other proceeding pending, nor has
there been any notice to the Company by any Taxing authority regarding any such
Tax, audit or other proceeding, or, to the knowledge of the Company, is any such
Tax audit or other proceeding threatened with regard to any Taxes or Returns.
The Company does not expect the assessment of any additional Taxes of the
Company or the Tax Affiliates and is not aware of any unresolved questions,
claims or disputes concerning the liability for Taxes of the Company that would
exceed the estimated reserves established on its books and records.
(d) The Company is not a party to any agreement, contract or
arrangement that would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code,
and the consummation of the transactions contemplated by this Agreement will not
be a factor causing payments to be made by the Company that are not deductible
(in whole or in part) under Section 280G of the Code.
(e) Except as set forth in Schedule 3.14, the Company has not
requested any extension of time within which to file any Return, which Return
has not since been filed. No property of the Company is property that the
Company is or will be required to treat as being owned by another person under
the provisions of Section 168(f)(8) of the Code (as in effect prior to amendment
by the Tax Reform Act of 1986) or is "tax-exempt use property" within the
meaning of Section 168 of the Code.
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(f) The Company is not required to include in income any adjustment
under Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by the Company as a result of the Tax Reform Act of 1986 and
the Internal Revenue Service has not proposed any such adjustment or change in
accounting method.
(g) All transactions that could give rise to an understatement of
federal income tax (within the meaning of Section 6661 of the Code as it applied
prior to repeal) or an underpayment of tax (within the meaning of Section 6662
of the Code) were reported in a manner for which there is substantial authority
or were adequately disclosed (or, with respect to Returns filed before the
Closing Date, will be reported in such a manner or adequately disclosed) on the
Returns required in accordance with Sections 6661(b)(2)(B) and 6662(d)(2)(B) of
the Code.
(h) The Company has not engaged in any transaction that would result
in a deemed election under Section 338(e) of the Code, and the Company will not
engage in any such transaction within any applicable "consistency period" (as
such term is defined in Section 338 of the Code).
(i) The Company has not filed any consent under Section
341(f) of the Code.
(j) The Company has evidence of payment for all taxes, charges, fees,
levies or other assessments of a foreign country paid or accrued for the fiscal
years ending three years prior to the Closing Date.
(k) The Company, to the extent it is a "controlled foreign
corporation" within the meaning of Section 957 of the Code, does not have now
nor has it had at any time in the past "subpart F income" within the meaning of
Section 952 of the Code.
(l) The Company is, and at all times has been, a corporation or
association taxable as a corporation for United States income tax purposes.
(m) Any "FSC" (within the meaning of Section 922 of the Code) has been
properly operated in accordance with the provisions of Sections 921-927 of the
Code.
(n) For purposes of this Agreement, the term "Taxes" means all taxes,
charges, fees, levies, or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, social security,
unemployment, excise, estimated, severance, stamp, occupation, property, or
other taxes, customs duties, fees, assessments, or charges of any kind
whatsoever, including, without limitation, all interest and penalties thereon,
and additions to tax or additional amounts imposed by any taxing authority,
domestic or foreign, upon the Company.
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3.15 Contracts and Commitments.
(a) Schedule 3.15 lists the following agreements to which the Company
is a party, which are currently in effect, and which relate to the operation of
the business of the Company: (i) collective bargaining agreement or contract
with any labor union; (ii) bonus, pension, profit sharing, retirement or other
form of deferred compensation plan; (iii) hospitalization insurance or other
welfare benefit plan or practice, whether formal or informal; (iv) stock
purchase or stock option plan; (v) contract for the employment of any officer,
individual employee or other person on a full-time or consulting basis or
relating to severance pay for any such person; (vi) agreement prohibiting the
Company from soliciting any person to become an employee of the Company;
(vii) contract, agreement or understanding relating to the voting of Company
Common Stock or the election of directors of the Company; (viii) agreement
relating to the borrowing of money in excess of $50,000 in the aggregate;
(ix) guaranty of any obligation for borrowed money or otherwise; (x) lease or
agreement under which the Company is lessee of, or holds or operates any
property, real or personal, owned by any other party requiring rentals in excess
of $15,000 per year, other than shown on Schedule 3.12; (xi) lease or agreement
under which the Company is lessor of, or permits any third party to hold or
operate, any property, real or personal, except for the software leases to
customers; (xii) contract or group of related contracts with the same party by
which the Company has agreed to purchase products or services with an
undelivered balance of such products or services in excess of $25,000; (xiii)
each contract or group of related contracts with the same party by which the
Company has agreed to sell products or services with an undelivered balance of
such products or services in excess of $25,000; (xiv) contract or group of
related contracts with the same party (other than any contract or group of
related contracts for the purchase or sale of products or services) with the
Company involving more than $25,000; (xv) contract which prohibits the Company
from freely engaging in business anywhere in the world; (xvi) franchise
agreement; (xvii) license agreement or agreement providing for the payment or
receipt of royalties or other license fees by the Company in excess of $25,000
for the 12 month period ending August 31, 1997 (other than as shown on
Schedule 3.16(a)(vii)); (xviii) contract or commitment for capital expenditures
by the Company in excess of $25,000; (xix) agreement by the Company for the sale
of any capital asset; (xx) contract with any affiliate which in any way relates
to the Company (other than for employment on customary terms); or (xxi) other
agreement which provides for payments in excess of $25,000 per year.
(b) Except as disclosed in Schedule 3.15(b), the Company has performed
all obligations required to be performed by it in connection with each of the
contracts or commitments required to be disclosed in Schedule 3.15 and is not in
default under any contract or commitment required to be disclosed in Schedule
3.15; the Company has no present expectation or intention of not fully
performing any obligation pursuant to any contract or commitment required to be
disclosed in Schedule 3.15; and there is no breach or, to the Company's
knowledge, anticipated breach by any other party to any contract or commitment
required to be disclosed in Schedule 3.15.
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(c) Prior to the date of this Agreement, Apertus has been supplied
with, or been provided access to, a true and correct copy of each written
contract or commitment referred to in Schedule 3.15, together with all
amendments, waivers or other changes thereto.
(d) Any contract or commitment that requires a payment to any person
by virtue of the transactions contemplated by this Agreement is referred to as a
"Change of Control Contract." All such Change of Control Contracts are shown on
Schedule 3.15.
3.16 Intellectual Property Rights.
(a) As used in this Agreement, the following terms shall
have the following meaning:
(i) "Business" shall mean the businesses in which the
Company is engaged as of the Closing Date;
(ii) "Copyrights" shall mean rights in original works of
authorship including, without limitation, computer programs, as those
terms are used in 17 U.S.C. (S)101 et seq. and corresponding rights under
foreign laws;
(iii) "Distribution Agreements" shall mean each agreement under
which third parties are granted rights to distribute products or provide
services incorporating or utilizing any of the Intellectual Property
Rights, all of which are identified in Schedule 3.16(a)(iii);
(iv) "Intellectual Property Rights" shall mean all the Patent
Rights, Copyrights, Trademarks and Trade Secrets, and other similar
rights in technology or business information that are owned or
exclusively controlled by the Company on the Closing Date and used in or
held for use in the Business. Intellectual Property Rights shall include,
without limitation, those properties listed on Schedule 3.16(a)(iv);
(v) "Know-How" shall mean (i) design documents, (ii)
specifications and performance criteria, (iii) operating instructions and
maintenance manuals, (iv) manufacturing information, including production
documentation, methods, layouts and supplier and cost information, (v)
computer software tools and related documentation, including, without
limitation, source code, object code, development tools, files, records,
data and all media on which any of the foregoing is recorded, (vi)
prototypes, models or samples, (vii) computer-aided design or computer-
aided manufacturing data, (viii) files relating to applications for
Intellectual Property Rights and (ix) all other tangible materials (not
necessarily proprietary) used in or held for use in the Business as of
the Closing Date;
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(vi) "Patent Rights" shall mean rights provided by a United
States or foreign patent, including reissues or extensions thereof, and
on applications for the foregoing, including any divisions, continuations
and continuations-in-part thereof filed by the Company on or before the
Closing Date or by Apertus or the Company after the Closing Date;
(vii) "License Agreements" shall mean each agreement under which the
Company is granted the right to use any intellectual property rights
owned or controlled by a third party, for monetary or other consideration
in excess of $25,000 in any one of 1995, 1996 or 1997, all of which are
identified in Schedule 3.16(a)(vii);
(viii) "Software" shall mean all computer software products that are
owned or exclusively controlled by the Company on the Closing Date and
used in or held for use in the Business, including, without limitation,
those identified by title on Schedule 3.16(a)(viii);
(ix) "Trademarks" shall mean trade names, trademarks, service marks,
trade dress and product configurations that are used or intended to be
used in connection with the Business or any part thereof as of the
Closing Date and all (1) goodwill and common law rights associated
therewith, (2) registration applications pending thereon in any state and
in any country, and (3) registrations issued thereon in any state and in
any country, including, but not limited to, those names, marks, etc.
identified in Schedule 3.16(a)(ix); and
(x) "Trade Secrets" shall mean all proprietary information that is
used in or held for use in connection with the Business and that (1)
derives independent economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means
by, third parties who can obtain economic value from its disclosure or
use and (2) is the subject of efforts by the Company that were and are
reasonable under the circumstances to maintain its secrecy, such as,
without limitation, computer program designs, unpublished computer
programs, inventions conceived but not embodied in a patent application,
customer lists, vendor lists, merchandising information, cost and
unpublished pricing information, and information regarding future
business opportunities.
(b) Except as set forth in Schedule 3.16, the Company hereby represents
and warrants to Apertus that:
(i) The Company owns and possesses all right, title and interest in
the Intellectual Property Rights and the Know-How and, except as shown on
Schedule 3.16(b)(i), has the right to disclose all Know-How to Apertus.
The Company has taken reasonable action to protect and maintain the
secrecy of those Intellectual Property Rights whose value is
substantially dependent on such secrecy and the trade secrets or
confidential information of third parties provided to the Company;
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(ii) The Intellectual Property Rights together with the third party
rights licensed to the Company under the License Agreements comprise all
intellectual property rights used or held for use in the Business;
(iii) No claim by any third party contesting the validity of any
Intellectual Property Rights has been made or is currently outstanding,
and the Company has not received any notice and is not aware of any facts
concerning any infringement, misappropriation or violation by others of
any Intellectual Property Rights;
(iv) No infringement, misappropriation or violation of any third
party intellectual property rights has occurred in the use of the
Intellectual Property Rights and Know-How by the Company;
(v) The Company has complied with all applicable disclosure
requirements and has not committed any fraudulent act in the application
for and maintenance of any Patent, Trademark or Copyright;
(vi) The Company has not received notice from any person that the
operation of the business of the Company, including its design,
development, manufacture and sale of its products (including products
currently under development) and provision of its services, infringes or
misappropriates the intellectual property of any person or constitutes
unfair competition or unfair trade practices under the laws of any
jurisdiction;
(vii) The License Agreements constitute all agreements under which
the Company has obtained the right to use any intellectual property
rights of third parties in exchange for a royalty or any other
consideration in excess of $25,000 in any one of 1994, 1995, 1996 or
1997;
(viii) The Distribution Agreements and evaluation and non-disclosure
agreements entered into in connection with marketing of the Company's
products ("Evaluation Agreements") constitute all agreements (other than
agreements with end-users of Software) under which the Company has
granted to third parties the right to use the Intellectual Property
Rights;
(ix) The License Agreements and Distribution Agreements are in
full force and effect. The consummation of the transactions contemplated
by this Agreement will neither violate nor result in the breach,
modification, cancellation, termination or suspension of the License
Agreements and Distribution Agreements. Following the Closing Date,
Apertus will be able to exercise all of the Company's rights under the
License Agreements and Distribution Agreements 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.
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(c) Except as set forth on Schedule 3.16, specifically with respect to
the Software and without limiting the foregoing, the Company hereby represents
and warrants to Apertus that:
(i) The Company is the sole proprietor of the Software;
(ii) The Company has the full power and authority to commercially
exploit all rights in the Software (to the extent provided for in the
License Agreements with respect to intellectual property rights owned or
controlled by a third party), and except for the Distribution Agreements,
no person has previously assigned, transferred or otherwise encumbered
these rights;
(iii) Except for the end-user license agreements, Distribution
Agreements and Evaluation Agreements, the Company has not granted to any
third party any license for or access to the Software;
(iv) No material portion of the Software is in the public domain;
(v) The Software and the reproduction, preparation of derivative
works based upon, performance of or display of the Software does not
infringe or violate any statutory copyright of any third party;
(vi) The Software does not invade the right of privacy or
publicity of any person or contain any matter libelous or otherwise in
contravention of the rights of any third person;
(vii) The Software contains no matter, the publication or sale of
which otherwise violates any federal or state statute or regulation, nor
is the Software in any other manner unlawful;
(viii) All Software is free from any viruses, worms, bombs, traps or
other code designed to interrupt normal processing, corrupt data or
render such Software unusable;
(ix) Written permission has been obtained for the incorporation of
any code, text or other subject matter not owned by the Company and
incorporated in the Software;
(x) All Software is Millennium Compliant, including date century
recognition, calculations that accommodate same century and multi-century
formulas and date values that reflect the century. As used herein,
"Millennium Compliant" shall mean the ability of the Software to provide
the following date-related functions:
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(A) consistently handle date information before, during and
after January 1, 2000, including but not limited to accepting date
input, providing date output, and performing calculations on dates
or portions of dates; and
(B) function in accordance with all documentation in all
material respects without interruption before, during and after
January 1, 2000, without any change of operations associated with
the advent of the new century;
(xi) All Software, up to and included in Release 5.6 on its
certified platforms as of the date hereof, conforms in all material
respects to the associated written specifications, documentation,
performance standard, representation or statement (if any) made or
provided with respect thereto by or with authorization of the Company; and
(xii) Except as set forth in Schedule 3.16(c)(xii), the Company has
not (other than pursuant to the end-user license agreements, Distribution
Agreements and Evaluation Agreements) disclosed or delivered to any
person, or permitted the disclosure or delivery to any person other than
employees and contractors of the Company of the source code, or any
portion or aspect of the source code, of any Software.
(d) Schedule 3.16(d) lists the Company's end-user license agreements
with third parties currently in effect involving receipt of license fees in
excess of $25,000 for the 12 month period ending August 31, 1997.
3.17 Litigation. Except as set forth in Schedule 3.17, there are no
actions, suits, proceedings, orders or investigations pending or, to the
knowledge of the Company, threatened against the Company, at law or in equity,
or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign.
3.18 Warranties. Schedule 3.18 summarizes all claims pending or, to
the knowledge of the Company, threatened for breach of any warranty or
agreement relating to any products or services sold or provided by the Company
prior to the date hereof. Schedule 3.18 lists all products that the Company
has contracted to deliver whose development has not been completed. There are
no material inherent design defects or systemic or chronic problems in such
products. Schedule 3.18 shows release dates for all announced versions of
Software products.
3.19 Employees. Schedule 3.19 lists each employee of the Company
(the "Employees") and the position, title, remuneration (including any
scheduled salary or remuneration increases, bonus, retention and deferred
compensation arrangements), date of employment and whether such Employee has a
written
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employment agreement with the Company. Schedule 3.19 also lists the
nonimmigrant status of each Employee who is an alien who is authorized to work
in the United States in nonimmigrant status. Except as disclosed on Schedule
3.19, (a) to the knowledge of Company, no Employee of the Company has provided
notice of termination of his or her employment prior to or within 60 days
following the Effective Date; (b) the Company has complied in all respects
with all laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other taxes; (c) for each Employee hired
after November 6, 1986, the Company has completed and retained an Immigration
and Naturalization Service Form I-9 in accordance with applicable rules and
regulations (and has not undergone any compliance review or inspection by the
Immigration and Naturalization Service with respect thereto); (d) to the
Company's knowledge, the Company has no labor relations problem relating to
collective bargaining or labor organization pending; (e) no workers'
compensation claim is pending against the Company nor is the Company aware of
any facts that would give rise to such a claim; (f) to the Company's
knowledge, no Employee is subject to any noncompetition agreement that would
impede in any way the ability of such employee to carry out fully all
activities of such employee in furtherance of the business of the Company; (g)
no Employee or former employee has any valid claim with respect to any
Intellectual Property Rights of the Company; (h) no Employee has a right to
receive a bonus based on any period ending after February 28, 1998; and (i) no
Employee has any severance rights.
3.20 Employee Benefit Plans.
(a) Schedule 3.20 lists (i) all nonqualified deferred compensation or
retirement plans, contracts or arrangements; (ii) all qualified defined
contribution plans (as defined in Section 3(34) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 414(i) of the
Code); (iii) all qualified defined benefit plans (as defined in Section 3(35) of
ERISA or Section 414(j) of the Code); and (iv) all employee welfare benefit
plans (as defined in Section 3(1) of ERISA) maintained or contributed to by the
Company with respect to Employees and former employees of the Company and all
dependents and beneficiaries of such Employees and former employees.
(b) All employee benefit plans (as defined in Section 3(3) of
ERISA) which the Company maintains or to which it contributes (collectively, the
"Plans") comply with the requirements of ERISA and the Code. With respect to
the Plans, (i) all required contributions which are due have been made and a
proper accrual has been made for all contributions due in the current fiscal
year; (ii) there are no actions, suits or claims pending, other than routine
uncontested claims for benefits; and (iii) there have been no prohibited
transactions (as defined in Section 406 of ERISA or Section 4975 of the Code).
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(c) The Company has provided or made available to Apertus true and
complete copies of (i) the most recent determination letter, if any, received by
the Company from the Internal Revenue Service regarding the Plans which the
Company maintains or to which it contributes and any amendment to any Plan made
subsequent to any Plan amendments covered by any such determination letter;
(ii) the most recent financial statements and annual report or return for the
Plans; and (iii) the most recently prepared actuarial valuation reports, if any.
(d) The Company does not contribute (and has not ever contributed) to
any multi-employer plan, as defined in Section 3(37) of ERISA. The Company has
no actual or potential liabilities under Section 4201 of ERISA for any complete
or partial withdrawal from a multi-employer plan. The Company has no actual or
potential liability for death or medical benefits after separation from
employment, other than (i) death benefits under the employee benefit plans or
programs (whether or not subject to ERISA) set forth in Schedule 3.20,
(ii) health care continuation benefits described in Section 4980B of the Code or
(iii) as otherwise required by applicable law.
(e) Neither the Company nor any of its directors, officers, employees
or other "fiduciaries," as such term is defined in Section 3(21) of ERISA, has
committed any breach of fiduciary responsibility imposed by ERISA or any other
applicable law with respect to the Plans which would subject the Company,
Apertus, Apertus's subsidiaries or any of their respective directors, officers
or employees to any liability under ERISA or any applicable law.
(f) The Company has not incurred any liability for any tax or civil
penalty or any disqualification of any employee benefit plan (as defined in
Section 3(3) of ERISA) imposed by Sections 4980B and 4975 of the Code and Part 6
of Title I and Section 502(i) of ERISA.
3.21 Insurance. Schedule 3.21 lists and briefly describes each
insurance policy maintained by the Company with respect to its properties,
assets and operations and sets forth the date of expiration of each such
insurance policy. All of such insurance policies are in full force and effect
and are issued by insurers of recognized responsibility. The Company is not in
default with respect to its obligations under any of such insurance policies.
3.22 Affiliate Transactions. To the knowledge of the Company,
except as disclosed Schedule 3.22, no shareholder, officer, director or
employee of the Company or any member of the immediate family of any such
officer, director or employee, or any entity in which any of such persons owns
any beneficial interest (other than any publicly held corporation whose stock
is traded on a national securities exchange or in the over-the-counter market
and less than one percent of the stock of which is beneficially owned by any
of such persons) (collectively "insiders"), has any agreement with the Company
(other than normal employment arrangements) or any interest in any property,
real, personal or mixed, tangible or intangible, used in or pertaining to the
business of the Company. To the knowledge
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of the Company, none of the insiders has any direct or indirect interest in
any competitor, supplier or customer of the Company or in any person, firm or
entity from whom or to whom the Company leases any property, or in any other
person, firm or entity with whom the Company transacts business of any nature.
For purposes of this Section 3.22, the members of the immediate family of an
officer, director or employee shall consist of the spouse, parents, children,
siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and
brothers- and sisters-in-law of such officer, director or employee.
3.23 Customers and Suppliers. Schedule 3.23 lists the 10 largest
customers (in terms of initial license fees) of the Company for each of the
year ended February 28, 1997 and the six months ended August 31, 1997 and sets
forth opposite the name of each such customer the dollar amount of revenues
attributable to such customer for each such period. Since the Balance Sheet
Date, no customer listed on Schedule 3.23 has notified the Company that it
will stop doing business with the Company.
3.24 Officers and Directors; Bank Accounts. Schedule 3.24 lists all
officers and directors of the Company and all of the Company's bank accounts
(designating each authorized signer).
3.25 Compliance with Laws; Permits.
(a) The Company and its officers, directors, agents and employees have
complied with all applicable laws, regulations and other requirements,
including, but not limited to, federal, state, local and foreign laws,
ordinances, rules, regulations and other requirements pertaining to product
labeling, consumer products safety, equal employment opportunity, employee
retirement, affirmative action and other hiring practices, occupational safety
and health, workers' compensation, unemployment and building and zoning codes to
which the Company may be subject. The Company is not relying on any exemption
from or deferral of any such applicable law, regulation or other requirement
that would not be available after the Closing Date.
(b) The Company has, in full force and effect, all licenses, permits
and certificates, from federal, state, local and foreign authorities (including,
without limitation, federal and state agencies regulating occupational health
and safety) necessary to conduct its business and own and operate its properties
(collectively, the "Permits"). A true, correct and complete list of all the
Permits is set forth in Schedule 3.25. The Company has conducted its business
in compliance with all terms and conditions of the Permits.
(c) The Company has not made or agreed to make gifts of money, other
property or similar benefits (other than incidental gifts of articles of nominal
value) to any actual or potential customer, supplier, governmental employee or
any other person in a position to assist or hinder the Company in connection
with any actual or proposed transaction.
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(d) In particular, but without limiting the generality of the
foregoing, the Company has not violated and has no liability, and has not
received a notice or charge asserting any violation of or liability under, the
federal Occupational Safety and Health Act of 1970 or any other federal or state
acts (including rules and regulations thereunder) regulating or otherwise
affecting employee health and safety.
3.26 Environmental Matters.
(a) As used in this Section 3.26, the following terms shall
have the following meanings:
(i) "Hazardous Materials" means any dangerous, toxic or
hazardous pollutant, contaminant, chemical, waste, material or substance
as defined in or governed by any federal, state or local law, statute,
code, ordinance, regulation, rule or other requirement relating to such
substance or otherwise relating to the environment or human health or
safety, including without limitation any waste, material, substance,
pollutant or contaminant that might cause any injury to human health or
safety or to the environment or might subject the Company to any
imposition of costs or liability under any Environmental Law.
(ii) "Environmental Laws" means all applicable federal, state,
local and foreign laws, rules, regulations, codes, ordinances, orders,
decrees, directives, permits, licenses and judgments relating to
pollution, contamination or protection of the environment (including,
without limitation, all applicable federal, state, local and foreign laws,
rules, regulations, codes, ordinances, orders, decrees, directives,
permits, licenses and judgments relating to Hazardous Materials in effect
as of the date of this Agreement).
(iii) "Release" shall mean the spilling, leaking, disposing,
discharging, emitting, depositing, ejecting, leaching, escaping or any other
release or threatened release, however defined, whether intentional or
unintentional, of any Hazardous Material.
(b) To the Company's knowledge, the Company is in compliance
with all applicable Environmental Laws.
(c) The Company has obtained, and maintained in full force and effect,
all environmental permits, licenses, certificates of compliance, approvals and
other authorizations necessary to conduct its business and operate its
properties (collectively, the "Environmental Permits"). A true and correct copy
of each such Environmental Permit has been provided by the Company to Apertus.
The Company has conducted its business in compliance with all terms and
conditions of the Environmental Permits. The Company has filed all reports and
notifications required to be filed under and pursuant to all Environmental Laws.
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(d) Except as set forth in Schedule 3.26, to the Company's knowledge:
(i) no Hazardous Materials have been generated, treated, contained, handled,
located, used, manufactured, processed, buried, incinerated, deposited, stored,
or released on, under or about any part of the property owned or leased by the
Company or any subsidiary at any time (the "Real Property"), (ii) the Real
Property contains no asbestos, urea, formaldehyde, radon at levels above natural
background, polychlorinated biphenyls (PCBs) or pesticides, and (iii) no
aboveground or underground storage tanks are located on, under or about the Real
Property, or have been located on, under or about the Real Property and then
subsequently been removed or filled.
(e) Except as set forth in Schedule 3.26, the Company has not received
notice alleging in any manner that it is or might be potentially responsible for
any Release of Hazardous Materials, or any costs arising under or violation of
Environmental Laws.
(f) To the Company's knowledge, no expenditure will be required in
order for Apertus to comply with any Environmental Laws in effect at the time of
the Closing in connection with the operation or continued operation of the
business of the Company or the Real Property in a manner consistent with the
current operation thereof by the Company.
(g) To the Company's knowledge, neither the Company nor the Real
Property is or has been listed on the United States Environmental Protection
Agency National Priorities List of Hazardous Waste Sites, or any other list,
schedule, law, inventory or record of hazardous or solid waste sites maintained
by any federal, state or local agency.
(h) The Company has disclosed and delivered or made available to
Apertus all environmental reports and investigations which the Company has
obtained or ordered with respect to the business of the Company.
(i) To the Company's knowledge, no part of the Real Property has been
used as a landfill, dump or other disposal, storage, transfer, handling or
treatment area for Hazardous Materials, or as a gasoline service station or a
facility for selling, dispensing, storing, transferring, disposing or handling
petroleum and/or petroleum products.
(j) To the Company's knowledge, no lien has been attached or filed
against the Company or the Real Property in favor of any governmental or private
entity for (i) any liability or imposition of costs under or violation of any
applicable Environmental Law; or (ii) any Release of Hazardous Materials.
3.27 Brokerage. No third party shall be entitled to receive
any brokerage commissions, finder's fees, fees for fairness opinion or
financial advisory services or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Company, except for Covington Associates,
which is entitled to receive a fee calculated as set forth in Schedule 3.27.
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3.28 Disclosure. Neither this Agreement nor any of the exhibits
hereto nor any of the documents delivered by or on behalf of the Company
pursuant to Article VII hereof nor the schedules nor any of the financial
statements referred to in Section 3.08 hereof, taken as a whole, contains any
untrue statement of a material fact regarding the Company or its business or
any of the other matters dealt with in this Article III relating to the
Company or the transactions contemplated by this Agreement that materially
adversely affects the Condition of the Company.
3.29 Information Statement. None of the information regarding the
Company supplied or to be supplied by the Company to Apertus for inclusion in
the Information Statement (as described in Section 6.01 hereof) and any other
documents regarding the Company supplied or to be supplied by the Company to
be filed with the Securities and Exchange Commission ("SEC") or any regulatory
authority in connection with the transactions contemplated herein will, at the
respective times the Information Statement and other documents are filed with
the SEC or any regulatory authority and, in the case of the Information
Statement, when mailed and at the time of the Stockholders' Meeting and at the
Effective Time, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
3.30 Definition of Company's Knowledge. As used in this Agreement,
the phrase "to the knowledge of the Company" or "to the best knowledge of the
Company" or any similar phrase means the actual knowledge of the Company's
current President, Chief Financial Officer, Vice President of Sales and
Marketing and Vice President of Software Development, without any obligation
on any of their parts to make any independent investigation of the matters
being represented and warranted, or to make any inquiry of any other persons,
or to search or examine any files, records, books, correspondence and the
like.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF APERTUS
-----------------------------------------
Apertus hereby represents and warrants to the Company that:
4.01 Incorporation and Corporate Power. Apertus is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Minnesota, with the requisite corporate power and authority to enter
into this Agreement and perform its obligations hereunder.
4.02 Execution, Delivery; Valid and Binding Agreement. The
execution, delivery and performance of this Agreement by Apertus and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all requisite corporate action, and no other corporate
proceedings on
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its part are necessary to authorize the execution, delivery or performance of
this Agreement. This Agreement has been duly executed and delivered by Apertus
and constitutes the valid and binding obligation of Apertus, enforceable in
accordance with its terms, and the Articles of Merger, when executed and filed
by Apertus, will be effective in accordance with its terms.
4.03 No Breach. The execution, delivery and performance of this
Agreement by Apertus and the consummation by Apertus of the transactions
contemplated hereby do not conflict with or result in any breach of any of the
provisions of, constitute a default under, result in a violation of, result in
the creation of a right of termination or acceleration or any lien, security
interest, charge or encumbrance upon any assets of Apertus, or require any
authorization, consent, approval, exemption or other action by or notice to
any court or other governmental body, under the provisions of the Articles of
Incorporation or Bylaws of Apertus or any indenture, mortgage, lease, loan
agreement or other agreement or instrument by which Apertus is bound or
affected, or any law, statute, rule or regulation or order, judgment or decree
to which Apertus is subject.
4.04 Apertus Common Stock; Notes. The Apertus Common Stock to be
issued as a part of the Merger Consideration has been duly authorized and,
upon issuance, will be validly issued, fully paid and nonassessable. The Notes
to be issued as a part of the Merger Consideration have been duly authorized,
and each Note, upon issuance, will constitute the valid and binding obligation
of Apertus, enforceable in accordance with its terms.
4.05 Governmental Authorities; Consents. Except for the filing of
the Articles of Merger with the Secretary of State of the State of Minnesota
and any filings under the Securities Act or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), Apertus is not required to submit any
notice, report or other filing with any governmental authority in connection
with the execution or delivery by it of this Agreement or the consummation of
the transactions contemplated hereby. No consent, approval or authorization of
any governmental or regulatory authority or any other party or person is
required to be obtained by Apertus in connection with its execution, delivery
and performance of this Agreement or the transactions contemplated hereby.
4.06 SEC Documents. Apertus has filed all required reports,
schedules, forms, statements, and other documents with the SEC since September
30, 1994 (together with later filed documents that revise or supersede earlier
filed documents, the "Apertus SEC Documents"). As of their respective dates,
the Apertus SEC Documents complied as to form in all material respects with
the requirements of the Securities Act, or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Apertus SEC Documents. None of the Apertus SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial
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statements of Apertus included in the Apertus SEC Documents complied as of
their respective dates of filing with the SEC as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the Exchange Act) applied
on a consistent basis during the periods involved (except as may be indicated
in the notes thereto), and fairly present the consolidated financial position
of Apertus and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
4.07 Brokerage. No third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for financial advisory services or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of
Apertus.
4.08 Ownership of the Company's Stock. Neither Apertus nor any of
its subsidiaries owns or has any beneficial interest in any shares of Capital
Stock or other securities convertible into Capital Stock.
4.09 Approval of this Agreement. Apertus's Board of Directors has
approved this Agreement and the transactions contemplated hereby, and no
further action on the part of Apertus's shareholders or otherwise is required
in connection with the Merger or any other transaction contemplated to take
place in connection therewith.
4.10 Continuity of Business Enterprise. It is the present intention
of Apertus to continue at least one significant historic business line of the
Company, or to use at least a significant portion of the Company's historic
business assets in a business, in each case within the meaning of Treasury
Regulations Section 1.368-1(d).
ARTICLE V
COVENANTS OF THE COMPANY
------------------------
5.01 Conduct of the Business. The Company shall observe each term
set forth in this Section 5.01 and agrees that, from the date hereof until the
Effective Time, unless otherwise consented to by Apertus in writing:
(a) The business of the Company shall be conducted only in, and the
Company shall not take any action except in, the ordinary course of the
Company's business, on an arm's-length basis and in accordance with all
applicable laws, rules and regulations and the Company's past custom and
practice;
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(b) The Company shall not, directly or indirectly, do or permit to
occur any of the following: (i) issue or sell any additional shares of, or any
options, warrants, conversion privileges or rights of any kind to acquire any
shares of, any of Capital Stock, (ii) sell, pledge, dispose of or encumber any
of its assets, except in the ordinary course of business; (iii) amend or propose
to amend its Articles of Organization or Bylaws; (iv) split, combine or
reclassify any outstanding shares of Capital Stock, or declare, set aside or pay
any dividend or other distribution payable in cash, stock, property or otherwise
with respect to shares of Capital Stock; (v) except by virtue of the Merger
redeem, purchase or acquire or offer to acquire any shares of Capital Stock or
other securities of the Company; (vi) acquire (by merger, exchange,
consolidation, acquisition of stock or assets or otherwise) any corporation,
partnership, joint venture or other business organization or division or assets
thereof; (vii) incur any indebtedness for borrowed money or issue any debt
securities except the borrowing of working capital in the ordinary course of
business and consistent with past practice; (viii) accelerate, beyond the normal
collection cycle, collection of accounts receivable; or (ix) enter into or
propose to enter into, or modify or propose to modify, any agreement,
arrangement or understanding with respect to any of the matters set forth in
this Section 5.01(b);
(c) The Company shall not, directly or indirectly, (i) enter into or
modify any employment, severance or similar agreements or arrangements with, or
grant any bonuses, salary increases, severance or termination pay to, any
officers or directors or consultants; or (ii) take any action with respect to
the grant of any bonuses, salary increases, severance or termination pay or with
respect to any increase of benefits payable in effect on the date hereof;
(d) The Company shall not adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, trust, fund or group arrangement for
the benefit or welfare of any employees or any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or
arrangements for the benefit or welfare of any director;
(e) The Company shall not cancel or terminate its current insurance
policies or cause any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse, replacement policies providing
coverage equal to or greater than the coverage under the canceled, terminated or
lapsed policies for substantially similar premiums are in full force and effect;
(f) The Company shall (i) use its best efforts to preserve intact the
Company's business organization and goodwill, keep available the services of the
Company's officers and employees as a group and maintain satisfactory
relationships with suppliers, distributors, customers and others having business
relationships with the Company; (ii) confer on a regular and frequent basis with
representatives of Apertus to report operational matters and the general status
of ongoing operations; (iii) not intentionally take any action which would
render, or
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which reasonably may be expected to render, any representation or warranty
made by it in this Agreement untrue at the Closing; (iv) notify Apertus of any
emergency or other change in the normal course of the Company's business or in
the operation of the Company's properties and of any governmental or third
party complaints, investigations or hearings (or communications indicating
that the same may be contemplated); and (v) promptly notify Apertus in writing
if the Company shall discover that any representation or warranty made by it
in this Agreement was when made, or has subsequently become, untrue;
(g) The Company shall (i) file any Tax returns, elections or
information statements with respect to any liabilities for Taxes of the Company
or other matters relating to Taxes of the Company which pursuant to applicable
law must be filed prior to the Closing Date; (ii) promptly upon filing provide
copies of any such Tax returns, elections or information statements to Apertus;
(iii) make any such Tax elections or other discretionary positions with respect
to Taxes taken by or affecting the Company only upon prior consultation with and
consent of Apertus; and (iv) not amend any Return; and
(h) The Company shall not perform any act referenced by (or omit to
perform any act which omission is referenced by) the terms of Section 3.11.
5.02 Access to Books and Records. Between the date hereof and the
Closing Date, the Company shall afford to Apertus and its authorized
representatives full access at all reasonable times and upon reasonable notice
to the offices, properties, books, records, officers, employees and other
items of the Company, and the work papers of Arthur Andersen LLP the Company's
independent accountants, and otherwise provide such assistance as is
reasonably requested by Apertus in order that Apertus may have a full
opportunity to make such investigation and evaluation as it shall reasonably
desire to make of the business and affairs of the Company. In addition, the
Company and its officers and directors shall cooperate fully (including
providing introductions, where necessary) with Apertus to enable Apertus to
contact such third parties, including customers, prospective customers,
specifying agencies, vendors, or suppliers of the Company as Apertus deems
reasonably necessary to complete its due diligence; provided, that Apertus
agrees not to initiate such contacts without the prior approval of the
Company, which approval will not be unreasonably withheld.
5.03 Meeting of Stockholders. The Company shall, promptly after the
date of this Agreement and in no event later than October 31, 1997, take all
action necessary in accordance with the Massachusetts Law and the Company's
Articles of Organization and Bylaws to convene a meeting of the stockholders
of the Company for the purpose of voting to approve this Agreement, and the
Company shall consult with Apertus in connection therewith. The Company shall
use its best efforts to obtain from the stockholders of the Company votes in
favor of this Agreement.
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5.04 Demands. The Company shall give Apertus (i) prompt notice of
any written notice of objection to the proposed Merger, any withdrawal of a
demand for fair value and any other instrument served pursuant to Section 86
or Section 89 of the Massachusetts Law received by the Company, and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for fair value under such Sections 90-97 of the Massachusetts Law.
5.05 Conditions. The Company shall take all actions necessary or
desirable to cause the conditions set forth in Section 7.01 to be satisfied
and to consummate the transactions contemplated herein as soon as reasonably
possible after the satisfaction thereof (but in any event within three
business days of such date), including the execution and delivery of the
documents and instruments described in Section 7.01.
5.06 No Shop. Prior to November 30, 1997, the Company: (i) will
not, directly or indirectly, through any officer, director, agent, affiliate,
employee or otherwise, solicit, initiate or encourage submission of any
proposal or offer from any person, group or entity relating to any acquisition
of the Capital Stock or business of the Company, or all or a material portion
of the assets of the Company, or other similar transaction or business
combination involving the business of the Company, (ii) will not participate
in any negotiations or discussions regarding or furnish to any other person
any information with respect to, or otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage any effort or attempt by any
other person or entity to do or seek such acquisition or other transaction,
(iii) will inform any person making inquiry with respect to the Company of
this Agreement, and (iv) will inform Apertus of any such inquiry.
5.07 Information Statement. The Company will promptly provide to
Apertus information pertaining to the Company, including financial statements,
necessary for Apertus to prepare an Information Statement complying with the
requirements of Regulation D under the Securities Act.
5.08 Confidentiality. All confidential information of Apertus
obtained from Apertus by the Company and its representatives during the course
of negotiation of this Agreement shall be subject to the terms of the
Confidentiality Agreement dated September 30, 1997 between Apertus and the
Company (the "Confidentiality Agreement").
ARTICLE VI
COVENANTS OF APERTUS
--------------------
6.01 Information Statement. Apertus will prepare an Information
Statement promptly after the date hereof, which shall be sent to holders of
the Capital Stock that would receive Apertus Common Stock in connection with
the Merger.
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6.02 Conditions. Apertus shall take all actions necessary or
desirable to cause the conditions set forth in Section 7.02 to be satisfied
and to consummate the transactions contemplated herein as soon as reasonably
possible after the satisfaction thereof (but in any event within three
business days of such date).
6.03 Payment of Loans. Following the Closing, Apertus shall,
within two business days of the closing of Apertus's sale of its Planet
Division, repay that certain subordinated debt under the Pioneer Notes in the
aggregate principal amount of $1,400,000 payable to Pioneer Capital (the
"Pioneer Loan"), together with accrued interest thereon, consistent with the
terms of the Pioneer Loan; provided, that Apertus' sole obligation with
respect to the Pioneer Loan after the Closing shall be repayment of the
Pioneer Loan, and the note representing such Pioneer Loan shall not be
convertible into equity securities of Apertus.
6.04 Apertus Board of Directors. Effective upon the Closing, the
number of members of the Board of Directors of Apertus shall be increased by
two, and Apertus's Board of Directors shall appoint Paul Fluckiger and and
another director to be selected by Mr. Fluckiger to fill such vacancies.
6.05 Blue Sky Permits. Apertus shall use its best efforts
to obtain, prior to the Effective Date, all necessary state securities laws or
"blue sky" permits and approvals required to carry out the transactions
contemplated by this Agreement, and will pay all expenses incident thereto.
6.06 Form S-8. Apertus has filed a registration statement on Form S-
8 or another appropriate form, which is effective with respect to the shares
of Apertus Common Stock subject to Apertus's assumption of the Outstanding
Stock Options, and shall use its best efforts to maintain the effectiveness of
such registration statement or registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so
long as such Outstanding Stock Options remain outstanding.
6.07 Confidentiality. All confidential information of the Company
obtained from the Company by Apertus and its representatives during the course
of their due diligence investigation of the Company shall be subject to the
terms of the Confidentiality Agreement.
6.08 Continuity of Business Enterprises. Apertus will continue at
least one significant historic business line of the Company, or use at least a
significant portion of the Company's historic business assets in a business,
in each case within the meaning of Treasury Regulations Section 1.368-1(d).
6.09 Carleton Line of Credit. Concurrently with the Closing,
Apertus shall repay the outstanding balance on Carleton's line of credit with
Fleet National Bank.
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ARTICLE VII
CONDITIONS TO CLOSING
---------------------
7.01 Conditions to Apertus's Obligations. The obligation of Apertus
to consummate the transactions contemplated by this Agreement is subject to
the satisfaction of the following conditions at or before the Effective Time:
(a) The representations and warranties set forth in Article III hereof
shall be true and correct in all material respects at and as of the Effective
Time as though then made and as though the Effective Time had been substituted
for the date of this Agreement throughout such representations and warranties
(without taking into account any disclosures by the Company of discoveries,
events or occurrences arising on or after the date hereof), except that any such
representation or warranty made as of a specified date (other than the date
hereof) shall only need to have been true on and as of such date; provided, that
for purposes of this Section 7.01(a), the representations and warranties set
forth in Section 3.10 shall be as of the date of this Agreement;
(b) The Company shall have performed in all material respects all of
the covenants and agreements required to be performed and complied with by it
under this Agreement prior to the Effective Time;
(c) Except as set forth in Schedule 3.10, since February 28, 1997,
there shall not have occurred any Material Adverse Change in the Company;
(d) The Company shall have obtained, or caused to be obtained, each
consent and approval necessary in order to ensure that the transactions
contemplated herein do not constitute a breach or violation of, or result in a
right of termination or acceleration of, or creation of any encumbrance on any
of the Company's assets pursuant to the provisions of, any agreement,
arrangement or undertaking of or affecting the Company or any license, franchise
or permit of or affecting the Company if the consequences of such breach,
violation termination, acceleration or encumbrance would have an aggregate
financial effect on the Company in excess of $10,000;
(e) This Agreement shall have been duly and validly approved by the
stockholders of the Company; the Company shall have delivered to Apertus
evidence, in form satisfactory to Apertus's counsel, of such approval; and the
Articles of Merger shall have been duly executed by the Company;
(f) All other governmental filings, authorizations and approvals that
are required for the consummation of the transactions contemplated by this
Agreement will have been duly made and obtained;
(g) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or
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indirectly restrain or prohibit, the consummation of the transactions
contemplated hereby or seeking to obtain damages in connection with such
transactions, (ii) seeking to prohibit direct or indirect ownership or
operation by Apertus of all or any portion of the business or assets of the
Company, or to compel Apertus or any of its subsidiaries or the Company to
dispose of or to hold separately all or any portion of the business or assets
of Apertus and its subsidiaries or of the Company, as a result of the
transactions contemplated hereby, (iii) seeking to require direct or indirect
transfer or sale by Apertus of any of the shares of Capital Stock, (iv)
seeking to invalidate or render unenforceable any provision of this Agreement
or any of the other agreements attached as exhibits hereto (collectively, the
"Related Agreements"), or (v) otherwise relating to the transactions
contemplated hereby;
(h) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated by
this Agreement, by any federal, state or foreign court, government or
governmental authority or agency, which would reasonably be expected to result,
directly or indirectly, in any of the consequences referred to in
Section 7.01(g) hereof;
(i) There shall have been no damage, destruction or loss of or to any
property or properties owned or used by the Company, whether or not covered by
insurance, which, in the aggregate, has, or would be reasonably likely to have,
a material adverse effect on the Company;
(j) No more than 5% of the outstanding shares of Capital Stock, giving
effect to the conversion of all preferred shares, shall be qualified to be
Dissenting Shares as of the Effective Time;
(k) Apertus shall have received from counsel for the Company a written
opinion, dated the date of the Effective Time, addressed to Apertus and
satisfactory to Apertus's counsel, in form and substance substantially as set
forth in Exhibit C;
(l) Prior to the Effective Time, the Company shall have delivered to
Apertus all of the following:
(i) a certificate of the Chief Executive Officer and Chief
Financial Officer of the Company, substantially in the form set forth in
Exhibit D attached hereto, dated as of the date of the Effective Time,
stating that the conditions precedent set forth in subsections (a) and (b)
above have been satisfied;
(ii) copies of the third party and governmental consents and
approvals and of the authorizations referred to in subsections (d), (e)
and (f) above;
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(iii) the Company's minute books, stock transfer records,
corporate seal and other materials related to the Company's corporate
administration;
(iv) a copy of the Articles of Organization of the Company,
certified by the Secretary of State of the Commonwealth of Massachusetts,
and Certificates of Good Standing from the Secretaries of State of the
Commonwealth of Massachusetts and the State of New York evidencing the
good standing of the Company in each such jurisdiction;
(v) a copy of each of (X) the text of the resolutions adopted
by the board of directors of the Company authorizing the execution,
delivery and performance of this Agreement and the consummation of all of
the transactions contemplated by this Agreement and (Y) the bylaws of the
Company; along with certificates executed on behalf of the Company by its
corporate secretary certifying to Apertus that such copies are true,
correct and complete copies of such resolutions and bylaws, respectively,
and that such resolutions and bylaws were duly adopted and have not been
amended or rescinded;
(vi) incumbency certificates executed on behalf of the Company
by its corporate secretary certifying the signature and office of each
officer executing this Agreement and the Related Agreements executed by
the Company ;
(vii) an executed copy of each of the Related Agreements; and
(viii) such other certificates, documents and instruments as
Apertus reasonably requests related to the transactions contemplated
hereby;
(m) The closing of Apertus's sale of its Internet Services Division
shall occur prior to or concurrently with the Closing of the Merger;
(n) The Subsidiary shall be a wholly owned subsidiary of the
Company prior to Closing;
(o) The Company's stockholders entitled to receive the Merger
Consideration shall have acknowledged in writing that they have no plan,
intention, or arrangement to dispose of any of the Apertus Common Stock received
in the Merger in a manner that would cause the Merger to violate the continuity
of shareholder interest requirement set forth in Treasury Regulations
Section 1.368-1; and
(p) In connection with the Merger, not more than 35 persons who are
not Accredited Investors within the meaning of Rule 501 under the Securities Act
will receive Apertus Common Stock and Notes.
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7.02 Conditions to the Company's Obligations. The obligations of
the Company to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions at or before the
Effective Time:
(a) The representations and warranties set forth in Article IV hereof
will be true and correct in all material respects at and as of the Effective
Time as though then made and as though the Effective Time had been substituted
for the date of this Agreement throughout such representations and warranties,
except that any such representation or warranty made as of a specified date
(other than the date hereof) shall only need to have been true on and as of such
date;
(b) Apertus shall have performed in all material respects all the
covenants and agreements required to be performed by its under this Agreement
prior to the Effective Time;
(c) All governmental filings, authorizations and approvals that are
required for the consummation of the transactions contemplated hereby will have
been duly made and obtained;
(d) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated by this Agreement or seeking to obtain damages in
connection with such transactions, (ii) seeking to invalidate or render
unenforceable any provision of this Agreement or any of the Related Agreements,
or (iii) otherwise relating to the transactions contemplated hereby or thereby;
(e) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated by
this Agreement, by any federal, state or foreign court, government or
governmental authority or agency, which would reasonably be expected to result,
directly or indirectly, in any of the consequences referred to in
Section 7.02(d) hereof;
(f) The Articles of Merger shall have been duly executed by Apertus;
(g) The Company shall have received from counsel for Apertus a written
opinion, dated as of the date of the Effective Time, addressed to the Company
and satisfactory to the Company's counsel, in form and substance substantially
as set forth in Exhibit E;
(h) At or prior to the Effective Time, Apertus will have delivered to
the Company (i) a certificate of the Chief Executive Officer of Apertus,
substantially in the form set forth as Exhibit F attached hereto and dated as of
the date of the Effective Time, stating that the conditions precedent set forth
in subsections (a) and (b) above have been satisfied, (ii) a copy of each of (X)
the text of the resolutions adopted by the board of directors of Apertus
authorizing the execution, delivery and performance of this Agreement and the
consummation of all of the transactions
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contemplated by this Agreement and (Y) the bylaws of Apertus, along with
certificates executed on behalf of Apertus by its corporate secretary
certifying to the Company that such copies are true, correct and complete
copies of such resolutions and bylaws, respectively, and that such resolutions
and bylaws were duly adopted and have not been amended or rescinded, and (iii)
incumbency certificates executed on behalf of Apertus by its corporate
secretary certifying the signature and office of each officer executing this
Agreement and of the Related Agreements as to which Apertus is a party, (iv)
an executed copy of each of the Related Agreements and (v) such other
certificates, documents and instruments as the Company reasonably requests
related to the transaction contemplated hereby;
(i) The parties hereto and the Exchange Agent shall have executed and
delivered an Exchange Agent Agreement substantially in the form attached hereto
as Exhibit G;
(j) The Company's stockholders shall have approved this Agreement; and
(k) The Company's stockholders entitled to receive the Merger
Consideration shall have acknowledged in writing that they have no plan,
intention, or arrangement to dispose of any of the Apertus Common Stock
received in the Merger in a manner that would cause the Merger to violate the
continuity of shareholder interest requirement set forth in Treasury
Regulations Section 1.368-1.
ARTICLE VIII
TERMINATION
-----------
8.01 Termination. This Agreement may be terminated at any time prior
to the Effective Time:
(a) by the mutual consent of Apertus and the Company;
(b) by either Apertus or the Company if there has been a material
misrepresentation, breach of warranty or breach of covenant on the part of the
other in the representations, warranties and covenants set forth in this
Agreement;
(c) by either Apertus or the Company if the transactions contemplated
by this Agreement have not been consummated by November 30, 1997; provided that,
neither will be entitled to terminate this Agreement pursuant to this
Section 8.01(c) if such party's willful breach of this Agreement has prevented
the consummation of the transactions contemplated by this Agreement; and
(d) by Apertus if, after the date hereof, there shall have been a
Material Adverse Change in the Company or if an event shall have occurred which,
so far as reasonably can be foreseen, would result in any such change.
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8.02 Effect of Termination. In the event of termination of this
Agreement by either Apertus or the Company as provided in Section 8.01, all
provisions of this Agreement shall terminate and there shall be no liability
on the part of Apertus or the Company or their respective shareholders,
officers, or directors, except that Sections 5.08, 6.07, 11.01, 11.02 and
11.09 hereof shall survive indefinitely and except that parties shall remain
liable for any breach of this Agreement prior to the time of such termination.
ARTICLE IX
ADDITIONAL AGREEMENTS
---------------------
9.01 Registration Rights.
(a) Required Registration. If, at any time after six months following
the Closing Date, Apertus receives a written request from holders of 30% or more
of the Apertus Common Stock issued pursuant to the Merger, Apertus shall prepare
and file within 30 days following such request a Form S-3 registration statement
under the Securities Act covering the shares of Apertus Common Stock that are
the subject of such requests and shall use its best efforts to cause such
registration statement to become effective. Apertus shall be obligated to
prepare, file and cause to become effective only one registration statement
pursuant to this Section 9.01(a).
(b) Incidental Registration. For six months following the Effective
Date, if Apertus shall determine to proceed with the actual preparation and
filing of a registration statement under the Securities Act in connection with
the proposed offer and sale for money of any of its common stock by it or any of
its shareholders (other than pursuant to a special purpose form, such as Form S-
4 or Form S-8), Apertus will, at least 45 days prior to the filing of such
registration statement, give written notice of its determination to all holders
of Apertus Common Stock issued pursuant to the Merger. Upon the written request
of such shareholder given within 30 days after receipt of such notice from
Apertus, Apertus shall, except as herein provided, use its best efforts to cause
all such shares of Apertus Common Stock, the holders of which have so requested
registration thereof, to be included in such registration statement, all to the
extent requisite to permit the sale or other disposition by the prospective
seller or sellers of the Apertus Common Stock to be so registered; provided,
however, that (i) nothing herein shall prevent Apertus from, at any time,
abandoning or delaying any such registration initiated by it, and (ii) if
Apertus determines not to proceed with a registration after the registration
statement has been filed with the SEC and Apertus's decision not to proceed is
primarily based upon the anticipated public offering price of the common stock
to be sold by Apertus, Apertus shall promptly complete the registration for the
benefit of those selling shareholders who wish to proceed with a public offering
of their Apertus Common Stock and who bear all expenses in excess of $50,000
incurred by Apertus as the result of such registration after Apertus has decided
not to proceed; provided further, that if any registration pursuant to this
section shall be underwritten in whole or in part, (X) Apertus may require that
the Apertus
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Common Stock requested for inclusion pursuant to this section be included in
the underwriting on the same terms and conditions as the Apertus Common Stock
otherwise being sold through the underwriters and (Y) Apertus shall have the
right to limit the aggregate size of the offering or the number of shares to
be included therein by shareholders of Apertus if requested to do so in good
faith by the managing underwriter of the offering, and only securities which
are to be included in the underwriting may be included in the registration.
Whenever the number of shares that may be registered pursuant to this Section
9.01(b) is limited by the provisions of the preceding sentence, (i) Apertus
shall have priority as to sales over the holders of Apertus Common Stock
received in the Merger, and (ii) such holders shall share pro rata (as a
single class) in the available portion (if any) of the registration in
question, such sharing to be based upon the number of shares of Apertus Common
Stock then held by each of such holders, respectively.
(c) Registration Procedures. If and whenever Apertus is required by
the provisions of Sections 9.01(a) or (b) to effect the registration of any
securities under the Securities Act, Apertus will:
(i) prepare and file with the SEC a registration statement with
respect to such shares of Apertus Common Stock, and use its best efforts
to cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
Apertus Common Stock, not to exceed 24 months;
(ii) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective for such
period as may be reasonably necessary to effect the sale of such Apertus
Common Stock, not to exceed 24 months;
(iii) furnish to the shareholders participating in such
registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as such
shareholders and underwriters may reasonably request in order to
facilitate the offering of such Apertus Common Stock;
(iv) notify the shareholders participating in such
registration, promptly after it shall receive notice thereof, of the time
when such registration statement has become effective or a supplement to
any prospectus forming a part of such registration statement has been
filed;
(v) notify the shareholders participating in such registration
promptly of any request by the SEC for the amending or supplementing of
such registration statement or prospectus or for additional information;
and
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(vi) advise such shareholders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by
the SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued.
(d) Registration Expenses. With respect to such registration, Apertus
shall bear the following fees, costs and expenses: all registration fees,
printing expenses, fees and disbursements of counsel and accountants for Apertus
and all internal Apertus expenses. Fees and disbursements of counsel and
accountants for the shareholders participating in such registration,
underwriting discounts and commissions and transfer taxes for such shareholders
and any other expenses incurred by the shareholders not expressly included above
shall be borne by such shareholders.
(e) Registration Rights of Transferees. The registration rights
granted to the holders of Apertus Common Stock pursuant to this Article IX shall
also be for the benefit of, and enforceable by, any subsequent holder of Apertus
Common Stock, whether or not any express assignment of such rights to any such
subsequent holder is made.
9.02 Employee Benefits. All employee compensation, benefit and
welfare plans of the Company will remain in effect temporarily after the
Effective Time and, in Apertus's discretion, will be discontinued or merged
into Apertus's plans, in which case employees of the Company shall become
eligible for the employee benefit plans of Apertus on the same terms as such
plans and benefits are generally offered from time to time to employees of
Apertus in comparable positions.
9.03 Severance Benefits and Costs. Severance benefits and related
costs arising within six months of Closing and paid by Apertus as a result of
individual employment agreements identified on Schedule 9.03 between the
Company and its employees shall reduce the Initial Principal Amount of the
Notes on a pro rata, dollar-for-dollar basis. The payments required by this
Section 9.03 are in addition to the indemnification provided in Section 10.02
and accordingly shall be deducted from the Notes without regard to the
provisions of Section 10.02(e)(iii) establishing a threshold amount.
9.04 Indemnification. For six years after the Effective Time, any
person who is an officer or director of the Company prior to the Effective
Time shall have rights to indemnification from Apertus with respect to acts or
omissions occurring prior to the Effective Time to the extent provided under
the Company's Articles of Organization and Bylaws in effect on the date
hereof.
9.05 Reorganization. From and after the date hereof and until the
Effective Time, none of Apertus, the Company or any of their respective
subsidiaries
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or other affiliates shall (i) knowingly take any action, or knowingly fail to
take any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code or (ii) enter
into any contract, agreement, commitment or arrangement with respect to the
foregoing. Following the Effective Time, Apertus shall use its reasonable best
efforts to conduct its business in a manner that would not jeopardize the
characterization of the Merger as a reorganization within the meaning of
Section 368(a) of the Code.
ARTICLE X
SURVIVAL AND OFFSET
-------------------
10.01 Survival of Representations and Warranties. Notwithstanding
any investigation made by or on behalf of any of the parties hereto or the
results of any such investigation and notwithstanding the participation of
such party in the Closing, the representations and warranties of the Company
contained in, or attached to, this Agreement shall survive for two years
following the Effective Date (the "Offset Period"); provided, however, that,
with respect to any specific representation or warranty under which a
Protected Party (as defined in Section 10.02 hereof) shall have made a claim
for offset hereunder prior to the date on which such representation or
warranty would expire in accordance with this Section 10.01, and as to which
such claim has not been completely and finally resolved prior to such date,
such representation or warranty shall survive for the period of time beyond
such date sufficient to resolve, completely and finally, the claim relating to
such representation or warranty; provided further, that Apertus shall be able
to exercise its Offset Right (as hereinafter defined) with respect to Carleton
Europe Losses (as hereinafter defined) for up to three years after the
Effective Date.
10.02 Right of Offset.
(a) Subject to Section 10.02(e) hereof, Apertus shall have a right to
offset (the "Offset Right"), from time to time, its "Losses" (as hereinafter
defined) against the Notes with respect to any actual loss, liability,
deficiency, damage, expense or cost (including reasonable legal expenses),
whether or not actually incurred or paid during the Offset Period (collectively,
the "Losses"), which Apertus or any of its affiliates, officers, directors,
employees or agents (the "Protected Parties") suffers, sustains or becomes
subject to, as a result of:
(i) Any misrepresentation (a "Misrepresentation") in any of the
representations and warranties of the Company contained in this Agreement
or in any of the exhibits, schedules, agreements, certificates and other
documents delivered or to be delivered by or on behalf of the Company
pursuant to this Agreement or otherwise attached to, or referenced or
incorporated in, this Agreement (collectively, the "Related Documents");
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(ii) Any breach (a "Breach") of, violation of, or failure to
perform, any agreement or covenant of the Company contained in this
Agreement or any of the Related Documents;
(iii) Any Claim (as defined in Section 10.02(c) hereof) or
threatened Claim against the Protected Parties arising out of actions,
inactions or status of the Company or the Subsidiary prior to the
Effective Time, including, but not limited to, all Claims arising out of
goods or services sold or delivered prior to such time;
(iv) Any Losses due to any settlement with Carleton Europe, N.V.
("Carleton Europe") or any Claim or threatened Claim against the
Protected Parties involving Carleton Europe and arising out of the
Company's Intellectual Property Rights, the Company's or the Subsidiary's
right to distribute Carleton Europe's products, any goods or services
developed, sold or delivered by the Company or the Subsidiary or any
agreements (written or unwritten) between Carleton Europe and the Company
or the Subsidiary prior to the Effective Time, regardless of whether
there may also be a Misrepresentation (all such Losses, Claims or
threatened Claims described in this paragraph (iv) are referred to as
"Carleton Europe Losses"); or
(v) Any amounts paid in respect of the Dissenting Shares in
excess of the aggregate amount of the value of the Merger Consideration
that the holders of such Dissenting Shares would have received in the
Merger.
(b) Apertus may exercise its Offset Right, from time to time, in
accordance with the procedures set forth in paragraphs (c) and (d) of this
Section 10.02, against the Final Amounts of the Notes. Each time, if any, that
Apertus exercises its Offset Right, Apertus shall promptly deliver to the
Stockholders' Representatives (as defined in Section 10.03 hereof) a schedule
signed by an officer of Apertus reflecting the aggregate and pro rata
calculations of the Reduced Principal Amounts and any other reductions to the
Final Amounts after giving effect to such exercise of its Offset Right.
(c) In the event any of the Protected Parties becomes involved in any
legal, governmental or administrative proceeding which may result in Losses, or
if any such proceeding is threatened or asserted (any such third party action or
proceeding being referred to herein as a "Claim"), Apertus shall promptly notify
the Stockholders' Representatives in writing of the nature of any such Claim and
Apertus's estimate of the Losses arising therefrom.
(i) The Stockholders' Representatives shall be entitled to
contest and defend such Claim; provided, that the Stockholders'
Representatives have a reasonable basis for concluding such defense may
be successful and diligently contest and defend such Claim; provided
further, that Apertus, in its sole and absolute discretion, may notify
the Stockholders' Representatives at any time that any such contest or
defense must be immediately terminated, in which case Apertus's Offset
Right with respect to
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such Claim shall thereupon terminate. Notice of the intention so to
contest and defend shall be given by the Stockholders' Representatives to
Apertus within 20 days after Apertus provides notice of such Claim (but,
in all events, at least five business days prior to the date that an
answer to such Claim is due to be filed). Such contest and defense shall
be conducted by reputable attorneys employed by the Stockholders'
Representatives. Apertus shall be entitled at any time, at its own cost
and expense (which expense shall not constitute a Loss unless the
Stockholders' Representatives are not adequately representing or, because
of a conflict of interest between, may not adequately represent, any
interests of the Protected Parties, and only to the extent that such
expenses are reasonable), to participate in such contest and defense and
to be represented by attorneys of its own choosing. If Apertus elects to
participate in such defense, Apertus shall cooperate with the
Stockholders' Representatives in the conduct of such defense. Neither
Apertus nor the Stockholders' Representatives may concede, settle or
compromise any Claim without the consent of the other, which consent
shall not be unreasonably withheld; provided, that the Stockholders'
Representatives may, without the consent of Apertus, settle any Claim
which is solely for money damages if the Stockholders' Representatives
acknowledge that such Claim gives rise to a Loss that is subject to
Apertus's Offset Right hereunder and if the entire amount of the
settlement amount may be recovered by Apertus by means of Apertus's
Offset Rights hereunder. The Stockholders' Representatives shall have the
right to have the cost of defense, including reasonable legal expenses,
paid or reimbursed through the exercise of Apertus's Offset Rights. A
request for payment or reimbursement thereof shall constitute the
acknowledgment of the Stockholders' Representatives that such costs
constitutes a Loss that is subject to Apertus's Offset Rights.
(ii) Notwithstanding the foregoing, if: (A) a Claim seeks
equitable relief against any of the Protected Parties, (B) the subject
matter of a Claim relates to the ongoing business of any of the Protected
Parties, which Claim, if decided against such Protected Party, would
materially adversely affect the ongoing business or reputation of such
Protected Party, or (C) the estimated Losses of the Protected Parties
related to the Claim exceed the amount Apertus may recover using its
Offset Right hereunder, then, in each such case, Apertus alone shall be
entitled to contest, defend and settle such Claim in the first instance
(but the Stockholders' Representatives shall be entitled to participate
therein at their own expense through counsel of their own choosing) and,
if Apertus does not contest, defend or settle such Claim, Stockholders'
Representatives shall have the right to contest and defend (but not
settle) such Claim.
(d) In the event Apertus (on behalf of itself or any Protected Party)
should have a claim giving rise to an Offset Right that does not involve a
Claim, Apertus shall deliver a notice (the "Offset Notice") of such claim with
reasonable promptness to the Stockholders' Representatives. The Offset Notice
shall include an estimate of Apertus's Losses relating to such claim. If the
Stockholders'
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Representatives notify Apertus that the Stockholders' Representatives do not
dispute the claim described in the Offset Notice, or if the Stockholders'
Representatives fail to notify Apertus within 45 days after delivery of the
Offset Notice of any such dispute with respect to such claim, the Losses in
the amount specified in the Offset Notice will be conclusively deemed Losses,
and Apertus may exercise its Offset Right with respect to such amount in
accordance with the Offset Notice, whereupon the Initial Principal Amount of
each Note shall be reduced on a pro rata basis by the amount of such Loss. If
the Stockholders' Representatives have timely disputed such claim, Apertus's
representatives and the Stockholders' Representatives will proceed in good
faith to negotiate a resolution of such dispute, and if not resolved through
the negotiations of such representatives within 60 days after the date of the
Offset Notice of such claim, such dispute shall be resolved fully and finally
in Boston, Massachusetts by an arbitrator selected pursuant to, and an
arbitration governed by, the Commercial Arbitration Rules of the American
Arbitration Association. The arbitrator shall resolve the dispute within 30
days after selection and judgment upon the award rendered by such arbitrator
may be entered in any court of competent jurisdiction.
(e) Notwithstanding anything contained in this Agreement to the
contrary, the right of Apertus to exercise its Offset Right hereunder shall be
subject to the following limitations:
(i) Apertus shall not be entitled to exercise its Offset Right
with respect to any Losses unless Apertus delivers to the Stockholders'
Representatives an Offset Notice under Section 10.02(d) or notice of a
Claim under Section 10.02(c) relating to such Losses prior to the end of
the Offset Period;
(ii) Apertus shall not be entitled to exercise its Offset Right
with respect to any Losses to the extent that such Losses result from or
arise out of the gross negligence or willful misconduct of Apertus or any
director, officer or employee of Apertus;
(iii) Apertus may exercise its Offset Right only if and to the
extent that the aggregate amount of all Apertus Losses exceeds $100,000
(the "Basket Amount"); provided, however, that the Offset Right shall be
limited to Apertus Losses (other than Carleton Europe Losses) totalling
$1,000,000 in the aggregate (the "Aggregate Limit"); provided further,
that such Basket Amount shall not apply to Carleton Europe Losses; and
Carleton Europe Losses shall be limited to $1,000,000 in the aggregate;
and
(iv) Notwithstanding anything herein to the contrary, the Notes
shall be the sole source of Offset for Apertus Losses. Apertus Losses
shall be deducted from the Notes on a pro rata basis (based upon the
ratio that the Initial Principal Amount of the Note bears to the
aggregate Initial Principal Amount of all Notes issued pursuant to this
Agreement, and for this purpose, the Initial Principal Amount of all
Notes issuable upon the exercise of Outstanding Warrants shall be deemed
to be outstanding).
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(f) The exercise of the Offset Right by Apertus in good faith, whether
or not ultimately determined to be justified, will not constitute an event of
default under the Notes. Neither the exercise of nor the failure to exercise
such Offset Right will constitute an election of remedies or limit Apertus in
any manner in the enforcement of any other remedies that may be available to it.
(g) Any amount payable under this Article X shall be, to the extent
permitted by law, an adjustment to purchase price.
(h) The parties hereto agree that the exercise of the Offset Right by
Apertus, and satisfaction thereof, shall be its sole and exclusive remedy with
respect to any claims arising under this Agreement or related to the
transactions contemplated hereby.
(i) In the event of a dispute relating to the exercise of the Offset
Right, the prevailing party shall be entitled to recover from the other its
costs and expenses thereof, including its reasonable attorneys' fees.
10.03 Stockholders' Representatives.
(a) Appointment. As used in this Agreement, the "Stockholders'
Representatives" shall mean Hemendra Desai and Frank Polestra, or any person
appointed as a successor Stockholders' Representative pursuant to
Section 10.03(b) hereof. The number of Stockholders' Representatives shall not
be more than two persons. By acceptance of the Notes, each holder of a Note
agrees to such appointment and authorizes the Stockholders' Representatives to
act on behalf of such holder for all Apertus claims pursuant to this Article X.
(b) Election and Replacement. During the period ending upon the date
when all obligations under this Agreement have been discharged (including all
obligations pursuant to Section 10.02 hereof), holders of greater than 50% of
the aggregate value of the Notes (a "Majority") may, from time to time upon
written notice to the Stockholders' Representatives and Apertus, remove any of
the Stockholders' Representatives or appoint one or more new Stockholders'
Representatives to fill any vacancy created by the death, incapacitation,
resignation or removal of one or both Stockholders' Representatives.
Furthermore, if a Stockholders' Representative dies, becomes incapacitated,
resigns or is removed by a Majority, the Majority shall appoint a successor
Stockholders' Representative to fill the vacancy so created. If the Majority
fails to appoint such successor within 10 business days after a request by
Apertus to appoint such successor, the remaining Stockholders' Representative
shall appoint such successor. If the remaining Stockholders' Representative
does not appoint such successor within 15 business days after Apertus's initial
request to the Majority to appoint such successor, then Apertus shall appoint
such successor, and shall advise all Note holders of such appointment by written
notice. A copy of any appointment by the Majority of the Stockholders'
Representatives of any successor Stockholders' Representative shall be provided
to Apertus promptly after it shall have been effected.
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(c) Authority. On behalf of the all holders of the Notes, the
Stockholders' Representatives shall be authorized to take action and to make and
deliver any certificate, notice, consent or instrument required or permitted to
be made or delivered under this Agreement or under the documents referred to in
this Agreement, including, without limitation, any such actions with respect to
an Offset Right (an "Instrument"), which the Stockholders' Representatives
determine in their discretion to be necessary, appropriate or desirable, and, in
connection therewith, to hire or retain, at the sole expense of the Note
holders, such counsel, investment bankers, accountants, representatives and
other professional advisors as they determine in their sole and absolute
discretion to be necessary, advisable or appropriate in order to carry out and
perform their rights and obligations hereunder. Any expenses incurred by the
Stockholders' Representatives in accordance with this Agreement shall be paid by
Apertus and shall be applied as an offset against the principal amount of the
Notes on a pro rata basis. Any party receiving an Instrument from the
Stockholders' Representatives shall have the right to rely in good faith upon
such Instrument, and to act in accordance with the Instrument without
independent investigation.
(d) No Liability of Apertus. Apertus shall have no liability to any
stockholder of the Company or otherwise arising out of the acts or omissions of
the Stockholders' Representatives or any disputes among the Company's
stockholders or among the Stockholders' Representatives. Apertus shall have no
direct liability to the Company's stockholders under this Agreement or the other
agreements referred to herein and may rely entirely on their dealings with, and
notices to and from, the Stockholders' Representatives to satisfy any
obligations Apertus might have under this Agreement, any agreement referred to
herein or otherwise to the Company's stockholders.
ARTICLE XI
MISCELLANEOUS
-------------
11.01 Press Releases and Announcements. Prior to the Effective
Time, the Company shall not issue any press release (or make any other public
announcement) related to this Agreement or the transactions contemplated hereby
or make any announcement to its employees, customers or suppliers without prior
written approval of Apertus, except as may be necessary, in the opinion of
counsel to the Company, to comply with the requirements of this Agreement or
applicable law. If any such press release or public announcement is so
required, the Company shall consult with Apertus prior to making such
disclosure, and the parties shall use all reasonable efforts, acting in good
faith, to agree upon a text for such disclosure which is satisfactory to both
parties.
11.02 Expenses. Except as otherwise expressly provided for herein,
Apertus will each pay all of its own expenses (including attorneys' and
accountants' fees) in connection with the negotiation of this Agreement, the
performance of its
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obligations under this Agreement and the consummation of the transactions
contemplated hereby (whether consummated or not). The Company will be
responsible for its expenses in connection with the negotiation of this
Agreement and all such expenses shall be assumed and paid by Apertus subject
to Section 2.06.
11.03 Amendment and Waiver. This Agreement may not be amended or
waived except in a writing executed by the party against which such amendment or
waiver is sought to be enforced; provided, however, that after the approval of
the Agreement by the stockholders of the Company, no amendment may be made which
reduces the Merger Consideration or which effects any changes which would
materially adversely affect the stockholders of the Company without the further
approval of the stockholders of the Company. No course of dealing between or
among any persons having any interest in this Agreement will be deemed effective
to modify or amend any part of this Agreement or any rights or obligations of
any person under or by reason of this Agreement.
11.04 Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered
or three days after being mailed, if mailed by first class mail, return
receipt requested, or when receipt is acknowledged, if sent by facsimile,
telecopy or other electronic transmission device. Notices, demands and
communications to Apertus and the Company will, unless another address is
specified in writing, be sent to the address indicated below:
Notices to Apertus: with a copy to:
- ------------------ --------------
Apertus Incorporated Dorsey & Whitney LLP
7275 Flying Cloud Drive 220 South Sixth Street
Eden Prairie, MN 55344 Minneapolis, MN 55402
Attn: Steven L. Thimjon Attn: William B. Payne
Facsimile: (612) 828-0723 Facsimile: (612) 340-8738
Notices to Carleton: with a copy to:
- ------------------- --------------
Carleton Corporation Goodwin, Procter & Hoar LLP
700 Technology Park Drive Exchange Place
Billerica, MA 01890 Boston, MA 02109-2881
Attn: Hem Desai Attn: Thomas P. Storer, P.C.
Facsimile: (508) 663-5447 Facsimile: (617) 523-1231
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Notices to Stockholders' Representatives: with a copy to:
- ---------------------------------------- --------------
c/o Hemendra Desai Goodwin, Procter & Hoar LLP
20 Coolidge Road Exchange Place
Winchester, MA 01890 Boston, MA 02109-2881
Facsimile: Attn: Thomas P. Storer, P.C.
Facsimile: (617) 523-1231
11.05 Assignment. This Agreement and all of the provisions hereof
will be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any party hereto without the prior written consent of the other
parties hereto.
11.06 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
11.07 Complete Agreement. This Agreement, the Related Agreements
and other exhibits hereto, the Confidentiality Agreement, the schedules and
the other documents referred to herein contain the complete agreement between
the parties and supersede any prior understandings, agreements or
representations by or between the parties, written or oral, which may have
related to the subject matter hereof in any way.
11.08 Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together will constitute one and
the same instrument.
11.09 Governing Law. The internal law, without regard for conflicts
of laws principles, of the State of Minnesota will govern all questions
concerning the construction, validity and interpretation of this Agreement and
the performance of the obligations imposed by this Agreement.
11.10 Jurisdiction; Service of Process. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of,
this Agreement may be brought against any of the parties in the courts of the
State of Minnesota, County of Hennepin, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of
Minnesota, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or
proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
APERTUS TECHNOLOGIES INCORPORATED
By /s/ Robert D. Gordon
--------------------------------
Its CEO
------------------------------
CARLETON CORPORATION
By /s/ Paul Fluckiger
--------------------------------
Its CEO
------------------------------
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EXHIBIT B
THIS NOTE NOT BEEN REGISTERED UNDER THE FEDERAL SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, OFFERED, OR OTHERWISE DISPOSED OF WITHOUT (i) THE OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER OF THIS NOTE THAT SUCH TRANSFER MAY LAWFULLY
BE MADE WITHOUT REGISTRATION OR QUALIFICATION UNDER APPLICABLE SECURITIES LAWS
OR (ii) SUCH REGISTRATION OR QUALIFICATION. THE PAYMENT OF PRINCIPAL AND
INTEREST ON THIS NOTE IS SUBJECT TO CERTAIN OFFSET PROVISIONS SET FORTH IN AN
AGREEMENT AND PLAN OF MERGER DATED AS OF OCTOBER 24, 1997 BETWEEN THE ISSUER OF
THIS NOTE AND CERTAIN OTHER PERSONS.
PROMISSORY NOTE
$[Initial Principal Amount] October __, 1997
FOR VALUE RECEIVED, the undersigned, APERTUS TECHNOLOGIES INCORPORATED
("Apertus"), hereby promises to pay to [CARLETON SHAREHOLDER] (the "Payee",
which term includes any subsequent holder hereof), at Minneapolis, Minnesota,
the principal sum of _______________________________ Dollars
($_________________) (subject to adjustment as set forth below, the "Initial
Principal Amount"), plus simple interest on the outstanding principal balance at
the rate of 5.81% per annum.
This Note is issued pursuant to the Agreement and Plan of Merger (the
"Merger Agreement") dated October 24, 1997 between Apertus and Carleton
Corporation ("Carleton"). As set forth in the Merger Agreement, this Note
serves as a portion of the Merger Consideration for the Merger and as a source
of offset for certain Losses recoverable by Apertus. Capitalized terms used and
not defined herein shall have the respective meanings set forth in the Merger
Agreement.
The final principal amount ("Final Amount") of the Note will be the
Reduced Principal Amount multiplied by the Accretion Ratio, less the pro rata
portion of (i) the amount of cash payments made by Apertus in respect of Company
Common Stock under the Merger Agreement, (ii) Apertus Losses (excluding Carleton
Europe Losses) and (iii) the expenses incurred by the Stockholders'
Representatives and paid by Apertus in accordance with Section 10.03(c) of the
Merger Agreement. The Reduced Principal Amount shall equal the Initial
Principal Amount less the pro rata portion of (i) the amount by which Carleton's
expenses relating to legal, investment banking and accounting professional
services fees and similar out-of-pocket fees and expenses in connection with the
negotiation of the Merger Agreement exceed $300,000, as described in Section
2.06 of the Merger Agreement, (ii) the amount of severance benefits and related
costs arising within six
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months of Closing and paid by Apertus pursuant to those individual employment
or severance agreements between Carleton and its employees set forth in
Section 9.03 of the Merger Agreement, (iii) Carleton Europe Losses and (iv)
the "Revenue Adjustment," which shall be determined based on the total
revenues (determined in accordance with generally accepted accounting
principles) of Apertus's data warehousing business, including the business and
assets of the Company acquired by Apertus under the Merger Agreement together
with all product-related revenues of Apertus other than revenues derived
directly from Apertus's Internet Services Division (or the sale of such
Division by Apertus), between September 29, 1997 and March 28, 1998 as
follows:
Carleton/Apertus Revenues Revenue Adjustment
------------------------- ------------------
$3,500,000 or less $1,000,000
$3,750,000 $ 800,000
$4,000,000 $ 600,000
$4,250,000 $ 300,000
$4,500,000 or more $ 0
provided, that the Revenue Adjustment between the designated Carleton/Apertus
revenue intervals shall be prorated on a linear basis between the corresponding
intervals. The Accretion Ratio shall be the ratio that the Fair Market Value on
the date that is three years from the date hereof (the "Maturity Date") bears to
$___ (the Fair Market Value on the date hereof); provided, however, that the
Accretion Ratio shall not be greater than 200% nor less than 50%. Fair Market
Value will be the average last sale price (unweighted), as reported on the
Nasdaq Stock Market, of the shares of Apertus Common Stock for the 60-day
calendar day period ending the business day prior to the date of determination.
The pro rata portion shall be based upon the ratio that the Initial Principal
Amount of the Note bears to the aggregate Initial Principal Amount of all Notes
issued pursuant to the Merger Agreement, and for this purpose, the Initial
Principal Amount of all Notes issuable upon the exercise of Outstanding Warrants
shall be deemed to be outstanding.
Each time, if any, that Apertus exercises its Offset Right or
otherwise reduces the Initial Principal Amount of the Note in accordance with
the Merger Agreement, Apertus shall promptly deliver to the Stockholders'
Representatives a schedule signed by an officer of Apertus setting forth the
calculation of the Reduced Principal Amount and any other reductions from the
Final Amount, after giving effect to such exercise of its Offset Right or other
reduction. The right of Apertus to exercise its Offset Right hereunder shall be
subject to the limitations set forth in Section 10.02(e) of the Merger
Agreement. Any dispute regarding Apertus's exercise of its Offset Right shall
be resolved in accordance with Article X of the Merger Agreement. By acceptance
of this Note, Payee agrees to the appointment of the Stockholders'
Representatives and authorizes the Stockholders' Representatives to act on
behalf of Payee for all Apertus claims pursuant to Article X of the Merger
Agreement.
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The Final Amount of this Note is payable in full on the Maturity Date.
All accrued interest shall be due and payable on the same day as such principal
is payable. However, Apertus will have the option to pay that portion of the
Final Amount exceeding the Reduced Principal Amount (the "Accretion") on a date
that is two years from the Maturity Date without interest or penalty upon making
a payment equal to 5% of the Accretion on the Maturity Date to the holder
hereof.
The occurrence of any one or more of the following events shall
constitute an Event of Default, and upon the occurrence of any Event of Default
the Payee may declare this Note to be, and the same shall forthwith become,
immediately due and payable and the Payee may exercise all rights and remedies
as may otherwise be allowed by law:
(1) Apertus shall have failed to make any payment of principal
or interest hereon when due and such failure shall have continued for 30
days after the due date thereof;
(2) There shall have been filed or commenced against Apertus an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect or an action shall have been
commenced to appoint a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of Apertus or for any
substantial part of Apertus's property or for the winding-up or
liquidation of Apertus's affairs and such action or proceeding shall not
have been dismissed within 60 days; or
(3) Apertus shall have commenced a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect; or shall consent to the entry of an order for relief in an
involuntary case under any such law; or shall consent to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) of Apertus or of any
substantial part of Apertus's property; or shall make any general
assignment for the benefit of creditors; or shall take any action in
furtherance of any of the foregoing.
The exercise of the Offset Right by Apertus in good faith, whether or not
ultimately determined to be justified, will not constitute an event of default
under this Note.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT
TO CONFLICT OF LAWS PRINCIPLES THEREOF.
Apertus hereby waives presentment for payment, notice of
dishonor, protest and notice of protest.
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IN WITNESS WHEREOF, Apertus has executed this Note as of the date
first above written.
APERTUS TECHNOLOGIES INCORPORATED
By
-----------------------------------
Its
--------------------------------
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Exhibit 2.2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of October 24,
1997 by and between CNT ACQUISITION I CORPORATION, a Minnesota corporation or
its designee (the "Buyer"), COMPUTER NETWORK TECHNOLOGIES CORPORATION (the
"Guarantor") and , APERTUS TECHNOLOGIES INCORPORATED, ("Apertus") a Minnesota
corporation, and its wholly owned and indirect subsidiaries set forth on the
signature page hereto (collectively, the "Subsidiaries") APERTUS and the
Subsidiaries are individually and collectively, jointly and severally, the
"Seller").
RECITALS:
WHEREAS, the Seller is engaged in the Business (as defined below) at the
leased facilities and locations set forth on Schedule 3.1(e) hereto; and
WHEREAS, the Seller desires to sell to the Buyer substantially all of the
assets and properties used in the Business, at 7275 Flying Cloud Drive, Eden
Prairie, Minnesota, and at the Leased facilities and locations set forth on
Schedule 3.1(e) hereto; and
WHEREAS, the Buyer desires to purchase from the Seller such assets and
properties of the Seller, pursuant to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, the parties hereto hereby agree as follows:
SECTION 1
TRANSFER OF ASSETS AND PROPERTIES
1.1 Purchase and Sale of Assets. At the Closing (as defined below) and on
the Closing Date (as defined below), (but effective as of the Appointment Time)
on the terms and conditions set forth herein, the Sellers shall, and shall cause
its subsidiaries to, sell, assign, transfer and deliver to the Buyer and the
Buyer shall purchase from the Seller, all of the tangible and intangible assets,
properties and rights of the Seller owned or used in the Business, of every kind
and description, wherever located, free and clear of all liens, encumbrances,
security interests, options, pledges, restrictions or claims of any kind
whatsoever, except as noted in this Agreement, other than the Excluded Assets
(as defined below). The assets, properties and rights to be sold by the Seller
and purchased by the Buyer under this Agreement (collectively, the "Assets")
include, without limitation:
a. the products and product lines (the "Products") set forth on
Schedule 1.1(a) hereto, and any other software related to the Business
including all
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versions of any language and all features, modifications, enhancements,
derivative works, optional modules, add-ons and extensions thereof whether
currently being marketed or in development (including beta test versions), and
all obsolete and prior versions, all related programming technology, in both
source and object code form, regardless of the state of development of any
such technology, any other computer program containing a substantial portion
of such source or object code, any tools and utilities and all development
environments, intellectual property used to develop, upgrade or maintain the
programs, and all documentation, drawings, specifications and technical data
and other related technology. Without limiting the foregoing, all software
related to the Vision line shall be included, including the programs known as
Vital Signs, Maxback, Multiterm, MultiPrint Cache/VSE, VLOCK, and VisionNet.
b. all strategic data, such as marketing development plans, forecasts,
and forecast assumptions and volumes, and future plans and potential
strategies of the Seller which are being discussed, and all financial data,
such as price and price objectives, price lists, pricing and quoting policies,
and procedures in each case relating to the Business;
c. all accounts receivable and installment receivables of the Seller
relating to the Business existing as of the Closing Date (the "Accounts
Receivable");
d. all inventory, work in progress, raw materials, returned goods
inventory, evaluation systems inventory, warranty returns inventory, service
inventory, finished products, supplies, packaging and shipping containers and
materials of the Seller (on-site, off-site and consigned) used in the Business
as of the Closing Date (the "Inventory") together with custody of all billed but
unshipped inventory ("Billed Inventory");
e. all machinery, equipment, furniture, fixtures, vehicles, computer
hardware and software (including hardware and software used to run the business
systems, content of the web site and the content of the Goldmine database), and
other personal property of the Seller used in the Business, including without
limitation, the items set forth in Schedule 1.1(e) attached hereto;
f. all of the following items used by the Seller in the conduct and
operation of the Business: (i) customer and contact lists, including names,
addresses and telephone numbers, (ii) sales, product and promotional data,
catalogs, brochures, literature, forms, mailing lists, art work, photographs and
advertising materials, (iii) vendor lists, including names, addresses and the
names of their representatives, (iv) all database information and software and
(v) all information necessary to bill customers for license usage, service
contracts and all other revenue items;
g. all of the prepaid expenses, deposits and credits relating to the
Business, including without limitation, the items set forth in Schedule 1.1(g)
hereto and those that may arise prior to the Closing Date;
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h. [Reserved.]
i. subject to the provisions of Section 1.4, all of the Seller's rights
under any personal property leases and other agreements, supply agreements,
licenses, end user agreements, contracts (including customer contracts, OEM
contracts, lease contracts, commitment contracts, and all agreements for the
testing, modification, development, trial, license, lease, rental or sale or
other use of the Products) and commitments, including without limitation, the
leases, agreements, contracts and commitments relating to or necessary to the
conduct and operation of the Business set forth on Schedule 1.1(i) attached
hereto (the "Contracts");
j. all backlog, orders, contracts and commitments for the sale of
Products;
k. subject to the provisions of Section 1.4 below, all permits,
approvals, qualifications, and the like issued by any government or
governmental unit, agency, board, body, or instrumentality, whether foreign,
federal, state, local or otherwise relating to or necessary to the conduct and
operation of the Business;
l. all of the Seller's rights, if any, with respect to internet domain
names, patents, patent applications, patent licenses, trademarks, trademark
licenses, trade names, trademark applications, brand names, labels, copyrights,
copyright registrations, applications and licenses, service marks, unpatented
inventions, techniques, discoveries, improvements, designs, patterns, logos,
artwork, printing plates, trade secrets, know-how, industrial designs, formulae,
processes, technical information, proprietary rights and non-public information
and data, whether patentable or not, and the goodwill that may be associated
with any trademarks, trademark licenses, trade names, assumed names, trademark
applications, brand names and labels necessary or used or useful in the conduct
or operation of the Business and any rights under licenses related to the
foregoing (the "Intellectual Property"), including but not limited to the names
"Apertus", "Enterprise/Connect", "Express", "Vision", "VisionNet", "TN Server",
"QX", "File Transfer Server", "Availability Server", "Datastar", "Datastar XP",
"DTS", "Blue Line", "Systems Strategies" and "Enterprise/Access" and names
similar thereto (in the event Seller is unable to transfer use of such names,
trademarks or service marks Seller shall, and shall cause its Subsidiaries to,
grant Buyer or its designee an exclusive, perpetual, irrevocable, royalty free
license to use such names on a worldwide basis); and
m. all other tangible or intangible personal or mixed property of the
Seller, if any, of every kind and description relating to or necessary to the
conduct or operation of the Business, wherever located, including without
limitation, business records (but excluding core corporate records) (whether in
paper or other tangible format or machine readable format).
For purposes of this Agreement, "Business" means all of the business,
products, support and services of the Seller discussed and set forth in the
Seller's Form 10-
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K filed with the Securities and Exchange Commission for the fiscal year ended
March 30, 1997 under the heading "Products--Internet Products", including the
business of designing, developing, marketing, distributing, maintaining,
servicing and exploiting the Products and Seller's CRT refurbishing business.
1.2 Excluded Assets. Notwithstanding the foregoing, the Assets shall not
include the items set forth on Schedule 1.2 attached hereto (the "Excluded
Assets").
1.3 Instruments of Transfer and Assignment. On the Closing Date the
Seller shall, and shall cause its subsidiaries to, deliver or cause to be
delivered to the Buyer duly executed bills of sale, deeds, licenses and such
other instruments of transfer and assignment (which shall be effective as of the
Appointment of Time) as may be necessary to vest in the Buyer good and valid
title to, and all of the Seller's right, title and interest in and to, the
Assets, free and clear of all liens, encumbrances, options, pledges,
restrictions and claims of any kind except as noted herein and the Schedules
hereto, which bills of sale, deeds, licenses and other instruments of transfer
and assignment shall be in form and substance reasonably satisfactory to the
Buyer and its counsel.
1.4 Consents to Assignments. Nothing in this Agreement or the documents
to be executed and delivered at the Closing shall be deemed to constitute an
assignment or an attempt to assign any permit, contract or other agreement to
which the Seller is a party, or any permit, approval if the attempted assignment
thereof without the consent of the other party to such contract or agreement
would constitute a breach thereof or affect in any way the rights of the Seller
thereunder. If after the Seller has used its best efforts to obtain the consent
of any such other party for such permit, contract or agreement, such consent
shall not be obtained at or prior to the Closing, or if an attempted assignment
would be ineffective or would adversely affect the Seller's rights thereunder,
the Seller shall cooperate in any arrangement the Buyer may reasonably request
to provide for the Buyer the benefits under such contract or agreement,
including the enforcement, at the cost of the Buyer, of any and all rights of
the Seller against such other party thereto arising out of the breach or
cancellation thereof by such other party.
SECTION 2
PURCHASE PRICE
2.1 Consideration; Payment. Subject to adjustment pursuant to Section
2.2, below, the aggregate consideration to be paid by the Buyer to the Seller
for the Assets is the sum of Eleven Million Four Hundred Twelve Thousand Dollars
($11,412,000) (the "Purchase Price"), plus the assumption and payment of the
Assumed Liabilities (the sum of the Purchase Price plus Assumed Liabilities is
referred to herein as the "Aggregate Consideration") by the Buyer. The Purchase
Price shall be payable as follows:
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a. on the Closing Date the Buyer shall, by wire transfer or bank check
of immediately available funds, pay to the Seller Ten Million Four Hundred
Twelve Thousand Dollars ($10,412,000); and
b. on the Closing Date the Buyer shall deposit with First Trust
("Escrow Agent") One Million Dollars ($1,000,000) (the "Escrow Amount") to be
disbursed pursuant to Section 2.2(c), below. Seller shall pay the fees and
expenses of the Escrow Agent.
2.2 Adjustment.
a. As promptly as practicable following the Closing Date, the Seller,
at its expense, shall cause to be prepared by Ernst & Young LLP, a statement
calculating the excess (the "Excess") of the book value at the Appointment
Time of the Assets (net of reserves and allowance for doubtful accounts) over
the book value at the Appointment Time of the Assumed Liabilities prepared in
accordance with generally accepted accounting principles applied in a manner
consistent with Seller's current Financial Statements (the "Closing
Statement"). Reserves shall not be adjusted below the levels included in the
financial statements included as Schedule 4.7 without the agreement of Buyer.
The Closing Statement shall be delivered to the Buyer not later than thirty
(30) days after the Closing Date, and shall be accompanied by an agreed upon
procedures letter of Ernst & Young LLP stating they have performed the
procedures agreed to by Buyer set forth in Schedule 2.2(a) hereto, and that as a
result of such procedures nothing has come to their attention that the Closing
Statement and calculation of the Excess has not been prepared in accordance with
this Agreement. At the Buyer's expense, the Buyer and its advisors shall have
the opportunity to participate in all procedures performed by Ernst & Young LLP,
including observations of physical inventory and confirmation of accounts
receivable, in connection with the preparation of the Closing Statement and
calculation of the Excess, and to review such of the workpapers and other
documents created or utilized by the Seller and/or Ernst & Young LLP in
connection with the preparation of the Closing Statement and calculation of the
Excess.
b. If the Excess at the Appointment Time, as determined in accordance
with the Section 2.2(a), is less than Six Million Seven Hundred Thousand
Dollars ($6,700,000) the Purchase Price shall be decreased by the amount by
which Six Million Seven Hundred Thousand Dollars ($6,700,000) exceeds the
Excess reflected on the Closing Statement. If the Excess reflected on the
Closing Statement is greater than or equal to Six Million Seven Hundred
Thousand Dollars ($6,700,000), the Purchase Price shall not be adjusted
pursuant to this Section 2.2.
c. The Buyer shall notify the Escrow Agent of amounts due to the Buyer
and the Seller under Section 2.2(b), and the Escrow Agent shall promptly
disburse all amounts then held in accordance with such direction. If the
amount on deposit in the
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Escrow Account is not sufficient to discharge the obligation of the Seller
under Section 2.2(b), the Seller shall promptly remit the difference to the
Buyer.
2.3 Allocation of Purchase Price. The Seller and the Buyer shall promptly
after the Closing Date determine the fair market value of the Assets and
allocate the Aggregate Consideration among the Assets in accordance with said
determination and Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code"). The Buyer and the Seller shall each file, in accordance
with Section 1060 of the Code an Asset Allocation Statement on Form 8594
(which conforms with such allocation) with its federal income tax return for
the tax year in which the Closing Date occurs and shall contemporaneously
provide the other party with a copy of the Form 8594 being filed. The Buyer
and Seller shall revise such allocation if an adjustment to the Purchase Price
is made under Section 2.2(b). Each party agrees not to assert, in connection
with any tax return, audit or other similar proceeding, any allocation of the
Aggregate Consideration which differs from the allocation determined by the
Buyer hereunder.
SECTION 3
ASSUMPTION OF LIABILITIES
3.1 Assumption. The Buyer is not assuming or agreeing to assume or
discharge any liability or obligation of the Seller whatsoever, whether now
existing or hereafter incurred, including without limitation, any liability or
obligation relating to the Assets or the sale thereof, excepting only the
following (the "Assumed Liabilities"):
a. those liabilities and obligations of the Seller related to future
performance to be discharged or performed after the Appointment Time under the
Contracts;
b. [Reserved.]
c. all accounts payable arising in the ordinary course of business
related to the Business to the extent included in the Closing Statement;
d. all obligations relating to express warranty commitments related to
the Products;
e. all liability for facility leases (including the CRSS Sublease) and
equipment leases (other than copier leases) set forth on Schedule 3.1(e) which
are related to the Business and which become due and owing after the Closing
Date; and
f. those liabilities and obligations of the Seller related to the
Business set forth on Schedule 3.1(e).
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The Seller shall pay and be responsible for all liabilities and obligations
of the Seller and/or arising from or relating to the Business which are not
Assumed Liabilities.
SECTION 4
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF
THE SELLER
The Seller hereby represents and warrants to and agrees with the Buyer and
the Guarantor as follows, all of which representations, warranties and
agreements are made as of the date of this Agreement and, except as they may be
modified by Seller in writing and accepted by Buyer in writing prior to or in
connection with the Closing, as of the Appointment Time (or with respect to
Sections 4.1, 4.4 and 4.17, as of the Closing Date):
4.1 Organization, Good Standing, Power, Etc. The Seller is a corporation
or limited liability company duly organized and validly existing under the laws
of the jurisdiction of its incorporation. The Seller is qualified to do
business and is in good standing in each jurisdiction in which the character and
location of the assets or the nature of the Business transacted by the Seller
makes such qualification necessary or the failure to qualify would have a
material adverse effect on the business, operations or financial condition of
the Business. The Seller has all the requisite corporate power and authority to
own or lease and operate the Assets and the Business and carry on the Business
and to consummate the transactions contemplated hereby.
4.2 Articles of Incorporation and Bylaws. The Seller has furnished the
Buyer with (a) the Restated Articles of Incorporation of the Seller, as amended
to date and (b) the Restated Bylaws of the Seller, as amended to date or (c)
like organizational documents. Such Articles of Incorporation and Bylaws and
like organizational documents are in full force and effect.
4.3 Other Information. None of the information and documents which have
been or may be furnished by the Seller or any representatives of the Seller to
the Buyer, or any of their representatives in connection with the transactions
contemplated hereby, or in or pursuant to this Agreement, or in connection with
the Buyer's and its representative's review of the business of Seller, is or
will be, to Seller's knowledge, materially false or misleading or contains or
will contain, to Seller's knowledge, any material misstatement of fact .
4.4 Authorization of Agreement. The execution, delivery and performance
of this Agreement by the Seller and consummation of the transactions
contemplated hereby have been duly and effectively authorized by the Board of
Directors of the Seller (and with respect to any Subsidiary, its shareholders)
and no other corporate proceedings are necessary to authorize this Agreement and
the transactions contemplated hereby. This Agreement has been duly and validly
authorized, executed and delivered by the Seller and
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constitutes the valid and binding obligation of the Seller enforceable in
accordance with its terms.
4.5 Effect of Agreement, Etc. Except as set forth on Schedule 4.5, the
execution, delivery and performance of this Agreement by the Seller and
consummation by Seller of the transactions contemplated hereby will not, with
or without the giving of notice and the lapse of time, or both, (a) violate
any provision of law, statute, rule or regulation to which the Seller is
subject, (b) violate any judgment, order, writ or decree of any court
applicable to the Seller, (c) have any material effect on, or be a material
violation of, any of the permits, licenses, orders or approvals relating to
the Business or the ability of the Buyer to make use of such permits,
licenses, orders or approvals, or (d) result in a material breach of or
conflict with any term, covenant, condition or provision of, result in a
material modification or termination of, constitute a material default under,
or result in the creation or imposition of any lien, security interest,
restriction, charge or encumbrance upon any of the Assets pursuant to any
Articles of Incorporation, Bylaws, organizational documents, commitment,
contract or other agreement or instrument to which the Seller is a party or by
which any of the Assets is or may be bound or affected or from which the
Seller derives benefit with respect to the Business.
4.6 Consents and Approvals. Except as set forth on Schedule 4.6, no
permit, application, notice, transfer, consent, approval, order, qualification,
waiver from, or authorization of, or declaration, filing or registration with,
any governmental authority is necessary in connection with the execution and
delivery by the Seller of this Agreement or the consummation by the Seller of
the transactions contemplated hereby and no consent of any third party is
required to consummate any of the transactions contemplated hereby.
4.7 Financial Statements. The Seller has delivered to the Buyer copies of
the Seller's audited consolidated balance sheets and related statements of
operations as of March 31, 1995, 1996 and 1997 and for each of the years then
ended and the unaudited interim period ended June 30, 1997, and with respect to
the Internet Solutions Division, the interim financial statements dated
September 28, 1997 and attached hereto as Schedule 4.7 (together, all such
balance sheets and related statements of operations shall be hereinafter
referred to as the "Financial Statements"). The Financial Statements (a) are in
accordance with the books and records of the Seller, (b) reflect fairly and
accurately the operations and financial condition of the Seller for the periods
or as of the dates indicated, and were prepared in accordance with generally
accepted accounting principles, uniformly applied on a basis consistent with
that of prior years or periods, (c) contain and reflect all necessary
adjustments and reserves for a fair and accurate presentation of the results of
operations for the period covered by such Financial Statements, and (d) reflect
fairly and accurately all of the liabilities and obligations of the Seller
(whether direct or indirect, accrued, absolute, contingent or otherwise).
4.8 No Undisclosed Liabilities, Claims, Etc. The Seller has no outstanding
liabilities or obligations, whether accrued, absolute, contingent or otherwise,
relating to the Business and exceeding in the aggregate Twenty-Five Thousand
Dollars ($25,000), except
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(i) to the extent reflected or taken into account in determining net worth in
the most recent Financial Statement and not heretofore paid or discharged or
reflected in the footnotes to the Financial Statements; (ii) to the extent
specifically set forth in or incorporated by express reference in any of the
schedules attached hereto; and (iii) normal liabilities incurred in the
ordinary course of business since the date of the most recent Financial
Statement of a type and in an amount consistent with the liabilities set forth
in the Financial Statements.
4.9 Taxes. (a) The Seller has prepared and filed, with the appropriate
foreign, federal, state and local tax authorities, all income, excise and other
tax returns required to be filed by the Seller as of the date hereof and the
Seller has paid all taxes shown on such returns to be due or which have become
due pursuant to any assessments, deficiency notice, 30 day letter or similar
notice received by them; (b) there are no claims pending or threatened for taxes
against the Seller or attributable to the Business known to the Seller in excess
of the amounts reflected on their books and the Financial Statements for such
taxes; (c) the Seller has not agreed to any waiver or extension of statutes of
limitations related to this section; (d) the Seller has paid or provided
adequate reserves for all federal, state and local income, profits, franchise,
sales, use, occupation, property, excise or other taxes attributable to the
Business of the Seller and which may have a material adverse financial effect on
Buyer; and (e) no deficiencies on any of the Seller's tax returns or reports
attributable to or otherwise allocable to the Business known to the Seller have
been threatened as of the date hereof.
4.10 Inventory and Backlog . The Inventory is (a) except to the extent of
reserves therefore in the Financial Statements, salable or usable in the normal
course of the Business, (b) at levels consistent with past practices of the
Business, and (c) carried on the books of the Seller pursuant to the normal
inventory valuation policies of the Seller, as reflected in the Financial
Statements. All of the Inventory with a value net of reserves in excess of
Fifty Thousand Dollars ($50,000) and Billed Inventory are located at the
facility in Eden Prairie, Minnesota. The location of the remaining Inventory is
as set forth on Schedule 4.10.
4.11 Absence of Certain Changes or Events. Except as set forth on
Schedule 4.11, since September 30, 1997, the Seller has conducted the Business
only in the ordinary course and consistent with past practices and the Seller
has not with respect to the Business:
a. suffered any damage, destruction or loss of any of the Assets,
whether or not covered by insurance, in excess of Ten Thousand Dollars
($10,000);
b. suffered any change in its financial condition, assets, liabilities
or business or suffer any other event or condition of any character which
individually or in the aggregate had or has a material adverse effect on the
financial condition or earnings of the Business, or materially diminishes the
value of the assets used in or relating to the Business;
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c. paid, discharged or satisfied any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise) of or relating to the Business
except in each case in the ordinary course of business;
d. waived any claims or rights of substantial value of or relating to
the Business, except in each case in the ordinary course of business;
e. pledged or permitted the imposition of any lien on or sell, assign,
transfer or otherwise dispose of any of the Assets used in or relating to the
Business, except the sale of inventory in the ordinary course of business;
f. sold, assigned, encumbered, licensed, pledged, abandoned or otherwise
transferred any patents, applications for patent, trademarks, trade names,
copyrights, licenses, or other intangible assets used in or relating to the
Business;
g. made any change in any method of accounting or accounting principle
or practice;
h. except for de minimus adjustments, written up or down the value of
the inventory of the Business or determined as collectible any notes or
Accounts Receivable of or arising out of the Business that were previously
considered to be uncollectible, except for write-ups or write-downs and other
determinations in the ordinary course of business and consistent with past
practice;
i. granted any general increase in the compensation payable or to become
payable to its officers or employees, engaged in or relating to the Business, or
otherwise designated as officers or employees of the Business (including any
such increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or any special increase in the compensation payable or to become
payable to any such officer or employee, or make any bonus payments to any such
officer or employee, except for normal merit and cost of living increases in the
ordinary course of business and in accordance with past practice (which details
of such ordinary course actions have been disclosed to Buyer);
j. lost or learned of the prospective loss of any Customer or Vendor
listed on Schedule 4.18;
k. made capital commitments on behalf of or relating to the Business in
excess of Ten Thousand Dollars ($10,000) in the aggregate;
l. failed to maintain accounts receivable, inventory, accounts payable
and other tangible capital accounts relating to the Business; or
m. agreed, whether in writing or otherwise, to take any action described
in this Section 4.11.
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4.12 Contracts and Commitments. Schedules 1.1(i) and 3.1(e) contain a
complete and accurate list of (i) all customer contracts, OEM contracts, sales
contracts, equipment and licensed products maintenance agreements with annual
revenues in excess of $50,000, and (ii) all other Contracts, and all other
agreements and commitments, whether written or oral, that are not in the
ordinary course of business (the "Commitments"), in each case entered into by
the Seller. Except as set forth on Schedule 4.12, (i) all of the Commitments
are in full force and effect and enforceable against the other parties thereto
in accordance with their terms; (ii) no event has occurred or circumstance
exists which, with the giving of notice or the lapse of time or both, would
constitute a default or an event of default by the Seller under any of the
Commitments, and to the Seller's best knowledge no event has occurred or
circumstance exists that, with the giving of notice or the lapse of time or
both, would constitute a default or an event of default under any of the
Commitments by any other party thereto; and (iii) all rentals and other
amounts owing by the Seller or by any other party under any of the Commitments
as of the date hereof have been paid in full, and the Seller has not accepted
any prepayments of any amounts owing to the Seller under any of the
Commitments. The standard form of equipment and licensed products maintenance
agreement is set forth on Schedule 4.12.
4.13 Title to Assets; Absence of Liens and Encumbrances, Etc. Schedule
1.1(e) contains a summary description of all of the Seller's fixed assets
relating to the Business and the agreed book value thereof as of September 30,
1997. As of the Closing Date and except for the Assumed Liabilities, the Seller
will own all right, title and interest in and to the Assets, free and clear of
all liens, encumbrances, security interests, options, pledges, restrictions on
transfer and other claims of any kind. The leases and other agreements or
instruments, if any, under which the Seller holds, leases or is entitled to the
use of any personal property are in full force and effect and all rentals, or
other payments payable thereunder prior to the date hereof have been duly paid
and the Seller enjoys peaceable and undisturbed possession under all leases
under which it is operating. No material default or event of default exists,
and no event which, with notice or lapse of time or both, would constitute a
material default, has occurred and is continuing, under the terms or provisions,
express or implied, of any such lease, agreement or other instrument or under
the terms or provisions of any agreement to which any such properties are
subject nor has the Seller or such Subsidiary received notice of any claim of
such default.
4.14 OSHA. The Seller has not received any notice and is not aware that
its operations and Assets have not been or are presently not in compliance with
OSHA and any applicable state provisions. The Seller has not received any
notice and is not aware of any potential environmental or occupational safety
and health problem or claim in connection with the operations or Assets of
Seller which could have an adverse effect thereon.
4.15 Intellectual Property. Schedule 1.1(h) contains a correct and
complete list of all licenses, contracts, agreements or understandings pursuant
to which the Seller has authorized any individual or entity to use any of the
Intellectual Property pursuant to which Seller has granted a license with
respect to the Intellectual Property with annual revenues in
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excess of $50,000 or out of the ordinary course of business, and Schedule 4.15
contains a complete list of all licenses, contracts, agreements or
understandings pursuant to which Seller has licensed, acquired ownership or
other rights which are included in the Intellectual Property. Schedule 4.15
sets forth a complete list of patents, patent applications, trade marks,
service marks, trade mark applications and copyright registrations. The Seller
owns, possesses, or licenses and as of the Closing Date will own, possess, or
license, all right, title and interest in and to the items of Intellectual
Property that are required to conduct its businesses as now conducted without
conflict with the rights of others. The records to be delivered by the Seller
will included all Contracts entered into by the Seller. Except as set forth in
Schedule 4.15: (a) the Seller has the right to use and market and to the
knowledge of the Seller, the sole and exclusive right to use and market, the
Intellectual Property (including applications for any of the foregoing) used
in connection with the Business, and none of the past or present employees,
officers, directors or stockholders of the Seller, or anyone else, has any
rights with respect thereto; (b) the consummation of the transactions
contemplated hereby will not alter or impair any such rights; (c) the Seller
has not received any notice or claim of infringement, misuse or
misappropriation or any claim challenging or questioning the validity or
effectiveness of any of the claims of Intellectual Property, and there is no
valid basis for any such claim; and (d) the Seller is not liable, nor has it
made any contract or arrangement whereby it may become liable, to any
individual or entity for any royalty or other compensation for use of any of
the items of Intellectual Property. Schedule 4.15 includes the text of the
Seller's standard licenses for the Intellectual Property.
4.16 Product Warranties; Service Commitments. True and correct copies of
the standard form of written warranties and guaranties and service commitments
(including those related to deferred revenue) applicable to the Products and
related services are attached hereto as Schedule 4.15 or 4.12. Hardware is
warranted for 12 months and software is warranted for 30 to 90 days. The
amounts reflected as warranty reserves and liabilities related to the service
commitments reflected in the Financial Statements and to be reflected in the
Closing Statement are not less than the amount required by generally accepted
accounting principles. The Products meet the specifications and the standards
set forth in the Seller's written descriptions of the Products and in its
representations and warranties to customers and distributors of the Products
(express and implied, written and oral).
4.17 Litigation. Except as set forth in Schedule 4.17, there is no claim,
action, suit, proceeding, arbitration, investigation or hearing or notice of
hearing pending or threatened, and to the best of the Seller's knowledge,
relating to or affecting the Business or any of the Assets or, with respect to
any employment matter, an employee, or the transactions contemplated by this
Agreement; nor are any facts known to the Seller which may give rise to any such
claim, action, suit, proceeding, arbitration, investigation or hearing. No such
claim, action, suit, proceeding, arbitration, investigation or hearing will
prevent the closing of this Agreement or the consummation of the transaction
contemplated hereby.
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4.18 Customers and Vendors. Schedule 4.18 sets forth correct and complete
lists of the customers ("Customers") and vendors ("Vendors") of the Business
during the most recently completed fiscal year, indicating the existing
contractual arrangements, if any, with each such Customer or Vendor. Except as
set forth in Schedule 4.18, there are no outstanding disputes with any
Customer or Vendor listed thereon and no Customer or Vendor listed thereon has
refused to continue to do business with the Seller or has stated its intention
not to continue to do business with the Seller. Since September 30, 1995,
there has not been any material shortage or unavailability of the raw
materials necessary to manufacture the products sold by the Business, and, to
the knowledge of the Seller, there is no current shortage or unavailability
which leads it to believe that any such shortages will occur. The customer
information included in the Assets as set forth in Section 1.1(f) is true,
correct and complete.
4.19 Books and Records. The books of account and other financial and
corporate records of the Seller related to the Accounts Receivable, Inventory
and fixed assets of the Business are in all material respects substantially
complete and correct and are maintained in accordance with good business
practices. Such records are adequate to prepare the financial statements set
forth in Section 6.10 and to permit Ernst & Young LLP to perform an audit
thereon.
4.20 Employment Matters. Except as provided in Schedule 4.20, Seller is
in material compliance with all laws, rules and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours with respect to employees of the Business. The Seller has
withheld all amounts required by law or agreement to be withheld from the wages
or salaries of, and other payments to, its employees and any former employees
and is not liable for any arrearage of wages, salaries or other payments to such
employees and any former employees or any taxes or penalties for failure to
comply with any of the foregoing.
4.21 Employee Benefit Plans. (a) Each tax qualified retirement plan
("Plan") of the Seller in which any employee of the Business participates that
is subject to any provisions of the Employee Retirement Income Security Act of
1974 and of the regulations adopted pursuant thereto (collectively "ERISA") is
being administered in accordance with the documents and instruments governing
such plans, and such documents and instruments are consistent with those
provisions of ERISA which are effective and operative as of the date of this
Agreement. To the best of the Seller's knowledge, no such plan has incurred any
material accumulated funding deficiency within the meaning of Section 302 of
ERISA, whether or not waived, and the Seller has not incurred any material
liability (including any material contingent liability to the Pension Benefit
Guaranty Corporation in connection with any such plan) and all payments related
to pension schemes of the UK Transferring Employees (as defined in Schedule
4.30) have been made. To the best of the Seller's knowledge, no such plan nor
any trust created thereunder nor any trustee or administrator thereof has
engaged in a prohibited transaction within the meaning of ERISA or Section 4975
of the Internal Revenue Code of 1986. The Plan's actuary has advised that the
Plan's assets are sufficient to discharge the Plan's liabilities. At no time
has the Seller contributed
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to or had any employees of the Business who were covered by any multiemployer
plan, as such term is defined in Section 3(37) of ERISA, which is a defined
benefit plan. To the best of the Seller's knowledge, the Seller has no unpaid
withdrawal liability with respect to any such multiemployer plan.
(b) Schedule 4.21 contains a list of each "employee pension benefit plan"
(as defined in section 3(2) of ERISA, "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA), pension scheme or arrangement, enhanced
redundancy arrangement, stock option, stock purchase, deferred compensation
plan or arrangement, and other employee fringe benefit plan or arrangement
maintained, contributed to or required to be maintained or contributed to by
Seller for the benefit of any present or former employees of the Business or
their beneficiaries (all the foregoing being herein called "Benefit Plans").
Seller has delivered to Buyer true, complete and correct copies of (1) each
Benefit Plan (or, in the case of any unwritten Benefit Plans, descriptions
thereof) and (2) the most recent summary plan description for each Benefit
Plan (if any such description was required).
(c) The Seller and its affiliates comply with the applicable requirements
of Section 4980B(f) of the Internal Revenue Code of 1986, as amended (the
"Code"), with respect to each Benefit Plan that is a group health plan (as such
term is defined in Section 5000(b)(1) of the Code).
4.22 Defects in Products or Designs; Product Safety. Except as set forth
on Schedule 4.22, there has been no pattern of defects in any Product line in
the design, construction, manufacturing or installation of any material product
made, manufactured, constructed, distributed, sold, leased, licensed or
installed by the Seller that would adversely affect the performance or quality
of such product. Each Product has been designed, manufactured, packaged and
labeled in substantial compliance with all regulatory, engineering, industrial
and other codes applicable thereto and the Seller has not received notice of
any alleged noncompliance with any such code. Except as set forth on Schedule
4.22, all Products will function for their intended use after December 31, 1999.
4.23 Finder. There is no person or entity that is entitled to a finder's
fee or any type of commission in relation to or in connection with the
transactions contemplated by this Agreement as a result of any agreement or
understanding with the Seller.
4.24 Sufficiency of Assets. Except as otherwise provided in this
Agreement or the Schedules hereto, the Assets to be transferred by the Seller at
the Closing Date will include all of Seller's assets, including fixed assets,
Intellectual Property, intangible assets, licenses, permits, contracts and
rights that relate to, arise from, are used or held by the Seller in the
operation of the Business, except for the Excluded Assets. The list of Assets
to be delivered to Buyer pursuant to Section 9.2(d) shall be true and correct on
the Closing Date.
4.25 Employees. Schedule 4.25 sets forth a complete and accurate list of
all employees (including leased employees) of the Business, showing for each:
name, hire date, current job title or description, current salary level
(including any bonus or deferred
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compensation arrangements) and any bonus, commission or other remuneration
paid during the most recently completed fiscal year, and describing any
existing contractual arrangement. Except as set forth on Schedule 4.25, no
employee (including leased employees) of the Business shall receive any
compensation as a result of the consummation of the transactions contemplated
by this Agreement. Except as set forth on Schedule 4.25, none of the employees
(including leased employees) of the Business is currently on short-term or
long-term disability, absence, maternity or other leave of absence. Except as
set forth on Schedule 4.25, since September 30, 1997 no salaried employee
(including leased employees) of the Business who has been compensated at an
annual rate in excess of $50,000 has terminated his or her employment or had
such employment terminated for any reason or for no reason; no such employee
has given notice of his or her intent to terminate such employment; and no
notice of termination has been given to any such employee by the Seller.
4.26 Condition of Assets. The Assets (a) are in condition and repair
which is suitable for the uses for which intended, (b) all leasehold premises
have been maintained in good condition in accordance with the relevant lease and
no liability exists under any such lease for repair, refurbishment or other
maintenance, and (c) are in substantial compliance with all applicable laws,
ordinances, regulations, orders and other requirements relating thereto
currently in effect, or which to the Seller's knowledge are scheduled to come
into effect.
4.27 Governmental Authorizations. The Seller has all licenses, permits or
other authorizations from governmental, regulatory or administrative agencies or
authorities required for the operation of the Business in the manner presently
conducted, each of which will be in full force and effect on the Closing Date. A
list of all such material governmental authorizations is set forth on Schedule
4.27. No registrations, filings, applications, notices, transfers, consents,
approvals, orders, qualifications, waivers or other actions of any kind are
required by virtue of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby to enable the Buyer to
continue the operation of the Business as presently conducted in all respects.
4.28 Compliance with Applicable Laws. The Seller has been, is, and on the
Closing Date will continue to be, in compliance in all respects with all
applicable laws (including duties imposed by common law), rules, regulations,
orders, ordinances, judgments and decrees of all governmental authorities
(federal, state, local and foreign) having jurisdiction over, applicable to or
otherwise concerning the Business, the Assets, and the products and employees of
the Seller.
4.29 Accounts Receivable, Installment Receivables, and Accounts Payable.
All Accounts Receivable, whether reflected on the Financial Statements, or to be
reflected of the Closing Statement, represent sales actually made or leases
entered into in the ordinary course of business or valid claims as to which full
performance has been rendered. Except to the extent reserved against the
Accounts Receivable and as set forth Schedule 4.29, no counterclaims or
offsetting claims with respect to the Accounts Receivable are pending or,
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to the knowledge of the Seller, threatened. The listing of Accounts Receivable
attached as Schedule 4.29 is true and correct (including the consolidated
aging thereon) and no material change has occurred since the date of
preparation, except in the ordinary course of business. The accounts payable
of the Seller reflected on the Financial Statements and to be reflected on the
Closing Statement arose, or will arise, from bona fide transactions in the
ordinary course of business, and all such accounts payable either have been
paid, are not yet due and payable under the Seller's or any such Subsidiary's
payment policies and procedures or are being contested by the Seller in good
faith. The listing of accounts payable attached as Schedule 4.29 provided by
Seller dated September 28, 1997 is true and correct and no material change has
occurred since that date, except in the ordinary course of business.
4.30 UK Transferring Employees. The representations and warranties set
forth under the caption "Representations and Warranties" on Schedule 4.30 are
hereby incorporated by reference.
4.31 Documentation. The documentation related to the Vision Product line
includes source and object code and is sufficient to run the Business related
thereto.
SECTION 5
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF
THE BUYER AND GUARANTOR
The Buyer and Guarantor, individually, hereby represent, warrant and
covenant to and agree with the Seller as follows, all of which representations,
warranties and agreements are made as of the date of this Agreement and, except
as they may be modified by Buyer or Guarantor in writing and accepted in writing
by Seller prior to or in connection with the Closing, as of the Appointment Time
(or with respect to Sections 5.1 and 5.2, as of the Closing Date.)
5.1 Organization, Etc. The Buyer and Guarantor are a corporation duly
organized, validly existing and in good standing under the laws of the state of
Minnesota. The Buyer and the Guarantor have the corporate power to execute,
deliver and perform this Agreement and consummate the transactions contemplated
hereby.
5.2 Authorization of Agreement. The execution, delivery and performance
of this Agreement has been duly authorized and approved by the Board of
Directors of the Buyer and the Guarantor. This Agreement constitutes a valid
and binding obligation of the Buyer and the Guarantor enforceable in accordance
with its terms, except that such enforcement may be limited by (a) bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally, and (b) general principles of equity, regardless of whether
enforcement is sought in a proceeding in equity or at law.
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5.3 Approvals. No consent or approval is required of any person or
entity, private or governmental, for the execution, delivery and performance of
this Agreement by the Buyer or the Guarantor, and neither will such execution,
delivery or performance, nor the consummation of the transactions contemplated
herein, breach any provision of the Buyer's or the Guarantor's Articles of
Incorporation or Bylaws or any law, rule, regulation, judgment, order, decree,
agreement, instrument or arrangement that would have a material adverse effect
on the Buyer's or Guarantor's ability to perform its obligations hereunder.
5.4 Finder. There is no person or entity that is entitled to a finder's
fee or any type of commission in relation to or in connection with the
transactions contemplated by this Agreement as a result of any agreement or
understanding with the Buyer or Guarantor; and the Buyer agrees to indemnify the
Seller and to hold it harmless against all claims, damages, costs or expenses of
or for any other such fees or commissions resulting from the Buyer's actions or
agreements regarding the execution or performance of this Agreement related to
such fees, and will pay all costs of defending any action or lawsuit brought to
recover any such fees or commissions incurred by the Seller, including
reasonable attorneys' fees.
5.5 Effect of Agreement, Etc. The execution, delivery and performance of
this Agreement by the Buyer and Guarantor and consummation by Buyer and
Guarantor of the transactions contemplated hereby will not, with or without the
giving of notice and the lapse of time, or both, (a) violate any provision of
law, statute, rule or regulation to which the Buyer or Guarantor is subject, (b)
violate any judgment, order, writ or decree of any court applicable to the Buyer
or Guarantor, or (c) result in the breach of or conflict with any term,
covenant, condition or provision of, result in the modification or termination
of, constitute a default under, or result in the creation or imposition of any
lien, security interest, restriction, charge or encumbrance upon any of the
Assets pursuant to the Articles of Incorporation or Bylaws, or any commitment,
contract or other agreement or instrument to which the Buyer or Guarantor is a
party or by which any of the Assets is or may be bound or affected or from which
the Buyer or Guarantor derives benefit.
5.6 Governmental Authority. The Buyer and the Guarantor have submitted
any notice, report or filing, and has received any consent, approval or
authorization, that is required by any governmental authority, in connection
with its execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby.
The Buyer covenants and agrees with the Seller as follows:
5.7 Seller's Employees. Prior to the Closing Date, the Buyer shall make
employment offers to the employees on Schedule 4.25 (except those designated as
having been terminated and the UK Transferring Employees to the extent an offer
is not necessary under the UK Transfer Regulations) and such employment offer
shall include comparable salaries, benefits (subject to applicable law and to
the extent comparable benefits are offered under Buyer's current plans, without
expansion, and current policies and job responsibilities and so that such
employees shall retain their employment dates for
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purposes of accruing benefits under Buyer's benefit plans, to the extent
permitted by Buyer's plans and applicable law). Notwithstanding the foregoing,
it is understood that Buyer does not have and will not implement a severance
policy and that all such offers shall be contingent on the transactions
contemplated being consummated and that such employees shall agree to work on
Buyer's premises and that Buyer will not pay any bonuses for any period prior
to the Closing or under seller's Bonus plans. It is understood and agreed that
Buyer's obligations to offer "comparable benefits" (other than with respect to
the UK Transferring Employees) does not require Buyer to expand its current
benefit plans or consummate new plans or enter into arrangements with other
benefit providers or expand its policies to match Seller's current plans. For
instance, Buyer need only offer Seller's employees $50,000 of term life
insurance because that is what Buyer provides its employees and Buyer will not
be required to increase that amount because Seller may offer more life
insurance. Likewise, Buyer is not required to expand its bonus plans, illness
policies, vacation policies and the like to meet Seller's policies and Buyer
only needs to offer Seller's employees comparable plans and policies offered
to Buyer's employees. It is expressly understood and agreed that Buyer need
only offer Seller's employees Buyer stock options to the extent and in
accordance with policies Buyer offers its employees stock options and Buyer
need not offer stock options to an employee merely because such employee
currently has a stock option granted by Seller. Buyer has provided Seller a
letter it will use to offer employees positions and agrees to abide by the
terms set forth therein.
5.8 Litigation Assistance. Buyer shall permit Seller (at Seller's
expense) to have reasonable access to employees accepting offers of Buyer for
the purpose of defending any litigation outstanding on the date hereof. No such
access shall be permitted which would interfere with the performance of such
employee's job duties or in any event require such employee to spend more than
fours hours on any given day or six hours in any given week.
5.9 CRSS Sublease. Buyer shall pay the brokers fee set forth in Section
20 of the sublease between Seller and CRSS Constructors, Inc., to the extent
such fee becomes due and payable and only if the Closing occurs.
SECTION 6
COVENANTS OF THE SELLER
The Seller covenants and agrees with the Buyer as follows:
6.1 Approvals, Consents, Etc. The Seller shall use its reasonable efforts
to obtain in writing prior to the Closing Date all approvals, consents and
waivers required to be obtained by the Seller in order to effectuate the
transactions contemplated hereby and shall deliver to the Buyer copies of such
approvals and consents in form and substance reasonably satisfactory to counsel
for the Buyer.
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6.2 Further Assurances. After the Closing Date, the Seller shall, at the
request and expense of the Buyer, execute, acknowledge and deliver to the Buyer
without further consideration, all such further assignments, conveyances,
endorsements, consents and other documents and take such other action as the
Buyer may reasonably request (a) to transfer to and vest in the Buyer and
protect its right, title and interest in, all of the Assets, (b) to aid in the
collection of Accounts Receivable, (c) obtain any consent required to an
assignment of a Contract, a Commitment or any of the Intellectual Property,
and (d) otherwise to consummate the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, Seller shall take
all steps necessary to perfect a legal assignment of the Accounts Receivable
held by Systems Strategies Limited or which otherwise originate in England,
including notifying debtors of the assignment.
6.3 Records. The Seller shall cooperate in providing information
regarding the Assets and the conduct of the Business that the Buyer reasonably
requires to evaluate the transactions contemplated by this Agreement. The Buyer
shall immediately return all such information and copies thereof to the Seller
if this Agreement is terminated.
6.4 Transition Obligations. Beginning from the time Buyer becomes the
exclusive agent to run the Business under Section 6.14 and through the date that
is forty-five (45) days after the Closing Date (the "Transition Period"), the
Seller shall use its reasonable efforts to transition the relationships with
business from the Customers and the Vendors to the Buyer and shall provide
assistance with respect to recruitment of employees, and in communicating the
sale to both employees and customers. Seller hereby grants Buyer a license, to
be in effect during the Transition Period, to allow Buyer's employees (including
those hired from Seller), to enter and conduct operations at Seller's
facilities, including a license to use telephones, desks, photocopies, facsimile
machines, internet access and packaging equipment. Such license also permits
Buyer to store assets purchased hereunder on Seller's premises. Seller also
agrees to provide the transition services set forth on Schedule 6.4 hereto and
Buyer agrees to pay the charges set forth on Schedule 6.4 hereto promptly upon
presentation of an invoice after the forty-five (45) day period referred to
above. Seller also agrees to provide other necessary transition services during
the Transition Period reasonably requested by Buyer and Buyer agrees to pay
Seller its out-of-pocket expenses incurred with respect thereto.
6.5 Access. At all times prior to the Closing Date, the Seller shall
provide the Buyer and its representatives with reasonable access to, and will
make available for inspection and review, all properties, personnel, books,
records and accounts of the Seller relating to the Business in order that the
Buyer may have a reasonable opportunity to make such investigation as it shall
desire to make of the Business during normal business hours. It is understood
that the Buyer shall be permitted to maintain personnel on the premises of the
Seller during normal business hours to observe all aspects of the operations of
the Business and to confer with the Seller's management, attorneys, accountants
and other third parties reasonably requested for verification of any information
obtained pursuant to such observations. The Seller also consents to the
examination by KPMG Peat Marwick LLP of work papers and other records of the
accountants (including those of Ernst & Young
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LLP) pertaining to the Business and will cooperate with Buyer to obtain such
access and related information from the accountants.
6.6 Solicitation of Employees. For a two (2) year period following the
Closing Date, Seller shall not and shall not permit is subsidiaries or
affiliates to directly or indirectly conduct, solicit, or initiate any
employment discussions with any of Seller's employees hired by the Buyer for a
period of two (2) years following the Closing Date, whether employed by Buyer or
any other person to whom Buyer sells the Business related to the Vision Product
line.
6.7 Turn Over. Seller shall promptly remit to Buyer (without any
deductions for set-offs, counterclaims and the like) after receipt any funds
received after the Closing Date with respect to the Contracts and Assets to be
transferred hereunder or any other funds remitted by customers of the Business
after the Closing Date.
6.8 Employees. Seller shall pay all costs associated with deferred
compensation of executives and any termination of its or its Subsidiaries'
employees or any employee not accepting any job offer extended by Buyer, or
refusing to transfer under the Transfer Regulations, including costs associated
with accrued vacation, payroll, paid time off or payments under the Worker
Adjustment and Retraining Notification Act ("WARN Act"), other than liabilities
associated with terminations by Buyer subsequent to the Closing Date. Seller
shall pay all bonuses and deferred compensation due to its employees hired by
Buyer. Seller shall pay all unfunded pension costs due for the UK Transferring
Employees.
6.9 Name Change. Seller shall use its best efforts to obtain shareholder
approval to change its name at its next annual meeting of shareholders (and at
any subsequent annual meeting if unsuccessful) and take all other steps to
effect such name change. If Seller's shareholders do not approve such name
change, Seller shall not use the name Apertus to market any products. Seller
shall cause any subsidiary or affiliate using the name "Apertus" to change such
name.
6.10 Financial Statements; Pro Formas. Seller shall deliver financial
statements and pro forma information related to the Business which will enable
Buyer to fully comply with applicable rules of the Securities and Exchange
Commission (the "SEC"), including Rules 3-01, Rule 3-02, Rule 3-05(b)(2)(iv),
Rule 11-01 and Rule 11-02 of Regulation S-X. Such financial statements shall be
accompanied by an unqualified opinion of Ernst & Young LLP that the financial
statements have been prepared in accordance with generally accepted accounting
principles. Buyer shall pay $40,000 towards the preparation of such financial
statements and pro forma information and audit by Ernst & Young LLP and any
further changes shall be at Seller's expense. Seller shall cooperate fully in
such audit, including preparing all schedules and providing necessary
information and letters of representations. Such financial statements, pro-
forma information and opinion of Ernst & Young LLP shall be provided within 45
days of the date of this Agreement. Seller shall also
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provide information and assistance so that Buyer can prepare management's
discussion and analysis and description of the business required by the SEC
rules.
6.11 Sales of Product Line. Seller shall, when reasonably requested by
Buyer, provide assistance to Buyer in selling any of the Business related to the
Vision Product line acquired hereunder to any third party.
6.12 [Reserved.]
6.13 Access to Excluded Assets. Seller shall afford Buyer reasonable
access to the Excluded Assets (including related computers and computer
records) or core corporate records retained by Seller if necessary to operate
the Business and Buyer shall afford Seller reasonable access to records
acquired hereunder necessary for Seller to operate its business.
6.14 Management Agreement. Effective as of 12:01 a.m. on October 25,
1997, (the "Appointment Time") but subject to Section 12.1 hereof, Seller hereby
irrevocably appoints Buyer as its exclusive agent to run and manage the Business
through the earlier of the Closing Date and the Drop Dead Date.
SECTION 7
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER
AND THE GUARANTOR
The obligations of the Buyer and the Guarantor under this Agreement are
subject to the satisfaction of the following conditions as of the Closing Date,
any or all of which conditions may be waived by the Buyer in its sole
discretion:
7.1 Changes in Benefit Plans. (i) Between the date of this Agreement and
the Closing Date, Seller shall not enter into, adopt or amend in any material
respect or terminate any Benefit Plan or any other agreement, arrangement, plan
or policy involving any employee to be employed by Buyer; or (ii) increase the
compensation of any such employee or pay any benefit or amount not required by a
plan or arrangement as in effect on the date of this Agreement, or enter into
any arrangement or commitment to do any of the foregoing.
7.2 Accuracy of Representations, Warranties and Agreements. The
representations, warranties and agreements made by the Seller herein shall be
true and correct on the date of this Agreement and at the Appointment Time (or
with respect to Sections 4.1, 4.4, and 4.17, as of the Closing Date) in all
material respects with the same effect as though made at such time (except to
the extent the Buyer shall waive the same). The Seller shall have performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by it in all material respects at or
prior to the Closing Date; and the Seller shall have delivered to the Buyer a
certificate of its Chief
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Executive Officer and President dated the Closing Date certifying to such
compliance and completion.
7.3 Consents and Approvals. The Buyer shall have received (a) from
governmental and administrative authorities all permits and licenses required
for it to carry on the business of the Seller, and (b) all consents or approvals
all in form and substance reasonably satisfactory to the Buyer.
7.4 Noncompetition Agreement. The Seller (for a five year period) and
Robert D. Gordon, (for a two year period) shall have executed and delivered to
the Buyer a noncompetition agreement in the forms of Exhibit A-1 and A-2 hereto,
respectively.
7.5 Secretary's Certificate. The Buyer shall have received a certificate
of the Secretary of the Seller with respect to the resolutions adopted by the
Board of Directors and Shareholders of the Seller, as applicable, approving this
Agreement and the transactions contemplated hereby (or like evidence acceptable
to Buyer from any Subsidiary incorporated outside the United States).
7.6 Employment Agreements and Offers. The Buyer shall be satisfied that
Martin Hahn, Steve Gimnicher and Will Fell shall have accepted offers of
employment from the Buyer or shall not have refused to transfer under the
Transfer Regulations.
7.7 Good Standing Certificates, Etc. The Buyer shall have received a
certificate dated within five (5) days before the Closing Date from the office
of the Secretary of State of Minnesota certifying that Seller is validly
existing and in good standing under the laws of its state of incorporation and
like certificates, to the extent available, shall be provided for any
Transferring Subsidiary.
7.8 Lien Search. The Seller, at its expense, shall have arranged for and
the Buyer shall have received the report or reports, reasonably satisfactory to
the Buyer and its counsel, of a reputable search company indicating that there
are no liens, mortgages, encumbrances, charges or other rights of third parties
of record as of a date not more than ten (10) days before the Closing Date in
each jurisdiction where Assets are located.
7.9 Opinion of Counsel to the Seller. The Buyer shall have received the
opinion of Dorsey & Whitney LLP (under Federal, Minnesota, and New York law) and
Julie Cummins Brady counsel to the Seller, addressed to the Buyer, dated the
Closing Date, in the forms set forth in Exhibits B-1 and B-2 attached hereto,
respectively, and from counsel acceptable to Buyer with respect to any foreign
Subsidiary in a form acceptable to Buyer.
7.10 Material Adverse Change. There shall not have occurred any material
adverse change in the Business since the date of this Agreement and the
Appointment Time.
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7.11 Engagement Letter. Seller shall deliver an engagement letter of
Ernst & Young LLP wherein such firm agrees to perform the audit required by
Section 6.10 and also agrees to deliver a consent wherein its opinion on the
financial statements delivered pursuant to Section 6.10 may be included in the
Guarantor's SEC filings and such firm may be named as an expert in such filings
and that such firm will use reasonable efforts to prepare any comfort letters
requested by the Guarantor (with such comfort letters to be at the Guarantor's
expense).
SECTION 8
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER
The obligations of the Seller under this Agreement are subject to the
satisfaction of the following conditions as of the Closing Date, any or all of
which may be waived by the Seller in its sole discretion:
8.1 Accuracy of Representations, Warranties and Agreements. The
representations, warranties and agreements of the Buyer and Guarantor herein
shall be true and correct on the date of this Agreement and at the Appointment
Time (or with respect to Sections 5.1 and 5.2, as of the Closing Date) in all
material respects with the same effect as if made at such time (except to the
extent the Seller waives the same); the Buyer shall have performed and complied
with all agreements, covenants, and conditions to be performed or complied with
by it in all material respects at or prior to the Closing Date; and the Buyer
and Guarantor shall have delivered to the Seller a certificate of its Chief
Executive Officer and President dated the Closing Date certifying to such
compliance and completion.
8.2 Secretary's Certificate. The Seller shall have received a certificate
of the Secretary of the Buyer and Guarantor with respect to the resolutions
adopted by the Board of Directors of the Buyer and Guarantor approving this
Agreement and the transactions contemplated hereby.
8.3 Good Standing Certificates, Etc. The Seller shall have received a
certificate dated within five (5) days before the Closing Date from the office
of the Secretary of State of Minnesota certifying that the Buyer and Guarantor
is validly existing and in good standing under the laws of its state of
incorporation.
8.4 Opinion of Counsel to the Buyer and Guarantor. The Seller shall have
received the opinion of Leonard, Street and Deinard, P.A., counsel to the Buyer
and Guarantor, addressed to the Seller, dated at the Closing Date, in the form
set forth in Exhibit C attached hereto.
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SECTION 8A
CONDITIONS TO EACH PARTY'S OBLIGATIONS
The obligations of the Seller, the Buyer and the Guarantor under this
Agreement are subject to the satisfaction of the following conditions as of the
Closing Date, any or all of which may be waived by all of the parties, each in
its sole discretion:
8A.1 Carleton Transaction. The Merger (the "Merger") contemplated by the
Agreement and Plan of Merger dated October 24, 1997 among APERTUS and Carleton
Corporation shall have been consummated in a manner reasonably satisfactory to
the parties hereto (including the filing of Articles of Merger in the states of
Minnesota and Massachusetts).
SECTION 9
CLOSING; CLOSING DATE;
CLOSING DELIVERIES
9.1 Closing. The Closing of the transactions contemplated hereby shall
occur immediately following the Merger (the "Closing") or at such later time as
all the conditions to Closing as set forth in Sections 7, 8, 8A, and 9.2 hereof
have been satisfied or waived. The Closing, when it occurs, shall be effective
as of the Appointment Time. The Closing will be held at the offices of Leonard,
Street and Deinard, P.A., Suite 2300, 150 South Fifth Street, Minneapolis, MN
55402 at 10:00 a.m. or at such other time and place as the parties mutually
agree. The date upon which the Closing occurs is referred to herein as the
"Closing Date."
9.2 Closing Deliveries. On the Closing Date, the Seller shall execute
and/or deliver to the Buyer the following:
a. a bill of sale conveying the Assets to the Buyer in form reasonably
satisfactory to the Buyer and its counsel and any other instrument required by
Section 1.3, including assignments of contracts and leases free and clear of all
encumbrances;
b. certificates of title and assignments thereof for all motor vehicles
transferred to the Buyer as part of the Assets;
c. all object code and source code for the Products and related
technical documentation;
d. a list of the Inventory, Billed Inventory, Accounts Receivable,
fixed assets, deposits and vendor payables as of the close of business on the
date hereof, which list shall be satisfactory to Buyer and subject to
adjustment as set forth herein;
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e. such other and further documents and certificates of the Seller's
officers and others as the Buyer shall reasonably request to evidence compliance
with the conditions set forth in this Agreement.
9.3 Buyer's Closing Documents. On the Closing Date, the Buyer will
execute and/or deliver to the Seller the following:
a. the Purchase Price by wire transfer, or in certified funds in
accordance with Section 2 of this Agreement, it being understood Buyer shall
deposit a portion of the Purchase Price in escrow pursuant to Section 2.1(b);
b. an Assumption Agreement, pursuant to which the Buyer will assume all
obligations of Seller under the Assumed Liabilities;
c. [Reserved.]
d. a royalty free license to use the name "Apertus" (other than for
marketing) for a period of six (6) months following the Closing Date; and
e. such other documents and certificates to evidence compliance with
the conditions set forth in this Article as may be reasonably requested by the
Seller.
SECTION 10
CONDUCT PRIOR TO CLOSING
10.1 Conduct and Transaction of Business Prior to Closing.
a. Access to Information. During the period prior to the Closing, the
Seller shall give to the Buyer and its attorneys, accountants or other
authorized representatives, reasonable access to the Business' premises, the
Seller's employees and the Assets, and shall furnish to the Buyer during such
period all such information concerning the Assets as the Buyer reasonably may
request. Unless and until the Closing shall have occurred, the Buyer shall
maintain in confidence all information acquired by it pursuant to this paragraph
and not use such information for any purpose other than assessing and
consummating the transactions contemplated herein. In the event that this
Agreement shall terminate prior to the Closing, the Buyer shall return to the
Seller all copies of all information acquired by it pursuant hereto.
b. Restrictions in Operation of the Business. The Seller covenants
that during the period from the date of this Agreement to the Closing:
(i) the Business shall be conducted only in the ordinary course
consistent with past practices;
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(ii) except with the consent of the Buyer, neither the Seller nor any
Participating Subsidiary will sell, dispose, transfer, assign or otherwise
remove any of the Assets other than Inventory in the ordinary course of business
consistent with past practice;
(iii) the Seller will timely and properly perform all of its
obligations and commitments under all existing contracts and agreements
pertaining to the Business, except as to amounts or obligations which the
Seller contests in good faith and with appropriate proceedings;
(iv) the Seller will use its best efforts to (a) preserve intact the
Assets and the Business, (b) not do anything to cause its employees of the
Business to seek employment elsewhere and (c) not impair relationships with
Vendors, Customers, distributors and others having business relations with the
Business;
(v) the Seller shall not agree to or put into effect any increase in
compensation or other benefits for any of the employees of the Business;
(vi) the Seller shall not change its accounting methods or practices
relating to the Business;
(vii) the Seller shall keep the Assets and premises at which it
conducts the Business insured in the amounts and with coverage at least as
great as the amounts and coverage in effect on the date hereof;
(viii) the Seller shall not provide any warranties with respect to any
products or services sold by it on terms more favorable to the customer than the
warranties described on Schedules 4.16 and 4.12 attached hereto; and
(ix) the Seller shall operate and maintain the real property and
premises on which Assets are located, in accordance with prudent, reasonable
business standards, including the maintenance of adequate liability insurance
and any currently-maintained insurance against loss by fire, windstorm and
other hazards, casualties and contingencies, including vandalism and malicious
mischief (Buyer understands that Seller may self-insure fire and other
property casualties).
c. Advice of Changes. During the period from the date of this Agreement
to the Closing Date, the Seller will advise the Buyer promptly in writing of any
fact of which the Seller becomes aware, which, if known at the date hereof,
would have been required to be set forth or disclosed in or pursuant to this
Agreement.
SECTION 11
INDEMNIFICATION
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11.1 Indemnification by Seller. The Seller covenants and agrees with the
Buyer and the Guarantor that it shall indemnify the Buyer and the Guarantor and
their owners, directors, and officers, and their successors and assigns, heirs
and legal representatives, and the owners, directors, and officers, of any such
successors and assigns, and hold them harmless from, against and in respect of
any and all costs, losses, claims, liabilities, fines, penalties, damages and
expenses (including interest which may be imposed in connection therewith and
court costs and fees and disbursements of counsel) (hereinafter referred to as
"Claims") arising out of or with respect to:
a. any liabilities or obligations of the Seller or any of its
Subsidiaries other than the Assumed Liabilities, including without limitation
any and all liabilities arising out of or relating to the operation of the
Business on or prior to the Appointment Time, any and all liabilities arising
out of or relating to the employment by the Seller of any of its employees or
the termination of such employment;
b. any breach of any of the representations, warranties, covenants or
agreements made by the Seller in this Agreement or in any other agreement or
certificate executed and delivered by the Seller pursuant hereto; and
c. any litigation or threatened litigation attributable to the
representations set forth in Sections 4.1 or 4.4 not being true in all respects
(or litigation or threatened litigation for which no cause of action would exist
if such representations are true and correct) or commenced by any person not a
party to this Agreement, including Seller's shareholders.
11.2 Indemnification by Buyer. The Buyer hereby covenants and agrees with
the Seller that it shall indemnify the Seller and its directors, officers, and
shareholders and successors and assigns, heirs and legal representatives, and
the directors, officers and shareholders of any such successors and assigns, and
hold them harmless from, against and in respect of any and all Claims, arising
out of or with respect to:
a. the operation of the business or the assets of the Buyer on and
following the Appointment Time;
b. the Buyer's assuming and agreeing to pay, perform and discharge the
obligations of the Seller related to future performance to be discharged or
performed after the Closing Date under the Contracts to the extent set forth
herein; and
c. any breach of any of the representations, warranties, covenants or
agreements made by the Buyer in this Agreement or in any ancillary documents.
11.3 Limits. Except with respect to Sections 2.2 and 11.1(c) (for which
there is no minimum amount which can be claimed), no claim for indemnification
may be made by any party hereto until the aggregate amount of such claims by
such party exceed Two Hundred Thousand Dollars ($200,000) and, except with
respect to Sections 2.2 and 11.1(c) (for
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which there is no maximum amount which can be claimed), the aggregate claims
indemnified against shall not exceed Eleven Million Four Hundred Twelve
Thousand Dollars ($11,412,000).
11.4 UK Transferring Employees. The provisions of Schedule 3.20 are
hereby incorporated by reference.
SECTION 12
TERMINATION
12.1 Termination. Anything in this Agreement to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated herein abandoned:
a. by the mutual written consent of all of the parties hereto at any
time prior to the Closing;
b. [Reserved.]
c. by the Buyer in the event of a material breach by the Seller of any
provision of this Agreement, which breach is not remedied within ten (10) days
after receipt of notice thereof (or if earlier, the Drop Dead Date);
d. by the Seller in the event of a material breach by the Buyer of any
provision of this Agreement, which breach is not remedied within ten (10) days
after receipt of notice thereof (or if earlier, the Drop Dead Date); or
e. the Closing does not occur on or before November 5, 1997 (the "Drop
Dead Date").
Any termination of this Agreement pursuant to this Section 12 shall be without
prejudice to any of the rights of the parties hereto with respect to any breach
of this Agreement occurring prior to the date of such termination.
In the event this Agreement is terminated or fails to close, Seller shall
not directly or indirectly conduct, solicit, initiate or encourage any
discussions with respect to all or any portion of the Business from 60 days from
the date of such termination or failure to close.
In the event this Agreement fails to close because of the lack of
reasonable efforts of one of the parties hereto (the "Defaulting Party"), the
Defaulting Party shall promptly pay the other party its reasonable out-of-pocket
expenses incurred in connection with the transactions contemplated hereby, upon
presentation of such costs and expenses.
The indemnification provisions set forth in Section 11.1(c) shall survive
any termination.
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In the event the Closing does not occur because of termination hereunder,
the appointment of Buyer as manager of the business may be revoked or Buyer may
resign, and in such event the Buyer and Seller shall unwind all transactions
which occur (including revenues earned and expenses incurred during the
Transition Period) so that the parties are placed in the same position as if
this Agreement had never been executed, except each party shall be liable for
its breaches of representations, warranties and covenants as set forth herein,
together with the obligations of any Defaulting Party.
12.2 Risk of Loss. The risk of loss to the Assets and all liability with
respect to injury and damage occurring in connection therewith shall be the sole
responsibility of the Seller until the time of the Closing.
SECTION 13
GENERAL
13.1 Expenses, Taxes. Except as set forth in Section 12.1, the Buyer and
the Seller shall pay their own respective expenses and the fees and expenses of
their respective counsel and accountants and other experts. The Seller shall
bear all transfer taxes, gains taxes, recording taxes and similar taxes payable
or determined to be payable in connection with the execution, delivery and
performance of this Agreement and the transfer of the Assets contemplated
hereby.
13.2 Survival of Representations and Warranties. The representations,
warranties in this Agreement and in any ancillary certificate or document shall
survive the Closing for a period of two (2) years from the Closing Date, except
the representations and warranties contained in Sections 4.1, 4.4, 4.5, 4.9,
4.13, 4.15, 4.21, 4.22, 5.1, and 5.2 which shall survive for the period of the
applicable statute of limitations. All covenants shall survive the Closing
indefinitely.
13.3 Waivers. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action, or compliance with any representation,
warranty, covenant or agreement contained herein. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach. The waiver by any party hereto
at or before the Closing Date of any condition to its obligations hereunder
which is not fulfilled shall preclude such party from seeking redress from the
other party hereto for breach of any representation, warranty, covenant or
agreement contained in this Agreement related to such waiver.
13.4 Binding Effect; Benefits. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns, heirs and legal representatives. Except as otherwise set
forth herein, nothing in this Agreement, express or implied, is intended to
confer on any person other than the parties
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hereto or their respective successors and permitted assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement.
13.5 Notices. All notices, requests, demands and other communications
which are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person or
three (3) days after deposit by certified or registered first class mail,
postage prepaid, return receipt requested, to the party to whom the same is so
given or made:
a. If to the Buyer or
Guarantor, to: COMPUTER NETWORK TECHNOLOGIES CORPORATION
605 North Highway 169
Suite 800
Minneapolis, MN 55441
Attention: President
With a copy to: Leonard, Street and Deinard, P.A.
150 South Fifth Street, Suite 2300
Minneapolis, MN 55402
Attention: Morris M. Sherman, Esq.
b. If to the Seller, to: APERTUS TECHNOLOGIES INCORPORATED
7275 Flying Cloud Drive
Eden Prairie, MN 55344
Attention: President
With a copy to: Dorsey & Whitney, LLP
220 South Sixth Street
Minneapolis, MN 55402
Attention: William B. Payne, Esq.
or to such other address as such party shall have specified by notice to the
other party hereto.
13.6 Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) constitutes the entire agreement and supersedes all prior
agreements (other than the letter with respect to exclusive dealings) and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof and cannot be changed or terminated orally.
13.7 Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not be deemed to be a part
of this Agreement or to affect the meaning or interpretation of this Agreement.
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13.8 Governing Law; Venue. This Agreement shall be construed as to
both validity and performance and enforced in accordance with and governed by
the laws of the state of Minnesota, without giving effect to the choice of law
principles thereof; and all actions or proceedings seeking to enforce any
provision of, or based on any right arising out of this Agreement shall be
brought against any of the parties in the courts of the state of Minnesota, or,
if it has or can acquire jurisdiction, in the United States District Court for
Minnesota, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein.
13.9 Amendments. This Agreement may not be modified or changed except
by an instrument or instruments in writing signed by the party against whom
enforcement of any such modification or amendment is sought.
13.10 Severability. The invalidity of all or any part of any
representation, warranty, covenant or indemnification section of this Agreement
shall not render invalid the remainder of this Agreement or the remainder of
such section. If any representation, warranty, covenant or indemnification
section of this Agreement or portion thereof is so broad as to be unenforceable,
it shall be interpreted to be only so broad as is enforceable.
13.11 Press Releases. None of the Seller, Buyer or the Guarantor
shall, without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as required by law or the regulation of any stock
exchange (but each party shall still endeavor to allow the other party
reasonable opportunity to review and comment to the extent feasible).
13.12 Guarantee. The Guarantor hereby fully and unconditionally
guarantees the obligation of Buyer to pay the Purchase Price.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed in their respective names by an officer thereunto duly authorized on
the date first above written.
SELLERS: BUYER:
APERTUS TECHNOLOGIES CNT ACQUISITION I CORPORATION
INCORPORATED
By: /s/ Robert D. Gordon By: /s/ Thomas Hudson
------------------------------- -------------------------------
Its: CEO Its: CEO
----------------------- -------------------------
GUARANTOR:
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COMPUTER NETWORK
TECHNOLOGIES CORPORATION
By: /s/ Thomas Hudson
-----------------------------
Its: CEO
-------------------------
BLUELINE SOFTWARE, INC.
By: /s/ Robert D. Gordon
---------------------------------
Its: President
-----------------------------
BLUELINE SOFTWARE EUROPE B.V.
By: /s/ Robert D. Gordon
---------------------------------
Its: Director
-----------------------------
SYSTEMS STRATEGIES, INC.
By: /s/ Robert D. Gordon
---------------------------------
Its: President
-----------------------------
SYSTEMS STRATEGIES LIMITED
By: /s/ Robert D. Gordon
---------------------------------
Its: Director
-----------------------------
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Exhibit 23.1
------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our firm) included in this report on Form 8-K.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 6, 1997
