<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event
reported): July 10, 1996
MAI SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-9158 22-2554549
(I.R.S. employer (Commission file number)
identification number)
9600 Jeronimo Road, Irvine, CA 92718
(Address of principal (Zip Code)
executive offices)
(714) 580-0700
(Registrant's telephone number
including area code)
<PAGE>2
Item 5. Other Events.
Pursuant to an Asset Purchase Agreement, dated as of June 30, 1996,
as amended by Amendment No. 1 to Asset Purchase Agreement, dated July 10, 1996
(as amended, the "Asset Purchase Agreement"), MAI Systems Corporation (the
"Company") agreed to acquire substantially all the assets and certain
liabilities of Hotel Information Systems, Inc. ("HIS"). The closing of the
acquisition is subject to certain conditions and is currently expected to take
place on or about August 9, 1996.
The assets to be acquired from Hotel Information Systems, Inc. are
to be used in the business of software design, engineering and service relating
to hotel information systems. The assets also include the subsidiaries of HIS in
Singapore, Hong Kong, Australia and Mexico. As of March 31, 1996, the value of
the acquired assets and assumed liabilities would have been approximately $9.8
million and $15.3 million, respectively.
As consideration for the assets received from HIS, the Company will
issue shares of Common Stock with a value of $10.9 million to HIS upon the
closing of the Asset Purchase Agreement. The Company will also issue shares of
Common Stock with a value of approximately $1.2 million to a holder of one of
the assumed debt liabilities of HIS in satisfaction of such liability. Such
shares (the "Consideration Shares") are expected to be (i) a number of shares of
Common Stock (the "Ordinary Consideration Shares") equal in value to $4,600,000
(497,298 shares at the Per Share Price) based on the Per Share Price, rounded up
to the nearest whole share, (ii) a number of shares of Common Stock (the
"Put/Call Consideration Shares") equal in value to $6,300,000 (681,082 shares at
the Per Share Price) based on the Per Share Price, rounded up to the nearest
whole share, and (iii) a number of Put/Call Consideration Shares equal in value
to $1,192,549 (128,925 shares at the Per Share Price). The Per Share Price
initially is $9.25 and increases periodically following the closing of the
acquisition based on the yield of U.S. government securities. The actual number
of Consideration Shares to be issued is subject to change based on certain
purchase price adjustments. Based on current expectations, the Company will
issue approximately 1.3 million shares in the acquisition and will have
approximately [8.0] million shares of Common Stock outstanding upon closing of
the acquisition.
The 1,307,305 Consideration Shares will be delivered to an escrow
agent pursuant to an Escrow Agreement (the "Escrow Agreement"), to be entered
into among the Company, HIS and such escrow agent, to be held in escrow pending
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(i) in the case of all Consideration Shares, resolution of purchase price
adjustments following the closing of the acquisition, (ii) in the case of
Ordinary Consideration Shares, resolution of disputes prior to the first
anniversary of the closing of the acquisition, or (iii) in the case of Put/Call
Consideration Shares, sale of such shares pursuant to a registration statement
or any put or call of such shares as described below.
All of the Consideration Shares will be entitled to certain demand
and piggyback registration rights contained in a Put/Call and Registration
Rights Agreement (the "Put/Call and Registration Rights Agreement"), to be
entered into between the Company and HIS. Any of the 810,007 Put/Call
Consideration Shares may be called at the Per Share Price upon exercise of the
registration rights applicable to such shares pursuant to the Put/Call and
Registration Rights Agreement. The Company may not exercise such call right
directly but may transfer such right to a third party (the "Caller"). If such
call right is not exercised by a Caller and the Put/Call Consideration Shares
are sold pursuant to a registration statement during the five years after the
closing of the acquisition, the amount of Put/Call Consideration Shares may
increase or decrease depending on whether the price at which such shares are
sold is below or above the Per Share Price. Five years after the closing of the
acquisition, the Put/Call Consideration Shares not previously disposed of may be
called by the Company or may be put to the Company at the Per Share Price.
The Agreement and Amendment No. 1 to the Agreement are filed as
Exhibits 1 and 2. The forms of the Escrow Agreement and the Put/Call and
Registration Rights Agreement are filed as Exhibits 3 and 4. The press release
announcing the execution of the Agreement is filed as Exhibit 5.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: July 23, 1996
MAI SYSTEMS CORPORATION
(Registrant)
By:
Name: Stanley P. Witkow
Title: Vice President Corporate and
Legal Affairs and Secretary
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<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit
Number Exhibit
<S> <C>
1 Asset Purchase Agreement, dated as of June 30,
1996, between MAI Systems Corporation and Hotel
Information Systems, Inc.
2 Amendment No. 1 to Asset Purchase Agreement,
dated July 10, 1996.
3 Form of Escrow Agreement.
4 Form of Put/Call and Registration Rights
Agreement.
5 Press Release issued July 11, 1996.
</TABLE>
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<PAGE>
==============================================================================
ASSET PURCHASE AGREEMENT
Dated as of June 30, 1996
Between
HOTEL INFORMATION SYSTEMS, INC.
and
MAI SYSTEMS CORPORATION
===========================================================================
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<PAGE>
TABLE OF CONTENTS
ARTICLE I
Acquisition and Disposition Page
1.1. Transfer of Assets............................................ 1
1.2. Excluded Assets............................................... 4
1.3. Assumed Liabilities........................................... 5
1.4. Non-Assumed Liabilities....................................... 7
1.5. Sales and Transfer Taxes...................................... 8
ARTICLE II
Transfer of Assets; Delivery of Documents
2.1. Consideration for Assets...................................... 9
2.2. The Consideration Shares...................................... 9
2.3. Delivery of Assets............................................ 9
2.4. Delivery of Other Documents................................... 9
2.5. Preliminary Closing Balance Sheet; Final
Closing Balance Sheet; Adjustments to
Consideration Shares............................................10
ARTICLE III
Representations and Warranties
3.1. Representations and Warranties of the
Company........................................................ 12
(a) Corporate Organization and Qualifica-
tion.................................................. 12
(b) Authorized Capital of Acquired
Subsidiaries.......................................... 13
(c) Corporate Authority................................... 13
(d) Governmental Filings; No Violations................... 15
(e) Financial Statements.................................. 15
(f) Absence of Certain Changes............................ 15
(g) Title to Assets; Leaseholds........................... 16
(h) Compliance with Laws.................................. 17
(i) Proprietary Rights.................................... 17
(j) Contracts............................................. 18
(k) Employee Matters...................................... 18
(l) Employee Benefits and Obligations..................... 19
(m) Litigation and Liabilities............................ 20
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Page
(n) Brokers and Finders................................... 20
(o) Environmental Matters................................. 20
(p) Taxes................................................. 21
(r) Accounts Receivable and Payable....................... 22
(s) Condition of the Assets............................... 22
(t) Bankruptcy Proceedings................................ 22
(u) Customers and Suppliers............................... 23
(v) No Misstatements or Omissions......................... 23
(w) Investment............................................ 23
(x) Software License Contracts............................ 23
3.2. Representations and Warranties of the
Purchaser............................................. 24
(a) Corporate Organization and
Qualification......................................... 24
(b) Corporate Authority................................... 24
(c) Governmental Filings; No Violations................... 24
(d) Purchaser Reports..................................... 25
(e) Capitalization........................................ 25
(f) Absence of Material Adverse Change.................... 25
ARTICLE IV
Covenants
4.1. Interim Operations of the Company.............................. 26
4.2. Acquisition Proposals.......................................... 27
4.3. Filings; Other Action.......................................... 28
4.4. Access......................................................... 29
4.5. Notification of Certain Matters................................ 29
4.6. Publicity...................................................... 30
4.7. Employees...................................................... 30
4.8. Agreement Not to Compete....................................... 31
(a) Agreement............................................. 31
(b) No Solicitation....................................... 31
(c) Separate Covenants.................................... 32
(d) Reformation........................................... 32
4.9. Bulk Transfer or Sales......................................... 32
4.10. Corporate Name................................................. 33
4.11. Covenants of the Purchaser..................................... 33
4.12. Insurance Policies............................................. 34
ARTICLE V
Closing; Closing Conditions
5.1. Closing........................................................ 34
5.2. Conditions to Obligations of the Purchaser..................... 34
(a) Governmental Consents................................. 34
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Page
(b) Litigation............................................ 35
(c) Compliance; Consents.................................. 35
(d) Other Obligations..................................... 35
(e) Financial Statements and Other........................ 35
(f) Preliminary Closing Balance Sheet..................... 35
(g) No Material Adverse Change............................ 36
5.3. Conditions to Obligations of the Company....................... 36
(a) Governmental Consents................................. 36
(b) Order................................................. 36
(c) Compliance............................................ 36
(d) Other Obligations..................................... 37
(e) American Stock Exchange............................... 37
(f) Tax Opinion........................................... 37
ARTICLE VI
Indemnification
6.1. The Company's Indemnification.................................. 37
6.2. The Purchaser's Indemnification................................ 37
6.3. Indemnification Procedure...................................... 37
6.4. Minimum Claims................................................. 38
6.5. Consideration Shares........................................... 38
6.6. Exclusive Remedy............................................... 39
ARTICLE VII
Termination
7.1. Termination by Mutual Consent................................. 39
7.2. Termination by Either the Purchaser or the
Company....................................................... 39
7.3. Termination by the Purchaser.................................. 39
7.4. Termination by the Company.................................... 39
7.5. Effect of Termination and Abandonment......................... 40
ARTICLE VIII
Miscellaneous and General
8.1. Payment of Expenses........................................... 40
8.2. Survival...................................................... 40
8.3. Amendment; Waiver............................................. 40
8.4. Counterparts.................................................. 41
8.5. GOVERNING LAW................................................. 41
8.6. Notices....................................................... 41
8.7. Entire Agreement, etc......................................... 42
8.8. Captions...................................................... 42
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Annexes
A Definitions
B Form of Escrow Agreement
C Form of Put/Call and Registration Rights Agreement
D Form of Consulting Agreement
E Form of Non-Competition Agreement
F Form of Opinion of Counsel to Company
G Form of Opinion of Foreign Counsel to Company
H Form of Restrictive Legends
I Form of Power of Attorney
J Interim Balance Sheet
K Form of Employee Services Agreement
Schedules
1.1(g) Acquired Subsidiaries
1.3(a) Assumed Current Liabilities
1.3(e) Other Liabilities
1.3(f) Other Liabilities -- Schedule to be provided later
3.1 Exception Schedule
3.1(d) Consents -- Schedule to be provided later
3.1(g) Leases
3.1(i) Proprietary Rights
3.1(j) Contracts
3.1(k) Employees
3.1(l) Employee Benefit Plans
3.1(m) Litigation and Liabilities
3.1(p) Asset Tax Basis -- Schedule to be provided later
3.1(q) Insurance -- Schedule to be provided later
3.1(u) Customers and Suppliers
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<PAGE>
ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of June
30, 1996, between Hotel Information Systems, Inc., a California corporation (the
"Company"), and MAI Systems Corporation, a Delaware corporation (the
"Purchaser").
RECITALS
WHEREAS, the Company is the owner of certain assets, more particularly
described in this Agreement, used by it in the business of software design,
engineering and service relating to hotel information systems;
WHEREAS, the Purchaser wishes to purchase those assets and is willing to
assume certain associated obligations and the Company is willing to sell those
assets on the terms and conditions set forth herein;
WHEREAS, the Company and the Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement and the Ancillary Agreements; and
WHEREAS,
capitalized terms used herein shall have the meanings set forth in Annex A.
NOW, THEREFORE, in consideration of the premises, and of the representations,
warranties, covenants and agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE I
Acquisition and Disposition
1.1. Transfer of Assets. On the terms and conditions contained in this
Agreement, the Company shall at the Closing convey, transfer, assign and deliver
to the Purchaser, and the Purchaser shall acquire and receive and become the
owner of (such acquisition and disposition, the "Sale"), all of the assets,
properties and rights owned and used or held for use by the Company other than
the Excluded Assets (collectively, the "Assets"). The Assets shall include (i)
all assets (other than the Excluded Assets) of the Company reflected in the
Final Closing Balance Sheet, (ii) the stock of the Acquired Subsidiaries to the
extent set forth in Section 1.1(g) below and Schedule 1.1(g) and (iii) all other
assets (other than the Excluded Assets) owned and used by the Company in its
business and operations, including (whether or not reflected in the Final
Closing Balance Sheet) the Company's entire right, title and interest in and to
the following, as applicable, as the same shall exist on the Closing Date: (a)
all cash and cash equivalents held by the Company other than as set forth in
Section 1.2(a);
(b) all trade accounts, notes and Contract
receivables, including, without limitation,
the intercompany receivables (the
"Intercompany Receivables"), of the Company
it being understood and agreed that the
Purchaser shall have the right and authority
to collect for its own account all such
receivables and to endorse with the name of
the Company any checks received on account
of any such receivables;
(c) all inventories of finished goods, work in process,
materials, stores, replacements, spare and
component parts, office and operating supplies,
samples and packaging materials;
(d) all prepaid assets, including travel
advances, customer reimbursable costs,
deposits and other prepaid assets;
(e) all furniture, fixtures, equipment and
computer software;
(f) all other property, plant and equipment and
assets, including prepaid royalties and
deposits;
(g) the stock of the subsidiaries listed on Schedule
1.1(g) (the "Acquired Subsidiaries"), provided that
the Purchaser shall only acquire, directly, the
stock of those subsidiaries so listed that is
directly owned by the Company;
(h) all rights under any partially or totally executory
contracts, Leases, equipment leases, notes,
indentures, mortgages, distribution agreements,
licenses, franchises, purchase orders and any other
agreements and commitments currently pertaining to
the business and operations of
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the Company (but not including any contracts
relating to the Employees or individual independent
contractors of the Company or to the shareholders
or securityholders of the Company except to the
extent specifically set forth in this Agreement) or
(as an indirect acquisition to the extent
contemplated by subsection (g) above) any Acquired
Subsidiary (collectively, "Contracts") subject in
each case to the terms, covenants, conditions and
provisions of such Contracts;
(i) the Proprietary Rights, including the name "Hotel
Information Systems", set forth on Schedule 3.1(i)
and any copies thereof and goodwill and
documentation associated therewith or related
thereto;
(j) all know-how, trade secrets, processes, shop
rights, technologies, discoveries,
unpatented inventions, formulae and
procedures (collectively, "Intellectual
Property") used in the business and
operations of the Company or (as an indirect
acquisition to the extent contemplated by
subsection (g) above) any Acquired
Subsidiary, including goodwill and
documentation associated with or relating to
any of the foregoing;
(k) any claims, demands, causes of action,
judgments and pending litigation where the
Company is a claimant, plaintiff, judgment
creditor or beneficiary that do not arise
out of or relate to a Non-Assumed Liability;
provided, however, that nothing in this
clause (k) shall modify or affect the terms
of Sections 1.3 or 1.4 hereof;
(l) to the extent permitted by law, all permits,
governmental licenses, approvals and quali-
fications of the Company; provided that the
Company may retain business licenses so long
as such licenses are required in connection
with the Company's business after the
Closing, but thereafter such items shall be
transferred to the Purchaser to the extent
it shall reasonably request;
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(m) all marketing records, customer lists,
warranty records, sales records, licensing
records, sales literature, electronic data
processing programs and accounting records
and documents which support or relate to the
Assets and Assumed Liabilities, including
computer software, transfer of leases for
such software or where applicable a waiver
of any fee associated with software
developed, used or assigned by the Company
where the Company has such rights to assign
or transfer;
(n) all personnel records, payroll records,
correspondence, books, files and other records
relating to Employees of the Acquired Subsidiaries
and Employees of the Company hired by the Purchaser
on or after the Closing Date;
(o) all insurance policies owned by the Company
that relate to the Assets or Assumed
Liabilities; and
(p) all other assets owned by or used in the
business and operations of the Company
except for Excluded Assets.
1.2. Excluded Assets. The Company shall retain
and not transfer, and the Assets do not include, any of the
following assets (the "Excluded Assets") pertaining to the
Company:
(a) up to $859,770 in cash and cash equivalents
held by the Company (any cash and cash
equivalents of the Acquired Subsidiaries are
not part of the Excluded Assets);
(b) all deferred income tax assets;
(c) three policies of "key man" life insurance
that are owned by the Company; and, for the
limited period mentioned below, all
insurance policies owned by the Company that
relate to Employees (the Company shall
retain such insurance policies that relate
to Employees so long as such insurance
policies are needed in connection with the
Company's business after the Closing, but
thereafter such insurance policies shall be
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transferred to the Purchaser to the extent
it shall reasonably request);
(d) any refunds and rights to receive refunds of
Taxes to the extent such refunds are not
reflected on the Final Closing Balance
Sheet;
(e) any refunds and rights to receive refunds of
workers' compensation insurance to the
extent such refunds are not reflected on the
Final Closing Balance Sheet;
(f) all assets owned by customers of the Company or
other third parties, except to the extent of any
right or interest (or claim of right or interest)
therein of the Company existing at the Closing
Date; and
(g) the stock of any subsidiary of the Company
that is not an Acquired Subsidiary.
1.3. Assumed Liabilities. On the terms and conditions contained in this
Agreement, the Purchaser shall at the Closing assume, pay, perform and discharge
the following liabilities (collectively, the "Assumed Liabilities"):
(a) the current liabilities of the Company set
forth on Schedule 1.3(a); provided that the
Company may provide a substitute Schedule
1.3(a) immediately prior to the Closing
which the Purchaser will accept, so long as
any changed items thereon represent only
current liabilities for sums certain that
were incurred in the ordinary course of
business of the Company; provided further
that such Schedule 1.3(a) shall be further
modified to reflect any revisions reflected
on the Final Closing Balance Sheet so long
as any changed liabilities thereon represent
only current liabilities for sums certain
that were incurred in the ordinary course of
busiess of the Company (collectively, the
"Assumed Current Liabilities");
(b) all deferred revenues set forth on Schedule
1.3(a), as substituted and/or revised
pursuant to Section 1.3(a);
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(c) all intercompany payables set forth on
Schedule 1.3(a), as substituted and/or
revised pursuant to Section 1.3(a)
(collectively, the "Intercompany Payables");
(d) all obligations under the Innovations Note
and the Sanford Note set forth on Schedule
1.3(a), as substituted and/or revised
pursuant to Section 1.3(a);
(e) the liabilities set forth on Schedule
1.3(e), provided that the Company may
provide a substitute Schedule 1.3(e)
immediately prior to the Closing which the
Purchaser will accept, so long as any
changed items thereon represent only
liabilities for sums certain that were
incurred in the ordinary course of business
of the Company and the sum certain of such
liabilities does not exceed $836,675
(collectively, the "Other Liabilities");
(f) the liabilities of the Company set forth on
a Schedule 1.3(f) provided by the Company
immediately prior to the Closing which the
Purchaser shall accept, so long as the items
thereon represent only liabilities for sums
certain that were incurred in the ordinary
course of business of the Company and the
total thereof does not exceed $2,000,000,
and otherwise the Purchaser may accept or
reject any items on such Schedule 1.3(f) in
its sole discretion; provided any
liabilities on such Schedule 1.3(f) shall
reduce the value on which the number of
Put/Call Consideration Shares to be
delivered to the Company is based by the
total of the sums certain of such
liabilities;
(g) accrued vacation of Leased Employees that
are hired by the Company after the Closing
Date;
(h) all liabilities, duties or obligations to customers
under any product liability, breach of warranty or
maintenance claim, express or implied, arising out
of or relating to any defect or damage, or alleged
defect or damage, in engineering, development,
design, programming, tooling,
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manufacturing, installation, packaging or shipping
of any product, software, Proprietary Right or
Intellectual Property of the Company and which is
or becomes part of the Assets or of any Acquired
Subsidiary that arose in the ordinary course of
business (it being understood that, among other
things, that claims for consequential damages are
not in the ordinary course of business); and
(i) all unperformed and unfulfilled obligations
of the Company to be performed or fulfilled
subsequent to the Closing under the
Contracts; provided, however, that the
Purchaser shall not assume any obligations
arising as a result of any breach by the
Company of such Contracts, unless such
breach relates to the completion of work on
a timely basis and such breach can be
remedied by completing such work or by
providing a reasonable non-monetary
adjustment or credit.
1.4. Non-Assumed Liabilities. Except for the Assumed Liabilities to be
assumed, paid, performed and discharged by the Purchaser, neither the Purchaser
nor any of its affiliates, successors or assigns shall assume or have any
responsibility for any liability, duty, obligation or commitment of any nature,
whether accrued, contingent, matured, unmatured or otherwise, of the Company
(the "Non- Assumed Liabilities"), and the Company shall retain all such
Non-Assumed Liabilities. Without limitation of the generality of the foregoing,
Non-Assumed Liabilities shall include:
(a) all current liabilities of the Company other
than the Assumed Current Liabilities;
(b) all Employee Benefits and Obligations other
than accrued vacation specifically assumed
pursuant to Section 1.3(g);
(c) all accrued interest other than accrued
interest specifically assumed pursuant to
Section 1.3(e) or (f);
(d) all short term borrowings and other obligations other
than short term borrowings specifically assumed
pursuant to Section 1.3(a), (c), (d), (e) or (f);
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(e) all federal, state, local or foreign taxes,
duties, imposts, fees and other governmental
charges, including penalties and interest in
respect thereof, whether due or to become due
and whether or not contested (collectively,
"Taxes"), (A) of the Company, (B) relating or
attributable to the Assets for any period
prior to and including the Closing Date,
(C) of any member of any "affiliated group"
(within the meaning of Section 1504 of the
Code) to which the Company has at any time
belonged or (D) of any other member of a
group of which the Company has at any time
been a member which files foreign, federal,
state or local Tax returns on a consolidated,
combined or unitary basis;
(f) all other liabilities, duties and obligations
relating to the Excluded Assets; and
(g) (i) all liabilities, duties and obligations
under any product liability, breach of
warranty or maintenance claim not
specifically assumed pursuant to Section
1.3(h), including, without limitation, claims
for consequential damages and (ii) all
obligations under the Contracts not
specifically assumed pursuant to Section
1.3(i); provided, however, that the Purchaser
agrees to use its best efforts to resolve or
remedy any such liabilities, duties or
obligations for the account and at the
expense of the Company (but the Purchaser
will only do so after receiving instructions
from the Company to do so and only after
obtaining the Company's prior approval for
any obligation or expense incurred for which
the Company may be liable); provided,
further, that any expenses or liabilities
incurred by the Purchaser pursuant to this
Section 1.4(g) are not subject to the
limitation set forth in Section 6.4.
1.5. Sales and Transfer Taxes. The Company shall pay all sales and transfer
Taxes, if any, relating to the transfer to the Purchaser of any Assets and shall
be responsible for preparing and timely filing and paying any such Taxes. The
Company shall provide to the Purchaser sufficient evidence that any returns
required to be filed have been filed and that the amount of transfer Taxes
reflected thereon has been remitted to the appropriate
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taxing authorities. The Purchaser shall reimburse the Company for the payment of
such sales and transfer taxes in an amount not to exceed $20,000.
ARTICLE II
Transfer of Assets; Delivery of Documents
2.1. Consideration for Assets. At Closing, the Purchaser shall issue to the
Company the following: (a) A number of shares of Common Stock (the "Ordinary
Consideration Shares") equal in value to $4,600,000 (497,298 shares at the Per
Share Price) based on the Per Share Price, rounded up to the nearest whole
share. (b) A number of shares of Common Stock (the "Put/Call Consideration
Shares" and, together with the Ordinary Consideration Shares, the "Consideration
Shares") equal in value to $6,300,000 (681,082 shares at the Per Share Price)
(subject to reduction in an amount equal to the sum certain of the liabilities
set forth on Schedule 1.3(f)) based on the Per Share Price, rounded up to the
nearest whole share. 2.2. The Consideration Shares. (a) The Consideration Shares
will be delivered to the Escrow Agent to be held in escrow subject to the terms
and conditions of the Escrow Agreement, the Put/Call and Registration Rights
Agreement and this Agreement. (b) The restrictive legends set forth in Annex H
will be printed on the certificates for the Consideration Shares. 2.3. Delivery
of Assets. At Closing, the Company shall deliver to the Purchaser executed
instruments of conveyance and assignment, transferring and assigning to the
Purchaser all of the Company's right, title and interest in the Assets, in form
and substance satisfactory to the Purchaser, and physical possession of the
stock certificates representing the capital stock of the Acquired Subsidiaries
and all other Assets capable of such delivery (provided that all software that
is included in the Assets shall be transferred to the Purchaser by means of
electronic transmission). 2.4. Delivery of Other Documents. The Company shall
also deliver to the Purchaser at the Closing:
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(a) Executed copies of the Ancillary Agreements
(other than the Confidentiality Agreement);
(b) Executed copies of a Non-Competition
Agreement with Robert S. Sanford;
(c) Opinion of counsel to the Company, dated the
Closing Date, substantially in the form of Annex F;
(d) Opinions of foreign counsel to the Company, dated the
Closing Date, substantially in the form of Annex G, with respect to each
Acquired Subsidiary that was directly owned by the Company prior to the Closing;
(e) The power of attorney referred to in Section
4.3, substantially in the form of Annex I; and
(f) Such certificates and other documents as may be reasonably
requested by the Purchaser or as may be required to be delivered by this
Agreement or the Ancillary Agreements or whose delivery is required to satisfy
the conditions herein or therein expressed.
2.5. Preliminary Closing Balance Sheet; Final
Closing Balance Sheet; Adjustments to Consideration Shares.
(a) Preliminary Closing Balance Sheet. Two business days prior to the
Closing Date, the Company shall deliver to the Purchaser an estimated
consolidated balance sheet of the Company and its subsidiaries as of the Closing
Date (the "Preliminary Closing Balance Sheet"), which shall identify the amount
of the Company's Current Assets, Assets, Assumed Current Liabilities and Assumed
Liabilities set forth on such balance sheet and be certified as a reasonable
estimate by Dennis Rowland, and be accompanied by a certification by Robert S.
Sanford that he has no reason to believe that it is not a reasonable estimate.
If (i) the Current Ratio and Net Current Assets on the Preliminary Closing
Balance Sheet (after giving effect to any adjustment pursuant to Section 1.3(f))
are not greater than or equal to the Current Ratio (1.483 to 1.0) and Net
Current Assets ($2,758,225) on the Interim Balance Sheet or (ii) Net Worth on
the Preliminary Closing Balance Sheet is not greater than or equal to Net Worth
(negative $5,562,359) on the Interim Balance Sheet, the Company and the
Purchaser shall mutually agree on appropriate revisions to Current Assets,
Assets, Assumed Current Liabilities, Assumed Liabilities or the Consideration
Shares to be delivered or assumed at Closing.
(b) Final Closing Balance Sheet. (i) As promptly as is reasonably
practicable following the Closing
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Date, there shall be prepared under the joint supervision and oversight of
representatives of the Purchaser and the Company, a consolidated balance sheet
of the Company and its subsidiaries as of the Closing Date (the "Closing Balance
Sheet"), which shall identify the amount of the Company's Current Assets,
Assets, Assumed Current Liabilities and Assumed Liabilities set forth on such
balance sheet. The Closing Balance Sheet shall be mutually agreed upon by the
Purchaser and the Company. If no such mutual agreement is reached within 60 days
after the Closing Date, the Purchaser and the Company shall mutually agree upon
(or, if they are unable so to agree within five business days, shall instruct
their independent certified public accountants to select within five business
days) and engage a nationally recognized firm of U.S. certified public
accountants independent with respect to the Purchaser and the Company to analyze
the Closing Balance Sheet. Upon such engagement, the Purchaser and the Company
each shall provide to such firm its calculation of Current Assets, Assets,
Assumed Current Liabilities and Assumed Liabilities. The Purchaser and the
Company shall each, and shall each use all reasonable efforts to cause its
accountants to, make readily available to such firm any relevant books and
records and work papers prepared by it or its affiliates relating to the Closing
Balance Sheet or calculations of the amounts of Current Assets, Assets, Assumed
Current Liabilities and Assumed Liabilities requested by such firm to undertake
such analysis. Such firm shall be instructed to complete such analysis within
thirty business days from the date of their engagement. Upon completion of such
analysis, such firm shall be instructed to (A) review each of the revisions to
Current Assets, Assets, Assumed Current Liabilities and Assumed Liabilities
proposed by the Company or the Purchaser and determine whether such revision is
necessary or appropriate in order that the Closing Balance Sheet present fairly
the Current Assets, Assets, Assumed Current Liabilities and Assumed Liabilities
of the Company as of the Closing Date in accordance with generally accepted
accounting principles, consistently applied ("GAAP") on the basis of procedures
consistent in all material respects with the procedures, methods and accounting
principles used by the Company to prepare its Audited Balance Sheet, (B)
recompute Current Assets, Assets, Assumed Current Liabilities and Assumed
Liabilities included on such Closing Balance Sheet on the basis of such
determination and (C) inform the Company and the Purchaser of each such
re-computation. The Closing Balance Sheet, the amount of Current Assets, Assets,
Assumed Current Liabilities and Assumed Liabilities, as agreed to by the
Purchaser and the Company or, as the case may be, as determined by the
aforementioned accounting firm pursuant to this paragraph (i) are herein
referred to
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respectively as the "Final Closing Balance Sheet," "Final Current Assets,"
"Final Assets," "Final Assumed Current Liabilities" and "Final Assumed
Liabilities." Also, Final Net Current Assets and Final Net Worth shall be
determined based on the foregoing.
(ii) The Company and the Purchaser shall each bear and pay one-half of the
fees and disbursements of such accounting firm in connection with its analysis.
(c) Adjustments to Consideration Shares. Within five business days after
the determination of the Final Closing Balance Sheet, and Final Net Current
Assets and Final Net Worth, pursuant to the procedures set forth in Section
2.5(b) hereof, if (A) Final Net Current Assets or Final Net Worth is less than
Net Current Assets or Net Worth, respectively, based on the Preliminary Closing
Balance Sheet (after giving effect to any adjustments under Section 1.3(f) or
2.5(a)), and (B) Final Net Current Assets or Final Net Worth is also less than
Net Current Assets ($2,758,225) or Net Worth (negative $5,562,359),
respectively, in each case subject to adjustment pursuant to Sections 1.3(f),
based on the Interim Balance Sheet, then the Purchaser and the Company shall
cause the Escrow Agent to deliver to the Purchaser that number of Consideration
Shares equal to such difference pursuant to clause (A) (as it pertains to either
Net Current Assets or Net Worth, whichever is greater) based on the Per Share
Price, rounded up to the nearest whole share. The Consideration Shares to be
delivered to the Purchaser under this provision shall be (i) first, Put/Call
Consideration Shares until the value of the remaining Put/Call Consideration
Shares is $4,700,000 based on the Per Share Price and (ii) second, Ordinary
Consideration Shares.
ARTICLE III
Representations and Warranties
3.1. Representations and Warranties of the Company. Except as set forth on
Schedule 3.1 (which schedule shall be organized according to the subsections of
this Section 3.1 so as to indicate the context of any particular exception or
exceptions), the Company hereby represents and warrants to the Purchaser that:
(a) Corporate Organization and Qualification. Each of the Company and the
Acquired Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of
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incorporation and each of the Acquired Subsidiaries is in good standing as
a foreign corporation in each jurisdiction where the properties owned, leased or
operated, or the business conducted, by it require such qualification, except
for such failure to so qualify or be in such good standing, which, when taken
together with all other such failures, is not reasonably likely to have a
material adverse effect on the financial condition, Assets, business, customers,
results of operations or prospects of such Acquired Subsidiary. Each of the
Company and the Acquired Subsidiaries has the corporate requisite power and
authority to carry on its respective businesses as they are now being conducted.
The Company has made available to the Purchaser a complete and correct copy of
the Company's and each Acquired Subsidiary's Articles of Incorporation, By-Laws,
charter documents or governing instruments, each as amended to date. The
Company's and the Acquired Subsidiaries' Articles of Incorporation, By-Laws,
charter documents and governing instruments so delivered are in full force and
effect.
(b) Authorized Capital of Acquired Subsidiaries. Each of the outstanding
shares of capital stock of each of the Acquired Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable and owned, either directly or
indirectly, by the Company free and clear of all liens, pledges, security
interests, claims or other encumbrances. There are no preemptive rights nor any
outstanding subscriptions, options, warrants, rights, convertible securities or
other agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of or any of the Acquired
Subsidiaries. The Company has no subsidiaries other than the Acquired
Subsidiaries and of these only Hotel Information Systems (LTD), Hong Kong, Hotel
Information Systems (LTD), Singapore and Hotel Information Systems Mexico are
owned directly by the Company. Hotel Information Systems (LTD), Hong Kong has no
subsidiaries other than Boss Systems. Hotel Information Systems has no
subsidiaries other than Hotel Information Systems (LTD), Australia and an
approximate 49.9% interest in Hotel Information Systems/Metro Systems
Corporation Joint Venture. Hotel Information Systems Mexico has no subsidiaries.
All representations and warranties contained herein with respect to the Acquired
Subsidiaries include the subsidiaries of such Acquired Subsidiaries.
(c) Corporate Authority. The Company has the requisite corporate power and
authority and has taken all corporate action necessary in order to execute and
deliver this Agreement and each of the Ancillary Agreements to which
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it is a party and to consummate the transactions contemplated hereby.
This Agreement is, and each of the Ancillary Agreements to which it is a party
will be, a valid and binding agreement of the Company enforceable against the
Company in accordance with its terms.
(d) Governmental Filings; No Violations. (i) No notices, reports or other
filings are required to be made by the Company or any Acquired Subsidiary with,
nor are any consents, registrations, approvals, permits or authorizations
required to be obtained by the Company or any Acquired Subsidiary from, any
governmental or regulatory authority, agency, commission or other entity,
domestic or foreign ("Governmental Entity"), in connection with the execution
and delivery of this Agreement and the Ancillary Agreements by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby, the failure to make or obtain any or all of which is reason- ably
likely to have a material adverse effect on the financial condition, Assets,
business, customers, results of operations or prospects of the Company or an
Acquired Subsidiary, or could prevent, materially delay or materially burden the
transactions contemplated by this Agreement and the Ancillary Agreements.
(ii) The execution and delivery of this Agreement and the Ancillary
Agreements by the Company does not, and the consummation by the Company of the
transactions contemplated by this Agreement and the Ancillary Agreements will
not, constitute or result in (i) a breach or violation of, or a default under,
the Articles of Incorporation or By- Laws of the Company or the comparable
charter documents or governing instruments of any of the Acquired Subsidiaries,
(ii) a breach or violation of, a default under or the triggering of any payment
or other material obligations pursuant to, any of the Company's or any Acquired
Subsidiary's Employee Benefit Plans or any grant or award made under any of the
foregoing, (iii) a breach or violation of, a default under, the acceleration of
or the creation of a lien, pledge, security interest or other encumbrance on any
Asset (with or without the giving of notice or the lapse of time) pursuant to,
any provision of any Contract of the Company or any of the Acquired Subsidiaries
or any law, rule, ordinance or regulation or judgment, decree, order, award or
governmental or non-governmental permit or license to which the Company or any
of the Acquired Subsidiaries is subject or (iv) any change in the rights or
obligations of any party under any of the Contracts, except, in the case of
clause (iii) or (iv) above, for such breaches, violations, defaults,
accelerations or changes that, alone or in the aggregate, are not reasonably
likely to have a material
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adverse effect on the financial condition, Assets, business, customers,
results of operations or prospects of the Company or any Acquired Subsidiary or
that could not prevent, materially delay or materially burden the transactions
contemplated by this Agreement and the Ancillary Agreements. Except as set forth
on Schedule 3.1(d), no consents are necessary or required in connection with the
assignment of any Contract to the Purchaser. The Company may omit Schedule
3.1(d) at the signing of this Agreement but agrees to provide such Schedule to
the Purchaser within five business days after the date of this Agreement.
(e) Financial Statements. The Company has delivered to the Purchaser its
Interim Balance Sheet and will deliver to the Purchaser its Audited Balance
Sheet prior to the Closing Date. The Interim Balance Sheet (other than the
omission of the related notes and schedules) fairly presents and accurately sets
forth, and each of the Audited Balance Sheet, the Closing Balance Sheet (other
than the omission of the related notes and schedules) and the Final Closing
Balance Sheet (other than the omission of the related notes and schedules) will
fairly present and accurately set forth, the assets, liabilities and
consolidated financial position of the Company and its subsidiaries as of their
respective dates, in each case in accordance with GAAP. The Interim Balance
Sheet was, and the Audited Balance Sheet, the Closing Balance Sheet and the
Final Closing Balance Sheet will be, prepared on the basis of procedures,
methods and accounting principles that are consistent in all material respects.
The Audited Balance Sheet will be included in the Audited Financial Statements.
The Audited Financial Statements will fairly present and accurately set forth
the results of operations, retained earnings and changes in financial position,
as the case may be, of the Company and its subsidiaries for the periods set
forth therein, in each case in accordance with GAAP. The Preliminary Closing
Balance Sheet will fairly present and accurately set forth the Company's best
estimate of the assets, liabilities and consolidated financial position of the
Company and its subsidiaries as of the Closing Date and will have a presentation
and format identical to the Interim Balance Sheet.
(f) Absence of Certain Changes. Since December 31, 1995, the Company and
the Acquired Subsidiaries have conducted their respective businesses only in,
and have not engaged in any material transaction (other than the transactions
contemplated hereby) other than according to, the ordinary and usual course of
such businesses and there has not been (i) any material adverse change in the
financial condition, Assets, business, customers, results of
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operations or prospects of the Company or any Acquired Subsidiary or any
development or combination of developments of which the Company has knowledge
which may result in any such change; (ii) any declaration, setting aside or
payment of any dividend or other distribution with respect to the capital stock
of the Company or any Acquired Subsidiary; (iii) any change by the Company in
accounting principles, practices or methods; (iv) any cancellation of any debts
owed to the Company or to any Acquired Subsidiary or any waiver of the Company's
or any Acquired Subsidiary's claims or rights, except in the ordinary course of
business; (v) except for licensing in the ordinary course of business, any
disposition of or lapsing of any rights to the use of any Proprietary Rights
owned or leased by the Company or any of the Acquired Subsidiaries; (vi) any
purchase or entering into of any contract or commitment by the Company or any of
the Acquired Subsidiaries to purchase any quantity of materials or supplies, or
any sale or entering into of any contract or commitment by the Company or any of
the Acquired Subsidiaries to sell any quantities of property or assets, except
in the ordinary course of business; (vii) any writing off, or requirement to
write off, of any notes or accounts receivable by the Company or any of the
Acquired Subsidiaries in an aggregate amount in excess of $50,000, or any
writing down, or requirement to write down, of any inventory by the Company or
any of the Acquired Subsidiaries in an aggregate amount in excess of $10,000;
(viii) any revaluation of any of the Company's or any Acquired Subsidiary's
properties; (ix) except in the ordinary course of business in amounts which are
not material to the Company or any of the Acquired Subsidiaries, (1) any
increase in the salary or other compensation payable or to become payable to any
of the Employees of the Company or any of the Acquired Subsidiaries, (2) except
as contemplated by this Agreement, any amendment of, or the establishment of any
new, Employee Benefit Plan or (3) any declaration, payment or entering into of
any commitment or obligation of any kind by the Company or any of the Acquired
Subsidiaries for the payment of a bonus or other additional salary or
compensation to any such Employee; (x) any amendment, in a material manner, or
termination of any material Contract to which the Company or any of the Acquired
Subsidiaries is a party; (xi) any receipt of written notice of the commencement
or threat of any governmental proceeding against, or investigation in connection
with, the business of the Company or any of the Acquired Subsidiaries or the
Assets; or (xii) any entering into of any negotiations or agreements by the
Company or any of the Acquired Subsidiaries to accomplish any of the items
described in the preceding clauses (i) through (xi).
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(g) Title to Assets; Leaseholds. (i) The Company has, and at the Closing
will convey to the Purchaser, good and indefeasible title to all the Assets.
Each Acquired Subsidiary has good and indefeasible title to all the assets held
by it. All Assets and all assets owned by the Acquired Subsidiaries are free and
clear of all liens, claims, encumbrances, charges and conditions to or
restrictions on transfer or assignment except for such that would not materially
adversely affect the value or marketability of such asset or that could not
prevent, materially delay or materially burden the transactions contemplated by
this Agreement and the Ancillary Agreements. Neither the Company nor any
Acquired Subsidiary owns any interest in real property other than pursuant to
the Leases. Schedule 3.1(g) sets forth a true, correct and complete list and
description of all existing Leases entered into by the Company or any Acquired
Subsidiary.
(ii) To the knowledge of the Company, neither the whole nor any portion of
the Leaseholds owned or held by the Company or by any Acquired Subsidiary is
subject to any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any governmental authority or other person
with or without payment or compensation therefor.
(iii) All improvements located on the Leaseholds are in compliance in all
material respects with all applicable building codes, and the Company's or any
Acquired Subsidiary's use of the Leaseholds and such improvements is in
compliance in all material respects with all applicable zoning, land use and
other laws, orders, ordinances and regulations affecting the Leaseholds.
(h) Compliance with Laws. The Company has acquired the Assets and conducted
its business and the business of the Acquired Subsidiaries in compliance with
all applicable laws, rules, ordinances and regulations and judgements, decrees,
orders, awards and governmental and non-governmental permits and licenses to
which the Company or any Acquired Subsidiary is subject, except for such
breaches or violations that, alone or in the aggregate, are not reasonably
likely to have a material adverse effect on the financial condition, Assets,
business, customers, results of operations or prospects of the Company or an
Acquired Subsidiary or that could not prevent, materially delay or materially
burden the transactions contemplated by this Agreement and the Ancillary
Agreements.
(i) Proprietary Rights. Schedule 3.1(i) sets forth a true, correct and
complete list and description
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(including without limitation, the jurisdiction in which registered) of all
registered and common law trademarks (including service marks), tradenames,
trademark applications, copyright registrations, patents, patent applications or
inventions (collectively, the "Proprietary Rights") used in connection with the
Company's or any of the Acquired Subsidiaries' businesses. The Company or any
Acquired Subsidiary, as the case may be, has taken reasonable steps to establish
and protect its interest in and to the Proprietary Rights and there are no
material limitations or prohibitions on the current or intended use of the
Proprietary Rights. None of such Proprietary Rights has been assigned,
transferred or licensed to any third party outside the ordinary course of
business. The validity or enforceability of such patents, trademarks,
tradenames, copyrights and applications and registrations thereof has not been
challenged by others, nor is there any pending or threatened litigation
involving any of such patents, trademarks, tradenames or copyrights. The
Company's use of the Proprietary Rights did not and will not, prior to the
Closing, constitute an infringement of the rights of any other person.
(j) Contracts. Schedule 3.1(j) sets forth a true, accurate and complete
list of all Contracts (other than maintenance contracts) that involve
unfulfilled aggregate payments or obligations of the Company or an Acquired
Subsidiary of more than $40,000, all multi-site Contracts and the 25 largest
single-site Contracts to which the Company or any Acquired Subsidiary is a party
to or bound. A complete and accurate copy of each Contract identified on
Schedule 3.1(j), together with all amendments, modifications, waivers or other
changes thereto, has been made available to the Purchaser or its
representatives. Neither the Company nor any of the Acquired Subsidiaries is in
material breach, violation or default of or under, or in receipt of any claim of
breach, violation or default of or under, any Contract. There is no Contract
between the Company or an Acquired Subsidiary and Computer Systems Associates
containing an agreement not to compete or other material restriction on the
business or operations of any of the Company, any Acquired Subsidiary or
Computer Systems Associates. The Company will take all action necessary to
assign the confidentiality agreement between it and Computer Systems Associates
to the Purchaser.
(k) Employee Matters. (i) Schedule 3.1(k) sets forth a true and complete
list of the names, positions and current salaries of each Employee and
independent contractor of the Company or of any of the Acquired Subsidiaries.
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(ii) Neither the Company nor any Acquired Subsidiary is a party to, or
bound by, any collective bargaining or union Contract.
(iii) The Company and the Acquired Subsidiaries are in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours. There is no
unfair labor practice complaint against or involving the Company or any Acquired
Subsidiary pending or, to the knowledge of the Company, threatened before the
National Labor Relations Board or other Governmental Entity. No labor strikes,
disputes, slowdowns or stoppages against the Company or any of the Acquired
Subsidiaries exists or, to the knowledge of the Company, is threatened.
(l) Employee Benefits and Obligations.
(i) All bonus, deferred compensation, pension, retirement, profit-sharing,
thrift, savings, employee stock ownership, stock bonus, stock purchase,
restricted stock and stock option plans, all employment or severance contracts,
vacation, person or sick time policies, other material employee benefit plans
and any applicable "change of control" or similar provisions in any plan,
contract or arrangement (regardless of whether they are funded or unfunded or
foreign or domestic) of the Company or any Acquired Subsidiary (the "Employee
Benefit Plans") covering employees or former employees of the Company or an
Acquired Subsidiary (the "Employees"), including, but not limited to, "employee
benefit plans" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") are set forth on Schedule
3.1(l). True and complete copies of all Employee Benefit Plans, including any
related trust instruments and/or insurance contracts, if any, forming a part of
any such Employee Benefit Plans, and all amendments thereto have been made
available to the Purchaser.
(ii) All Employee Benefit Plans, to the extent subject to the provisions of
ERISA or the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), are in substantial compliance with ERISA and the Code. There is no
material pending or threatened litigation relating to the Employee Benefit
Plans. The Company does not sponsor, maintain, contribute to or have an
obligation to contribute to, nor has ever maintained, sponsored, contributed to
or had an obligation to contribute to any "employee pension benefit plan" or
"pension plan," as defined by Section 3(2) of ERISA.
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(iii) Neither the Company nor any of the Acquired Subsidiaries has any
obligations for retiree health and life benefits under any Employee Benefit
Plan, except as set forth on Schedule 3.1(l). There are no restrictions on the
ability of the Company or the Acquired Subsidiaries to amend or terminate any
such Employee Benefit Plan, under the terms of such Employee Benefit Plan,
without incurring any liability thereunder.
(iv) All Employee Benefit Plans covering non-U.S. Employees comply in all
material respects with applicable local law. The Company and the Acquired
Subsidiaries have no material unfunded liabilities with respect to any Pension
Plan which covers non-U.S. Employees.
(m) Litigation and Liabilities. Except as set forth on Schedule 3.1(m),
there are no (i) civil, criminal or administrative actions, suits, claims,
hearings, investi- gations or proceedings pending or, to the knowledge of the
Company, threatened against the Company or any of its Acquired Subsidiaries or
(ii) obligations or liabilities, whether or not accrued, contingent or
otherwise, including, without limitation, those relating to matters involving
any Environmental Law, or any other facts or circumstances of which the
management of the Company is aware that could result in any claims against or
obligations or liabilities of the Company or any of the Acquired Subsidiaries,
that, alone or in the aggregate, are reasonably likely to have a material
adverse effect on the financial condition, Assets, business, results of
operations or prospects of the Company or such Acquired Subsidiary or that could
not prevent, materially delay or materially burden the transactions contemplated
by this Agreement and the Ancillary Agreements.
(n) Brokers and Finders. Neither the Company nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated herein, other than Sequoia Partners
Incorporated, the fees and expenses of which are set forth on Schedule 1.3(e).
(o) Environmental Matters. Except for such matters that, alone or in the
aggregate, are not reasonably likely to have a material adverse effect on the
financial condition, Assets, business, customers, results of operations or
prospects of the Company or any Acquired Subsidiary, (i) the Company and the
Acquired Subsidiaries have complied in all material respects with all applicable
Environmental Laws; (ii) to the knowledge of the Company, the properties
presently or formerly owned, leased
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or operated by the Company or the Acquired Subsidiaries (including, without
limitation, soil, groundwater or surface water on, under or adjacent to the
properties, and buildings thereon) (the "Properties") do not contain any
Hazardous Substance other than as permitted under applicable Environmental Law,
do not, and have not, contained any underground storage tanks, do not have any
asbestos present (and have not had any asbestos removed therefrom) and have not
been used as a sanitary landfill or hazardous waste disposal site (provided,
however, that with respect to Properties formerly owned, leased or operated by
the Company or any Acquired Subsidiaries, such representation is limited to the
period prior to the disposition of such Properties by the Company or any of the
Acquired Subsidiaries); (iii) neither the Company nor any of the Acquired
Subsidiaries has received any notices, demand letters or requests for
information from any Governmental Entity or any third party that the Company may
be in violation of, or liable under, any Environmental Law and none of the
Company, the Acquired Subsidiaries or the Properties are subject to any court
order, administrative order or decree arising under any Environmental Law and
(iv) no Hazardous Substance has been disposed of, transferred, released or
transported from any of the Properties during the time such Property was owned
or operated by the Company or one of the Acquired Subsidiaries, other than as
permitted under applicable Environmental Law.
(p) Taxes. (i) There are (and immediately following the Closing there will
be) no liens or similar encumbrances relating or attributable to Taxes with
respect to, or connected with, the Assets or the assets of any Acquired
Subsidiary, other than liens securing the payment of real property Taxes not yet
due. There is no basis for the assertion of any claims for Taxes which, if
adversely determined, would result in the imposition of a lien or similar
encumbrance on the Assets or the assets of any Acquired Subsidiary or otherwise
adversely affect the Purchaser or its use of the Assets. All federal, state,
local and foreign tax returns and reports of the Company and the Acquired
Subsidiaries required by law to be filed which relate to or affect the Acquired
Subsidiaries or the Assets or the Assumed Liabilities have been duly filed and
the taxes required to be shown on such returns have been paid.
(ii) Schedule 3.1(p), which the Company agrees to provide prior to the
Closing Date, will set forth a true and correct list of the adjusted federal
income tax basis of each category of the Assets as of December 31, 1995. Each
such basis has been calculated in all material respects in compliance with the
Code and regulations thereunder.
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(q) Insurance. Schedule 3.1(q), which the Company agrees to provide prior
to the Closing Date, will set forth a true, correct and complete list and
description of the insurance policies held by the Company or any of the Acquired
Subsidiaries covering any of the Assets.
(r) Accounts Receivable and Payable. All notes, intercompany and other
accounts receivable reflected as a net amount on the Audited Balance Sheet, the
Interim Balance Sheet, the Preliminary Closing Balance Sheet, the Closing
Balance Sheet and the Final Closing Balance Sheet represent valid and
enforceable obligations due to the Company or any of the Acquired Subsidiaries,
as the case may be. As of the dates of the applicable Schedules, neither the
Company nor any Acquired Subsidiary has had or will have any intercompany
receivables or payables other than the Intercompany Receivables and the
Intercompany Payables. (s) Condition of the Assets. (i) Taken as a whole, the
plant, equipment and machinery included in the Assets are usable and in a state
of maintenance, repair and operating condition suitable for operation and use
thereof in the ordinary course of the Company and the Acquired Subsidiaries'
business as currently conducted. (ii) There are no liabilities, duties or
obligations under any product liability, breach of warranty or maintenance
claim, express or implied, arising out of or relating to any defect or damage,
or alleged defect or damage, in engineering, development, design, programming,
tooling, manufacturing, installation, packaging or shipping of any product,
software, Proprietary Right or Intellectual Property of the Company or any
Acquired Subsidiary or, to the extent related to or arising out of the Assets or
the business of the Company or the Acquired Subsidiaries, any component thereof,
except for such liabilities, duties or obligations arising in the ordinary
course of business (it being understood that claims for consequential damages
are not in the ordinary course of business). (t) Bankruptcy Proceedings. No
petition has been filed by or against the Company or any of the Acquired
Subsidiaries for relief under any applicable bankruptcy, insolvency or similar
law, no decree or order for relief has been entered in respect of the Company or
any of the Acquired Subsidiaries, voluntarily or involuntarily, under any such
law; and no receiver, liquidator, sequestrator, trustee, custodian or other
officer has been appointed with respect to the Company or any of the Acquired
Subsidiaries or their assets and liabilities pursuant to any such law. No writ
of attachment, execution or similar process has been
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executed against the Company or any of the Acquired Subsidiaries with
respect to any assets or properties of the Company or any of the Acquired
Subsidiaries. Neither the Company nor any of the Acquired Subsidiaries has made
any assignment for the benefit of creditors. (u) Customers and Suppliers. To the
best knowledge of the Company, no material customer or supplier of the Company
or any Acquired Subsidiary will cease or substantially reduce the business
conducted with the Purchaser after, or as a result of, the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements. (v) No
Misstatements or Omissions. None of the documents, reports, schedules or other
information provided by the Company or its representatives to the Purchaser in
connection with this Agreement or any Ancillary Agreement or during the course
of negotiations culminating in this Agreement and the Ancillary Agreements
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading.
The Company acknowledges and agrees that no representation or warranty set forth
herein or exception thereto shall in any way affect the amount or nature of
Assumed Liabilities specifically assumed by the Purchaser pursuant to Section
1.3 hereof. (w) Investment. The Company is acquiring the Consideration Shares
for investment purposes only and not with a view to distribution in violation of
the Securities Act. The Company understands that the shares may not be sold,
offered for sale, pledged or hypotheticated except in accordance with the
Securities Act. In connection with any liquidation, dissolution or other
distribution of assets of the Company after the Closing Date, the Company will
have sole responsibility for determining the number of its shareholders and
option holders who will participate in such liquidation, dissolution or
distribution, their respective residencies, their status as accredited investors
or otherwise, their representation by a purchaser representative, if needed, and
any other relevant considerations necessary to ensure that such transaction, for
purposes of Rule 145 under the Securities Act, qualifies under Regulation D
under the Securities Act. If reasonably requested by the Purchaser, the Company
will provide a legal opinion at the Closing with respect to such matters.
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(x) Software License Contracts. In connection with the selected software
licenses relating to the four accounts set forth on Schedule 3.1(j)(2), the
Company represents and warrants that (i) the cash receipts that are available to
be received for or under such software licenses after the Closing Date (provided
the Purchaser acts reasonably with respect to the terms of such licenses) will
be at least $725,000 and (ii) in no event will the amount reasonably required to
be spent after the Closing Date in order to realize such cash receipts exceed
$375,000. Any such cash receipts received and expenses incurred after the date
of this Agreement and prior to the Closing Date shall be treated for all
purposes of this Agreement as if they occurred after the Closing Date. The
representation and warranty contained in this Section 3.1(x) are not subject to
the limitation set forth in Section 6.4.
3.2. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company that:
(a) Corporate Organization and Qualification. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is in good standing as a foreign corporation in
each jurisdiction where the properties owned, leased or operated, or the
business conducted, by it require such qualification except for such failure to
so qualify or to be in such good standing, which, when taken together with all
other such failures, is not reasonably likely to have a material adverse effect
on the financial condition, proper- ties, business or results of operations of
the Purchaser and its subsidiaries, taken as a whole.
(b) Corporate Authority. The Purchaser has the requisite corporate power
and authority and has taken all corporate action necessary in order to execute
and deliver this Agreement and each of the Ancillary Agreements to which it is a
party and to consummate the transactions contemplated hereby. This Agreement is
and each of the Ancillary Agreements which it is a party will be, a valid and
binding agreement of the Purchaser enforceable against the Purchaser in
accordance with its terms. (c) Governmental Filings; No Violations. (i) Other
than as required by the Exchange Act or the rules and regulations promulgated by
the American Stock Exchange, no notices, reports or other filings are required
to be made by the Purchaser with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by the Purchaser
from, any Governmental Entity in connection
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with the execution and delivery of this Agreement and the Ancillary
Agreements by the Purchaser and the consummation by the Purchaser of the
transactions contemplated hereby and thereby, the failure to make or obtain any
or all of which could prevent, materially delay or materially burden the
transactions contemplated by this Agreement and the Ancillary Agreements.
(ii) The execution and delivery of this Agreement and the Ancillary
Agreements by the Purchaser does not, and the consummation of the transactions
contemplated hereby by the Purchaser will not, constitute or result in (A) a
breach or violation of, or a default under, the Certificate of Incorporation or
By-Laws of the Purchaser or (B) a breach or violation of, a default under, the
acceleration of or the creation of a lien, pledge, security interest or other
encumbrance on assets (with or without the giving of notice or the lapse of
time) pursuant to, any provision of any Contract of the Purchaser or any law,
ordinance, rule or regulation or judgment, decree, order, award or governmental
or non-governmental permit or license to which the Purchaser is subject, except,
in the case of clause (B) above, for such breaches, violations, defaults or
accelerations that, alone or in the aggregate, could not prevent, materially
delay or materially burden the transactions contemplated by this Agreement and
the Ancillary Agreements. (d) Purchaser Reports. As of their respective dates,
the Purchaser Reports did not, and any Purchaser Reports filed with the
Securities and Exchange Commission ("SEC") subsequent to the date hereof and
prior to the Closing Date will not, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances in which they
were made, not misleading. Other than the Purchaser Reports, the Company has not
filed any other definitive reports or statements with the SEC since December 31,
1995. (e) Capitalization. The authorized capital stock of the Purchaser consists
of 25,000,000 shares of Common Stock of which, as of the date hereof, not more
than 7.0 million shares are outstanding. The Consideration Shares have been duly
and validly authorized, and, upon the issuance to the Company pursuant to this
Agreement or the Put/Call and Registration Rights Agreement, will be fully paid
and non-assessable. Prior to the Closing Date, the Purchaser shall comply with
its obligations under its listing agreement with the American Stock Exchange
with respect to listing the Consideration Shares on such exchange.
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(f) Absence of Material Adverse Change. Since the date of the latest
Purchaser Report, the Purchaser has conducted its business only in, and has not
engaged in any material transaction (other than the transactions contemplated
hereby) other than according to, the ordinary and usual course of such business
and there has not been any material adverse change in the financial condition,
assets, business, customers, results of operations or prospects of the Purchaser
or any development or combination of developments of which the Purchaser has
knowledge which may result in any such change.
ARTICLE IV
Covenants
4.1. Interim Operations of the Company. The Company covenants and agrees
that, after the date of this Agreement and prior to the Closing Date (unless the
Purchaser shall otherwise agree in writing and except as otherwise contemplated
by this Agreement):
(a) the business of the Company and its subsidi- aries shall be conducted
only in the ordinary and usual course and, to the extent consistent therewith,
each of the Company and its subsidiaries shall use its reasonable efforts to
preserve its business organization, goodwill and properties intact and maintain
its existing relations with customers, suppliers, Employees and business
associates; (b) the Company and its Acquired Subsidiaries shall maintain the
Assets and Leaseholds in accordance with their past practice; (c) the Company
and the Acquired Subsidiaries shall not sell or pledge or agree to sell or
pledge any stock owned by it or them in any of the Acquired Subsidiaries or
declare, set aside or pay any dividend payable in cash, stock or property with
respect to any of its or their capital stock or transfer, assume or incur any
assets or liabilities, or enter into any other transaction, between the Company
and an Acquired Subsidiary other than in the ordinary course of business; (d)
neither the Company nor any of its subsidi- aries shall (i) issue, sell, pledge,
dispose of or encumber any additional shares of, or securities con- vertible or
exchangeable for, or options, warrants,
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calls, commitments or rights of any kind to acquire, any shares of capital
stock of any class of any Acquired Subsidiary; (ii) transfer, lease, license,
guarantee, sell, mortgage, pledge, dispose of or encumber any assets or incur or
modify any indebtedness or other liability other than in the ordinary and usual
course of business; (iii) acquire directly or indirectly by redemption or
otherwise any shares of the capital stock of the Company or any Acquired
Subsidiary; (iv) authorize capital expenditures in excess of $40,000 or make any
acquisition of, or investment in, assets or stock of any other person or entity;
or (v) enter into any Contract that, if entered into before the date of this
Agreement, would need to be disclosed on Schedule 3.1(j) (it being understood
that the Purchaser will not unreasonably withhold its agreement with respect to
any such Contract); (e) neither the Company nor any of its subsidi- aries shall
grant any severance or termination pay to, or enter into any employment or
severance agreement with any director, officer or other Employee of the Company
or its subsidiaries other than pursuant to Contracts existing on the date hereof
or involving payments of no more than two weeks' salary; and neither the Company
nor any of its subsidiaries shall establish, adopt, enter into, make any new
grants or awards under or amend any Employee Benefit Plan; (f) neither the
Company nor any of its subsidi- aries shall settle or compromise any material
claims or litigation or, except in the ordinary and usual course of business,
modify, amend or terminate any of its Contracts or waive, release or assign any
material rights or claims; (g) neither the Company nor any of its subsidiaries
shall make any tax election or permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or terminated without notice
to the Purchaser, except in the ordinary and usual course of business; and (h)
neither the Company nor any of its subsidiar- ies will authorize or enter into
an agreement to do any of the foregoing.
4.2. Acquisition Proposals. The Company agrees that neither the Company nor
any of its subsidiaries nor any of the respective officers and directors of the
Company or its subsidiaries shall, and the Company shall direct and use
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its best efforts to cause its employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of its subsidiaries) not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making of any proposal
or offer (including, without limitation, any proposal or offer to shareholders
of the Company) with respect to a merger, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities of, the Company or any of its subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal") or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal. The Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. The Company will take
the necessary steps to inform the individuals or entities referred to in the
first sentence hereof of the obligations undertaken in this Section 4.2. The
Company will notify the Purchaser immediately if any such inquiries or proposals
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with the
Company. The Company also will promptly request each person, other than the
Purchaser, which has heretofore executed a confidentiality agreement in
connection with its consideration of acquiring the Company to return or destroy
all confidential information heretofore furnished to such person by or on behalf
of the Company.
4.3. Filings; Other Action. Subject to the terms and conditions herein
provided, the Company and the Purchaser shall use their best efforts to promptly
take, or cause to be taken, all other action and do, or cause to be done, all
other things necessary, proper or appropriate under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement and the Ancillary Agreements as soon as practicable. The Company
will have sole responsibility for obtaining any consents from its shareholders
with respect to the transactions contemplated by this Agreement and the
Ancillary Agreements (which consent process shall comply with Regulation D under
the Securities Act). The Company will also have sole responsibility for any
ancillary matters to such consent solicitation such as any dissenters' rights
available to such shareholders under applicable law. At any time from and after
the Closing, the Company and the
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Purchaser shall execute, acknowledge, swear to, deliver and file any
further assignments, conveyances, assurances, instruments of transfer or other
documents requested by the other party, and shall take any other action not
inconsistent with the terms of this Agreement and the Ancillary Agreements that
may reasonably be requested by the other party, for the purpose of assigning,
transferring, granting, conveying, confirming or reducing to possession or
perfecting the Purchaser's title to the Assets or otherwise for the purpose of
giving effect to the intent of the parties hereto in connection with the
transactions contemplated hereby. At the Closing, the Company shall execute and
deliver a power of attorney to the Purchaser enabling the Purchaser to take such
actions on behalf of, or in the name of, the Company.
4.4. Access. Upon reasonable notice, the Company shall (and shall cause
each of its subsidiaries to) afford the Purchaser's officers, employees,
counsel, accountants and other authorized representatives ("Representatives")
access, during normal business hours throughout the period prior to the Closing
Date, to its properties, books, Contracts and records and, during such period,
the Company shall (and shall cause each of its subsidiaries to) furnish promptly
to the Purchaser all information concerning its business, properties and
personnel as the Purchaser or its Representatives may reasonably request,
provided that no investigation pursuant to this Section 4.4 shall affect or be
deemed to modify any representation or warranty made by the Company. All
requests for information made pursuant to this Section 4.4 shall be directed to
an executive officer of the Company or such person as may be designated by any
such officer. The Purchaser will not, and will cause its Representatives not to,
use any information obtained pursuant to this Section 4.4 for any purpose
unrelated to the consummation of the transactions contemplated by this Agreement
and the Ancillary Agreements. Subject to the requirements of law, pending
consummation of the transactions herein contemplated, the Purchaser will keep
confidential, and will cause its Representatives to keep confidential, all
information and documents obtained pursuant to this Section 4.4 unless such
information (i) was already known to the Purchaser prior to the execution of the
Confidentiality Agreement, (ii) becomes available to the Purchaser from other
sources not known by the Purchaser to be bound by a confidentiality obligation,
(iii) is independently acquired by the Purchaser as a result of work carried out
by any employee or representative of the Purchaser to whom no disclosure of such
information has been made, (iv) is disclosed with the prior written approval of
the Company or (v) is or becomes readily ascertainable from
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published information or trade sources. Upon any ter- mination of this
Agreement, the Purchaser will collect and deliver to the Company all documents
obtained by it or any of its Representatives then in their possession and any
copies, summaries and abstracts thereof.
4.5. Notification of Certain Matters. The Company shall give prompt notice
to the Purchaser after the date of this Agreement and prior to the Closing Date
of: (a) any notice of, or other communication relating to, any Environmental Law
or Hazardous Substance, or any default or event that, with notice or lapse of
time or both, would become a default, received by the Company or any of its
subsidiaries subsequent to the date of this Agreement and prior to the Closing
Date, under any Contract to which the Company or any of its subsidiaries is a
party or is subject; and (b) any material adverse change in the financial
condition, Assets, business, customers, results of operations or prospects of
the Company or an Acquired Subsidiary or the occurrence of any event (other than
the transactions contemplated hereby) which, so far as rea- sonably can be
foreseen at the time of its occurrence, is reasonably likely to result in any
such change. Each of the Company and the Purchaser shall give prompt notice to
the other party of any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions con- templated by this Agreement and the
Ancillary Agreements.
4.6. Publicity. The Company and the Purchaser shall jointly produce and
mutually agree on the timing and substance of public press releases and
announcements regarding the transactions contemplated hereby; provided, that the
Purchaser shall have the right in its sole and absolute discretion to make
whatever public press releases or announcements which it deems necessary in
order to comply with applicable federal and state securities or other laws, and
the rules and regulations promulgated by the American Stock Exchange; and
provided, further, that the Purchaser shall use reasonable efforts to give the
Company advance notice of any such public press releases.
4.7. Employees. (a) Effective as of the Closing Date, the Purchaser and the
Company shall enter into an employee services agreement, substantially in the
form of Annex K hereto (the "Employee Services Agreement"), with respect to the
Employees of the Company on the Closing Date identified in writing by the
Purchaser at least two weeks prior to the Closing (the "Leased Employees"), for
a period beginning on the Closing Date and ending on the date that is 90 days
following the Closing Date (the "Lease Period").
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The Company shall have no liability should any Employee be unwilling to be
leased to the Purchaser, with respect to the Purchaser's inability to lease such
Employee. In the case of any Acquired Subsidiary, the Acquired Subsidiary shall
continue to employ the employees of such Acquired Subsidiary effective as of the
Closing Date. The Purchaser shall notify the Company promptly, and at least
prior to two weeks prior to the date that the services of any Leased Employee
are no longer required by the Purchaser, regarding any such Leased Employee
whose services are no longer required by the Purchaser, or the Purchaser shall
assume such Leased Employee's accrued vacation liability. The Purchaser shall
not assume any liability for, or otherwise be responsible for, any severance
obligations incurred by the Company with respect to Leased Employees.
(b) At or prior to the Closing Date, the Purchaser and Robert S. Sanford
shall enter into the Consulting Agreement, in the form of Annex D hereto. (c)
The Company shall be solely responsible for all notices required to be given
under the WARN Act or other similar statutes or regulations of any jurisdiction
relating to any plant closing or mass layoff or as otherwise required by any
such statute to the extent of any Leased Employees that do not become employees
of the Purchaser. The Purchaser shall be solely responsible for all such notices
with respect to Leased Employees who become employees of the Purchaser. (d) The
Purchaser shall not assume, adopt or sponsor any Employee Benefit Plan following
the Closing Date. The Company or, where appropriate, an Employee Benefit Plan
shall retain liability for all benefits, including, without limitation,
severance benefits, or contributions accrued and all expenses incurred on or
prior to the expiration of the Lease Period under all Employee Benefit Plans or
otherwise applicable with respect to the Employees or the Leased Employees. Any
Employee Benefit Plan that is a "group health plan" within the meaning of
Section 5000(b)(1) of the Code shall retain liability for and shall pay when due
all benefits attributable to the Leased Employees and their spouses and
dependents who are "qualified beneficiaries" entitled to continuation coverage
under Section 4980B of the Code or Part 6 of Subtitle B of ERISA as of the end
of the Lease Period, regardless of when services where rendered or expenses
incurred.
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4.8. Agreement Not to Compete.
(a) Agreement. The Company agrees that for a period of three (3) years from
the Closing Date, it shall not directly or indirectly, engage in or have any
ownership interest in, or participate in the financing, operation, management or
control of, any person, firm, corporation or business that engages in a
Restricted Business in a Restricted Territory. (b) No Solicitation. The Company
agrees that it shall not, directly or indirectly, during the three-year period
commencing on the date of this Agreement, solicit (i) any of the existing
customers of the Company or the Purchaser for purposes of obtaining their custom
or trade with respect to the Restricted Business, or (ii) any of the existing
Employees of the Company or the Purchaser for purposes of obtaining their
employment services in a business which is competitive with the Restricted
Business. (c) Separate Covenants. The parties intend that the covenants
contained in the preceding paragraphs of this Section 4.8 shall be construed as
a series of separate covenants, one for each county, city and state of the
Restricted Territory. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenants contained in the
preceding paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenants (or such part) shall be
deemed eliminated from this Agreement for the purpose of those proceedings to
the extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced. (d) Reformation. In the event that the provisions of
this Section 4.8 should ever be deemed to exceed the duration or geographic
limitations or scope permitted by applicable law, then such provisions shall be
reformed to the maximum time or geographic limitations in scope, as the case may
be, permitted by applicable laws. (e) Specific Performance. The Company
acknowledges that it would be impossible to determine the amount of damages that
would result from any breach of any of the provisions of this Section 4.8 and
that the remedy at law for any breach, or threatened breach, of any of such
provisions would likely be inadequate and, accordingly, agrees that the
Purchaser shall, in addition to any other rights or remedies which it may have,
be entitled to seek such equitable and injunctive relief as may be available
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from any court of competent jurisdiction to restrain the Company from
violating any of such provisions of this Agreement. In connection with any
action or proceeding for injunctive relief, the Company hereby waives the claim
or defense that a remedy at law alone is adequate and agrees, to the maximum
extent permitted by law, to have each such provision of this Section 4.8
specifically enforced against it, without the necessity of posting bond or other
security against it, and consents to the entry of injunctive relief against it
enjoining or restraining any breach or threatened breach of such provisions of
this Section 4.8.
4.9. Bulk Transfer or Sales. The Company agrees to take all action, if any,
necessary to comply with the bulk transfer or bulk sales laws of any
jurisdiction, including without limitation Section 6105 of the California
Commercial Code.
4.10. Corporate Name. The Company will take all action necessary to allow
or permit the Purchaser to use the name "Hotel Information Systems" and promptly
following the Closing will amend its Articles of Incorporation to remove such
name from its corporate name.
4.11. Covenants of the Purchaser. (a) Subject to the terms and conditions
of this Agreement, the Purchaser agrees to take all action necessary to acquire
the Assets and to assume and perform the Assumed Liabilities as of the Closing
Date. (b) The Purchaser covenants and agrees that, after the date of this
Agreement and prior to the Closing Date (unless the Company otherwise agrees in
writing and except as otherwise contemplated by this Agreement), the Purchaser
shall not take any action that could prevent, materially delay or materially
burden the transactions contemplated by this Agreement and the Ancillary
Agreements. (c) For a period of four years after the Closing Date, solely as an
accommodation to the Company, the Purchaser agrees that it will provide the
Company and its representatives access to its books and records that relate to
the business and operations of the Company prior to the Closing Date and will
cause its employees to cooperate with the Company and its representatives, and
assist in the collection of information, in each case so long as the requested
access, cooperation and assistance is reasonable in scope and does not
unreasonably interfere with or burden the operations or business of the
Purchaser or the duties or responsibilities of any employee of the Purchaser.
The Purchaser shall allow the Company to occupy one locked
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office at the facilities acquired by the Purchaser in
Concord, California until the end of the current lease term or, if earlier, the
date the Purchaser ceases occupying such facilities. The Purchaser assumes no
responsibility or liability for any such information, cooperation or office or
any of the business or operations of the Company after the Closing Date. (d) The
Purchaser agrees to pay the amounts due under the CSA Note, the Debenture and
the Merrill Lynch Revolving Credit Facility on the Closing Date. The Company
agrees not to increase the principal amount under any such obligations at any
time before, on or after the Closing Date and will take all action necessary to
ensure that all such obligations and any Contracts related thereto are
terminated promptly after the above payment has been made. 4.12. Insurance
Policies. With respect to any insurance policy that is assigned or transferred
to the Purchaser, the Purchaser shall, to the extent practicable and appropriate
in view of the Non-Assumed Liabilities, take reasonable steps to have the
Company named as an additional insured under such policy. ARTICLE V Closing;
Closing Conditions 5.1. Closing. The closing hereunder (the "Closing") shall
take place at the offices of Sullivan & Cromwell, counsel to the Purchaser, at
9:00 a.m., Los Angeles time, on the later of (a) July 31, 1996 and (b) the
second business day after satisfaction of all conditions to closing hereunder,
or at such other time and date as the Company and the Purchaser shall mutually
agree, such time and date being herein called the "Closing Date," and the
Closing shall be effective as of the close of the Company's business on the
Closing Date. All actions to be taken and all documents to be executed and
delivered as of the Closing Date shall be deemed to have been taken, executed
and delivered simultaneously, and no action shall be deemed to have been taken
nor any documents executed and delivered until all such have been taken,
executed and delivered. 5.2. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the actions contemplated by this
Agreement and the Ancillary Agreements are subject to the fulfillment of each of
the following conditions, any or all of which may be waived in whole or in
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part by the Purchaser to the extent permitted by applicable
law: (a) Governmental Consents. All filings required to be made prior to the
Closing Date by the Company with, and all consents, approvals and authorizations
required to be obtained prior to the Closing Date by the Company or the
Purchaser from, any Governmental Entity in connection with the execution and
delivery of this Agreement and the Ancillary Agreements by the Company and the
Purchaser and the consummation of the transactions contemplated hereby and
thereby by the Company and the Purchaser shall have been made or obtained (as
the case may be); (b) Litigation. No court or other Governmental Entity of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) which is in effect and
prohibits consummation of the transactions contemplated by this Agreement and
the Ancillary Agreements or imposes material restrictions on the Purchaser or
the Company in connection with consummation of the Sale or with respect to their
business operations, either prior to or subsequent to the Sale (collectively, an
"Order"); (c) Compliance; Consents. The representations and warranties contained
in Section 3.1 shall be true in all material respects as of the Closing Date as
though made at and as of the Closing Date except for changes contemplated by
this Agreement, the Company shall have complied in all material respects with
the covenants and agreements contained in this Agreement to be complied with or
performed by the Company prior to the Closing Date and the Company shall have
obtained any necessary consents from parties in contract with it to the Sale on
terms and conditions reasonably satisfactory to the Purchaser; (d) Other
Obligations. The Company shall have fulfilled its obligations under Article IV;
(e) Financial Statements and Other. The Company shall have delivered to the
Purchaser the Audited Financial Statements; all consents listed in Schedule
3.1(d) shall have been obtained on terms and conditions reasonably satisfactory
to the Purchaser except for such consents, alone or in the aggregate, which the
failure to obtain is not reasonably likely to have a material adverse effect on
the financial condition, Assets, business, customers, results of operations or
prospects of the Company or any Acquired Subsidiary or that could not prevent,
materially
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delay or materially burden the transactions contemplated by this Agreement and
the Ancillary Agreements; the System/36 Front Office Software owned by Robert S.
Sanford shall have been contributed to the Company and be a Proprietary Right;
(f) Preliminary Closing Balance Sheet. (i) The Current Ratio and Net Current
Assets on the Preliminary Closing Balance Sheet are greater than or equal to the
Current Ratio (1.483 to 1.0) and Net Current Assets ($2,758,225) on the Interim
Balance Sheet and (ii) Net Worth on the Preliminary Closing Balance Sheet is
greater than or equal to Net Worth (negative $5,562,359) on the Interim Balance
Sheet unless a revision has been agreed to under Section 2.5(a); and (g) No
Material Adverse Change. There shall not have occurred any material adverse
change in the financial condition, Assets, business, customers, results of
operations or prospects of the Company or an Acquired Subsidiary or the
occurrence of any event (other than the transactions contemplated hereby) which,
so far as reasonably can be foreseen at the time of its occurrence, is
reasonably likely to result in any such change; provided that the Purchaser
agrees that the failure of the Company and the Acquired Subsidiaries to enter
into new license sales agreements during the period between the signing of this
Agreement and the Closing shall not constitute such a material adverse change.
5.3. Conditions to Obligations of the Company. The obligations of the Company to
consummate the Sale are subject to the fulfillment of each of the following
conditions, any or all of which may be waived in whole or in part by the Company
to the extent permitted by applicable law: (a) Governmental Consents. All
filings required to be made prior to the Closing Date by the Purchaser with, and
all consents, approvals, permits and authorizations required to be obtained
prior to the Closing Date by the Purchaser or the Company from, any Governmental
Entity in connection with the execution and delivery of this Agreement and the
Ancillary Agreements by the Purchaser and the Company and the consummation of
the transactions contemplated hereby and thereby by the Purchaser and the
Company shall have been made or obtained (as the case may be); (b) Order. There
shall be in effect no Order;
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(c) Compliance. The representations and warranties contained in Section 3.2
shall be true in all material respects as of the Closing Date as though made at
and as of the Closing Date except for changes contemplated by this Agreement,
the Purchaser shall have complied in all material respects with the covenants
and agreements contained in this Agreement to be complied with or performed by
the Purchaser prior to the Closing Date and the Purchaser shall have obtained
any necessary consents from parties in contract with it to the Sale on terms and
conditions reasonably satisfactory to the Company except for such consents,
alone or in the aggregate, which the failure to obtain is not reasonably likely
to have a material adverse effect on the financial condition, assets, business,
customers, results of operations or prospects of the Purchaser or that could not
prevent, materially delay or materially burden the transactions contemplated by
this Agreement and the Ancillary Agreements; (d) Other Obligations. The
Purchaser shall have fulfilled its obligations under Article IV; (e) American
Stock Exchange. The Consideration Shares shall have been approved for listing on
the American Stock Exchange; and (f) Tax Opinion. The Company shall have
received a tax opinion from Heller, Ehrman, White & McAuliffe as to the
transactions contemplated hereby that is reasonably acceptable to the Company,
provided that this condition shall be deemed to be satisfied unless the Company
gives written notice to the Purchaser of failure of this condition within five
business days of the date of this Agreement. ARTICLE VI Indemnification 6.1. The
Company's Indemnification. The Company hereby indemnifies and holds the
Purchaser and its officers, directors, shareholders, affiliates, successors and
assigns harmless from and against any and all damages, losses, claims, suits,
actions, proceedings, judgments, assessments, deficiencies, penalties and
interest, liabilities and expenses (including reasonable attorneys' fees and
disbursements) together with any such costs or expenses to enforce the
provisions hereof (collectively, "Claims") arising out of, based upon or
resulting from: (i) the inaccuracy of any representation or warranty made by the
Company, or the material breach by the Company of any -37-Company, or the
material breach by the Company of any
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covenant or agreement of the Company contained in this Agreement or any
Ancillary Agreement; (ii) except as specifically set forth herein, the conduct
of the business of the Company on or prior to Closing Date; (iii) any NonAssumed
Liability; or (iv) any amount due in respect of the Other Liabilities in excess
of $2,890,230. 6.2. The Purchaser's Indemnification. The Purchaser hereby
indemnifies and holds the Company and its officers, directors, shareholders,
affiliates, successors and assigns harmless from and against all Claims arising
out of, based upon or resulting from any Assumed Liability. 6.3. Indemnification
Procedure. In case (A) the Purchaser, the Company or any other indemnified party
determines that it is entitled to indemnification under Section 6.1 or 6.2 or
(B) the Purchaser, the Company or any other indemnified party receives written
notice of any claim, suit, action or proceeding from any person who is not a
party to this Agreement which is subject to indemnification hereunder, such
party (the "Indemnified Party") shall give prompt written notice in reasonable
detail to the other party (the "Indemnifying Party"). The Indemnifying Party
shall, at its expense, defend any such third party claim, suit, action or
proceeding through counsel of its own choice that is reasonably acceptable to
the Indemnified Party, and failing such defense, the Indemnified Party shall
have the right to (but shall not be obligated to) pay, compromise or defend the
same. In any claim, suit, action or proceeding defended by the Indemnifying
Party, the Indemnified Party may participate, at its expense, in the defense of
same. The Indemnifying Party shall not in the defense of a third party claim,
suit, action or proceeding consent to entry of any judgment or enter into any
settlement that provides any release of the Indemnifying Party and that (i) does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to the Indemnified Party of a release from all liability in respect of
all Claims arising therefrom or (ii) requires the performance of any act (other
than the payment of moneys for which such Indemnified Party is held harmless
hereunder) or the agreement not to perform any act by the Indemnified Party, in
each case except with the written consent of the Indemnified Party. 6.4. Minimum
Claims. No claim for indemnification may be made hereunder against the Company
unless and until the aggregate amount of Claims for which indemnification is
expected to be made against the Company exceeds $250,000.
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6.5. Consideration Shares. To the extent the Company does not promptly pay,
compromise or defend any valid Claim under Section 6.1 for which the Company is
liable, then in accordance with the terms of the Escrow Agreement, the Purchaser
and/or the Company shall be entitled to cause the Escrow Agent to deliver to or
upon the order of the Purchaser or any other Indemnified Party, as the case may
be, that number of Ordinary Consideration Shares, whether held by HIS or any HIS
Entity, equal to the Claim based on the average of the closing prices of the
Common Stock on the American Stock Exchange for the ten trading days preceding
the date of notice to the Escrow Agent to deliver such shares, rounded up to the
nearest whole share. If the number of Ordinary Consideration Shares would not
provide a value equal to the amount of the Claim, and if in accordance with the
Escrow Agreement, the property then held in escrow thereunder includes Other
Escrow Property and/or Permitted Investments (each as defined in the Escrow
Agreement) that derived from the Ordinary Consideration Shares, then the
Purchaser shall also be entitled to satisfy such Claim out of such Other Escrow
Property and Permitted Investments, valued at fair market value, up to the
amount of any deficiency represented by Ordinary Consideration Shares. 6.6.
Exclusive Remedy. Following the Closing, the provisions of Section 6.5 shall be
the sole and exclusive remedy of the Purchaser hereunder for the breach of any
representation or warranty of the Company in Section 3.1 (other than matters of
title in Section 3.1(g)); provided, however, that nothing in this Section 6.6
shall be deemed to have waived or released any claims, causes of action or
remedies which Purchaser may have against the Company for intentional
misrepresentation. ARTICLE VII Termination 7.1. Termination by Mutual Consent.
This Agree- ment and the Ancillary Agreements may be terminated and the Sale may
be abandoned at any time prior to the Closing Date by the mutual consent of the
Purchaser and the Company, by action of their respective Boards of Directors.
7.2. Termination by Either the Purchaser or the Company. This Agreement and the
Ancillary Agreements may be terminated and the Sale may be abandoned by action
of the Board of Directors of either the Purchaser or the Company if the Sale
shall not have been consummated by September 30,
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1996, or if the Company timely gives the notice contemplated by Section
5.3(f) regarding non-receipt of tax opinion. 7.3. Termination by the Purchaser.
This Agreement and the Ancillary Agreements may be terminated and the Sale may
be abandoned at any time prior to the Closing Date by action of the Board of
Directors of the Purchaser, if the Company shall have failed to comply in any
material respect with any of the representations, warranties, covenants or
agreements contained in this Agreement or any Ancillary Agreement to be complied
with or performed by the Company at or prior to such date of termination after
notice of such failure and 10 business days to cure. 7.4. Termination by the
Company. This Agreement and the Ancillary Agreements may be terminated and the
Sale may be abandoned at any time prior to the Closing Date by action of the
Board of Directors of the Company, if the Purchaser shall have failed to comply
in any material respect with any of the representations, warranties, covenants
or agreements contained in this Agreement or any Ancillary Agreement to be
complied with or performed by the Purchaser at or prior to such date of
termination after notice of such failure and 10 business days to cure. 7.5.
Effect of Termination and Abandonment. In the event of termination of this
Agreement and the Ancillary Agreements and abandonment of the Sale pursuant to
this Article VII, no party hereto (or any of its directors or officers) shall
have any liability or further obligation to any other party to this Agreement,
except as provided in Section 8.2; provided, that nothing herein will relieve
any party from liability for any willful breach of this Agreement. ARTICLE VIII
Miscellaneous and General 8.1. Payment of Expenses. Whether or not the Sale
shall be consummated, each party hereto shall pay its own expenses incident to
preparing for, entering into and carrying out this Agreement and the Ancillary
Agreements and the consummation of the Sale. 8.2. Survival. The representations,
warranties, covenants and agreements of the Company and the Purchaser contained
in this Agreement and the Ancillary Agreements shall survive the consummation of
the Sale except that the representations and warranties in Article III (other
than
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<PAGE>
those pertaining to title in section 3.1(g)) shall terminate (except for
matters as to which a Claim has been made prior thereto) on the date that is one
year after the Closing Date. The agreements of the Company and the Purchaser
contained in Sections 4.4 and 7.5 of this Agreement and this Article VIII shall
survive the termination of this Agreement, but the other provisions hereof shall
not survive such termination. 8.3. Amendment; Waiver. This Agreement may not be
modified or amended except by a written instrument signed by authorized
representatives of both parties and referring specifically to this Agreement.
The conditions to each of the parties' obligations to consummate the Sale are
for the sole benefit of such party and may be waived by such party in whole or
in part to the extent permitted by applicable law. No waiver of any breach or
default hereunder shall be considered valid unless in writing and signed by the
party giving such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach of the same or similar nature. 8.4. Counterparts. For the
convenience of the parties hereto, this Agreement may be executed in any number
of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute one and the same
agreement. 8.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. 8.6. Notices. Any
notice, request, instruction or other document to be given hereunder by any
party to the others shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, next-day air courier or
facsimile: 1. if to the Purchaser, at 9600 Jeronimo Road Irvine, California
92718 Facsimile No.: (714) 580-2378 Attention: President
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<PAGE>
with a copy to:
Sullivan & Cromwell
444 South Flower Street, Suite 1200
Los Angeles, California 90071
Facsimile No.: (213) 683-0457
Attention: Frank H. Golay, Jr.
2. if to the Company, at
2300 Clayton Road, Suite 300
Concord, California 94520
Facsimile No.: (510) 602-3052
Attention: President
with copies to:
Heller, Ehrman, White & McAullife
525 University Avenue
Suite 1100
Palo Alto, California 94301-1908
Facsimile No.: (415) 324-0638
Attention: August J. Moretti
Saphier, Rein & Walden
10000 Santa Monica Boulevard, #312
Los Angeles, California 90067
Facsimile No.: (310) 556-1564
Attention: Robert S. Rein
or to such other persons or addresses as may be designated in writing by
the party to receive such notice.
8.7. Entire Agreement, etc. This Agreement (including any Annexes or
Schedules hereto) and the Ancillary Agreements (a) constitute the entire
agreement, and supersedes all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof, and (b) shall not be transferable or
assignable by operation of law or otherwise and is not intended to create any
obligations to, or rights in respect of, any persons other than the parties
hereto; provided, that the Purchaser may assign any of its rights and
obligations hereunder to any of its subsidiaries without, however, relieving it
from such obligations if not performed by the assignee; provided, further, that
the HIS Entities are third party beneficiaries under the Put/Call and
Registration Rights Agreement and Computer Systems Associates is a third party
beneficiary under Section 4.11(d).
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<PAGE>
8.8. Captions. The Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
HOTEL INFORMATION SYSTEMS, INC.
By: /s/ Richard S. Ressler
Name: Richard S. Ressler
Title: Chief Executive Officer
MAI SYSTEMS CORPORATION
By: /s/ Robert S. Sanford
Name: Robert S. Sanford
Title: President
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<PAGE>
ANNEX A
DEFINITIONS
"Acquired Subsidiaries" has the meaning set forth in Section 1.1(g).
"Acquisition Proposal" has the meaning set forth in Section 4.2. "Agreement"
means the Asset Purchase Agreement, dated as of June 30, 1996, between the
Company and the Purchaser. "Ancillary Agreements" means the Escrow Agreement,
the Put/Call and Registration Rights Agreement, the Consulting Agreement, the
Non-Competition Agreements, the Employee Services Agreement and the
Confidentiality Agreement. "Assets" has the meaning set forth in Section 1.1.
"Assumed Current Liabilities" has the meaning set forth in Section 1.3(a).
"Assumed Liabilities" has the meaning set forth in Section 1.3. "Audited Assumed
Current Liabilities" means the amount of Assumed Current Liabilities calculated
from the Audited Balance Sheet. "Audited Balance Sheet" means the consolidated
balance sheet of the Company and its subsidiaries as of December 31, 1995,
audited by Ernst & Young. "Audited Current Assets" means the amount of Current
Assets calculated from the Audited Balance Sheet. "Audited Financial Statements"
means the consolidated financial statements of the Company and its subsidiaries
as of and for the periods ended December 31, 1994 and 1995, audited by Ernst &
Young. "Claims" has the meaning set forth in Section 6.1. "Closing" has the
meaning set forth in Section 5.1. "Closing Balance Sheet" has the meaning set
forth in Section 2.5(b).
A-1
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"Closing Date" has the meaning set forth in
Section 5.1.
"Code" has the meaning set forth in
Section 3.1(l)(ii).
"Common Stock" means the Common Stock, par value
$0.01 per share, of the Purchaser.
"Company" has the meaning set forth in the first
paragraph of the Agreement.
"Computer Systems Associates" means CSA Holdings
Ltd, Computer Systems Advisers (Private) Limited and their
affiliates.
"Confidentiality Agreement" means the Confidentiality
Agreement previously entered into between the Purchaser and the Company.
"Consideration Shares" has the meaning set forth
in Section 2.1(b).
"Consulting Agreement" means the Employment and Consulting
Agreement, to be dated the Closing Date, between the Purchaser and Robert S.
Sanford, in the form of Annex D to the Agreement.
"Contracts" has the meaning set forth in
Section 1.1(h).
"CSA Note" means the Revolving Credit Note issued by an
Acquired Subsidiary in August 1995 in aggregate principal amount of $500,000.00.
"Current Assets" means Assets that are considered current
assets in accordance with GAAP.
"Current Ratio" means the ratio of Current Assets
to Assumed Current Liabilities.
"Debenture" means the Convertible Debenture Due 2010 issued by
the Company on October 21, 1993 in original principal amount of $1,036,999.32.
"Employee" has the meaning set forth in
Section 3.1(l)(i).
"Employee Benefit Plans" has the meaning set forth
in Section 3.1(l)(i). Employee Benefit Plans only refer to
A-2
<PAGE>
Employee Benefit Plans of the Company or an Acquired Subsidiary. "Employee
Benefits and Obligations" means all accrued payroll and related accrued payroll
and other employee benefit liabilities and obligations, including, without
limitation, all accrued employee benefits, vacation, commissions and bonuses,
severance costs, supplemental and excess pension plan and other Employee Benefit
Plan liabilities and obligations, all deferred compensation and other
compensation liabilities and obligations and all liabilities and obligations
associated with Employees employed by the Company whose employment is deemed to
be terminated by operation of law or otherwise as a result of the consummation
of the transactions contemplated by the Agreement and the Ancillary Agreements.
"Employee Services Agreement" has the meaning set forth in Section 4.7(a).
"Environmental Law" means (i) any Federal, state, foreign or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, common law, legal doctrine, order, judgment, decree, injunction,
requirement or agreement with any Governmental Entity, (x) relating to the
protection, preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource), or to human health or safety, or (y) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances. "ERISA" has
the meaning set forth in Section 3.1(l)(i). "Escrow Agent" means the party named
as Escrow Agent in the Escrow Agreement. The Purchaser shall select the Escrow
Agent who shall be reasonably acceptable to the Company. "Escrow Agreement"
means the Escrow Agreement, to be dated the Closing Date, among the Company, the
Purchaser and the Escrow Agent, in the form or substantially in the form of
Annex B to the Agreement (it being recognized that the Escrow Agent may require
changes to such form of agreement prior to signing).
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<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Excluded Assets" has the meaning set forth in
Section 1.2.
"Final Assets" has the meaning set forth in
Section 2.5(b)(i).
"Final Assumed Current Liabilities" has the
meaning set forth in Section 2.5(b)(i).
"Final Assumed Liabilities" has the meaning set
forth in Section 2.5(b)(i).
"Final Closing Balance Sheet" has the meaning set
forth in Section 2.5(b)(i).
"Final Current Assets" has the meaning set forth
in Section 2.5(b)(i).
"Final Net Current Assets" means Final Current
Assets less Final Assumed Current Liabilities.
"Final Net Worth" means Final Assets less Final
Assumed Liabilities.
"GAAP" has the meaning set forth in
Section 2.5(b)(i).
"Governmental Entity" has the meaning set forth in
Section 3.1(d)(i).
"Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any substance containing any such substance as a component.
"Indemnified Party" has the meaning set forth in
Section 6.3.
"Innovations Note" means the note dated June 15,
1993 in the original principal amount of $150,000 payable to
Software Advantage, Inc. dba Innovations America.
"Intellectual Property" has the meaning set forth
in Section 1.1(j).
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"Intercompany Payables" has the meaning set forth in Section 1.3(c).
"Intercompany Receivables" has the meaning set forth in Section 1.1(b). "Interim
Balance Sheet" means the consolidated balance sheet of the Company and its
subsidiaries at March 31, 1996 attached as Annex J to the Agreement. For
purposes of Section 2.5(c) of the Agreement, the Interim Balance Sheet shall be
adjusted to give effect to any reclassification of amounts (as opposed to
changes in such amounts) made on the Final Closing Balance Sheet; provided that
no such reclassification shall affect any ratio or dollar amount set forth in
Sections 2.5(a), 2.5(c) or 5.2(f), which as originally stated shall remain the
applicable measurement standards for the financial tests set forth in such
Sections. "Leased Employee" has the meaning set forth in Section 4.7(a).
"Leases" means the leases of real property set forth on Schedule 3.1(g).
"Leaseholds" means the real property subject to the Leases. "Merrill Lynch
Revolving Credit Line" means the credit line associated with Merrill Lynch
Working Capital Management Account No. 322-07578. "Net Current Assets" means
Current Assets less Assumed Current Liabilities excluding deferred revenues.
"Net Worth" means Assets less Assumed Liabilities. "Non-Assumed Liabilities" has
the meaning set forth in Section 1.4. "Non-Competition Agreement" means any Non-
Competition Agreement, to be dated the Closing Date, between the Purchaser and a
stockholder of the Company, in the form of Exhibit E to the Agreement. "Order"
has the meaning set forth in Section 5.2(b). "Ordinary Consideration Shares" has
the meaning set forth in Section 2.1(a).
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<PAGE>
"Other Liabilities" has the meaning set forth in
Section 1.3(e).
"Per Share Price" means $9.25. The Per Share Price shall
automatically (i) adjust for any stock dividend, stock split, reverse stock
split or other subdivision or combination of the outstanding shares of common
stock and (ii) increase on the first day of each month after the Closing Date by
one-twelfth (1/12) of the annualized yield for United States government
securities with a maturity of six months, as published in the Wall Street
Journal on the business day immediately preceding the nearest prior July 15 or
January 15, as applicable.
"Preliminary Assumed Current Liabilities" means
the amount of Assumed Current Liabilities identified on the
Preliminary Closing Balance Sheet.
"Preliminary Closing Balance Sheet" has the
meaning set forth in Section 2.5(a).
"Preliminary Current Assets" means the amount of
Current Assets identified on the Preliminary Closing Balance
Sheet.
"Properties" has the meaning set forth in
Section 3.1(o).
"Proprietary Rights" has the meaning set forth in
Section 3.1(i).
"prospects" (i) when used with respect to any representation or warranty of
the Company contained in Section 3.1 of the Agreement shall not include any
event or condition affecting the computer hardware, software or information
system industries generally and (ii) in all other contexts shall not be so
limited. "Purchaser" has the meaning set forth in the first paragraph of the
Agreement. "Purchaser Reports" shall mean each registration statement, schedule,
report, proxy statement or information statement prepared by the Purchaser since
December 31, 1995, including, without limitation, (i) the Purchaser's Annual
Report on Form 10-K for the year ended December 31, 1995 and (ii) the
Purchaser's Quarterly Report on Form 10-Q for the period ended March 31, 1996,
each in the form (including exhibits and any amendments thereto) filed with the
SEC.
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"Put/Call Consideration Shares" has the meaning set forth in Section 2.1(b).
"Put/Call and Registration Rights Agreement" means the Put/Call and Registration
Rights Agreement, to be dated the Closing Date, between the Company and the
Purchaser, in the form of Annex C to the Agreement. "Representatives" has the
meaning set forth in Section 4.4. "Restricted Business" shall mean the design,
engineering and servicing of software relating to hotel information systems.
"Restricted Territory" shall mean (x) every county of every state of the United
States other than the State of California and every foreign country in which the
Company currently does substantial business, including Australia, Austria,
China, Hong Kong, Singapore, Thailand and the United Kingdom, and (y) every
county in the State of California (it being agreed that the Company does
substantial business in each such county). "Sale" has the meaning set forth in
Section 1.1. "Sanford Note" means a promissory note payable to Robert S. Sanford
in the aggregate principal amount of approximately $15,000. "SEC" has the
meaning set forth in Section 3.2(d). "Securities Act" means the Securities Act
of 1933, as amended. "Taxes" has the meaning set forth in Section 1.4(e). "WARN
Act" means the Worker Adjustment and Retraining Notification Act.
A-7
<PAGE>
A-8
<PAGE>1
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT (this "Amendment"), dated as of July
10, 1996, between Hotel Information Systems, Inc., a California corporation (the
"Company"), and MAI Systems Corporation, a Delaware corporation (the
"Purchaser").
RECITALS
WHEREAS, the Company and the Purchaser have executed an Asset Purchase Agreement
(the "Agreement"), dated as of June 30, 1996; and
WHEREAS, the Company and the Purchaser now desire to amend the Agreement and
certain Ancillary Agreements as set forth herein.
NOW, THEREFORE, in consideration of the premises, and of the representations,
warranties, covenants and agreements contained in the Agreement and herein, the
parties hereto hereby agree as follows:
1. Liquidation of the Company. The Company advises the Purchaser that the
Company intends to liquidate immediately after the Closing. Accordingly, the
Purchaser consents to the assignment of the Employee Services Agreement to any
successor or assignee of the Company that is the employer of the Employees;
provided that no such assignment shall affect any rights or remedies of the
Purchaser under the Agreement or any Ancillary Agreement or release the Company
from any of its obligations thereunder if not performed by such assignee.
2. Assumed Liabilities. The Company represents and warrants that all amounts
owning under the Debenture may be paid in full through the issuance of a number
of Put/Call Consideration Shares equal in value to $1,192,549 (128,925 shares at
the Per Share Price); provided that this representation and warranty is not
subject to the limitation set forth in Section 6.4 of the Agreement. Such shares
shall be issued in the name of Computer Systems Associates and shall be subject
to the terms of the Agreement and the Ancillary Agreements.
3. Software License Contracts. The parties hereby agree that the cash receipts
and expenses relating tothe delivery of interfaces to Mirage after the Closing
Date shall not be included in the representation and agreement
set forth in Section 3.1(x) of the Agreement.
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<PAGE>2
4. Rental for Office. The parties hereby add the following three sentences
to the end of Section 4.11(c)of the Agreement:
The Company shall pay, or cause to be paid, to the Purchaser a monthly rental of
$500 per month for the one locked office at the facilities in Concord,
California, which the parties agree is a fair market rental of such office. Such
rental shall be payable in arrears on the last day of each month during the term
of such lease. Such office may be used by a liquidating trust of the Company.
5. CSA Note. The Purchaser and the Company agree that payment of amounts due
under the CSA Note shall be made by the Acquired Subsidiary that is the obligor
on the CSA Note. In addition, the first sentence of Section 4.11(d) of the
Agreement shall be replaced by: "The Purchaser agrees to pay the amounts due
under the Merrill Lynch Revolving Credit Facility on the Closing Date and to
cause the Acquired Subsidiary that is the obligor on the CSA Note to pay the
amounts due under the CSA Note on the first business day for such Acquired
Subsidiary after the Closing Date."
6. Closing. The phrase "July 31, 1996" in
Section 5.1(a) of the Agreement shall be changed to "August
9, 1996".
7. Escrow Agreement. In the Escrow Agreement
that will be executed at Closing, the third word of Section
2.3(a) shall be changed from "second" to "fifth".
8. Put/Call and Registration Rights Agreement.
In the Put/Call and Registration Rights Agreement that will
be executed at Closing:
(a) The twelfth word of Section 2.2(b) shall be changed from "second" to fifth".
(b) The fourth word of Section 2.3(a) shall be changed from "second" to "fifth".
(c) In Section 3.1(a), the twenty-sixth word in the first sentence shall be
changed from "second" to "fifth", the word "such" appearing as the fifty-third
word in the second sentence shall be deleted, the words "10 days" in such second
sentence shall be changed to "20 days" and the first three words of the third
sentence shall be replaced by "During the first and fifth years".
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<PAGE>3
(d) The eighteenth word of Section 3.1(b)(i)(B) shall be changed from "second"
to "fifth".
(e) The eighth word of Section 3.1(b)(i)(C) shall be changed from "second" to
fifth".
(f) The introductory clause to the third
paragraph of Schedule 3.1(a) shall be replaced by: "After
the first anniversary and prior to the fifth anniversary of
the Closing Date,".
The Agreement and the Ancillary Agreements, as so amended, are hereby reaffirmed
in all respects.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
HOTEL INFORMATION SYSTEMS, INC.
By: /s/ Robert S. Sanford
Name: Robert S. Sanford
Title: President
MAI SYSTEMS CORPORATION
By: /s/ Richard S. Ressler
Name: Richard S. Ressler
Title: Chief Executive Officer
3
<PAGE>
==============================================================================
ESCROW AGREEMENT
Dated as of July ___, 1996
Among
HOTEL INFORMATION SYSTEMS, INC.,
MAI SYSTEMS CORPORATION
and
[CITY NATIONAL BANK], AS ESCROW AGENT
==============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
RECITALS.............................................................B-1
ARTICLE I
Definitions
1.1 Definitions..................................................B-1
1.2 Other Definitions............................................B-3
ARTICLE II
Escrow Arrangement
2.1 Delivery of Consideration Shares and Other
Escrow Property to the Escrow Agent, Etc.....................B-4
2.2 Delivery by Escrow Agent of Ordinary
Consideration Shares and Other Escrow
Property Upon Certain Events.................................B-5
2.3 Delivery By Escrow Agent of Put/Call
Consideration Shares and Other Escrow
Property Upon Certain Events.................................B-6
2.4 Voting of Consideration Shares...............................B-7
2.5 Term of Escrow...............................................B-7
2.6 Investment...................................................B-7
2.7 Representations and Warranties...............................B-7
ARTICLE III
The Escrow Agent
3.1 The Escrow Agent.............................................B-8
3.2 Compensation and Indemnification of Escrow
Agent........................................................B-9
3.3 Merger or Consolidation of Escrow Agent......................B-10
3.4 Duties of Escrow Agent.......................................B-10
3.5 Change of Escrow Agent.......................................B-11
ARTICLE IV
Miscellaneous and General
4.1 Amendment; Waiver............................................B-12
4.2 Successors...................................................B-12
4.3 Binding Effect...............................................B-12
4.4 GOVERNING LAW................................................B-13
4.5 Notices......................................................B-13
4.6 Counterparts.................................................B-14
B-i
<PAGE>
4.7 Entire Agreement, etc........................................B-14
4.8 Captions.....................................................B-14
B-ii
<PAGE>
ESCROW AGREEMENT (this "Agreement"), dated as of July ___, 1996,
among Hotel Information Systems, Inc., a California corporation ("HIS"), MAI
Systems Corporation, a Delaware corporation (the "Issuer"), and [City National
Bank], a ______________ corporation (the "Escrow Agent").
RECITALS
WHEREAS, this Agreement is entered into in connection with the
Asset Purchase Agreement, dated as of June 30, 1996, between the Issuer and HIS
(the "Asset Purchase Agreement"), which provides for the issuance by the Issuer
to HIS of an aggregate of 1,178,380 shares (the "Consideration Shares") of the
Issuer's Common Stock, including 681,082 Put/Call Consideration Shares (the
"Put/Call Consideration Shares") and 497,298 Ordinary Consideration Shares (the
"Ordinary Consideration Shares"), that are subject to this Agreement; and
WHEREAS, the Asset Purchase Agreement provides for the Issuer to
deliver the Consideration Shares to the Escrow Agent upon the Closing that is
taking place on the date of this Agreement (the "Closing" or the "Closing
Date"), such Consideration Shares to be held by the Escrow Agent in escrow
subject to the terms and conditions of this Agreement, and in order to
facilitate the purposes of the Asset Purchase Agreement and the Put/Call and
Registration Rights Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein and in
the Asset Purchase Agreement and the Put/Call and Registration Rights Agreement,
the parties hereto hereby agree as follows:
ARTICLE I
Definitions
1.1 DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
"Agreement" has the meaning set forth in the first
paragraph of this Agreement.
"Asset Purchase Agreement" has the meaning set
forth in the recitals of this Agreement.
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<PAGE>
"Certified Notice" shall mean written notice certified by the
Issuer and/or either HIS or the applicable HIS Entity.
"Closing" or the "Closing Date" have the meanings
set forth in the recitals of this Agreement.
"Consideration Shares" has the meaning set forth
in the recitals of this Agreement.
"Dispute" shall mean any dispute, civil action, suit, claim,
arbitration, mediation or other disagreement or proceeding arising out of or in
connection with the Asset Purchase Agreement, for which indemnification has been
claimed and not paid in full pursuant to the Asset Purchase Agreement.
"Dividend" has the meaning set forth in Section
2.1(b).
"Escrow Agent" has the meaning set forth in the
first paragraph of this Agreement.
"Final Judgment" shall mean any final judgment or order not
subject to further appeal issued by a court with competent jurisdiction over the
parties to the Asset Purchase Agreement.
"HIS" has the meaning set forth in the first
paragraph of this Agreement.
"HIS Entities" means HIS and the Permitted
Transferees.
"Issuer" has the meaning set forth in the first
paragraph of this Agreement.
"Judgment" shall mean any order, consent decree, judgment,
sanction, ruling or other remedial action taken by a court, arbitrator or other
entity with competent jurisdiction over the parties to the Asset Purchase
Agreement, or any resolution, agreement or other settlement, arising out of or
in connection with a Dispute.
"Ordinary Consideration Shares" has the meaning
set forth in the recitals of this Agreement.
"Other Escrow Property" has the meaning set forth
in Section 2.1(b).
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<PAGE>
"Permitted Investments" means (i) U.S. Government Obligations
with a maturity of one year or less; or (ii) certificates of deposit or
acceptances with a maturity of one year or less of the Escrow Agent or any other
financial institution that is a member of the United States Federal Reserve
System having combined capital and surplus and undivided profits of not less
than $500,000,000 or (iii) investment funds which invest primarily in U.S.
Government Obligations of which the Escrow Agent or any of its affiliates are a
sponsor, investment advisor, manager, custodian or agent and for which the
Escrow Agent may be separately compensated, provided that such investment or
deposit is not prohibited by Federal or state banking laws applicable to the
Escrow Agent.
"Permitted Transferees" shall mean the holders of common or
preferred stock (or of options to acquire such stock) of HIS as of the Closing
Date, which include Robert S. Sanford, Computer Systems Associates and Montreux
Equity Partners III L.P. ("Montreux"). Permitted Transferees shall also include
such other persons as to which the Issuer shall consent in writing, such consent
not to be unreasonably withheld. In any event, up to ten accredited investors,
within the definition under Regulation D under the Securities Act, requested by
Computer Systems Associates or Montreux will be consented to by the Issuer.
"Put/Call and Registration Rights Agreement" means the Put/Call
and Registration Rights Agreement, to be dated the Closing Date, between the
Issuer and HIS.
"Put/Call Consideration Shares" has the meaning
set forth in the recitals of this Agreement.
"Registration" refers to a registration effected by the Issuer by
preparing and filing a registration statement in compliance with the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder
("Registration Statement"), and the declaration or ordering of the effectiveness
of such Registration Statement.
"U.S. Government Obligations" means direct obliga-
tions (or certificates representing an ownership interest in
such obligation) of the United States of America.
1.2 OTHER DEFINITIONS. All capitalized terms
used herein and not otherwise defined shall have the respec-
tive meanings set forth in the Asset Purchase Agreement.
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<PAGE>
ARTICLE II
Escrow Arrangement
2.1 DELIVERY OF CONSIDERATION SHARES AND OTHER ESCROW PROPERTY TO
THE ESCROW AGENT, ETC. (a) On the Closing Date, the Issuer will deliver the
Consideration Shares to the Escrow Agent pursuant to Section 2.2(a) of the Asset
Purchase Agreement. From time to time, the Issuer may deliver additional
Put/Call Consideration Shares to the Escrow Agent pursuant to Section 2.3(b) of
the Put/Call and Registration Rights Agreement. The Escrow Agent will hold such
Consideration Shares in escrow and will not transfer any interest in such
Consideration Shares except pursuant to the terms of this Agreement and except
as required by law. The Escrow Agent will hold the Ordinary Consideration Shares
(and any Other Escrow Property derived therefrom) in a separate escrow from the
Put/Call Consideration Shares (and any Other Escrow Property derived therefrom)
and will not intermingle any such shares or Other Escrow Property related
thereto.
(b) If the Issuer shall declare and pay any dividend, whether in
the form of cash, Common Stock, other capital stock of the Issuer or any other
property, or whether as a stock split or other subdivision of the Common Stock
(a "Dividend"), during the term of this Agreement, the Issuer shall deliver such
Dividend payable with respect to the Consideration Shares ("Other Escrow
Property", which term shall also include any Permitted Investments and proceeds
thereof in accordance with this Agreement) to the Escrow Agent. The Escrow Agent
will hold such Other Escrow Property in escrow and will not transfer any
interest in such Other Escrow Property except pursuant to the terms of this
Agreement and except as required by law.
(c) Upon receipt by the Escrow Agent of a Certified Notice from
HIS certifying as to the transfer of shares to a Permitted Transferee, the
Escrow Agent will take all necessary action to have the Consideration Shares
registered in the name of the Permitted Transferee, but shall continue to hold
such Consideration Shares in escrow and will not transfer any interest in such
Consideration Shares except pursuant to the terms of this Agreement and except
as required by law.
(d) Upon receipt by the Escrow Agent of a Certified Notice from
the Issuer and HIS certifying as to an adjustment to the Consideration Shares
(and Other Escrow Property, if applicable) pursuant to Section 2.5(c) of the
Asset Purchase Agreement, the Escrow Agent shall deliver
B-4
<PAGE>
such number of Consideration Shares and Other Escrow Property as is stated in
such Certified Notice to or upon the order of the Issuer. The Escrow Agent will
continue to hold the remaining Consideration Shares and Other Escrow Property,
if any, in escrow and will not transfer any interest in such Consideration
Shares or Other Escrow Property except pursuant to the terms of this Agreement
and except as required by law.
(e) At any time during the term of this Agreement and upon
receipt of a Certified Notice from the Issuer and HIS certifying the number of
Consideration Shares and Other Escrow Property to be delivered to or upon the
order of the Issuer or HIS, the Escrow Agent shall deliver such number of
Consideration Shares and Other Escrow Property to or upon the order of the
Issuer or HIS, as applicable. The Escrow Agent will continue to hold the
remaining Consideration Shares and Other Escrow Property, if any, in escrow and
will not transfer any interest in such Consideration Shares or Other Escrow
Property except pursuant to the terms of this Agreement and except as required
by law.
2.2 DELIVERY BY ESCROW AGENT OF ORDINARY CONSIDERATION SHARES AND
OTHER ESCROW PROPERTY UPON CERTAIN EVENTS. (a) Upon the first anniversary of the
Closing Date and in the absence of receipt by the Escrow Agent of a Certified
Notice from the Issuer certifying that there exists a Dispute or Disputes, the
Escrow Agent shall deliver the Ordinary Consideration Shares and the Other
Escrow Property that derives from the Ordinary Consideration Shares then in its
possession to or upon the order of HIS. However, if at the first anniversary of
the Closing Date, the Escrow Agent shall have received a Certified Notice from
the Issuer certifying that there exists a Dispute or Disputes, then no such
delivery of Ordinary Consideration Shares and any related Other Escrow Property
shall occur pursuant to this subsection 2.2(a); instead, it is contemplated that
any such distribution would occur pursuant to Section 2.1(e) above. However,
after such anniversary date, from time to time as may be consistent with its
rights under the Asset Purchase Agreement, the Issuer agrees that it will
provide a Certified Notice under Section 2.1(e) with respect to (i) amounts that
are not subject to a Dispute or Disputes or (ii) amounts that subsequently cease
to be subject to a Dispute or Disputes.
(b) At any time during the term of this Agreement and upon the
receipt by the Escrow Agent of a Certified Notice from the Issuer and HIS
certifying that there exists a Judgment, or from the Issuer alone certifying
that there exists a Final Judgment, the amount of such Judgment or
B-5
<PAGE>
Final Judgment and the number of Ordinary Consideration Shares and amount of
Other Escrow Property that derives from such Ordinary Consideration Shares to be
delivered to or upon the order of the Issuer, the Escrow Agent shall deliver
such number of Ordinary Consideration Shares and amount of such Other Escrow
Property then in its possession to or upon the order of the Issuer. The Escrow
Agent will continue to hold the remaining Ordinary Consideration Shares and
Other Escrow Property, if any, relating thereto in escrow and will not transfer
any interest in such Ordinary Consideration Shares or Other Escrow Property
except pursuant to the terms of this Agreement and except as required by law.
2.3 DELIVERY BY ESCROW AGENT OF PUT/CALL CONSIDERATION SHARES AND
OTHER ESCROW PROPERTY UPON CERTAIN EVENTS. (a) Upon the second anniversary of
the Closing Date and in the absence of receipt by the Escrow Agent of a
Certified Notice from the Issuer certifying that it has exercised its call right
pursuant to Section 2.2(b) of the Put/Call and Registration Rights Agreement,
the Escrow Agent shall deliver the Put/Call Consideration Shares and the Other
Escrow Property that derives from such Put/Call Consideration Shares then in its
possession to or upon the order of HIS.
(b) At any time during the term of this Agreement and upon
receipt by the Escrow Agent of a Certified Notice from the Issuer certifying
that the Issuer or a Caller has exercised its call rights pursuant to Section
2.2(a) or (b) of the Put/Call and Registration Rights Agreement and the number
of Put/Call Consideration shares and the Other Escrow Property that derives from
the Put/Call Consideration Shares to be delivered to or upon the order of the
Issuer, the Escrow Agent shall deliver such number of Put/Call Consideration
Shares and Other Escrow Property to or upon the order of the Issuer. The Escrow
Agent will continue to hold the remaining Put/Call Consideration Shares and such
Other Escrow Property, if any, in escrow and will not transfer any interest in
such Put/Call Consideration Shares or Other Escrow Property except pursuant to
the terms of this Agreement and except as required by law.
(c) At any time during the term of this Agreement and upon
receipt by the Escrow Agent of a Certified Notice from the Issuer and an HIS
Entity certifying that such HIS Entity has sold Put/Call Consideration Shares
pursuant to a Registration, and the Number Sold, the Escrow Agent shall deliver
such number of Put/Call Consideration Shares to or upon the order of the Issuer
and the HIS Entity specified in such Certified Notice. The Escrow Agent will
continue to hold the remaining Put/Call Consideration Shares and related
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<PAGE>
Other Escrow Property, if any, in escrow and will not transfer any interest in
such Put/Call Consideration Shares or Other Escrow Property except pursuant to
the terms of this Agreement and except as required by law.
2.4 VOTING OF CONSIDERATION SHARES. Prior to the delivery by the
Escrow Agent to the Issuer or to a HIS Entity, as the case may be, of the
Consideration Shares pursuant to Sections 2.1, 2.2 or 2.3 above, the HIS
Entities shall have the sole power to exercise any voting rights attendant to
the Consideration Shares and to any shares that constitute Other Escrow
Property.
2.5 TERM OF ESCROW. The term of this Escrow Agreement will
commence upon receipt by the Escrow Agent of the Consideration Shares and will
terminate when the last of the Consideration Shares and any Other Escrow
Property has been delivered out of escrow pursuant to this Agreement, provided
that Articles III and IV shall survive any such termination.
2.6 INVESTMENT. The Escrow Agent agrees to invest all cash held
by it pursuant to this Agreement in Permitted Investments at the written
direction of the HIS Entities in the form of a Certified Notice and to hold such
investments until their maturity unless directed by Certified Notice to
liquidate such investments in order to make distributions of Other Escrow
Property pursuant to Sections 2.1, 2.2 or 2.3 above. The Escrow Agent shall not
be liable for any loss of principal or interest or for any penalty that may
result from following any investment instructions contained in any such
Certified Notices.
2.7 REPRESENTATIONS AND WARRANTIES. (a) Each of the Issuer and
HIS represents and warrants, with respect to itself, that (i) it has the
requisite corporate power and authority and has taken all corporate action
necessary in order to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, (ii) this Agreement is a valid and binding
agreement of it enforceable against it in accordance with its terms, (iii) the
execution and delivery of this Agreement by it does not, and the consummation of
the transactions contemplated hereby by it will not, constitute or result in (A)
a breach or violation of, or a default under, its charter documents or (B) a
breach or violation of, a default under, the acceleration of or the creation of
a lien, pledge, security interest or other encumbrance on assets (with or
without the giving of notice or the lapse of time) pursuant to, any provision of
any Contract of it or any law, ordinance, rule or regulation or judgment,
decree, order, award or governmental or non-
B-7
<PAGE>
governmental permit or license to which it is subject, except, in the case of
clause (B) above, for such breaches, violations, defaults or accelerations that,
alone or in the aggregate, could not prevent, materially delay or materially
burden the transactions contemplated by this Agreement and such liens, pledges,
security interests or other encumbrances as may be created pursuant to this
Agreement.
(b) The Escrow Agent represents and warrants that (i) it has the
requisite corporate power and authority and has taken all corporate action
necessary in order to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and (ii) this Agreement is a valid and binding
agreement of the Escrow Agent enforceable against the Escrow Agent in accordance
with its terms.
ARTICLE III
The Escrow Agent
3.1 THE ESCROW AGENT. (a) [City National Bank]
is hereby appointed as Escrow Agent in accordance with the
terms and conditions set forth herein, and the Escrow Agent
hereby accepts such appointment.
(b) Subject to the other terms and conditions hereof, the Escrow
Agent hereby irrevocably declares that it will hold all right, title and
interest in and to the Consideration Shares and any Other Escrow Property in
escrow for the use and benefit of the Issuer and the HIS Entities upon the terms
set forth herein.
(c) Copies of the Asset Purchase Agreement and the Put/Call and
Registration Rights Agreement are being furnished to the Escrow Agent
simultaneously with the execution of this Agreement, and such other agreements
shall be deemed to be annexes to this Agreement. However, nothing in such
agreements or in this Agreement is intended to impose any liability on the
Escrow Agent for the execution, validity or performance of such other
agreements, such matters being solely the responsibility of the Issuer, HIS and
the other HIS Entities.
(d) HIS agrees to provide, and agrees to cause the HIS Entities
to provide, to the Escrow Agent such stock powers and other instruments of
transfer as the Escrow Agent may from time to time reasonably request for
purposes of administering the escrows created hereunder. To that end, HIS hereby
further grants to the Escrow Agent the following power of attorney, and agrees
to cause each of the HIS
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<PAGE>
Entities to deliver to the Escrow Agent a similar power of attorney:
POWER OF ATTORNEY
Know all persons by these presents, that Hotel Information
Systems, Inc. [name of HIS Entity] constitutes and appoints [name of
Escrow Agent] its true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for it and in its name, place
and stead, in any and all capacities, to sign any and all instruments of
transfer for the purposes of the Escrow Agreement, dated as of July __,
1996, among Hotel Information Systems, Inc., MAI Systems Corporation and
[name of Escrow Agent], with respect to any of the Consideration Shares
or Other Escrow Property (as defined in such Escrow Agreement), granting
unto said attorney-in-fact and agent, full power and authority to do and
perform to all intents and purposes as the grantor of this power of
attorney might do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or its substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
3.2 COMPENSATION AND INDEMNIFICATION OF ESCROW AGENT. (a) The
Issuer agrees to pay the Escrow Agent such fees as the Issuer and the Escrow
Agent shall from time to time agree for all services rendered by the Escrow
Agent hereunder and, from time to time, on demand of the Escrow Agent, its
reasonable expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Issuer also agrees to indemnify the Escrow Agent
and its officers, directors and agents for, and to hold each of them harmless
against, any loss, liability or expense, incurred without gross negligence, bad
faith or willful misconduct on the part of the Escrow Agent, for anything done
or omitted by the Escrow Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
any claim of liability directly arising therefrom.
(b) The Escrow Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered, or omitted by it in
connection with its administration of this Agreement in reliance upon any
Certified Notice signed by the proper party or parties.
B-9
<PAGE>
3.3 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 consoli- dated, or any corporation
resulting from any merger or consolidation to which the Escrow Agent or any
successor escrow agent shall be party or any corporation succeeding to the
corporate trust business of the Escrow Agent or a successor escrow agent as a
whole or substantially as a whole, whether by sale or otherwise shall be the
successor to the Escrow Agent under this Agreement without 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 of Section 3.5 hereof, and any Consideration Shares or Other Escrow
Property held by the Escrow Agent prior to such transaction shall be deemed to
be held by such successor thereafter.
3.4 DUTIES OF ESCROW AGENT. The Escrow Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions:
(a) The Escrow Agent may consult with legal counsel (who may be
legal counsel for the Issuer or HIS), and the opinion of such counsel shall be
full and complete authorization and protection to the Escrow Agent as to any
action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Escrow Agent deems it necessary or desirable that any fact or
matter be proved or established by the Issuer or HIS prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof is herein specifically prescribed) may be deemed to be provided
conclusively by Certified Notice delivered to the Escrow Agent. Any such
certificate shall be full authorization to the Escrow Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Escrow Agent shall be liable hereunder only for its own
gross negligence, bad faith or willful misconduct.
(d) The Escrow Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or be required
to verify the same. All such statements and recitals shall be deemed to have
been made by the Issuer and HIS only.
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<PAGE>
(e) The Escrow Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution and delivery hereof by the Escrow Agent) or in respect
of the validity or execution of any stock certificate representing Consideration
Shares; nor shall it be responsible for any breach by the Issuer or HIS of any
covenant or condition contained in this Agreement; nor shall it by any act
hereunder be deemed to make any representation or warranty as to whether any
Consideration Shares (or any Other Escrow Property) will be validly authorized
and issued, fully paid and nonassessable.
(f) Each of the Issuer and HIS agrees that it will perform,
execute, acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Escrow Agent for the carrying
out or performing by the Escrow Agent of the provisions of this Agreement.
(g) The Escrow Agent is hereby authorized and directed to accept
Certified Notice with respect to the performance of its duties hereunder and to
apply to any Officer for advice or instructions in connection with its duties,
and it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with the instructions of any such officer.
(h) The Escrow Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents.
3.5 CHANGE OF ESCROW AGENT. The Escrow Agent may resign and be
discharged from its duties under this Agreement upon 30 days' notice in writing
mailed to the Issuer by registered or certified mail, and to HIS by first-class
mail. The Issuer may remove the Escrow Agent or any successor escrow agent upon
30 days' notice in writing, mailed to the Escrow Agent or successor escrow
agent, as the case may be, by registered or certified mail, and to HIS by first
class mail. If the Escrow Agent resigns or is removed or otherwise becomes
incapable of acting, the Issuer shall appoint a successor to the Escrow Agent.
If the Issuer fails to make such appointment within a period of 30 days after
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Escrow Agent or by HIS, then HIS
may apply to any court of competent jurisdiction for the appointment of a new
Escrow Agent. Any successor escrow agent, whether
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<PAGE>
appointed by the Issuer or by such a court, shall be a corporation organized and
doing business under the laws of the United States or the laws of any state, in
good standing, which is authorized under such laws to exercise corporate trust
powers and is subject to supervision or examination by a federal or state
authority and which has at the time of its appointment as escrow agent a
combined capital and surplus of at least $25,000,000. After appointment, the
successor escrow agent shall, without further action, be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Escrow Agent; but the predecessor Escrow Agent shall deliver and transfer to
the successor escrow agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
this purpose. Not later than the effective date of any such appointment, the
Issuer shall file notice thereof in writing with the predecessor Escrow Agent
and mail a notice thereof in writing to HIS. Failure to give any notice provided
for in this Section 3.5, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the Escrow Agent or the
appointment of the successor escrow agent, as the case may be.
ARTICLE IV
Miscellaneous and General
4.1 AMENDMENT; WAIVER. This Agreement may not be modified or
amended except by a written instrument signed by authorized representatives of
the Issuer, HIS and the Escrow Agent and referring specifically to this
Agreement.
4.2 SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Issuer, HIS or the Escrow Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
4.3 BINDING EFFECT. The agreements herein set forth shall be
mutually binding upon, and inure to the mutual benefit of, the Issuer, HIS and
the Escrow Agent. Except as set forth in the following sentence, the parties do
not intend that any third party shall enjoy any rights under this Agreement and
no such third party shall be entitled to make any claim, or bring any action to
enforce this Agreement against either party to this Agreement even if the third
party receives some benefit from this Agreement. However, if and when HIS
certifies to the Escrow Agent the transfer of shares to a Permitted Transferee
pursuant to Section 2.1(c) hereof, then from and
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<PAGE>
after such time, and to the extent of their respective interests in the
Consideration Shares and Other Escrow Property hereunder, the HIS Entities will
become third party beneficiaries of this Agreement entitled to enforce the same,
but subject to their performance of the duties imposed upon the HIS Entities
hereunder.
4.4 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA.
4.5 NOTICES. Any notice, request, instruction or other document
to be given hereunder by any party to the others shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
next-day air courier or facsimile:
1. if to Issuer, at
9600 Jeronimo Road
Irvine, California 92718
Facsimile No.: (714) 580-2378
Attention: President
with a copy to:
Sullivan & Cromwell
444 South Flower Street, Suite 1200
Los Angeles, California 90071
Facsimile No.: (213) 683-0457
Attention: Frank H. Golay, Jr.
2. if to the Escrow Agent, at
[City National Bank]
[address]
Facsimile No.:
Attention:
with a copy to:
3. if to HIS, at
2300 Clayton Road, Suite 300
Concord, California 94520
Facsimile No.: (510) 602-3052
Attention: President
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<PAGE>
with copies to:
Heller, Ehrman, White & McAullife
525 University Avenue
Suite 1100
Palo Alto, California 94301-1908
Facsimile No.: (415) 324-0638
Attention: August J. Moretti
Saphier, Rein & Walden
10000 Santa Monica Boulevard, #312
Los Angeles, California 90067
Facsimile No.: (310) 556-1564
Attention: Robert S. Rein
4.6 COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute one and the same agreement.
4.7 ENTIRE AGREEMENT, ETC. This Agreement (including any Annexes
or Schedules hereto) (a) constitutes the entire agreement, and supersedes all
other prior agreements, understandings, representations and warranties both
written and oral, among the parties, with respect to the subject matter hereof,
and (b) shall not be transferable or assignable by operation of law or otherwise
and is not intended to create any obligations to, or rights in respect of, any
persons other than the parties hereto and other than as set forth in Section
4.3.
4.8 CAPTIONS. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
B-14
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first written above.
MAI SYSTEMS CORPORATION
By:________________________________
Name:
Title:
HOTEL INFORMATION SYSTEMS, INC.
By:________________________________
Name:
Title:
[CITY NATIONAL BANK]
By:________________________________
Name:
Title:
B-15
<PAGE>
ANNEX C
===========================================================================
PUT/CALL AND REGISTRATION RIGHTS AGREEMENT
Dated as of July ___, 1996
Between
HOTEL INFORMATION SYSTEMS, INC.
and
MAI SYSTEMS CORPORATION
==============================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
1.1. Definitions.............................................. C-1
1.2. Other Definitions........................................ C-4
ARTICLE II
Put and Call Rights
2.1. Put Right of the HIS Entities............................ C-4
2.2. Call Right............................................... C-4
2.3. Amount of Consideration Shares........................... C-5
2.4. Escrow Agreement......................................... C-6
ARTICLE III
Registration Rights
3.1. Registration............................................. C-7
(a) Demand Registration Right............... C-7
(b) Restrictions on Demand
Registrations............................................ C-8
(c) Piggyback Registrations Right............ C-10
(d) Notice of Sales......................... C-11
3.2. Compliance with Blue Sky Laws............................. C-11
3.3. Expenses of Registration.................................. C-11
3.4. Registration Procedures................................... C-12
3.5. Information............................................... C-12
3.6. Indemnification........................................... C-12
(a) Issuer's Indemnification.................... C-12
(b) HIS Entities' Indemnification............... C-13
(c) Indemnification Procedure................... C-14
(d) Contribution................................ C-15
3.7. Selection of Underwriters................................. C-15
3.8. Holdback Agreements....................................... C-16
3.9. Delay of Registration..................................... C-16
ARTICLE IV
Miscellaneous and General
4.1. No Inconsistent Agreements................................ C-16
4.2. Term...................................................... C-16
C-i
<PAGE>
Page
4.3. Amendment; Waiver....................................... C-16
4.4. Counterparts............................................ C-17
4.5. GOVERNING LAW........................................... C-17
4.6. Notices................................................. C-17
4.7. Successors and Assigns.................................. C-18
4.8. Severability............................................ C-18
4.9. Captions................................................ C-18
4.10. Further Assurances....................................... C-19
Schedules
3.1(a) Demand Registration Limitation
C-ii
<PAGE>
PUT/CALL AND REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
July ___, 1996, between Hotel Information Systems, Inc., a California
corporation ("HIS"), and MAI Systems Corporation, a Delaware corporation (the
"Issuer").
RECITALS
WHEREAS, this Agreement is entered into in connection with the Asset
Purchase Agreement, dated as of June 30, 1996, between the Issuer and HIS (the
"Asset Purchase Agreement"), which provides for the issuance by the Issuer to
HIS of 1,178,380 shares of the Issuer's Common Stock, including 681,082 Put/Call
Consideration Shares and 497,298 Ordinary Consideration Shares, that are subject
to this Agreement; and WHEREAS, in order to induce HIS to enter into the Asset
Purchase Agreement, the Issuer has agreed to provide the put, call and
registration rights set forth in this Agreement. NOW, THEREFORE, in
consideration of the premises, and of the representations, warranties, covenants
and agreements contained herein and in the Asset Purchase Agreement, the parties
hereto hereby agree as follows:
ARTICLE I
Definitions
1.1. Definitions. As used in this Agreement, the following terms shall have
the following meanings: "Agreement" has the meaning set forth in the first
paragraph of this Agreement. "Amount Requested" has the meaning set forth in
Section 3.1(a). "Asset Purchase Agreement" has the meaning set forth in the
recitals of this Agreement. "Call Securities" shall mean that amount of Put/Call
Consideration Shares for which an HIS Entity has exercised its registration
rights pursuant to Section 3.1 hereof. "Caller" has the meaning set forth in
Section 2.2.
C-1
<PAGE>
"Demand Registration Notice" has the meaning set
forth in Section 3.1(a).
"HIS" has the meaning set forth in the first
paragraph of this Agreement.
"HIS Entities" means HIS and the Permitted
Transferees.
"HIS Entities Indemnitees" has the meaning set
forth in Section 3.6(b).
"Indemnified Party" has the meaning set forth in
Section 3.6(c).
"Indemnifying Party" has the meaning set forth in
Section 3.6(c) hereof.
"Issuer" has the meaning set forth in the first
paragraph of this Agreement.
"Issuer Indemnitees" has the meaning set forth in
Section 3.6(a).
"Number Requested" has the meaning set forth in
Section 3.1(a).
"Number Sold" means the number of Put/Call Consideration Shares sold or to
be sold pursuant to a Regis- tration with a value equal to the Amount Requested.
For this purpose, value shall be equal to the amount realized by the HIS Entity
or HIS Entities concerned, either in the aggregate or on a per share basis (on a
per share basis, the "Realized Per Share Price"), based on a sale using
reasonable efforts in good faith, after deduction of all Registration Expenses
and Selling Expenses payable by them. For convenience, an example showing the
interrelationship of Number Sold and Amount Requested and Number Requested is
included in Schedule 3.1(a), which also sets forth the limits on Registration
during a given period hereunder.
"Permitted Transferees" shall mean the holders of common or preferred stock
(or of options to acquire such stock) of HIS as of the Closing Date, which
include Robert S. Sanford, Computer Systems Associates and Montreux Equity
Partners III L.P. ("Montreux"). Permitted Transferees shall also include such
other persons as to which the Issuer shall consent in writing, such consent not
to be unreasonably withheld. In any event, up to ten accredited investors,
within the definition under Regulation D under the
C-2
<PAGE>
Securities Act, requested by Computer Systems Associates or Montreux will
be consented to by the Issuer. "Per Share Price" means $9.25. The Per Share
Price shall automatically (i) adjust for any stock dividend, stock split,
reverse stock split or other subdivision or combination of the outstanding
shares of common stock and (ii) increase on the first day of each month after
the Closing Date by one-twelfth (1/12) of the annualized yield (the "T-bill
Yield") for United States government securities with a maturity of six months,
as published in the Wall Street Journal on the business day immediately
preceding the nearest prior July 15 or January 15, as applicable. "Proportionate
Share" has the meaning set forth in Section 3.3. "Realized Per Share Price" has
the meaning set forth in the definition of the term "Number Sold". "Register,"
"Registered" and "Registration" refer to a registration effected by preparing
and filing a regis- tration statement in compliance with the Securities Act and
the rules and regulations promulgated thereunder ("Registra- tion Statement"),
and the declaration or ordering of the effectiveness of such Registration
Statement by the Securities and Exchange Commission. "Registrable Common Stock"
shall mean (a) the Consideration Shares and (b) all Common Stock issued, or
issuable upon conversion, exchange or exercise of an equity security which is
issued, pursuant to a stock split, stock dividend or other similar distribution
or event with respect to Registrable Common Stock. "Registration Expenses" shall
mean all expenses incurred by the Issuer in complying with Article III hereof
(other than Selling Expenses), including, without limita- tion, all federal and
state registration, qualification and filing fees, so-called "Blue Sky" filing
fees and expenses, printing expenses, fees and disbursements of counsel for the
Issuer (but not counsel for the HIS Entities), underwriting expenses and fees
(other than Selling Expenses) and expenses of the Issuer's independent
accountants. "Registration Statement" has the meaning set forth in the
definition of the term "Register." "Securities Act" shall mean the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
C-3
<PAGE>
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Common Stock. "Valid Business
Reason" has the meaning set forth in Section 3.1(b)(iii). 1.2. Other
Definitions. All capitalized terms used herein and not otherwise defined shall
have the respec- tive meanings set forth in the Asset Purchase Agreement.
ARTICLE II
Put and Call Rights
2.1. Put Right of the HIS Entities. At any time after the fifth anniversary
of the Closing Date and prior to the sixth anniversary of the Closing Date, any
HIS Entity may require the Issuer to purchase all the Put/Call Consid- eration
Shares held by it and not previously disposed of at a cash purchase price per
share equal to the Per Share Price. To implement such a put, an HIS Entity shall
deliver written notice of the same to the Issuer. The date of the put will be
the date the written notice is delivered to the Issuer. The closing of such put
shall take place twenty (20) business days after the date of the put, at which
time (a) the HIS Entity shall deliver to the Issuer the Put/Call Consideration
Shares held by it and (b) the Issuer shall pay to the HIS Entity the purchase
price for the Put/Call Consideration Shares by wire transfer of immediately
available funds to a bank account designated by the HIS Entity. 2.2. Call Right.
(a) If at any time any HIS Entity exercises its registration rights with respect
to Put/Call Consideration Shares pursuant to Section 3.1 hereof, the Issuer has
the right, in lieu of such registration, to require such HIS Entity to sell all
of such Call Securities at a cash purchase price per share equal to the Per
Share Price. The Issuer may not exercise such right directly but shall be
entitled to transfer such right to any other person or entity (the "Caller") who
shall acknowledge and agree that the transfer of such right is in a transaction
not involving any public offering and that the shares of Common Stock acquired
upon exercise of such right may be restricted securities for purposes of the
Securities Act. To implement such a call, the Caller shall deliver written
notice of the same to the HIS Entity within the 30-day period set forth in
Section 3.1(a), at which time Caller shall be irrevocably obligated to purchase
such shares. The
C-4
<PAGE>
date of the call will be the date the written notice is delivered to the
HIS Entity. The closing of such call shall take place twenty (20) business days
after the date of the call, at which time (a) the HIS Entity shall deliver, or
the Issuer on behalf of the Caller shall direct the Escrow Agent to deliver, to
the Caller the Call Securities and (b) the Caller shall pay to the HIS Entity
(not the Escrow Agent) the purchase price for the Call Securities by wire
transfer of immediately available funds to a bank account designated by the HIS
Entity. (b) At any time during the thirty (30) business days preceding the
second anniversary of the Closing Date, the Issuer has the right to require any
HIS Entities to sell the Put/Call Consideration Shares held by them at a cash
purchase price equal to the Per Share Price. To implement such a call, the
Issuer shall deliver written notice of the same to the HIS Entity. The date of
the call will be the date the written notice is delivered to the HIS Entity. The
closing of such call shall take place twenty (20) business days after the date
of the call, at which time (a) the HIS Entity shall deliver, or the Issuer shall
direct the Escrow Agent to deliver, to the Issuer the Call Securities and (b)
the Issuer shall pay to the HIS Entity the purchase price for the Call
Securities by wire transfer of immediately available funds to a bank account
designated by the HIS Entity. 2.3. Amount of Consideration Shares. (a) Prior to
the second anniversary of the Closing Date, the Put/Call Consideration Shares
may only be sold pursuant to Section 2.2 or a Registration and the number of
Put/Call Consideration Shares that may be sold pursuant to a Registration and
released from escrow and delivered to or upon the order of the HIS Entities may
not exceed the Number Sold. (b) If, after using reasonable efforts in good
faith, the Number Sold by any HIS Entity in a Registration of Put/Call
Consideration Shares pursuant to this Agreement is greater than the Number
Requested, the Issuer shall promptly issue to the HIS Entity and deliver to the
Escrow Agent a number of additional Put/Call Consideration Shares equal to the
difference between the Number Sold and the Number Requested and the Issuer and
such HIS Entity shall direct the Escrow Agent to release such Number Sold of
Put/Call Consideration Shares from escrow and deliver them to or upon the order
of such HIS Entity. Such new shares shall be deemed to be Put/Call Consideration
Shares and shall have all the benefits of this Agreement attributable thereto;
provided that, to the extent the amount of such new
C-5
<PAGE>
shares when added to the original number of Put/Call Consideration Shares
sold would exceed 59% of the aggregate of the amount of Put/Call Consideration
Shares and Original Consideration Shares, such excess shares shall be held in
escrow and not sold prior to the first anniversary of the Closing Date. If the
Issuer reasonably believes that the Number Sold at any time may be greater than
the Number Requested, the Issuer may issue and deliver to the Escrow Agent and
Register such additional Put/Call Consideration Shares as it deems necessary to
enable the HIS Entities to sell the Number Sold of Put/Call Consideration Shares
without undue delay. (c) If, after using reasonable efforts in good faith, the
Number Sold by any HIS Entity in a Registration of Put/Call Consideration Shares
pursuant to this Agreement is less than the Number Requested, the Issuer and
such HIS Entity shall direct the Escrow Agent to release such Number Requested
of Put/Call Consideration Shares from escrow, to deliver such Number Sold of
Put/Call Consideration Shares to or upon the order of such HIS Entity and to
deliver a number of Put/Call Consideration Shares equal to the difference
between the Number Requested and the Number Sold to or upon the order of the
Issuer. 2.4. Escrow Agreement. As long as the Escrow Agreement is in effect, the
delivery of all Consideration Shares subject to such Escrow Agreement shall be
in accordance with the terms of the Escrow Agreement. For example, if Ordinary
Consideration Shares are not at the time available to be released under the
Escrow Agreement, for example because a Dispute (as defined in such agreement)
then exists and has not yet been resolved, then such Ordinary Consideration
Shares shall not be available for sale pursuant to the registration rights in
Article III of this Agreement, notwithstanding that such registration rights
would otherwise be applicable at that time, until such shares are available to
be released under the terms of the Escrow Agreement. The Issuer and the HIS
Entities agree to cooperate with the Escrow Agent to ensure that the Put/Call
Consideration Shares will be released from escrow in accordance with the terms
of this Agreement and the Escrow Agreement without undue delay. The Escrow
Agreement contemplates that, in addition to Consideration Shares that may be
escrowed thereunder, the escrow property may also include Other Escrow Property
(as defined in the Escrow Agreement). The Escrow Agreement contemplates that
dis- tributions of Other Escrow Property would ordinarily follow the same rules
as applicable to the related Consideration Shares. This Agreement does not
provide for the treatment of Other Escrow Property, on the basis that the Escrow
C-6
<PAGE>
Agreement makes adequate provision therefor. However, in any case where the
provisions of this Agreement do not sufficiently reflect the intended economics
of a particular transaction, due to the existence of Other Escrow Property, then
the parties agree to make whatever adjustments are necessary herein so that this
Agreement may be applied in a manner consistent with the Escrow Agreement and
the Asset Purchase Agreement, with respect to the Other Escrow Property, if any.
For example, any put or call of Put/Call Consideration Shares hereunder should
include delivery to the Issuer of the related Other Escrow Property. Also, the
calculation of the Number Sold in case of any Registration and sale of Put/Call
Consideration Shares is designed to result in proceeds to the HIS Entities equal
to the Amount Requested. So long as this requirement is met, the Issuer should
receive the related Other Escrow Property. Alterna- tively, in an appropriate
case (for example following a stock split) the Number Sold should include the
additional shares that constitute Other Escrow Property.
ARTICLE III
Registration Rights
3.1. Registration. (a) Demand Registration Right. At any time and from time
to time commencing fifteen (15) days after the date of execution and delivery of
this Agreement and until the second anniversary of the Closing Date, the HIS
Entities may demand Registration under the Securities Act of their Registrable
Common Stock on a Registration Statement by a written notice given to the Issuer
signed by such HIS Enti- ties (a "Demand Registration Notice"); provided,
however, that in the case of each such Registration so requested by the HIS
Entities, the amount of Put/Call Consideration Shares for which the HIS Entities
may demand registration shall be limited (such limit to be based on the Amount
Requested and the Number Requested) during the first year after the Closing to
the amount set forth in Schedule 3.1(a) to this Agreement. During such first
year, such Demand Registration Notice shall be made by Computer Systems
Associates and Montreux jointly, and not by any other HIS Entity; provided, this
sentence shall not preclude the Registrable Common Stock of other HIS Entities
from being part of such Registration; provided further that upon receipt of any
such Demand Registration Notice, the Issuer shall give notice to Robert S.
Sanford and shall allow other HIS Entities who deliver a Demand Registration
Notice to the Issuer within 10 days after such notice to Mr. Sanford to
C-7
<PAGE>
have their Registrable Common Stock included in such Demand Registration.
During any year, the HIS Entities shall give any Demand Registration Notice at
least 90 days prior to the applicable anniversary date that ends such year, so
as to facilitate compliance with the other provisions of this Agreement. The
Demand Registration Notice shall specify the dollar amount to be realized after
deduction of all Registration Expenses, if any, and Selling Expenses payable by
such HIS Entities (the "Amount Requested") of Registrable Common Stock for which
such Registration is demanded. The "Number Requested" equals the Amount
Requested divided by the Per Share Price at the time requested, rounded up to
the nearest whole share. The Issuer will have the right for thirty (30) days
following receipt of such written notice from the HIS Entities with respect to
Put/Call Consideration Shares to notify the HIS Entities whether it proposes to
Register shares of Common Stock pursuant to such Registra- tion or to exercise
its call right pursuant to Section 2.2. All registrations demanded under this
Section 3.1 are referred to herein as "Demand Registrations." (b) Restrictions
on Demand Registrations. (i) During the term of this Agreement, the HIS Entities
will be entitled to request and have effective (A) only one Demand Registration
with respect to Put/Call Consideration Shares and no Demand Registration with
respect to Ordinary Consideration Shares prior to the first anniversary of the
Closing Date, (B) only one Demand Registration with respect to Consideration
Shares after the first anniversary and prior to the second anniversary of the
Closing Date and (C) no Demand Registration on or after the second anniversary
of the Closing Date. Demand Registrations may be made on any form deemed
advisable by the Issuer. (ii) The Issuer will not be obligated to effect any
Demand Registration if the Board of Directors of the Issuer adopts a resolution
to the effect that the Issuer intends to Register shares of Common Stock under
the Securi- ties Act within the six-month period subsequent to receipt of the
Demand Registration Notice until such period has elapsed or the Issuer shall
have abandoned such intention prior to the expiration of such six-month period
or, in the event such Registration becomes effective, during the one hundred
twenty (120) day period after the effective date of such Registration, but this
provision may be used only to delay and not to prevent any Demand Registration
that is otherwise available. Also, if the Issuer uses this provi- sion, then
during the period of such delay, solely with respect to the shares that are
subject to such delay, the increase in the Per Share Price, pursuant to clause
(ii) of the second sentence of the definition thereof, shall be at
C-8
<PAGE>
the T-bill Yield plus 7.5%, rather than at the T-bill Yield only, and
otherwise in accordance with such definition. However, the Issuer shall use its
reasonable best efforts to include in such Registration the shares of
Registrable Common Stock that are the subject of the Demand Registration Notice
unless the managing underwriter or underwriters advise the Issuer that in its or
their opinion a limitation on the total number of shares of Common Stock to be
included in such Registration is advisable, then the Issuer will include in such
Registration such number of shares of Common Stock as in the opinion of such
underwriter or underwriters may be sold, allocated among (i) first, the shares
of Common Stock the Issuer proposes to sell pursuant to such Registra- tion and
(ii) second, the shares of Registrable Common Stock the HIS Entities propose to
sell pursuant to such Registration. (iii) In addition, if the Board, in its good
faith judgment, determines that any registration of Registrable Common Stock
should not be made or continued because it would materially interfere with any
material financing, acquisition, corporate reorganization or merger involving
the Issuer (collectively, a "Valid Business Reason"), the Issuer may postpone
filing a Registration Statement relating to any Demand Registration until such
Valid Business Reason has been consummated or terminated, and, in case any such
Registration Statement has already been filed the Issuer may cause such
Registration Statement to be withdrawn and its effectiveness prematurely
terminated or may postpone amending or supplementing such Registration
Statement, but this provision may be used only to delay and not to prevent any
Demand Registration that is otherwise available. The HIS Entities agree that,
upon receipt of any notice from the Issuer that the Issuer has determined to
withdraw any Registration Statement pursuant to this Section 3.1(b)(iii), the
HIS Entities will discontinue their disposition of Registrable Common Stock
pursuant to such Registration Statement and, if so directed by the Issuer, will
deliver to the Issuer (at the Issuer's expense) all copies then in the HIS
Entities' possession of the prospectus covering such Registrable Common Stock
that was in effect at the time of receipt of such notice. If the Issuer shall
give any notice of withdrawal or postponement of a Registration Statement, the
Issuer shall, at such time as the Valid Business Reason that caused such
withdrawal or postponement no longer exists, with respect to a withdrawn
Registration Statement, as soon as practicable file a new Registration Statement
covering the Registrable Common Stock that was covered by the withdrawn
Registration Statement or, with respect to a postponed Registration Statement,
use its best efforts to effect the Registration under the Securities Act of
Regis-
C-9
<PAGE>
trable Common Stock in accordance with this Article III, and such
Registration Statement shall be maintained effective for the full period of time
required by this Agreement for Registration Statements effected pursuant to this
Arti- cle III. If the Issuer shall have withdrawn or prematurely terminated a
Registration Statement filed pursuant to this Article III (whether pursuant to
this clause (b)(iii) or as a result of any stop order, injunction or other order
or requirement of the SEC or any other governmental agency or court), the Issuer
shall not be considered to have effected an effective Registration for the
purposes of this Arti- cle III until the Issuer shall have filed a new
Registration Statement covering the Registrable Common Stock covered by the
withdrawn Registration Statement and such Registration Statement shall have been
declared effective and shall not have been withdrawn or prematurely terminated.
The Issuer represents that as of the date of this Agreement, it has no present
intention to proceed with a material financing, acquisition, corporate
reorganization or merger as a result of which it would cause a withdrawal or
postponement of a Registration Statement pursuant to this paragraph. Also, if
the Issuer uses this provision, then during the period of such delay, solely
with respect to the shares that are subject to such delay, the increase in the
Per Share Price, pursuant to clause (ii) of the second sentence of the
definition thereof, shall be at the T-bill Yield plus 7.5%, rather than at the
T-bill Yield only, and otherwise in accordance with such definition. (iv) If the
HIS Entities give a Demand Registration Notice prior to thirty days after the
Closing Date, the Issuer will not be entitled to delay such Demand Registration
pursuant to Section 3.1(b)(ii), but may include in such Demand Registration
shares of Common Stock to be issued in an underwritten offering by the Issuer.
The shares of Registrable Common Stock held by the HIS Entities that are the
subject of the Demand Registration will not be subject to cutback or holdback by
the managing underwriter or underwriters of such offering. The HIS Entities
shall cooperate with the Company in effectuating any such offering. (c)
Piggyback Registrations Right. In the event that the Issuer intends to Register
shares of Common Stock under the Securities Act (other than pursuant to a Demand
Registration) prior to the second anniversary of the Closing Date, on a form
that would permit inclusion of the Consideration Shares held by the HIS Entities
(any such Registration, a "Piggyback Registration"), the Issuer will promptly
give each of the HIS Entities written notice thereof (the "Piggyback
Registration Notice") and use its
C-10
<PAGE>
reasonable best efforts to include in such Registration all of the shares
of Common Stock that are specified in a written notice given to the Issuer by
such HIS Entity within twenty (20) days after the date of the Piggyback
Registra- tion Notice unless the managing underwriter or underwriters advise the
Issuer that in its or their opinion a limitation on the total number of shares
of Common Stock to be included in such Registration is advisable, then the
Issuer will include in such Registration such number of shares of Common Stock
as in the opinion of such underwriter or underwriters may be sold, allocated
among (i) first, the shares of Common Stock the Issuer proposes to sell pursuant
to such Registra- tion and (ii) second, the shares of Registrable Common Stock
the HIS Entities propose to sell pursuant to such Registra- tion. The HIS
Entities shall not be entitled to a Piggyback Registration with respect to
Ordinary Consideration Shares prior to the first anniversary of the Closing
Date. Piggy- back Registration shall not be available for any shares of Common
Stock previously sold by the HIS Entities, or previously registered pursuant to
any Demand Registration and still available for sale pursuant thereto, or that
are then subject to a pending call pursuant to Section 2.2 hereof. (d) Notice of
Sales. If any HIS Entity intends to sell shares of Common Stock pursuant to an
effective Registration, other than pursuant to an underwritten offering in which
the Issuer is a party to the underwriting agreement, such HIS Entity shall give
the Issuer at least fifteen (15) days' notice of such sale in order to allow the
Issuer to comply with its obligations under the Securities Act and the Exchange
Act. 3.2. Compliance with Blue Sky Laws. In the event of any Registration of
Registrable Common Stock pursuant to this Article III, the Issuer will use its
reasonable best efforts to Register and qualify the Consideration Shares
included in the Registration under such Blue Sky or other securities laws of
such states or other jurisdictions as shall be reasonably requested by the HIS
Entities concerned, in the case of a Registration that does not involve an
underwriting, or by the representative of the underwriters, in the case of a
Registration involving an underwriting, to effect the plan of distribution of
such securities; provided, however, that the Issuer shall not be required to
subject itself to taxation in any such state or jurisdiction, qualify to do
business in any such state or jurisdiction or file a general consent to service
of process in any such state or jurisdiction solely by reason of such
qualification of such securities.
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<PAGE>
3.3. Expenses of Registration. In the event of a Registration, the Issuer
shall bear all the Registration Expenses and the HIS Entities shall be
responsible for (i) their own legal fees and expenses in connection with such
Registration, and (ii) their proportionate share of all Selling Expenses, such
proportionate share to be equal to a fraction, the numerator of which is the
number of shares of Common Stock being so Registered by the HIS Entities and the
denominator of which is the aggregate number of shares of Common Stock being
Registered ("Proportionate Share"). 3.4. Registration Procedures. The Issuer
will keep the HIS Entities advised as to the initiation, amendment and
completion of any Registration effected pursuant to this Agreement. At its
expense, the Issuer will: (a) use its reasonable best efforts to effect promptly
such Registration and to keep any such Registration effective for a period of
180 days or until the HIS Entities have completed the distribution described in
the Registration Statement relating thereto, whichever first occurs; (b) in the
case of the first Demand Registration hereunder, to file the Registration
Statement within 60 days after the Demand Registration Notice; (c) furnish such
number of prospectuses (including preliminary prospectuses) and other documents
to the HIS Entities from time to time as the HIS Entities may reasonably
request; and (d) the Issuer will amend any Registration if and when required,
including to correct any material misstatement or omission therein it becomes
aware of. 3.5. Information. It is a condition precedent to the Issuer's
obligations under this Agreement that the HIS Entities, after requesting that
Registrable Common Stock be included in a Registration pursuant to this Article
III, furnish to the Issuer, or to the underwriters or representa- tive
participating in such Registration, such information regarding the HIS Entities,
and the distribution proposed by the HIS Entities as the Issuer or such
underwriters or representative may reasonably request. In addition, the HIS
Entities shall enter into such agreements with the Issuer and the underwriters
or representatives participating in such Registration, including agreements with
respect to indemnification, as the Issuer and the underwriter or representative
participating in such Registration may reasonably request. 3.6. Indemnification.
(a) Issuer's Indemnification. To the extent permitted by law, the Issuer will
indemnify the HIS Entities holding Registrable Common Stock with respect to
which
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<PAGE>
Registration or qualification has been effected pursuant to this Agreement,
and each of their agents, employees and controlling persons within the meaning
of the Securities Act, officers, directors and partners (collectively, the
"Issuer Indemnitees"), against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any Registration
Statement, prospectus or other document incident to any such Registration or
qualification or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading, or any violation by the Issuer of the
Securities Act or any rule or regulation thereunder applicable to the Issuer in
connection with any such Registration or qualification, and will reimburse each
Issuer Indemnitee for any legal and any other expenses reasonably incurred by
any such party in connection with investigating or defending any such claim,
loss, damage, liability or action as such expenses are incurred; provided,
however, that the indemnity contained in this Section 3.6(a) shall not apply to
amounts paid in settlement of any such claim, loss, damage, liability or action
if settlement is effected without the prior written consent of the Issuer (which
consent shall not be unreasonably withheld); and provided further, however, that
the Issuer will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission based upon written information furnished to the
Issuer by any HIS Entity or Issuer Indemnitee and stated to be specifically for
use therein. (b) HIS Entities' Indemnification. To the extent permitted by law,
each of the HIS Entities, severally and not jointly, will indemnify the Issuer
and each of its agents, employees and controlling persons within the meaning of
the Securities Act, officers, directors and partners (collectively, the "HIS
Entities Indemnitees"), against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any Registration
Statement, prospectus or other document incident to such Registration or
qualification or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading, and will reimburse each HIS Entities'
Indemnitee for any legal and any other expenses reasonably incurred by any such
party in connection with investigating or defending any such claim, loss,
damage, liability or action as such expenses
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are incurred, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged omission)
is made in such Registration Statement, prospectus or other document in reliance
upon and in conformity with written information furnished to the Issuer by such
HIS Entity or any agent, employee, officer, director, partner or controlling
person thereof and stated to be specifically for use therein; provided however
that the indemnity contained in this Section 3.6(b) shall not apply to amounts
paid in settlement of any such claim, loss, demand, liability or action if such
settlement is effected without the prior written consent of such HIS Entity
(which consent shall not be unreasonably withheld). (c) Indemnification
Procedure. Each party entitled to indemnification under this Section 3.6 (the
"Indemnified Party") shall give written notice, which is reasonably detailed, 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, with
counsel chosen by such Indemnifying Party (such counsel to be reasonably
acceptable to Indemnified Party), and the Indemnifying Party shall not be
obligated to indemnify the Indemnified Party for any legal and any other
expenses incurred by the Indemnified Party in connection with investigating and
defending such action after the Indemnifying Party assumes the defense of such
claim; provided, however, that nothing contained herein shall prevent the
Indemnified Party from participating in such defense at such party's expense. If
the Indemnified Party reasonably determines, based upon written advise of its
counsel, that there is a conflict between the position of the Indemnified Party
and the Indemnifying Party in conducting the defense of such action, then the
Indemnified Party shall be entitled to conduct the defense of such action, at
the expense of the Indemnifying Party, to the extent reasonably determined by
such counsel to be necessary to protect the interest of the Indemnified Party.
The failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 3.6(c)
provided that the parties to this Agreement reserve any rights to make a claim
under this Agreement for damages actually incurred by reason of any failure of
an Indemnified Party to give prompt written notice of a claim to an Indemnifying
Party. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the prior written consent of each Indemnified Party, consent
to entry of any judgment or
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enter into any settlement which 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 in respect of such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with the defense of such claim and
the litigation resulting therefrom. (d) Contribution. The Issuer and the HIS
Entities agree that, if for any reason the indemnification provisions
contemplated by Section 3.6(a) or Section 3.6(b) hereof are unavailable to or
insufficient to hold harmless an Indemnified Party in respect of any claims,
losses, damages or liabilities (or actions in respect thereof) referred to
therein, then each Indemnifying Party shall contribute to the amount paid or
payable by the Indemnified Party as a result of such claims, losses, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party and the Indemnified
Party in connection with the statements or omissions which resulted in the
claims, losses, damages or liabilities (or action in respect thereof), as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether the untrue statement (or alleged untrue statement)
of a material fact or omission (or alleged omission) to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the statement or omission. The parties hereto
agree that it would not be just and equitable if contribu- tion pursuant to this
Section 3.6(d) were determined by pro rata allocation (even if the Issuer, the
HIS Entities or all of them were treated as one entity for such purpose) or by
any other method of allocation which does not take account of the equitable
considerations referred to in this Sec- tion 3.6(d). The amount paid or payable
by an Indemnified Party as a result of the claims, losses, damages or
liabilities (or actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by the
Indemnified Party in connection with the investigating or defending any such
action or claim. The Issuer and the HIS Entities' obligations in this Section
3.6(d) to contribute shall be several and not joint. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from
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any person who was not guilty of fraudulent misrepresentation. 3.7.
Selection of Underwriters. In the case of any Registration, including a Demand
Registration, the Issuer shall have the right, in its sole discretion, to select
the investment banker(s) and manager(s) and to administer the offering of any
such Registration pursuant to this Article III. 3.8. [not used] 3.9. Delay of
Registration. The HIS Entities shall have no right to obtain or seek an
injunction restraining or otherwise delaying any Registration of the securities
of the Issuer as the result of any controversy that might arise with respect to
the interpretation or implementation of this Article III.
ARTICLE IV
Miscellaneous and General
4.1. No Inconsistent Agreements. The Issuer has not, as of the date hereof,
and the Issuer shall not, after the date of this Agreement, enter into any
agreement with respect to any of its securities that is inconsistent with the
rights granted to the HIS Entities in this Agreement or otherwise conflicts with
the provisions hereof. 4.2. Term. This Agreement shall be effective as of the
Closing Date and shall expire on the seventh anniversary of such Closing Date.
4.3. Amendment; Waiver. This Agreement may not be modified or amended except by
a written instrument signed by authorized representatives of both parties and
referring specifically to this Agreement. No waiver of any breach or default
hereunder shall be considered valid unless in writ- ing and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach of the same or similar nature. 4.4. Counterparts. For the
convenience of the parties hereto, this Agreement may be executed in any number
of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute one and the same
agreement.
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<PAGE>
4.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. 4.6. Notices. Any notice,
request, instruction or other document to be given hereunder by any party to the
other shall be in writing and delivered personally or sent by registered or
certified mail, postage prepaid, next-day air courier or facsimile: 1. if to the
Issuer, at 9600 Jeronimo Road Irvine, California 92718 Facsimile No.: (714)
580-2378 Attention: President with a copy to: Sullivan & Cromwell 444 South
Flower, Suite 1200 Los Angeles, California 90071 Facsimile No.: (213) 683-0457
Attention: Frank H. Golay, Jr. 2. if to the HIS Entities, at Hotel Information
Systems, Inc. 2300 Clayton Road, Suite 300 Concord, California 94520 Facsimile
No.: (510) 602-3052 Attention: President with copies to: Heller, Ehrman, White &
McAullife 525 University Avenue Suite 1100 Palo Alto, California 94301-1908
Facsimile No.: (415) 324-0638 Attention: August J. Moretti Saphier, Rein &
Walden 10000 Santa Monica Boulevard, #312 Los Angeles, California 90067
Facsimile No.: (310) 556-1564 Attention: Robert S. Rein or to such other persons
or addresses as may be designated in writing by the party to receive such
notice.
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4.7. Successors and Assigns. This Agreement is solely for the benefit of
the Issuer and the HIS Entities and, except with respect to assignments to
Permitted Transferees, the rights granted and the obligations incurred hereunder
may not be transferred or assigned by operation of law or otherwise; provided
that the Issuer may transfer its call rights in Section 2.2 to any other person
or entity. In the case of any assignment of this Agreement by HIS to any
Permitted Transferee (so as to permit the HIS Entities, as opposed to HIS alone,
to take advantage of this Agreement), HIS agrees to provide to the Issuer a
written agreement of each such Permitted Transferee agreeing to be bound by the
terms and conditions of this Agreement and the Escrow Agreement. However, even
in the absence of delivery of such written agreement(s), by including any of its
securities in any Registration hereunder, such Permitted Transferee shall be
deemed to have agreed to be bound by the terms and conditions of this Agreement
and the Escrow Agreement for all purposes, as a consequence of accepting the
benefits of Registration hereunder. 4.8. Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable. 4.9. Captions. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof. 4.10. Further Assurances. The Issuer and HIS shall take all actions not
inconsistent with the terms of this Agreement, the Asset Purchase Agreement and
the other Ancillary Agreements that may be reasonably requested by the other
party in order to effectuate the purposes of this Agreement. Each of the parties
hereto agrees to take all reasonable actions to ensure that the shares to be
sold
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pursuant to a Registration will be sold as soon as practicable. IN WITNESS
WHEREOF, the parties have executed this Agreement as of the date first written
above.
MAI SYSTEMS CORPORATION
By:___________________________
Name:
Title:
HOTEL INFORMATION SYSTEMS, INC.
By:___________________________
Name:
Title:
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Schedule 3.1(a)
Limit during Specified Periods as to Amount Requested
and Number Requested for Purposes of any
Registration of Put/Call Consideration Shares
This limitation applies only to the Put/Call Consideration Shares. Prior to
the first anniversary of the Closing Date, the aggregate Registration (on behalf
of all the HIS Entities) of Amount Requested of Put/Call Consideration Shares
may not exceed $5,450,000 (i.e., half the dollar amount of the Consideration
Shares), equivalent to a Number Requested of 589,190 Put/Call Consideration
Shares; provided that such Amount Requested and Number Requested shall be
reduced by one-half of any reduction pursuant to Sections 1.3(f), 2.1(b) and
2.5(c) of the Asset Purchase Agreement. Nevertheless, the foregoing Amount
Requested will be subject to increase to the extent of any increase in the Per
Share Price, but without any change in such Number Requested. After the first
anniversary and prior of the second anniversary of the Closing Date, there will
be no such limit on the amount of the aggregate Registration on behalf of all
the HIS Entities. Any of the Put/Call Consideration Shares of the HIS Entities,
not previously disposed of, may be included in the Number Requested. The Amount
Requested will equal the Number Requested times the Per Share Price. In
accordance with Sections 2.3(b) and (c) of the Put/Call and Registration Rights
Agreement (the "Agree- ment"), and consistent with the definition of Number Sold
thereunder, if upon any Registration and sale of Put/Call Consideration Shares,
the Realized Per Share Price is less than the Per Share Price, then additional
shares will be sold and will be delivered by the Issuer in accordance with
Section 2.3(b) of the Agreement and the related provisions of the Escrow
Agreement. Alternatively, if upon any such Registration and sale, the Realized
Per Share Price is greater than the Per Share Price, then in accordance with
Section 2.3(c) a fewer number of shares will be sold and the remainder will be
delivered back to the Issuer. Through the foregoing mechanisms, upon any such
Registration and sale, the amount realized by the HIS Entities will be equal to
the then current Per Share Price times the number of Put/Call Consideration
Shares originally scheduled to be sold, subject to reduction pursuant to
Sections 1.3(f), 2.1(b) and 2.5(c) of the Asset Purchase Agreement. Any
increased value that would otherwise be realized by the HIS Entities, or
diminution in value that would otherwise be incurred by them, will be
adjusted for by changes in the Number Sold, and will be for the account of
the Issuer.
For example, during the period prior to the first anniversary of the
Closing Date, if the Amount Requested was $1 million, and the Per Share Price
was $10, then the Number Requested would be 100,000. If however, in connection
with an actual sale, the Realized Per Share Price was only $8 per share, then
the Number Sold would be 125,000 shares, and the Issuer would be responsible for
providing the extra 25,000 shares.
<PAGE>
NEWS RELEASE
Company Stanley P. Witkow
Contact: Vice President, Corporate and Legal Affairs
MAI Systems Corporation
714-580-0700
MAI Acquires Hotel Information Systems
IRVINE, CA, July 11, 1996 MAI Systems Corporation (AMEX: NOW) announced
today that it had entered into a definitive agreement to acquire substantially
all of the assets Hotel Information Systems, Inc. ("HIS") of Concord,
California. Upon completion of the acquisition, the combination of HIS and MAI's
CLS Software Division will result in the world's leading provider of property
management software. In addition to the combined companies' leadership in
property management systems, the combination will allow MAI to offer HIS's
customers the same systems integration, resources and tools that it offers its
CLS customers.
MAI said that the acquisition price for HIS was $10.9 million of MAI common
stock plus the assumption of certain liabilities. The number of shares to issued
is subject to an adjustment if the price of MAI common stock differs from $9.25
per share at the time of registration of certain of the shares issued in
connection with the transactiona portion of such shares sold.
The acquisition is expected to be completed during the third quarter of 1996.
"Combining with HIS establishes MAI as a clear leader in the hospitality
information system industry," said George G. Bayz, MAI's president and chief
operating officer. "With the addition of the HIS product line, MAI will be able
to offer the hospitality industry a variety of powerful solutions on a wide
variety of hardware and software environments."
<PAGE>
Bayz said that MAI was committed to the HIS products and customers. "During
the past year, MAI has invested heavily in its product support and development
activities so it will be able to provide HIS customers with an enhanced level of
service and support," he said.
Robert Sanford, HIS's chairman and chief executive officer, said, "This
combination will give HIS's customers the ability to implement new client/server
solutions with the proper level of needs assessment, configuration planning and
systems integration resources sorely lacking among other hospitality vendors.
Properly planned and executed, with the right level of complex wide and local
area network expertise, HIS and CLS customers will benefit from our evolving
enterprise-wide hospitality solutions." Mr. Sanford said that he would continue
with the combined company to direct development of the next generation of
software products.
MAI said that it expected that HIS's Hong Kong and Singapore subsidiaries
would become the cornerstones of its on-going efforts to provide hospitality and
gaming technology products into Asia's fast-growing markets.
MAI installs and supports total information systems solutions, primarily in
the hospitality, gaming, distribution and manufacturing industries. In addition,
the company designs, sells and supports a wide variety of computer products
including (i) local and wide area computer networks, (ii) document imaging
systems, (iii) computer products for legacy systems which upgrade, enhance and
integrate legacy systems with currently available computer technologies, and
(iv) vertical and horizontal software applications including OpenBASIC, CLS's
Hotel CompuSystem II, Gaming Systems International's slot accounting and player
tracking systems, MANBASE, ASG, Medical Management, BFMS and TriBASE.
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