<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
BROOKTROUT TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Name of issuer)
COMMON STOCK, par value $.01 per share
- --------------------------------------------------------------------------------
(Title of class of securities)
114580103
-------------------------------------------------------
(CUSIP number)
Beverly Fox
c/o Technically Speaking, Incorporated
333 Turnpike Road
Southborough, MA 01772
(508) 229-7777
- --------------------------------------------------------------------------------
(Name, address and telephone number of person authorized to receive notices and
communications)
May 29, 1996
-------------------------------------------------------
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement. /X/ (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
(Continued on the following pages)
(Page 1 of 7 Pages)
- --------------------------------
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 or otherwise subject to the liabilities of that section of the Act but
shall be subject to all other provisions of the Act (however, see the Notes).
<PAGE> 2
SCHEDULE 13D
- ----------------------------- ------------------------------
CUSIP NO. 114 580 10 3 Page 2 of 7 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Andrew Fox
###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 163,039
OWNED BY EACH ------------------------------------------------------------
REPORTING 8 SHARED VOTING POWER
PERSON
WITH None
------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
163,039
------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
None
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
326,078 shares of Common Stock
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.00%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
IN
================================================================================
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
SCHEDULE 13D
- ----------------------------- ------------------------------
CUSIP NO. 114 580 10 3 Page 3 of 7 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Beverly Fox
###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 163,039
OWNED BY EACH ------------------------------------------------------------
REPORTING 8 SHARED VOTING POWER
PERSON
WITH None
------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
163,039
------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
None
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
326,078 Shares of Common Stock
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.00%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
IN
================================================================================
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 4
SCHEDULE 13D
- ----------------------------- ------------------------------
CUSIP No. 114 580 10 3 Page 4 of 7 Pages
- ----------------------------- ------------------------------
ITEM 1. SECURITY AND ISSUER.
-------------------
The security to which this statement relates is the common stock, par
value $.01 per share (the "Common Stock" or the "Securities"), of Brooktrout
Technology, Inc., a Massachusetts corporation (the "Issuer" or the "Company").
The principal executive offices of the Issuer are located at 410 First Avenue,
Needham, MA 02192.
ITEM 2. IDENTITY AND BACKGROUND.
-----------------------
<TABLE>
<S> <C> <C>
(a) Names: Andrew Fox Beverly Fox
-----
(b) Residential address 699 Grove Street 699 Grove Street
------------------- Framingham, MA 01701 Framingham, MA 01701
(c) Principal Occupation: President Treasurer
-------------------- Technically Speaking Technically Speaking
Incorporated Incorporated
333 Turnpike Rd. 333 Turnpike Rd.
Southborough, MA 01772 Southborough, MA 01772
</TABLE>
Technically Speaking, Incorporated ("TSI") is engaged in the business
of developing software tools for interoffice voice messaging.
(d) and (e). During the last five years, neither Beverly Fox nor Andrew
Fox has been convicted in any criminal proceeding (excluding traffic violations
or similar misdemeanors) or has been a party to any civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violations with respect to
such laws.
(f) Andrew Fox and Beverly Fox are citizens of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
-------------------------------------------------
On May 29, 1996, the Company acquired TSI, a private company of which
Mr. Fox and Mrs. Fox were shareholders, officers and directors (the
"Acquisition"). Pursuant to the terms of the Amended and Restated Agreement and
Plan of Merger, dated May 29, 1996 attached hereto as EXHIBIT 1 (the "Merger
Agreement"), Brooktrout Acquisition Corp., a wholly-owned subsidiary of the
Company, merged with and into TSI. Following the Merger, TSI became a
wholly-owned subsidiary of the Company. Mr. and Mrs. Fox each received 4.65825
shares of the Common Stock of the Company for each share of TSI's Common Stock
upon surrender of certificates formerly representing the common stock of TSI.
ITEM 4. PURPOSE OF TRANSACTION.
----------------------
Andrew and Beverly Fox hold the Securities for investment purposes.
They acquired the securities in connection with the Acquisition.
The reporting persons intend to review on a continuing basis their
investment in the Company and the Company's business, prospects and financial
condition. Based on such continuing review, alternative investment opportunities
available to the reporting persons and
<PAGE> 5
- ----------------------------- ------------------------------
CUSIP No. 114 580 10 3 Page 5 of 7 Pages
- ----------------------------- ------------------------------
all other factors deemed relevant (including without limitation, the market for
and price of the Common Stock of the Company, offers for shares of the Common
Stock of the Company, general economic conditions and other future
developments), the reporting persons may decide to increase or decrease their
equity interest in the Company by acquiring additional shares of Common Stock of
the Company or by disposing of all or a portion of the Securities.
Neither Andrew Fox nor Beverly Fox has any present plan or proposal
which relates to or would result in:
(a) the acquisition of additional securities of the Company, or the
disposition of securities of the Company;
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company or any of
its subsidiaries;
(c) a sale or transfer of a material amount of assets of the Company
or any of its subsidiaries;
(d) any change in the present board of directors or management of
the Company, including any plans or proposals to change the
number or term of directors or to fill any existing vacancies on
the board;
(e) any material change in the present capitalization or dividend
policy of the Company;
(f) any other material change in the Company's business or corporate
structure;
(g) changes in the Company's charter, bylaws or instruments
corresponding thereto or other actions which may impede the
acquisition of control of the Company by any person;
(h) a class of securities of the Company to be delisted from a
national securities exchange or to cease to be authorized to be
quoted in the inter-dealer quotation system of a registered
national securities association;
(i) a class of equity securities of the Company becoming eligible
for termination of registration pursuant to Section 12(g)(4) of
the Exchange Act; or
(j) any action similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF ISSUER.
--------------------------------
(a) Each of Andrew Fox and Beverly Fox is the record holder of
163,039 shares of Common Stock. As husband and wife, each of Andrew Fox and
Beverly Fox is the beneficial owner of 326,078 shares of Common Stock
representing approximately 5.0% of the number of shares of Common Stock of the
Issuer currently outstanding.
(b) Andrew Fox has sole voting and dispositive power with respect to
the 163,039 shares of Common Stock of the Issuer that he holds.
Beverly Fox has sole voting and dispositive power with respect
to the 163,039 shares of Common Stock of the Issuer that she holds.
(c) Except for the purchase of the Securities reported above,
Neither Andrew Fox nor Beverly Fox has effected any transactions in the Common
Stock during the past 60 days.
<PAGE> 6
- ----------------------------- ------------------------------
CUSIP No. 114 580 10 3 Page 6 of 7 Pages
- ----------------------------- ------------------------------
(d) Ten percent of the shares owned by Beverly Fox and ten percent
of the shares owned by Andrew Fox are subject to an Escrow Agreement as more
fully discribed in EXHIBIT 2 attached hereto pursuant to which the Escrow Agent
may direct the proceeds of the sale of stock.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
---------------------------------------------------------------------
TO SECURITIES OF THE ISSUER.
---------------------------
Andrew and Beverly Fox are party to the Merger Agreement attached
hereto as EXHIBIT 1, pursuant to which they have certain registration rights and
are subject to certain restrictions on transfer, all as more fully described in
Sections 3 and 8 of te Merger Agreement attached as EXHIBIT 1 hereto.
Pursuant to the Merger Agreement attached hereto, ten percent of the
shares of the Company are held by an Escrow Agent pursuant to an Escrow
Agreement dated May, 29, 1996, attached hereto as EXHIBIT 2. Under the escrow
agreement, the shares and any proceeds or rights received in exchange for such
shares remain part of the Escrow Fund. For a period of up to one year after the
date of the closing of the Acquisition, the Company may make a claim against the
Escrow Fund for indemnification, all as more fully described in EXHIBITS 1 and 2
attached hereto.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
--------------------------------
The following documents are filed as exhibits to this statement:
Exhibit 1 Amended and Restated Agreement and Plan of Merger by and
--------- among Brooktrout Technology, Inc., Technically Speaking,
Incorporated and the stockholders of Technically
Speaking, Incorporated dated May 29, 1996.
Exhibit 2 Escrow Agreement by and among Brooktrout Technology,
--------- Inc., Andrew Fox, Beverly Fox, Robert Friedman and Fleet
National Bank, dated May 29, 1996.
<PAGE> 7
SIGNATURE
- ----------------------------- ------------------------------
CUSIP No. 114 580 10 3 Page 7 of 7 Pages
- ----------------------------- ------------------------------
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: June 7 , 1996 /s/ Andrew Fox
----------------------
Name: Andrew Fox
Dated: June 7 , 1996 /s/ Beverly Fox
----------------------
Name: Beverly Fox
<PAGE> 8
EXHIBIT INDEX
Exhibit 1 Amended and Restated Agreement and Plan of Merger by and
--------- among Brooktrout Technology, Inc., Technically Speaking,
Incorporated and the stockholders of Technically
Speaking, Incorporated dated May 29, 1996.
Exhibit 2 Escrow Agreement by and among Brooktrout Technology,
--------- Inc., Andrew Fox, Beverly Fox, Robert Friedman and Fleet
National Bank, dated May 29, 1996.
<PAGE> 1
Exhibit 1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
by and among
BROOKTROUT TECHNOLOGY, INC.
as Buyer
BROOKTROUT ACQUISITION CORP.
THE STOCKHOLDERS OF TECHNICALLY SPEAKING, INC.
as Sellers
and
TECHNICALLY SPEAKING, INC.
May 29, 1996
<PAGE> 2
<TABLE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
<CAPTION>
INDEX
-----
Page
----
<S> <C> <C> <C>
SECTION 1. THE MERGER.......................................................1
- --------- ----------
1.1 The Merger.......................................................1
----------
1.2 Conversion of Company Shares; Escrow.............................2
------------------------------------
1.3 Time and Place of Closing........................................3
-------------------------
1.4 Sellers' Representative..........................................3
-----------------------
1.5 Further Assurances...............................................4
------------------
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS........5
- --------- ---------------------------------------------------------
2.1 Making of Representations and Warranties.........................5
----------------------------------------
2.2 Organization and Qualifications of the Company...................5
----------------------------------------------
2.3 Capital Stock of the Company; Beneficial Ownership...............5
--------------------------------------------------
2.4 No Subsidiaries..................................................6
---------------
2.5 Authority of the Company.........................................6
------------------------
2.6 Real and Personal Property.......................................7
--------------------------
2.7 Financial Statements.............................................8
--------------------
2.8 Taxes............................................................9
-----
2.9 Collectibility of Accounts Receivable...........................10
-------------------------------------
2.10 Inventories.....................................................10
-----------
2.11 Absence of Certain Changes......................................11
--------------------------
2.12 Ordinary Course.................................................13
---------------
2.13 Banking Relations...............................................13
-----------------
2.14 Intellectual Property...........................................13
---------------------
2.15 Contracts.......................................................15
---------
2.16 Litigation......................................................16
----------
2.17 Compliance with Laws............................................16
--------------------
2.18 Insurance.......................................................17
---------
2.19 Warranty or Other Claims........................................17
------------------------
2.20 Powers of Attorney..............................................17
------------------
2.21 Finder's Fee....................................................17
------------
2.22 Permits; Burdensome Agreements..................................17
------------------------------
2.23 Corporate Records; Copies of Documents..........................18
--------------------------------------
2.24 Transactions with Interested Persons............................18
------------------------------------
2.25 Employee Benefit Programs.......................................18
-------------------------
2.26 Environmental Matters...........................................20
---------------------
2.27 List of Directors and Officers..................................21
------------------------------
2.28 Disclosure......................................................21
----------
2.30 Backlog.........................................................21
-------
2.31 Employees; Labor Matters........................................22
------------------------
2.32 Customers, Distributors and Suppliers...........................22
-------------------------------------
2.33 Transfer of Shares..............................................23
------------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
2.34 Stock Repurchase................................................23
----------------
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLERS.......................23
- --------- -----------------------------------------
3.1 Company Shares..................................................23
--------------
3.2 Authority.......................................................23
---------
3.3 Finder's Fee....................................................24
------------
3.4 Agreements......................................................24
----------
SECTION 4. COVENANTS OF THE COMPANY AND THE SELLERS........................25
- --------- ----------------------------------------
4.1 Making of Covenants and Agreements..............................25
----------------------------------
4.2 Conduct of Business.............................................25
-------------------
4.3 Authorization from Others.......................................28
-------------------------
4.4 Notice of Default...............................................28
-----------------
4.5 Consummation of Agreement.......................................28
-------------------------
4.6 Access; Cooperation of the Company and Sellers..................28
----------------------------------------------
4.7 No Solicitation of Other Offers.................................29
-------------------------------
4.8 Confidentiality.................................................29
---------------
4.10 Tax Returns.....................................................29
-----------
4.11 Pooling of Interests; Tax-free Reorganization...................29
---------------------------------------------
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER AND ACQUISITION
- --------- -------------------------------------------------------
SUBSIDIARY......................................................30
----------
5.1 Making of Representations and Warranties........................30
----------------------------------------
5.2 Organization of Buyer and Acquisition Subsidiary................30
------------------------------------------------
5.3 Authority of Buyer and Acquisition Subsidiary...................30
---------------------------------------------
5.4 Litigation......................................................31
----------
5.5 Finder's Fee....................................................31
------------
SECTION 6. COVENANTS OF BUYER..............................................32
- --------- ------------------
6.1 Making of Covenants and Agreement...............................32
---------------------------------
6.2 Confidentiality.................................................32
---------------
SECTION 7. CONDITIONS......................................................33
- --------- ----------
7.1 Conditions to the Obligations of Buyer..........................33
--------------------------------------
SECTION 8. REGISTRATION RIGHTS.............................................36
- --------- -------------------
8.1 Registration of Brooktrout Shares...............................36
---------------------------------
8.2 Sale of Brooktrout Shares by Seller.............................36
-----------------------------------
8.3 Registration Expenses...........................................37
---------------------
8.4 Piggyback Registrations.........................................37
-----------------------
8.5 Indemnification.................................................38
---------------
8.6 Additional Obligation of Holders of Registrable Securities......39
----------------------------------------------------------
8.7 Additional Obligations of the Buyer.............................39
-----------------------------------
8.8 Reports Under the Securities Exchange Act of 1934...............40
-------------------------------------------------
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
SECTION 9. TERMINATION OF AGREEMENT; ABANDONMENT OF MERGER; RIGHTS
- --------- -------------------------------------------------------
TO PROCEED......................................................41
----------
9.1 Termination.....................................................41
-----------
9.2 Effect of Termination...........................................41
---------------------
9.3 Right to Proceed Or Defer Closing...............................41
---------------------------------
SECTION 10. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING....................42
- ---------- --------------------------------------------
10.1 Survival of Warranties..........................................42
----------------------
SECTION 11. INDEMNIFICATION.................................................42
- ---------- ---------------
11.1 Indemnification by the Sellers..................................42
------------------------------
11.2 Indemnification by Buyer........................................43
------------------------
11.3 Notice; Defense of Claims.......................................43
-------------------------
SECTION 12. MISCELLANEOUS...................................................45
- ---------- -------------
12.1 Fees and Expenses...............................................45
-----------------
12.2 Governing Law...................................................45
-------------
12.3 Notices.........................................................45
-------
12.4 Entire Agreement................................................46
----------------
12.5 Assignability; Binding Effect...................................47
-----------------------------
12.6 Captions and Gender.............................................47
-------------------
12.7 Execution in Counterparts.......................................47
-------------------------
12.8 Amendments......................................................47
----------
12.9 Publicity and Disclosures.......................................47
-------------------------
12.10 Consent to Jurisdiction.........................................47
-----------------------
12.11 Specific Performance............................................47
--------------------
12.13 Company's Tax Returns...........................................48
---------------------
12.14 Payment of Tax Liabilities Dividends............................49
------------------------------------
12.15 Date of Agreement ..............................................50
-----------------
</TABLE>
(iii)
<PAGE> 5
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
-------------------------------------------------
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, AN Agreement was entered into as of March 8, 1996, pursuant to
Section 78 of Chapter 156B of the Massachusetts Business Corporation Law, by and
among Brooktrout Technology, Inc., a Massachusetts corporation ("Buyer"),
Brooktrout Acquisition Corp., a Massachusetts corporation and wholly-owned
subsidiary of Buyer (the "Acquisition Subsidiary"), Technically Speaking, Inc.,
a Massachusetts corporation (the "Company"), and Andrew Fox, Beverly Fox and
Robert Friedman (collectively referred to as the "Sellers" and individually as a
"Seller").
WHEREAS, the Sellers own of record and beneficially all of the issued
and outstanding capital stock of the Company, consisting of 100,000 shares of
the Company's Series A Common Stock, no par value per share (said shares being
referred to herein as the "Company Shares");
WHEREAS, the Sellers desire to sell the Company to Buyer, and Buyer
desires to acquire the Company;
WHEREAS, it is intended that the transactions effected by this
Agreement (the "Acquisition") qualify as (i) a "pooling of interests" under
generally accepted accounting principles; and (ii) a tax-free reorganization
under the provisions of Sections 368(a) of the United States Internal Revenue
Code of 1986, as amended (the "Code");
WHEREAS, Buyer has formed the Acquisition Subsidiary for the purpose of
merging the Acquisition Subsidiary into the Company to effect the Acquisition
(the "Merger"); and
WHEREAS, in the event the Merger is consummated, (i) all options to
purchase the Company's Series B common stock, no par value per share, held by
the persons listed on EXHIBIT A hereto (collectively referred to as the
"Optionee-Sellers" and individually as an "Optionee-Seller") will become fully
vested and (ii) the Optionee-Sellers desire to exercise their options in full
and acquire all of the 2,040 shares of the Company's Series B Common Stock (said
shares being referred to herein as the "Option Shares");
NOW, THEREFORE, in order to consummate said Acquisition and in
consideration of the mutual agreements set forth herein, the parties hereto
agree to amend and restate the Agreement and Plan of Merger, effective as of May
29, 1996, as follows:
SECTION 1. THE MERGER.
- ---------------------------
1.1 THE MERGER. (a) In reliance upon the mutual representations and
warranties herein contained and made at the Closing (as defined in Section 1.3)
and subject to the satisfaction of all of the conditions contained herein, the
parties hereto agree to effect the
<PAGE> 6
Merger as provided herein. The Acquisition Subsidiary and the Company shall be
the constituent corporations to the Merger. The Merger shall be effective at the
time of the Closing or such later time as determined pursuant to the terms of
this Agreement (the "Effective Time"). At the Effective Time, the Acquisition
Subsidiary shall be merged with and into the Company in accordance with Section
78 of Chapter 156B of the Massachusetts Business Corporation Law, and the
Company shall be the surviving corporation in the Merger (the "Surviving
Corporation"). The identity, existence, rights, privileges, powers, franchises,
properties and assets of the Company shall continue unaffected and unimpaired by
the Merger. At the Effective Time, the identity and separate existence of the
Acquisition Subsidiary shall cease, the outstanding capital stock of the
Acquisition Subsidiary shall be canceled, and all of the rights, privileges,
powers, franchises, properties and assets of the Acquisition Subsidiary shall be
vested in the Surviving Corporation.
(b) The purposes of the Surviving Corporation shall be the
corporate purposes authorized for the Company immediately prior to the Effective
Time.
(c) The Surviving Corporation shall be authorized to issue the
same capital stock that the Company had authorized for issuance immediately
prior to the Effective Time, which consists of 200,000 shares of Class A Common
Stock, no par value per share, and 200,000 shares of Class B Common Stock, no
par value per share. Such Class A Common Stock and Class B Common Stock shall
have the same preferences, voting powers, qualifications, special and relative
rights and privileges as held by the Class A Common Stock and Class B Common
Stock of the Company immediately prior to the Effective Date.
(d) The Articles of Organization and Bylaws of the Company, as
amended and in effect immediately prior to the Effective Time, shall be the
Articles of Organization and Bylaws of the Surviving Corporation until
thereafter amended as provided by law.
(e) The directors and officers of the Surviving Corporation
shall be the incumbent directors and officers of the Company immediately prior
to the Effective Time. Such officers shall continue in office as officers of the
Surviving Corporation until their successors shall have been elected and
qualified or until their earlier resignation or removal.
(f) At the Effective Time, the stock books of the Acquisition
Subsidiary shall be permanently closed.
1.2 CONVERSION OF COMPANY SHARES; ESCROW. The parties hereto agree
that, upon consummation of the Merger at the Effective Time, (a) each Company
Share and Option Share shall automatically, without any further action on the
part of the Buyer or the Sellers, be converted into the right to receive 4.65825
duly authorized, validly issued, fully paid and non-assessable shares of common
stock, $.01 par value per share, of Buyer ("Common Stock"). The 475,328 shares
of Buyer's Common Stock resulting from this conversion (the "Brooktrout Shares")
shall be allocated among the Sellers and such other stockholders of the Company
as set forth on EXHIBIT A hereof;
2
<PAGE> 7
(b) Sellers will immediately tender to Buyer all of the
certificates representing the Company Shares set forth on EXHIBIT A;
(c) Buyer will exchange such certificates for certificates
representing the Brooktrout Shares in the amounts set forth on EXHIBIT A, and
Buyer will deliver 90% of the Brooktrout Shares to Sellers; and
(d) Buyer will deposit with the Escrow Agent in accordance with
the terms of the Escrow Agreement (as hereinafter described) 10% of the
Brooktrout Shares (the "Escrowed Purchase Price").
1.3 TIME AND PLACE OF CLOSING. The closing of the Acquisition and
the Merger provided for in this Agreement (herein called the "Closing") shall be
held at the offices of Goodwin, Procter & Hoar, LLP at 53 State Street, Boston,
Massachusetts 02109 on May 29, 1996 or at such other place or an earlier or
later date or time as may be mutually agreed upon by the parties or established
pursuant to Section 9.3 hereof.
1.4 Sellers' Representative.
-----------------------
(a) In order to administer efficiently (i) the implementation of
the Agreement by the Sellers, (ii) the waiver of any condition to the
obligations of the Sellers to consummate the transactions contemplated hereby,
and (iii) the settlement of any dispute with respect to the Agreement, the
Sellers hereby designate Beverly Fox as their representative (the "Sellers'
Representative").
(b) The Sellers hereby authorize the Sellers' Representative (i)
to take all action necessary in connection with the implementation of the
Agreement on behalf of the Sellers, the waiver of any condition to the
obligations of the Sellers to consummate the transactions contemplated hereby,
or the settlement of any dispute, (ii) to give and receive all notices required
to be given under the Agreement and (iii) to take any and all additional action
as is contemplated to be taken by or on behalf of the Sellers by the terms of
this Agreement.
(c) In the event that the Sellers' Representative dies, becomes
legally incapacitated or resigns from such position, Andrew Fox shall fill such
vacancy and shall be deemed to be the Sellers' Representative for all purposes
of this Agreement; however, no change in the Sellers' Representative shall be
effective until Buyer is given notice of it by the Sellers.
(d) All decisions and actions by the Sellers' Representative
shall be binding upon all of the Sellers, and no Seller shall have the right to
object, dissent, protest or otherwise contest the same, in the absence of fraud,
gross negligence or willful misconduct of the Sellers' Representative.
3
<PAGE> 8
(e) By their execution of this Agreement, the Sellers agree
that:
(i) Buyer shall be able to rely conclusively on the
instructions and decisions of the Sellers' Representative as to any
actions required or permitted to be taken by the Sellers or the
Sellers' Representative hereunder, and no party hereunder shall have
any cause of action against Buyer for any action taken by Buyer in
reliance upon the instructions or decisions of the Sellers'
Representative;
(ii) all actions, decisions and instructions of the Sellers'
Representative shall be conclusive and binding upon all of the Sellers
and no Seller shall have any cause of action against the Sellers'
Representative for any action taken, decision made or instruction given
by the Sellers' Representative under this Agreement, except for fraud,
gross negligence or willful breach of this Agreement by the Sellers'
Representative;
(iii) the Sellers' Representative shall be deemed to fulfill
any fiduciary obligation to the Sellers so long as no Seller is
adversely affected by any action or failure to act of the Sellers'
Representative in a disproportionate measure compared to any other
Seller.
(iv) remedies available at law for any breach of the
provisions of this Section 1.4 are inadequate; therefore, Buyer shall
be entitled to temporary and permanent injunctive relief without the
necessity of proving damages if Buyer brings an action to enforce the
provisions of this Section 1.4; and
(v) the provisions of this Section 1.4 are independent and
severable, shall constitute an irrevocable power of attorney, coupled
with an interest and surviving death, granted by the Sellers to the
Sellers' Representative and shall be binding upon the executors, heirs,
legal representatives and successors of each Seller.
(f) All fees and expenses incurred by the Sellers'
Representative shall be paid by the Sellers.
1.5 FURTHER ASSURANCES. The Sellers from time to time after the
Closing at the request of Buyer and without further consideration shall execute
and deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably require to fully implement the provisions of this
Agreement. The Buyer from time to time after the Closing at the request of the
Sellers' Representative and without further consideration shall execute and
deliver further instruments of transfer and assignment and take such other
action as the Sellers' Representative may reasonably require to fully implement
the provisions of this Agreement.
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<PAGE> 9
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS.
- --------------------------------------------------------------------------
2.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material
inducement to Buyer to enter into this Agreement and consummate the transactions
contemplated hereby, the Company and each of the Sellers jointly and severally
hereby make to Buyer the representations and warranties contained in this
Section 2; PROVIDED, HOWEVER, that no Seller shall have any right of indemnity
or contribution from the Company with respect to any breach of representation or
warranty hereunder. The representations and warranties contained in this section
of this Article 2 are made as of the date of execution of this Agreement and are
qualified in their entirety by the corresponding portions of the Schedules
attached hereto.
2.2 ORGANIZATION AND QUALIFICATIONS OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts with full corporate power and authority to
own or lease its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business is currently
conducted or proposed to be conducted. The copies of the Company's Articles of
Organization, as amended to date, certified by the Massachusetts Secretary of
State, and of the Company's by-laws, as amended to date, certified by the
Company's Clerk, and heretofore delivered to Buyer's counsel, are complete and
correct, and no amendments thereto are pending. Except as disclosed in Schedule
2.2, the Company is not in violation of any term of its Articles of Organization
or By-laws. The Company is not required to be licensed or qualified to conduct
its business in any jurisdiction other than the Commonwealth of Massachusetts.
2.3 Capital Stock of the Company; Beneficial Ownership.
--------------------------------------------------
(a) The authorized capital stock of the Company consists of (a)
200,000 shares of Class A Common Stock, no par value per share, of which 100,000
shares are duly and validly issued, outstanding, fully paid and non-assessable
and of which 100,000 shares are authorized but unissued and (b) 200,000 shares
of Class B Common Stock, no par value per share, of which no shares are
outstanding and of which 200,000 shares are authorized but unissued. Except as
disclosed in Schedule 2.3(c), there are no outstanding options, warrants,
rights, commitments, preemptive rights or agreements of any kind for the
issuance or sale of, or outstanding securities convertible into, any additional
shares of capital stock of any class of the Company. None of the Company's
capital stock has been issued in violation of any federal or state law. Except
as set forth in the SCHEDULE 2.3 attached hereto, there are no voting trusts,
voting agreements, proxies or other agreements, instruments or undertakings with
respect to the voting of the Company Shares to which the Company or any of the
Sellers is a party.
(b) Each of the Sellers owns beneficially and of record the
Company Shares set forth opposite such Seller's name on Exhibit A hereto free
and clear of any liens, restrictions or encumbrances.
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(c) The Company has adopted a 1995 Stock Option Plan (the
"Option Plan") which provides for the issuance of up to 200,000 shares of Class
B Common Stock. As of the date hereof, options to purchase 2,040 shares of
Common Stock have been granted and are outstanding under the Option Plan to the
persons, in the amounts and at the exercise prices set forth in Exhibit A, and
no options have been exercised.
2.4 NO SUBSIDIARIES. The Company has no subsidiaries or investments
in any other corporation or business entity.
2.5 AUTHORITY OF THE COMPANY. The Company has full right, authority
and power to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by the Company pursuant to this
Agreement and to carry out the transactions contemplated hereby. The execution,
delivery and performance by the Company of this Agreement and each such other
agreement, document and instrument have been duly authorized by all necessary
action of the Company and no other action on the part of the Company or the
Sellers is required in connection therewith.
This Agreement and each agreement, document and instrument executed and
delivered by the Company pursuant to this Agreement constitutes, or when
executed and delivered will constitute, valid and binding obligations of the
Company enforceable in accordance with their terms. The execution, delivery and
performance by the Company of this Agreement and each such agreement, document
and instrument:
(i) does not and will not violate any provision of
the Articles of Organization or by-laws of the Company;
(ii) does not and will not violate any laws of the
United States, or any state or other jurisdiction applicable to the
Company or require the Company to obtain any approval, consent or
waiver of, or make any filing with, any person or entity (governmental
or otherwise) that has not been obtained or made; and
(iii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award to which the Company is a
party or by which the property of the Company is bound or affected, or
result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any of the
Company's assets or the Company Shares, except as specifically
identified on SCHEDULE 2.5.
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2.6 REAL AND PERSONAL PROPERTY.
--------------------------
(a) REAL PROPERTY. The Company owns no real property. All real
property which the Company leases is identified on the SCHEDULE 2.6(a) (the
"Leased Real Property").
(i) STATUS OF LEASES. All leases of Leased Real Property are
identified on SCHEDULE 2.6(a), and true and complete copies thereof
have been delivered to Buyer. Each of said leases has been duly
authorized and executed by the parties and is in full force and effect.
Except as disclosed on SCHEDULE 2.6(a), the Company is not in default
under any of said leases, nor has any event occurred which, with notice
or the passage of time, or both, would give rise to such a default. To
the Company's and the Sellers' knowledge, the other party to each of
said leases is not in default under any of said leases and there is no
event which, with notice or the passage of time, or both, would give
rise to such a default.
(ii) CONSENTS. Except as set forth in SCHEDULE 2.6(a), no
consent or approval is required with respect to the transactions
contemplated by this Agreement from the other parties to any lease of
Leased Real Property or from any regulatory authority, no filing with
any regulatory authority is required in connection therewith, and to
the extent that any such consents, approvals or filings are required,
the Company or the Sellers will obtain or complete them before the
Closing.
(iii) COMPLIANCE WITH THE LAW. The Company has not received
any notice from any governmental authority of any violation of any law,
ordinance, regulation, license, permit or authorization issued with
respect to the Leased Real Property that has not been heretofore
corrected and no such violation exists which could have a material
adverse affect on the operation or value of the Leased Real Property.
All improvements located on or constituting part of the Leased Real
Property and their use and operation by the Company were and are now in
compliance in all respects with all applicable laws, ordinances,
regulations, licenses, permits and authorizations, expect as set forth
in SCHEDULE 2.6(a). No approval or consent to the transactions
contemplated by this Agreement is required of any governmental
authority with jurisdiction over any aspect of the Leased Real Property
or its use or operations. The Company has not received any notice of
any real estate tax deficiency or assessment or is aware of any
proposed deficiency, claim or assessment with respect to any of the
Leased Real Property, or any pending or threatened condemnation
thereof.
(b) PERSONAL PROPERTY. A complete list containing a description
of the machinery and equipment of the Company that is reflected as capitalized
in the Base Balance Sheet (as hereinafter defined) is contained in SCHEDULE
2.6(b) hereto. Except as specifically disclosed in said Schedule or in the Base
Balance Sheet, the Company has good and marketable title to all of its personal
property; provided that no representation is made in this Section 2.6 with
respect to the Intellectual Property, which is addressed in Section 2.14. None
of such personal property or assets is subject to any mortgage, pledge, lien,
conditional sale
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agreement, security title, encumbrance or other charge except as specifically
disclosed in said Schedule or in the Base Balance Sheet, other than (i) liens
securing taxes or other governmental charges not yet due; (ii) deposits or
pledges made in connection with social security obligations; and (iii) liens of
carriers, warehousemen, mechanics and materialmen, less than 120 days old as to
obligations not yet due (collectively, "Permitted Encumbrances"). The Base
Balance Sheet reflects all personal property of the Company. Except as otherwise
specified in SCHEDULE 2.6(b) hereto, all leasehold improvements, furnishings,
machinery and equipment of the Company are in good repair, have been well
maintained, and substantially comply with all applicable laws, ordinances and
regulations, and such machinery and equipment is in good working order,
reasonable wear and tear excepted. Neither the Company nor any of the Sellers
knows of any pending or threatened change of any such law, ordinance or
regulation which could adversely affect the Company or its business.
2.7 FINANCIAL STATEMENTS.
(a) The Company has delivered to Buyer the following financial
statements, copies of which are attached hereto as SCHEDULE 2.7:
(i) Unaudited balance sheets of the Company for its fiscal
years ended on December 31, 1995 and 1994 and statements of income,
retained earnings and cash flows for the years then ended, including
any worksheets and other supporting documentation for each general
ledger account.
(ii) Unaudited balance sheets of the Company as of February
29, 1996 (herein the "Base Balance Sheet") and statements of income,
retained earnings and cash flows for the period then ended.
The Sellers have delivered to Buyer a certificate of the Company's President and
Chief Financial Officer dated as of the date hereof to the effect that said
financial statements have been prepared in accordance with generally accepted
accounting principles applied consistently during the periods covered thereby,
are complete and correct in all material respects and present fairly in all
material respects the financial condition of the Company at the dates of said
statements and the results of its operations for the periods covered thereby,
subject, in the case of the Base Balance Sheet, to normal year-end adjustments,
which shall not be material in amount.
(b) As of the date of the Base Balance Sheet, the Company has no
liabilities of any nature, whether accrued, absolute, contingent or otherwise,
asserted or unasserted, known or unknown (including without limitation,
liabilities as guarantor or otherwise with respect to obligations of others,
liabilities for taxes due or then accrued or to become due, or contingent or
potential liabilities relating to activities of the Company or the conduct of
its business prior to the date of the Base Balance Sheet regardless of whether
claims in respect thereof had been asserted as of such date), except liabilities
stated or adequately reserved against on the Base Balance Sheet, or reflected in
Schedules furnished to Buyer hereunder as
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<PAGE> 13
of the date hereof or immaterial liabilities incurred in the ordinary course of
business of the Company which are not required to be reflected in the Base
Balance Sheet or the notes thereto under generally accepted accounting
principles.
(c) As of the date hereof, the Company has not had any
liabilities of any nature, whether accrued, absolute, contingent or otherwise,
asserted or unasserted, known or unknown (including without limitation,
liabilities as guarantor or otherwise with respect to obligations of others, or
liabilities for taxes due or then accrued or to become due or contingent or
potential liabilities relating to activities of the Company or the conduct of
its business prior to the date hereof, regardless of whether claims in respect
thereof had been asserted as of such date), except liabilities (i) stated or
adequately reserved against on the Base Balance Sheet or the notes thereto, (ii)
reflected in Schedules furnished to Buyer hereunder on the date hereof, or (iii)
incurred after the date of the Base Balance Sheet in the ordinary course of
business of the Company consistent with the terms of this Agreement.
2.8 Taxes.
-----
(a) Except as set forth on SCHEDULE 2.8, the Company has paid or
caused to be paid all federal, state, local, foreign, and other taxes, including
without limitation, income taxes, estimated taxes, alternative minimum taxes,
excise taxes, sales taxes, use taxes, value-added taxes, gross receipts taxes,
franchise taxes, capital stock taxes, employment and payroll-related taxes,
withholding taxes, stamp taxes, transfer taxes, windfall profit taxes,
environmental taxes and property taxes, whether or not measured in whole or in
part by net income, and all deficiencies, or other additions to tax, interest,
fines and penalties owed by it (collectively, "Taxes"), required to be paid by
it through the date hereof.
(b) Except as set forth on SCHEDULE 2.8, the Company has in
accordance with applicable law filed all federal, state, local and foreign tax
returns required to be filed by it through the date hereof, and all such returns
correctly and accurately set forth the amount of any Taxes relating to the
applicable period. A list of all federal, state, local and foreign income tax
returns filed with respect to the Company for taxable periods ended on or after
December 31, 1990 is set forth in SCHEDULE 2.8 attached hereto, and said
Schedule indicates those returns that have been audited or currently are the
subject of an audit. For each taxable period of the Company ended on or after
December 31, 1990, the Company has delivered to Buyer correct and complete
copies of all federal, state, local and foreign income tax returns, examination
reports and statements of deficiencies assessed against or agreed to by the
Company.
(c) The Company has received no notice that the Internal Revenue
Service or any other governmental authority is now asserting or threatening to
assert against the Company any deficiency or claim for additional Taxes. The
Company has received no notice that any claim has ever been made by an authority
in a jurisdiction where the Company does not file reports and returns that the
Company is or may be subject to taxation by that jurisdiction. There are no
security interests on any of the assets of the Company that arose in
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<PAGE> 14
connection with any failure (or alleged failure) to pay any Taxes. The Company
has never entered into a closing agreement pursuant to Section 7121 of the
Internal Revenue Code of 1986, as amended (the "Code").
(d) Except as set forth in SCHEDULE 2.8 attached hereto, there
has not been any audit of any tax return filed by the Company, no such audit is
in progress, and the Company has not been notified by any tax authority that any
such audit is contemplated or pending. Except as set forth in SCHEDULE 2.8, no
extension of time with respect to any date on which a tax return was or is to be
filed by the Company is in force, and no waiver or agreement by the Company is
in force for the extension of time for the assessment or payment of any Taxes.
(e) The Company has never been (nor has it ever had any
liability for unpaid Taxes because it once was) a member of an "affiliated
group" (as defined in Section 1504(a) of the Code). Except as set forth in
SCHEDULE 2.8, the Company has never filed, and has never been required to file,
a consolidated, combined or unitary tax return with any other entity. Except as
set forth in SCHEDULE 2.8, the Company does not own and has never owned a direct
or indirect interest in any trust, partnership, corporation or other entity.
Except as set forth in SCHEDULE 2.8 attached hereto, the Company is not a party
to any tax sharing agreement.
(f) The Company has elected to qualify, and as of the date of
execution hereof currently qualifies, as a Small Business Corporation (an "S
Corporation") under Section 1362 of the Code. Upon consummation of the Closing,
the Company will no longer qualify as an S Corporation.
(g) For purposes of this Agreement, all references to Sections
of the Code shall include any predecessor provisions to such Sections and any
similar provisions of federal law.
2.9 COLLECTIBILITY OF ACCOUNTS RECEIVABLE. All of the accounts
receivable of the Company as shown or reflected on the Base Balance Sheet or
existing at the date hereof (less the reserve for bad debts set forth on the
Base Balance Sheet) are or will be at the Closing valid and enforceable claims,
fully collectible and subject to no setoff or counterclaim. The Company has no
accounts or loans receivable from any person, firm or corporation which is
affiliated with the Company or from any director, officer or employee of the
Company, except as disclosed on SCHEDULE 2.9 hereto.
2.10 INVENTORIES. Except as disclosed in SCHEDULE 2.10, all items in
the inventories of the Company shown on the Base Balance Sheet or existing at
the date hereof are of a quality and quantity saleable in the ordinary course of
business of the Company at profit margins consistent with their experience
during the fiscal year ended December 31, 1995. Except as disclosed in SCHEDULE
2.10, said inventories reflect write-downs to realizable values in the case of
items which are below standard quality or have become obsolete or unsaleable
(except at
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<PAGE> 15
prices less than cost) through regular distribution channels in the ordinary
course of the business of the Company. No such write-downs since January 1, 1993
have had a material adverse effect on the financial condition or results of
operations of the Company. The values of the inventories stated in the Base
Balance Sheet and any subsequent financial statements of the Company reflect the
normal inventory valuation policies of the Company and were determined at the
lower of cost or market in accordance with generally accepted accounting
principles, practices and methods consistently applied. Purchase commitments for
raw materials and parts are not in excess of normal requirements and none are at
prices materially in excess of current market prices. All inventory items are
located on the Leased Real Property, except for equipment on consignment and
located at customers' offices as described on Schedule 2.10. Since the date of
the Base Balance Sheet, no inventory items have been sold or disposed of except
through sales in the ordinary course of business at profit margins consistent
with the experience of the Company during the fiscal year ended December 31,
1995, and all sales commitments for the products of the Company are at prices
not less than inventory values plus selling expenses and said profit margins.
2.11 Absence of Certain Changes.
--------------------------
(a) Except as disclosed in SCHEDULE 2.11 attached hereto, since the
date of the Base Balance Sheet there has not been:
(i) Any change in the financial condition,
properties, assets, liabilities, business or operations of the Company,
which change by itself or in conjunction with all other such changes,
whether or not arising in the ordinary course of business, has been
materially adverse with respect to the Company;
(ii) Any contingent liability incurred by the Company
as guarantor or otherwise with respect to the obligations of others or
any cancellation of any material debt or claim owing to, or waiver of
any material right of, the Company;
(iii) Any mortgage, encumbrance or lien placed on any
of the properties of the Company which remains in existence on the date
hereof or will remain on the Closing Date, except for Permitted
Encumbrances;
(iv) Any obligation or liability of any nature,
whether accrued, absolute, contingent or otherwise, asserted or
unasserted, known or unknown (including without limitation liabilities
for Taxes due or to become due or contingent or potential liabilities
relating to products or services provided by the Company or the conduct
of the business of the Company since the date of the Base Balance Sheet
regardless of whether claims in respect thereof have been asserted),
incurred by the Company other than obligations and liabilities incurred
in the ordinary course of business consistent with the terms of this
Agreement (it being understood that product or service liability claims
shall not be deemed to be incurred in the ordinary course of business);
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(v) Any purchase, sale or other disposition, or any
agreement or other arrangement for the purchase, sale or other
disposition, of any of the properties or assets of the Company other
than in the ordinary course of business;
(vi) Any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the
properties, assets or business of the Company;
(vii) Any declaration, setting aside or payment of
any dividend by the Company, or the making of any other distribution in
respect of the capital stock of the Company, or any direct or indirect
redemption, purchase or other acquisition by the Company of its own
capital stock;
(viii) Any labor trouble or claim of unfair labor
practices involving the Company; any change in the compensation payable
or to become payable by the Company to any of its officers, employees,
agents or independent contractors other than normal merit increases in
accordance with its usual practices; or any bonus payment or
arrangement made to or with any of such officers, employees, agents or
independent contractors;
(ix) Any change with respect to the officers or
management of the Company;
(x) Any payment or discharge of a material lien or
liability of the Company which was not shown on the Base Balance Sheet
or incurred in the ordinary course of business thereafter;
(xi) Any obligation or liability incurred by the
Company to any of its officers, directors, Sellers or employees, or any
loans or advances made by the Company to any of its officers,
directors, Sellers or employees, except normal compensation and expense
allowances payable to officers or employees;
(xii) Any change in accounting methods or practices,
credit practices or collection policies used by the Company;
(xiii) Any other transaction entered into by the
Company other than transactions in the ordinary course of business; or
(xiv) Any agreement or understanding whether in
writing or otherwise, for the Company to take any of the actions
specified in paragraphs (i) through (xiii) above.
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(b) To the best knowledge of Sellers, the Company and Sellers have
disclosed to Buyer all facts and circumstances regarding the Company and the
transactions it has engaged in which could reasonably be expected to adversely
affect or preclude accounting for the Acquisition (as structured by this
Agreement and the Non-competition Agreements of even date herewith as described
in Section 7 hereof) as a pooling of interest if consummated at any time from
the date hereof through March 8, 1997. As of the date hereof, to the best
knowledge of the Sellers and the Company, the factual representations set forth
on EXHIBIT B hereto are true and accurate.
2.12 ORDINARY COURSE. Except as contemplated by this Agreement,
since the date of the Base Balance Sheet, the Company has conducted its business
only in the ordinary course and consistently with its prior practices.
2.13 BANKING RELATIONS. All of the arrangements which the Company has
with any banking institution are completely and accurately described in SCHEDULE
2.13 attached hereto, indicating with respect to each of such arrangements the
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
2.14 Intellectual Property.
---------------------
(a) Except as described in SCHEDULE 2.14, the Company has
exclusive ownership of, or exclusive license to use, all patent, copyright,
trade secret, trademark, or other proprietary rights (collectively,
"Intellectual Property") used or to be used in the business of the Company as
presently conducted or contemplated. Except as described in Schedule 2.14, all
of the rights of the Company in such Intellectual Property are freely
transferable. Except as described in SCHEDULE 2.14, there are no claims or
demands of any other person pertaining to any of such Intellectual Property and
no proceedings have been instituted, or are pending or threatened, which
challenge the rights of the Company in respect thereof. The Company has the
right to use, free and clear of claims or rights of other persons, all customer
lists, designs, manufacturing or other processes, computer software, systems,
data compilations, research results and other information required for or
incident to its products or its business as presently conducted or contemplated,
subject, however, to the license agreements set forth on Schedule 2.14.
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned by or
licensed to the Company or used or to be used by the Company in its business as
presently conducted or contemplated, and all other items of Intellectual
Property which are material to the business or operations of the Company, are
listed in SCHEDULE 2.14. All of such patents, patent applications, trademark
registrations, trademark applications and registered copyrights which are owned
by the Company have been duly registered in, filed in or issued by the United
States Patent and Trademark Office, the United States Register of Copyrights, or
the corresponding offices of other jurisdictions as identified on said Schedule,
and have been properly maintained and
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renewed in accordance with all applicable provisions of law and administrative
regulations of the United States and each such jurisdiction.
(c) All licenses or other agreements under which the Company is
granted rights in Intellectual Property are listed in SCHEDULE 2.14. All said
licenses or other agreements are in full force and effect, there is no material
default by any party thereto, and, except as set forth on SCHEDULE 2.14, all of
the rights of the Company thereunder are freely assignable. To the knowledge of
Company, the licensors under said licenses and other agreements have and had all
requisite power and authority to grant the rights purported to be conferred
thereby. True and complete copies of all such licenses or other agreements, and
any amendments thereto, have been provided to Buyer.
(d) All licenses or other agreements under which the Company has
granted rights to others in Intellectual Property owned or licensed by the
Company are listed in SCHEDULE 2.14. All of said licenses or other agreements
are in full force and effect, there is no material default by any party thereto,
and, except as set forth on SCHEDULE 2.14, all of the rights of Company
thereunder are freely assignable. True and complete copies of all such licenses
or other agreements, and any amendments thereto, have been provided to Buyer.
(e) Except as described in SCHEDULE 2.14, the Company has taken
all steps required in accordance with sound business practice to establish and
preserve its ownership of all Intellectual Property rights with respect to its
products, services and technology. Except as described in SCHEDULE 2.14, the
Company has required all employees having access to non-public information of
Company to execute agreements under which such employees are required to convey
to the Company ownership of all inventions and developments conceived or created
by them in the course of their employment and to maintain the confidentiality of
all such information of Company, and copies of all such agreements have been
provided to Buyer. The Company has not made any such information available to
any person other than employees of Company except pursuant to written agreements
requiring the recipients to maintain the confidentiality of such information and
appropriately restricting the use thereof. The Company has no knowledge of any
infringement by others of any Intellectual Property rights of the Company.
(f) The present and contemplated business, activities and
products of the Company do not infringe any Intellectual Property of any other
person. No proceeding charging the Company with infringement of any adversely
held Intellectual Property has been filed or, to the Company's or the Sellers'
knowledge, is threatened to be filed. Except as described in SCHEDULE 2.14, to
the Company's and the Sellers' knowledge, there exists no unexpired patent or
patent application which includes claims that would be infringed by or otherwise
adversely affect the products, activities or business of the Company. The
Company is not making unauthorized use of any confidential information or trade
secrets of any person, including without limitation, any former employer of any
past or present employee of Company. Except as set forth in SCHEDULE 2.14,
neither the Company nor, to the knowledge of the Company and the Sellers, any of
their employees have any agreements or arrangements
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with any persons other than the Company related to confidential information or
trade secrets of such persons or restricting any such employee's ability to
engage in business activities of any nature. The activities of their employees
on behalf of the Company do not violate any such agreements or arrangements
known to the Company.
(g) SCHEDULE 2.14 sets forth a true and complete list of all
computer software products and computer hardware products currently being
marketed by the Company which are proprietary to the Company (the "Proprietary
Products"). The Company's rights in the Proprietary Products constitute
Intellectual Property subject to all of the representations and warranties set
forth in the foregoing provisions of this Section 2.14. Except as set forth in
SCHEDULE 2.14, the software and designs of the Proprietary Products have been
developed and implemented in a professional manner and are documented in
accordance with normal professional standards so as to enable a qualified
software or hardware engineer, as applicable, to maintain and modify the
Proprietary Products conveniently and effectively on the basis of such
documentation. The Company has conducted a regular program of maintaining and
updating the Proprietary Products in response to defects on problem reports, and
has in effect reliable procedures for version control with respect to the
Proprietary Products. Except as set forth on SCHEDULE 2.14, the Company is not
aware of any material software or design defects in any of the Proprietary
Products, any failure of any of the Proprietary Products to conform in all
material respects to its specifications and documentation.
2.15 CONTRACTS. Except for contracts, commitments, plans, agreements
and licenses described in SCHEDULE 2.15 (true and complete copies of which have
been delivered to Buyer) or Exhibit A hereto, the Company is not a party to or
subject to:
(a) any plan or contract providing for bonuses, pensions,
options, stock purchases, deferred compensation, retirement payments, profit
sharing, collective bargaining or the like, or any contract or agreement with
any labor union;
(b) any employment contract or contract for services that is not
terminable within 30 days by the Company without liability for any penalty or
severance payment;
(c) any contract or agreement for the purchase of any commodity,
material or equipment except purchase orders in the ordinary course for less
than $3,000 each, such orders not exceeding $10,000 in the aggregate;
(d) any other contracts or agreements creating any obligations
of the Company of $10,000 or more with respect to any such contract or agreement
not specifically disclosed elsewhere under this Agreement;
(e) any contract or agreement providing for the purchase of
Proprietary Products of third parties for inclusion in products sold by the
Company or otherwise for resale by the Company, or providing for the purchase of
all or substantially all of its requirements of a particular product from a
supplier;
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(f) any contract or agreement involving more than $5,000 which
by its terms does not terminate or is not terminable without penalty by the
Company or its successors within one year after the date hereof;
(g) any contract or agreement for the sale or lease of its
products extending beyond a single order or otherwise not made in the ordinary
course of business;
(h) any contract with any sales agent or distributor of products
of the Company;
(i) any contract containing covenants limiting the freedom of
the Company to compete in any line of business or with any person or entity;
(j) any contract or agreement for the purchase of any fixed
asset for a price in excess of $10,000 whether or not such purchase is in the
ordinary course of business;
(k) any license agreement (as licensor or licensee);
(l) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money; or
(m) any contract or agreement with any officer, employee,
director or Seller of the Company or with any persons or organizations
controlled by or affiliated with any of them.
The Company is not in default under any such contracts, commitments,
plans, agreements or licenses described in said Schedule and has no knowledge of
conditions or facts which with notice or passage of time, or both, would
constitute a default.
2.16 LITIGATION. SCHEDULE 2.16 hereto lists all currently pending
litigation and governmental or administrative proceedings or investigations to
which the Company is a party. Except for matters described in SCHEDULE 2.16,
there is no litigation or governmental or administrative proceeding or
investigation pending or, to the knowledge of the Company or the Sellers,
threatened against the Company or their affiliates which may have any material
adverse effect on the properties, assets, prospects, financial condition or
business of the Company or which would prevent or hinder the consummation of the
transactions contemplated by this Agreement. With respect to each matter set
forth therein, SCHEDULE 2.16 sets forth a description of the matter, the forum
(if any) in which it is being conducted, the parties thereto and the type and
amount of relief sought.
2.17 COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 2.17
hereto, the Company is, and all products sold by the Company are, in
compliance in all material respects with all applicable statutes, ordinances,
orders, judgements, decrees, rules and regulations promulgated by any federal,
state, municipal entity, agency, court or other governmental
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authority which apply to the Company or to the conduct of its business or to
such products, and the Company has received no notice of a violation or alleged
violation of any such statute, ordinance, order, rule or regulation.
2.18 INSURANCE. The physical properties and assets of the Company are
insured to the extent disclosed in SCHEDULE 2.18 attached hereto and all such
insurance policies and arrangements are disclosed in said Schedule. Said
insurance policies and arrangements are in full force and effect, all premiums
with respect thereto are currently paid, and the Company is in compliance in all
material respects with the terms thereof. Except as set forth in SCHEDULE 2.18,
said insurance is adequate and customary for the business engaged in by the
Company and, except as set forth in SCHEDULE 2.18, is sufficient for compliance
by the Company with all requirements of law and all agreements and leases to
which the Company is a party.
2.19 WARRANTY OR OTHER CLAIMS. Except as described in SCHEDULE 2.19,
there are no existing or, to the Company's or the Sellers' knowledge, threatened
product liability, warranty or other similar claims, or any facts upon which a
material claim of such nature could be based, against the Company for products
or services which are defective or fail to meet any product or service
warranties. No claim has been asserted against the Company for renegotiation or
price redetermination of any business transaction, and there are no facts upon
which any such claim could be based.
2.20 POWERS OF ATTORNEY. Except as described in SCHEDULE 2.20,
neither the Company nor any Seller has any outstanding power of attorney, except
as granted pursuant to this Agreement.
2.21 FINDER'S FEE. The Company has not incurred or become liable for
any broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
2.22 PERMITS; BURDENSOME AGREEMENTS. SCHEDULE 2.22 lists all permits,
registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state or local
authorities in order for the Company to conduct its business as of the date of
execution hereof. The Company has obtained all such Approvals, which are valid
and in full force and effect, and is operating in compliance therewith. Such
Approvals include, but are not limited to, those required under federal, state
or local statutes, ordinances, orders, requirements, rules, regulations, or laws
pertaining to environmental protection, public health and safety, worker health
and safety, buildings, highways or zoning. Except as disclosed in SCHEDULE 2.22
or in any other Schedule hereto, the Company is not subject to or bound by any
agreement, judgment, decree or order which may materially and adversely affect
its business or prospects, its condition, financial or otherwise, or any of its
assets or properties.
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2.23 CORPORATE RECORDS; COPIES OF DOCUMENTS. The corporate record
books of the Company accurately record all corporate action taken by its
stockholders, board of directors and committees. The copies of the corporate
records of the Company, as made available to Buyer for review, are true and
complete copies of the originals of such documents. The Company has made
available for inspection and copying by Buyer and its counsel true and correct
copies of all documents referred to in this Section or in the Schedules
delivered to Buyer pursuant to this Agreement.
2.24 TRANSACTIONS WITH INTERESTED PERSONS. Except as set forth in
SCHEDULE 2.24 hereto, neither the Company, any Seller, officer, supervisory
employee or director of the Company or, to the knowledge of Company, any of
their respective spouses or immediate family members, (a) is indebted to or is
owed money by the Company (other than with respect to indebtedness under expense
reimbursement arrangements and related advances in the ordinary course of
business not exceeding $1,000 in any individual case), (b) is a party to any
material contract or arrangement with the Company, or (c) owns directly or
indirectly on an individual or joint basis any material interest in, or serves
as an officer or director or in another similar capacity of, any competitor or
supplier of Company, or any organization which has a material contract or
arrangement with the Company.
2.25 Employee Benefit Programs.
-------------------------
(a) SCHEDULE 2.25 lists every Employee Program (as defined
below) that has been maintained (as defined below) by the Company at any time
during the three-year period ending on the Closing date.
(b) Each Employee Program which has ever been maintained by the
Company and which has at any time been intended to qualify under Section 401(a)
or 501(c)(9) of the Code has received a favorable determination or approval
letter from the Internal Revenue Service ("IRS") regarding its qualification
under such section and has, in fact, been qualified under the applicable section
of the Code from the effective date of such Employee Program through and
including the Closing (or, if earlier, the date that all of such Employee
Program's assets were distributed). No event or omission has occurred which
would cause any such Employee Program to lose its qualification under the
applicable Code section.
(c) The Company does not know and has no reason to know, of any
failure of any party to comply with any laws applicable to the Employee Programs
that have been maintained by the Company. With respect to any Employee Program
ever maintained by the Company, there has occurred no "prohibited transaction,"
as defined in Section 406 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or Section 4975 of the Code, or breach of any duty
under ERISA or other applicable law (including, without limitation, any health
care continuation requirements or any other tax law requirements, or conditions
to favorable tax treatment, applicable to such plan), which could result,
directly or indirectly, in any taxes, penalties or other liability to the
Company or Buyer. No litigation, arbitration, or governmental administrative
proceeding (or investigation) or other proceeding
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<PAGE> 23
(other than those relating to routine claims for benefits) is pending or
threatened with respect to any such Employee Program.
(d) Neither the Company nor any Affiliate (as defined below) (i)
has ever maintained any Employee Program which has been subject to title IV of
ERISA (including, but not limited to, any Multiemployer Plan (as defined below))
or (ii) has ever provided health care or any other non-pension benefits to any
employees after their employment is terminated (other than as required by part 6
of subtitle B of title I of ERISA) or has ever promised to provide such
post-termination benefits.
(e) With respect to each Employee Program maintained by the
Company within the three years preceding the Closing, complete and correct
copies of the following documents (if applicable to such Employee Program) have
previously been delivered to Buyer: (i) all documents embodying or governing
such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended;
(ii) the most recent IRS determination or approval letter with respect to such
Employee Program under Code Sections 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the summary plan description for such Employee
Program (or other descriptions of such Employee Program provided to employees)
and all modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy) related to such Employee Program; (vi) any documents
evidencing any loan to an Employee Program that is a leveraged employee stock
ownership plan; and (vii) all other materials reasonably necessary for Buyer to
perform any of its responsibilities with respect to any Employee Program
subsequent to the Closing (including, without limitation, health care
continuation requirements).
(f) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited
to, multiple employer welfare arrangements (within the meaning of ERISA
Section 3(4)), plans to which more than one unaffiliated employer
contributes and employee benefit plans (such as foreign or excess
benefit plans) which are not subject to ERISA; and (B) all stock option
plans, bonus or incentive award plans, severance pay policies or
agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans,
agreements, and arrangements not described in (A) above. In the case of
an Employee Program funded through an organization described in Code
Section 501(c)(9), each reference to such Employee Program shall
include a reference to such organization.
(ii) An entity "maintains" an Employee Program if such
entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to
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<PAGE> 24
contribute to or provide benefits under such Employee Program, or if
such Employee Program provides benefits to or otherwise covers
employees of such entity, or their spouses, dependents, or
beneficiaries.
(iii) An entity is an "Affiliate" of the Company if it would
have ever been considered a single employer with the Company under
ERISA Section 4001(b) or part of the same "controlled group" as the
Company for purposes of ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and
which is maintained pursuant to one or more collective bargaining
agreements.
2.26 Environmental Matters.
---------------------
(a) Except as set forth in SCHEDULE 2.26 hereto, (i) no
Hazardous Material (as defined below) has ever been or is threatened to be
spilled, released, or disposed of at any site presently or formerly owned,
operated, leased, or used by the Company, or has ever been located in the soil
or groundwater at any such site; (ii) no Hazardous Material has ever been
transported from any site presently or formerly owned, operated, leased, or used
by the Company for treatment, storage, or disposal at any other place; (iii) the
Company does not presently own, operate, lease, or use, nor has it previously
owned, operated, leased, or used any site on which underground storage tanks are
or were located; and (iv) no lien has ever been imposed by any governmental
agency on any property, facility, machinery, or equipment owned, operated,
leased, or used by the Company in connection with the presence of any Hazardous
Material.
(b) Except as set forth in SCHEDULE 2.26 hereto, (i) the Company
has no liability under, nor has it ever violated, any Environmental Law (as
defined below); (ii) the Company, any property owned, operated, leased, or used
by the Company, and any facilities and operations thereon, are presently in
compliance with all applicable Environmental Laws; (iii) the Company has not
entered into or been subject to any judgment, consent decree, compliance order,
or administrative order with respect to any environmental or health and safety
matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law; and (iv) the Company has no reason to believe that any of the
items enumerated in clause (iii) of this subsection will be forthcoming.
(c) Except as set forth in SCHEDULE 2.26 hereto, to the best of
the Company's or any Seller's knowledge, no site owned, operated, leased, or
used by the Company contains any asbestos or asbestos-containing material, any
polychlorinated biphenyls (PCBs) or equipment containing PCBs, or any urea
formaldehyde foam insulation.
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<PAGE> 25
(d) The Company has provided to Buyer copies of all documents,
records, and information in the possession of the Company or any Seller
concerning any environmental or health and safety matter relevant to the
Company, whether generated by the Company or others, including without
limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials,
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and safety
matters issued by any governmental agency.
(e) For purposes of this SECTION 2.26, (i) "Hazardous Material"
shall mean and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant, contaminant, or
other substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Environmental
Law" shall mean any environmental or health and safety-related law, regulation,
rule, ordinance, or by-law at the foreign, federal, state, or local level,
whether existing as of the date of execution hereof, previously enforced, or
subsequently enacted; and (iii) "Company" shall mean and include the Company and
all other entities for whose conduct the Company is or may be held responsible
under any Environmental Law.
2.27 LIST OF DIRECTORS AND OFFICERS. SCHEDULE 2.27 hereto contains a
true and complete list of all current directors and officers of the Company. In
addition, SCHEDULE 2.27 hereto contains a list of all managers, employees and
consultants of the Company who, individually, have received or are scheduled to
receive compensation from the Company for the fiscal year ended December 31,
1995 or the fiscal year ending December 31, 1996. In each case such Schedule
includes the current job title and aggregate annual compensation of each such
individual.
2.28 DISCLOSURE. The representations, warranties and statements
contained in this Agreement and in the certificates, exhibits and schedules
delivered by the Company pursuant to this Agreement to Buyer do not contain any
untrue statement of a material fact, and, when taken together, do not omit to
state a material fact required to be stated therein or necessary in order to
make such representations, warranties or statements not misleading in light of
the circumstances under which they were made. There are no facts which presently
or may in the future have a material adverse affect on the business, properties,
prospects, operations or condition of the Company which have not been
specifically disclosed herein or in a Schedule furnished herewith, other than
general economic conditions affecting the industries in which the Company
operate.
2.29 [Intentionally Omitted]
2.30 BACKLOG. As of the date hereof, the Company has a backlog of
firm orders for the sale or lease of products or services, for which revenues
have not been recognized by the Company, as set forth in SCHEDULE 2.30.
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2.31 EMPLOYEES; LABOR MATTERS. The Company employs a total of
approximately 27 full-time employees and two part-time employees and generally
enjoy good employer-employee relationships. The Company does not currently
employ, will not as of the Closing date employ, and has not employed during the
six calendar months prior to the Closing date 50 or more employees in any single
facility in Massachusetts. The Company does not employ a total of 100 or more
employees (excluding employees who work less than 20 hours per week or who have
worked for the Company less than six of the last twelve months) and will not
have employed 100 or more employees at any point during the 90 days prior to and
including the Closing date. Except as described in SCHEDULE 2.31, the Company is
not delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed for
it to the date of execution hereof or amounts required to be reimbursed to such
employees. Upon termination of the employment of any of said employees, neither
the Company nor Buyer will by reason of the transactions contemplated under this
Agreement or anything done prior to the Closing be liable to any of said
employees for so-called "severance pay" or any other payments, except as set
forth in SCHEDULE 2.31 or Exhibit A hereto. The Company has no policy, practice,
plan or program of paying severance pay or any form of severance compensation in
connection with the termination of employment, except as set forth in said
Schedule. Except as described in SCHEDULE 2.31, the Company is in compliance
with all applicable laws and regulations respecting labor, employment, fair
employment practices, work place safety and health, terms and conditions of
employment, and wages and hours. There are no charges of employment
discrimination or unfair labor practices, nor are there any strikes, slowdowns,
stoppages of work, or any other concerted interference with normal operations
which are existing, pending or, to the Company's or the Sellers' knowledge,
threatened against or involving the Company. Except as disclosed on Schedule
2.31, no question concerning union representation exists respecting any
employees of the Company. There are no grievances, complaints or charges that
have been filed against the Company under any dispute resolution procedure
(including, but not limited to, any proceedings under any dispute resolution
procedure under any collective bargaining agreement) that might have an adverse
effect on the Company or the conduct of their respective businesses, and there
is no arbitration or similar proceeding pending and no claim therefor has been
asserted. No collective bargaining agreement is in effect or is currently being
or is about to be negotiated by the Company. The Company has received no
information indicating that any of its employment policies or practices is
currently being audited or investigated by any federal, state or local
government agency. The Company is, and at all times since November 6, 1986 has
been, in compliance with the requirements of the Immigration Reform Control Act
of 1986.
2.32 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. SCHEDULE 2.32(A) sets
forth any customer, sales representative or distributor (whether pursuant to a
commission, royalty or other arrangement) which accounts for more than 5% of the
sales of the Company for the twelve months ended December 31, 1995 or the two
months ended as of the date of the Base Balance Sheet (collectively, the
"Customers and Distributors"). SCHEDULE 2.32(B) lists all of the suppliers of
the Company to whom during the fiscal year ended December 31, 1995 the Company
made payments aggregating $5,000 or more showing, with respect to each, the
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<PAGE> 27
name, address, description of transaction and dollar volume involved (the
"Suppliers"). The relationships of the Company with its Customers, Distributors
and Suppliers are good commercial working relationships. No Customer,
Distributor or Supplier has canceled, materially modified, or otherwise
terminated its relationship with the Company, or has during the last twelve
months decreased materially its services, supplies or materials to the Company
or its usage or purchase of the services or products of the Company, nor to the
knowledge of Company, does any Customer, Distributor or Supplier have any plan
or intention to do any of the foregoing.
2.33 TRANSFER OF SHARES. No holder of stock of the Company has at any
time transferred any of such stock to any employee of the Company, which
transfer constituted or could be viewed as compensation for services rendered to
the Company by said employee.
2.34 STOCK REPURCHASE. The Company has never redeemed or repurchased
any of its capital stock.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLERS.
- ---------------------------------------------------------
As a material inducement to Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, each Seller hereby severally
makes to Buyer each of the representations and warranties set forth in this
Section 3 with respect to such Seller. No Seller shall have any right of
indemnity or contribution from the Company with respect to the breach of any
representation or warranty hereunder. The representations and warranties
contained in each section of this Article 3 are made as of the date of execution
of this Agreement and are qualified in their entirety by the corresponding
portions of the Schedules attached hereto.
3.1 COMPANY SHARES. Such Seller owns of record and beneficially the
number of the Company Shares set forth opposite such Seller's name in EXHIBIT A.
Such Company Shares are, and at the Effective Time will be, duly authorized,
validly issued, fully paid, non-assessable and free and clear of any and all
liens, encumbrances, charges or claims, under Article 8 of the Massachusetts
Uniform Commercial Code or otherwise.
3.2 AUTHORITY. Such Seller has full right, authority, power and
capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of such Seller pursuant
to this Agreement and to carry out the transactions contemplated hereby and
thereby. This Agreement and each agreement, document and instrument executed and
delivered by such Seller pursuant to this Agreement constitutes a valid and
binding obligation of such Seller, enforceable in accordance with their
respective terms, and each Seller has full power and authority to transfer, sell
and deliver the Company Shares to Buyer pursuant to this Agreement. As of the
date of execution hereof, the execution, delivery and performance of this
Agreement and each such agreement, document and instrument:
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<PAGE> 28
(i) does not and will not violate any laws of the
United States or any state or other jurisdiction applicable to such
Seller, or require such Seller to obtain any approval, consent or
waiver from, or make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made; and
(ii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of, any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award to which such Seller is a
party or by which the property of such Seller is bound or affected, or
result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any assets of the
Company or on Company Shares owned by such Seller.
3.3 FINDER'S FEE. Such Seller has not incurred or become liable for
any broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
3.4 AGREEMENTS. Each Seller is not a party to any non-competition,
trade secret or confidentiality agreement with any party other than the Company.
There are no agreements or arrangements not contained herein or disclosed in a
Schedule hereto, to which such Seller is a party relating to the business of the
Company or to such Seller's rights and obligations as a Seller, director or
officer of the Company. Such Seller does not own, directly or indirectly, on an
individual or joint basis, any material interest in, or serve as an officer or
director of, any customer, competitor or supplier of the Company, or any
organization which has a contract or arrangement with the Company. Such Seller
has not at any time transferred any of the stock of the Company held by or for
such holder to any employee of the Company, which transfer constituted or could
be viewed as compensation for services rendered to the Company by said employee.
The execution, delivery and performance of this Agreement will not violate or
result in a default or acceleration of any obligation under any contract,
agreement, indenture or other instrument involving the Company to which such
Seller is a party.
3.5 INVESTOR RESTRICTIONS. Each Seller understands that because the
Brooktrout Shares have not been registered under the Securities Act of 1933, as
amended from time to time (the "1933 Act"), or applicable state securities laws,
such Seller cannot dispose of any or all of the Brooktrout Shares unless such
shares are subsequently registered under the 1933 Act and applicable state
securities laws, or exemptions from such registration are available. Each Seller
understands that each certificate representing the Brooktrout Shares will bear
the following legend or one substantially similar thereto:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act") or the
securities laws of any state. These shares may not be transferred
without an effective registration statement for such shares under the
Act or a valid exemption from such registration.
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3.6 EXCHANGE ACT FILINGS. Each Seller acknowledges receipt of
Buyer's Annual Report on Form 10-K for the fiscal year ended December 31, 1994
and the Buyer's Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, June 30 and September 30, 1995 (the "Exchange Act Filings"). Each
Seller is not relying on any information or representations with regard to Buyer
or the Brooktrout Shares other than the information contained in the Exchange
Act Filings and the representations and warranties of Buyer contained in this
Agreement.
SECTION 4. COVENANTS OF THE COMPANY AND THE SELLERS.
- --------------------------------------------------------
4.1 MAKING OF COVENANTS AND AGREEMENTS. The Company and the Sellers
jointly and severally hereby make the covenants and agreements set forth in this
Section 4 and the Sellers agree to cause the Company to comply with such
agreements and covenants. No Seller shall have any right of indemnity or
contribution from the Company with respect to the breach of any covenant or
agreement hereunder.
4.2 CONDUCT OF BUSINESS. Between the date of this Agreement and the
Closing Date, the Company will:
(a) Conduct its business only in the ordinary course and refrain
from changing or introducing any method of management or operations except in
the ordinary course of business and consistent with prior practices;
(b) Refrain from making any purchase, sale or disposition of any
asset or property other than in the ordinary course of business, from purchasing
any capital asset costing more than $10,000 and from mortgaging, pledging,
subjecting to a lien or otherwise encumbering any of its properties or assets
other than in the ordinary course of business;
(c) Refrain from incurring any contingent liability as a
guarantor or otherwise with respect to the obligations of others, and from
incurring any other contingent or fixed obligations or liabilities except in the
ordinary course of business;
(d) Refrain from entering into any of the following contracts:
(i) any plan or contract providing for bonuses, pensions,
options, stock purchases, deferred compensation, retirement payments,
profit sharing, collective bargaining or the like, or any contract or
agreement with any labor union;
(ii) any employment contract or contract for services that
is not terminable within 30 days by the Company without liability for
any penalty or severance payment;
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<PAGE> 30
(iii) any contract or agreement for the purchase of any
commodity, material or equipment except purchase orders in the ordinary
course for less than $5,000 each, such orders not exceeding $20,000 in
the aggregate;
(iv) any other contracts or agreements creating any
obligations of the Company of $10,000 or more with respect to any such
contract or agreement not specifically disclosed elsewhere under this
Agreement or otherwise generally incurred in the ordinary course of
business;
(v) any contract or agreement providing for the purchase of
Proprietary Products of third parties for inclusion in products sold by
the Company or otherwise for resale by the Company, or providing for
the purchase of all or substantially all of its requirements of a
particular product from a supplier except as disclosed in SCHEDULE
2.14;
(vi) any contract or agreement involving more than $5,000
which by its terms does not terminate or is not terminable without
penalty by the Company or its successors within one year after the date
hereof;
(vii) any contract or agreement for the sale or lease of its
products extending beyond a single order or otherwise not made in the
ordinary course of business;
(viii) any contract with any sales agent or distributor of
products of the Company, except those entered into in the ordinary
course of business;
(ix) any contract containing covenants limiting the freedom
of the Company to compete in any line of business or with any person or
entity;
(x) any contract or agreement for the purchase of any fixed
asset for a price in excess of $10,000, other than the currently
planned payment of approximately $30,000 for a file server, $13,000 of
which is reflected on the Base Balance Sheet;
(xi) any license agreement (as licensor or licensee), except
those entered into in the ordinary course of business;
(xii) any indenture, mortgage, promissory note, loan
agreement, guaranty or other agreement or commitment for the borrowing
of money, other than with the consent of the Buyer; or
(xiii) any contract or agreement with any officer, employee,
director or Seller of the Company or with any persons or organizations
controlled by or affiliated with any of them;
26
<PAGE> 31
PROVIDED, HOWEVER, that, the Company may request in writing at any time that the
Buyer waive compliance with any provision of this Subsection 4.2(d), and the
Buyer may waive such compliance in writing at any time.
(e) Refrain from making any change or incurring any obligation
to make a change in its Articles of Organization, By-laws or authorized or
issued capital stock;
(f) Refrain from declaring, setting aside or paying any
dividend, making any other distribution in respect of its capital stock or
making any direct or indirect redemption, purchase or other acquisition of its
stock, except as follows:
(i) The Company may declare and distribute to the Sellers a
dividend no greater than the amount that is sufficient to pay the federal and
state tax liabilities of the Sellers resulting from the Company's operations
during the tax year ended December 31, 1995, such dividend to be calculated in a
manner consistent with past dividend payment practices of the Company. To the
extent such dividend is not distributed to the Sellers prior to the Closing
Date, it may be distributed on or after the Closing Date, under Section 12.14(c)
hereof.
(ii) Consistent with past dividend payment practices of the
Company, the Company may declare a dividend for the purpose of distributing an
amount of cash to the Sellers approximately equal to the federal and state tax
liabilities of the Sellers resulting from the Company's operations during the
short tax year beginning January 1, 1996 and ending on the Closing Date. Such
dividend shall be payable to the Sellers in two installments on or after the
Closing Date, as more fully set forth in Section 12.14(b) hereof. The amount of
such dividend shall be no greater than the amount of the dividend provided for
in Section 12.14(a) hereof.
(g) Refrain from making any change in the compensation payable
or to become payable to any of the Sellers;
(h) Refrain from prepaying any loans (if any) from the Sellers,
its officers or directors or making any change in its borrowing arrangements,
other than expense advances and reimbursements in the ordinary course of
business;
(i) Use its best efforts to prevent any change with respect to
its management and supervisory personnel and banking arrangements without the
written consent of Buyer;
(j) Use commercially reasonable efforts to keep intact its
business organization, to preserve and protect all Intellectual Property and
other assets of the Company, to keep available its present officers and
employees and to preserve the goodwill of all suppliers, customers, independent
contractors and others having business relations with it;
(k) Have in effect and maintain at all times all insurance of
the kind, in the amount and with the insurers set forth in the SCHEDULE 2.18
hereto or equivalent insurance with any substitute insurers approved in writing
by Buyer; and
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(l) Furnish Buyer with unaudited monthly balance sheets and
statements of income and retained earnings and cash flows of the Company within
ten (10) days after each month end for each month ending more than ten (10) days
before the Closing.
(m) Permit Buyer and its authorized representatives to have full
access to all its properties, assets, records, tax returns, contracts and
documents and furnish to Buyer or its authorized representatives such financial
and other information with respect to its business or properties as Buyer may
from time to time reasonably request.
(n) Not knowingly engage in any transaction or cause any fact or
circumstance to occur which would preclude accounting for the Acquisition (as
structured by this Agreement and the Non-competition Agreements of even date
herewith as described in Section 7 hereof) as a pooling of interests if
consummated at any time from the date hereof through March 8, 1997.
4.3 AUTHORIZATION FROM OTHERS. Prior to the Closing Date, the
Sellers and the Company will use their best efforts to obtain the
authorizations, consents and permits of others required to permit the
consummation by the Sellers, the Company of the transactions contemplated by
this Agreement, as set forth on SCHEDULE 7.1.
4.4 NOTICE OF DEFAULT. From the date of execution hereof and through
the Closing Date, promptly upon the occurrence of, or promptly upon the Company
or a Seller becoming aware of the impending or threatened occurrence of, any
event which would cause or constitute a breach or default, or would have caused
or constituted a breach or default had such event occurred or been known to the
Company or such Seller prior to the date of execution hereof, of any of the
representations, warranties or covenants of the Company or the Sellers contained
in or referred to in this Agreement or in any Schedule or Exhibit referred to in
this Agreement, the Company or the Sellers shall give detailed written notice
thereof to Buyer and the Company and the Sellers shall use commercially
reasonable efforts to prevent or promptly remedy the same.
4.5 CONSUMMATION OF AGREEMENT. The Company and each of the Sellers
shall use their best efforts to perform and fulfill all conditions and
obligations on their parts to be performed and fulfilled under this Agreement,
to the end that the transactions contemplated by this Agreement shall be fully
carried out. To this end, the Company will obtain prior to the Closing all
necessary authorizations or approvals of its Sellers and Board of Directors.
4.6 ACCESS; COOPERATION OF THE COMPANY AND SELLERS. The Company and
each of the Sellers shall provide the Buyer and its agents full and unrestricted
access to the Company's premises, records, assets, officers and employees, and
shall cooperate with all reasonable requests of Buyer and Buyer's counsel in
connection with the consummation of the transactions contemplated hereby.
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4.7 NO SOLICITATION OF OTHER OFFERS. From the date of execution
hereof through the earlier of the Closing Date or termination of this Agreement
pursuant to Section 9.1, neither the Company, the Sellers, nor any of their
representatives will, directly or indirectly, solicit, encourage, assist,
initiate discussions or engage in negotiations with, provide any information to,
or enter into any agreement or transaction with, any person, other than Buyer,
relating to the possible acquisition of the Company Shares, the Company or any
of their assets, except for the sale of assets in the ordinary course of
business of the Company consistent with the terms of this Agreement.
4.8 CONFIDENTIALITY. The Company and the Sellers agree that, unless
and until the Closing has been consummated, each of the Company, the Sellers and
their officers, directors, agents and representatives will hold in strict
confidence, and will not use, any confidential or proprietary data or
information obtained from Buyer with respect to its business or financial
condition except for the purpose of evaluating, negotiating and completing the
transaction contemplated hereby. Information generally known in Buyer's industry
or which has been disclosed to the Company or the Sellers by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this agreement. If the transaction contemplated by
this Agreement is not consummated, the Company and the Sellers will return to
Buyer (or certify that they have destroyed) all copies of such data and
information, including but not limited to financial information, customer lists,
business and corporate records, worksheets, test reports, tax returns, lists,
memoranda, and other documents prepared by or made available to the Company or
the Sellers in connection with the transaction.
4.9 DISCLOSURE. Until such time as the transactions contemplated
hereby have been publicly disclosed, and except for purposes of obtaining any
third party consents required to consummate the transactions contemplated
hereby, the Company and the Sellers shall not make any public disclosure with
respect to the transaction contemplated hereby, except pursuant to a joint press
release in a form agreeable to the Buyer to be issued promptly following the
execution and delivery of this Agreement.
4.10 TAX RETURNS. The Company and the Sellers shall cooperate with
Buyer to permit the Company in accordance with applicable law to promptly
prepare and file on or before the due date or any extension thereof all federal,
state and local tax returns required to be filed by the Company with respect to
taxable periods ending on or before the Closing.
4.11 POOLING OF INTERESTS; TAX-FREE REORGANIZATION. Sellers
acknowledge that Buyer contemplates that the Acquisition will be treated as a
"pooling of interests" under generally accepted accounting principles and as a
tax-free reorganization under the Internal Revenue Code. In connection
therewith, Sellers hereby represent to Buyer that they have no intention, either
directly or indirectly, to sell, transfer or otherwise dispose of any Brooktrout
Shares, or cause any Brooktrout Shares to be sold, transferred or otherwise
disposed of, (a) until such time as unaudited financial statements covering at
least thirty (30) days of the combined operations of Buyer and the Company
following the Acquisition have been published by Buyer
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and (b) in excess of 50% of the Brooktrout Shares issued to each Seller
hereunder until two years have elapsed following the Closing.
4.12 EMPLOYEE PROGRAMS. The Company and the Sellers shall cooperate
fully with Buyer to take all steps necessary under the relevant documents and
applicable law to maintain the qualification of each Employee Program identified
on Schedule 2.25 notwithstanding the Merger.
4.13 [Intentionally Omitted]
4.14 TERMINATION OF BANK CREDIT FACILITY. The Sellers and the Company
shall terminate the Company's $100,000 line of credit with The First National
Bank of Boston prior to the Merger.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER AND ACQUISITION
- -----------------------------------------------------------------------
SUBSIDIARY.
----------
5.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material
inducement to the Company and the Sellers to enter into this Agreement and
consummate the transactions contemplated hereby, Buyer and the Acquisition
Subsidiary hereby make the representations and warranties to the Company and the
Sellers contained in this Section 5.
5.2 ORGANIZATION OF BUYER AND ACQUISITION SUBSIDIARY. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of Massachusetts with full corporate power to own or lease its properties and to
conduct its business in the manner and in the places where such properties are
owned or leased or such business is conducted by it. The Acquisition Subsidiary
is a corporation duly organized, validly existing and in good standing under the
laws of Massachusetts with full corporate power to own or lease its properties
and to conduct its business in the manner and in the places where such
properties are owned or leased or such business is conducted by it.
5.3 AUTHORITY OF BUYER AND ACQUISITION SUBSIDIARY. (a) Buyer has
full right, authority and power to enter into this Agreement and each agreement,
document and instrument to be executed and delivered by Buyer pursuant to this
Agreement and to carry out the transactions contemplated hereby. The execution,
delivery and performance by Buyer of this Agreement and each such other
agreement, document and instrument have been duly authorized by all necessary
corporate action of Buyer and no other action on the part of Buyer is required
in connection therewith. This Agreement and each other agreement, document and
instrument executed and delivered by Buyer pursuant to this Agreement
constitute, or when executed and delivered will constitute, valid and binding
obligations of Buyer enforceable in accordance with their terms. The execution,
delivery and performance by Buyer of this Agreement and each such agreement,
document and instrument:
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(i) does not and will not violate any provision of the
Articles of Organization or by-laws of Buyer;
(ii) does not and will not violate any laws of the United
States or of any state or any other jurisdiction applicable to Buyer or
require Buyer to obtain any approval, consent or waiver of, or make any
filing with, any person or entity (governmental or otherwise) which has
not been obtained or made; and
(iii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any indenture, loan or credit
agreement, or other agreement mortgage, lease, permit, order, judgment
or decree to which Buyer is a party and which is material to the
business and financial condition of Buyer.
(b) The Acquisition Subsidiary has full right, authority and
power to enter into this Agreement and each agreement, document and instrument
to be executed and delivered by the Acquisition Subsidiary pursuant to this
Agreement and to carry out the transactions contemplated hereby. The
consummation of the Merger and the execution, delivery and performance by the
Acquisition Subsidiary of this Agreement and each such other agreement, document
and instrument have been duly authorized by all necessary corporate action of
the Acquisition Subsidiary and no other action on the part of the Acquisition
Subsidiary is required in connection therewith. This Agreement and each other
agreement, document and instrument executed and delivered by the Acquisition
Subsidiary pursuant to this Agreement constitute, or when executed and delivered
will constitute, valid and binding obligations of the Acquisition Subsidiary
enforceable in accordance with their terms. The execution, delivery and
performance by the Acquisition Subsidiary of this Agreement and each such
agreement, document and instrument does not and will not violate any provision
of the Articles of Organization or by-laws of the Acquisition Subsidiary.
Immediately prior to the Merger, the Acquisition Subsidiary will have 200,000
shares of common stock, $.01 par value per share, authorized for issuance and
1,000 shares of common stock, $.01 par value per share, issued and outstanding,
held of record by the Buyer.
5.4 LITIGATION. There is no litigation pending or, to its knowledge,
threatened against Buyer or the Acquisition Subsidiary which would prevent or
hinder the consummation of the transactions contemplated by this Agreement.
5.5 FINDER'S FEE. Neither the Buyer nor the Acquisition Subsidiary
has incurred or become liable for any broker's commission or finder's fee
relating to or in connection with the transactions contemplated by this
Agreement, other than to Broadview Associates, L.P.
5.6 BROOKTROUT SHARES. As of the Closing, and after giving effect
to the adoption of the amendment to the Buyer's Articles of Organization
referred to in Section 7.1(k), (a) the Brooktrout Shares will have been duly
authorized, and when issued pursuant to the terms of the Merger, will be validly
issued and outstanding, fully paid and nonassessable, (b) each of
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the Sellers will be the lawful owner of the number of Brooktrout Shares set
forth opposite his or her name on Exhibit A, free and clear of any pledges,
liens or other encumbrances created by the Buyer, except as contemplated hereby,
when issued in exchange for the number of Company Shares set forth opposite such
Seller's name on Exhibit A. As of the date of execution hereof, except as set
forth in EXHIBIT C, there are no: (i) outstanding warrants, options or other
rights to purchase or acquire, or securities exchangeable for or convertible
into, any shares of Common Stock, (ii) preemptive rights with respect to the
issuance or sale by the Buyer of any of its securities, (iii) restrictions on
the transfer or voting of any shares of the Common Stock or (iv) existing rights
with respect to registration under the 1933 Act of any of the Buyer's
securities.
SECTION 6. COVENANTS OF BUYER.
- -----------------------------------
6.1 MAKING OF COVENANTS AND AGREEMENT. Buyer hereby makes to each
Seller the covenants and agreements set forth in this Section 6.
6.2 CONFIDENTIALITY. Buyer agrees that, unless and until the Closing
has been consummated, Buyer and its officers, directors, agents and
representatives will hold in strict confidence, and will not use any
confidential or proprietary data or information obtained from the Company or the
Sellers with respect to the business or financial condition of the Company
except for the purpose of evaluating, negotiating and completing the transaction
contemplated hereby. Information generally known in the industries of the
Company or which has been disclosed to Buyer by third parties which have a right
to do so shall not be deemed confidential or proprietary information for
purposes of this Agreement. If the transaction contemplated by this Agreement is
not consummated, Buyer will return to the Company (or certify that it has
destroyed) all copies of such data and information, including but not limited to
financial information, customer lists, business and corporate records,
worksheets, test reports, tax returns, lists, memoranda, and other documents
prepared by or made available to Buyer in connection with the transaction.
6.3 CONSUMMATION OF AGREEMENT. Buyer shall use its best efforts to
perform and fulfill all conditions and obligations to be performed and fulfilled
by it under this Agreement, to the end that the transactions contemplated by
this Agreement shall be fully carried out. To this end, Buyer shall obtain prior
to the Closing all necessary approvals and authorizations of its Board of
Directors and shall use commercially reasonable efforts to obtain approval of
its shareholders of all actions necessary to consummate the transactions
contemplated by this Agreement and the issuance of the Brooktrout Shares,
including without limitation the recommendation by Buyer's management to its
shareholders of approval of the amendment to Buyer's Articles of Organization
referred to in Section 7.1(k) and the voting of Buyer's management, in their
individual capacities as stockholders, in favor thereof. Buyer shall use its
best efforts to publish as soon as possible unaudited financial statements
covering at least thirty (30) days of the combined operations of Buyer and the
Company following the Acquisition.
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6.4 TAX FREE REORGANIZATION. Buyer shall not engage in any
transaction or cause any fact or circumstance to occur which might prevent the
Acquisition from being treated as a tax-free reorganization under the Internal
Revenue Code.
6.5 MAINTENANCE OF RECORDS. After the Effective Date, Buyer shall
cause the Surviving Corporation to maintain a copy of this Agreement in the
Commonwealth of Massachusetts at the offices of the Surviving Corporation.
6.6 [Intentionally Omitted]
SECTION 7. CONDITIONS.
- ---------------------------
7.1 CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligation of Buyer
to consummate this Agreement and the transactions contemplated hereby are
subject to the fulfillment or waiver, prior to or at the Closing, of the
following conditions precedent:
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of the Company and the Sellers contained in
Section 2 shall be true and correct in all material respects (except for such
representations and warranties that are qualified by their terms as to
materiality, which representations and warranties as so qualified shall be true
in all respects) as of the date of this Agreement; and the Company and each of
the Sellers shall, on or before the Closing, have performed all of their
obligations hereunder which by the terms hereof are to be performed on or before
the Closing.
(b) CERTIFICATE FROM OFFICERS. The Sellers shall have delivered
to Buyer a certificate of the Company's President and Chief Financial Officer
dated as of the Closing to the effect that the statements set forth in paragraph
(a) and (b) above in this Section 7.1 are true and correct.
(c) OPINION OF COUNSEL. On the Closing Date, Buyer shall have
received from Lucash, Gesmer & Updegrove, counsel for the Company and the
Sellers, an opinion as of said date, substantially in the form attached hereto
as EXHIBIT D.
(d) NO LITIGATION. No action, proceeding or litigation shall
have been commenced against the Buyer, the Company or any of the Sellers which
reasonably questions the validity of the transactions contemplated by this
Agreement or the right of the Buyer, the Company or the Sellers to enter into
this Agreement.
(e) CONSENTS. The Company, the Sellers and Buyer shall have
received all authorizations, waivers, consents and permits, in form and
substance reasonably satisfactory to Buyer, from all third parties set forth on
SCHEDULE 7.1.
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(f) NON-COMPETITION AGREEMENTS. Each of the Sellers shall have
executed and delivered to Buyer a Non-Competition Agreement in substantially the
form of EXHIBIT E attached hereto.
(g) FIRPTA WITHHOLDING. At or prior to the Closing, Buyer shall
have received from each Seller a "transferor's certificate of non-foreign
status" as provided in the Treasury Regulations under Section 1445 of the Code
outstanding in the form attached hereto as EXHIBIT F attached hereto.
(h) MASSACHUSETTS TAX CERTIFICATE. At or prior to the Closing,
Buyer shall have received from the Company a certificate of payment/good
standing from the Commissioner of Revenue as provided in Massachusetts General
Laws Chapter 62C, Section 44(a).
(i) RELEASES. The Company shall have delivered to Buyer general
releases signed by each of the Sellers of all claims which any of them have
against the Company in the form attached hereto as EXHIBIT G.
(j) ACCOUNTANTS' CONFIRMATION. Buyer shall have also received
confirmation from Deloitte & Touche LLP that the Company's financial records and
related information are adequate to enable the Buyer to satisfy all requirements
of generally accepted accounting principles and of the Securities and Exchange
Commission (the "SEC") with regard to presentation and inclusion of the
Company's historical financial statements on an audited basis in connection with
filings and disclosures required to be made by the Buyer.
(k) STOCKHOLDER APPROVAL. The stockholders of Buyer shall have
approved, at their annual meeting scheduled for May 29, 1996, an amendment to
Buyer's Articles of Organization to increase Buyer's authorized shares of common
stock to a number sufficient to permit Buyer to issue the Brooktrout Shares set
forth in Section 1.2 hereof.
(l) ESCROW AGREEMENT. Each of Sellers, Buyer, the Company and
the Escrow Agent shall have executed and delivered the Escrow Agreement,
substantially in the form attached hereto as EXHIBIT H and the escrowed
Brooktrout Shares shall have been deposited with the Escrow Agent to be held in
escrow pursuant to the provisions of the Escrow Agreement.
(m) FINANCIAL STATEMENTS. The Company shall have delivered to
Buyer the following financial statements:
(i) Balance sheets of the Company for its fiscal year ended
on December 31, 1995 and statements of income, retained earnings and
cash flows for the years then ended, which statements are audited by
the Buyer's independent public accountant.
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(ii) An unaudited balance sheet dated as of April 30, 1996,
and statements of income, retained earnings and cash flows for the
period then ended.
The Sellers shall have delivered to Buyer a certificate of the
Company's President and Chief Financial Officer dated as of the date hereof to
the effect that said financial statements have been prepared in accordance with
generally accepted accounting principles applied consistently during the periods
covered thereby, are complete and correct in all material respects and present
fairly in all material respects the financial condition of the Company at the
dates of said statements and the results of its operations for the periods
covered thereby, subject, in the case of the April 30, 1996 balance sheet, to
normal year-end adjustments, which shall not be material in amount.
(n) EXERCISE OF STOCK OPTIONS. All of the outstanding stock
options set forth on EXHIBIT A shall have been exercised immediately prior to
the Merger.
7.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SELLERS. The
obligation of the Company and the Sellers to consummate this Agreement and the
transactions contemplated hereby is subject to the fulfillment or waiver, prior
to or at the Closing, of the following conditions precedent:
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of Buyer contained in Section 5 shall be true and
correct in all material respects as though made on and as of the Closing; Buyer
shall, on or before the Closing, have performed all of its obligations hereunder
which by the terms hereof are to be performed on or before the Closing; and
Buyer shall have delivered to the Company and the Sellers a certificate of the
President or any Vice President of Buyer dated on the Closing to such effect.
(b) NO LITIGATION. No action, proceeding or litigation shall
have been commenced against the Buyer, the Company or any of the Sellers which
reasonably questions the validity of the transactions contemplated by this
Agreement or the right of the Buyer, the Company or the Sellers to enter into
this Agreement.
(c) OPINION OF COUNSEL. On the Closing Date, the Company and the
Sellers shall have received from Goodwin, Procter & Hoar, LLP counsel for Buyer,
an opinion as of said date, in form attached hereto as EXHIBIT I.
(d) MINIMUM STOCK VALUATION. The average per share daily closing
price on the NASDAQ National Market System of the Common Stock of Buyer for the
period of five (5) business days ending two business days prior to the Closing
Date shall be equal to or greater than $16.67.
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SECTION 8. REGISTRATION RIGHTS.
- ------------------------------------
8.1 Registration of Brooktrout Shares.
---------------------------------
(a) Buyer shall prepare and file with the SEC as soon as
practicable a registration statement on the appropriate form (together with all
amendments and supplements to any such registration statement, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such registration statement (the
"Registration Statement") under the 1933 Act, and the rules and regulations
promulgated thereunder, for the registration (the "Registration") of the
secondary offering of 50% of the Brooktrout Shares for the account of the
Sellers (to apportioned among the Sellers on a pro rata basis). Buyer shall use
its reasonable efforts to have the Registration declared effective by the SEC on
or before the earlier of (a) the day after unaudited financial statements
covering at least thirty (30) days of the combined operations of Buyer and the
Company following the Acquisition have been published by Buyer or (b) the
ninetieth (90th) day following the Closing Date. Buyer shall take such steps as
are required to register such Brooktrout Shares for sale on a delayed or
continuous basis under Rule 415 of the 1933 Act and to keep such Registration
Statement continuously effective for a period of twenty-four (24) months
following the Closing Date, or such shorter period that will terminate when all
of the Brooktrout Shares have been sold by the Sellers (the "Trading Period").
While such Registration Statement remains in effect, Buyer may at any time
deliver to Sellers written notice to the effect that sales may not be effected
under the Registration Statement for a period of time (the "Blackout Period")
because of the existence of material facts not disclosed in such Registration
Statement and in the then-current prospectus included therein; upon receipt of
any such notice, Sellers shall refrain from selling any Brooktrout Shares under
such Registration Statement until they have received notice from Buyer to the
effect that such sales may then be effected; PROVIDED, HOWEVER, that the
Blackout Period shall not exceed, in aggregate, twenty (20) business days during
the first two months following the Closing Date. Buyer shall promptly update
such Registration Statement and the prospectus included therein in order to
permit the Brooktrout Shares to be sold, and the Trading Period shall
automatically be extended by a number of days equal to the number of days that
the Sellers were instructed to refrain from selling Brooktrout Shares pursuant
to the preceding sentence.
(b) Sellers shall cooperate with Buyer in connection with the
Registration and shall provide such information and execute such documents as
Buyer shall reasonably request in connection with the Registration.
(c) Buyer may in its sole discretion grant to any owner of
Brooktrout Shares registration rights of any kind or nature, provided that such
rights do not interfere with the rights of Sellers and the obligations of Buyer
under this Article 8.
8.2 SALE OF BROOKTROUT SHARES BY SELLER. If at any time any Seller
elects to sell all or any of his Brooktrout Shares, Seller shall conduct such
sales only through registered securities brokers ("Brokers").
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8.3 REGISTRATION EXPENSES. Buyer shall be responsible for and shall
pay all fees, costs and expenses incurred by it relating to the Registration,
including without limitation, all SEC and securities exchange, NASDAQ
registration and filing fees, and all fees and expenses of compliance by Buyer
with the federal securities laws or any applicable state blue sky laws, but not
including any fees and expenses of Sellers' counsel or otherwise incurred by
Sellers, and not including any fees or expenses paid to underwriters engaged by
any Seller.
8.4 Piggyback Registrations.
-----------------------
(a) RIGHT TO PIGGYBACK. At any time prior to the date two years
after the Closing, whenever the Buyer proposes to register any of its Common
Stock or securities convertible into or exchangeable or exercisable for Common
Stock ("Equity Securities") under the 1933 Act (other than pursuant to a
registration primarily for sales of securities to employees of the Buyer) or
otherwise sell any of its Equity Securities under Rule 144A under the 1933 Act,
Regulation S or other similar provision and the registration form or type of
offering to be used may be used for the registration or offering of Brooktrout
Shares, Buyer will give prompt written notice to all Sellers of its intention to
effect such a registration or offering (a "Piggyback Registration") and will
include in such registration any of the Brooktrout Shares registered or eligible
for registration pursuant to Section 8.1(a) and with respect to which the Buyer
has received written requests for inclusion therein within fifteen (15) days
after the receipt of the Buyer's notice except as set forth in paragraphs (c)
and (d) below, which written request may specify all or part of a holder's
Brooktrout Shares.
(b) PIGGYBACK EXPENSES. The types of expenses specified in
Section 8.3 will be paid by Buyer in all Piggyback Registrations.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration or offering on behalf of
the Buyer, and the managing underwriters advise Buyer in writing that in their
opinion the number of securities requested to be included in such registration
or offering exceeds the number which can be sold in such offering without
adversely affecting such underwriters' ability to effect an orderly distribution
of such securities, Buyer will include in such registration: first, the
securities Buyer proposes to sell, and second, all securities held by
stockholders of Buyer which Buyer has agreed to include therein (including the
Brooktrout Shares requested to be included in such registration or offering) pro
rata among the holders of such securities on the basis of the total number of
shares of Common Stock (or equivalents) held by such stockholders in each case.
(d) PRIORITY ON SECONDARY REGISTRATIONs. If a Piggyback
Registration is an underwritten secondary registration or offering on behalf of
holders of the Buyer's securities, and the managing underwriters advise Buyer in
writing that in their opinion the number of securities requested to be included
in such registration or offering exceeds the number which can be sold in such
offering without adversely affecting such underwriters' ability to effect an
orderly distribution of such securities, Buyer will include in such registration
or offering: first, the securities requested to be included therein by the
holders on whose behalf such
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registration or offering was initiated, and second, the Brooktrout Shares
requested to be included in such registration or offering and any other
securities requested to be included in such registration or offering by
stockholders of Buyer which Buyer has agreed to include therein, pro rata among
the holders of such securities on the basis of the number of shares of Common
Stock (or equivalents) represented by such holders. If any holder of Brooktrout
Shares who has requested inclusion in such registration or offering disapproves
of the terms of the underwriting, he or she may elect to withdraw therefrom by
written notice to Buyer, the underwriter and the holders of Brooktrout Shares
who initiated the offering.
(e) Buyer represents and warrants to Sellers that Exhibit C sets
forth the number of shares of Common Stock (or equivalents), excluding the
Brooktrout Shares, subject to piggyback registration rights that Buyer has
granted as of the Closing Date.
8.5 INDEMNIFICATION. Incident to any registration statement referred
to in this Section 8 and subject to applicable law, Buyer will indemnify and
hold harmless each underwriter, each holder of Brooktrout Shares so registered,
and each person who controls any of them within the meaning of Section 15 of the
1933 Act or Section 20 of the Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations promulgated thereunder, from and against any and all
losses, claims, damages, expenses and liabilities, joint or several (including
any investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they, or any of them, may become subject under the 1933 Act,
the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
arise out of or are based on (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement (including
any related preliminary or definitive prospectus, or any amendment or supplement
to such registration statement or prospectus), (ii) any omission or alleged
omission to state in such document a material fact required to be stated in it
or necessary to make the statements in it not misleading, or (iii) any violation
by Buyer of the 1933 Act, any state securities or "blue sky" laws or any rule or
regulation thereunder in connection with such registration, PROVIDED that Buyer
will not be liable to the extent that such loss, claim, damage, expense or
liability arises from and is based on an untrue statement or omission or alleged
untrue statement or omission made in reliance on and in conformity with
information furnished in writing to Buyer by such underwriter, holder or
controlling person expressly for use in such registration statement. With
respect to such untrue statement or omission or alleged untrue statement or
omission in the information furnished in writing to Buyer by such holder
expressly for use in such registration statement, such holder will indemnify and
hold harmless each underwriter, Buyer (including its directors, officers,
employees and agents), each other holder of Brooktrout Shares so registered, and
each person who controls any of them within the meaning of Section 15 of the
1933 Act or Section 20 of the Exchange Act, from and against any and all losses,
claims, damages, expenses and liabilities, joint or several, to which they, or
any of them, may become subject under the 1933 Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise to the
same extent provided in the immediately preceding sentence in an amount not to
exceed the amount of proceeds received by
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<PAGE> 43
such holder from the sale of Brooktrout Shares in such offering. Each party
entitled to indemnification under this Section 8.5 (the "Indemnified Party")
shall give notice to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom, provided that the Indemnified Party may participate in such
defense at such Indemnified Party's expense. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
with respect to such claim or litigation.
8.6 ADDITIONAL OBLIGATION OF HOLDERS OF REGISTRABLE SECURITIES.
Buyer shall have no obligation to register any Brooktrout Shares in an offering
in which Buyer is also registering securities for its own account unless the
holder of such Brooktrout Shares enters into an underwriting agreement in
customary form with the underwriter or underwriters selected for the offering by
Buyer (which shall not require the holder of Brooktrout Shares to indemnify the
underwriter with respect to misstatements or omissions in the registration
statement other than misstatements or omissions in written material supplied by
such holder expressly for inclusion in the registration statement) and, if
requested by the underwriter(s), an agreement appointing one or more (but not
more than three) persons approved by a majority in interest of the holders of
Brooktrout Shares whose shares are to be included in the registration statement,
to act as attorney-in-fact for such holder and as escrow agent for the
Brooktrout Shares to be included in the offering in customary form. In any
registered offering, each holder of Brooktrout Shares to be included in the
registration statement shall provide Buyer in a writing signed by such holder
such information about such holder as, in the opinion of securities counsel to
Buyer, shall be either necessary or appropriate to enable Buyer to comply with
the 1933 Act and applicable state securities laws. Such information shall be
provided to Buyer within a reasonable time after written request is made by
Buyer and shall be supplied by such holder whether or not any Brooktrout Shares
of such holder are to be included in the registration.
8.7 ADDITIONAL OBLIGATIONS OF THE BUYER. With respect to any
registration hereunder, the Buyer shall:
(a) Prepare and file with the SEC a registration statement with
respect to such securities and use reasonable efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby, including without limitation the extension of such period
of distribution by a period of days equal to the period during which any
suspension of trading is in effect;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as
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<PAGE> 44
may be necessary to comply with the provisions of the 1933 Act with respect to
the disposition of all securities covered by such registration statement;
(c) Furnish to the Sellers such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Brooktrout Shares owned by
them;
(d) Use reasonable efforts to qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably appropriate for the distribution of the
securities covered by the registration statement;
(e) use reasonable efforts to notify NASDAQ of the issuance of
the Brooktrout Shares covered by such registration statement; and
(f) notify each seller of Brooktrout Shares and each underwriter
under such registration statement as promptly as possible, at any time when a
prospectus relating thereto is required to be delivered under the 1933 Act, of
the happening of any event of which the Buyer has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes 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 therein
not misleading in light of the circumstances then existing.
8.8 REPORTS UNDER THE SECURITIES EXCHANGE ACT OF 1934. With a view
to making available to the Sellers the benefits of Rule 144 promulgated under
the 1933 Act and any other rule or regulation of the SEC that may at any time
permit a Seller to sell securities of the Buyer to the public without
registration, the Buyer agrees to use its reasonable efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;
(b) file with the SEC in a timely manner all reports and other
documents required of the Buyer under the 1933 Act and the Exchange Act; and
(c) furnish to any Seller forthwith upon request a written
statement by the Buyer that it has complied with the reporting requirements of
Rule 144 and of the 1933 Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Buyer, and such other reports and documents so
filed by the Buyer as may be reasonably requested in availing any Seller of any
rule or regulation of the SEC permitting the selling of any securities of the
Buyer held by it without registration.
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<PAGE> 45
SECTION 9. TERMINATION OF AGREEMENT; ABANDONMENT OF MERGER; RIGHTS TO
- --------------------------------------------------------------------------
PROCEED OR DEFER CLOSING.
------------------------
9.1 TERMINATION. At any time prior to the Closing, this Agreement
may be terminated, and the Merger thus abandoned, as follows:
(i) by mutual written consent of all of the parties to this
Agreement;
(ii) by Buyer, pursuant to written notice by Buyer to the
Company and the Sellers, if any of the conditions set forth in Section
7.1 of this Agreement have not been satisfied at or prior to the
Closing, or if it has become reasonably and objectively certain that
any of such conditions, other than a condition within the control of
the Company or any Seller, will not be satisfied at or prior to the
Closing, such written notice to set forth such conditions which have
not been or will not be so satisfied;
(iii) by the Company and the Sellers, pursuant to written
notice by the Company and the Sellers to Buyer, if any of the
conditions set forth in Section 7.2 of this Agreement have not been
satisfied at or prior to the Closing, or if it has become reasonably
and objectively certain that any of such conditions, other than a
condition within the control of Buyer, will not be satisfied at or
prior to the Closing, such written notice to set forth such conditions
which have not been or will not be so satisfied; and
(iv) by the Sellers if for any reason the Closing has not
occurred on or prior to June 15, 1996.
9.2 EFFECT OF TERMINATION. All obligations of the parties hereunder
shall cease, and the Merger shall be abandoned, upon any termination pursuant to
Section 9.1, provided, however, that (i) the provisions of this Section 9,
Section 4.9, Section 6.2, Section 12.1 and Section 12.9 hereof shall survive any
termination of this Agreement; (ii) nothing herein shall relieve any party from
any liability for a material error or omission in any of its representations or
warranties contained herein or a material failure to comply with any of its
covenants, conditions or agreements contained herein, if such error, omission or
failure was deliberate or willful (a "Deliberate Breach"); but in the absence of
a Deliberate Breach, the liability of the responsible party to the other party
shall be limited to out-of-pocket expenses incurred by the other party in
connection with negotiating, preparing and entering into this Agreement and
carrying out the transactions contemplated hereby (and in no event shall the
Company or the Sellers be liable for in excess of $300,000 in the aggregate) and
(iii) any party may proceed as further set forth in Section 9.3 below.
9.3 RIGHT TO PROCEED OR DEFER CLOSING. Anything in this Agreement to
the contrary notwithstanding, (a) if any of the conditions specified in Section
7.1 or Section 7.2(c) hereof have not been satisfied on or before the scheduled
date of Closing, Buyer shall have the right to proceed with the transactions
contemplated hereby without waiving any of its rights
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<PAGE> 46
hereunder or, at Buyer's option, defer the date of Closing from time to time to
a date selected by Buyer which shall be within a reasonable time following the
satisfaction of all such conditions that are not waived by Buyer and in any
event not later than June 15, 1996, and (b) if any of the conditions specified
in Section 7.2 or Section 7.1(f) hereof have not been satisfied, the Sellers
shall have the right to proceed with the transactions contemplated hereby
without waiving any of their rights hereunder or, at the option of the Sellers,
defer the date of Closing from time to time to a date selected by the Sellers
which shall be within a reasonable time following the satisfaction of all such
conditions that are not waived by the Sellers, and in any event not later than
June 15, 1996.
SECTION 10. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
- ------------------------------------------------------------
10.1 SURVIVAL OF WARRANTIES. Each of the representations, warranties,
agreements, covenants and obligations herein or in any schedule, exhibit,
certificate or financial statement delivered by any party to the other party
incident to the transactions contemplated hereby are material, shall be deemed
to have been relied upon by the other party and shall survive the Closing
regardless of any investigation and shall not merge in the performance of any
obligation by either party hereto; provided, however, that such representations
and warranties shall expire on the same dates as and to the extent that the
rights to indemnification with respect thereto under Section 11 shall expire.
SECTION 11. INDEMNIFICATION.
- -------------------------------
11.1 INDEMNIFICATION BY THE SELLERS. Subject to Section 8.5 hereof
(which shall constitute the exclusive indemnification for liability relating to
registration of securities pursuant to Section 8), Sellers jointly and severally
agree subsequent to the Closing to indemnify and hold the Company and Buyer
(individually a "Buyer Indemnified Party" and collectively the "Buyer
Indemnified Parties") harmless from and against any damages, liabilities,
losses, taxes, fines, penalties, costs, and expenses (including, without
limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) which may be sustained
or suffered by any of them arising out of or based upon any of the following
matters:
(a) fraud or a deliberate or wilful breach by the Company or any
Seller of any of their representations, warranties or covenants under this
Agreement or in any certificate, schedule or exhibit delivered pursuant hereto;
(b) any other breach of any representation, warranty or covenant
of the Company or any Seller under this Agreement or in any certificate,
schedule or exhibit delivered pursuant hereto, or by reason of any claim, action
or proceeding asserted or
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<PAGE> 47
instituted growing out of any matter or thing constituting a breach of such
representations, warranties or covenants; and
(c) any liability of the Company for Taxes arising from an event
or transaction prior to the Closing or as a result of the Closing which have not
been paid or provided for or reserved against by the Company, including without
limitation, any increase in Taxes due to the unavailability of any loss or
deduction claimed by the Company.
Sellers' obligation to indemnify Buyer under Sections 11.1(b) and 11.1(c) shall
expire on the earlier of (i) the first anniversary of the Closing Date or (ii)
the date of issuance of the first independent audit report on the financial
statements of the Buyer and the Company following the Closing Date.
11.2 INDEMNIFICATION BY BUYER. Subject to Section 8.5 hereof (which
shall constitute the exclusive remedy for liability relating to registration of
securities pursuant to Section 8), Buyer agrees, subsequent to the Closing and
for a period expiring on the first anniversary of the Closing, to indemnify and
hold the Sellers (individually a "Seller Indemnified Party" and collectively the
"Seller Indemnified Parties") harmless from and against any damages,
liabilities, losses and expenses (including, without limitation, reasonable fees
of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) which may be sustained or suffered by any of them
arising out of or based upon any breach of any representation, warranty or
covenant made by Buyer in this Agreement or in any certificate delivered by
Buyer hereunder, or by reason of any third-party claim, action or proceeding
asserted or instituted growing out of any matter or thing constituting such a
breach.
11.3 NOTICE; DEFENSE OF CLAIMS. An indemnified party may make claims
for indemnification hereunder by giving written notice thereof to the
indemnifying party within the period in which indemnification claims can be made
hereunder. If indemnification is sought for a claim or liability asserted by a
third party, the indemnified party shall also give written notice thereof to the
indemnifying party promptly after it receives notice of the claim or liability
being asserted, but the failure to do so shall not relieve the indemnifying
party from any liability except to the extent that it is prejudiced by the
failure or delay in giving such notice. Such notice shall summarize the bases
for the claim for indemnification and any claim or liability being asserted by a
third party. Within 20 days after receiving such notice the indemnifying party
shall give written notice to the indemnified party stating whether it disputes
the claim for indemnification and whether it will defend against any third party
claim or liability at its own cost and expense. If the indemnifying party fails
to give notice that it disputes an indemnification claim within 20 days after
receipt of notice thereof, it shall be deemed to have accepted and agreed to the
claim, which shall become immediately due and payable. The indemnifying party
shall be entitled to direct the defense against a third party claim or liability
with counsel selected by it (subject to the consent of the indemnified party,
which consent shall not be unreasonably withheld) as long as the indemnifying
party is conducting a good faith and diligent defense. The indemnified party
shall at all times have the
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<PAGE> 48
right to fully participate in the defense of a third party claim or liability at
its own expense directly or through counsel; provided, however, that if the
named parties to the action or proceeding include both the indemnifying party
and the indemnified party and the indemnified party is advised that
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, the indemnified party may engage
separate counsel at the expense of the indemnifying party. The indemnified party
shall not settle or compromise any claim by a third party for which it is
entitled to indemnification hereunder without the prior written consent of the
indemnifying party, which shall not be unreasonably withheld, unless suit shall
have been instituted against it and the indemnifying party shall not have taken
control of such suit after notification thereof as provided above. If no such
notice of intent to dispute and defend a third party claim or liability is given
by the indemnifying party, or if such good faith and diligent defense is not
being or ceases to be conducted by the indemnifying party, the indemnified party
shall have the right, at the expense of the indemnifying party, to undertake the
defense of such claim or liability (with counsel selected by the indemnified
party), and to compromise or settle it, exercising reasonable business judgment.
The indemnified party shall make available such information and assistance as
the indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense, at the expense of the indemnifying party.
11.4 LIMITATIONS OF LIABILITY; PAYMENT. None of the Sellers shall be
required to indemnify Buyer for any claims or liabilities hereunder if the
aggregate of such claims does not exceed $75,000 (the "Deductible Amount"),
whereupon Sellers shall be required to indemnify the indemnified party with
respect to the excess, if any, of the full amount of all such claims over the
Deductible Amount (the "Indemnification Amount"). Each of Sellers and Buyer
hereby agree that Buyer shall be reimbursed as follows:
(a) first, the Indemnification Amount shall be paid out of the
Escrowed Purchase Price pursuant to the Escrow Agreement;
(b) second, if the Indemnification Amount exceeds the Escrowed
Purchase Price, such excess shall be paid by Sellers to the Buyer in
cash, or, in lieu of cash, at Sellers' option, by tender to the Buyer
of an appropriate number of Brooktrout Shares, at the fair market value
thereof, determined in the same manner as set forth in the Escrow
Agreement (whether or not the Escrow Agreement is in force at such
time), until the Indemnification Amount exceeds $6 million; and
(c) finally, to the extent that the Indemnification Amount
otherwise exceeds $6 million, such excess shall be payable as follows
and shall be payable only after the second anniversary of the Closing
Date: at Sellers' option (i) by payment of such excess in cash or (ii)
by the tender to the Buyer of an appropriate number of Brooktrout
Shares, which shall be valued at the average per share daily closing
price on the NASDAQ National Market System for the period five (5)
business days ending two business days prior to the second anniversary
of the Closing Date (the "Second Anniversary Closing Price");
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PROVIDED that the liability of Sellers to Buyer under this Agreement shall in no
event exceed $12,000,000 in the aggregate or, in the event that the Sellers have
elected to tender Brooktrout Shares pursuant to Subsection 11.4(c), the
liability of Sellers to Buyer under this Agreement shall in no event exceed $6
million plus the product of the Second Anniversary Closing Price multiplied by
237,664 (which shall in no event exceed $12 million).
11.5 EXCLUSIVE REMEDY. The Buyer, the Company and the Sellers
acknowledge and agree that the provisions of this Article 11 shall be their
exclusive remedy for any damages arising out of or related to this Agreement.
Except as provided in this Article 11, no party shall have any right to money
damages for any breach of this Agreement or in contract, tort or otherwise
arising out of or related to this Agreement.
SECTION 12. MISCELLANEOUS.
- ------------------------------
12.1 Fees and Expenses.
-----------------
(a) Except as set forth in Section 9.2, each of the parties will
bear its own expenses in connection with the negotiation and the consummation of
the transactions contemplated by this Agreement, and no expenses of the Company
or the Sellers relating in any way to the Acquisition hereunder and the
transactions contemplated hereby, including without limitation legal, accounting
or other professional expenses of the Company or Seller, shall be charged to or
paid by the Company or Buyer.
(b) The Sellers will pay all costs incurred, whether at or
subsequent to the Closing, in connection with the Acquisition as contemplated by
this Agreement, including without limitation, all transfer taxes and charges
applicable to such transfer, and all costs of obtaining permits, waivers,
registrations or consents with respect to any assets, rights or contracts of the
Company.
12.2 GOVERNING LAW. This Agreement shall be construed under and
governed by the internal laws of the Commonwealth of Massachusetts without
regard to its conflict of laws provisions.
12.3 NOTICES. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, or if
sent by registered or certified mail, upon the sooner of the date on which
receipt is acknowledged or the expiration of five (5) days after deposit in
United States post office facilities properly addressed with postage prepaid.
All notices to a party will be sent to the addresses set forth below or to such
other address or person as such party may designate by notice to each other
party hereunder:
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<PAGE> 50
TO BUYER: Robert C. Leahy
- -------- Brooktrout Technology, Inc.
410 First Avenue
Needham, MA 02194
With a copy to: Goodwin, Procter & Hoar, LLP
Exchange Place
Boston, MA 02109
Attn: Thomas P. Storer, P.C.
TO COMPANY: Andrew Fox
- ---------- Technically Speaking, Inc.
333 Turnpike Road
Southborough, MA 01772
With a copy to: Lucash, Gesmer & Updegrove
40 Broad Street
Boston, MA 02109
Attention: William Contente, Esq.
TO ANY SELLER: [Seller's Name]
- ------------- Technically Speaking, Inc.
333 Turnpike Road
Southborough, MA 01772
With a copy to: Lucash, Gesmer & Updegrove
40 Broad Street
Boston, MA 02109
Attention: William Contente, Esq.
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
12.4 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by any of the parties
hereto except as referred to herein or in such Schedules and Exhibits or in such
other
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writings; and all inducements to the making of this Agreement relied upon by
either party hereto have been expressed herein or in such Schedules or Exhibits
or in such other writings.
12.5 ASSIGNABILITY; BINDING EFFECT. This Agreement may not be
assigned by Buyer without the written consent of the Sellers' Representative.
This Agreement may not be assigned by the Sellers or the Company without the
prior written consent of Buyer. This Agreement shall be binding upon and
enforceable by, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.
12.6 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
12.7 EXECUTION IN COUNTERPARTS. For the convenience of the parties
and to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
12.8 AMENDMENTS. This Agreement may not be amended or modified, nor
may compliance with any condition or covenant set forth herein be waived, except
by a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
12.9 PUBLICITY AND DISCLOSURES. No press releases or public
disclosure, either written or oral, of the transactions contemplated by this
Agreement, shall be made by a party to this Agreement without the prior
knowledge and written consent of Buyer and the Company.
12.10 CONSENT TO JURISDICTION. Each of the parties hereby consents to
personal jurisdiction, service of process and venue in the federal or state
courts of Massachusetts for any claim, suit or proceeding arising under this
Agreement, or in the case of a third party claim subject to indemnification
hereunder, in the court where such claim is brought.
12.11 SPECIFIC PERFORMANCE. The parties agree that it would be
difficult to measure damages which might result from a breach of this Agreement
by the Buyer, the Company or the Sellers and that money damages would be an
inadequate remedy for such a breach. Accordingly, if there is a breach or
proposed breach of any provision of this Agreement by the Buyer, the Company or
the Sellers, and the non-breaching party does not elect to terminate under
Section 9, the non-breaching party shall be entitled, in addition to any other
remedies which it may have, to an injunction or other appropriate equitable
relief to restrain such breach without having to show or prove actual damage to
the non-breaching party.
12.12 WAIVER OF STOCKHOLDER AGREEMENT. The Sellers and the Company
hereby waive all compliance with the Stockholders Agreement by and among the
Sellers, the Company and Neil R. Schauer as Trustee, dated November 20, 1995.
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12.13 Company's Tax Returns.
----------------------
(a) The Company shall make reasonable efforts to cause to be
prepared and filed, on or before the Closing Date, the Company's federal and
state income tax returns for the tax year ended December 31, 1995, at the
Company's expense. In the event that any such return is not filed on or before
the Closing Date, the Company shall make timely application for an extension of
time to file such return, and shall cause such return to be prepared and filed
on or before the extended due date.
(b) In no event later than June 12, 1996, the Company shall
cause to be prepared, at the Buyer's expense, draft federal and state income tax
returns for the Company for its short tax year ended on the Closing Date. Such
returns shall be prepared by Deloitte & Touche, LLP, or another firm of
certified public accountants acceptable to the Sellers. Provided that the
Sellers have, as provided in Section 12.14(b) hereof, received the first
installment payment of the dividend described in Section 12.14(a), such returns
shall be prepared on the accrual method of accounting and shall be accompanied
by a completed Form 3115; unless the prior consent of each of the Sellers is
obtained, the preparation of such returns shall otherwise be consistent with the
manner in which the Company's returns for prior tax years have been prepared.
Promptly upon preparation of such draft returns, copies thereof, together with
copies of the Company's financial and other information used to prepare them,
shall be forwarded to each of the Sellers. Within fourteen (14) days of receipt
of such returns and such information, each Seller shall give written notice to
the Company of any errors or any inconsistencies with the manner in which the
Company's prior tax returns have been prepared, believed by the Seller to exist
in either of such returns. The Sellers and the Company shall promptly thereafter
attempt in good faith to resolve any disagreement regarding items or matters
which any Seller believes to be in error, but which the Company believes to be
correct. Any disagreement which cannot be so resolved by June 30, 1996, other
than a good-faith disagreement over how the federal or state tax laws ought to
be interpreted, shall be referred by either party to the American Arbitration
Association to be settled by arbitration in Boston, Massachusetts in accordance
with the commercial arbitration rules of said Association. Unless otherwise
directed by the arbitrator, the fees and expenses of the arbitrator shall be
borne 50% by the Sellers and 50% by the Company. Any disagreement over how the
federal or state tax laws ought to be interpreted which cannot be resolved by
July 15, 1996, shall be resolved in favor of the Company's good-faith
interpretation. However, nothing contained in this Agreement shall be construed
as an agreement with respect to the preparation or filing of any individual
income tax return of any of the Sellers, or as a limitation of any sort on the
ability of any Seller to prepare and file his or her individual income tax
returns as the Seller sees fit. Promptly after any disagreements have been
resolved as provided above, the Company shall cause the Company's federal and
state income tax returns for the short year ended on the Closing Date to be
prepared, and shall cause such returns to be timely filed (by the original or
extended due dates), such returns to be substantially identical to the
agreed-upon draft returns.
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12.14 Payment of Tax Liabilities Dividends.
-------------------------------------
(a) Consistent with past dividend payment practices of the
Company, the Company shall declare a dividend to its shareholders of record as
of the day immediately preceding the Closing Date, for the purpose of
distributing an amount of cash to the Sellers approximately equal to the federal
and state tax liabilities of the Sellers resulting from the Company's operations
during the short tax year beginning January 1, 1996 and ending on the Closing
Date, calculated using the accrual method of accounting. Such dividend shall be
payable in cash in two installments on or after the Closing Date, as provided in
Paragraph (b) of this Section 12.14, and shall be in an aggregate amount to be
determined according to the following formula: forty-four percent (44%)
multiplied by the net pass-through income (as hereinafter defined) of the
Company for the period beginning January 1, 1996 and ending on the Closing Date.
For this purpose, "net pass-through income" shall mean the sum of (i) the
Company's nonseparately computed income as defined in Internal Revenue Code
Section 1366(a)(2), plus (ii) the Company's items of income described in
Internal Revenue Code Section 1366(a)(1) other than any tax-exempt income and
any net capital loss.
(b) The first installment of the dividend described in Paragraph
(a) of this Section 12.14 shall be paid not later than May 31, 1996. The amount
of such installment shall equal ninety percent (90%) of what the aggregate
amount of such dividend would be if it were determined, according to the formula
set forth in Paragraph (a), based on the Company's draft federal income tax
return required to be prepared under Section 12.13(b) hereinabove, including all
changes to such return that have been agreed to as of such date. The second
installment of such dividend shall be determined and paid promptly after any and
all disagreements regarding the preparation of the Company's federal income tax
return for the period ended on the Closing Date have been resolved as provided
in Section 12.13(b) and the Company's federal income tax return has been
prepared for filing as therein provided. The amount of such installment shall
equal the difference between (i) the aggregate amount of the dividend described
in Paragraph (a) of this Section 12.14, according to the formula therein set
forth and based on the Company's federal income tax return as so finally
prepared for filing, and (ii) the amount of the first installment payment as
hereinabove determined. Any payment required hereunder which is not paid by June
3, 1996, shall bear interest at the rate of ten percent (10%) per annum.
(c) Consistent with past dividend payment practices of the
Company, the Company has declared or shall declare a dividend to its
shareholders as described in Section 4.2(f) hereof. Any part of such dividend
which has not been paid prior to the Closing Date shall be paid on or promptly
after the Closing Date.
(d) The Buyer shall take all necessary actions to assure that
the Company has available funds with which to make each of the installment
payments provided for in Paragraphs (b) and (c) hereinabove.
49
<PAGE> 54
12.15 DATE OF AGREEMENT. Any reference to the "date of this Agreement"
or the "date of execution of this Agreement" contained herein shall be deemed to
refer to March 8, 1996.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
50
<PAGE> 55
IN WITNESS WHEREOF the parties hereto have caused this Amended and
Restated Agreement to be executed under seal, as of the date set forth above by
their duly authorized representatives.
BROOKTROUT TECHNOLOGY, INC.
By: /s/ Eric R. Giler
-----------------------------
Eric R. Giler
President
BROOKTROUT ACQUISITION CORP. ATTEST:
By: /s/ Eric R. Giler /s/ Robert C. Leahy
----------------------------- ------------------------------
Eric R. Giler Robert C. Leahy
President Treasurer
TECHNICALLY SPEAKING, INC. ATTEST:
By: /s/ Andrew Fox /s/ Beverly Fox
----------------------------- ------------------------------
Andrew Fox Beverly Fox
President Treasurer
SELLERS:
/s/ Andrew Fox
------------------------------
Andrew Fox
/s/ Beverly Fox
------------------------------
Beverly Fox
/s/ Robert Friedman
------------------------------
Robert Friedman
51
<PAGE> 56
<TABLE>
List Of Exhibits And Schedules
------------------------------
<CAPTION>
<S> <C>
Exhibit A: List of Sellers, Stockholdings and Consideration to be Paid
B: Representations Regarding Pooling
C: Warrants and Options for Brooktrout Common Stock
D: Opinion of Counsel for the Company and the Sellers
E: Non-Competition Agreement
F: FIRPTA Representation
G: Releases
H: Escrow Agreement
I: Opinion of Counsel for Buyer
</TABLE>
<TABLE>
<S> <C>
Schedule 2.3 Voting Agreements, etc.
2.6(a) Real Property
2.6(b) Personal Property
2.7 Financial Statements
2.8 Tax Disclosures
2.9 Affiliated Accounts Receivable
2.10 Inventories
2.11 Absence of Changes
2.13 Banking Arrangements
2.14 Intellectual Property
2.15 Contracts, etc.
2.16 Litigation
2.17 Compliance with Laws
2.18 Insurance
2.19 Warranty Claims
2.22 Permits, Burdensome Agreements
2.24 Transactions with Interested Persons
2.25 Employee Benefit Programs
2.26 Environmental Matters
2.27(a) Officers and Directors
2.27(b) Suppliers
2.30 Backlog
2.31 Labor Matters
2.32(a) Customers and Distributors
2.32(b) Suppliers
7.1 Consents To Be Obtained
</TABLE>
<PAGE> 57
EXHIBIT A
<TABLE>
List of Sellers, Stockholdings and Consideration to be Paid
-----------------------------------------------------------
<CAPTION>
================================================================================
OWNERSHIP
OF
NAME AND ADDRESS OF COMPANY BROOKTROUT SHARES TO BE
SELLER SHARES RECEIVED
- --------------------------------------------------------------------------------
<S> <C> <C>
ANDREW FOX 35,000 163,039
699 GROVE STREET
FRAMINGHAM, MA 01710
- --------------------------------------------------------------------------------
BEVERLY FOX 35,000 163,039
699 GROVE STREET
FRAMINGHAM, MA 01710
- --------------------------------------------------------------------------------
ROBERT FRIEDMAN 30,000 139,747
6 SAMUEL HARRINGTON ROAD
WESTBORO, MA 01581
================================================================================
</TABLE>
<TABLE>
Outstanding Stock Options
-------------------------
<CAPTION>
NAME OPTIONS HELD
- ---- ------------
<S> <C>
Raymond Phillips 765 shares, exercisable at $5.00 per share
Michael Tinglof 510 shares, exercisable at $5.00 per share
Joe Finegold 255 shares, exercisable at $5.00 per share
Diamentino Fidalgo 255 shares, exercisable at $5.00 per share
Michael Healy 255 shares, exercisable at $5.00 per share
</TABLE>
<PAGE> 1
EXHIBIT 2
ESCROW AGREEMENT
----------------
AGREEMENT dated as of May 29, 1996 by and among Brooktrout Technology,
Inc., a Delaware corporation ("Buyer"), Andrew Fox, Beverly Fox, Robert
Friedman, (collectively the "Sellers"), Beverly Fox as the designated
representative of the Sellers (the "Sellers' Representative") and Fleet National
Bank, a national banking association, as escrow agent (the "Escrow Agent").
WITNESSETH:
----------
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Agreement"),
dated as of March 8, 1996, by and among Buyer, the Sellers and Technically
Speaking Inc. (the "Company"), Buyer is acquiring all of the outstanding common
stock of the Company, which is currently held by the Sellers, as set forth in
the Agreement; and
WHEREAS, the Sellers have agreed to indemnify Buyer against breaches of
the representations, warranties and covenants made by the Sellers and the
Company in the Agreement and against certain other matters as specified in
Section 11 of the Agreement;
WHEREAS, to secure partially the payment of the indemnification
obligations of the Sellers, the Sellers are depositing with the Escrow Agent 10%
of the shares of common stock of Buyer payable to the Sellers under the
Agreement to be held in escrow as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises of the parties herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. ESTABLISHMENT OF ESCROW. Sellers have herewith deposited with the
Escrow Agent and the Escrow Agent acknowledges receipt of certificates for
46,582 shares of common stock of Buyer (hereafter with any other securities,
cash or other property delivered to or held by the Escrow Agent under the terms
hereof referred to as the "Escrow Fund"). Any common stock of Buyer or other
securities from time to time held in the Escrow Fund shall be registered in the
name of the Escrow Agent or its nominee. The Escrow Fund shall be held by the
Escrow Agent in escrow subject to the terms and conditions set forth herein.
2. DIVIDENDS AND DISTRIBUTIONS; INVESTMENT OF CASH; VOTING OF SHARES.
Any securities or other property (except ordinary cash dividends) issued with
respect to, or in exchange for, any securities held in the Escrow Fund, shall
become a part of the Escrow Fund and shall be held hereunder upon the same
terms as the securities with respect to or in exchange for which such
securities shall have been issued. Any rights to purchase securities
distributed from time to time on the shares held in the Escrow Fund shall be
sold promptly by the Escrow Agent and the proceeds of such sale shall be added
to the Escrow Fund. All cash
* The certificates set forth on Exhibit A hereto have been delivered to the
Escrow Agent in the names of the Sellers, accompanied by executed stock
powers by Beverly Fox and Robert U. Friedman in favor of the Escrow Agent.
As of the date hereof, a stock power by Andrew Fox has not been delivered to
the Escrow Agent.
<PAGE> 2
dividends on securities held in the Escrow Fund shall not constitute part of the
Escrow Fund but shall be distributed by the Buyer directly to Sellers. The
Escrow Agent shall invest any cash held in the Escrow Fund as directed in
writing by the Sellers in U.S. Government obligations or bank certificates of
deposit, and it shall not be responsible for any loss incurred upon any such
investment made in accordance with such instructions; provided however, until
written instructions are received from the Sellers' Representative by the Escrow
Agent to the contrary, all cash held in the Escrow Fund shall be invested in
automatic sweep vehicles investing primarily in U.S. Treasury Obligations
including the Federated Treasury Obligation Fund. In the event of any meeting of
stockholders of Buyer during the term of this Agreement, the Escrow Agent shall
send to the Sellers' Representative (as defined in the Agreement), promptly (but
in no event later than seven (7) days after receipt from the Buyer), copies of
any notices, proxies and proxy material in connection with such meeting. The
Escrow Agent shall execute and deliver to the Sellers' Representative a proxy
authorizing Sellers to vote the whole number of shares of common stock of the
Buyer in the Escrow Fund. Any of the shares of common stock of the Buyer held in
the Escrow Fund as to which the Escrow Agent receives no direction shall not be
voted. The parties hereby authorize the Escrow Agent to apply to Buyer's
transfer agent, Fleet National Bank, or any successor transfer agent.
3. CLAIMS AGAINST ESCROW FUND. At any time or times prior to the
earlier of (i) the first anniversary of May 29, 1996 (the "Closing Date") or
(ii) the date of issuance of the first independent audit report on the financial
statements of the Buyer and the Company following the Closing Date (the
"Independent Audit Reports"), Buyer may make claims against the Escrow Fund for
indemnification pursuant to the Agreement. Buyer shall notify the Sellers'
Representative and the Escrow Agent in writing of each such claim specifying the
amount and basis thereof. If the Sellers shall dispute such claim, the Sellers
Representative shall give written notice of such objection to Buyer and the
Escrow Agent within thirty (30) days after receipt of notice of Buyer's claim;
otherwise, such claim shall be deemed to have been acknowledged to be payable in
the full amount thereof and shall be paid forthwith to Buyer by delivery of
shares of Buyer's common stock or other property or both (taking proportionately
from each class of shares or property held in the Escrow Fund) having a fair
market value (determined as hereafter provided) equal to the amount of such
claim. A notice of claim is deemed received on the second business day after the
date of the postmark on the registered or certified mail (postage prepaid,
return receipt requested) containing the notice of claim. The Escrow Agent shall
not be deemed to have received the notice until it has been actually received by
the Corporate Trust Department.
4. DISPUTED CLAIMS. If the Sellers shall dispute an indemnification
claim of Buyer or the Company as above provided, the Escrow Agent shall set
aside a portion of the Escrow Fund whose fair market value is sufficient to pay
said claim in full. If the disputed claim has not been resolved or compromised
within sixty (60) days after the notice of dispute of the same, said claim shall
be referred by either party to the American Arbitration Association (the
"Association"), to be settled by arbitration in Boston, Massachusetts in
accordance with the commercial arbitration rules of the Association, and
judgment upon the award rendered by the
2
<PAGE> 3
arbitrator may be entered in any court having jurisdiction thereof. Unless
otherwise directed by the arbitrator, the fees and expenses of the arbitrator
shall be borne 50% by Buyer and 50% by the Sellers. The determination of the
arbitrator as to the amount, if any, of the indemnification claim which is
properly allowable, shall be conclusive and binding upon the parties hereto and
shall be forthwith paid by the Escrow Agent to Buyer out of the Escrow Fund at
the fair market value of the property held therein.
5. FAIR MARKET VALUE OF ESCROW FUND. For the purposes of this
Agreement, the fair market value of the property held in the Escrow Fund shall
be conclusively determined by the Escrow Agent at the time of each payment or
distribution to be made out of the Escrow Fund and at the time of setting aside
of a portion of the Fund for such payments; provided, that shares of common
stock of Buyer shall be valued at $25.17 per share during the term of this
Escrow Agreement. The Escrow Agent will not accept securities other than the
common stock of Buyer unless accompanied by a written statement setting forth
the per share value of such securities.
6. TERMINATION. This Agreement shall terminate on the earlier of (i)
the first anniversary of the Closing Date or (ii) the date of issuance of the
Independent Audit Reports; PROVIDED, HOWEVER, that if there are outstanding
indemnification claims on such date, this Agreement shall continue in effect
until all indemnification claims made by Buyer pursuant to Section 4 hereof
prior to said date shall have been disposed of. Buyer shall notify the Escrow
Agent in writing of the issuance of the Independent Audit Reports. As of the
Termination Date, shares of common stock of Buyer or other property in the
Escrow Fund having a fair market value equal to 110% of the amount of all
disputed and undisputed claims made by Buyer pursuant to Section 4 hereof,
rounded up to the nearest whole share, will be held by the Escrow Agent and the
Escrow Agent shall distribute within five (5) business days of the Termination
Date the balance of the Escrow Fund, if any, then held by it to the Sellers
based on their pro rata interest as set forth on EXHIBIT A hereto. At such time
as all remaining indemnification claims hereunder have been resolved, the Escrow
Agent shall distribute the remaining Escrow Fund, if any, to the Sellers within
five (5) business days of the resolution of the last indemnification claim
hereunder.
7. THE ESCROW FUND. Notwithstanding anything herein to the contrary,
the Escrow Agent shall promptly dispose of all or any part of the Escrow Fund as
directed by a writing signed by the Sellers' Representative AND Buyer. The
reasonable fees and expenses of the Escrow Agent, including the fees and
disbursements of its counsel, in connection with its performance of this
Agreement shall be paid by Buyer and, unless so paid, shall be deducted from any
payments to Buyer from the Escrow Fund. The Escrow Agent shall be jointly and
severally indemnified and held harmless by Buyer and the Sellers for all losses,
damages and expenses (including, without limitation, all expenses reasonably
incurred in investigation and defense and costs and expenses reasonably incurred
in enforcing this right to indemnification) that it may incur as a result of its
acceptance of this Escrow Agreement and any action taken in connection herewith;
PROVIDED, HOWEVER, that the Escrow Agent shall not be indemnified
3
<PAGE> 4
hereunder and may be liable to the parties hereto for any action taken in
connection herewith by the Escrow Agent that constitutes gross negligence or
willful misconduct. The Escrow Agent may conclusively rely, and shall be
protected in acting or refraining from acting upon, any written notice,
certificate, request, waiver, consent, receipt or other paper or document
furnished to it, not only as to its due execution and validity and effectiveness
of its provisions but also to the truth and accuracy of any information therein
contained which the Escrow Agent reasonably believes to be genuine and to have
been signed and presented by the proper party or parties. Should it be necessary
for the Escrow Agent to act upon any instructions, directions, documents or
instruments issued or signed by or on behalf of another party thereto,
fiduciary, or individual acting on behalf of another party hereto, it shall not
be necessary for the Escrow Agent to inquire into such corporation's,
fiduciary's, or individual's authority, capacity, existence or identity. The
Escrow Agent is also relieved from the necessity of satisfying itself as to the
authority of the person executing this Escrow Agreement in a representative
capacity. It is understood that any references herein to joint instructions or
written instructions or words of similar import include any instructions signed
in counterpart. The Escrow Agent's duties shall be determined solely with
reference to this Escrow Agreement and applicable laws, and the Escrow Agent is
not charged with knowledge of or any duties or responsibilities in connection
with any other document or agreement.
8. RESIGNATION OF ESCROW AGENT. The Escrow Agent shall have the right
at any time to resign hereunder by giving written notice of its resignation to
the parties hereto at the addresses set forth herein or at such other address as
the parties shall provide, at least thirty (30) business days prior to the date
specified for such resignation to take effect; and upon the effective date of
such resignation, all shares of Buyer's common stock and other payments and all
other property then held by the Escrow Agent hereunder shall be delivered by it
to such successor escrow agent or as otherwise shall be designated in writing by
the parties hereto. In the event that no successor Escrow Agent is appointed and
no other written designation is received by the end of the thirty (30) business
day notice period, the Escrow Agent may apply to a court of competent
jurisdiction for such appointment.
9. INTERPLEADER. In the event that the Escrow Agent shall at any time
be confronted with inconsistent claims or demands by the parties hereto, the
Escrow Agent shall have the right to interplead said parties in any court of
competent jurisdiction and request that such court determine such respective
rights of the parties with respect to this Agreement, and upon doing so, the
Escrow Agent automatically shall be released from any obligations or liability
as a consequence of any such claims or demands, except that the Escrow Agent
shall not be released from any liability for its gross negligence or willful
misconduct occurring during the time that it served as Escrow Agent.
10. REMOVAL OF ESCROW AGENT. Both (a) Buyer and (b) the Sellers, acting
together, shall have the right to remove the Escrow Agent hereunder by giving
notice in writing to the Escrow Agent, specifying the date upon which such
removal shall take effect. In the event of
4
<PAGE> 5
such removal, the parties agree that the parties effecting such removal will
jointly appoint a successor Escrow Agent within thirty (30) days after the
giving of such notice and the Escrow Agent hereby agrees that, upon receiving
joint written instructions from the Sellers and Buyer, it shall turn over and
deliver to such successor Escrow Agent all of the Escrow Fund, and other
property held by it pursuant to this Agreement in accordance with the terms of
such written instructions.
11. SUCCESSOR ESCROW AGENT. Upon receipt of the Escrow Fund,
undistributed Interest, and any other amounts held by the Escrow Agent pursuant
to this Agreement, the successor escrow agent shall thereupon be bound by all of
the provisions hereof and the term "Escrow Agent" as used herein shall mean such
a successor escrow agent.
12. MISCELLANEOUS. This Agreement shall be construed under and governed
by the laws of The Commonwealth of Massachusetts and shall inure to the benefit
of and be binding upon the successors, assigns, heirs and personal
representatives of the parties hereto. The Escrow Agent may execute any of its
powers or responsibilities hereunder and exercise any of its rights hereunder
either directly or by or through its agents or attorneys. Nothing in this
Agreement shall be deemed to impose upon the Escrow Agent the duty to qualify to
do business or to act as fiduciary or otherwise in any jurisdiction other than
The Commonwealth of Massachusetts.
13. NOTICES. Any notice to a party hereto pursuant to this Agreement
shall be given by certified or registered mail addressed as follows:
TO BUYER:
--------
Robert Leahy
Brooktrout Technology, Inc.
410 First Avenue
Needham, MA 02194
With a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attention: Thomas P. Storer, P.C.
5
<PAGE> 6
TO THE SELLERS:
--------------
Beverly Fox
Technically Speaking, Inc.
333 Turnpike Road
Southborough, MA 01772
With a copy to:
Lucash, Gesmer & Updegrove
40 Broad Street
Boston, MA 02109
Attention: William Contente, Esq.
TO THE ESCROW AGENT:
-------------------
Fleet National Bank
One Federal Street
Boston, MA 02211
Attention: Corporate Trust Division
or to such other address of which any party may by certified or registered mail
notify all other parties.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which documents shall be considered one and the same
document.
15. CONSENTS, WAIVERS AND ACTIONS BY SELLERS. Each of the Sellers
expressly acknowledges and agrees that any consent or approval required or
permitted to be given by the Sellers under this Agreement or any other agreement
executed in connection with the transactions contemplated hereby, may be given,
and any term or condition of this Agreement or any other agreement executed in
connection with the transactions contemplated hereby, may be amended, and the
performance or observance by the Buyer or the Escrow Agent of any term of this
Agreement or any other agreement executed in connection with the transactions
contemplated hereby, may be waived (either generally or in a particular instance
and either retrospectively or prospectively), by the Seller's Representative or
those Sellers holding at least fifty-one percent of the outstanding Brooktrout
Shares (as defined in the Agreement) as of the date hereof (the "Majority
Sellers"), and any such consent, approval, amendment or waiver by the Seller's
Representative or Majority Sellers shall be binding upon each and every Seller
regardless of whether each and every Seller received notice of, or is in favor
of, such consent, approval, amendment or waiver.
6
<PAGE> 7
16. MERGER OR CONSOLIDATION OF ESCROW AGENT. Any corporation into which
the Escrow Agent or any successor Escrow Agent may be merged or with which it
may be consolidated, or any corporation resulting from any merger or
consolidation to which the Escrow Agent or any successor Escrow Agent shall be a
party, or any corporation succeeding to the corporate trust business of the
Escrow Agent or any successor Escrow Agent, shall be the successor to the Escrow
Agent under this Escrow Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Escrow Agent under
the provisions hereof.
17. TAXES. The Sellers shall deliver to the Escrow Agent all federal
and state tax forms reasonably requested by the Escrow Agent.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be
executed by their duly authorized representatives, as of the date first written
above.
BROOKTROUT TECHNOLOGY, INC.
By: /S/ ROBERT C. LEAHY
-------------------------------
Name: Robert C. Leahy
Title: President
TECHNICALLY SPEAKING, INC.
By: /S/ ANDREW FOX
-------------------------------
Name: Andrew Fox
Title: President
SELLERS
/S/ ANDREW FOX
----------------------------------
/S/ BEVERLY FOX
----------------------------------
/S/ ROBERT FRIEDMAN
----------------------------------
SELLERS' REPRESENTATIVE
/S/ BEVERLY FOX
----------------------------------
Beverly Fox
FLEET NATIONAL BANK
as Escrow Agent
By: /S/ ROBERT L. BICE II
-------------------------------
Name: Robert L. Bice II
Title: Vice President
8
<PAGE> 9
<TABLE>
EXHIBIT A
---------
<CAPTION>
================================================================================
NAME AND ADDRESS OF PERCENTAGE BROOKTROUT SHARES TO BE
SELLER OF SHARES PLACED IN ESCROW
- --------------------------------------------------------------------------------
<S> <C> <C>
ANDREW FOX 35% 16,304
699 GROVE STREET
FRAMINGHAM, MA 01710
BEVERLY FOX 35% 16,304
699 GROVE STREET
FRAMINGHAM, MA 01710
ROBERT FRIEDMAN 30 % 13,975
6 SAMUEL HARRINGTON ROAD
WESTBORO, MA 01581
================================================================================
</TABLE>
9
