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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): March 8, 1999
TOUCHSTONE SOFTWARE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-12969 95-3778226
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2124 MAIN STREET, HUNTINGTON BEACH, CALIFORNIA 92648
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 969-7746
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective as of the close of business on March 8, 1999, TouchStone
Software Corporation (the "Company") acquired all of the issued and outstanding
capital stock of Unicore Software, Inc., a Massachusetts corporation
("Unicore"). At the time of the acquisition, Unicore was privately owned by
Pierre A. Narath, the Company's President and Chief Executive Officer and a
member of the Company's Board of Directors, and Jason K. Raza, who became a Vice
President of the Company in connection with the acquisition. Unicore is a
leading provider of system management software, including BIOS upgrades, PC
Diagnostics and Year 2000 Solutions, whose customers consist of a majority of
Fortune 500 corporations, government agencies, and major educational and
financial institutions. The original Unicore was founded by Mr. Narath in 1989,
and sold to Award Software International, Inc. ("Award") in 1997. On October 27,
1998, following the merger of Award into Phoenix Technologies Ltd. (collectively
"Phoenix"), Messrs. Narath and Raza formed Unicore as a new Massachusetts
corporation and used it to purchase all of the assets of the original Unicore
from Phoenix.
Pursuant to the terms and conditions of a definitive Agreement and Plan
of Acquisition ("Acquisition Agreement") dated as of March 5, 1999, the
acquisition of Unicore was accomplished through the merger of Unicore with and
into a newly-formed and wholly-owned subsidiary of the Company. Immediately
prior to the acquisition, the Company contributed all of the assets, products
and operations of its personal computer diagnostic software business to this
newly-formed corporation. As a consequence, since the closing of the Unicore
acquisition the Company has served as a holding company with a single,
wholly-owned subsidiary that currently conducts the business and activities that
previously were separately conducted by both the Company and Unicore. A copy of
the Acquisition Agreement is filed herewith as Exhibit A-1. The Agreement and
Plan of Merger pursuant to which Unicore was merged with and into the
newly-formed subsidiary of the Company is attached as Exhibit A-5.
Unicore was acquired by the Company for an aggregate purchase price of
$4,555,000, with $1,205,000 of this sum paid in cash at the closing. The
$3,350,000 balance of the purchase price is to be paid immediately following the
1999 Annual Meeting of the Company's stockholders (the "Annual Meeting"), as
described in more detail below. As a condition to the closing, the Company
deposited the sum of $620,000 in cash with Lawrence Savings Bank of
Massachusetts, in order to obtain the release of Mr. Narath from his personal
guarantee of approximately $620,00 of indebtedness owed by Unicore to Lawrence
Savings Bank that was incurred in connection with the purchase of Unicore from
Phoenix.
In connection with the acquisition, each of Messrs. Narath and Raza
entered into a three-year employment agreement with the Company. Under the terms
of his employment agreement, Mr. Narath is to serve as the President and Chief
Executive Officer of the Company, and as a member of its Board of Directors, and
as the President, Chief Executive Officer and a director of Unicore which
currently operates as a wholly-owned subsidiary of the Company. A copy of this
employment agreement is filed herewith as Exhibit A-2. The employment agreement
has an initial term of three years commencing March 1, 1999, and will
automatically renew for an additional one-year period on each March 1 unless
terminated by either party on six months prior written notice. For the year
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ending December 31, 1999, Mr. Narath is to be paid a base salary of $200,000,
with his base salary to increase to $210,000 for the year ending December 31,
2000 and to $225,000 for the year ending December 31, 2001. In addition to this
base salary, Mr. Narath is to be paid a bonus equal to 3.5% of all consolidated
net sales in excess of $6,000,000 generated by the Company during the year
ending December 31, 1999, plus such other bonuses as the Company's Board of
Directors may determine. Mr. Narath's employment agreement also provides that he
is entitled to receive certain specified supplemental health and life insurance
and all costs of a motor vehicle to be selected by him, in addition to
reimbursement for all of his reasonable business expenses, and to participate in
all of the Company's existing benefit plans.
Should his employment with the Company be terminated for any reason
other than "cause" as defined therein, Mr. Narath would be entitled to receive,
in one payment, an amount equal to one year's base salary at the level then in
effect, plus an amount equal to any bonuses earned during the previous calendar
year. However, if Mr. Narath's employment is terminated for any reason within
one year following a specified change in control of the Company which is not
approved by the Company's Board of Directors, with Mr. Narath voting in favor
thereof, the Company would be obligated to pay Mr. Narath, in one payment, an
amount equal to 200% of one year's salary at the level then in effect, plus 200%
of any bonuses earned during the previous calendar year and an additional amount
equal to all taxes payable by Mr. Narath on the full amount of such payment. In
the event that there is a change in control of the Company which has been
approved by the Company's Board of Directors, with Mr. Narath voting in favor
thereof, he would nevertheless be entitled to terminate his employment agreement
for "good cause" if his duties were substantially diminished within 12 months
thereafter, in which case the Company would be obligated to pay him, in one
payment, an amount equal to one year's base salary at the level then in effect,
plus an amount equal to any bonuses earned during the previous calendar year.
Mr. Raza's employment agreement provides that he is to be employed as a
Vice President of both the Company and Unicore for a three-year period
commencing March 1, 1999, subject to the same provision for additional one-year
extensions. A copy of this employment agreement is filed herewith as Exhibit
A-3. During each year of the initial term, Mr. Raza is to be paid a base salary
of not less than $110,00 and shall be entitled to receive such bonuses as the
Company's Board of Directors may determine. In the event that his employment
with the Company is terminated for any reason other than "cause" as defined
therein, Mr. Raza would be entitled to receive, in one payment, an amount equal
to one year's base salary at the level then in effect, plus an amount equal to
any bonuses earned during the previous calendar year.
At the closing of the acquisition of Unicore by the Company, the former
shareholders of Unicore, Messrs. Narath and Raza, received an aggregate of
$1,205,000 in cash and became entitled to receive an additional $3,350,000 as
the balance of the purchase price. It was and continues to be the intention of
all parties that the balance of the purchase price for Unicore be paid through
the issuance and delivery of an aggregate of 3,350,000 shares of the Company's
Common Stock, with each share valued for this purpose at $1.00. However, because
of the number of shares to be issued and the fact that the primary recipient
thereof, Mr. Narath, is a director and the President and Chief Executive Officer
of the Company, the corporate governance rules for continued listing of the
Company's Common Stock on The Nasdaq National Market require that the Company
obtain stockholder approval of the issuance of these shares. Consequently, the
Acquisition Agreement
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provides that the payment of the balance of the purchase price be deferred until
after the upcoming Annual Meeting, in order to afford the stockholders of the
Company with the opportunity to consider and vote upon a proposal to approve the
issuance of shares of the Company's Common Stock in payment therefor.
At the Annual Meeting, the Company's stockholders will be asked to
approve the issuance of 3,350,000 shares of the authorized but previously
unissued shares of the Company's Common Stock, which would be delivered to the
former shareholders of Unicore in payment, at the rate of $1.00 per share, of
the $3,350,000 remaining to be paid to them as the balance of the purchase price
for Unicore. On March 8, 1999, the effective date of the acquisition, the
closing price for a share of the Company's Common Stock on The Nasdaq National
Market was $0.69. Approval of the proposal to issue these 3,350,000 shares of
the Company's Common Stock in payment of the balance of the Unicore purchase
price will require the affirmative vote of the holders of a majority of the
issued and outstanding Common Stock of the Company. Each of the executive
officers and directors of the Company, including Mr. Narath, has indicated the
intention to vote all of the shares of the Company's Common Stock over which
such individual has voting control in favor of the issuance of 3,350,000 shares
of the Company's Common Stock in payment of the balance of the purchase price
for Unicore.
In the event that the stockholders of the Company do not approve the
issuance of these 3,350,00 shares of Common Stock at the Annual Meeting, it
would be the intention of the Company's management to pay the balance of the
purchase price for Unicore with $3,350,000 in cash. In order to secure, in part,
the obligation of the Company to pay the balance of the purchase price, the
Company deposited the sum of $2,000,000 in cash into an interest-bearing escrow
at the time of closing of the Unicore acquisition.
Approval of the issuance of 3,350,000 shares of the Company's Common
Stock in payment of the balance of the Unicore purchase price is not required by
Delaware law. Consequently, the Company would have the corporate power and
authority to issue and deliver these shares to the former shareholders of
Unicore even if the Company's stockholders declined to approve the issuance
thereof at the Annual Meeting. Under certain circumstances specified in the
Acquisition Agreement, the former shareholders of Unicore would have the right
to insist that the balance of the purchase price be paid through issuance and
delivery of 3,350,000 shares of the Company's Common Stock, rather than in cash,
even if the issuance of these shares is not approved at the Annual Meeting. This
right would arise in the event that the closing price for a share of the
Company's Common Stock on The Nasdaq National Market has exceeded $1.00 at any
time following the effective date of the Acquisition Agreement and the date of
the Annual Meeting. Should the former shareholders of Unicore exercise their
right to receive shares of the Company's Common Stock in lieu of cash under
these circumstances, the continued listing of the Company's Common Stock on The
Nasdaq National Market could be jeopardized since the shares would be issued
without stockholder approval.
In connection with the acquisition, each of Messrs. Narath and Raza also
was granted "piggy-back" registration rights with respect to any and all shares
of the Company's Common Stock owned by them, including any shares issued in
payment of the balance of the purchase price. A copy of the Registration Rights
Agreement between the Company and Messrs. Narath and Raza is filed herewith as
Exhibit A-4.
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The acquisition of Unicore was reported by the Company be a press
release issued on March 8, 1999. A copy of the press release is filed as Exhibit
B to this Current Report on Form 8-KSB and by this reference incorporated
herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
It is impracticable for the Registrant to provide the required financial
statements for the business acquired at the time this Current Report on Form 8-K
is filed. Such financial statements will be filed as soon as practicable but not
later than 60 days after the date this Current Report on Form 8-K is required to
be filed.
(b) PRO FORMA FINANCIAL INFORMATION.
It is impracticable for the Registrant to provide the required pro forma
financial information for the business acquired at the time this Current Report
on Form 8-K is filed. Such pro forma financial information will be filed as soon
as practicable but not later than 60 days after the date this Current Report on
Form 8-K is required to be filed.
(c) EXHIBITS.
The following exhibits are filed herewith as part of this Current Report
on Form 8-K:
Exhibit 99.A-1 Agreement and Plan of Acquisition dated March 5, 1999.
Exhibit 99.A-2 Employment Agreement with Pierre A. Narath.
Exhibit 99.A-3 Employment Agreement with Jason K. Raza.
Exhibit 99.A-4 Registration Rights Agreement.
Exhibit 99.A-5 Agreement and Plan of Merger dated March 5, 1999.
Exhibit 99.B Press release dated March 10, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TOUCHSTONE SOFTWARE CORPORATION
By: /s/ R. R. Maas
----------------------------------
Ron Maas, Executive Vice President
Date: March 19, 1999
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EXHIBIT INDEX
Exhibit 99.A-1 Agreement and Plan of Acquisition dated March 5, 1999
Exhibit 99.A-2 Employment Agreement with Pierre A. Narath
Exhibit 99.A-3 Employment Agreement with Jason K. Raza
Exhibit 99.A-4 Registration Rights Agreement.
Exhibit 99.A-5 Agreement and Plan of Merger dated March 5, 1999
Exhibit 99.B Press release dated March 10, 1999.
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EXHIBIT 99.A-1
Form 8-K
AGREEMENT AND PLAN OF ACQUISITION
THIS AGREEMENT AND PLAN OF ACQUISITION (this "Agreement") dated
effective as of March 5, 1999, is made and entered into by and between
TouchStone Software Corporation, a Delaware corporation ("TouchStone"), on the
one hand, and each of the individuals and/or entities whose names appear on the
signature page hereof, each of whom (individually, a "Seller", and collectively,
the "Sellers") is the owner of shares of the capital stock of Unicore Software,
Inc., a Massachusetts corporation (the "Company"), relating to the sale by the
Sellers and the purchase by TouchStone of all of the issued and outstanding
shares of the capital stock of the Company (the "Shares").
WHEREAS, there currently are 100 Shares issued and outstanding, all of
which are owned beneficially and of record by the Sellers, with the number of
Shares owned by each Seller set forth opposite their respective names on the
signature page hereof.
WHEREAS, TouchStone desires to purchase the Shares from the Sellers,
and the Sellers desire to sell the Shares to TouchStone, on the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Purchase and Sale of Shares. Subject to the terms and conditions
hereof, at the Closing to be held in accordance with the provisions of Section 3
hereof, TouchStone agrees to purchase the Shares from the Sellers, and each of
the Sellers agrees, severally and not jointly, to sell the Shares to TouchStone.
It is the intention of the parties that the purchase of the Shares be
accomplished through the merger (the "Merger") of the Company with and into a
newly-to-be-formed and wholly-owned subsidiary of TouchStone, which will be the
surviving corporation in the Merger (the "Surviving Corporation"), such that the
acquisition will qualify as a "reorganization" within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended, with the Sellers to recognize
taxable income at the Closing only on the amount of cash received by each
pursuant to subsection 2(a) below (assuming that the balance of the
consideration to be received by the Sellers consists of shares of TouchStone
Common Stock as contemplated in subsection 2(b)(i) below).
2. Purchase Price. As a consequence of the Merger, and as the aggregate
purchase price to be paid by TouchStone to the Sellers as a group for the Shares
(the "Purchase Price"), Sellers shall receive and be entitled to receive from
TouchStone a total of $4,555,000, at the following times and in the manner
indicated below:
(a) Upon execution hereof, TouchStone shall place on deposit in
the Attorney-Client Trust Account of Devine, Millimet & Branch, Professional
Association, counsel to Sellers, the sum of $250,000, as a deposit against the
cash portion of the Purchase Price payable as provided in this subsection 2(a)
(the "Deposit"). At Closing, the Deposit shall be released to Sellers (without
interest
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or deduction of any kind) and, in addition, Sellers shall receive from
TouchStone, in cash, by wire transfer or certified or cashier's check or checks,
the sum of $955,000, with the amount of the cash to be received by each Seller
at Closing set forth opposite their respective names on the signature page
hereof;
(b) Prior to the close of business on the date on which the Annual
Meeting of the stockholders of TouchStone is held as provided in Section 8.5
below, the Sellers shall be entitled to receive from TouchStone the balance of
$3,350,000, as follows:
(i) By issuance and delivery of an aggregate of 3,350,000
shares of the authorized but previously unissued Common Stock of TouchStone (the
"TouchStone Common Stock"), provided that the stockholders of TouchStone have
approved the issuance and delivery of the TouchStone Common Stock at the Annual
Meeting; or
(ii) By payment in cash, by wire transfer or certified or
cashier's check or checks, in the event that the stockholders of TouchStone do
not approve the issuance and delivery of the TouchStone Common Stock at the
Annual Meeting.
(c) The respective number of shares of TouchStone Common Stock, or
the additional amount of cash, to be delivered and paid to each Seller pursuant
to subsections 2(b(i) and (ii) )is set forth opposite their respective names on
the signature page hereof. In the event that, subsequent to the execution hereof
but prior to the date on which TouchStone Common Stock is issued to the Sellers,
the outstanding shares of TouchStone's Common Stock shall have been increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities through reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, or public offering, or any other
change in TouchStone's capitalization shall have occurred (a "Recapitalization",
as the case may be), then an appropriate and proportionate adjustment shall be
made to the number of shares of TouchStone Common Stock to be received by the
Sellers such that the Sellers shall receive the equivalent equity interest in
TouchStone that the Sellers would have received had the shares of TouchStone
Common Stock issuable to them hereunder actually been issued immediately prior
to such Recapitalization.
3. Closing. The Closing shall take place at the offices of TouchStone
in Huntington Beach, California, at 5:00 p.m., local time, on March 5, 1999 (the
"Closing Date"), or at such other time, date and place as may be mutually agreed
upon in writing by the parties hereto. If the Closing fails to occur by March 5
At the close of business on the date of the Annual Meeting, upon written notice
from the Company and Pierre A. Narath, on behalf of the Sellers, that the
balance of the Purchase Price is to be paid, 1999, or by such later date to
which the Closing may be extended as provided hereinabove, for any reason other
than as provided in Sections 6.7 and 6.8 below, this Agreement shall
automatically terminate, the full amount of the Deposit shall promptly be
released and returned to TouchStone (on the next business day, without interest
or deduction of any kind), all parties shall pay their own expenses incurred in
connection herewith, and neither TouchStone nor any of the Sellers shall have
any further obligations hereunder; provided, however, that no such termination
shall constitute a waiver by either TouchStone or any of the Sellers who is not
in default of any of its respective representations, warranties or covenants
herein, of any rights or remedies it might have at law if the other is in
default of any of its respective representations, warranties or covenants under
this Agreement.
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At the Closing, TouchStone shall pay the cash portion of the Purchase
Price as provided in Section 2(a) above, and the parties shall execute and
deliver and cause to be filed in all applicable jurisdictions the Agreement of
Merger set forth as Exhibit A attached hereto, with such changes thereto as the
parties executing and delivering the same shall approve, such approval to be
conclusively evidenced by the execution and delivery thereof. At the Closing, as
a consequence of the Merger, TouchStone shall acquire good and valid title in
and to the Shares, free and clear of all liens, and the Sellers, as a group,
shall become entitled to receive the aggregate Purchase Price specified in
Section 2 above. At the Closing, there shall also be delivered to Sellers and
TouchStone the certificates and other contracts, documents and instruments to be
delivered under Sections 7.3 and 7.4 hereof.
4. Representations and Warranties of Sellers. Sellers hereby jointly
and severally represent and warrant to, and covenant with, TouchStone as follows
(it being acknowledged that TouchStone is entering into this Agreement in
material reliance upon each of the following representations and warranties, and
that the truth and accuracy in all material respects of each of which
constitutes a condition precedent to TouchStone's obligations hereunder):
4.1 Organization 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 is duly qualified and in good standing to do
business as a foreign corporation in each jurisdiction where the failure to be
so qualified would have a materially adverse effect upon the Company. The
Company has all requisite corporate power and authority to conduct its business
as now being conducted and to own and lease the properties which it now owns and
leases. The Articles of Organization of the Company, as amended to date,
certified by the Secretary of State of the Commonwealth of Massachusetts, and
the bylaws of the Company, as amended to date, certified by the Clerk of the
Company, which have previously been provided to TouchStone by or on behalf of
Sellers, are true and complete copies thereof as currently in effect.
4.2 Authorizations. This Agreement, and each and every other
agreement, document and instrument to be executed by Sellers, or any of them, in
connection herewith, has been effectively authorized by all necessary action on
the part of each of the Sellers, has been duly and validly executed and
delivered by each of the Sellers and constitutes a legal, valid and binding
obligation of each Seller, enforceable against each Seller in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general application relating to or affecting creditors' rights
and to general equity principles.
4.3 Capitalization of the Company. The authorized capital stock of
the Company consists of 200,000 shares of Common Stock, without par value. As of
the date hereof, 100 shares of such Common Stock are issued and outstanding, all
of which are owned, beneficially and of record, by the Sellers. Except as may be
disclosed in the Disclosure Letter delivered by Sellers to TouchStone
contemporaneously with this Agreement ("Sellers' Disclosure Letter"), all of
such shares are free and clear of (i) any lien, charge, mortgage, pledge,
conditional sale agreement, or other encumbrance
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of any kind or nature whatsoever, and (ii) any claim as to ownership thereof or
any rights, powers or interest therein by any third party, whether legal or
beneficial, and whether based on contract, proxy or other document or otherwise.
The delivery of a certificate or certificates at the Closing representing the
Shares in the manner provided in Section 2 above will transfer to TouchStone
good and valid title to the Shares, free of any liens, encumbrances and claims
of third parties. As of the date hereof, except as expressly set forth
hereinabove, there are no warrants, options, calls, commitments or other rights
to subscribe for or to purchase from the Company any capital stock of the
Company or any securities convertible into or exchangeable for any shares of
capital stock of the Company, or any other securities or agreements pursuant to
which the Company is or may become obligated to issue any shares of its capital
stock, nor is there outstanding any commitment, obligation or agreement on the
part of the Company to repurchase, redeem or otherwise acquire any of the
outstanding shares of its capital stock.
4.4 No Conflicts. Except as set forth in Sellers' Disclosure
Letter, neither the execution and delivery of this Agreement, nor the
consummation by Sellers of any of the transactions contemplated hereby, or
compliance with any of the provisions hereof, will (i) conflict with or result
in a breach of, violation of, or default under, any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture, license, lease,
credit agreement or other agreement, document, instrument or obligation to which
any Seller or the Company is a party or by which any of their respective assets
or properties may be bound, which breach, violation or default reasonably could
be expected to have a material adverse effect on the Company, or (ii) violate
any judgment, order, injunction, decree, statute, rule or regulation applicable
to any Seller or the Company, or any of the assets or properties of either of
them. Except as set forth in Sellers' Disclosure Letter, no authorization,
consent or approval of any public body or authority is necessary for the
consummation by Sellers of the transactions contemplated by this Agreement.
4.5 Financial Statements. Attached hereto as Exhibit B are the
unaudited financial statements of the Company and its predecessor operations for
each of the two years ended December 31, 1997 and 1998, consisting of balance
sheets as of such dates and the related income statements for each of the years
then ended. The Company's balance sheet as of December 31, 1998 is herein
referred to as the Balance Sheet, and such financial statements are herein
sometimes collectively referred to as the "Financial Statements." The Financial
Statements (i) are derived from the books and records of the Company, which
books and records have been consistently maintained in a manner which reflects,
and such books and records do fairly and accurately reflect in all material
respects, the assets and liabilities of the Company, and (ii) fairly and
accurately present in all material respects the financial condition of the
Company on the respective dates of such statements and the results of its
operations for the periods indicated, except as may be disclosed in the
footnotes set forth therein or in Sellers' Disclosure Letter.
4.6 Absence of Undisclosed Liabilities. Except as and to the
extent reflected or reserved against in the Balance Sheet or set forth in
Sellers' Disclosure Letter, the Company has no liability or obligation (whether
accrued, to become due, contingent or otherwise) which individually or in the
aggregate reasonably could be expected to have a materially adverse effect on
the business, assets, condition (financial or otherwise) or prospects of the
Company.
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4.7 Absence of Certain Developments. Except as set forth in
Sellers' Disclosure Letter, since the date of the Balance Sheet there has been
(i) no declaration, setting aside or payment of any dividend or other
distribution with respect to the capital stock of the Company or redemption,
purchase or other acquisition of any capital stock of the Company, or any
split-up or other recapitalization relative to any capital stock of the Company
or any action authorizing or obligating the Company to do any of the foregoing;
(ii) no loss, destruction or damage to any material property or asset of the
Company, whether or not insured; (iii) no acquisition or disposition of assets
(or any contract or arrangement therefor), or any other transaction by the
Company otherwise than for fair value and in the ordinary course of business;
(iv) no discharge or satisfaction by the Company of any material lien or
encumbrance or payment of any material obligation or liability (absolute or
contingent) other than current liabilities shown on the Balance Sheet, or
current liabilities incurred since the date thereof in the ordinary course of
business, (v) no sale, assignment or transfer by the Company of any of its
tangible or intangible assets except in the ordinary course of business,
cancellation by the Company of any debts, claims or obligations, or mortgage,
pledge, subjection of any assets to any lien, charge, security interest or other
encumbrance, or waiver by the Company of any rights of value which, in any such
case, is material to the business of the Company; (vi) no payment by the Company
of any bonus to or change in the compensation of any director, officer or
employee, whether directly or by means of any bonus, pension plan, contract or
commitment; (vii) no write-off or material reduction in the carrying value of
any asset which is material to the business of the Company; (viii) no
disposition or lapse of rights as to any intangible property which is material
to the business of the Company; (ix) except for ordinary travel advances, no
loans or extensions of credit to shareholders, officers, directors or employees
of the Company, (x) no agreement to do any of the things described in this
Section 4.7, and (xi) no materially adverse change in the condition (financial
or otherwise) of the Company or in its assets, liabilities, properties, business
or prospects.
4.8 Real Property. Sellers' Disclosure Letter contains a complete
and accurate description of each parcel of real property owned by or leased to
and occupied by the Company. The buildings and all fixtures and improvements
located on such real property are in good operating condition in all material
respects, ordinary wear and tear excepted. The Company is not in violation of
any material zoning, building or safety ordinance, regulation or requirement or
other law or regulation applicable to the operation of leased properties, and
the Company has not received any notice of violation with which it has not
complied. The Company has valid leasehold interests in all such real property,
free and clear of all liens, mortgages, encumbrances, easements, leases,
restrictions and claims of any kind on such leasehold interests whatsoever,
except for (i) those matters shown on Sellers' Disclosure Letter; (ii) liens for
taxes and tax assessments not yet due and payable; and (iii) mechanics' or
similar liens for materials or services furnished or to be furnished after the
date hereof. All leases of real property to which the Company is a party and
which are material to the business of the Company are fully effective in
accordance with their respective terms and afford the Company peaceful and
undisturbed possession of the subject matter of the lease, and there exists no
default on the part of the Company or termination thereof, except as may be set
forth in Sellers' Disclosure Letter.
4.9 Tangible Personal Property. Sellers' Disclosure Letter sets
forth a complete list of all items of tangible personal property owned or leased
and used by the Company in the current conduct of its business, where the
original cost was in excess of $1,000. Except as set forth on Sellers'
Disclosure Letter, the Company has, and at the Closing will have, good and
marketable title to, or
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in the case of leased equipment a valid leasehold interest in, and is in
possession of, all such items of personal property owned or leased by it, free
and clear of all material title defects, mortgages, pledges, security interests,
conditional sales agreements, liens, restrictions or encumbrances whatsoever.
Included in Sellers' Disclosure Letter is a list of all outstanding equipment
leases and maintenance agreements to which the Company is a party as lessee and
which individually provide for future lease payments in excess of $500 per
month, with the identities of the other parties to all such leases and
agreements shown thereon. All leases of tangible personal property to which the
Company is a party and which are material to the business of the Company are
fully effective in accordance with their respective terms, and there exists no
default on the part of the Company or termination thereof, except as may be set
forth on Sellers' Disclosure Letter. Each item of capital equipment reflected in
the Balance Sheet which is used in the current conduct of the Company's business
is, and on the date of the Closing will be, in good operating and usable
condition and repair, ordinary wear and tear excepted, and is and will be
suitable for use in the ordinary course of the Company's business and fit for
its intended purposes, except as may be set forth on Sellers' Disclosure Letter.
4.10 Taxes. Except as set forth in Sellers' Disclosure Letter, the
Company has duly filed any and all federal, state, county and local tax returns
required to have been filed by it in those jurisdictions where the nature or
conduct of its business requires such filing and where the failure to so file
would be materially adverse to the Company. Copies of any and all such tax
returns have been made available for inspection by TouchStone prior to the
execution hereof. All federal, state, county and local taxes, including but not
limited to those taxes due with respect to the Company's properties, income,
gross receipts, excise, occupation, franchise, permit, licenses, sales, payroll,
and inventory due and payable as of the date of the Closing by the Company have
been paid. Except as set forth in Seller's Disclosure Letter, the amounts
reflected in the Balance Sheet as liabilities or reserves for taxes which are
due but not yet payable is sufficient for the payment of all accrued and unpaid
taxes of the types referred to hereinabove. No consent to the application of
Section 341(f)(2) of the Internal Revenue Code of 1986, as amended, has been
filed with respect to the Company.
4.11 Accounts Receivable. The accounts receivable reflected in the
Balance Sheet constituted all accounts receivable of the Company as of the date
thereof, other than accounts receivable fully written off as uncollectible as of
such date. All such accounts receivable arose from valid sales, were recorded in
the ordinary course of business and, to the knowledge of Sellers, are not
subject to any set-off or counter claim, except as set forth in Sellers'
Disclosure Letter. Such accounts receivable have been collected in full since
the date of the Balance Sheet or, to the knowledge of Sellers, are collectible
at their full respective amounts (net of allowance for doubtful accounts
established in accordance with consistently applied prior practice). Based upon
the prior experience of the Company, the "allowance for doubtful accounts" shown
on the Balance Sheet is sufficient to cover all doubtful accounts.
4.12 Inventories. The Company has, and on the Closing Date will
continue to have, good and marketable title to all of its inventories of raw
materials, work-in-process and finished goods, including models and samples,
free and clear of all security interests, liens, claims and encumbrances, except
as set forth in Sellers' Disclosure Letter. All such inventories consist of
items that are usable and salable in the ordinary course of business of the
Company for an amount at least equal to the
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book value thereto, plus the costs of disposition thereof, and represent
quantities not in excess of one year's requirements for its business as
currently conducted.
4.13 Contracts and Commitments. The Company has no contract,
agreement, obligation or commitment, written or oral, expressed or implied,
which involves a commitment or liability in excess of $1,000 or for a term of
more than 6 months (other than obligations which are included in accounts
payable), and no union contracts, employee or consulting contracts, financing
agreements, debtor or creditor arrangements, licenses, franchise, manufacturing,
distributorship or dealership agreements, leases, or bonus, health or stock
option plans, except as described in Sellers' Disclosure Letter. True and
complete copies of all such contracts and other agreements listed on Sellers'
Disclosure Letter have been made available to TouchStone prior to the execution
hereof. As of the date hereof, to the knowledge of Sellers there exists no
circumstances which would affect the validity or enforceability of any of such
contracts and other agreements in accordance with their respective terms. The
Company has performed and complied in all material respects with all obligations
required to be performed by it to date under, and is not in default (without
giving effect to any required notice or grace period) under, or in breach of,
the terms, conditions or provisions of any of such contracts and other
agreements. Except as set forth in Sellers' Disclosure Letter, the validity and
enforceability of any contract or other agreement described herein has not been
and shall not in any manner be affected by the execution and delivery of this
Agreement without any further action, which effect reasonably could be expected
to have a material adverse effect on the Company. To Seller's knowledge, the
Company has no contract, agreement, obligation or commitment which requires or
will require future expenditures (including internal costs and overhead) in
excess of reasonably anticipated receipts, nor which is likely to be materially
adverse to the Company's business, assets, condition (financial and otherwise)
or prospects.
4.14 Patents, Trade Secrets and Customer Lists. The Company does
not have any patents, applications for patents, trademarks, applications for
trademarks, trade names, licenses or service marks relating to the business of
the Company, except as set forth in Sellers' Disclosure Letter, nor does any
present or former shareholder, officer, director or employee of the Company own
any patent rights relating to any products manufactured, rented or sold by the
Company. Except as disclosed in Sellers' Disclosure Letter, to the best of
Sellers' knowledge, the Company has the unrestricted right to use, free and
clear of any claims or rights of others, all trade secrets, customer lists, and
manufacturing and secret processes reasonably necessary to the manufacture and
marketing of all products made or proposed to be made by the Company and, to the
best of Sellers' knowledge, the continued use thereof by the Company following
the Closing will not conflict with, infringe upon, or otherwise violate any
rights of others. The Company has not used and is not making use of any
confidential information or trade secrets of any present or past employee of the
Company.
4.15 No Pending Litigation or Proceedings. Except as set forth in
Sellers' Disclosure Letter, there are no actions, suits or proceedings pending
or, to the knowledge of Sellers, threatened against or affecting the Company
(including actions, suits or proceedings where liabilities may be adequately
covered by insurance) at law or in equity or before or by any federal, state,
municipal or other governmental department, commission, court, board, bureau,
agency or instrumentality, domestic or foreign, or, to the knowledge of Sellers,
affecting any of the shareholders, officers or directors of the Company in
connection with the business, operations or affairs of the Company, in each case
which reasonably could be expected to result in any material adverse change in
the business,
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properties or assets, or in the condition (financial or otherwise) or prospects
of the Company, or which question or challenge the sale of the Shares by Sellers
to TouchStone. Except as disclosed in Sellers' Disclosure Letter, the Company
has not been subjected to, or to the best of Sellers' knowledge threatened with,
any action, suit, proceedings or claim (including actions, suits, proceedings or
claims where its liabilities may be adequately covered by insurance) for
personal injuries allegedly attributable to products sold or services performed
by the Company asserting a particular defect or hazardous property in any of the
Company's products, services or business practices or methods, nor has the
Company been a party to or, to the best of Sellers' knowledge threatened with,
proceedings brought by or before any federal or state agency; and Sellers have
no knowledge of any defect or hazardous property, claimed or actual, in any such
product, service or business practice or method. The Company is not subject to
any voluntary or involuntary proceeding under the United States Bankruptcy Code
and has not made an assignment for the benefit of creditors.
4.16 Insurance. The Company maintains insurance with reputable
insurance companies on such of its equipment, tools, machinery, inventory and
properties as it deems necessary, and maintains products and personal liability
insurance, and such other insurance against hazards, risks and liability to
persons and property as it deems necessary. A true and complete listing and
general description of each of the Company's insurance policies as currently in
force is set forth in Sellers' Disclosure Letter. All such insurance policies
currently are, and through the Closing shall be, in full force and effect.
4.17 Arrangements with Personnel. Except as set forth in Sellers'
Disclosure Letter, no stockholder, director, officer or employee is presently a
party to any transaction with the Company, including without limitation any
contract, loan or other agreement or arrangement providing for the furnishing of
services by, the rental of real or personal property from or to, or otherwise
requiring loans or payments to, any such stockholder, director, officer or
employee, or to any member of the family of any of the foregoing, or to any
corporation, partnership, trust or other entity in which any stockholder,
director, officer or employee or any member of the family of any of them has a
substantial interest or is an officer, director, trustee, partner or employee.
There is set forth in Sellers' Disclosure Letter a list showing (i) the name,
title, date and amount of last compensation increase, and aggregate
compensation, including amounts paid or accrued pursuant to any bonus, pension,
profit sharing, commission, deferred compensation or other plans or arrangements
in effect as of the date of this Agreement, of each officer, employee, agent or
contractor of the Company whose salary and other compensation, in the aggregate,
received from the Company or accrued is at an annual rate (or aggregated for the
most recently completed fiscal year) in excess of $25,000 as well as any
employment agreements relating to any such persons; (ii) all powers of attorney
from the Company to any person or entity; (iii) the name of each person or
entity authorized to borrow money or incur or guarantee indebtedness on behalf
of the Company; and (iv) all bank and savings accounts, and other accounts at
similar financial institutions, of the Company.
4.18 Labor Relations. Except as set forth in Sellers' Disclosure
Letter, the Company has no obligations under any collective bargaining agreement
or other contract with a labor union, under any employment contract or
consulting agreement, or under any executive's compensation plan, agreement or
arrangement nor, to Seller's knowledge, is any union, labor organization or
group of employees of the Company presently seeking the right to enter into
collective bargaining with the Company on behalf of any of its employees. The
Company has made available to TouchStone a copy
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of all written personnel policies, including without limitation vacation,
severance, bonus, pension, profit sharing and commissions policies, applicable
to any of the Company's employees.
4.19 Absence of Questionable Payments. Neither the Company nor, to
the knowledge of Sellers, any shareholder, director, officer, agent, employee,
consultant or other person associated with or acting on behalf of any of them,
has (i) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (b)
made any direct or indirect unlawful payments to governmental officials or
others from corporate funds, engaged in any payments or activity which would be
deemed a violation of the Foreign Corrupt Practices Act or rules or regulations
promulgated thereunder, or (c) established or maintained any unlawful or
unrecorded accounts.
4.20 Compliance with Laws. Except as set forth in Sellers'
Disclosure Letter, the Company holds all licenses, franchises, permits and
authorizations necessary for the lawful conduct of its business as presently
conducted, has complied with all applicable statutes, laws, ordinances, rules
and regulations of all governmental bodies, agencies and subdivisions having,
asserting or claiming jurisdiction over it, with respect to any part of the
conduct of its business and corporate affairs, where the failure to so hold or
comply reasonably could be expected to have a material adverse affect upon the
Company's condition (financial or otherwise), business, assets, properties or
prospects.
4.21 Environmental Matters. Neither the Company nor, to the
knowledge of Sellers, any previous owner, tenant, occupant, user or operator of
any of the real property owned, leased or otherwise occupied by the Company,
used, generated, manufactured, installed, released, discharged, stored or
disposed of any "Hazardous Materials," as defined below, on, under, in or about
the site of such real property, except as set forth in Sellers' Disclosure
Letter. To the knowledge of Sellers, all such real property complies with all
applicable Federal, state and local laws, ordinances and regulations pertaining
to air and water quality, Hazardous Materials, waste, disposal or other
environmental matters, including the Clean Water Act, the Clean Air Act, the
Federal Water Pollution Control Act, the Solid Waste Disposal Act, the Resource
Conservation Recovery Act, the Comprehensive Environmental Response,
Compensation, and Liability Act, and the rules, regulations and ordinances of
the State of Massachusetts and any and all administrative agencies thereof, the
city and county in which such real property is located, the Environmental
Protection Agency and all other applicable Federal, state, regional and local
agencies and bureaus, except where the failure to comply with such laws,
ordinances and regulations could reasonably not be expected to have a material
adverse effect on the Company. The term "Hazardous Materials" shall mean any
substance, material or waste which is regulated by any local government
authority, the Commonwealth of Massachusetts, or the United States Government,
including, without limitations, any mater or substance which is (a) defined as a
"hazardous waste," "hazardous material," "hazardous substance," "extremely
hazardous waste" or "restricted hazardous waste" under any provision of
California law, (b) petroleum, (c) asbestos, (d) designated as a "hazardous
substance" pursuant to section 311 of the Clean Water Act or listed pursuant to
Section 307 of the Clean Water Act, (e) defined as a "hazardous waste" pursuant
to Section 1004 of the Resource Conservation and Recovery Act.
4.22 Relationships with Customers and Suppliers. No present
customer or substantial supplier to the Company has indicated to the Company or
the Sellers an intention to terminate or
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materially and adversely alter its existing business relationship therewith, and
none of the Sellers has any knowledge that any of the present customers of or
substantial suppliers to the Company intends to do so.
4.23 Brokerage. Except as set forth in Sellers' Disclosure
Schedule, neither any of the Sellers nor the Company has any obligation to any
person or entity for brokerage commissions, finder's fees or similar
compensation in connection with the transactions contemplated by this Agreement,
and Sellers shall jointly and severally indemnify and hold TouchStone harmless
against any liability or expenses arising out of such a claim asserted against
either TouchStone or the Company by any party.
4.24 Disclosure. Neither this Agreement, Sellers' Disclosure
Schedule, nor any certificate, exhibit, or other written document attached
hereto or furnished to TouchStone by or on behalf of the Sellers or the Company
in connection with the transactions contemplated by this Agreement contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary to be stated in order to make the statements contained
herein or therein not misleading. Neither Sellers nor the Company has any
knowledge of any fact which has not been disclosed in writing to TouchStone
which may reasonably be expected to materially and adversely affect the
business, properties, operations, and/or prospects of the Company or the ability
of Sellers to perform all of the obligations to be performed by Sellers under
this Agreement and/or any other agreement between TouchStone and Sellers and/or
the Company to be entered into pursuant to any provision of this Agreement.
4.25 Investment Representation. Each Seller has the knowledge and
experience in business and financial matters to meaningfully evaluate the merits
and risks of the purchase and acquisition of the TouchStone Common Stock in
exchange and consideration for the Shares owned by such Seller as contemplated
hereby. Each Seller acknowledges that the shares of TouchStone Common Stock to
be issued to such Seller in the transactions contemplated hereby will be issued
by TouchStone without registration or qualification or other filings being made
under the Federal Securities Act of 1933, as amended, or the securities or "blue
sky" laws of any state, in reliance upon specific exemptions therefrom, and in
furtherance thereof each Seller represents that the shares of TouchStone Common
Stock to be received by such Seller will be taken for such Seller's own account
for investment, with no present intention of a distribution or disposition
thereof to others. Each Seller agrees that the certificate(s) representing the
shares of the TouchStone Common Stock issued to such Seller shall be subject to
a stop-transfer order and shall bear a restrictive legend, in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
ARE "RESTRICTED SECURITIES," AND MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, IS NOT REQUIRED TO BE REGISTERED UNDER THE
ACT."
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5. REPRESENTATIONS AND WARRANTIES OF TOUCHSTONE
TouchStone represents and warrants to Sellers as follows (it being
acknowledged and agreed that Sellers are entering into this Agreement in
material reliance upon each of the following representations and warranties, and
that the truth and accuracy in all material respects of each of which
constitutes a condition precedent to the obligations of Sellers hereunder):
5.1 Organization and Corporate Power. TouchStone is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full power, corporate or otherwise, legal capacity and
authority to perform the obligations to be performed by TouchStone under this
Agreement, and to execute, deliver and perform all attendant documents and
instruments and to consummate the transactions herein contemplated, including
all attendant acts.
5.2 Authorizations. The execution and delivery of this Agreement
and all attendant documents, and the consummation by TouchStone of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary action, corporate and otherwise, and no other
proceedings are necessary to authorize this Agreement and all attendant
documents and the transactions contemplated thereby and hereby. This Agreement
constitutes the legal, valid and binding act of TouchStone and is enforceable
with respect to TouchStone in accordance with its terms, except as enforcement
hereof may be limited by bankruptcy, insolvency, reorganization, priority, or
other laws relating to or affecting generally the enforcement of creditors
rights or by laws affecting generally the availability of equitable remedies.
5.3 No Conflicts. Neither the execution and delivery by TouchStone
nor the consummation by TouchStone of the transactions contemplated by this
Agreement and all attendant documents, nor compliance by TouchStone with any of
the provisions thereof or hereof, will (i) conflict with or result in a breach
or violation of, or default under, any of the terms, conditions or provisions of
any material note, bond, mortgage, indenture, license, agreement or other
instrument or obligation (including, without limitation, its Certificate of
Incorporation and bylaws) to which TouchStone is a party or by which it is
bound, which breach, violation or default reasonably could be expected to have a
material adverse effect on TouchStone, or (ii) violate any judgment, order,
injunction, decree, statute, rule or regulation applicable to TouchStone or any
of its properties or assets.
5.4 Consents. No governmental consents, approvals or
authorizations, and no consents or approvals by any third party, are required to
be obtained by TouchStone, and no registration or declarations are required to
be filed by TouchStone, in connection with the execution and delivery of this
Agreement and all attendant documents or the consummation of the transactions
contemplated hereby and thereby.
5.5 No Pending Material Litigation or Proceedings. Except as
disclosed in the SEC Documents referred to in Section 5.7 below or as may be set
forth in Disclosure Letter delivered by TouchStone to Sellers contemporaneously
with this Agreement (the "TouchStone Disclosure Letter"), there are no actions,
suits or proceedings pending or, to TouchStone's knowledge, threatened, against
or affecting TouchStone (including actions, suits or proceedings where
liabilities may be adequately covered by insurance) at law or in equity or
before or by any federal, state,
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municipal or other governmental department, commission, court, board, bureau,
agency or instrumentality, domestic or foreign, which reasonably could be
expected to result in any material adverse change in the business, properties or
assets, or in the condition (financial or otherwise) or prospects of TouchStone,
or which might prevent the purchase of the Shares by TouchStone from Sellers
pursuant to this Agreement or the performance by TouchStone of any of the
obligations to be performed by TouchStone hereunder.
5.6 Capitalization. The authorized capital stock of TouchStone
consists of 20,000,000 shares of TouchStone Common Stock and 3,000,000 shares of
preferred stock, $.001 par value. As of the date hereof, there are 7,963,060
shares of TouchStone Common Stock outstanding, and no shares of preferred stock
have been issued or are outstanding. In addition, there are currently
outstanding options and warrants to purchase from TouchStone an aggregate of
1,798.808 shares of TouchStone Common Stock. Except as expressly set forth
herein above, there are no warrants, options, calls, commitments or other rights
to subscribe for or to purchase from TouchStone any capital stock of TouchStone
or any securities convertible into or exchangeable for any shares of capital
stock of TouchStone, or any other securities or agreements pursuant to which
TouchStone is or may become obligated to issue any shares of its capital stock,
nor is there outstanding any commitment, obligation or agreement on the part of
TouchStone to repurchase, redeem or otherwise acquire any of the outstanding
shares of its capital stock. The TouchStone Common Stock is registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and traded in The Nasdaq National Market under the symbol "TSSW." The
shares of TouchStone Common Stock issued and outstanding as of the date hereof
have been, and all of the Shares of TouchStone Common Stock to be issued and
delivered to Sellers, if any, when issued will be, duly authorized and validly
issued, and are and will be fully paid and non-assessable, under the laws of the
State of Delaware.
5.7 Reports Under the Exchange Act. Since January 1, 1996,
TouchStone has filed with the Securities and Exchange Commission (the "SEC") on
a timely basis all reports and other information which TouchStone has been
required to file under the Exchange Act. TouchStone has made available to each
Seller accurate and complete copies of each report, proxy statement, information
statement or schedule, together with all amendments thereto, that were required
to be filed by TouchStone with the SEC under the Exchange Act since January 1,
1996 (the "SEC Documents"). As of their respective dates, the SEC Documents
complied in all material respects with the applicable requirements of the
Exchange Act, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were or are made, not misleading. Except as disclosed in the
TouchStone Disclosure Schedule, there has been no material adverse change in the
business, properties or assets, or in the condition (financial or otherwise) or
prospects of TouchStone since September 30, 1998.
5.8 Disclosure. Neither this Agreement, the TouchStone Disclosure
Schedule, nor any certificate, exhibit, or other written document attached
hereto or furnished to Sellers by or on behalf of TouchStone in connection with
the transactions contemplated by this Agreement contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary to be stated in order to make the statements contained herein or
therein not misleading. TouchStone
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has no knowledge of any fact which has not been disclosed in writing to Sellers
which may reasonably be expected to materially and adversely affect the
business, properties, operations and/or prospects of TouchStone or the ability
of TouchStone to perform all of the obligations to be performed by TouchStone
under this Agreement and/or any other agreement between TouchStone and any of
the Sellers to be entered into pursuant to any provision of this Agreement.
5.9 Brokerage. TouchStone has no obligation to any person or
entity for brokerage commissions, finder's fees or similar compensation in
connection with the transactions contemplated by this Agreement, and shall
indemnify and hold the Sellers harmless against any liability or expenses
arising out of such a claim asserted against any of the Sellers by any party.
5.10 Purchase for Investment. TouchStone, through its current
officers and directors, has the knowledge and experience in business and
financial matters to meaningfully evaluate the merits and risks of the issuance
of TouchStone Common Stock in exchange and consideration for the Shares as
contemplated hereby. TouchStone understands and acknowledges that the Shares
were originally issued to the Sellers, and will be sold and transferred to
TouchStone, without registration or qualification under the Securities Act of
1933, as amended, or any applicable state securities or "blue sky" law, in
reliance upon specific exemptions therefrom, and in furtherance thereof
TouchStone represents that the Shares will be taken and received by TouchStone
for its own account for investment, with no present intention of a distribution
or disposition thereof to others.
6. COVENANTS OF THE PARTIES PRIOR TO THE CLOSING
Sellers and TouchStone hereby covenant to and agree with the other that
between the date hereof and the Closing:
6.1 Access to Properties and Records.
(a) Each party shall give, or cause to be given, to the other
and its authorized representatives full access, during reasonable business
hours, in such a manner as not unduly to disrupt normal business activities, to
any and all of such party's premises, properties, contracts, books, records and
affairs (including in the case of Sellers, the Company's premises, properties,
contracts, books, records and affairs), and will furnish or cause to be
furnished any and all data and information pertaining to its business that the
other party may from time to time reasonably require.
(b) Unless and until the transactions contemplated by this
Agreement have been consummated, each party and its representatives shall hold
in confidence all information so obtained, will not use such information except
in connection with this Agreement, and if the transactions contemplated hereby
are not consummated will return all documents hereinabove referred to and
obtained therefrom, and all copies thereof and notes relating thereto. Such
obligation of confidentiality shall not extend to any information which as shown
to have been previously (i) known to the party (except for information which was
delivered to the party by the other in confidence prior to the execution of this
Agreement), (ii) generally known to others engaged in the trade or business of
the other party, (iii) part of public knowledge or literature, or (iv) lawfully
received by the party
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from a third party not under a duty of confidentiality. Without limiting the
generality of the foregoing, it is understood and agreed that certain
information disclosed by each party to the other, or their respective
representatives, may constitute "material inside information" that has not
previously been disclosed to the public generally. Each party acknowledges that
it and its representatives are aware of the restrictions on the use of such
information imposed by federal and state securities laws, agrees to comply and
cause its representatives to comply with such restrictions, and agrees to
indemnify and hold the other party and each of its directors, officers and
employees free and harmless from any and all liability, cost or expense that any
of them may incur or suffer by reason of any breach by the indemnifying party or
any of its authorized representatives of any of such restrictions. From and
after the date hereof and until the Closing or termination hereof, neither
party, nor any of their respective officers, directors, principal shareholders
or other representatives, shall purchase or sell, directly or indirectly, in the
public marketplace or otherwise, any securities of the other party.
6.2 Corporate Existence, Rights and Franchises. TouchStone, on the
one hand, and Sellers, on the other hand, shall take all necessary actions to
maintain, or cause to be maintained, in full force and effect, the corporate
existence, rights, franchises and good standing of TouchStone and the Company,
as the case may be. No change shall be made in the charter documents of either
TouchStone or the Company.
6.3 Insurance. Sellers shall take all necessary actions to cause
the Company to maintain in force until the Closing all of its existing insurance
policies, subject only to variations in amounts required by the ordinary
operation of the Company's business.
6.4 Conduct of Business in the Ordinary Course. Neither
TouchStone, on the one hand, nor Sellers, on the other hand, shall permit to be
done any act which would result in the breach of any of the covenants of such
party contained herein or which would cause the representations and warranties
of such party contained herein to become untrue or inaccurate in any material
respect as of any date subsequent to the date hereof. Without limiting the
generality of the foregoing, except as may be contemplated by this Agreement,
TouchStone, on the one hand, and Sellers, on the other hand, shall take all
necessary actions to cause TouchStone or the Company, as the case may be, to (i)
operate its business diligently in the ordinary course of business as an ongoing
concern, and will use reasonable efforts to preserve in all material respects
its organization and operations at current levels, retain the services of its
current employees, and preserve its relationships with its suppliers and
customers and others having business relationships with it; (ii) maintain in
good operating condition, ordinary wear and tear excepted, all of its assets and
properties which are in such condition as of the date hereof; (iii) maintain its
books, accounts and records in the usual, regular and ordinary manner, on a
basis consistent with past practice in recent periods; (iv) refrain from
entering into any contract, agreement, sales order, lease, capital expenditure
or other commitment of a value in excess of $1,000 (other than purchases of raw
materials and sales of inventory in the ordinary course of business), or from
modifying, amending, canceling or terminating any of such contracts, agreements,
leases or other commitments presently in force, except as expressly contemplated
by this Agreement, without the prior approval of the other (which approval shall
not be unreasonably withheld and which may
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be verbal to be followed by written confirmation); (v) refrain from paying any
bonus to any employee, officer or director, and from declaring or paying any
dividend, or making any other distribution in respect of, or from redeeming, any
capital stock; (except that the Company may make an appropriate "S" dividend to
the Sellers in any amount equal to their tax liability for taxable income
generated by the Company through the date of the Closing); and (vi) refrain from
issuing any capital stock or other securities convertible into capital stock.
6.5 Consents. Each of the parties shall use its reasonable efforts
to obtain any and all necessary permits, approvals, qualifications, consents or
authorizations from third parties and governmental authorities which are
required to be obtained prior to the Closing, and shall use its reasonable
efforts to make or complete all filings, proceedings and waiting periods
required to be made or completed prior to the Closing.
6.6 No Equitable Conversion. Prior to the Closing, neither the
execution of this Agreement nor the performance of any provision contained
herein shall cause either TouchStone, on the one hand, or the Company or any of
the Sellers, on the other hand, to be or become liable for or in respect of the
operations or business of the other, for the cost of any labor or materials
furnished to or purchased by the other, for compliance with any laws,
requirements or regulations of, or taxes, assessments or other charges now or
hereafter due to, any governmental authority, or for any other charges or
expenses whatsoever pertaining to the conduct of the business or the ownership,
title, possession, use or occupancy of the property of the other, and each
hereby agrees to indemnify and hold the other harmless from any such liability.
6.7 Standstill Agreements. Prior to the Closing, neither party
shall initiate, directly or indirectly, any possible business combination, sale
of assets or stock, or other transaction which is inconsistent with the
transactions contemplated thereby. Notwithstanding the foregoing, TouchStone may
respond to third party inquiries if, in the reasonable opinion of TouchStone's
Board of Directors, such response is required in furtherance of the fiduciary
duties imposed upon the directors of TouchStone under applicable law, in which
event TouchStone shall pay or reimburse Sellers for the payment of, up to
$115,000 of expenses reasonably incurred by Sellers in connection with the
transactions contemplated hereby. In the event that the Closing contemplated
hereby does not occur for any reason whatsoever, then for a period of two (2)
full years from the date of such termination, neither party shall, directly or
indirectly, except as may expressly be permitted in writing by the other party:
(i) acquire or agree, offer, seek or propose to acquire, or cause to be
acquired, ownership of any of the assets or businesses or voting securities of
the other party, or any other rights or options to acquire any such ownership
(including from a third party); (ii) seek or propose to influence or control the
management or policies of the other party; or (iii) enter into any discussions,
negotiations, arrangements or understandings with any third party with respect
to any of the foregoing.
6.8 Valuation Opinion. TouchStone may, but shall not be obligated
to, obtain on or before March 5, 1999, at its sole cost and expense, a
third-party opinion as to value of the Company. Should such opinion not be
reasonably acceptable to TouchStone, TouchStone shall be entitled to terminate
this Agreement and the transactions contemplated hereby, in which event
TouchStone shall pay or reimburse Sellers for the payment of, up to $115,000 of
expenses reasonably incurred by Sellers in connection with the transactions
contemplated hereby.
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<PAGE> 16
7. CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
The respective obligations of the parties hereto to consummate the
transactions contemplated hereby shall be subject to the fulfillment or written
waiver, at or prior to the Closing, of the following conditions:
7.1 Regulatory Approvals. There shall have been obtained any and
all permits, approvals and qualifications of, and there shall have been made or
completed all filings, proceedings and waiting periods, required by any
governmental body, agency or regulatory authority which, in the reasonable
opinion of counsel to TouchStone and counsel to Sellers, are required for the
consummation of the transactions contemplated hereby.
7.2 No Action or Proceeding. No claim, action, suit, investigation
or other proceeding shall be pending or threatened before any court or
governmental agency which presents a substantial risk of the restraint or
prohibition of the transactions contemplated by this Agreement or the obtaining
of material damages or other relief in connection therewith.
7.3 Obligations of TouchStone. The obligation of TouchStone
hereunder to consummate the transactions contemplated by this Agreement are
expressly subject to the satisfaction of each of the further conditions set
forth below, any or all of which may be waived by TouchStone in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by TouchStone of any other condition or of any of its
rights or remedies, at law or in equity, if any of the Sellers shall be in
default or breach of any of any of the representations, warranties or covenants
of Sellers under this Agreement:
(a) Sellers shall have performed the agreements and covenants
required to be performed by Sellers under this Agreement prior to the Closing in
all material respects, there shall have been no material adverse change in the
condition (financial or otherwise), assets, liabilities, earnings, business or
prospects of the Company since the date hereof, and the representations and
warranties of Sellers contained herein shall, except as contemplated or
permitted by this Agreement or as qualified in a writing dated as of the date of
the Closing delivered by the Company to TouchStone with the approval of
TouchStone indicated thereon (which writing is to be attached hereto as Exhibit
C, be true in all material respects on and as of the Closing Date as if made on
and as of such date, and TouchStone shall have received certificates, dated as
of the Closing Date, signed by each Seller, reasonably satisfactory to
TouchStone and its counsel, to such effect; and
(b) If TouchStone shall have obtained a third-party opinion as
to value of the Company as contemplated by Section 6.8 above, such opinion shall
be reasonably acceptable to TouchStone.
7.4 Obligations of Sellers. The obligation of Sellers hereunder to
consummate the transactions contemplated by this Agreement are expressly subject
to the satisfaction of each of the further conditions set forth below, any or
all of which may be waived, in whole or in part, by Sellers, without prior
notice; provided, however, that no such waiver of a condition shall constitute a
waiver by Sellers of any other condition or of any of their rights or remedies,
at law or in equity, if
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<PAGE> 17
TouchStone shall be in default or breach of any of its representations,
warranties or covenants under this Agreement:
(a) TouchStone shall have performed the agreements and
covenants required to be performed by TouchStone under this Agreement prior to
the Closing in all material respects, and the representations and warranties of
TouchStone contained herein shall, except as contemplated or permitted by this
Agreement or as qualified in a writing dated as of the date of the Closing
delivered by TouchStone to Sellers with the approval of Sellers indicated
thereon (which writing is to be attached hereto as Exhibit D), be true in all
material respects on and as of the date of Closing as if made on and as of such
date, and TouchStone shall have provided Sellers with a certificate, dated as of
the date of Closing, signed by the Corporate Secretary of TouchStone, reasonably
satisfactory to Sellers and their counsel, to such effect.
(b) TouchStone shall have provided Sellers with certified
copies of resolutions (certified as of the Closing Date as being in full force
and effect by the Corporate Secretary of TouchStone) duly adopted by the Board
of Directors of TouchStone authorizing the making and performance by TouchStone
of this Agreement.
(c) TouchStone shall have entered into mutually acceptable
agreements with Pierre Narath and Jason Raza, effective as of the Closing Date,
setting forth the terms and conditions upon which Messrs. Narath and Raza will
be employed by the Company following the Closing Date.
(d) TouchStone shall have entered into a mutually acceptable
agreement with each of the Sellers pertaining to the rights of the Sellers to
request that TouchStone register the Shares for subsequent transfer by Sellers
under the Securities Act of 1933, as amended.
(e) Lawrence Savings Bank (the "Bank") shall have consented to
the change in ownership of the Company, released the Shares from the pledge
thereof made by Sellers to and for the benefit of the Bank, and canceled the
personal guarantees of Pierre Narath and his wife and Jason Raza of any and all
indebtedness of the Company to the Bank, all in form and substance reasonably
satisfactory to Sellers.
8. ADDITIONAL AGREEMENTS OF THE PARTIES
8.1 Taxes and Expenses.
(a) Except as otherwise provided in Section 6.7 above or in
subsections 8.1(b) and (c) immediately below, each of Sellers, on the one hand,
and TouchStone, on the other hand, shall pay all of their own respective taxes,
attorneys' fees and other costs and expenses payable in connection with or as a
result of the transactions contemplated hereby and the performance and
compliance with all agreements and conditions contained in this Agreement
respectively to be performed or observed by each of them.
(b) Sellers shall pay any and all income taxes which become
due on account of the sale and transfer of the Shares to TouchStone, and
TouchStone shall pay all sales and use taxes, if any, which become due on
account of the sale of the Shares to TouchStone, each party reserving the right
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<PAGE> 18
to contest any assessment of taxes as a consequence of the sale and transfer of
the Shares to TouchStone.
(c) The Company shall pay or reimburse Sellers for the payment
of up to $115,000 of the legal fees, costs of obtaining an audit, by an
independent certified public accounting firm reasonably acceptable to
TouchStone, of the financial statements of the Company as of December 31, 1998
and for the two years then ended, and other out-of-pocket costs and expenses
incurred by or on behalf of Sellers in connection with the execution, delivery
and/or closing of the transactions contemplated by this Agreement.
8.2 Expiration of Representations and Warranties.
(a) The representations and warranties of the parties
contained herein and in any other document or instrument delivered by or on
behalf of any of the parties pursuant hereto, as such may be qualified in
Exhibits C and/or D hereto, as the case may be, shall survive the Closing and
any investigations made by or on behalf of the other party made prior to the
Closing, and shall remain in full force and effect for a period of one (1) full
year from the date of the Closing (the "Indemnity Period"), and thereupon
expire.
(b) Nothing contained in Section 8.2(a) shall in any way
affect any obligations of any party under this Agreement that are to be
performed, in whole or in part, after the Closing, nor shall it prevent or
preclude either party from pursuing any and all available remedies at law or in
equity for actual fraud in the event that, prior to the Closing, either had
actual knowledge of any material breach of any of their respective
representations and warranties herein but failed to disclose to or actively
concealed such knowledge from the other party prior to the Closing. After
expiration of the Indemnity Period, each party's sole recourse shall be for
claims of actual fraud.
8.3 Indemnification.
(a) Sellers hereby jointly and severally agree to indemnify
and hold TouchStone and the Company, and each officer, director, shareholder,
agent and employee of TouchStone, harmless with respect to any and all claims,
losses, damages, obligations, liabilities and expenses, including without
limitation reasonable legal and other costs and expenses of investigating and
defending any actions or threatened actions, which any of them may incur or
suffer following the Closing in respect or by reason of (i) any liabilities or
obligations of the Company existing as of the Closing of the type referred to in
Section 4.6 above that were not disclosed to TouchStone prior to the Closing,
and (ii) any breach of any of the representations and warranties of Sellers
contained herein.
(b) TouchStone hereby agrees to indemnify and hold each of the
Sellers harmless with respect to any and all claims, losses, damages,
obligations, liabilities and expenses, including without limitation reasonable
legal and other costs and expenses of investigating and defending any actions or
threatened actions, which any of them may incur or suffer following the Closing
by reason of (i) the status of Pierre Narath, who currently is a member of
TouchStone's Board of Directors and serves as its President and Chief Executive
Officer, as an "interested party" to the transactions contemplated hereby, and
(ii) any breach of any of the representations and warranties of TouchStone
contained herein.
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<PAGE> 19
(c) Whenever any claim shall arise for indemnification
hereunder, the party seeking indemnification shall give written notice to the
other of its claim for indemnification prior to the expiration of the Indemnity
Period, which notice shall set forth the amount involved in the claim for
indemnification and contain a reasonably thorough description of the facts
constituting the basis of such claim. Resolution of such claim for
indemnification shall be determined in accordance with the procedures specified
in Section 8.4 below.
(d) If a third party claim is asserted which would likely
result in a claim for indemnification hereunder, each party shall, with
reasonable promptness, provide the other with notice of any such claim, make
available to the other all information within the knowledge or control of the
party seeking indemnification which reasonably might be deemed relevant and
material to the defense of any such claim, and otherwise cooperate with the
other in the defense of the claim. Neither party shall settle or compromise any
such claim without the prior written consent of the other unless (i) suit shall
have been instituted against the party seeking indemnification and the other
party shall have failed, after reasonable notice of institution of the suit, to
take control of such suit as provided below, or (ii) the settlement or
compromise by the indemnifying party involves only the payment of money damages
and does not impose an injunction or other equitable relief on the indemnified
party. If the party from whom indemnification is sought admits in writing that
it will be liable to the other with respect to the full amount and as to all
material elements of a third party claim alleging damages, up to the maximum
amount for which such party may be liable under this Section 8.3, should the
third party prevail in such suit, then the party from whom indemnification is
being sought shall have the right to assume full control of the defense of such
claim, and the other party shall be entitled to participate in the defense of
such claim only with the consent of the party from whom indemnification is being
sought, which consent shall not unreasonably be withheld or delayed. As to any
third party claim alleging damages in excess of the maximum amount for which a
party may be liable under this Section 8.3, the party seeking indemnification
shall have and retain the right to control the defense of such claim, and the
other party shall be entitled to participate in the defense of such claim only
with the consent of the party seeking indemnification, which consent shall not
unreasonably be withheld or delayed.
(e) Except as otherwise expressly provided below in this
subsection 8.3(e), (i) Sellers shall have no obligation to indemnify TouchStone
and the Company under the provisions of Section 8.3(a) above unless and until
the aggregate amount as to which TouchStone and the Company seek indemnification
exceeds $200,000, and then only to the extent of such excess, (ii) the maximum
liability of either Seller in respect of each and any claim for indemnification
hereunder shall be equal to such Seller's proportionate shares of such claim
(based upon each Seller's current ownership of the Company's capital stock), and
(iii) in no event shall the maximum aggregate liability of either Seller as a
consequence of any one or more breach or breaches of one or more of the
representations and warranties of Sellers contained herein exceed the following
respective aggregate amounts:
Pierre A. Narath $ 2,400,000
Jason Raza $ 600,000
In the case of actual fraud, TouchStone may, in addition to the foregoing right
of indemnification, pursue any and all legal and equitable remedies it may have
against any and all of the Sellers.
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<PAGE> 20
(f) In the event that Sellers, or either of them, become
obligated to indemnify TouchStone and/or the Company pursuant to the provisions
of this Section 8.3, the amount of such obligation may be satisfied, in whole or
in part, at the sole option of the Seller or Sellers in question, by the
delivery and surrender for cancellation of Shares, with the $1.00 of such
indemnification obligation to be deemed satisfied for each Share so delivered
and surrendered for cancellation.
(g) TouchStone shall have the right to offset and deduct from
any amounts remaining to be paid by TouchStone to any of the Sellers hereunder,
or otherwise, the amount of an claim for indemnification if and when, and only
if and when, the amount of such claim (subject to Section 8.3(e) hereof) has
been agreed upon by the parties in writing or determined by mediation or
litigation as provided in Section 8.4 below.
8.4 Dispute Resolution. Any dispute arising out of or relating to
this Agreement shall be resolved in accordance with the following procedures:
(a) The parties shall first attempt in good faith to resolve
any claim or controversy arising out of or relating to the execution,
interpretation and performance of this Agreement (including the validity, scope
and enforceability of these dispute resolution provisions) promptly by
negotiations between executives who have authority to settle the controversy.
Any party may give the other party written notice of any dispute not resolved in
the ordinary course of business (the "Notice"), which shall set forth a
statement of such party's position and a summary of the arguments supporting
that position, together with the name and title of the executive who will
represent the such party at the negotiations to be held as provided herein
below, identifying any other person who will accompany the named executive.
Within thirty (30) days from the receipt of such Notice, the receiving party
shall submit to the other a written response setting forth a statement of the
responding party's position and a summary of the arguments supporting that
position, together with the name and title of the executive who will represent
the responding party and any other person who will accompany the named
executive. Within thirty (30) days after receipt of the responsive notice,
executives of both parties shall meet at a mutually acceptable time and place,
and thereafter as often as they deem necessary, and shall use their respective
best efforts to attempt in good faith to agree upon a mutually acceptable
resolution of the dispute, in which case the parties shall promptly prepare and
sign a memorandum setting forth such agreement. All reasonable requests for
information made by one party to the other will be honored. All negotiations
pursuant hereto shall be confidential and shall be treated as compromise and
settlement negotiations for purposes of applicable rules of evidence.
(b) Any dispute which has not been resolved by the non-binding
procedure specified in Section 8.4(a) above within ninety (90) days of receipt
of the Notice, unless otherwise agreed by the parties, shall be submitted to
binding arbitration in accordance with the American Arbitration Rules in effect
on the date of this Agreement, by a single arbitrator and judgment upon the
award rendered by the arbitrator shall be entered by any court having
jurisdiction thereof. Each of the parties shall have the right to utilize the
discovery procedures authorized by the California Code of Civil Procedure. The
place of arbitration shall be Orange County, California. The arbitrator is not
empowered to award damages in excess of compensatory damages, and each party
hereby irrevocably waives any right to recover such damages, except for the
recovery of certain fees and costs if and to the extent provided for in Section
8.1 hereof.
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<PAGE> 21
(c) The prevailing party in any mediation or arbitration under
Section 8.4(b) hereof shall be entitled to recover the amount of any and all
fees and costs (including reasonable attorney's fees) incurred by the prevailing
party if and to the extent that the amount awarded to such party in such
mediation/arbitration (excluding the recovery of fees and costs) exceeds the
last written offer in settlement given by the other party thereto.
(d) Notwithstanding anything to the contrary herein above, the
parties agree that a breach of Sections 6.1 and/or 6.7 hereof would cause
substantial harm to the non-breaching party for which damages would not be a
fully adequate remedy and, therefore, that the non-breaching party shall have
the right to obtain injunctive relief.
8.5 Annual Meeting of TouchStone Stockholders.
(a) At the Annual Meeting of the stockholders of TouchStone to
be held as soon as practicable following the Closing, and in all events on or
before July 31, 1999, the stockholders of TouchStone will be asked, among other
things, to approve the issuance of an aggregate of 3,350,000 shares of
TouchStone Common Stock to the Sellers pursuant to the provisions of subsection
2(b)(i) above.
(b) It is understood and agreed that TouchStone shall prepare
the proxy statement and any other materials to be furnished to the stockholders
of TouchStone in connection with the Annual Meeting (the "Proxy Statement"), and
that Sellers shall furnish, and cause the Company to furnish, to TouchStone for
inclusion in the Proxy Statement, all such information relating to the Company
and each of the Sellers as TouchStone or its counsel reasonably requests,
including without limitation audited financial statements of the Company and its
predecessor operations for each of the two years in the two year period ended
December 31, 1998. As promptly thereafter as is practicable, TouchStone shall
file the Proxy Statement with the SEC and shall use all reasonable efforts to
respond to any comments of the SEC staff and to obtain clearance from the SEC to
mail the Proxy Statement as promptly as practicable. TouchStone agrees to
provide to Sellers the opportunity to review and comment on each form of the
Proxy Statement within a reasonable time before filing, and each responsive
correspondence to be sent to the SEC, and agrees not to file any such documents
without Sellers' consent. TouchStone shall (i) include in each form of the Proxy
Statement information relating to Sellers and the Company only as authorized by
Sellers, and (ii) promptly provide to Sellers copies of all correspondence
received from the SEC with respect to each form of the Proxy Statement and
copies of all responsive correspondence to the SEC. TouchStone agrees to notify
Sellers of any stop orders or threatened stop orders with respect to the Proxy
Statement. The Proxy Statement may be filed with the SEC as confidential
preliminary proxy material under Regulation 14A of the Exchange Act.
(c) TouchStone shall not furnish to the stockholders of
TouchStone any proxy materials relating to the transaction contemplated hereby
except the Proxy Statement. TouchStone shall mail to the stockholders of
TouchStone (i) the Proxy Statement, as promptly as practicable after clearance
thereof by the SEC (the date of such mailing hereinafter being referred to as
the "Mailing
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<PAGE> 22
Date"), (ii) any supplemental or amended Proxy Statement, as promptly as
practicable after receipt thereof, and (iii) such other supplementary proxy
materials as may be necessary, in light of the circumstances arising after the
mailing of the Proxy Statement, to make the Proxy Statement, as theretofore
supplemented or amended, complete and correct. The Proxy Statement and all
amendments and supplements thereto shall comply with applicable law and shall be
in form and substance satisfactory to TouchStone and Sellers.
(d) TouchStone and Sellers each shall advise the other if, at
any time before the Mailing Date of the Proxy Statement or the date of the
Annual Meeting, the Proxy Statement contains an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading. In such event,
TouchStone or Sellers, as the case may be, shall provide the other with the
information needed to correct such misstatement or omission.
(e) In the event that the Annual Meeting has not been held by
July 31, 1999, for any reason whatsoever, Sellers shall have the right, but not
the obligation, to jointly request that the balance of the Purchase Price
payable as provided in subsection 2(b) above be paid within two (2) business
days of the receipt of such request by TouchStone. In such event, TouchStone
shall have the right to pay the balance of the Purchase Price payable as
provided in subsection 2(b) above either in shares of TouchStone Common Stock as
provided in subsection 2(b)(i) or in cash as provided in subsection 2(b)(ii), it
being understood and acknowledged by Sellers that the continued listing of the
TouchStone Common Stock on The Nasdaq National Market may be jeopardized in the
event that TouchStone elects to pay the balance of the Purchase Price through
the delivery of shares of TouchStone Common Stock as provided in subsection
2(b)(i) above. As security for the obligation of TouchStone to pay the balance
of the Purchase Price to Sellers, TouchStone shall deposit $2,000,000 into an
interest-bearing escrow account to be established at Southern California Bank
(on such bank's standard terms and conditions) upon consummation of the Merger,
with the costs of such escrow to be borne and paid by TouchStone. In the event
that the balance of the Purchase Price is paid by TouchStone in shares of
TouchStone Common Stock, TouchStone shall be entitled to receive and retain, in
addition to the principal sum so deposited, any and all interest earned thereon.
In the event that the balance of the Purchase Price is paid by TouchStone
through the issuance and delivery of cash, Sellers shall be entitled to receive
and retain, in addition to the principal sum so deposited, any and all interest
earned thereon (subject, in all events, to the provisions of Section 8.3 above).
(f) In the event that (i) the Market price for a share of
TouchStone Common Stock has exceeded $1.00 at any time between the date hereof
and the date of the Annual Meeting, and (ii) the stockholders of TouchStone fail
to approve at the Annual Meeting the issuance and delivery of the TouchStone
Common Stock as payment of the balance of the Purchase Price, Sellers shall
nevertheless have the right, but not the obligation, to jointly request that the
balance of the Purchase Price be paid in Shares of TouchStone Common Stock
pursuant to subsection 2(b)(i) above, it being understood and acknowledged by
Sellers that the continued listing of the TouchStone Common Stock on The Nasdaq
National Market might thereby be jeopardized.
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8.6 Certain Corporate Matters.
(a) The Surviving Corporation shall be a Delaware corporation.
Immediately prior to the Merger, TouchStone will contribute to the capital of
the Surviving Corporation all of the assets, subject to the liabilities, of
TouchStone's current personal computer diagnostic software business. Following
the Merger, the Surviving Corporation will conduct both the business and
activities formerly conducted by the Company and the diagnostic software
business formerly conducted directly by TouchStone, as a wholly-owned subsidiary
of TouchStone. As a consequence of the Merger, the corporate name of the
Surviving Corporation shall be changed to "Unicore Software, Inc."
(b) It is the understanding of the parties that the corporate
headquarters of the Surviving Corporation will be located in Massachusetts,
initially at the current corporate headquarters of the Company, until changed by
the Board of Directors of the Surviving Corporation. Following the Merger, there
will be (3) directors of the Surviving Corporation (until changed in accordance
with applicable law and the Certificates of Incorporation and bylaws of the
Surviving Corporation), who shall be: Pierre A. Narath, Larry Dingus and Ron
Maas. Mr. Narath shall serve as the President and Chief Executive Officer of the
Surviving Corporation, and Jason Raza shall serve as a Vice President of the
Surviving Corporation.
(c) Following the Merger, until changed in accordance with
applicable law and the Certificate of Incorporation and bylaws of TouchStone,
the number of authorized members of the Board of Directors of TouchStone will
continue to be five (5), to include the five individuals to be elected at the
Annual Meeting (it being understood that it is the current intention of the
Board of Directors of TouchStone to nominate each of the four current members of
the TouchStone Board of Directors for re-election at the Annual Meeting, there
currently being a vacancy on the TouchStone Board of Directors), Messrs. Narath
and Raza will serve as the President and Chief Executive Officer and as a Vice
President, respectively of, TouchStone pursuant to the terms of their employment
agreements, and the corporate offices of TouchStone will remain in California.
9. MISCELLANEOUS
9.1 Other Documents. Each of the parties hereto shall execute and
deliver such other and further documents and instruments, and take such other
and further actions, as may be reasonably requested of them for the
implementation and consummation of this Agreement and the transactions herein
contemplated.
9.2 Parties in Interest. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, the heirs, personal representatives,
successors and assigns of Seller and of TouchStone, but shall not confer,
expressly or by implication, any rights or remedies upon any other party.
9.3 Governing Law. This Agreement is made and shall be governed in
all respects, including validity, interpretation and effect, by the laws of the
State of California.
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<PAGE> 24
9.4 Notices. All notices, requests or demands and other
communications hereunder must be in writing and shall be deemed to have been
duly made if personally delivered or two days after mailed, postage prepaid, to
the parties as follows:
(a) If to Sellers, in care of: Pierre A. Narath
c/o Unicore Software, Inc.
1538 Turnpike Street
North Andover, MA 01845
With a copy to: Mark E. Tully, Esq.
Devine, Millimet & Branch, P.A.
12 Essex Street
Andover, MA 01810
(b) If to TouchStone, to: Ron Maas
TouchStone Software Corporation
2124 Main Street
Huntington Beach, CA 92648
Any party hereto may change its address by written notice to the other party
given in accordance with this Section 9.4.
9.5 Entire Agreement. This Agreement, together with the exhibits
attached hereto, contains the entire agreement between the parties and supersede
all prior agreements, understandings and writings between the parties with
respect to the subject matter hereof and thereof, including without limitation
the Term Sheet dated January 7, 1999. Each party hereto acknowledges that no
representations, inducements, promises or agreements, oral or otherwise, have
been made by any party, or anyone acting with authority on behalf of any party,
which are not embodied herein or in an exhibit hereto, and that no other
agreement, statement or promise may be relied upon or shall be valid or binding.
Neither this Agreement nor any term hereof may be changed, waived, discharged or
terminated orally. This Agreement may be amended or any term hereof may be
changed, waived, discharged or terminated by an agreement in writing signed by
each of the Sellers and by TouchStone.
9.6 Headings. The captions and headings used herein are for
convenience only and shall not be construed as a part of this Agreement.
9.7 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which taken together shall
constitute but one and the same document.
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<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
TOUCHSTONE SOFTWARE CORPORATION
By:
---------------------------------
- ---------------------------------
Pierre A. Narath, as the owner of 80 Shares
Mr. Narath is to receive $1,005,000 in
cash at Closing, pursuant to the
provisions of Section 2(a), and either
2,680,000 shares of TouchStone Common
Stock pursuant to the provisions of
Section 2(b)(i) or an additional
$2,680,000 in cash pursuant to Section
2(b)(ii)
- ---------------------------------
Jason Raza, as the owner of 20 Shares
Mr. Raza is to receive $200,000 in cash
at Closing, pursuant to the provisions
of Section 2(a), and either 670,000
shares of TouchStone Common Stock
pursuant to the provisions of Section
2(b)(i) or an additional $670,000 in
cash pursuant to Section 2(b)(ii)
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Name of Exhibit Exhibit No.
--------------- -----------
<S> <C>
Agreement and Plan of Merger A
Financial Statements B
Sellers' Closing exceptions C
TouchStone's Closing exceptions D
</TABLE>
26
<PAGE> 1
EXHIBIT 99.A-2
Form 8-K
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated as of March 5, 1999,
is by and among TouchStone Software Corporation, a Delaware corporation (the
"Company"), Unicore Software, Inc., a Massachusetts corporation and a
wholly-owned subsidiary of the Company (the "Subsidiary") and Pierre A. Narath
("Narath"). This Agreement shall for all purposes be deemed to be effective as
of March 1, 1999 (the "Effective Date"). In consideration of the mutual
covenants and conditions set forth below, the Company, the Subsidiary and Narath
hereby agree as follows:
1. EMPLOYMENT. The Company and the Subsidiary hereby employ Narath and
Narath hereby accepts employment with the Company and the Subsidiary subject to
the covenants and conditions of this Agreement.
2. DUTIES. Narath shall be employed in the capacity of President and
Chief Executive Officer of the Company and President, Treasurer and Clerk of the
Subsidiary. During the term of employment (as defined below), Narath shall, on a
substantially full time basis, use his skills and render services to the best of
his ability in performing such duties as are consistent with his position,
subject to the direction of the Board of Directors of the Company. It is
understood by the parties that Narath may pursue certain business ventures,
provided that such ventures do not substantially interfere with his employment
under this Agreement.
3. TERM. Subject to earlier termination as hereafter provided, this
Agreement shall have an original term of three (3) years commencing on the
Effective Date and shall be automatically extended thereafter for successive
terms of one (1) year each (the "Extended Term"), unless either party provides
notice to the other at least six (6) months prior to the expiration of the
original term or the Extended Term that the Agreement is not to be extended. The
term of this Agreement, as from time to time extended or renewed, is herein
referred to as the "term of employment," the "term of this Agreement" or the
"term hereof".
4. BASE SALARY. During the term of Narath's employment hereunder,
Narath shall be paid a base salary at an annual rate of Two Hundred Thousand
($200,000.00) Dollars for the period from the Effective Date to December 31,
1999, at an annual rate of Two Hundred and Ten Thousand ($210,000.00) Dollars
for the period from January 1, 2000 - December 31, 2000 and at an annual rate of
Two Hundred and Twenty Five Thousand ($225,000.00) Dollars for the period from
January 1, 2001 - December 31, 2001. During the Extended Term, Narath shall be
paid a base salary at an annual rate to be mutually agreed between the Company
and Narath, with such annual rate to be not less than Two Hundred and Twenty
Five Thousand ($225,000.00) Dollars or such higher amount as may be mutually
agreed by the parties. Payments of base salary shall be in equal installments at
the end of such regular payroll periods as are established by the Company, or in
such other installments upon which the parties hereto shall mutually agree.
<PAGE> 2
5. INCENTIVE COMPENSATION. In addition to the base salary, Narath shall
be entitled to receive incentive bonus compensation in accordance with the terms
established from time to time by the Board of Directors of the Company and/or
the Subsidiary. In addition to the foregoing, Narath shall be provided with a
bonus equal to the product of (i) the aggregate gross sales, less all returns,
of the Company, Unicore and all of their subsidiaries and affiliates in the
fiscal year ended December 31, 1999, in excess of Six Million ($6,000,000.00)
Dollars; multiplied by (ii) 3.5%. Such bonus shall be paid by the Company to
Narath in cash no later than March 1, 2000. For fiscal years after the year
ended December 31, 1999, the amount of Narath's bonus shall be mutually agreed
upon by Narath and the Board of Directors of the Company.
6. PARTICIPATION IN BENEFIT PLANS. Narath shall be entitled to
participate in, and receive benefits under, all the Company's employee benefit
plans and arrangements as in effect from time to time (including, but not
limited to, participation in any pension, profit sharing, stock option, stock
bonus or employee stock ownership plan adopted by the Company). Such benefit
plans and arrangements shall not be less than any benefit plans and arrangements
which the Subsidiary currently maintains.
7. VACATION DAYS. Narath shall be entitled to twenty (20) vacation
days, which number may be increased from time to time as determined by the
Company to be appropriate for similarly situated senior executives of the
Company and paid holidays in each year as are determined by the Company from
time to time for similarly situated senior executives; provided that the
aggregate annual number of such vacation days and paid holidays shall at no time
fall below the number of days per year to which Narath was entitled with the
Subsidiary immediately prior to the Effective Date.
8. PERQUISITES. The Company shall provide Narath with life, health,
dental, disability and other insurance at a level not less than the level to
which Narath was entitled with the Subsidiary immediately prior to the Effective
Date. The Company shall provide Narath with a new motor vehicle every two (2)
years, such motor vehicle to be selected by Narath and to be substantially
similar to the motor vehicle to which Narath was entitled with the Subsidiary
immediately prior to the Effective Date, and the Company shall pay to, or for
the benefit of, Narath all motor vehicle expenses, any applicable loan or lease
payments, customary insurance, gas, taxes, maintenance and any other costs
related thereto.
9. EXPENSES. Narath shall receive prompt reimbursement for all
reasonable travel, entertainment and business-related expenses in connection
with his employment hereunder, in accordance with the reasonable policies of the
Board of Directors of the Company, including, but not limited to, the cost of
all telephone and telephone-related expenses incurred at his personal residence
in respect of business matters.
10. TRAVEL/RELOCATION. Narath shall not be required to travel in
connection with his employment hereunder to any extent materially greater than
the normal and customary travel incurred by him with the Subsidiary during the
one (1) year period of time immediately prior to the Effective Date. The Company
shall not locate or relocate the Company's offices
2
<PAGE> 3
at which Narath is principally employed to a location more than 25 miles from
the Subsidiary's offices in North Andover, Massachusetts and the Company shall
not require Narath to be based anywhere other than the Subsidiary's offices at
such location.
11. DIRECTOR. During the term of this Agreement, the Company agrees to
propose to the stockholders of the Company at each Annual Meeting of such
shareholders during the term hereof the election or re-election of Narath as a
member of the Board of Directors of the Company. During the term of this
Agreement, the Company agrees to vote its shares of the Subsidiary in favor of
the election of Narath as a member of the Board of Directors of the Subsidiary.
During the period in which Narath is a director of the Company or the
Subsidiary, and for a period of three (3) years thereafter, the Company shall
maintain directors and officers' liability insurance coverage for the Company
and the Subsidiary in an amount not less than the coverage amount currently in
force.
12. TERMINATION OF EMPLOYMENT. a) During the term of this Agreement,
the Company may terminate Narath's employment with the Company only for the
following reasons:
1. Upon the death of Narath.
2. If Narath is (a) permanently disabled as defined and
determined under any disability insurance policy carried
by the Company covering Narath or (if no such policy is
then in place) if Narath is unable to perform his duties
effectively for reasons such as mental illness, injury,
physical illness or disability and such inability has
continued for a period in excess of six (6) months, as
evidenced by a written statement of Narath's physician, or
(b) deemed incapacitated by a court of competent
jurisdiction in a final ruling.
3. As a result of any tender or exchange offer, merger,
consolidation or other business combination, sale of
assets or contested election, or any combination of the
foregoing transactions: (a) the persons who were directors
of the Company before such transaction shall cease to
constitute a majority of the Board of Directors of the
Company (or of any successor entity), (b) the Company is
not the surviving corporation in the transaction, or (c)
the stockholders of the Company immediately prior to such
transaction do not hold immediately after such transaction
a majority in the aggregate of the outstanding common
shares of the surviving entity.
4. The sale or disposition of all or substantially all of the
assets of the Company in one transaction or in a series of
transactions.
5. The liquidation or dissolution of the Company.
6. The willful and continued failure by Narath to
substantially perform his duties with the Company (other
than failure resulting from the incapacity of Narath due
to physical or mental illness) after a written demand for
substantial performance is delivered to Narath by the
Company which demand specifically identifies the manner in
which the Company believes that Narath has not
substantially performed Narath's duties and provided that
3
<PAGE> 4
Narath fails to cure such performance within thirty (30)
days following said written demand.
7. The willful and intentional engagement by Narath in
conduct which is demonstrably and materially injurious to
the Company or the Subsidiary, including material unlawful
conduct, material and conscious falsification or
unauthorized disclosure of important records, embezzlement
or unauthorized conversion of property.
8. By the Company for any reason by giving Narath thirty (30)
days written notice specifying the date as of which his
termination is to become effective.
b) During the term of this Agreement, Narath may terminate his
employment with the Company at any time for Good Reason. For purposes of this
Agreement the term "Good Reason" shall mean: (i) the assignment to Narath
without his consent of any duty which is inconsistent in any material respect
with Narath's position, authority, duties or responsibilities as specified in
Section 2 above; or (ii) a material breach by the Company of the terms of this
Agreement which breach is not cured within thirty (30) days after written notice
from Narath.
c) In addition to a termination for Good Reason, during the term of
this Agreement, Narath may terminate his employment with the Company for any
reason by giving thirty (30) days written notice to the Company specifying the
date as of which his termination is to become effective. Upon voluntary
termination by Narath of his employment pursuant to this Section 12(c), the
Company shall have no further obligation to Narath under this Agreement except
to distribute to Narath his base salary due pursuant to Section 4 hereof and
accrued vacation pay and expenses up to the date of termination, together with
any bonus accrued to Narath as of the date of termination. This Section 12(c)
shall not apply to a termination by Narath for Good Reason, which shall be
governed by the terms of Section 12(b) above and Section 13 below.
13. EFFECT OF TERMINATION.
a) Upon the occurrence of any event listed in Section 12(a)(3) or
12(a)(4) (a "Change in Control") which has not been approved by Narath in his
capacity as a director of the Company, and the termination of this Agreement at
any time within Twelve (12) months of the Change in Control, including, without
limitation, any termination by Narath for Good Reason, the Company, upon such
termination, shall make a lump sum cash payment to Narath equal to the sum of
(collectively, the "Change in Control Payment"): (i) 200% of the annual base
salary payable in cash or its equivalent, or agreed to be paid in lieu of cash
compensation to Narath at the time of termination of Narath's employment; plus
(ii) 200% of the amount of any bonuses paid to, or earned by, Narath during the
previous calendar year; plus (iii) a gross-up payment in the amount of all
deductions for all federal, state and local income taxes, excise tax and FICA
and Medicare withholding taxes such that the net payment to Narath shall equal
the sum of i and ii above. The Company shall continue to provide to Narath, at
no charge, for a period of eighteen (18) months after the date of termination,
Narath's then-existing coverage under the Company's health, dental, life and
disability insurance plans or, if continued coverage under such plans cannot be
provided, substantially equivalent coverage under
4
<PAGE> 5
alternative arrangements. In the event that the benefits payable to Narath under
this Section are subject to the 20% excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended, the Company shall pay to Narath an
additional payment in the amount of all deductions for all federal, state and
local income taxes, excise tax and FICA and Medicare withholding taxes
attributable to the excise tax, such that the net payment to Narath shall equal
the Change in Control Payment.
b) Upon the occurrence of a Change in Control which has been approved
by Narath in his capacity as a director of the Company, Narath shall
nevertheless continue to be entitled to terminate his employment for Good
Reason, in which case the provisions of Section 13(c) below shall apply.
c) Upon termination of Narath's employment pursuant to Sections
12(a)(1), 12(a)(2), 12(a)(5), 12(a)(8) or 12(b) hereof, the Company shall make a
lump sum cash payment to Narath equal to the sum of: (a) one year's base salary
payable in cash or its equivalent, or agreed to be paid in lieu of cash
compensation to Narath at the time of Narath's termination of employment; plus
(b) the amount of any bonuses paid to, or earned by, Narath during the previous
calendar year. The Company shall continue to provide to Narath, at no charge,
for a period of eighteen (18) months after the date of termination, Narath's
then-existing coverage under the Company's health, dental, life and disability
insurance plans or, if continued coverage under such plans cannot be provided,
substantially equivalent coverage under alternative arrangements.
Upon termination of Narath's employment pursuant to Section 12(a)(6) or
12(a)(7), the Company shall have no further obligation to Narath under this
Agreement except to deliver to Narath his base salary due pursuant to Section 4
and accrued vacation pay and expenses up to the date of termination, together
with any bonus accrued to Narath as of the date of termination.
14. WITHHOLDING. Subject to the terms of Section 13 hereof, all
payments made by the Company under this Agreement shall be reduced by any tax or
other amounts required to be withheld by the Company under applicable law.
15. COMPETITIVE EMPLOYMENT. For a period of one (1) year after the date
of the termination of his employment, Narath shall not engage in Directly
Competitive Employment (as hereinafter defined). For purposes of this Agreement,
"Directly Competitive Employment" shall mean employment with those employers who
have been individually and specifically determined by the Company in a written
notice given to Narath by the Company, at or within five (5) days of Narath's
termination, to offer directly competitive employment with respect to Narath's
former employment with the Company. In making its determination under this
Section, the Company shall determine that Narath's knowledge of such matters as
the Company's particular methods, policies, customers, suppliers, personnel or
plans, as distinguished from the skills, experience and services of Narath in
general, would materially enhance Narath's new employer. For purposes of this
Agreement, the Company shall identify not more than five (5) persons, firms, or
corporations which would constitute Directly
5
<PAGE> 6
Competitive Employment. Narath believes that the restrictions in this Section
are reasonable and they will not prevent Narath from pursuing his livelihood.
However, should a court or tribunal find that the definition of Directly
Competitive Employment is unreasonable, then Narath recognizes that the court
shall interpret and enforce the definition to the maximum lawful extent.
16. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Narath shall protect,
safeguard, and keep secret business, technical and trade information that has
been discovered or accumulated by or for the Company (the "Confidential
Information"), except as otherwise authorized by the Company in writing and as
is required in the performance of his duties pursuant to this Agreement, during
Narath's employment and thereafter. For purposes of this Agreement, the term
"Confidential Information" shall not include information that Narath acquires
from parties other than the Company, or to any information, matter or thing that
is in the public domain or has been disclosed to others by the Company or its
subsidiaries, employees or agents. Narath shall also use the Confidential
Information only for the Company's benefit and only at the Company's direction.
Narath shall not, and shall not allow another to, publish or disclose the
Confidential Information to any third party or use it for any other purpose,
other than as required pursuant to court order, subpoena in a governmental
proceeding, arbitration or other process of law. Narath understands that such
Confidential Information includes, but is not limited to, trade secrets,
business or financial information (including markets, sales, profits, pricing,
and customer lists), plans or projections for future development, ideas,
technical data or other information which have been kept secret or confidential
by the Company, regardless of whether the Confidential Information is merely
remembered or embodied in a tangible medium, developed in whole or part by
Narath, or whether it was provided to Narath. Immediately upon termination of
employment for any reason, Narath shall return to the Company all records,
files, computer disks, stored computer data or other tangible or electronic
media containing such Confidential Information, including all copies.
17. AUTHORIZATION AND EXECUTION. The Company hereby represents and
warrants that the execution and delivery of the Agreement by the Company has
been authorized by all necessary corporate action of the Company, including the
unanimous consent of the Board of Directors (excluding Narath), and the
Agreement constitutes a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general equitable principles.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes any
and all prior agreements, understandings and communications between the parties,
oral or written, with respect to such subject matter.
19. MODIFICATION AND TERMINATION. Any waiver, termination, alteration,
amendment or modification of any provision of this Agreement shall not be valid
unless in writing signed by the party against whom enforcement is sought.
6
<PAGE> 7
20. SEVERABILITY. Each term and provision of this Agreement is intended
to be enforced to the maximum extent permitted by applicable law. If any term or
provision of this Agreement, or the applicability thereof to any person or
circumstances, shall to any extent be invalid or unenforceable, the remainder of
this Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and shall continue in full force and effect.
21. NOTICE. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be deemed received and
effective upon the earlier of (i) hand delivery to the recipient, (ii) two (2)
days after posting by air courier, or (iii) five (5) days after posting by
certified or registered mail, postage prepaid, return receipt requested, or (iv)
when initially transmitted by facsimile transmission, if such notice is
concurrently sent by traceable mail:
(i) If to the Company or the Subsidiary:
TouchStone Software Corporation
2124 Main Street
Huntington Beach, CA 92648
Attention: Ron Maas
(ii) If to Narath:
Pierre A. Narath
1538 Turnpike Street
North Andover, Massachusetts 01845
With a copy to:
Mark E. Tully, Esq.
Devine, Millimet & Branch, P.A.
12 Essex Street
Andover, Massachusetts 01810
or to such other person or address as either of the parties shall furnish in
writing to the other party from time to time.
22. CHOICE OF LAW. This Agreement shall be governed for all purposes by
the laws of the State of California, to the jurisdiction of whose courts the
parties hereto submit.
23. ATTORNEYS' FEES. In the event of litigation arising out of or in
connection with this Agreement, the prevailing party shall be entitled to
recover from the other party all of its attorneys' fees and other expenses
incurred in connection with such litigation.
7
<PAGE> 8
24. SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and shall be binding upon the heirs, personal
representatives, successors and assigns of the parties and no signature or other
indication of assent by any such person shall be required as a prerequisite to
enforceability; provided, however, that Narath's obligations to the Company are
personal to Narath and Narath acknowledges that Narath may not assign them.
25. HEADINGS AND GENDER. The headings of the Sections of this Agreement
have been included for convenience of reference purposes only and shall in no
way be interpreted to restrict or modify the terms hereof. The use of pronouns
of any gender herein shall include pronouns of all other genders, as applicable.
26. COUNTERPARTS. This Agreement may be signed in one or more
counterparts, each of which may be termed an original, but all of which together
shall constitute one Agreement.
IN WITNESS WHEREOF, the parties have executed or caused to be executed
this Agreement as of the date first above written.
TOUCHSTONE SOFTWARE CORPORATION
By:
- ------------------------------ ------------------------------
Witness Name:
Title: Chairman of the Board
of Directors
UNICORE SOFTWARE, INC.
By:
- ------------------------------ ------------------------------
Witness Name:
Title: Director
- ------------------------------ ---------------------------------
Witness Pierre A. Narath
8
<PAGE> 1
EXHIBIT 99.A-3
Form 8-K
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated as of March 5, 1999,
is by and among TouchStone Software Corporation, a Delaware corporation (the
"Company"), Unicore Software, Inc., a Massachusetts corporation (the
"Subsidiary") and Jason K. Raza ("Raza"). This Agreement shall for all purposes
be deemed to be effective as of March 1, 1999 (the "Effective Date"). In
consideration of the mutual covenants and conditions set forth below, the
Company, the Subsidiary and Raza hereby agree as follows:
1. EMPLOYMENT. The Company and the Subsidiary hereby employ Raza and
Raza hereby accepts employment with the Company and the Subsidiary subject to
the covenants and conditions of this Agreement.
2. DUTIES. Raza shall be employed in the capacity of Vice-President of
the Company and Vice-President of the Subsidiary. During the term of employment
(as defined below), Raza shall, on a substantially full time basis, use his
skills and render services to the best of his ability in performing such duties
as are consistent with his position, subject to the direction of the President
of the Company.
3. TERM. Subject to earlier termination as hereafter provided, this
Agreement shall have an original term of three (3) years commencing on the
Effective Date and shall be automatically extended thereafter for successive
terms of one (1) year each (the "Extended Term"), unless either party provides
notice to the other at least six (6) months prior to the expiration of the
original term or the Extended Term that the Agreement is not to be extended. The
term of this Agreement, as from time to time extended or renewed, is herein
referred to as the "term of employment," the "term of this Agreement" or the
"term hereof".
4. BASE SALARY. During the term of Raza's employment hereunder, Raza
shall be paid a base salary at an annual rate of One Hundred and Ten Thousand
($110,000.00) Dollars. During the Extended Term, Raza shall be paid a base
salary at an annual rate to be mutually agreed between the Company and Raza,
with such annual rate to be not less than One Hundred and Ten Thousand
($110,000.00) Dollars or such higher amount as may be mutually agreed by the
parties. Payments of base salary shall be in equal installments at the end of
such regular payroll periods as are established by the Company, or in such other
installments upon which the parties hereto shall mutually agree.
5. INCENTIVE COMPENSATION. In addition to the base salary, Raza shall
be entitled to receive incentive bonus compensation in accordance with the terms
established from time to time by the President of the Company.
6. PARTICIPATION IN BENEFIT PLANS. Raza shall be entitled to
participate in, and receive benefits under, all the Company's employee benefit
plans and arrangements as in effect from time to time (including, but not
limited to, participation in any pension, profit sharing, stock option, stock
bonus or employee stock ownership plan adopted by the
<PAGE> 2
Company). Such benefit plans and arrangements shall not be less than any benefit
plans and arrangements which the Subsidiary currently maintains.
7. VACATION DAYS. Raza shall be entitled to twenty (20) vacation days,
which number may be increased from time to time as determined by the Company to
be appropriate for similarly situated senior executives of the Company and paid
holidays in each year as are determined by the Company from time to time for
similarly situated senior executives; provided that the aggregate annual number
of such vacation days and paid holidays shall at no time fall below the number
of days per year to which Raza was entitled with the Subsidiary immediately
prior to the Effective Date.
8. PERQUISITES. The Company shall provide Raza with life, health,
dental, disability and other insurance at a level not less than the level to
which Raza was entitled with the Subsidiary immediately prior to the Effective
Date.
9. EXPENSES. Raza shall receive prompt reimbursement for all reasonable
travel, entertainment and business-related expenses in connection with his
employment hereunder, in accordance with the reasonable policies of the Board of
Directors of the Company.
10. TRAVEL/RELOCATION. Raza shall not be required to travel in
connection with his employment hereunder to any extent materially greater than
the normal and customary travel incurred by him with the Subsidiary during the
one (1) year period of time immediately prior to the Effective Date. The Company
shall not relocate the Company's offices at which Raza is principally employed
to a location more than 25 miles from the Subsidiary's offices in North Andover,
Massachusetts and the Company shall not require Raza to be based anywhere other
than the Subsidiary's offices at such location.
11. TERMINATION OF EMPLOYMENT. a) During the term of this Agreement,
the Company may terminate Raza's employment with the Company only for the
following reasons:
1. Upon the death of Raza.
2. If Raza is (a) permanently disabled as defined and
determined under any disability insurance policy carried
by the Company covering Raza or (if no such policy is then
in place) if Raza is unable to perform his duties
effectively for reasons such as mental illness, injury,
physical illness or disability and such inability has
continued for a period in excess of six (6) months, as
evidenced by a written statement of Raza's physician, or
(b) deemed incapacitated by a court of competent
jurisdiction in a final ruling.
3. As a result of any tender or exchange offer, merger,
consolidation or other business combination, sale of
assets or contested election, or any combination of the
foregoing transactions: (a) the persons who were directors
of the Company before such transaction shall cease to
constitute a majority of the Board of Directors of the
Company (or of any successor entity), (b) the Company is
not the surviving corporation in the transaction,
2
<PAGE> 3
or (c) the stockholders of the Company immediately prior
to such transaction do not hold immediately after such
transaction a majority in the aggregate of the outstanding
common shares of the surviving entity.
4. The sale or disposition of all or substantially all of the
assets of the Company in one transaction or in a series of
transactions.
5. The liquidation or dissolution of the Company.
6. The willful and continued failure by Raza to substantially
perform his duties with the Company (other than failure
resulting from the incapacity of Raza due to physical or
mental illness) after a written demand for substantial
performance is delivered to Raza by the Company which
demand specifically identifies the manner in which the
Company believes that Raza has not substantially performed
Raza's duties and provided that Raza fails to cure such
performance within thirty (30) days following said written
demand.
7. The willful and intentional engagement by Raza in conduct
which is demonstrably and materially injurious to the
Company or the Subsidiary, including material unlawful
conduct, material and conscious falsification or
unauthorized disclosure of important records, embezzlement
or unauthorized conversion of property.
8. By the Company for any reason by giving Raza thirty (30)
days written notice specifying the date as of which his
termination is to become effective.
b) During the term of this Agreement, Raza may terminate his employment
with the Company by giving thirty (30) days written notice to the Company
specifying the date as of which his termination is to become effective. Upon
voluntary termination by Raza of his employment pursuant to this Section 11(b),
the Company shall have no further obligation to Raza under this Agreement except
to distribute to Raza his base salary due pursuant to Section 4 hereof and
accrued vacation pay and expenses up to the date of termination, together with
any bonus accrued to Raza as of the date of termination.
12. EFFECT OF TERMINATION. Upon termination of Raza's employment
pursuant to Sections 11(a)(1), 11(a)(2), 11(a)(5) or 11(a)(8) hereof, the
Company shall make a lump sum cash payment to Raza equal to the sum of: (a) one
year's base salary payable in cash or its equivalent, or agreed to be paid in
lieu of cash compensation to Raza at the time of Raza's termination of
employment; plus (b) the amount of any bonuses paid to, or earned by, Raza
during the previous calendar year. The Company shall continue to provide to
Raza, for an eighteen (18) month period after the date of termination, Raza's
then-existing coverage under the Company's health, dental, life and disability
insurance plans or, if continued coverage under such plans cannot be provided,
substantially equivalent coverage under alternative arrangements.
Upon termination of Raza's employment pursuant to Sections 11(a)(3),
11(a)(4), 11(a)(6) or 11(a)(7), the Company shall have no further obligation to
Raza under this Agreement except to deliver to Raza his base salary due pursuant
to Section 4 and accrued
3
<PAGE> 4
vacation pay and expenses up to the date of termination, together with any bonus
accrued to Raza as of the date of termination.
13. WITHHOLDING. Subject to the terms of Section 12 hereof, all
payments made by the Company under this Agreement shall be reduced by any tax or
other amounts required to be withheld by the Company under applicable law.
14. COMPETITIVE EMPLOYMENT. For a period of one (1) year after the date
of the termination of his employment, Raza shall not engage in Directly
Competitive Employment (as hereinafter defined). For purposes of this Agreement,
"Directly Competitive Employment" shall mean employment with those employers who
have been individually and specifically determined by the Company in a written
notice given to Raza by the Company, at or within five (5) days of Raza's
termination, to offer directly competitive employment with respect to Raza's
former employment with the Company. In making its determination under this
Section, the Company shall determine that Raza's knowledge of such matters as
the Company's particular methods, policies, customers, suppliers, personnel or
plans, as distinguished from the skills, experience and services of Raza in
general, would materially enhance Raza's new employer. For purposes of this
Agreement, the Company shall identify not more than five (5) persons, firms, or
corporations which would constitute Directly Competitive Employment. Raza
believes that the restrictions in this Section are reasonable and they will not
prevent Raza from pursuing his livelihood. However, should a court or tribunal
find that the definition of Directly Competitive Employment is unreasonable,
then Raza recognizes that the court shall interpret and enforce the definition
to the maximum lawful extent.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Raza shall protect,
safeguard, and keep secret business, technical and trade information that has
been discovered or accumulated by or for the Company (the "Confidential
Information"), except as otherwise authorized by the Company in writing and as
is required in the performance of his duties pursuant to this Agreement, during
Raza's employment and thereafter. For purposes of this Agreement, the term
"Confidential Information" shall not include information that Raza acquires from
parties other than the Company, or to any information, matter or thing that is
in the public domain or has been disclosed to others by the Company or its
subsidiaries, employees or agents. Raza shall also use the Confidential
Information only for the Company's benefit and only at the Company's direction.
Raza shall not, and shall not allow another to, publish or disclose the
Confidential Information to any third party or use it for any other purpose,
other than as required pursuant to court order, subpoena in a governmental
proceeding, arbitration or other process of law. Raza understands that such
Confidential Information includes, but is not limited to, trade secrets,
business or financial information (including markets, sales, profits, pricing,
and customer lists), plans or projections for future development, ideas,
technical data or other information which have been kept secret or confidential
by the Company, regardless of whether the Confidential Information is merely
remembered or embodied in a tangible medium, developed in whole or part by Raza,
or whether it was provided to Raza. Immediately upon termination of employment
for any reason, Raza shall return to the Company all records, files, computer
disks, stored computer
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<PAGE> 5
data or other tangible or electronic media containing such Confidential
Information, including all copies.
16. AUTHORIZATION AND EXECUTION. The Company hereby represents and
warrants that the execution and delivery of the Agreement by the Company has
been authorized by all necessary corporate action of the Company, including the
unanimous consent of the Board of Directors, and the Agreement constitutes a
legal, valid and binding obligation of the Company, enforceable in accordance
with its terms, except to the extent limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by general equitable principles.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes any
and all prior agreements, understandings and communications between the parties,
oral or written, with respect to such subject matter.
18. MODIFICATION AND TERMINATION. Any waiver, termination, alteration,
amendment or modification of any provision of this Agreement shall not be valid
unless in writing signed by the party against whom enforcement is sought.
19. SEVERABILITY. Each term and provision of this Agreement is intended
to be enforced to the maximum extent permitted by applicable law. If any term or
provision of this Agreement, or the applicability thereof to any person or
circumstances, shall to any extent be invalid or unenforceable, the remainder of
this Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and shall continue in full force and effect.
20. NOTICE. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be deemed received and
effective upon the earlier of (i) hand delivery to the recipient, (ii) two (2)
days after posting by air courier, or (iii) five (5) days after posting by
certified or registered mail, postage prepaid, return receipt requested, or (iv)
when initially transmitted by facsimile transmission, if such notice is
concurrently sent by traceable mail:
(i) If to the Company or the Subsidiary:
TouchStone Software Corporation
2124 Main Street
Huntington Beach, CA 92648
Attention: Ron Maas
(ii) If to Raza:
Jason K. Raza
1538 Turnpike Street
North Andover, Massachusetts 01845
With a copy to:
Arthur J. McCabe and Associates, P.C.
300 Brickstone Square
Andover, Massachusetts 01810
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<PAGE> 6
or to such other person or address as either of the parties shall furnish in
writing to the other party from time to time.
21. CHOICE OF LAW. This Agreement shall be governed for all purposes by
the laws of the State of California, to the jurisdiction of whose courts the
parties hereto submit.
22. ATTORNEYS' FEES. In the event of litigation arising out of or in
connection with this Agreement, the prevailing party shall be entitled to
recover from the other party all of its attorneys' fees and other expenses
incurred in connection with such litigation.
23. SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and shall be binding upon the heirs, personal
representatives, successors and assigns of the parties and no signature or other
indication of assent by any such person shall be required as a prerequisite to
enforceability; provided, however, that Raza's obligations to the Company are
personal to Raza and Raza acknowledges that Raza may not assign them.
24. HEADINGS AND GENDER. The headings of the Sections of this Agreement
have been included for convenience of reference purposes only and shall in no
way be interpreted to restrict or modify the terms hereof. The use of pronouns
of any gender herein shall include pronouns of all other genders, as applicable.
25. COUNTERPARTS. This Agreement may be signed in one or more
counterparts, each of which may be termed an original, but all of which together
shall constitute one Agreement.
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<PAGE> 7
IN WITNESS WHEREOF, the parties have executed or caused to be executed
this Agreement as of the date first above written.
TOUCHSTONE SOFTWARE CORPORATION
By:
- ----------------------------------- -----------------------------------
Witness Name:
Title:
UNICORE SOFTWARE, INC.
By:
- ----------------------------------- -----------------------------------
Witness Name:
Title: Director
- ----------------------------------- -----------------------------------
Witness Jason K. Raza
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<PAGE> 1
EXHIBIT 99.A-4
Form 8-K
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of March 5, 1999 by and between TOUCHSTONE SOFTWARE CORPORATION,
a Delaware corporation (the "Company"), and the individuals listed on the
signature page of this Agreement who, concurrently with the execution hereof,
are becoming stockholders of the Company (individually, a "Stockholder," and
collectively, the "Stockholders").
A. The Company and the Stockholders have entered into an Agreement and
Plan of Acquisition dated as of March 5, 1999 (the "Acquisition Agreement"),
pursuant to which the Stockholders, who currently own all of the issued and
outstanding capital stock of Unicore Software, Inc., a Massachusetts corporation
("Unicore"), have agreed to sell to the Company all of the issued and
outstanding capital stock of Unicore for a specified amount of cash and
3,350,000 shares (the "Shares") of the Company's Common Stock, $.001 par value
(the "Common Stock").
B. The execution and delivery of this Agreement by the Company are
conditions to the obligation of the Stockholders to consummate the transactions
contemplated by the Acquisition Agreement. Accordingly, the Company deems it
necessary and advisable and in the best interests of the Company and its
stockholders to enter into this Agreement with the Stockholders.
C. As a material inducement and consideration to the Stockholders to
enter into and perform their respective obligations under the Acquisition
Agreement, the Company has agreed to enter into and execute this Agreement on
the terms and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements of the parties contained herein, the Company
hereby grants to each of the Stockholders certain rights with respect to the
registration under the Securities Act of 1933, as amended (the "Securities
Act"), of the Shares acquired by the Stockholders pursuant to the Acquisition
Agreement, on the following terms and subject to the following conditions:
1. (a) If, at any time after the acquisition of the Shares by the
Stockholders, the Company shall determine to register under the Securities Act
any shares of its Common Stock to be offered for cash by it or others, including
registrations relating to proposed public offerings of securities of the
Company, the Company will (i) promptly give written notice of its intention to
file such registration statement to the Stockholders and (ii) subject to the
provisions of subparagraphs (b) through (d) below, include among the shares
covered by the registration statement such portion of the Shares as shall be
specified in a written request given to the Company by one or more of the
Stockholders within 30 days after the date on which the Company gave such
written notice.
<PAGE> 2
(b) Upon receipt of any written request described in
subparagraph 1(a) above, but subject to the provisions hereof and of
subparagraphs 1(c) and (d) below, the Company shall use its best efforts within
reason to effect the registration, qualification or compliance under the
Securities Act and under other applicable federal law and any applicable
securities or "blue sky" laws of jurisdictions within the United States of the
Shares specified in the request(s) (the Stockholders, and any other holders of
the Company's Common Stock who are entitled to request that any shares of the
Company's Common Stock held by them be included in any such registration, are
herein individually called a "Selling Stockholder" and collectively, the
"Selling Stockholders"); provided, however, that in no event shall the Company
be obligated to qualify to do business in any jurisdiction where it is not so
qualified or to take any action that would subject it to tax or the service of
process (other than process in connection with such registration) in any
jurisdiction where it is not subject thereto, nor shall the Company be required
to include the Shares among the securities covered by the registration statement
if (i) the requests of the Selling Stockholders cover, in the aggregate, less
than 5% of the then outstanding shares of the Company's Common Stock; or (ii)
the Board of Directors of the Company determines in good faith that including
shares of Common Stock held by any Selling Stockholder among the securities
covered by the registration statement would have a materially detrimental effect
on the offering and would therefore not be in the best interests of the Company.
(c) The Company shall have priority over any and all of the
Selling Stockholders with respect to the inclusion of shares in any such
registration, and in no event shall the Company be required to reduce or limit
the number of newly to be issued shares of its Common Stock to be covered by any
registration statement for the purpose of permitting the Shares of any Selling
Stockholder to be included in the registration.
(d) The Company alone shall determine and control all
decisions concerning any registration of the Company's securities which might
give rise to the registration rights granted herein, including any registration
in which Shares of any Selling Stockholder are to be included. The Company's
exclusive right to make decisions shall include, without limitation, the
decision as to whether to use underwriters, the selection of underwriters and
arrangements therewith, the size, timing and other terms of any offering, the
provisions of the registration statements and prospectuses and all supplements
and amendments thereto, the selection of accountants and attorneys for the
Company, and the states in which the sale of shares shall occur and be
registered or qualified for sale.
If the offering registered by the Company is to be
underwritten, the Company shall enter into and perform its obligations under an
underwriting agreement in usual and customary form, and each Selling Stockholder
shall sell all shares of the Company's Common Stock included in the registration
statement to or through the underwriter or underwriters selected by the Company
on the same terms and conditions provided in any underwriting agreement entered
into therewith by the Company, and shall
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<PAGE> 3
complete and execute all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements. Notwithstanding anything to the contrary hereunder,
if the underwriter or underwriters selected by the Company reasonably determine
that all or any portion of the shares of Common Stock held by the Selling
Stockholders should not be included in the registration statement, the
determination of the underwriter or underwriters shall be conclusive; provided,
however, that if such underwriter or underwriters determine that some but not
all of the shares of Common Stock of the Selling Stockholders shall be included
in the registration statement, the number of shares owned by each Selling
Stockholder to be included in the registration statement will be proportionately
reduced in accordance with their respective aggregate holdings of the Company's
Common Stock.
2. If and whenever the Company is required by the provisions of this
Agreement to use its best efforts to effect the registration of any of the
Shares under the Securities Act, the Company shall:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to such
Shares and use its best efforts to cause such registration statement to become
and remain effective under the Securities Act as provided herein;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
current and to comply with the provisions of the Securities Act with respect to
the sale or other disposition of all Shares covered by such registration
statement; provided, however, that in the case of any registered distribution
which is not underwritten on a firm commitment basis, then the Company shall not
be required to file a post-effective amendment or supplement the prospectus more
than 180 days after the effective date of the registration statement;
(c) furnish to each Stockholder (and any other person
participating in the registration as a Selling Stockholder) such number of
copies of the prospectus contained in the registration statement filed under the
Securities Act (including each preliminary prospectus) in conformity with the
requirements of the Securities Act, and such other documents as the Selling
Stockholders may reasonably request in order to facilitate the disposition of
the Company's Common Stock held by them which is covered by the registration
statement; and
(d) notify each Stockholder (and any other person
participating in the registration as a Selling Stockholder), at any time when a
prospectus is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus in the registration
statement, as then in effect, includes an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and prepare and furnish to them any
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<PAGE> 4
reasonable number of copies of any supplement to or amendment of such prospectus
as may be necessary so that, as thereafter delivered, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
3. The Company shall bear all costs and expenses relating to or
incurred by it in connection with any registration ("Registration Expenses") in
which any Stockholder participates pursuant hereto, including without limitation
all registration and filing fees, printing expense, fees and disbursements of
counsel and independent accountants for the Company and fees and expenses
incident to compliance with state securities or "blue sky" laws, but
specifically excluding any fees and disbursements of counsel, accountants or
other professionals engaged by any Stockholder. Each Stockholder participating
in such registration shall be responsible for and bear any underwriters'
discounts and commissions properly allocable to the Shares included in a
registration statement at the request of a Stockholder hereunder.
4. (a) The Company shall indemnify and hold harmless, to the extent
permitted by law, each Stockholder participating in any registration effected by
the Company pursuant to any provision of this Agreement against any actions,
losses, claims, damages, liabilities and expenses (including legal fees and
other expenses reasonably incurred in the investigation and defense thereof)
resulting from any untrue or alleged untrue statement of a material fact or any
omission or alleged omission of a material fact in any registration statement,
prospectus, offering circular or other document filed in connection with any
such registration, and against any violation by the Company of the Securities
Act or any state securities or "blue sky" law, or any rule or regulation under
any of them, applicable to the Company in connection with such registration,
unless and to the extent that any such actions, claims, losses, damages,
liabilities or expenses arise out of or are based upon any of the written
information specifically provided by the Stockholder for use in such
registration statement, prospectus, offering circular or other document pursuant
to subparagraph 4(b) below.
(b) In connection with any registration in which any of the
Stockholders is participating, each such Stockholder shall furnish to the
Company such information in writing regarding the Stockholder as the Company
reasonably requests for inclusion in the registration statement, prospectus,
offering circular and other documents filed in connection therewith, and shall
state that such information is provided specifically for use in the registration
statement, prospectus, offering circular or other documents. Each such
Stockholder shall also indemnify and hold harmless, to the extent permitted by
law, the Company, and its directors and officers, and each underwriter of the
offering, if any (in a manner reasonably satisfactory in form and substance to
such underwriter), and each person who controls the Company or each such
underwriter (within the meaning of the Securities Act), against any actions,
losses, claims, damages, liabilities, and expenses (including legal and other
expenses reasonably incurred in the investigation and defense thereof) resulting
from any untrue or alleged untrue statement of a material fact or any omission
or alleged omission of a material fact required to be stated in any such
documents or any supplement or amendment thereto, and against any violation by
the Company of the
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<PAGE> 5
Securities Act or any state securities or "blue sky" law, or any rule or
regulation under any of them, applicable to the Company in connection with such
registration, or necessary to make the statements therein not misleading, but
only to the extent that such untrue statement or omission is made in reliance on
and in conformity with the written information furnished to the Company by such
Stockholder specifically for use in any such documents; provided that the
indemnity contained in this Section 4(b) shall not apply to amounts paid in
settlement of any such actions, losses, claims, damages, liabilities and
expenses if such settlement is effected without the consent of the Stockholder,
unless the consent of such Stockholder is unreasonably withheld, and provided,
further, that in no event shall any indemnity under this Section 4(b) exceed the
proceeds from the registration received by the Stockholder
Promptly after receipt by an indemnified party under this Section 4 of
notice of the commencement of any action (including any governmental action),
such indemnified party shall, is a claim in respect thereof is to be made
against any indemnifying party under this Section 4, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent that the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the
indemnified party and the indemnifying party(s); provided, however, that an
indemnified party shall retain the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party(s), if representation of
such indemnified party by the counsel retained by the indemnifying party(s)
would be inappropriate due to actual or potential differing interests between
such indemnified party and any other party(s) represented by such counsel in
such proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
4, but the omission to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 4.
5. With a view to making available to each Stockholder the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Shares to the public without registration under the Securities Act, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are defined in the Commission's Rule 144 or any similar or analogous rule
promulgated under the Securities Act, for so long as the Company's Common Stock
continues to be registered under Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act");
(b) File with the Commission, in a timely manner, all reports
and other documents required to be filed by the Company under the Exchange Act;
and
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<PAGE> 6
(c) So long as any Stockholder owns any Shares, furnish to
such Stockholder forthwith upon request: (i) a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 and of the
Exchange Act; (ii) a copy of the most recent annual or quarterly report of the
Company; and (iii) any such other reports and documents which have publicly been
made available by the Company as the Stockholder may reasonably request in
availing itself of any rule or regulation of the Commission allowing it to sell
any of the Shares without registration under the Securities Act.
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<PAGE> 7
6. (a) Each of the parties hereto shall execute and deliver such other
and further documents and instruments, and take such other and further actions,
as may be reasonably requested of them for the implementation and consummation
of this Agreement and the transactions herein contemplated.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto, and the heirs, personal representatives,
successors and assigns of all of them, but shall not confer, expressly or by
implication, any rights or remedies upon any other party.
(c) This Agreement is made and shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Delaware. Should any provision of this Agreement be rendered void,
invalid or unenforceable by any court for any reason, such invalidity or
unenforceability shall not void or render invalid or unenforceable any other
provisions of this Agreement.
(d) All notices, requests or demands and other communications
hereunder must be in writing and shall be deemed to have been duly made if
personally delivered or mailed, postage prepaid, to the parties as follows:
If to the Company, to: Ronald Maas
TouchStone Software Corporation
2124 Main Street
Huntington Beach, CA 92648
If to any Stockholder, in care of: Pierre Narath
c/o Unicore Software, Inc.
1538 Turnpike Street
North Andover, MA 01845
Any party hereto may change its address by written notice to
the other party given in accordance with this subparagraph 5(d).
(e) This Agreement, together with the Acquisition Agreement
and the other exhibits attached thereto, contain the entire agreement between
the parties and supersede all prior agreements, understandings and writings
between the parties with respect to the subject matter hereof and thereof. Each
party hereto acknowledges that no representations, inducements, promises or
agreements, oral or otherwise, have been made by any party, or anyone acting
with authority on behalf of any party, which are not embodied herein or in an
exhibit hereto, and that no other agreement, statement or promise may be relied
upon or shall be valid or binding. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated orally. This Agreement may be
amended or any term hereof may be changed, waived, discharged or terminated by
an agreement in writing signed by all parties hereto.
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<PAGE> 8
(f) The captions and headings used herein are for convenience
only and shall not be construed as a part of this Agreement.
(g) In the event of any litigation between the parties hereto,
the non-prevailing party(s) shall pay the reasonable expenses, including the
attorneys' fees, of the prevailing party(s) in connection therewith.
(h) This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which taken together shall
constitute but one and the same document.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
"The Company"
TOUCHSTONE SOFTWARE CORPORATION
By:
-----------------------------
Title:
-----------------------------
"Stockholders"
-----------------------------
Pierre A. Narath
-----------------------------
Jason Raza
8
<PAGE> 1
EXHIBIT 99.A-5
Form 8-K
Agreement and Plan of Acquisition
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made
and entered into on March 5, 1999, by and among TOUCHSTONE SOFTWARE CORPORATION,
a Delaware corporation ("TouchStone"), Unicore Acquisition Corp., a newly formed
Delaware corporation and wholly-owned subsidiary of TouchStone ("Subsidiary"),
and Unicore Software, Inc., a Massachusetts corporation ("Unicore"). Subsidiary
and Unicore are sometimes hereinafter collectively referred to as the
"Constituent Corporations."
R E C I T A L S
A. Subsidiary is authorized to issue 1,000 shares of Common Stock,
$.001 par value ("Subsidiary Common Stock"), of which 1,000 shares have been
issued and are outstanding as of the date hereof, all of which are owned,
beneficially and of record, by TouchStone.
B. Unicore is authorized to issue 200,000 shares of Common Stock,
without par value ("Unicore Common Stock"), of which 100 shares have been issued
and are outstanding as of the date hereof.
C. TouchStone and the stockholders of Unicore have previously entered
into that certain Agreement and Plan of Acquisition dated as of March 5, 1999
(the "Acquisition Agreement"), for the purposes of setting forth all of the
terms and conditions upon which Unicore would be merged with and into Subsidiary
(the "Merger") in accordance with the provisions of the Delaware General
Corporation Law, the Massachusetts Business Corporations Law and the terms and
conditions hereinafter set forth.
D. The Board of Directors of each of TouchStone, Subsidiary and Unicore
has approved the Merger and the transactions contemplated by this Agreement as
being in the best interests of each such corporation and their respective
stockholders, upon the terms and subject to the conditions set forth herein,
TouchStone, as the sole shareholder of Subsidiary has approved the Merger and
the transactions contemplated by this Agreement, and the two shareholders of
Unicore have approved the Merger and the transactions contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements contained herein, and in accordance with the
applicable provisions of the Delaware General Corporations Law and the
Massachusetts Business Corporations Law, the parties hereto covenant and agree
as follows:
1
<PAGE> 2
ARTICLE I
THE MERGER, THE SURVIVING CORPORATION
AND THE EFFECTIVE DATE
1.1 As soon as practicable following the fulfillment (or waiver, to the
extent permitted therein) of the conditions specified in Article IV hereof,
Unicore shall merge with and into Subsidiary (the "Merger"), with Subsidiary to
be the surviving corporation in the Merger.
1.2 The Merger shall occur and be effective at the time and on the date
that this Agreement, having been duly executed and acknowledged, together with
any and all other necessary documents and instruments, is filed with the
Secretary of State of Delaware and the Articles of Merger entered into by the
Constituent Corporations are filed with the Secretary of State of the
Commonwealth of Massachusetts. The date on which the Merger occurs and becomes
effective is hereby defined to be and is hereinafter referred to as the
"Effective Date" and the time of such effectiveness is hereby defined to be and
is hereinafter referred to as the "Effective Time."
1.3 Subsidiary, as the surviving corporation in the Merger (hereinafter
as such referred to as the "Surviving Corporation"), shall continue its
corporate existence under the laws of the State of Delaware and shall continue
to conduct the business and operations previously conducted by both of the
Constituent Corporations. On the Effective Date, the separate existence and
corporate organization of Unicore, except insofar as it may be continued by
operation of law, shall be terminated and cease.
ARTICLE II
ARTICLES OF INCORPORATION, BYLAWS,
AND DIRECTORS OF THE SURVIVING CORPORATION
2.1 Upon filing of this Agreement with the Delaware Secretary of State,
the Certificate of Incorporation of Subsidiary as in effect immediately before
the Effective Time shall be amended to change the corporate name of Subsidiary
to "Unicore Software, Inc.", and the Certificate of Incorporation of Subsidiary,
as so amended, shall be the Certificate of Incorporation of the Surviving
Corporation until amended or repealed in accordance with the provisions thereof
and of applicable law.
2.2 The Bylaws of Subsidiary as in effect immediately prior to the
Effective Date shall be the Bylaws of the Surviving Corporation, until amended
or repealed in accordance with applicable law, the Articles of Incorporation of
the Surviving Corporation or such Bylaws.
2.3 There shall be three (3) directors of the Surviving Corporation
from and after the Effective Date (until changed in accordance with applicable
law and the Articles of Incorporation and Bylaws of the Surviving Corporation),
who shall be Pierre Narath, Larry Dingus and Ron Maas.
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<PAGE> 3
ARTICLE III
TREATMENT OF SHARES OF EACH OF THE
CONSTITUENT CORPORATIONS
3.1 On the Effective Date:
(a) Each share of Unicore Common Stock outstanding immediately
prior to the Merger shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted automatically into and become the right
to receive the following:
(i) From and after the Effective time, the sum of
$12,050 in cash; and
(ii) Prior to the close of business on the date on
which the Annual Meeting of the stockholders of TouchStone is held as provided
in Section 8.5 of the Acquisition Agreement, the sum of $33,500, as follows:
(A) By issuance and delivery of an aggregate
of 33,500 shares of the authorized but previously unissued Common Stock of
TouchStone (the "TouchStone Common Stock"), provided that the stockholders of
TouchStone have approved the issuance and delivery of the TouchStone Common
Stock at the Annual Meeting;
(B) By payment in cash, by wire transfer or
certified or cashier's check or checks, in the event that the stockholders of
TouchStone do not approve the issuance and delivery of the TouchStone Common
Stock at the Annual Meeting; or
(C) By issuance and delivery of an aggregate
of 33,500 shares of the authorized but previously unissued Common Stock of
TouchStone even if the stockholders of TouchStone do not approve the issuance
and delivery of TouchStone Common Stock at the Annual Meeting in the
circumstances described in Section 8.5(f) of the Acquisition Agreement.
(b) All options, warrants and other rights to purchase shares
of Unicore's Common Stock outstanding immediately prior to the Merger shall be
canceled and retired, and all rights in respect thereof shall cease to exist.
(c) All shares of Unicore's Common Stock owned by TouchStone
immediately prior to the Effective Time, if any, shall be canceled and retired,
and all rights in respect thereof shall cease to exist.
(d) Each share of Common Stock of Subsidiary issued and
outstanding immediately prior to the Closing shall be converted, by virtue of
the Merger and without any action on the part of the holder thereof, into one
share of Common Stock of the Surviving Corporation.
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<PAGE> 4
3.2 After the Effective Date, certificates formerly representing shares
of Unicore's Common Stock shall be deemed for all purposes to evidence solely
the right to receive, without interest thereon, the cash and/or shares of
TouchStone's Common Stock which the holders thereof have the right to receive
pursuant to the provisions of Section 3.1(a) above less, in each case, the
amount of any required withholding taxes.
3.3 Each Unicore shareholder, if any, who becomes entitled, pursuant to
the provisions of Massachusetts law, to the payment in cash of the "fair market
value" of such holders shares of Unicore Common Stock ("Perfected Dissenting
Shares"), shall receive payment therefor from TouchStone, but only after the
value thereof shall have been agreed upon or finally determined pursuant to such
provisions. Perfected Dissenting Shares acquired by TouchStone, if any, shall be
canceled.
ARTICLE IV
DEFERRAL, TERMINATION AND AMENDMENT
4.1 Consummation of the Merger may be deferred by agreement of the
respective Boards of Directors of each of the Constituent Corporation for a
reasonable period of time if it is determined that deferral would be in the best
interests of the respective shareholders of the parties.
4.2 This Agreement may be terminated as provided in the Acquisition
Agreement at any time prior to the Effective Time. In the event of such
termination, this Agreement shall become wholly void and of no effect, and there
shall be no liability on the part of TouchStone, Subsidiary or Unicore, or the
Board of Directors or stockholders of any of them, except as set forth in the
Acquisition Agreement and as provided in Section 4.3 hereof.
4.3 If the Merger becomes effective, the Surviving Corporation shall
assume and pay all expenses in connection therewith not theretofore paid by the
respective parties. If for any reason the Merger shall not become effective, the
respective expenses of each party incurred in connection with all the
proceedings taken in respect of this Agreement or relating thereto shall be paid
in accordance with the provisions of the Acquisition Agreement.
4.4 The parties hereto, by mutual consent of their respective Boards of
Directors, may amend, modify or supplement this Agreement in such matter as may
be agreed upon by them in writing at any time before the Effective Time;
provided, however, that no such amendment, modification or supplement not
adopted and approved by the shareholders of Unicore shall affect the rights of
such shareholders or change any of the principal terms of this Agreement.
4
<PAGE> 5
ARTICLE V
TRANSFER OF ASSETS AND LIABILITIES
5.1 On the Effective Date, the rights, privileges, powers and
franchises, both of a public as well as a private nature, of each of the
Constituent Corporations shall be vested in and possessed by the Surviving
Corporation, subject to all of the disabilities, duties and restrictions of or
upon each of the Constituent Corporations; and all rights, privileges, powers
and franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, of each of the Constituent Corporations, and all debts due
to each of the Constituent Corporations on whatever account, and all things in
action or belonging to each of the Constituent Corporations shall be transferred
to and vested in the Surviving Corporation; and all property, rights,
privileges, powers and franchises, and all and every other interest, shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the Constituent Corporations, and the title to any real estate vested by deed
or otherwise in either of the Constituent Corporations shall not revert or be in
any way impaired by reason of the Merger; provided, however, that the
liabilities of the Constituent Corporations and of their shareholders,
directors, and officers shall not be affected and all rights of creditors and
all liens upon any property of either of the Constituent Corporations shall be
preserved unimpaired, and any claim existing or action or proceeding pending by
or against either of the Constituent Corporations may be prosecuted to judgment
as if the Merger had not taken place except as they may be modified with the
consent of such creditors, and all debts, liabilities and duties of each of the
Constituent Corporations shall attach to the Surviving Corporation, and may be
enforced against it to the same extent as if such debts, liabilities and duties
had been incurred or contracted by it.
5.2 The parties hereto agree that, from time to time and as when
requested by the Surviving Corporation, or by its successors and assigns, to the
extent permitted by law, the officers and directors of Subsidiary and of the
Surviving Corporation are fully authorized in the name of Subsidiary or
otherwise to execute and deliver all such deeds, assignments, confirmations,
assurances and other instruments and to take or cause to be taken all such
further action as the Surviving Corporation may deem necessary or desirable in
order to vest, perfect, confirm in or assure the Surviving Corporation title to
and possession of all said property, rights, privileges, powers and franchises
and otherwise to carry out the intent and purposes of this Agreement.
5
<PAGE> 6
ARTICLE VI
MISCELLANEOUS
For the convenience of the parties and to facilitate any filing and
recording of this Agreement, any number of counterparts hereof may be executed,
each of which shall be deemed to be an original of this Agreement but all of
which together shall constitute one and the same instrument.
This Agreement and the legal relations between the parties hereto shall
be governed by and construed in accordance with the laws of the State of
Delaware except to the extent that the laws of the Commonwealth of Massachusetts
apply.
IN WITNESS WHEREOF, the parties to this Agreement, pursuant to the
approval and authority duly given by resolutions adopted by their respective
Boards of Directors have caused this Agreement to be executed as an instrument
under seal by the duly authorized officers of each party hereto, all as of the
day and year first above written.
TOUCHSTONE SOFTWARE CORPORATION
By:
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Title:
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By:
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Title:
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UNICORE ACQUISITION CORP.
By:
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Title:
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By:
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Title:
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UNICORE SOFTWARE, INC.
By:
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Title:
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By:
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Title:
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6
<PAGE> 1
EXHIBIT 99.B
Form 8-K
TOUCHSTONE SOFTWARE CORPORATION
[TOUCHSTONE SOFTWARE 2124 MAIN ST. 1538 TURNPIKE STREET
CORPORATION LOGO] HUNTINGTON BEACH, CA 92648 NORTH ANDOVER, MA 01845
TRADED: Nasdaq NMS: TSSW
<TABLE>
<S> <C> <C> <C>
AT THE COMPANY:
PIERRE A. NARATH RAY NORBERTE RON MAAS RICH WEST
PRESIDENT AND CEO INVESTOR RELATIONS EXEC. VICE PRESIDENT MEDIA RELATIONS
(978) 686-6468 (714) 969-7746 (714) 969-7746 (978)686-6468
</TABLE>
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
MARCH 10, 1999
TOUCHSTONE SOFTWARE COMPLETES $4.5 MILLION ACQUISITION OF
UNICORE SOFTWARE, INC.
COMBINED COMPANY EXPECTS TO BECOME AGGRESSIVE LEADER IN DIAGNOSTIC
INNOVATIONS AND SYSTEM MANAGEMENT SOFTWARE
HUNTINGTON BEACH, CA, MARCH 10, 1999 TouchStone Software Corporation (Nasdaq
NMS: TSSW) today announced the completion of the acquisition of
Massachusetts-based Unicore Software, Inc. ("Unicore") a privately-held leading
BIOS upgrade provider. TouchStone has acquired all of the issued and outstanding
capital stock of Unicore for a total purchase price of $4,555,000. Of this sum,
$1,205,000 was paid in cash at the closing. The balance of $3,350,000 is
expected to be paid in TouchStone Common Stock immediately following
TouchStone's 1999 Annual Meeting of Stockholders to be held on or before July
31, 1999.
"The completion of the Unicore acquisition, which is expected to
immediately improve TouchStone's bottom line, provides the ability to resource
nearly 10 years of aggressive sales experience in both direct and OEM channels,"
said Pierre Narath, President and Chief Executive Officer of TouchStone Software
Corporation.
more
<PAGE> 2
"This acquisition also reflects TouchStone's continued efforts to lower
the overall cost of PC ownership while enabling users the ability to effectively
and easily use complex technologies. Unicore also possesses extensive
engineering resources and market-leading low-level PC diagnostic tools. Our
immediate goals will be to capitalize on e-commerce opportunities with the
development of a TouchStone e-commerce webstore as well as intensified efforts
in research and development of diagnostics for the Microsoft Windows NT
platform. We expect the combined Company to achieve both operational and
financial success, as we leverage TouchStone's brand recognition and strong
product lines and Unicore's BIOS upgrade expertise."
At the Annual Meeting, in accordance with the corporate governance
rules for continued listing of TouchStone's Common Stock on Nasdaq, the
stockholders of TouchStone will be asked to approve the issuance of 3,350,000
shares of the Company's Common Stock at the rate of $1.00 per share as payment
of the balance of the purchase price for Unicore. If the stockholders do not
approve the issuance of the Common Stock, it is anticipated that the balance of
the purchase price would be paid in cash. However, the stockholders of Unicore
retain the right to elect to receive TouchStone Common Stock, in lieu of cash,
even if the stockholders do not approve such issuance.
In connection with the acquisition, the two stockholders of Unicore,
Pierre A. Narath and Jason K. Raza, have each entered a specified 3-year
employment agreement with TouchStone. Each will receive "piggy-back registration
rights" with respect to all shares of TouchStone's Common Stock that will be
received for payment of the purchase price for Unicore. Mr. Narath serves as
President and Chief Executive Officer of TouchStone, and Mr. Raza will serve as
Vice-President. Assuming that the balance of the purchase price for Unicore were
paid in shares of TouchStone's Common Stock, Mr. Narath would own 2,805,000
shares, including shares he previously purchased, or approximately 25%, of the
TouchStone Common Stock outstanding immediately following the acquisition.
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<PAGE> 3
Unicore Software, Inc. Financial Snapshot (unaudited)
<TABLE>
<CAPTION>
1998 1997 Change
---- ---- ------
<S> <C> <C> <C>
Revenue $3,264,000 $2,411,000 35%
Net income $ 417,000 $ 197,000 54%
</TABLE>
TouchStone Software Corporation is a leading developer of innovative
software designed to help people use complex technologies. The company's
products, which include CheckIt 98, CheckIt 98 Diagnostic Suite, CheckIt
NetOptimizer and FastMove!, are distributed worldwide through the retail, VAR,
distributor, direct and OEM sales channels. TouchStone has offices located at
1538 Turnpike Street, North Andover, MA, 01845 and 2124 Main Street, Huntington
Beach, CA 92648, with a branch office in Munich, Germany. Additional information
about TouchStone Software is available at www.touchstonesoftware.com.
Unicore Software, Inc. is a leading provider of system management
software which includes BIOS upgrades, PC Diagnostics and Year 2000 Solutions.
Unicore's customers consists of a majority of Fortune 500 corporations,
government agencies, and major educational/financial institutions. Prior to the
announcement of the acquisition, Unicore was a wholly owned subsidiary of
Phoenix Technologies LTD/Award Software (Nasdaq NMS: PTEC). Information on
Unicore Software, Inc. and all of their products is available at www.unicore.com
(Note: This release contains certain forward-looking statements regarding
product development schedules, sales of products in the future, return to
profitability, financial position and growth plans. Such statements are subject
to risks and uncertainties. Actual results could vary materially from these
statements or current trends. Investors should refer to TouchStone's 1998 Form
10-KSB and Form 8KSB, to be released shortly, for a further description of the
Unicore acquisition and various risk factors.)
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