<PAGE>
As filed with the Securities and Exchange Commission on May 6, 1999
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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INTERLEAF, INC.
(Exact name of Registrant as Specified in its Charter)
Massachusetts 04-2729042
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
62 Fourth Avenue
Waltham, Massachusetts 02451
(781) 290-0710
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
-----------------------------------
Craig Newfield, Esq.
Interleaf, Inc.
62 Fourth Avenue
Waltham, Massachusetts 02451
(781) 290-0710
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
----------------------------------
Copies to:
David Murphree, Esq.
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Tel: (617) 856-8200
Fax: (617) 856-8201
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this registration statement. If the only
securities being registered on this form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under Securities Act of
1933, please check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering./ /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box./ /
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<PAGE>
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
AMOUNT PROPOSED PROPOSED
TITLE OF SHARES TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE (1) OFFERING PRICE (1) REGISTRATION FEE
--------------------------- ---------- ------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 1,037,501 $4,0625 $4,214,848 $1,172
shares
--------------------------- ---------- ------------------- ------------------ ----------------
</TABLE>
- ----------
(1) Estimated solely for purposes of calculating the Registration fee pursuant
to Rule 457(c) under the Securities Act of 1933. Based upon the average of
the high and low price of the Common Stock as reported on the Nasdaq
National Market on May 4, 1999.
------------------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 the registration statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
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<PAGE>
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Preliminary prospectus dated May __, 1999, Subject to Completion
INTERLEAF, INC.
1,037,501 Shares of Common Stock
This prospectus relates to the resale of up to 1,037,501 shares of the common
stock of Interleaf. These shares are already outstanding and may be offered for
sale from time to time for the accounts of the selling stockholders listed on
page 6 of this prospectus.
The common stock presently is traded on the Nasdaq National Market under the
symbol "LEAF". On May 4, 1999, the last reported sale price of the common
stock on the Nasdaq National Market was $3.875 per share.
An investment in the common stock offered under this prospectus involves a high
degree of risk. See "Risk Factors" beginning on page 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is May __, 1999.
The information contained in this prospectus is not complete and may be changed.
The securities may not be sold until the related registration statement filed
with the Securities and Exchange Commission or any applicable state securities
commission is effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
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<PAGE>
This prospectus is part of a registration statement that we filed with the SEC.
You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making an offer in any jurisdiction where the offering is not
permitted.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary................................................ 1
Risk Factors........................................... 2
Use of Proceeds........................................ 4
Selling Stockholders................................... 4
Plan of Distribution................................... 5
Where You Can Find More Information.................... 7
Legal Matters.......................................... 7
Experts................................................ 7
</TABLE>
INTERLEAF, INC.
1,037,501 shares of common stock
PROSPECTUS
May __, 1999
INTERLEAF, INC.
1,037,501 Shares of common stock
PROSPECTUS
May __, 1999
<PAGE>
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SUMMARY
About Interleaf
Interleaf and its subsidiaries develop and market software products used in the
creation, publication, management and distribution of information and documents
in electronic and paper form. Interleaf's software products enable customers to
compose, edit, view, print, control, manage and distribute information and
documents on a cost-effective and efficient basis.
Interleaf's core product line includes:
- - electronic publishing;
- - document management systems;
- - intranet publishing; and
- - content management software.
Interleaf provides technical support and maintenance to its customers utilizing
its software products. In addition, it provides consulting, custom application
and implementation services to its customers.
Interleaf's principal executive offices are located at 62 Fourth Avenue,
Waltham, Massachusetts 02451, and its telephone number is (781) 290-0710.
Summary of the Offering
Securities Offered: 1,037,501 shares of common stock.
Plan of Distribution: The shares of common stock covered by this prospectus
may be offered from time to time by the selling
stockholders. See "Plan of Distribution."
Trading: The common stock presently is traded on the Nasdaq
National Market under the symbol "LEAF."
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-1-
<PAGE>
RISK FACTORS
The common stock offered under this prospectus involves a high degree of risk.
You should carefully consider the following risk factors in addition to the
other information in this prospectus before deciding to purchase the common
stock.
IF INTERLEAF DOES NOT SUCCESSFULLY DEVELOP NEW PRODUCTS AND MARKETS, THEN
REVENUES MAY CONTINUE TO DECLINE.
Interleaf's revenues have declined over the last several years as a result of
both the maturation and saturation of the market for electronic publishing
software which historically was the focus of its business and the increased
popularity of low cost versions of Windows-based authoring software. Unless
Interleaf successfully develops new products and exploits new markets, revenues
can be expected to continue to decline.
INTERLEAF IS DEPENDENT ON THE SUCCESS OF ITS NEW ENTERPRISE CONTENT MANAGEMENT
PRODUCTS AND SERVICES.
Interleaf's strategy for future growth depends upon the successful development,
introduction and customer acceptance of new and improved products and services
such as its enterprise content management products and services. Enterprise
content management refers to processes and technology which enable a business
enterprise to create and package information content (such as text, graphics,
documents and hyperlinks) from throughout an organization and its business
partners as part of a dynamic, integrated web-based solution. There is a risk
that the market for enterprise content management products and services may not
grow, that Interleaf may not be successful in developing enterprise content
management software, or that the marketplace may not accept Interleaf's
software. Interleaf's new products are based on the "XML" language (extensible
Markup Language). There are risks that this new technology will change, and as a
result the new products when released will not meet market and customer
requirements.
INTERLEAF'S QUARTERLY OPERATING RESULTS MAY FLUCTUATE.
Interleaf believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and that investors should not rely on
them as indications of future performance because of the following factors:
- Interleaf typically ships a substantial amount of its products in the
final weeks, or even the final days, of each quarter;
- The length of Interleaf's sales cycle makes it difficult to predict when
Interleaf will receive license revenue; and
- Any shortfall or delay in the recognition of revenue from even a limited
number of license transactions could cause significant variations in
Interleaf's operating results from quarter to quarter because Interleaf's
expenses are relatively fixed.
These factors also increase the risk that Interleaf's results in some quarters
will be below the expectations of stock analysts or investors. Such an "earnings
surprise" frequently will result in a drop in the market price of a company's
stock.
THERE IS INTENSE COMPETITION IN INTERLEAF'S TECHNICAL DOCUMENTATION AND
ENTERPRISE CONTENT MANAGEMENT MARKETS.
The market for Interleaf's existing technical documentation products is very
competitive, subject to rapid change and significantly affected by activities of
other industry participants. Several competitors in that market have greater
market penetration, greater name recognition, a larger installed base of
customers and significantly greater financial, technical and marketing resources
than Interleaf. While Interleaf does not yet know who its principal competitors
in the emerging and highly fragmented enterprise content management market will
be, it is likely that the enterprise content management market will develop
characteristics similar to those described above.
INTERLEAF IS DEPENDENT ON ITS STRATEGIC RELATIONSHIPS WITH MICROSTAR SOFTWARE
LTD. AND MICROSOFT, INC.
Interleaf is dependent on the performance of Microstar Software Ltd. in the
development of Interleaf's new enterprise content management products, and if
Microstar were sold to a competitor, went out of business or otherwise ceased to
-2-
<PAGE>
provide contract services to Interleaf, it could have a material adverse effect
on Interleaf's business. Interleaf also needs to maintain a good working
relationship with Microsoft, Inc., since many of Interleaf's products are
designed to be accessed using Microsoft software such as Microsoft Word, Office,
SQL Server and NT.
INTERLEAF'S INTELLECTUAL PROPERTY HAS LIMITED PROTECTION; OTHERS COULD
MISAPPROPRIATE INTERLEAF'S INTELLECTUAL PROPERTY AND INTERLEAF MAY NOT BE ABLE
TO ENFORCE ITS RIGHTS; INTERLEAF'S INTELLECTUAL PROPERTY COULD INFRINGE ON
RIGHTS OF OTHERS.
Interleaf's success is heavily dependent upon the protection of its proprietary
technology through a combination of copyrights, trademarks, patents, trade
secrets and technical measures. There is the risk that Interleaf's attempts to
protect its rights will not be adequate and that competitors may independently
develop similar technology. Interleaf seeks to protect its software,
documentation and other written materials primarily under trade secret and
copyright laws, which afford only limited protection. The laws of some foreign
countries do not provide the same level of protection to Interleaf's proprietary
rights as do the laws of the United States. Policing unauthorized use of
Interleaf's products is difficult. While Interleaf cannot determine the extent
to which piracy of its software products exists, some software piracy can be
expected.
Interleaf is not aware that any of its products infringe the proprietary rights
of third parties. However, in the future, third parties may claim that
Interleaf's current or future products infringe on their proprietary rights.
Claims of this type could be very time-consuming, result in costly litigation,
cause product shipment delays or require Interleaf to enter into costly royalty
or licensing agreements.
INTERLEAF'S IN PROCESS RESEARCH AND DEVELOPMENT WRITE-OFFS COULD BE REDUCED.
In connection with the acquisitions of PDR Automated Systems and
Publications, Inc. and Softquad, Inc. during the current fiscal year,
Interleaf wrote off approximately $990,000 for in-process research and
development. The SEC has recently increased the scrutiny of certain
accounting practices, including the extent of write-offs of in-process
research and development in connection with acquisitions. While Interleaf did
obtain an appraisal from an outside accounting firms with respect to the PDR
write-offs, there is a risk that a portion of those write-offs may be
reduced, which would result in a corresponding increase in the amount of
goodwill associated with those acquisitions. Any additional goodwill would
have to be amortized over future years.
INTERLEAF'S FOREIGN SALES AND FINANCIAL RESULTS MAY FLUCTUATE BECAUSE OF
CURRENCY EXCHANGE RATE FLUCTUATIONS.
Interleaf generates sales primarily in U.S. dollars, British pounds, and Euros
and incurs expenses principally in the same currencies. Fluctuations in the
value of the U.S. dollar and foreign currencies have caused, and are likely to
continue to cause, amounts translated into U.S. dollars to fluctuate in
comparison with previous periods. Interleaf generally has not attempted to limit
its foreign currency exposure through foreign currency exchange rate hedging
transactions. Exchange rate fluctuations or other risks associated with
international operations may have a material adverse affect on Interleaf's
business, financial condition and results of operations. Interleaf's worldwide
business operations also may be affected by changes in demand resulting from
these currency exchange rate fluctuations, as well as by governmental controls
and other risks associated with international sales (such as changes in various
regulatory requirements, political and economic changes and disruptions,
export/import controls, tariff regulations, difficulties in staffing and
managing foreign sales and support operations, greater difficulties in trade
accounts receivable collection, and possibly adverse tax consequences).
YEAR 2000 PROBLEMS COULD AFFECT INTERLEAF'S BUSINESS.
Some computers, software, and other equipment include programming code in which
calendar year data is abbreviated to only two digits. As a result of this design
decision, some of the systems do not properly recognize a year that begins with
"20" instead of "19". These problems are widely expected to increase in
frequency and severity as the year 2000 approaches, and are commonly referred to
as the "Millennium Bug" or "Year 2000 problem". Interleaf has made significant
efforts to address its Year 2000 issues, as described in its most recent
quarterly report on Form 10-Q filed with the SEC. At this time, there are no
identifiable significant risks associated with its Year 2000 readiness, although
there is a risk that unanticipated problems may arise. Any costs, which are not
expected to be material, that are associated with compliance efforts are being
funded out of cash flow from operations.
-3-
<PAGE>
RECENT ACQUISITIONS HAVE RISKS.
As part of its business strategy to acquire and develop new products and
services, Interleaf acquired PDR and the remaining outstanding capital of
Interleaf Italia Srl and certain assets of Softquad and Texcel International AB,
during the last year. The risks related to these acquisitions include, among
others, the difficulty of assimilating the operations, information systems and
personnel of the acquired businesses; difficulties in assimilating the acquired
products into Interleaf's current sales force and sales channels; the risk that
customers of the acquired businesses will react unfavorably to the acquisition
and as a result Interleaf will not reap the benefits that it had expected; and
difficulties in retaining and integrating employees of the acquired businesses.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus and in the documents
incorporated by reference are forward-looking. The following and similar
expressions identify forward-looking statements:
- expects;
- anticipates; and
- estimates.
Forward-looking statements include, but are not limited to, statements related
to:
- Interleaf's plans, objectives, expectations and intentions;
- the timing of, availability and functionality of products under
development or recently introduced; and
- general economic conditions.
Actual results may differ materially from those suggested by the forward-looking
statements for various reasons, including those discussed under "Risk Factors."
These forward-looking statements speak only as of the date of this prospectus,
or in the case of forward-looking statements in documents incorporated by
reference, as of the dates of those documents.
USE OF PROCEEDS
Interleaf will not receive any proceeds from the sale by the selling
stockholders listed below of the shares of common stock offered under this
prospectus.
SELLING STOCKHOLDERS
The shares of common stock covered by this prospectus are being offered by those
selling stockholders listed below. As of the effective date of this registration
statement, Interleaf has issued 541,667 shares of the common stock and warrants
to purchase 495,834 shares of the common stock to the selling stockholders in
connection with the transactions described below.
On February 25, 1999, Interleaf purchased all of the remaining outstanding
stated capital of Interleaf Italia Srl from Finpiave, S.p.A. pursuant to a
stock purchase agreement. Interleaf issued, as part of the purchase price for
such stated capital, 275,000 shares of the common stock to Finpiave and
16,667 shares of the common stock to Filippo Zuccarello, as Finpiave's
designee. Interleaf additionally issued to Finpiave in connection with the
transaction, a warrant to purchase 229,167 shares of the common stock at an
exercise price of $2.25 per share (subject to adjustment as provided in the
warrant) expiring June 30, 1999 and a warrant to purchase 66,667 shares of
the common stock at an exercise price of $ .01 per share (subject to
adjustment as provided in the warrant) which shall be deemed to have been
exercised by Finpiave on March 20. 2000 unless earlier cancelled in exchange
for $200,000 cash.
On April 7, 1999, Interleaf purchased certain of the assets of Texcel
International AB pursuant to an asset purchase agreement. Interleaf issued to
Texcel, as part of the purchase price for such assets, 250,000 shares of the
common stock and warrants to purchase 200,000 shares of the common stock at
an exercise price of $6.00 per share (subject to adjustment as provided in
the warrant) expiring April 7, 2000. Additionally, Interleaf agreed to pay
certain contingent consideration based on a percentage of Interleaf's gross
revenues during the one year period following closing attributable to the
acquired Texcel products. Such contingent consideration is payable within 120
days of the anniversary of the closing and may be paid in cash or shares of
the common stock at Inteleaf's option. Interleaf and Texcel further agreed to
form a joint venture to develop business in Scandinavia. Pursuant to the
asset purchase agreement, Interleaf may be required under certain
circumstances to purchase Texcel's interest in such joint venture. The
purchase price for such purchase may be paid in cash or the common stock at
Interleaf's option.
-4-
<PAGE>
Other than as just described, none of the selling stockholders has held any
position or office or had any other material relationship with Interleaf during
the past three years.
The following table sets forth:
- the number of shares of common stock beneficially owned by each of the
selling stockholders as of May 5, 1999 (including any shares which
that selling stockholder has the right to acquire by the exercise of
options);
- the maximum number of shares of common stock that may be offered by the
selling stockholder under this prospectus;
- the number of shares of common stock that will be beneficially owned by
each selling stockholder assuming all of the shares that may be offered
under this prospectus are sold; and
- the percentage of common stock owned after the offering if all of the
shares that may be offered under this prospectus are sold.
The information with regard to each selling stockholder provided in the table
and footnotes below is based upon information provided to Interleaf by that
selling stockholder.
<TABLE>
<CAPTION>
NUMBER OF SHARES MAXIMUM NUMBER NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY OWNED AS OF OF SHARES BEING BENEFICIALLY OWNED CLASS OWNED
NAME OF BENEFICIAL OWNER MAY 5, 1999 OFFERED AFTER OFFERING AFTER OFFERING
- ------------------------ ------------------------ --------------- ------------------ --------------
<S> <C> <C> <C> <C>
Finpiave S.p.A. 570,834(1) 570,834 -- 0%
Filippo Zuccarello 16,667 16,667 -- 0%
Texcel International AB 450,000(2) 450,000 -- 0%
</TABLE>
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(1) Includes 295,834 shares issuable upon exercise of warrants.
(2) Includes 200,000 shares issuable upon exercise of a warrant.
PLAN OF DISTRIBUTION
The selling stockholders may offer their shares of common stock from time to
time in transactions (which may include block transactions) on any exchange or
market on which the common stock is listed or quoted, in public or private
transactions, through a combination of such methods of sale, or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices, or at negotiated prices.
The selling stockholders may sell the common stock by selling:
- directly to purchasers;
- through broker-dealers acting as agents for them;
- to broker-dealers who may purchase common stock as principals and then
sell the common stock from time to time in transactions which may include
block transactions on any exchange or market on which securities are
listed or quoted, as applicable;
- in negotiated transactions; or
- through a combination of the foregoing methods of sale, or otherwise.
However, in the stock purchase agreements pursuant to which they are receiving
the stock being offered hereby, the selling stockholders have agreed to certain
limitations on the manner of their sale of the stock, including volume
limitations and selling through a single broker, which are intended by Interleaf
to reduce the risk of their sales into the market having a negative effect on
the market price of Interleaf's common stock.
Broker-dealers engaged by selling stockholders may arrange for other
broker-dealers to participate in the sales. Broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders and/or the purchasers of the common stock. The
broker-dealers may act as agents for the selling stockholders or they may sell
to them as principals, or both. Particular broker-dealers may receive, as
compensation, commissions in excess of customary commissions.
Except as provided herein, Interleaf has agreed to pay all expenses incident to
the offer and sale of the common stock offered by the selling stockholders under
this prospectus. Interleaf estimates such expenses to be approximately
$17,172. The selling stockholders will pay all selling commissions, brokerage
fees and related expenses.
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<PAGE>
To comply with the securities laws of certain jurisdictions, if applicable, the
common stock offered under this prospectus will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers.
Under applicable rules and regulations under the Securities Exchange Act of
1934, any person engaged in a distribution of the common stock may be limited in
its ability to engage in market activities with respect to the common stock. In
addition, each selling stockholder will be subject to applicable provisions of
the Securities and Exchange Act and the rules and regulations under the
Securities and Exchange Act, which may limit the timing of purchases and sales
of any of the common stock by the selling stockholders.
-6-
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
on the SEC's Website at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
1. Annual Report on Form 10-K for the fiscal year ended March 31, 1998;
2. Quarterly Report on Form 10-Q and the amendments thereto for the fiscal
quarters ended June 30, 1998, September 30, 1998 and December 31, 1998;
3. Current Reports on Form 8-K dated July 17, 1998, September 24, 1998 (as
amended on November 12, 1998) and November 27, 1998; and
4. The description of Interleaf's common stock contained in the
registration statement on Form 8-A filed on June 11, 1986, including all
amendments or reports filed for the purpose of updating such description.
You may request a copy of these filings at no cost, by writing or
telephoning our general counsel at the following address:
Interleaf, Inc.
62 Fourth Avenue
Waltham, Massachusetts 02451
(781) 290-0710
This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of the document.
LEGAL MATTERS
The validity of the shares of common stock offered hereby has been passed upon
for Interleaf by Craig Newfield, Esq., General Counsel of Interleaf.
EXPERTS
The consolidated financial statements of Interleaf, Inc. appearing in Interleaf,
Inc.'s Annual Report (Form 10-K) for the year ended March 31, 1998, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
The financial statements of PDR Automated Systems and Publications, Inc.
appearing in Interleaf's Current Report on Form 8-K as filed with the SEC on
September 24, 1998 and the amendment thereto filed on November 12, 1998, have
been audited by Dulworth, Breeding & Karns, LLP, independent public accountants,
as indicated in their report with respect thereto, and are incorporated by
reference herein in reliance upon the authority of Dulworth, Breeding & Karns,
LLP as experts in accounting and auditing.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses payable by the
registrant in connection with the sale and distribution of the securities
registered hereby. All amounts are estimated except the SEC and Nasdaq filing
fee. Costs of issuance and distribution will be borne by the registrant as
follows:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee $ 1,172.00
Accounting Fees and Expenses $ 5,000.00*
Legal Fees and Expenses $10,000.00*
Miscellaneous $ 1,000.00*
----------
Total $17,172.00*
</TABLE>
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* Estimated.
Item 15. Indemnification of Directors and Officers
(a) Section 67 of the Massachusetts Business Corporation Law permits
indemnification of present and former directors and officers to the extent
specified in or authorized by (i) the articles of organization, (ii) a by-law
adopted by the stockholders, (iii) a vote adopted by the holders of a majority
of the shares of stock entitled to vote, or (iv) in the case of officers who are
not directors, by the Board of Directors, except that no indemnification shall
be provided for any person with respect to any matter as to which he shall have
been adjudicated in any proceeding not to have acted in good faith in the
reasonable belief that his action was in the best interests of the corporation.
Section 67 also provides that the absence of any express provision for
indemnification shall not limit any right of indemnification existing
independently of such Section.
(b) Article V of Interleaf's By-laws provides that Interleaf shall, to the
extent legally permissible, indemnify each former or present director or officer
against all liabilities and expenses imposed upon or incurred by any such person
in connection with, or arising out of, the defense or disposition of any action,
suit or other proceeding, civil or criminal, in which he may be threatened or
involved, by reason of his having been a director or officer; provided that
Interleaf shall provide no indemnification with respect to any matter as to
which any such person shall be finally adjudicated in such action, suit or
proceeding not to have acted in good faith in the reasonable belief that his
action was in the best interests of Interleaf. If any such action is disposed
of, on the merits or otherwise, without the disposition being adverse to the
director or officer and without an adjudication that such person did not act in
good faith in the reasonable belief that his action was in the best interests of
Interleaf, the director or officer is entitled to indemnification as a matter of
right. In all other cases, indemnification shall be made as of right unless
after investigation (a) by the Board of Directors by a majority vote of a quorum
of disinterested directors, or (b) by written opinion of independent legal
counsel (who may be regular counsel of Interleaf), or (c) the holders of a
majority of outstanding stock entitled to vote (exclusive of stock owned by any
interested directors or officers), it shall be determined by clear and
convincing evidence that such person did not act in good faith and in a manner
reasonably believed to be in or not opposed to the best interest of Interleaf.
Indemnification may include advancement of expenses of defending an action upon
receipt of an undertaking by the person indemnified to repay such advances if it
is ultimately determined that such person is not entitled to indemnification
under Article V. Article V also provides that the right of indemnification
provided therein is not exclusive of and does not affect any other rights to
which any director or officer may be entitled under any agreement, statute, vote
of stockholders or otherwise. The Company's obligation to indemnify under
Article V shall be offset to the extent of any other source of indemnification
or any otherwise applicable insurance coverage.
(c) The Company has entered into an Agreement to Defend and Indemnify with each
of its officers and directors. Pursuant to these agreements, Interleaf has
agreed, to the extent legally permissible, to indemnify such person against all
losses (including, without limitation, judgments, fines and penalties) and
expenses
II-1
<PAGE>
(including, without limitation, amounts paid in settlement and counsel fees and
disbursements) incurred by such person in connection with or as a result of any
claim, action, suit or other proceeding, civil or criminal, or appeal related
thereto, in which he may be involved by reason of his having been a director or
officer or by reason of any action taken or not taken in his capacity as
director or officer; provided that no indemnification shall be provided with
respect to any matter as to which such person shall not have acted in good faith
in the reasonable belief that his action was in the best interests of Interleaf.
If any such claim, action, suit or proceeding is disposed of, on the merits or
otherwise, without the disposition being adverse to such person, without a plea
of guilty or NOLO CONTENDRE and without an adjudication that such person did not
act in good faith in the reasonable belief that his action was in the best
interests of Interleaf, the director or officer is entitled to indemnification
as a matter of right. In all other cases, indemnification shall be made upon a
determination that such person's conduct was in good faith and in the reasonable
belief that his action was in the best interests of Interleaf by (a) a quorum of
disinterested directors, or (b) independent legal counsel (who may be regular
counsel of Interleaf), or (c) the holders of a majority of outstanding stock
entitled to vote (exclusive of stock owned by an interested directors or
officer). Expenses may be advanced by Interleaf prior to any final disposition
of any such action upon receipt of an undertaking by the person indemnified to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification under the Agreement. Such Agreements provide that
the right of indemnification provided therein is in addition to any rights to
which any person concerned may be entitled by other agreements or as a matter of
law, and shall inure to the benefit of the heirs, executors and administrators
of the indemnified person. The rights of indemnification provided in such
Agreements are in addition to any rights under any insurance policy in effect,
provide that to the extent any claim is covered by any such insurance policy,
Interleaf will provide coverage after the full coverage of the insurance policy
is exhausted or otherwise unavailable.
(d) Article 6D of Interleaf's Articles of Organization provides that, to the
fullest extent permitted by Chapter 156B of the Massachusetts General Laws, a
director of Interleaf shall not be personally liable to Interleaf or its
stockholders for monetary damages for breach of fiduciary duty as a director,
notwithstanding any provision of law imposing such liability. Section 13(b)(1
1/2) of Chapter 156B of the Massachusetts General Laws permits a corporation to
include in its articles of organization a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary as a director, except for (i) any
breach of the director's duty of loyalty to the corporation and its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (ii) improper
issuances of stock or unauthorized distributions to stockholders, or (iv) any
transaction in which the director derived an improper personal benefit.
II-2
<PAGE>
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
3.1 Restated Articles of Organization of Interleaf, as amended (Filed as
the applicable exhibit to Interleaf's Report on Form 10-Q for the
fiscal quarter ended September 30, 1997)*
3.2 By-Laws of Interleaf, as amended (Filed as the applicable exhibit to
Interleaf's Annual Report on Form 10-K for the fiscal year ended March
31, 1994)*
4.1 Specimen Certificate for shares of Interleaf's common stock (Filed as
the applicable exhibit to Interleaf's registration statement on Form
S-1, File No. 33-5743)*
4.2 Stock Purchase Agreement, dated February 25, 1999, between
Interleaf and Finpiave, S.p.A.**
4.3 Asset Purchase Agreement, dated April 7, 1999, by and among Interleaf,
Inc., Texcel International AB, Texcel Research, Inc. and Texcel (UK)
Limited**
5.1 Legal Opinion of Craig Newfield, Esq.**
23.1 Consent of Ernst & Young LLP **
23.2 Consent of Dulworth, Breeding & Karns, LLP **
23.3 Consent of Craig Newfield, Esq. (contained in Exhibit 5.1)**
24 Power of Attorney (contained on Signature Page of this Registration
Statement)**
</TABLE>
- ---------------
* Not filed herewith. In accordance with Rule 411 promulgated pursuant to
the Securities Act of 1933, reference is made to the documents previously
filed with the Commission, which are incorporated by reference herein.
** Filed herewith.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section do
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
II-3
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Not applicable.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and persons
controlling the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
(i) Not applicable.
(j) Not applicable.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in City of Waltham, Commonwealth of Massachusetts, on May 6, 1999.
INTERLEAF, INC.
By: /s/ Jaime W. Ellertson
----------------------
Jaime W. Ellertson, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jaime W. Ellertson, Peter Rice and Craig
Newfield, and each of them (with full power to each of them to act alone), his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this registration statement, and to file the same,
with all exhibits thereto and other documents in connection therewith, and, in
connection with any registration of additional securities pursuant to Rule
462(b) under the Securities Act of 1933, to sign any abbreviated registration
statement and any and all amendments thereto, and to file the same, with all
exhibits thereto and other documents in connection therewith, in each case, with
the Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or either of them, or
their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Jaime W. Ellertson President and Chief Executive Officer,
and Director (Principal Executive Officer) May 6, 1999
- ------------------------------------
Jaime W. Ellertson
/s/ Peter J. Rice Vice President of Finance and May 6, 1999
- ------------------------------------ Administration, Chief Financial Officer
Peter J. Rice and Treasurer (Principal Financial and
Accounting Officer)
/s/ Frederick B. Bamber
- ------------------------------------ Director May 6, 1999
Frederick B. Bamber
/s/ David A. Boucher
- ------------------------------------ Director May 6, 1999
David A. Boucher
/s/ Rory J. Cowan Chairman of the Board of Directors May 6, 1999
- ------------------------------------
Rory J. Cowan
/s/ Marcia J. Hooper
- ------------------------------------ Director April 30, 1999
Marcia J. Hooper
/s/ John A. Lopiano
- ------------------------------------ Director April 30, 1999
John. A. Lopiano
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
<S> <C>
3.1 Restated Articles of Organization of Interleaf, as amended (Filed as
the applicable exhibit to Interleaf's Report on Form 10-Q for the
fiscal quarter ended September 30, 1997)*
3.2 By-Laws of Interleaf, as amended (Filed as the applicable exhibit to
Interleaf's Annual Report on Form 10-K for the fiscal year ended March
31, 1994)*
4.1 Specimen Certificate for shares of Interleaf's common stock (Filed as
the applicable exhibit to Interleaf's registration statement on Form
S-1, File No. 33-5743)*
4.2 Stock Purchase Agreement, dated February 25, 1999, between Interleaf
and Finpiave, S.p.A.**
4.3 Asset Purchase Agreement, dated April 7, 1999, by and among Interleaf,
Inc., Texcel International AB, Texcel Research, Inc. and Texcel (UK)
Limited**
5.1 Legal Opinion of Craig Newfield, Esq.**
23.1 Consent of Ernst & Young LLP **
23.2 Consent of Dulworth, Breeding & Karns, LLP **
23.3 Consent of Craig Newfield, Esq. (contained in Exhibit 5.1)**
24 Power of Attorney (contained on Signature Page of this Registration
Statement)**
</TABLE>
- ---------------
* Not filed herewith. In accordance with Rule 411 promulgated pursuant to
the Securities Act of 1933, as amended, reference is made to the documents
previously filed with the Commission, which are incorporated by reference
herein.
** Filed herewith.
<PAGE>
Exhibit 4.2
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into effective as of the ___th
day of February, 1999, between Interleaf, Inc., of 62 Fourth Avenue, Waltham
Massachusetts USA ("Buyer") and Finpiave, S.P.A. of Via Postumia n. 85, 31047
Ponte di Piave, Treviso Italy (the "Seller"). Certain capitalized terms used
herein and not otherwise defined are defined in Article 5.
RECITALS
WHEREAS, the Seller and the Buyer together own all of the outstanding
stated capital of Interleaf Italia Srl an Italian company with registered
offices at Palazzo No. 2 Strada No. 6, CAP 20089, Registration No.: 285263, with
the Companies' Register at the Tribunal of Milan, corporate capital of Lire
65,000,000 (the "Company"), with the Seller owning a quota in the Company having
a nominal value of Lire 45,000,000 representing approximately 69% of the entire
corporate capital (the "Purchased Quota") and with Buyer owning a quota in the
Company having a nominal value of Lire 20,000,000 representing approximately the
remaining 31% (including a quota in the nominal amount of 500,000 Lira held by
Mr. John Brennan); and
WHEREAS, Buyer wishes to acquire all of the capital of the Company owned
by the Seller; and
WHEREAS, Seller has negotiated to sell the Purchased Quota to Buyer;
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1. PURCHASE AND SALE OF QUOTA.
1.1 PURCHASE OF PURCHASED QUOTA. Subject to the provisions of this Agreement,
the Seller agrees to sell, and Buyer agrees to purchase, at the Closing the
Purchased Quota, and to pay for the Purchased Quota the following amounts (the
"Purchase Price"):
(a) At the Closing, Buyer shall issue 275,000 shares of Buyer's Common
Stock, $ .01 par value ("Buyer's Stock") to Seller, and 16,667 shares of Buyer's
Stock to Seller's designee Mr. Filippo Zuccarello, all subject to the
requirements of Sections 1.2 and 1.4 below; and
(b) At the Closing, Buyer shall pay Seller the amount of Two Hundred
Thousand Dollars ($200,000.00) payable in cash, by certified check or wire
transfer of immediately available funds;
(c) Within 15 days after the Closing, Buyer shall deliver to Seller one,
two or three Stock Purchase Warrant(s) substantially in the form of EXHIBIT A
hereto. The number of shares of Buyer's Stock subject to such Warrant(s) and
the(ir) exercise price(s) shall be designated by the Seller within 15 days after
the date of this Agreement, in accordance with EXHIBIT B (and such shares shall
be issued subject to the requirements of Sections 1.2 and 1.4 below);
(d) Within 15 days after the Closing, Buyer shall deliver to Seller one
additional Stock Purchase Warrant substantially in the form of EXHIBIT A hereto,
under which Seller may purchase 66,667 shares of Buyer's Stock (subject to the
requirements of Sections 1.2 and 1.4 below) at an exercise price of $ .01 per
share, which shall be deemed to have been exercised 12 months from the Closing;
provided, that at Seller's sole option pursuant to written notice given at least
30 days prior to the date such Warrant is deemed to have been exercised, such
Warrant shall be cancelled and Buyer shall pay Seller the amount of Two Hundred
Thousand Dollars ($200,000.00) in cash, by certified check or wire transfer of
immediately available funds; and
(e) 24 months from the Closing, Buyer shall pay Seller the amount of Two
Hundred Thousand Dollars ($200,000.00) payable in cash, by certified check or
wire transfer of immediately available funds.
- --------------------------------------------------------------------------------
Stock Purchase Agreement Page 1
<PAGE>
1.2 REGISTRATION OF BUYER's Stock. Buyer agrees to use its best efforts to
insure that the shares of Buyer's Stock which are issued pursuant to Sections
1.1(a) above (and which are issued pursuant to the exercise of Warrants
delivered under Sections 1.1 (c) and (d) above other than in connection with a
"net issue exercise" under Section 2.2 of such Warrant(s)) are effectively
registered for resale by Seller under the Securities Act, pursuant to a
registration statement filed with the SEC within 30 days after each issuance of
such shares to Seller.
1.3 SECURITY FOR CASH PAYMENTS. As security for Buyer's obligations under
Section 1.1(d) and its obligations to deliver cash under Section 1.1(e), Buyer
shall deliver to Seller at the Closing security consisting of an irrevocable
stand-by letter of credit in substantially the form attached as EXHIBIT D.
1.4 RESTRICTIONS ON RESALE OF BUYER's Stock. Seller agrees to resell any and all
Buyer's Stock issued to Seller under this Agreement subject to the following:
(i) Seller shall effect all sales through a broker/dealer registered
with the SEC;
(ii) Seller shall not, without Buyer's consent:
(a) offer to sell during any given week more than 50% of the
Average Daily Volume (measured on the first trading day of
that week); or
(b) offer to sell on any given trading day more than the lesser of
(x) 10% of all Buyer's Stock delivered by Buyer under this
Agreement, or (y) 25% of the Average Daily Volume; and
(iii) Seller shall not, either directly, indirectly or through any of its
affiliates, employees or agents, or anybody acting on their behalf,
engage in any short sales, swaps, purchasing of puts, or other
hedging activities that involve the direct or indirect use of
Buyer's Stock or securities derivative from Buyer's Stock, for any
reason.
The restrictions of this Section 1.4 shall expire, as to each installment of
Buyer's Stock delivered to Seller hereunder, on the earlier of (i) twelve (12)
months after such Buyer's Stock is either registered pursuant to Section 1.2
above or an exemption from such registration is available as determined by
opinion of counsel reasonably acceptable to the Buyer, or (ii) such time as FMV
is greater than $12.00.
1.5 TIME AND PLACE OF CLOSING. The Closing shall be held at the offices of
Seller at 10:00 a.m., on February 23, 1999, or at such other place, date or time
as may be fixed by mutual agreement of the parties (the "Closing Date");
provided, however, that in no event shall the Closing Date be extended beyond
March 15, 1999.
1.6 FORMALITIES FOR TRANSFER OF THE PURCHASED QUOTA. On Closing Date, in
order to comply with Italian tax and corporate law related to the transfer of
quotas, the Seller and the Buyer shall execute before Dr. Cafiero, notary public
in Milan, one deed of transfer substantially in the text attached hereto as
EXHIBIT C (the "Deed of Transfer"). The Notary Public shall take care of the
filings with the Registro delle Imprese of Milan, the Tax Office, and all of the
other filings and formalities required by Italian law. The Deed of Transfer
shall not amend, supersede or novate any of the obligations of the parties set
forth herein, and in the case of any discrepancy between the Deed of Transfer
and this Agreement, the provisions of this Agreement shall prevail.
It is agreed that all actions and transactions described in paragraphs 1.1. to
1.6. shall be regarded as one and single transaction so that, at the option of
the party having interest to the carrying out of the specific action or
transaction, no action or transaction shall be deemed to have taken place if and
until all other actions and transactions shall have taken place. The parties
acknowledge the essential nature of this provision.
- --------------------------------------------------------------------------------
Stock Purchase Agreement Page 2
<PAGE>
1.7 COMPANY CASH BALANCE. At or immediately prior to the Closing, the Seller and
Buyer shall cause the Company to distribute up to $200,000.00 of the Company's
cash to the Seller, which shall be in the form of a distribution of paid-in
capital. The Company may borrow to fund such payment; provided, that after such
payment the net worth of the Company as of 12-31-98 shall be at least Lit.
504,862,336.
1.8 FURTHER ASSURANCES. The Seller from time to time after the Closing, at the
request of Buyer and without further consideration, shall execute and deliver
such further instruments of transfer and assignment and take such other action
as Buyer may reasonably require to more effectively transfer the Purchased Quota
to the Buyer.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller hereby represents and warrants to Buyer as follows:
2.1 TITLE TO QUOTA. Seller is the record and beneficial owner of the Purchased
Quota. Seller does not own of record or beneficially any other shares of capital
stock of the Company, or any rights, options, or warrants with respect thereto.
The Purchased Quota to be transferred by Seller to Buyer pursuant to this
Agreement will be, when delivered, duly authorized, validly issued, fully paid
and nonassessable, and will be free and clear of all Encumbrances.
2.2 AUTHORIZATION OF TRANSACTION. The Seller has the unrestricted and absolute
power, authority and capacity to execute and deliver this Agreement and to
perform its obligations hereunder, and to carry out the transactions
contemplated hereby. All necessary action, corporate or otherwise, has been
taken by Seller to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Seller and is the legal, valid and binding
obligation of the Seller, enforceable against the Seller in accordance with its
terms. Buyer acknowledges that Mr. John Brennan has a right of first refusal to
purchase the Purchased Quota, and Buyer will be responsible for obtaining the
waiver from Mr. Brennan of this right.
2.3 FINANCIAL STATEMENTS.
(a) Attached as SCHEDULE 2.3 hereto are the following financial
statements of the Company, all of which, to the best of the Seller's knowledge,
are complete and correct and present fairly the assets, liabilities, and
financial position of the Company on the date thereof, and the results of
operations and changes in the financial condition of the Company for the periods
covered thereby:
Balance Sheet, Statement of Profit and Loss and Statement of Cash Flows
for the calendar years 1997 and 1998
(b) To the best of the Seller's knowledge, the books of account of the
Company for the periods of the financial statements referred to in paragraph (a)
are complete and correct in all material respects and have been maintained on a
consistent basis.
2.4 ABSENCE OF UNDISCLOSED LIABILITIES. To the best of the Seller's
knowledge, the Company has no liabilities of any nature, whether accrued,
absolute, contingent or otherwise (including without limitation liabilities as
guarantor or otherwise with respect to obligations of others, or liabilities for
taxes due or then accrued or to become due), except for liabilities stated or
adequately reserved against on the Balance Sheet dated as of December 31, 1998
(the "1998 Balance Sheet") or incurred after the date of the 1998 Balance Sheet
in the ordinary course of business. To the best of the Seller's knowledge, there
is no fact which materially adversely affects, or may in the future (so far as
can now be reasonably foreseen), materially adversely affect, the business,
properties, operations or conditions of the Company which has not been
specifically disclosed herein or on a schedule hereto.
- --------------------------------------------------------------------------------
Stock Purchase Agreement Page 3
<PAGE>
2.5 PAYMENT OF TAXES. The Company has duly and timely filed all Tax Returns
with respect to all Taxes. All of the Tax Returns are complete and correct in
all respects. All Taxes shown to be due on the Tax Returns have been paid, and
there are no Taxes which are being contested in good faith by the Company. With
respect to all other Taxes for which no return is required or which have not yet
accrued or otherwise become due, adequate provision has been made in the
financial statements referred to in Section 2.3 above. All Taxes and other
assessments and levies which the Company is required to withhold or collect have
been withheld or collected and paid over or will be paid over to proper
governmental authorities as required. All transfer, excise and other Taxes
payable to any jurisdiction by reason of the transfer of the Purchased Quota
pursuant to this Agreement shall be paid or provided for by Seller after the
Closing at no cost to Buyer.
2.6 LABOR AND EMPLOYEE RELATIONS. The Company has paid in full (or made
accrual or provisions for payment in full) to its employees, agents and
contractors all wages, salaries, commissions, bonuses and other direct
compensation for all services performed by them through the end of the Company's
most recent pay period. The Company does not have any contingent liability for
sick leave, vacation time, holiday pay, severance pay or similar items not set
forth on the 1998 Balance Sheet. The Company has complied with and has no
liabilities whatsoever with respect to payroll, social security, and other
employment related taxes for its employees and independent contractors. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not trigger any severance pay
obligation under any contract or at law. All of the representations of Seller in
this Section 2.6 are made to the best of the Seller's knowledge.
2.7 MINUTE BOOKS. To the best of the Seller's knowledge, the minute books and
stock records of the Company accurately record all action taken by the
stockholders, board of directors and committees thereof of the Company and all
issuances and transfers of capital stock of the Company. Complete and accurate
copies of all minute books and stock records of the Company have been delivered
to or made available for inspection by Buyer.
2.8 INVESTMENT MATTERS.
(a) Seller is an "accredited investor" within the meaning of Rule
501(a)(3) under the Securities Act.
(b) Seller is not a U.S. person, or is not acquiring Buyer's Stock for
the account or benefit of a U.S. person within the meaning of Rule 902(k) under
the Securities Act.
(c) Seller acknowledges that Buyer's Stock issued pursuant hereto
constitute restricted securities within the meaning of Rule 144 of the
Securities Act and Seller may not and will not resell, transfer or otherwise
dispose of any Buyer's Stock unless (i) pursuant to a registration statement
filed with the Securities and Exchange Commission pursuant under the Securities
Act with respect thereto which is in effect or an exemption from such
registration is available, including without limitation, Regulation S (Rule 901
through Rule 905) under the Securities Act; or (ii) in accordance with Rule 144
under the Securities Act. Seller further acknowledges and agrees that hedging
transactions involving Buyer's Stock issued pursuant hereto may not be
conducted. Any certificates of Buyer's Stock issued pursuant hereto shall bear a
legend as to the restrictions contained in this Section.
2.9 DISCLOSURE OF MATERIAL INFORMATION. To the best of Seller's knowledge,
neither this Agreement nor the financial statements, any Schedule, any exhibit,
document or certificate delivered by or on behalf of the Seller pursuant hereto
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statements herein or therein not misleading in light
of circumstances under which made.
- --------------------------------------------------------------------------------
Stock Purchase Agreement Page 4
<PAGE>
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to Seller as follows:
3.1 ORGANIZATION OF BUYER. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts with full corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is conducted by it.
3.2 CAPITALIZATION. The Company is authorized to issue (a) 50,000,000 shares
of common stock, $.01 par value per share, of which 7,651,828 shares were issued
and outstanding as of December 31, 1998 (after giving effect to a one-for-three
reverse split), and (b) 5,000,000 shares of preferred stock, $.10 par value per
share, of which (i) 726,003 shares designated as Senior Series B Convertible
Preferred Stock were outstanding as of December 31, 1998, and (ii) 1,350 shares
designated as 6% Convertible Preferred Stock were issued and outstanding as of
December 31, 1998. Any shares of Buyer's Stock issued to Seller under this
Agreement will be, when issued in accordance with this Agreement, duly
authorized, validly issued, fully paid, nonassessable and free of all preemptive
rights and Buyer will use its best efforts to insure that such shares are
registered for resale by the Seller on an effective registration statement under
the Securities Act filed with the SEC within 90 days from their issuance.
3.3 AUTHORIZATION OF TRANSACTION. Buyer has the full power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement and the performance of this Agreement
and the consummation by the Buyer of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action.
This Agreement has been duly and validly executed and delivered by the Buyer and
constitutes a valid and binding obligation of the Buyer, enforceable against the
Buyer in accordance with its terms.
3.4 NO CONFLICT OF TRANSACTION WITH OBLIGATIONS AND LAWS.
(a) Neither the execution, delivery and performance of this Agreement,
nor the performance of the transactions contemplated hereby, will (i) conflict
with or constitute (with or without the passage of time or the giving of notice)
a breach of, or default under any material agreement, instrument or obligation
to which the Buyer is a party or by which its assets are bound which would
materially affect the performance by the Buyer of its obligations under this
Agreement; or (ii) result in a violation of Law or Court Order applicable to the
Buyer.
(b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby by the Buyer do not require the consent,
waiver, approval, authorization, exemption of or giving of notice to any
Governmental Authority or other third party.
3.5 REPORTS. Buyer's Common Stock is registered under the Exchange Act, and
Buyer is subject to the periodic reporting requirements thereof. The Buyer has
previously furnished to the Seller complete and accurate copies, as amended or
supplemented, of its (a) Annual Report on Form 10-K for the fiscal years ended
March 31, 1997 and 1998, as filed with the SEC, (b) proxy statements relating to
all meetings of its stockholders (whether annual or special) since January 1,
1997 and (c) all other reports filed with the SEC pursuant to the Exchange Act
since January 1, 1997 (such annual reports, proxy statements and other filings,
together with any amendments or supplements thereto, are collectively referred
to herein as the "Buyer Reports"). Buyer Reports (i) comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, (ii) have been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
covered thereby (except as may be indicated therein or in the notes thereto),
(iii) fairly present the consolidated financial condition, results of operations
and cash flows of the Buyer as of the respective dates thereof and for the
periods referred to therein, and (iv) are consistent in all material respects
with the books and records of the Buyer.
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Stock Purchase Agreement Page 5
<PAGE>
ARTICLE 4. INDEMNIFICATION.
4.1 Subject to the limitations in paragraph 4.2 below, the Seller agrees to
defend, indemnify and hold harmless Buyer's Indemnified Persons from and against
all Losses directly or indirectly incurred by or sought to be imposed upon any
of them:
i) resulting from or arising out of any breach of any of the covenants,
representations or warranties made by Seller in this Agreement, or
in any agreement, document or instrument executed and delivered
pursuant hereto or in connection with the Closing;
ii) resulting from or arising out of the intentional misrepresentation
or breach of warranty of the Seller or any intentional failure of
the Seller to perform or comply with any covenant or agreement of
the Seller contained herein;
iii) resulting from or arising out of any breach of the representations
or warranties set forth in Section 2.5 of this Agreement;
iv) resulting from or arising out of any breach of the representations
or warranties set forth in Section 2.6 of this Agreement; or
v) equal to the amount by which the net worth of the Company at
12-31-98 is less than Lit. 504,862,336.
4.2 The right to indemnification under section 4.1 is subject to the following
limitations:
i) The Seller shall have no liability under section 4.1 unless one or
more of the Buyer's Indemnified Persons gives written notice to the
Seller asserting a claim for Losses, including reasonably detailed
facts and circumstances pertaining thereto, before a period of two
(2) years from the Closing Date; provided, that for any claim based
upon a covenant or undertaking which by its terms is to be performed
after the Closing, then the period above shall commence on the date
when such covenant or agreement should have been performed.
ii) Seller shall not be liable to Buyer under this Agreement for any
Losses which result from or arise out of the conduct of the
Company's business after the Closing.
iii) Except for Losses arising under Sections 4.1(ii) and 4.1(iii), and
except for Seller's fraud, Seller's liability shall not exceed the
amount of the consideration paid by Buyer hereunder. The foregoing
notwithstanding, Seller's liability for Losses arising under Section
4.1(iii) shall be limited to $2,000,000, solely if and to the extent
that Seller had no actual or constructive knowledge of the breach of
the representation(s) or warranty(ies) contained in Section 2.5
which directly caused such Losses.
iv) Indemnification shall be payable by Seller only if the aggregate
amount of all Losses hereunder by Buyer's Indemnified Persons shall
exceed $10,000, at which point Seller shall be responsible for all
Losses, including the first $10,000 of such Losses.
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Stock Purchase Agreement Page 6
<PAGE>
v) The indemnification provisions of this Article 4 state the Buyer's
sole and exclusive recourse, and the Seller's sole and exclusive
liability, for any claims, damages or Losses arising under or out of
this Agreement or the transactions contemplated hereunder.
4.3 DEFENSE OF THIRD PARTY ACTIONS.
(a) Within 30 days after receipt of notice of any Third Party Action,
any person who believes he, she or it may be an Indemnified Person will give
notice to Seller of such action. The omission to give such notice to the Seller
will relieve the Seller of any liability hereunder, to the extent that it was
actually prejudiced thereby.
(b) Upon receipt of a notice of a Third Party Action, the Seller shall
have the right, at its option and at its own expense, to participate in and be
present at the defense of such Third Party Action, but not to control the
defense, negotiation or settlement thereof, which control shall remain with the
Indemnified Person, unless the Seller makes the election provided in paragraph
(c) below.
(c) By written notice within forty-five (45) days after receipt of a
notice of a Third Party Action, Seller may elect to assume control of the
defense, negotiation and settlement thereof, with counsel reasonably
satisfactory to the Indemnified Person; provided, however, that the Seller
agrees (i) to promptly indemnify the Indemnified Person for its expenses to
date, and (ii) to hold the Indemnified Person harmless from and against any and
all Losses caused by or arising out of any settlement of the Third Party Action
approved by the Seller or any judgment in connection with that Third Party
Action. The Seller shall not in the defense of the Third Party Action enter into
any settlement which does not include as a term thereof the giving by the third
party claimant of an unconditional release of the Indemnified Person, or consent
to entry of any judgment except with the consent of the Indemnified Person.
4.4 MISCELLANEOUS.
(a) Indemnified Persons shall be entitled to indemnification regardless
of whether the matter giving rise to the applicable liability, payment,
obligation or expense may have been previously disclosed to any such person
unless expressly disclosed on each particular Schedule requiring such
disclosure.
(b) Buyer shall first recover any amount owing by the Seller for
indemnification hereunder by setoff against any amounts that may otherwise be
due from the Buyer or the Company to the Seller whether hereunder or otherwise.
(c) Claims for indemnification under this Article 4 shall be paid or
otherwise satisfied by Seller within thirty (30) days after a Final Adjudication
thereof (as defined in Section 6.2 below).
ARTICLE 5. DEFINITIONS.
As used in this Agreement, the following terms have the indicated meanings:
"Average Daily Volume" means the average of the daily trading volume of the
Buyer's Common Stock on the Nasdaq National Market for the 20 trading days
preceding the day in question, divided by two to adjust for Nasdaq reporting of
both sides of a trade.
"Buyer's Stock" means the Common Stock, $.01 par value per share, of Buyer
delivered to Seller pursuant hereto.
"Closing" means the closing of the purchase and sale provided for in this
Agreement.
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Stock Purchase Agreement Page 7
<PAGE>
"Encumbrance" means any lien, option (including right of first refusal or first
offer), encumbrance, restriction, mortgage, pledge, security interest, claim or
charge of any kind or character.
"Fair Market Value" or "FMV" for a given date means (i) for cash, the nominal
value thereof, and (ii) for Buyer's Stock, the volume-weighted average of the
closing prices of Buyer's Stock on the Nasdaq National Market for the twenty
trading days immediately preceding such date.
"Indemnified Persons" means the Buyer, its subsidiary and affiliated
corporations, their respective directors, officers, employees, stockholders and
agents, the Company after the Closing, and any person serving as a director,
officer, employee or agent of the Company at Buyer's request after the Closing.
"Laws" means all applicable statutes, laws, ordinances, rules and regulations.
"Losses" means the "Applicable Percentage" of all losses, damages (including,
without limitation, punitive and consequential damages), fines, penalties,
liabilities, payments and obligations, and all expenses related thereto. Losses
shall include the Applicable Percentage of any reasonable legal fees and costs
incurred by any of the Indemnified Persons subsequent to the Closing in defense
of or in connection with any alleged or asserted liability, payment or
obligation, whether or not any liability or payment, obligation or judgment is
ultimately imposed against the Indemnified Persons and whether or not the
Indemnified Persons are made or become parties to any such action. The
"Applicable Percentage" shall be 100% for all Losses arising from Seller's fraud
or referred to under Section 4.1(ii) or (iii) above, and 69% for all other
Losses.
"Purchased Quota" means the entire issued quota of the capital of the Company
having a nominal value of 45,000,000 Lire owned by the Seller prior to the
Closing.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Taxes" means all applicable taxes, including without limitation, income,
profit, franchise, sales, use, real property, personal property, ad valorem,
excise, employment, social security and wage withholding taxes, severance,
stamp, occupation, and windfall taxes, of every kind, character or description
imposed by any governmental or quasi-governmental authority (domestic or
foreign), and any interest or fines, and any and all penalties or additions
relating to such taxes, charges, fees, levies or assessments.
"Tax Returns" means all Federal, state, local, and foreign, government income,
excise, gross receipts and franchise tax returns, real estate and personal
property tax returns, sales and use tax returns, employee tax and contribution
returns and all other tax returns, reports and declarations, including valid
extensions therefor, or estimated taxes required to be filed by it, with respect
to all Taxes.
"Third Party Action" means any written assertion of a claim, or the commencement
of any action, suit, or proceeding, by a third party as to which any person
reasonably believes it may be an Indemnified Person hereunder.
ARTICLE 6. MISCELLANEOUS.
6.1 SURVIVAL OF WARRANTIES. All representations, warranties, agreements,
covenants and obligations herein or in any schedule, certificate or financial
statement delivered by any party to another party incident to the transactions
contemplated hereby are material, shall be deemed to have been relied upon by
the other party and shall survive the Closing for the applicable periods set
forth in Article 4 and shall be further
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Stock Purchase Agreement Page 8
<PAGE>
actionable subject to the limitations set forth therein, regardless of any
investigation and shall not merge in the performance of any obligation by either
party hereto.
6.2 RIGHT TO OFFSET. Buyer has the right to offset and credit any and all
payments to be made by it under this Agreement to or for the benefit of the
Seller by reason of the Final Adjudication in favor of Buyer of any claim by
Buyer against Seller for indemnification pursuant to Section 4.1 hereof. If the
Buyer does exercise its right of set-off hereunder, it shall give Seller 10
calendar days advance written notice thereof. If a Buyer's Indemnified Person
has claim(s) pending against Seller for indemnification of Losses pursuant to
Article 4 hereof at a time when payments are otherwise due to be paid by Buyer
to Seller, Buyer may withhold from such payments an amount equal to Buyer's
reasonable estimate of the amount of such Losses, until such time as the Final
Adjudication of such claim(s). If it is ultimately determined (by final judgment
of a court of competent jurisdiction not subject to further appeal, by binding
arbitration award, or by agreement between the parties, referred to herein as a
"Final Adjudication") that Buyer was not entitled to set off the amount set-off,
Buyer shall pay Seller interest on the amount withheld from the date when it
should have been paid to the date of payment at an interest rate equal to the
rate at which Buyer could then borrow funds from its principal commercial
lending bank.
6.4 FEES AND EXPENSES. Each of the parties will bear its own expenses in
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement, or its negotiation and termination (if
terminated), including without limitation all legal, accounting and investment
banking or advisory fees.
6.5 NOTICES. All notices, requests, demands and other communications required
or permitted to be given (i) hereunder by any party hereto shall be in writing
and shall be deemed to have been duly given when received if delivered
personally, or (ii) on the third business day following the day sent if sent by
prepaid internationally recognized overnight receipted courier or when receipt
is telephonically acknowledged if sent by telecopier transmission on a business
day or, if not a business day, on the next following business day, or parties at
the following addresses (or at such other addresses as shall be specified by the
parties by like notice):
If to the Seller, to:
Finpiave, S.P.A.
Via Postumia n. 85
31047 Ponte di Piave
Treviso Italy
Attn: Tito Berna
Tel: 39-0422-819-555
Fax: 39-0422-819-539
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050 USA
Attn: Robert P. Latta, Esq.
Tel: 1-650-493-9300
Fax: 1-650-845-5000
If to the Buyer, to:
Interleaf, Inc.
62 Fourth Avenue
Waltham, MA 02451 USA
Attn.: Craig Newfield, V.P. & General Counsel
Tel: 1-781-768-1086
Fax: 1-781-768-1145
with a copy to:
Brosio, Casati e Associati / Allen & Overy
Corso Vittorio Emanuele II, 68
10121 Torino Italy
Attn.: Guido Brosio
Tel: 39-011-5155300
Fax: 39-011-541018
and in any case at such other address as the addressee shall have specified by
written notice.
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Stock Purchase Agreement Page 9
<PAGE>
6.6 PUBLICITY AND DISCLOSURES. Except as may be otherwise required for
compliance by Buyer with applicable stock market rules or securities laws (and
subject to applicable limitations contained in contracts to which the Company is
a party), neither Buyer nor Seller shall issue nor approve any news release or
other public announcement concerning this Agreement (or any schedules or
exhibits hereto) without the prior written approval of the other.
6.7 CONFIDENTIALITY. The parties agree that they will keep confidential and
not disclose or divulge any confidential, proprietary or secret information
which they may obtain from another party hereto in connection with the
transactions contemplated herein, or pursuant to inspection rights granted
hereunder, or reveal the financial or other terms and conditions of this
Agreement unless such information is or hereafter becomes public information
through means other than a default hereof by such party or is required to be
disclosed by applicable law, including applicable securities laws or stock
exchange rules or regulations.
6.8 ENTIRE AGREEMENT. This Agreement (all exhibits or schedules appended to
this Agreement and all documents delivered pursuant to or referred to in this
Agreement, all of which are hereby incorporated herein by reference) and the
Deed of Transfer constitutes the entire agreement between the parties, and all
promises, representations, understandings, warranties and agreements with
reference to the subject matter hereof and inducements to the making of this
Agreement relied upon by any party hereto, have been expressed herein or in the
documents incorporated herein by reference.
6.9 SEVERABILITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
hereof.
6.10 ASSIGNABILITY. This Agreement may not be assigned otherwise by operation
of law or otherwise by either party without the prior written consent of the
other. However, any or all rights of Buyer to receive performance (but not the
obligations of Buyer to Seller hereunder) and rights to assert claims against
Seller in respect of breaches of representations, warranties or covenants of
Seller hereunder, may be assigned by Buyer to any direct or indirect subsidiary
or other affiliate of Buyer, but any such assignee of Buyer's rights hereunder
shall take such rights subject to any defenses, counterclaims and rights of
setoff to which Seller might be entitled under this Agreement. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns.
6.11 AMENDMENT. This Agreement may be amended only by a written agreement
executed by all parties hereto.
6.12 GOVERNING LAW.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts (other than the choice of law
principles thereof), except that any representations and warranties with respect
to real and tangible property shall be governed by and construed in accordance
with the laws of the jurisdiction where such property is situated.
The foregoing notwithstanding, all matters related to the formalities of
the transfer of the Purchased Quota, and the Deed of Transfer, shall be governed
by Italian law. However, as between the parties, this Agreement shall prevail.
(b) Any claim, action, suit or other proceeding initiated by any party
to this Agreement, under or in connection with this Agreement may be asserted,
brought, prosecuted and maintained in any court in London, England as the party
bringing such action, suit or proceeding shall elect, having jurisdiction over
the subject matter thereof, and the parties hereby waive any and all rights to
object to the laying of venue in any such court and to any right to claim that
any such court may be an inconvenient forum. Each of the
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Stock Purchase Agreement Page 10
<PAGE>
Parties hereby submit themselves to the jurisdiction of each such court and
agree that service of process on them in any such action, suit or proceeding may
be effected by the means by which notices are to be given to it under this
Agreement.
6.13 REMEDIES. The parties hereto acknowledge that the remedy at law for any
breach of the obligations undertaken by the parties hereto is and will be
insufficient and inadequate and that the parties hereto shall be entitled to
equitable relief, in addition to remedies at law. In the event of any action to
enforce the provisions of this Agreement, Seller shall waive the defense that
there is an adequate remedy at law.
6.14 COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as an instrument under seal in multiple counterparts by their duly
authorized representatives on February ___, 1999, to be effective as of the date
first set forth above.
<TABLE>
<CAPTION>
Interleaf, Inc. Finpiave S.p.A.
<S> <C>
By: By:
------------------------------- -----------------------------------
Name: Name:
----------------------------- ---------------------------------
Title: Title:
---------------------------- --------------------------------
Date: Date:
----------------------------- ---------------------------------
</TABLE>
SCHEDULES AND EXHIBITS:
SCHEDULE 2.3: Financial Statements
EXHIBIT A: Form of Warrant
EXHIBIT B: Alternative Warrant Specifications
EXHIBIT C: Deed of Transfer
EXHIBIT D: Form of Letter of Credit
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Stock Purchase Agreement Page 11
<PAGE>
Exhibit 4.3
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- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
INTERLEAF, INC.
AND
TEXCEL INTERNATIONAL AB
TEXCEL RESEARCH, INC.
AND
TEXCEL (UK) LIMITED
DATED: APRIL 7, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
<PAGE>
INTERLEAF CONFIDENTIAL
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is made as of the 7th day
of April 1999 by and between Interleaf, Inc., a Massachusetts corporation (the
"Buyer") and Texcel International AB a Swedish company with company registration
number 556540-1667 ("Texcel Sweden"), Texcel Research, Inc., a Delaware
corporation and a wholly owned indirect subsidiary of Texcel Sweden ("Texcel
U.S."), and Texcel (UK) Limited, a United Kingdom corporation and a wholly owned
indirect subsidiary of Texcel Sweden ("Texcel UK"), (each of Texcel Sweden,
Texcel UK and Texcel US are referred to severally as a "Seller", and
collectively they are referred to as the "Sellers", unless otherwise
specifically provided).
RECITALS:
WHEREAS, among its other businesses, the Sellers are engaged in the
development, marketing, licensing and sale of certain software products as
listed within SCHEDULE 1.1 (the "Products");
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Buyer wishes to acquire certain of the assets of the Sellers and is prepared
to assume certain liabilities and obligations of the Sellers related to such
purchased assets; and
WHEREAS, the Sellers wish to convey such assets to the Buyer, subject to
such certain liabilities.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
Unless otherwise defined herein, capitalized terms shall have the meanings
given in ARTICLE 13.
ARTICLE 1. PURCHASE AND SALE OF ASSETS
1.1 PURCHASED ASSETS. Subject to the provisions of this Agreement:
a) ASSETS PURCHASED FROM TEXCEL SWEDEN. Texcel Sweden agrees to sell, and
the Buyer agrees to purchase, at the Closing, Texcel Sweden's rights,
title and interest in and to certain of its assets, properties and
rights, wherever located, as specified and described in SCHEDULE
1.1(A) to this Agreement.
b) ASSETS PURCHASED FROM TEXCEL UK. Texcel UK agrees to sell, and the
Buyer agrees to purchase, at the Closing, Texcel UK's rights, title
and interest in and to certain of its assets, properties and rights,
wherever located, as specified and described in SCHEDULE 1.1(B) to
this Agreement.
c) ASSETS PURCHASED FROM TEXCEL US. Texcel US agrees to sell, and the
Buyer agrees to purchase, at the Closing, Texcel US's rights, title
and interest in and to certain
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ASSET PURCHASE AGREEMENT Page 1
<PAGE>
INTERLEAF CONFIDENTIAL
of its assets, properties and rights, wherever located, as specified
and described in SCHEDULE 1.1(C) to this Agreement.
The assets to be purchased under (a), (b) and (c) above, and described
in any part of SCHEDULE 1.1, are collectively referred to herein as
the "Purchased Assets".
d) ACCOUNTS RECEIVABLE. In consideration of the payment by Buyer of
certain amounts pursuant to Section 10.3(c), all accounts receivable
pertaining to product licenses delivered or other services performed
on or after March 15, 1999 and through the Closing will be transferred
to Buyer by each Seller free and clear of all liens, encumbrances and
security interests of any kind, and all amounts collected by the
Sellers from and after March 15, 1999 and through the Closing relating
thereto shall immediately be paid to Buyer; provided that Buyer
undertakes to deliver such product licenses and perform such services,
although Buyer may choose to assume the existing contract with respect
to such product licenses and services or to enter into a new contract
with the customer.
i) Accounts receivable pertaining to product licenses delivered or
services performed prior to March 15, 1999 shall be retained by
the Sellers.
ii) In addition, Texcel US will assign to Buyer all accounts
receivable whenever and however arising from Computer Sciences
Corp. ("CSC") and CACI, and all such accounts receivable shall be
deemed to be part of the Purchased Assets and shall become the
property of Buyer at the Closing; provided, that Buyer agrees to
assume the liability of Texcel US to Silicon Valley Bank, in a
total amount not to exceed $212,858.75 plus a per diem of $185.25
from and after April 1, 1999, and such bank shall assign to Buyer
or discharge all of its security interest on all Purchased
Assets.
iii) Accounts receivable for maintenance services shall be included in
the Purchased Assets and Buyer shall be entitled to all amounts
related thereto and collected by a Seller or any Affiliate from
and after March 15, 1999, which shall immediately be paid to
Buyer, provided that Buyer undertakes to continue to provide such
maintenance.
iv) All other accounts receivable for product licenses to be
delivered or services to be performed from and after March 15,
1999 shall be included in the Purchased Assets and shall
immediately be paid to, or retained by, Buyer. Sellers are not
required to pay to Buyer amounts collected by any Seller prior to
March 15, 1999 as payment for maintenance services to be rendered
after March 15, 1999.
1.2 ASSUMPTION OF LIABILITIES. Upon the sale and purchase of the Purchased
Assets, the Buyer shall assume, pay, perform or discharge when due those
liabilities and obligations
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ASSET PURCHASE AGREEMENT Page 2
<PAGE>
INTERLEAF CONFIDENTIAL
(and only those liabilities and obligations) of the Sellers which are
listed and described in SCHEDULE 1.2 as follows (collectively, the "Assumed
Liabilities"):
a) The obligations of the Sellers accruing from and after the Closing
Date pursuant to the particular contracts which may be assumed by the
Buyer as provided herein (the "Assumed Contracts"), it being agreed
that (except as specifically stated in a written undertaking made by
Buyer) any undisclosed obligations or liabilities pursuant to the
Assumed Contracts prior to and on the Closing Date shall not be
assumed by the Buyer hereunder and further that (except pursuant to
such written undertaking) the Buyer shall not assume liability for, or
be obligated in any respect for, any undisclosed defaults or failures
of performance under any Assumed Contracts by the Sellers on or prior
to the Closing Date; and
b) Any and all costs associated with the Purchased Assets which are
incurred by the Buyer from and after the Closing Date.
1.3 RETAINED LIABILITIES. Except as expressly provided in Section 1.2, the
Buyer shall not assume nor become liable for any of the Sellers'
obligations, liabilities (including under any employee benefit plans
subject to the Employee Retirement Income Security Act of 1974), debts,
contracts or other commitments of any kind whatsoever, known or unknown,
fixed or contingent of any Seller or any entity related to Sellers, for all
of which the Sellers shall remain obligated Without limiting the foregoing,
but except for amounts that Buyer has agreed to pay pursuant to
Section 10.3(c), Sellers specifically retain sole responsibility for all
liabilities associated with or arising out of the employment of any persons
or contractors by any Seller or their Affiliates, and the termination of
such employees' employment by any Seller or any of their Affiliates in
connection with the purchase of the Purchased Assets by the Buyer or for
any other reason.
ARTICLE 2. PURCHASE PRICE AND PAYMENT.
In consideration of the sale by each respective Seller to the Buyer of the
applicable Purchased Assets, subject to the assumption by the Buyer of the
Assumed Liabilities of such Seller, the Buyer agrees that it will deliver to
each Seller the following (the "Purchase Price"):
2.1 CONSIDERATION PAID TO TEXCEL UK. On the Closing Date, Buyer will pay Texcel
UK U.S.$15,000 by wire transfer pursuant to Texcel UK's instructions. Buyer
has also agreed to assume responsibility for payment of the salary expense
of certain employees of Texcel UK from and after March 15, 1999, as listed
on SCHEDULE 6.18.
2.2 CONSIDERATION PAID TO TEXCEL US. On the Closing Date, Buyer will pay Texcel
US U.S.$30,000 by wire transfer pursuant to Texcel US's instructions. Buyer
has also agreed to assume responsibility for payment of the salary expense
of certain employees of Texcel US from and after March 15, 1999, as listed
on SCHEDULE 6.18.
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ASSET PURCHASE AGREEMENT Page 3
<PAGE>
INTERLEAF CONFIDENTIAL
2.3 CASH CONSIDERATION PAID TO TEXCEL SWEDEN. On the Closing Date, Buyer will
pay Texcel Sweden U.S.$155,000 by wire transfer pursuant to Texcel US's
instructions.
The cash amounts being paid to the Sellers pursuant to Sections 2.1, 2.2
and 2.3 above (not including amounts paid to their respective employees)
shall be referred to collectively as the "Cash Amounts".
2.4 CONSIDERATION PAID TO TEXCEL SWEDEN. On the Closing Date:
a) Buyer will issue in the name of Texcel Sweden 250,000 shares of Stock
(the "Shares"), subject to the pledges contained in Sections
2.3(c)(ii) and 11.8 below.
b) Buyer will issue to Texcel Sweden a warrant to purchase 200,000 shares
of Stock at an exercise price of $6.00 per share, exercisable
immediately, expiring 12 months from the Closing Date, and providing
for "cashless" exercise, in substantially the form of EXHIBIT A (the
"Warrant").
c) Buyer will loan to Texcel Sweden an amount in U.S. Dollars up to the
Fair Value of 100,000 shares of Stock on the Closing Date, with
interest accruing at the annual rate of 4.58% (the "Loan"). The
principal amount of such Loan, together with accrued interest, will be
repaid in full not later than June 30, 1999, which date shall be
postponed by that number of additional days beyond June 30, 1999 which
are necessary for Texcel Sweden to sell the requisite number of shares
of Stock to repay the Loan within the resale restrictions of Section
3.3.
i) The Loan will be represented by a 4.58% Secured Term Note in
substantially the form of EXHIBIT B (the "Note").
ii) The Loan will be secured by a perfected first priority pledge of
the Shares pursuant to a stock pledge agreement in substantially
the form of EXHIBIT C (the "Stock Pledge Agreement"); provided,
that, Buyer shall release that number of the Shares which have
been sold by Texcel Sweden in compliance with Section 3.3, below,
if following such sale and release, the Fair Value on the date of
such sale of the Shares remaining subject to the Stock Pledge
Agreement is equal to or greater than the then outstanding
principal and accrued interest under the Loan after applying the
net proceeds of such sale to the repayment of the Loan.
iii) Upon maturity or earlier acceleration, the Loan shall be repaid,
at Buyer's option, in cash and/or in whole or in part by the
delivery and transfer to Buyer of Shares which have been pledged
to Buyer, valued at Fair Value as of the date of such repayment.
2.5 FUTURE CONTINGENT CONSIDERATION PAYABLE TO TEXCEL SWEDEN. Buyer will pay
Texcel Sweden an additional amount, (the "Contingent Payment"), calculated
as a percentage of Buyer's Gross Revenue for the Earnout Period, as
follows:
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ASSET PURCHASE AGREEMENT Page 4
<PAGE>
INTERLEAF CONFIDENTIAL
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROSS REVENUE (MILLIONS) PERCENTAGE PAYABLE
<S> <C>
Less than $4.0 0
greater than or equal to $4.0, but less than $4.5 5%
greater than or equal to $4.5, but less than $5.0 6%
greater than or equal to $5.0, but less than $5.5 7%
greater than or equal to $5.5, but less than $6.0 8%
greater than or equal to $6.0, but less than $6.5 9%
greater than or equal to $6.5, but less than $7.0 10%
greater than or equal to $7.0, but less than $7.5 11%
greater than or equal to $7.5, but less than $8.0 12%
greater than or equal to $8.0, but less than $8.5 13%
greater than or equal to $8.5, but less than $9.0 14%
greater than $9.0 15%
</TABLE>
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a) Buyer will market the Products either as they currently exist or may
be further developed by Buyer, or as separate modules of Buyer's
overall content management solution family of products. For each sale,
Gross Revenue will include Buyer's then-current local country list
price for the Products or modules as the case may be, minus the Gross
Revenue Average Discount (including a 100% discount where Buyer
licenses the Product to a customer for no license or maintenance fee).
"Gross Revenue Average Discount" means (I) the total list price for
all Products and Buyer's products sold in any transaction to a
particular customer minus the actual price charged to the customer,
(II) divided by the total list price for all Products and Buyer's
products sold in such transaction to the customer.
i) To the extent that, in a customer contract, maintenance revenue
is not specifically allocated to or between the Products and
Buyer's Products, such maintenance revenue shall for purposes of
determining Gross Revenue be allocated in accordance with Buyer's
relative list prices for maintenance of the particular Products
and Buyer's Products which are referred to in the customer
contract.
ii) To the extent that, in a customer contract, consulting services
revenue is not allocated to or between the Products and Buyer's
specifically Products, such consulting revenue shall for purposes
of determining Gross Revenue be allocated in good faith by Buyer
in accordance with the relative number of billable person-hours
being devoted to the particular Products and Buyer's Products
which are referred to in the customer contract in question.
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b) Buyer shall make the Contingent Payment to Texcel Sweden within
120 days after the end of the Earnout Period.
c) The Contingent Payment shall be in cash or, at Buyer's option, in
shares of Stock having an aggregate Fair Value on the last day of
the Earnout Period equal to the amount of the Contingent Payment.
Buyer will use reasonable efforts to insure that such Stock is
registered promptly following delivery (see Section 3.2).
d) Buyer shall use commercially reasonable efforts to market and
license the Products during the Earnout Period. Buyer makes no
guaranty and provides no assurances as to the results of its
efforts, or as to the amount of the Contingent Payment, if any,
which will be made at the end of the Earnout Period under this
Section 2.5.
e) At the time Buyer makes the Contingent Payment under this Section
2.4, it will deliver to Texcel Sweden a report setting forth in
reasonable detail its calculation of Gross Revenue and the
calculation of the Contingent Payment. Texcel Sweden may audit
Buyer's business records directly related to the determination of
Gross Revenue (including the allocation of revenue between the
parties' products); provided, that such audit must be commenced
within 30 days from Texcel Sweden's receipt of such report, using
independent auditors of Texcel Sweden's choice, at Texcel
Sweden's expense, upon not less that 5 days notice to Buyer, in
the presence of Buyer's employees and without undue disruption of
Buyer's operations. The auditors and Texcel Sweden must execute a
non-disclosure agreement in such form reasonably acceptable to
Buyer, covering without limitation, the information reviewed
during the audit. In the event that the audit reveals
underpayment by more than 10% of the amount paid, Buyer will bear
Texcel Sweden's reasonable audit costs. If Buyer disagrees with
the Texcel Sweden's auditors' determination of Gross Revenue and
the disagreement is not resolved by Buyer and Texcel Sweden
within 15 days following Buyer's notice of such disagreement to
Texcel Sweden, either party may submit the disagreement to
binding arbitration in Boston, Massachusetts according to the
rules of the American Arbitration Association.
2.6 ALLOCATION OF THE PURCHASE PRICE The Purchase Price to be paid by the Buyer
under this Article 2, plus all obligations of the Sellers assumed or
discharged by Buyer with respect to periods prior to the Closing Date,
shall be allocated among the Purchased Assets in the manner set forth in
SCHEDULE 2.6 hereto. The parties hereto acknowledge and agree that such
allocation reflects the respective fair market values of the Purchased
Assets and that they will not take a position inconsistent with such
allocation for U.S. or foreign federal, state, provincial or local tax
purposes.
ARTICLE 3. REGISTRATION AND RESALE RESTRICTIONS.
3.1 REGISTRATION OF SHARES. Buyer will use reasonable efforts to register the
Shares, and the shares of Stock issuable upon exercise of the Warrant,
under the Securities Act at Buyer's
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cost for resale by Texcel Sweden pursuant to a registration statement on
Form S-3 (or similar successor form) which is filed with the SEC within 45
days from the Closing.
3.2 REGISTRATION OF ADDITIONAL STOCK. Buyer will use reasonable efforts to
register under the Securities Act any shares of Stock issued to Texcel
Sweden as the Contingent Payment under Section 2.4 above at Buyer's cost
for resale by Texcel Sweden pursuant to a registration statement on Form
S-3 (or similar successor form) which is filed with the SEC promptly
following the date that the parties agree on the amount of the Contingent
Payment, such registration statement to become effective immediately
following delivery of such shares of Stock to Texcel Sweden; provided, that
if Buyer is not eligible to register such shares of Stock on a Form S-3
registration statement or any similar successor form then the Buyer's
deadline for filing the S-3 shall be extended until the earlier to occur of
(i) 90 days following the restoration of Buyer's eligibility under the
Securities Act to use Form S-3, and (ii) the effective date of a
registration statement for a primary offering of Buyer's Stock in which
such Contingent Payment shares of Stock may lawfully be included.
3.3 RESTRICTIONS ON RESALE. Texcel Sweden and its Affiliates will not resell
any Shares or other shares of Stock issued to Texcel Sweden hereunder or
under the Warrant or otherwise, without compliance with the following
conditions:
a) All sales shall be effected through a registered broker/dealer;
b) Texcel Sweden and its Affiliates shall not, without Buyer's written
consent:
i) offer to sell during any given week shares of Stock constituting
more than 50% of the Average Daily Volume (measured on the first
trading day of such week); or
ii) offer to sell on any given trading day shares of Stock
constituting more than the lesser of (x) 10% of all shares of
Stock delivered under this Agreement, and (y) 25% of the Average
Daily Volume; and
c) Texcel Sweden and its Affiliates shall not, either directly or
indirectly, or acting through any of their respective Affiliates,
employees or agents, or any person acting on their behalf, engage in
any short sales, swaps, purchasing of puts, or other hedging
activities that involve the direct or indirect use of Stock or
securities derivative of Stock for any reason.
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ARTICLE 4. SCANDINAVIA JOINT VENTURE.
Within 30 days after the Closing Date, Texcel Sweden and the Buyer will
create a new company upon mutually agreeable terms and conditions (which are to
be negotiated in good faith) with offices in Sweden (the "New Company"), in
which Buyer or its designated Affiliate will own 25% of the equity and Texcel
Sweden or its designated Affiliate will own 75% of the equity. Provided, that
prior to the formation of the New Company, Interleaf may elect at its sole
option to own less than 20% of its equity, with Texcel Sweden owning the
balance. The equity owners of New Company will negotiate in good faith to enter
into mutually acceptable agreements providing for the following:
4.1 CAPITAL REQUIREMENTS AND GOVERNANCE. The Sellers will satisfy any capital
requirements (including the funding of any losses) of the New Company, and
Buyer's contribution will be the transfer and assignment to New Company of
Buyer's ongoing business relationships with certain customers within
Sweden, Norway, Finland and Denmark ("Scandinavia").
4.2 DISTRIBUTION AGREEMENTS. Buyer will appoint New Company as Buyer's
exclusive distributor of the Products and the Buyer's content management
family of products (I7 and BladeRunner) within Scandinavia; provided, that
Buyer shall use reasonable efforts within such period of time as necessary
prior to such appointment of New Company either to terminate its existing
distributors in Scandinavia, or convert such distributors into
sub-distributors for the New Company upon such terms and conditions as
Buyer in its sole discretion shall determine.
a) Each distribution agreement between Buyer and New Company relating to
the Products and Buyer's content management family of products will be
for a term of two years and renewable for additional one year terms
under the conditions of Buyer's then standard Reseller Agreement
(excluding any provisions for termination for convenience or otherwise
by Buyer without cause).
b) Buyer may exclude the following existing major accounts from each
distribution agreement: Saab, Ericsson and Bofors. Provided, the New
Company will be authorized to sell Products and associated services to
these customers under rules of engagement and for fees to be contained
in the distribution agreement, but no royalties will be paid on
revenues generated with respect to existing products of Buyer and
associated services as a result of Buyer's existing business
relationships with these customers.
c) Royalties for all product sales under such distribution agreements
will be 50% of Buyer's then-current local country list price, and
royalties for maintenance services will be 60% of such list price. All
other terms and conditions relating to the payment of royalties shall
be the same as those contained in the Buyer's then standard reseller
agreement.
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4.3 SELLER'S PUT OPTION.
a) In the event that gross revenue recognized by New Company from its
IM/I7/BladeRunner business for the first 12 months following the
appointment of New Company as Buyer's exclusive distributor exceeds
U.S. $3.0 million and New Company has earnings before interest and
taxes (as determined in accordance with US GAAP, "EBIT") equal to at
least 10% of such gross revenues for such 12 month period, then, at
Texcel Sweden's option (the "First Put Option"), Buyer shall purchase
Texcel Sweden's total equity interest in New Company for a purchase
price equal to 75% of 60% of such gross revenues (the "First Put
Option Exercise Price"), payable at Buyer's option either in cash or
in shares of Stock having a Fair Value on the last day of the 12 month
period equal to the First Put Option Exercise Price.
b) In the event that Texcel Sweden does not exercise the First Put Option
or if the criteria for triggering the First Put Option are not
satisfied under the preceding paragraph (a), and if gross revenue
recognized by New Company for the 13th through 24th months following
the appointment of New Company as Buyer's exclusive distributor
exceeds U.S. $4.0 million and New Company has EBIT equal to at least
12.5% of such gross revenues for such 12 month period then at Texcel
Sweden's option, Buyer shall purchase Texcel Sweden's total equity
interest in New Company for a purchase price (the "Second Put Option
Exercise Price") equal to 75% of 60% of such gross revenues, payable
at Buyer's option either in cash or in shares of Stock having a Fair
Value on the last day of such 24th month period equal to the Second
Put Option Exercise Price.
c) New Company will notify Texcel Sweden and the Buyer within 30 days
from the end of the 12 and 24 month periods described in (a) and (b)
above as to whether Texcel Sweden is entitled to exercise its option
at that time. Texcel Sweden will have 10 days from such notice within
which to notify the Buyer of its intent to exercise such option, and
the parties will use reasonable efforts to close the transaction
within 45 days from Texcel Sweden's notice. Buyer will use reasonable
efforts to register for resale under the Securities Act the shares of
Stock to be delivered by Buyer to Texcel Sweden under this Section 4.3
at Buyer's cost pursuant to a registration statement on Form S-3 which
is filed with the SEC promptly following the date that the parties
agree on the number of shares to be issued, such registration
statement to become effective immediately following delivery of such
shares of Stock to Texcel Sweden.
ARTICLE 5. THE CLOSING.
5.1 TIME AND PLACE OF CLOSING. The Closing shall be held at the offices of
Brown, Rudnick, Freed & Gesmer at One Financial Center, Boston,
Massachusetts, at 10:00 a.m. on April 7, 1999; provided that either party
may by written notice extend the Closing Date to a date not later than
April 15, 1999 if such party is not able to close on April 7, 1999
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<PAGE>
INTERLEAF CONFIDENTIAL
despite its good faith efforts to do so. The date on which the Closing is
held shall be referred to herein as the "Closing Date".
5.2 DELIVERY OF DOCUMENTS OF TITLE. At the Closing, the Sellers shall deliver
or cause to be delivered to the Buyer, against payment of the Cash Amounts,
instruments of transfer which are good and sufficient to transfer to the
Buyer the Purchased Assets free and clear of al liens and encumbrances, and
an instrument of assumption representing the assumption of the Assumed
Liabilities. Such instruments of transfer (i) shall be in the form and will
contain the warranties, covenants and other provisions (not inconsistent
with the provisions hereof) which are usual and customary for transferring
the type of property involved under the laws of the jurisdictions
applicable to such transfers, (ii) shall be in form and substance
reasonably satisfactory to counsel for the Buyer, (iii) shall effectively
vest in the Buyer good and marketable title to all the Purchased Assets,
free and clear of all security interests, mortgages, pledges, liens, and
encumbrances of any kind whatsoever, and (iv) shall effectively cause the
Buyer to assume the Assumed Liabilities.
5.3 DELIVERY OF RECORDS AND CONTRACTS At the Closing, the Sellers also shall
deliver or cause to be delivered to the Buyer, against payment of the Cash
Amount and the assumption of the Assumed Liabilities, all of the Assumed
Contracts, with such assignments thereof and consents to assignments as are
necessary to assure the Buyer of the full benefit of the same. The Sellers
shall also make available to the Buyer at the Closing all of the Sellers'
business records, books and other data relating to the Purchased Assets
(except corporate records and books of account of the Sellers), and the
Sellers shall take all requisite steps to put the Buyer in actual
possession and operating control of the Purchased Assets. After the
Closing, the Sellers shall afford to the Buyer and its accountants and
attorneys reasonable access during Sellers' business hours to the books and
records of each Seller to the extent required by Buyer to comply with its
obligations under applicable securities, tax, environmental, employment or
other laws and regulations, and for other proper purposes.
Texcel US shall deliver such consent(s) and assignments, including without
limitation, a lease assignment, and other documents as are necessary and
appropriate to grant Buyer the right to enter and use Texcel US's office at
3508 Far West Boulevard, Austin, Texas under the terms of the Sublease
Agreement between Texcel Ventures, Inc. and Kevin Yul Wright & Associates,
P.C. dated March 1996 (the "Austin Lease") for the term remaining under
such sublease.
5.4 FURTHER ASSURANCES.
a) From time to time after the Closing at the request of the Buyer and
without further consideration, the Sellers shall execute and deliver
further instruments of transfer and assignment (in addition to those
delivered under Sections 5.2 and 5.3 hereof) and shall take such other
action as the Buyer may reasonably require to effectively transfer and
assign to, and vest in, the Buyer each of the Purchased Assets,
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<PAGE>
INTERLEAF CONFIDENTIAL
including those specific contracts of the Sellers that the Buyer
designates as Assumed Contracts. To the extent that the assignment of
any Assumed Contract shall require the consent of other parties
thereto, this Agreement shall not constitute an assignment thereof;
however, the Sellers shall use their best efforts before and after the
Closing to obtain any necessary consents or waivers to assure the
Buyer of the benefits of such contracts, commitments or rights, as and
to the extent specifically desired by the Buyer. If such consent is
not obtained, the Sellers agree to cooperate with Buyer in any
reasonable arrangement designed to provide for the Buyer the benefits
thereunder, including, but not limited to, having (a) the Buyer act as
agent for the Seller(s) and (b) the Sellers enforce for the benefit of
the Buyer any and all rights of the Sellers against the other party
thereto arising out of the cancellation by such other party or
otherwise.
b) From time to time after the Closing at the request of the Sellers and
without further consideration, the Buyer shall execute and deliver
such further documents and shall take such other action as the Sellers
may reasonably require in order to confirm assumption by the Buyer of
the Assumed Liabilities.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The following representations and warranties are made severally by each of
the Sellers. Each Seller hereby represents and warrants to the Buyer as to
itself follows:
6.1 ORGANIZATION AND QUALIFICATION OF THE SELLER. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority to own
those Purchased Assets owned by it and to license or lease those Purchased
Assets licensed or leased by it, to conduct its business in the manner and
in the places where such properties are owned or such business is conducted
by it and to consummate the transactions contemplated by this Agreement.
The copies of the Seller's Certificate of Incorporation or equivalent
organizational documents as amended to date ("Charter"), and of the
Seller's bylaws or equivalent documents as amended to date ("Bylaws"), and
previously delivered to Buyer's counsel, are complete, correct and in
effect as of the date hereof. The Seller is duly qualified to do business
as a foreign corporation in every jurisdiction where the failure to be so
qualified would have a material adverse effect upon the business of the
Seller.
6.2 OMITTED.
6.3 SUBSIDIARIES
a) Texcel Sweden directly or indirectly owns 100% of the issued and
outstanding capital stock of each of Texcel UK and Texcel
US(hereinafter referred to as the "Subsidiaries" or individually as a
"Subsidiary" of Texcel Sweden). Texcel Sweden has good and marketable
title to the shares of each of the Subsidiaries which it owns, free of
any adverse claim, lien or restriction, and there are no
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<PAGE>
INTERLEAF CONFIDENTIAL
outstanding options, warrants or agreements granted by Texcel Sweden
or the Subsidiaries of any kind for the issuance or sale of, or
outstanding shares of securities convertible into, any additional
shares of stock of any of the Subsidiaries.
b) Each Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation, with
full power and authority to own or lease its properties and to conduct
its business in the manner and in the places where such properties are
owned or leased or such business is conducted. The copies of the
Charter and By-laws of each Subsidiary as amended to date, certified
by the Secretary of State of the state of incorporation of such
Subsidiary or its Secretary (or the equivalent) and previously
delivered to Buyer's counsel are complete and correct. Each of the
Subsidiaries is duly qualified to do business as a foreign corporation
in every jurisdiction where the failure to be so qualified would have
a material adverse effect upon the business of that Subsidiary.
c) None of the Sellers owns any securities issued by any other business
organization or governmental authority, except U.S. Government
securities. None of the Sellers is a partner or participant in any
joint venture or partnership of any kind.
6.4 AUTHORIZATION OF TRANSACTION. The Board of Directors of Texcel Sweden have
voted in favor of this Agreement and the transactions contemplated herein.
On or before April 20, 1999, Texcel Sweden will hold a general meeting of
shareholders to consider approval of this Agreement and the transactions
contemplated herein. Under Texcel Sweden's Charter, the affirmative vote of
shareholders holding at least two-thirds of the votes entitled to be cast
at such meeting are necessary and sufficient to authorize this Agreement
and the transactions contemplated herein. Texcel Sweden has delivered to
the Buyer Powers of Attorney under which the holders of more that
two-thirds of the votes entitled to be cast at such meeting have authorized
and instructed their attorney-in-fact to vote such shares in favor of this
Agreement and the transactions contemplated herein. Except as stated in the
previous four sentences, all necessary action, corporate or otherwise, has
been taken by each Seller to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated hereby, and
this Agreement and each other agreement and document executed and delivered
by the Seller in connection herewith are the valid and binding obligations
of the Seller, enforceable in accordance with their terms.
6.5 COMPLIANCE WITH OBLIGATIONS AND LAW. Neither the Seller nor any Subsidiary
is in violation of its Charter or By-laws as of the date hereof. To the
knowledge of the Seller, and except for violations due to the nonpayment of
wages or other compensation to its employees, it is not in violation of any
law, regulation, administrative order, arbitration award or judicial order
or similar restriction applicable to the Seller or the Purchased Assets.
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INTERLEAF CONFIDENTIAL
6.6 NO CONFLICT OF TRANSACTION WITH OBLIGATIONS AND LAWS. Neither the
execution, delivery and performance of this Agreement, nor the consummation
of the transactions contemplated hereby, will: (i) constitute a breach or
violation of the Charter or Bylaws of the Seller; (ii) conflict with or
constitute (with or without the passage of time or giving of notice) a
default under, or a breach of, any contract, instrument or obligation
relating to the Purchased Assets to which the Seller is a party or by which
the Seller or the Purchased Assets are bound or give any person the right
to accelerate any material indebtedness or terminate any material right
(except for such consents to assignment as may be required under the
Assumed Contracts); or (iii) to the knowledge of the Seller, result in a
violation of any law, regulation, administrative order or judicial order
applicable to the Seller or the Purchased Assets. The execution, delivery
and performance of this Agreement and the transactions contemplated hereby
by the Seller do not require the consent, waiver, approval, authorization,
exemption of, or giving of notice to, any governmental authority.
6.7 FINANCIAL STATEMENTS Attached as SCHEDULE 6.7 are certain financial
statements of the Sellers, together with all related compilation, review or
audit reports issued by the Sellers' independent certified public
accountants with respect thereto, all of which are complete and correct and
present fairly (subject to the limitations stated therein) the assets,
liabilities, and financial position of the Sellers on the dates thereof,
and the results of operations and changes in the financial condition of the
Sellers for the periods covered thereby, and such financial statements have
been prepared in accordance the accounting principals indicated on SCHEDULE
6.7 consistently applied throughout the periods involved and prior periods.
The balance sheet of the Seller dated December 31, 1998 is referred to
herein as the "Base Balance Sheet".
6.8 PAYMENT OF TAXES Except as set forth on SCHEDULE 6.8:
a) The Seller has duly and timely filed all Tax Returns with respect to
all Taxes (or obtained lawful extensions of time required to file).
All of the Tax Returns are complete and correct in all respects. The
Tax Returns filed in any jurisdiction by the Seller for the most
recent five (5) fiscal years are listed on SCHEDULE 6.8 and have been
delivered to the Buyer. All Taxes shown to be due on such Tax Returns
have been paid or are being contested in good faith by the Seller and
such contest is being diligently pursued, all of which contested Taxes
are listed on SCHEDULE 6.8. With respect to all other Taxes for which
no return is required or which have not yet accrued or otherwise
become due, no lien has or will arise with respect to the Purchased
Assets. Except for withholdings with respect to unpaid wages, all
Taxes and other assessments and levies which the Seller is required to
withhold or collect have been withheld or collected and paid over or
will be paid over to proper governmental authorities as required. All
transfer, excise and other Taxes payable by Seller to any jurisdiction
by reason of the sale of the Purchased Assets and issuance of the
Stock and Warrant to the Seller
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INTERLEAF CONFIDENTIAL
pursuant to this Agreement shall be paid or provided for by Seller to
the reasonable satisfaction of the Buyer after the Closing out of the
consideration payable by Buyer hereunder.
b) The Tax Returns of Texcel US have been examined by the United States
Internal Revenue Service only for calendar year 1994. They have never
been examined by any States of the United States. The Seller is not
aware of any intention on the part of any Governmental Authority to
examine any of the Tax Returns. No deficiencies have been asserted or
assessments made against the Seller, nor is the United States Internal
Revenue Service nor any other Governmental Authority now asserting or,
to the knowledge of the Seller, threatening to assert against the
Seller any deficiency or claim for additional Taxes or interest
thereon or penalties in connection therewith.
c) The Seller has not filed a consent under Section 341(f) of the Code.
6.9 PRIORITY CLAIMS All consideration received by the Seller pursuant to the
transactions contemplated by this Agreement will be applied first towards
the payment of costs and expenses of closing, second towards secured
claims, third towards Priority Claims, and fourth with any remaining
proceeds being distributed among other creditors in a fair and equitable
manner.
6.10 ABSENCE OF UNDISCLOSED LIABILITIES There are no liabilities of any nature
with respect to the Purchased Assets, whether accrued, absolute, contingent
or otherwise (including without limitation liabilities as guarantor or
otherwise with respect to obligations of others, or liabilities for Taxes
due or then accrued or to become due), except as set forth on SCHEDULE
6.10. Except as disclosed on SCHEDULE 6.14, neither the Seller, any of its
Affiliates, nor any other party to any contract, agreement or license
identified on SCHEDULE 6.14, has breached any obligation under any
contract, agreement or license identified on SCHEDULE 6.14. There is no
fact which materially adversely affects, or may in the future (so far as
can now be reasonably foreseen) materially adversely affect the Purchased
Assets which has not been specifically disclosed herein or in a schedule
furnished herewith.
6.11 ABSENCE OF CERTAIN CHANGES. Since the date of the Base Balance Sheet, there
has not been:
a) any obligation or liability incurred by the Seller or any Subsidiary
to any of its officers, directors or stockholders for any loans or
advances made by the Seller or any Subsidiary to any of their
officers, directors or stockholders; or
b) any distributions or payments by the Seller or any Subsidiary to any
of its officers, directors or stockholders other than payment of
compensation in the ordinary course of business.
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6.12 TITLE TO PROPERTIES; LIENS; SUFFICIENCY OF PURCHASED ASSET
a) Set forth on SCHEDULE 1.1 or SCHEDULE 6.12 hereto is a listing of all
leases under which the Seller leases, or has factored, borrowed
against or otherwise granted a security interest in, any of the
Purchase Assets.
b) The Seller has good and marketable title to all of the tangible assets
included in the Purchased Assets, including the machinery, equipment
and other personal property described on SCHEDULE 1.1, and all of the
leases or other instruments described in SCHEDULE 1.1 which are
included among the Purchased Assets are valid and subsisting and fully
assignable by the Seller.
c) Except as stated on SCHEDULE 1.1 or SCHEDULE 6.12, none of the
Purchased Assets is subject to any security interest, mortgage,
pledge, lien (other than for taxes not yet due and payable),
conditional sale agreement or encumbrance.
6.13 INTELLECTUAL PROPERTY RIGHTS.
a) The Seller owns or has the right to use, free and clear of any
attachments, liens or encumbrances, all Intellectual Property
necessary to or regularly used in the development, marketing, support
or distribution of the Products as presently conducted by the Sellers.
All material rights of ownership of, and material licenses to use,
Intellectual Property are listed on SCHEDULE 6.13, and all royalty
obligations for use of such Intellectual Property are reflected in the
license agreements listed on SCHEDULE 6.13, copies of which have been
provided to the Buyer.
b) The Seller does not have any Statutory Intellectual Property rights
other than the trademark registrations set forth on SCHEDULE 6.13 and
all of the trademark registrations so listed:
i) have been duly registered, filed in, or issued by, the United
States Patent and Trademark Office or the corresponding offices
of other countries identified on said schedule; and to the extent
registered, have been properly maintained and renewed in
accordance with all applicable laws and regulations in the United
States and such foreign countries;
ii) are owned exclusively by the Seller, free and clear of any
licenses, sublicenses, liens or encumbrances such that no other
person has any right or interest in or license to use or right to
license others to use any of the Statutory Intellectual Property
except as set forth on SCHEDULE 6.13;
iii) are freely transferable (except as otherwise required by law);
and
iv) are not subject to any outstanding order, decree, judgment or
stipulation.
c) All works of authorship, copyrightable or not, were developed and
authored as original works of authorship either by full-time employees
of the Seller within the
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INTERLEAF CONFIDENTIAL
normal scope of their duties as works for hire, or by third persons as
works for hire under an express written agreement so stating or under
a written agreement expressly transferring and assigning all rights to
the Seller.
d) Except as described on SCHEDULE 6.13, all material licenses and other
agreements pursuant to which any item of Intellectual Property is
licensed to the Seller or is licensed by the Seller are valid, binding
and enforceable, and, subject to any third party consents as set forth
on SCHEDULE 6.13, will continue as such notwithstanding consummation
of the transactions contemplated hereby. Except as described on
SCHEDULE 6.13, There does not exist under any such license or
agreement a default or an event or condition which, after notice or
lapse of time or both, would constitute a default by the Seller or, a
default by another party thereto.
e) No proceedings to which the Seller is a party are pending which (i)
challenge the rights of the Seller in respect of the Intellectual
Property required to be listed on SCHEDULE 6.13, or (ii) charge the
Seller with infringement of any other person's rights in Intellectual
Property and, to the knowledge of the Seller, no such proceeding to
which the Seller is not a party has been filed, nor are any such
proceedings pending or threatened to be filed. Sellers will provide
the Buyer with a complete copy of all pleadings, correspondence, notes
and other material in its possession concerning any such proceedings
pending or threatened, as noted on SCHEDULE 6.13.
f) Except as described on SCHEDULE 6.13, the Seller is not infringing
upon any Statutory Intellectual Property rights of any other person
and none of the rights in Statutory Intellectual Property listed on
SCHEDULE 6.13 is being infringed by any other person. The Seller is
not using or in any way making use of any Trade Secrets of any third
party, including without limitation a former employer of any present
or past employee of the Seller, and to the knowledge of the Seller, no
other person is using any Trade Secret of the Seller without
authorization.
g) No director, officer or employee of the Seller owns, directly or
indirectly, in whole or in part, any Intellectual Property right which
the Seller has used, is presently using, or the use of which is
reasonably necessary to its business as now conducted or contemplated
to be conducted.
h) With respect to the Products, except as set forth in SCHEDULE 6.13,
Seller and each Subsidiary has: (i) affixed in a timely manner
appropriate copyright notices complying with the Copyright Act of
1976, as amended, and the rules and regulations of the United States
Copyright Office to all copies of such Computer Software, in object
code form or any other form distributed to the public; (ii)
distributed such Products only pursuant to written agreements limiting
the use, reproduction, distribution and disclosure thereof, and
requiring the licensees to preserve the confidentiality thereof to an
extent adequate to protect Seller's rights
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therein; and (iii) disclosed or made available the source code or
systems documentation thereof only to employees or consultants of
Seller who required such disclosure or access for the business
purposes of Seller.
6.14 MATERIAL CONTRACTS. SCHEDULE 6.14 contains a complete and accurate list and
description of all currently effective contracts, licenses, distribution
agreements and other agreements, documents and instruments to which the
Seller, its Subsidiaries or any of its Affiliates are a party or by which
any of them is bound and which are related to the development, marketing,
support or distribution of the Products. Except for contracts, licenses and
agreements described on SCHEDULE 6.14 hereto, the Seller is not a party to
or subject to:
a) any contract or agreement pertaining to the Purchased Assets for the
purchase of any commodity, material, equipment or asset, except
purchase orders in the ordinary course for less than $10,000 each;
b) any other contracts or agreements creating any obligations of the
Seller with respect to the Purchased Assets after the December 31,
1998 of $10,000 or more, other than sales, licenses and purchase
commitments in the ordinary course of business;
c) any contract, license or agreement creating obligations with respect
to the Purchased Assets in excess of $10,000 which by its terms is not
terminable without penalty by the Seller upon thirty (30) days'
notice;
d) any contract or agreement for the sale or lease of the Purchased
Assets not made in the ordinary course;
e) any contract or agreement containing covenants limiting the freedom of
the Seller to operate the Purchased Assets in competition with any
line of business or with any person or entity;
f) any contract or agreement between Seller and any of its Affiliates, or
between any Affiliate and any other Affiliate, under which any lien,
claim or encumbrance (including any royalty, transfer pricing or
payment obligation) could arise with respect or attach to any of the
Purchased Assets;
g) any other contract, license or agreement which individually or on the
aggregate is material to the Purchased Assets;
h) any contract with any sales agent or distributor of products within
the Purchased Assets; or
i) any license or franchise agreement relating to the Purchased Assets.
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The Seller has delivered, or will deliver on or before the Closing
Date, to Buyer accurate and complete copies of each contract, license
or agreement set forth on SCHEDULE 6.14, in each case with all
modifications, amendments and related correspondence.
6.15 LITIGATION. Except as disclosed on SCHEDULE 6.15, there is no suit, claim,
action, proceeding or governmental investigation pending against the
Seller, before any court or any governmental agencies or regulatory
authorities or which seeks to enjoin or otherwise hinder or prevent the
consummation of the transactions contemplated by this Agreement and the
Seller is not subject to any order, injunction or decree relating to or
affecting the Purchased Assets.
6.16 PRODUCT WARRANTY CLAIMS Since January 1, 1996: (i) there have been no
claims asserting breach of contract, breach of express or implied product
or service warranty, tortious interference with contractual relations,
breach of non-competition or non-solicitation covenants, or other material
claims made, asserted or threatened by customers, vendors, competitors,
suppliers or employees of the Seller or any of its affiliates relating to
the Purchased Assets for an amount in excess of $5,000 with respect to any
single claim or for amounts in excess of $25,000 with respect to all claims
made in any fiscal year; and (ii) there are no such claims outstanding or
currently being threatened. Seller does not know of any facts which exist
which could give rise to any such claims.
6.17 PRODUCT LIABILITY CLAIMS No product liability or other tort claims have
been made or, to threatened in writing against the Seller, relating to
products sold or services performed with respect to the Purchased Assets in
the past three (3) years. The Seller has delivered to the Buyer copies of
all the product liability and errors and omissions insurance policies
relating to the Purchased Assets for the last three (3) years. To the
knowledge of the Seller, there are no facts which exist which could give
rise to any such claims.
6.18 EMPLOYEES
a) To Seller's knowledge, SCHEDULE 6.18 sets forth the list of Seller's
employees or sub-contractors that Buyer wishes to hire. SCHEDULE 6.18
accurately and completely states the salaries, bonus, accrued vacation
and employee benefits and policies for such individuals. There are no
grievances or claims by any of the persons on SCHEDULE 6.18 pending
with respect to their employment by the Seller, including, but not
limited to, sexual harassment and discrimination claims and claims
arising under workers' compensation laws. Complete and accurate copies
of all agreements with such employees and subcontractors have been
delivered to Buyer.
b) None of the employees of the Seller or any Subsidiary is covered by
any collective bargaining agreement with any trade or labor union,
employees' association or similar association. Each of the Seller and
the Subsidiaries has complied in all material respects with applicable
laws, rules and regulations relating to the employment of labor,
except for those pertaining to the full and
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timely payment of wages and the reimbursement of expenses. There are
no representation elections or other labor troubles pending, or to the
knowledge of the Seller, overtly threatened, with respect to the
employees of the Seller or any Subsidiary.
6.19 OMITTED.
6.20 ABSENCE OF SENSITIVE PAYMENTS To the knowledge of the Seller, none of the
Seller's directors, officers, agents, stockholders or employees or any
other person associated with or acting on behalf of the Seller:
a) made or agreed to make any solicitations, contributions, payments or
gifts of funds or property to any governmental official, employee or
agent where either the payment or the purpose of such solicitation,
contribution, payment or gift was or is illegal under the laws of the
United States, any state thereof, or any other jurisdiction (foreign
or domestic) or prohibited by the policy of the Seller or of any of
its suppliers or customers;
b) established or maintained any unrecorded fund or asset for any
purpose, or has made any false or artificial entries on any of its
books or records for any reason; or
c) made or agreed to make any contribution or expenditure, or reimbursed
any political gift or contribution or expenditure made by any other
person to candidates for public office, whether federal, state or
local (foreign or domestic) where such contributions were or would be
a violation of applicable Law.
6.21 FINDER'S FEE. Neither the Seller, nor any Subsidiary has incurred or become
liable for any broker's commission or finder's fee relating to or in
connection with a transaction contemplated by this Agreement.
6.22 YEAR 2000
a) The Products are designed to be used prior to, during, and after
calendar year 2000 and the Products will operate during each such time
period without error relating to date data, specifically including any
error relating to, or the conduct of, date data which represents or
references different centuries or more than one century. Without
limiting the generality of the foregoing, (i) the Products will not
abnormally terminate or provide invalid or incorrect results as a
result of date data, and (ii) the Products have been designed to
ensure year 2000 compatibility, including date data, century
recognition, calculations which accommodate same century and
multi-century formulas and date values, and date data interface values
that reflect the correct century.
b) The Products include "Year 2000 Capabilities." For purposes of this
Agreement, "Year 2000 Capabilities" means the Products (i) will manage
and manipulate data
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involving dates, including single century formulas and multi-century
formulas, and will not cause an abnormally ending scenario within the
application or generate incorrect values or invalid results involving
such dates, (ii) provide that all date-related users interface
functionalities and data fields include the indication of century, and
(iii) provide that all date-related data interface functionalities
include the indication of century.
c) Seller is not responsible for, and will not be deemed in breach of the
foregoing warranties by reason of, the failure of any computer
software, computer platforms or operating systems not created by
Seller to comply with this Section 6.22. Seller has, however, made
reasonably inquiry of such third parties as to the Year 2000
Capabilities of their respective products.
6.23 DISCLOSURE OF MATERIAL INFORMATION Neither this Agreement, the financial
statements (including the footnotes thereto), any Schedule, any exhibit,
document or certificate delivered by or on behalf of Seller or its
Affiliates pursuant hereto contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements
herein or therein not misleading in light of circumstances under which
made. There is no fact which materially adversely affects the Purchased
Assets which has not been set forth herein.
6.24 NO INSOLVENCY PROCEEDINGS. The Seller is not a debtor in any case under the
Bankruptcy Code, or subject to any other insolvency proceeding under the
laws of any applicable jurisdiction, and the transfer of the Purchased
Assets to Buyer is not subject to avoidance, recovery or disgorgement under
the laws of any applicable jurisdiction, whether in connection with any
future insolvency proceeding involving Seller, or any of its Subsidiaries,
or otherwise.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
7.1 ORGANIZATION OF THE BUYER The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts with full corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places
where such properties are owned or leased or such business is conducted by
it and to consummate the transactions contemplated by this Agreement.
7.2 AUTHORIZATION OF TRANSACTION All necessary action, corporate or otherwise,
has been taken by the Buyer to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated hereby, and
this Agreement has been duly executed and delivered by the Buyer and is the
valid and binding obligation of the Buyer, enforceable in accordance with
its terms, subject to laws of general application affecting creditors'
rights generally.
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7.3 NO CONFLICT OF TRANSACTION WITH OBLIGATIONS AND LAWS Neither the execution,
delivery and performance of this Agreement, nor the consummation of the
transactions contemplated hereby, will: (i) constitute a breach or
violation of the Buyer's Articles of Organization or Bylaws; (ii) conflict
with or constitute (with or without the passage of time or the giving of
notice) a default under, or a breach of, any material agreement, instrument
or obligation to which the Buyer is a party or by which it or its assets
are bound; or (iii) result in a violation of any law, regulation,
administrative order or judicial order applicable to the Buyer. The
execution, delivery and performance of this Agreement and the transactions
contemplated hereby by the Buyer do not require the consent, waiver,
approval, authorization, exemption of or giving of notice to any
governmental authority.
7.4 LITIGATION There is no litigation pending or, to the knowledge of the
Buyer, threatened against the Buyer which seeks to enjoin or otherwise
hinder or prevent the consummation of the transactions contemplated by this
Agreement.
7.5 SEC FILINGS
a) Buyer has filed or caused to be filed all registration statements,
reports or statements, and any amendments thereto, required to be
filed by it pursuant to Sections 13, 14 or 15(d) of the Securities
Exchange Act of 1934 (and such filings were made within the time
required thereunder), and has heretofore furnished to Seller copies
of:
i) Buyer's Annual Report on Form 10-K for its three most recent
fiscal years;
ii) Buyer's Annual Report to Stockholders for its three most recent
fiscal years;
iii) Buyer's definitive Proxy Statements for all meetings of
stockholders since the beginning of its third preceding fiscal
year; and
iv) Buyer's Quarterly Report(s) on Form 10-Q for each quarter since
the end of its most recent fiscal year.
b) The documents furnished to Seller pursuant to paragraph (a) were
prepared in accordance with the requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder in all
material respects and do not contain any misstatement of a material
fact or omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances, not
misleading.
7.6 FINDER'S FEE. Buyer has not incurred or become liable for any broker's
commission or finder's fee relating to or in connection with the
transaction contemplated by this Agreement.
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7.7 ISSUANCE OF STOCK. When issued by the Buyer as required under the terms of
this Agreement, all Stock, and the Warrant, will be duly authorized,
validly issued, fully paid and non-assessable.
7.8 DISCLOSURE OF MATERIAL INFORMATION Neither this Agreement, nor any
Schedule, exhibit, document or certificate delivered by or on behalf of
Buyer or its Affiliates pursuant hereto contains any untrue statement of a
material fact, or omits to state a material fact necessary to make the
statements herein or therein not misleading in light of circumstances under
which made.
ARTICLE 8. CERTAIN DELIVERABLES OF THE SELLER
At the Closing, the Seller shall deliver:
8.1 REPRESENTATIONS; WARRANTIES; COVENANTS A certificate of an officer of the
Seller that: (a) each of the representations and warranties of the Seller
set forth in Article 6 hereof were true and accurate on the date when made
and are true and accurate in all respects as though made on and as of the
Closing, and (b) the Seller has performed in all respects all of those
obligations, and has complied in all material respects with those
covenants, required to be performed or observed at or prior to the Closing.
8.2 GOVERNMENTAL CONSENTS AND APPROVALS All governmental consents and approvals
required of Seller in order to permit the parties to complete the
transactions in compliance with all applicable Laws.
8.3 CONSENTS AND APPROVALS Any and all consents or approvals which may be
required under the Assumed Contracts in order to consummate the
transactions contemplated by this Agreement and to transfer the Purchased
Assets to the Buyer, in form and substance reasonably satisfactory to the
Buyer and its counsel.
8.4 TERMINATION OF INTER-COMPANY AGREEMENTS Evidence reasonably satisfactory
that agreements between or among Seller and any of its Affiliates which may
be reasonably viewed as distribution agreements, agency agreements,
transfer pricing agreements and the like have been effectively and
permanently terminated.
8.5 OMITTED.
8.6 CORPORATE APPROVAL Appropriate documents and certificates providing
evidence reasonably satisfactory to the Buyer and its counsel that the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been approved by the requisite
vote of the boards of directors and of the stockholders of the Seller
(except as provided in Section 6.4 above), the Subsidiaries and the
Seller's Affiliates in accordance with applicable law and the Charter and
Bylaws of each of, the Seller, the Subsidiaries and the Seller's
Affiliates.
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8.7 OPINION OF SELLER'S COUNSEL AND OTHER DOCUMENTS At the Closing, the Buyer
shall have received (i) from Posternak, Blankstein & Lund, L.L.P., counsel
for Texcel US, an opinion dated as of the Closing, in form and substance
reasonably satisfactory to the Buyer and its counsel, (ii) from Nils
Setterwalls Advokatbyre AB, counsel for Texcel Sweden, an opinion dated as
of the Closing, in form and substance reasonably satisfactory to the Buyer
and its counsel, (ii) evidence satisfactory to the Buyer of the due
authorization, execution, delivery and enforceability of this Agreement and
all related agreements by the Seller, and (iii) such other certificates and
documents as the Buyer shall have reasonably requested.
8.8 AUSTIN LEASE The Buyer shall have received, in form and substance
satisfactory to the Buyer, an instrument of assignment of the Austin Lease
to the Buyer.
8.9 SELLER'S FAILURE TO DELIVER The Sellers may not rely on any of their
failure to deliver any item required in this Article 8 or its failure to
use its best efforts to cause the Closing not to occur.
ARTICLE 9. DELIVERABLES OF THE BUYER
At the Closing, the Buyer shall deliver:
9.1 REPRESENTATIONS; WARRANTIES; COVENANTS A certificate of an officer of the
Buyer that (a) each of the representations and warranties of the Buyer
contained in Article 7 hereof were true and accurate on the date when made
and are true and accurate in all material respects as though made on and as
of the Closing, and (b) the Buyer has performed in all material respects
all of those obligations, and shall have complied in all respects with
those covenants, required to be performed or observed at or prior to the
Closing.
9.2 GOVERNMENTAL CONSENTS AND APPROVALS All governmental consents and approvals
required of the Buyer in order to permit the parties to complete the
transactions in compliance with all applicable Laws.
9.3 CORPORATE APPROVAL Appropriate documents and certificates providing
evidence reasonably satisfactory to the Seller and its counsel that the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been approved by the requisite
vote of the board of directors of the Buyer.
9.4 OPINION OF COMPANY'S COUNSEL AND OTHER DOCUMENTS At the Closing, Texcel
Sweden shall have received (i) from Craig Newfield, General Counsel for the
Buyer, an opinion dated as of the Closing, in form and substance reasonably
satisfactory to Texcel Sweden and its counsel, (ii) evidence satisfactory
to Texcel Sweden of the due authorization, execution and delivery of this
Agreement and all related agreements by the Buyer, and (iii) such other
certificates and documents as Texcel Sweden shall have reasonably
requested.
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9.5 BUYER'S FAILURE TO DELIVER. The Buyer may not rely on its failure to
deliver any item required in this Article 9 or on its failure to use its
best efforts to cause the Closing not to occur.
ARTICLE 10. RIGHTS AND OBLIGATIONS SUBSEQUENT TO THE CLOSING
10.1 SURVIVAL OF WARRANTIES. All representations, warranties, agreements,
covenants and obligations herein or in any schedule, certificate or
financial statement delivered by any party hereto to the other parties
incident to the transactions contemplated hereby are material, shall be
deemed to have been relied upon by the other parties and shall survive the
Closing in accordance with Article 10 hereof, regardless of any
investigation and shall not merge in the performance of any obligation by
any party hereto.
a) Each party to this Agreement covenants and agrees to perform and
discharge its respective obligations and liabilities, if any, under
the Warrant, the Note, the Pledge Agreement and any other document,
instrument or agreement executed and delivered by it in connection
with this Agreement or the transactions contemplated herein (each, a
"Collateral Agreement"). The failure of a party to perform or
discharge its obligations or liabilities under a Collateral Agreement,
or its commission of a breach or default under a Collateral Agreement,
shall be a breach of and default under this Agreement.
10.2 NON-COMPETITION; SOLICITATION OF EMPLOYEES. For a period of two (2) years
following the Closing Date, neither the Sellers nor any of their Affiliates
shall, directly or indirectly, engage in any business which offers for
sale, markets, develops, distributes, promotes or licenses software
components for sale to OEM manufacturers, or stand-alone products or
solutions for sale to any customer, which, in either case, offer the same
or substantially similar functionality to customers as (i) any of the
Products or (ii) any product of the Buyer which represents an upgrade or
modification of or enhancement to, any of the Products and which has the
same or substantially similar functionality as any of the Products. The
foregoing restriction shall not apply to the activities of the New Company
(see Article 4), or to Texcel Sweden in its capacity as an equity owner
therein. Further, for a period of two (2) years following the Closing Date,
neither the Sellers nor any of their Affiliates shall, directly or
indirectly, solicit, induce or encourage any person employed by the Buyer
in the operation of the business involving the Purchased Assets to
terminate his or her employment with the Buyer, provided, however, that the
restrictions set forth in this Section 10.2 shall not be construed to limit
or restrict the Sellers or any of their Affiliates from (i) making general,
untargeted public solicitations for employment in print, broadcast or
electronic media, or (ii) transitioning to the Buyer full control and use
of the Purchased Assets.
10.3 EMPLOYEES.
a) Seller and its Affiliates shall cooperate and not interfere with
Buyer's attempts to hire the employees listed on SCHEDULE 6.18. The
Buyer shall have no obligation to hire any of such employees. Seller
and its Affiliates shall refrain from offering to
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any of those employees listed on SCHEDULE 6.18 hereto any
opportunities for continued employment by the Seller or its
Affiliates.
b) The Seller shall be responsible for all wages, benefits, severance
obligations, claims for overtime, sick leave accruals and other
obligations for, and claims of, all of its current and former
employees (including such employees who are hired by Buyer) up to the
date such employee is no longer an employee of the Seller, and all
claims related to the termination of their employment by Seller or its
Affiliates, and all claims of discrimination, unfair treatment, and
violations of labor laws.
c) Without limiting the foregoing, with respect to employees listed on
SCHEDULE 6.18, Buyer shall be responsible for wages from and after
March 15, 1999 at rates independently negotiated between Buyer and
each such employee.
10.4 APPLICATION OF PROCEEDS. Each Seller shall pay over the Purchase Price
(including the Loan, and any proceeds from disposition of any Stock or the
Warrant) paid by the Buyer hereunder, and apply any proceeds from accounts
receivable retained by such Seller, all towards the discharge of any
secured claims, Taxes or Priority Claims which have not been discharged
prior to the Closing. Each Seller shall apply the balance of such proceeds
to the satisfaction of its other third party creditors in a fair and
equitable manner (or as agreed by each creditor separately).
10.5 FURTHER COOPERATION. Each Seller agrees to cooperate with the Buyer and to
provide the Buyer with such reasonable assistance as may be necessary to
effectively transfer the Purchased Assets from such Seller to the Buyer.
If, in order properly to prepare any documents required to be filed with
any governmental entity or any financial statements, it is necessary that
any party hereto be furnished with additional information relating to the
Purchased Assets and such information is in the possession of any other
party hereto, such party agrees to use its best efforts to furnish such
information to such other party, without cost and expense to the party
being furnished such information.
a) The parties will reasonably cooperate with each other as necessary
after the Closing to facilitate the collection of all material
receivables. To the extent that either party collects an account
receivable which is allocable to the other party hereunder, the
collecting party shall hold such amounts in trust for the benefit of
the other party and shall immediately pay such funds over to the other
party. Buyer and the Sellers shall reconcile amounts collected under
accounts receivable under this Section 1.1(b) every 30 days following
the Closing Date until July 1, 1999.
b) Within 30 days after the Closing, Buyer will provide the Sellers with
a definitive list of those contracts of the Sellers that Buyer wishes
to have assigned to Buyer and become part of the Assumed Contracts.
Seller will also provide instruments of assignment and consent for the
Sellers' signature. Sellers will promptly
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execute such instruments, deliver them to Buyer and provide reasonable
assistance to the Buyer in effecting a smooth transition of the
contract to Buyer.
ARTICLE 11. INDEMNIFICATION.
11.1 DEFINITIONS. For purposes of this Article 11:
"Losses" means all losses, damages, liabilities, payments and obligations,
and all expenses related thereto. Losses shall include any reasonable legal fees
and costs incurred by any of the Indemnified Persons subsequent to the Closing
in defense of any liability, payment or obligation, whether or not any liability
or payment, obligation or judgment is ultimately imposed against the Indemnified
Persons and whether or not the Indemnified Persons are made or become parties to
any such action, and, in the case of a Third Party Action or a governmental
action against an Indemnified Person, shall also include any amounts for
punitive, incidental or consequential damages for which the third party claimant
or governmental entity receives an award against such Indemnified Persons but
does not include the punitive, incidental or consequential damages of any
Indemnified Person other than as may arise out of a Third Party Action or
governmental action. Notwithstanding the foregoing, the amount of any Loss
suffered or incurred by an Indemnified Person shall be reduced by the amount of
any insurance proceeds received by such Indemnified Person in respect of such
Loss.
The "Buyer's Indemnified Persons" means the Buyer and any entity that
directly or indirectly controls, or is controlled by, or is under common control
with, the Buyer, and its directors, officers, employees, stockholders and
agents.
"Indemnified Person" means any person entitled to be indemnified under this
Article 11.
"Indemnifying Person" means any person obligated to indemnify another
entity under this Article 11.
The "Seller's Indemnified Persons" means each Seller and any person that
directly or indirectly controls, or is controlled by, or is under common control
with, such Seller, and their respective directors, officers, employees,
stockholders and agents.
"Third Party Action" means any written assertion of a claim, or the
commencement of any action, suit, or proceeding, by a third party as to which
any person believes it may be an Indemnified Person hereunder.
11.2 INDEMNIFICATION BY EACH SELLER.
a) Subject to the limitation in paragraphs (b) and (c) below, each Seller
shall defend, indemnify and hold harmless the Buyer's Indemnified
Persons from and against all Losses directly or indirectly incurred by
or sought to be imposed upon such Seller:
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i) resulting from or arising out of any breach of any of the
representations or warranties set forth in Article 6 hereof;
ii) resulting from or arising out of any breach of any covenant or
agreement made by such Seller in this Agreement or any Collateral
Agreement;
iii) resulting from or arising out of the claims of any broker, finder
or other entity acting in a similar capacity on behalf of such
Seller in connection with the transactions herein contemplated;
iv) resulting from or arising out of (I) intentional
misrepresentations, (II) fraud, (III) infringement claims (breach
of Section 6.11), (IV) any liens, claims or attachments which
attach to (or adversely affect the Buyer's ability to use and
exploit) the Purchased Assets, including without limitation such
as result from or arise out of the bankruptcy or insolvency of
any of such Seller, or (V) non-compliance with the provisions of
the Bulk Sales Act or any other applicable bulk sales legislation
or analogous legislation for the benefit of creditors;
v) resulting from or arising out of the assertion of any valid claim
of a creditor of the Seller against the Buyer, any of Buyer's
Affiliates or any of the Purchased Assets; or
vi) in respect of any Retained Liability.
b) Except claims described in Sections (a)(iv) or (a)(v) above, Seller
shall have no liability under paragraph (a) unless one or more of the
Buyer's Indemnified Persons gives written notice to the Seller
asserting a claim for Losses, including reasonably detailed facts and
circumstances pertaining thereto, before the expiration of a period of
24 months following the Closing Date.
c) Indemnification for claims under paragraph (a) above (other than under
clauses (a)(iv), or a(v)) shall be payable by Seller only if the
aggregate amount of all Losses hereunder by Buyer's Indemnified
Persons shall exceed $10,000, at which point Seller shall be
responsible for all Losses, including the first $10,000 of such
Losses. The aggregate liability of Seller for indemnification under
paragraph (a) above (other than under clauses (a)(iv) or a(v)) shall
not exceed the aggregate Purchase Price paid by Buyer to Seller and
any of Seller's Affiliates under this Agreement.
d) For purposes of clarification, each Seller (including Texcel Sweden)
shall be obligated to indemnify the Buyer and the Buyer's Indemnified
Parties with respect to Losses resulting from or arising out of such
Seller's own acts or omissions as described in (a) above. In addition,
Texcel Sweden shall also be obligated to indemnify the Buyer and the
Buyer's Indemnified Parties with
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respect to Losses resulting from or arising out of such acts and
omissions of each or both of the other Sellers.
11.3 INDEMNIFICATION BY THE BUYER.
a) Subject to the limitation in paragraph (b) below, the Buyer shall
defend, indemnify and hold harmless the Sellers' Indemnified Persons
from any and all Losses directly or indirectly incurred by or sought
to be imposed upon any of them:
i) resulting from or arising out of any breach of any of the
representations or warranties set forth in Article 7 hereof;
ii) resulting from or arising out of any breach of any covenant or
agreement made by the Buyer in this Agreement or any Collateral
Agreement;
iii) resulting from or arising out of the claims of any broker, finder
or other entity acting in a similar capacity on behalf of the
Buyer in connection with the transactions herein contemplated; or
iv) in respect of any Assumed Liability.
b) The Buyer shall have no liability under paragraph (a) unless one or
more of the Sellers' Indemnified Persons gives written notice to the
Buyer asserting a claim for Losses, including reasonably detailed
facts and circumstances pertaining thereto, before the expiration of a
period of 24 months following the date of the Closing (or, with
respect to Losses arising with respect to an Assumed Contract, 24
months from the termination of such Assumed Contract).
c) Indemnification for claims under paragraph (a) above shall be payable
by the Buyer only if the aggregate amount of all Losses hereunder by
Sellers' Indemnified Persons shall exceed $10,000.00, at which point
Buyer shall be responsible for all Losses, including the first
$10,000.00 of such Losses. The aggregate liability of Buyer for
indemnification under paragraph (a) above shall not exceed the
aggregate Purchase Price paid by Buyer to Sellers under this
Agreement.
11.4 DEFENSE OF THIRD PARTY ACTIONS.
a) Promptly after receipt of notice of any Third Party Action, any person
who believes he, she or it may be an Indemnified Person shall give
notice to the potential Indemnifying Person of such action. The
omission to give such notice to the Indemnifying Person will not
relieve the Indemnifying Person of any liability hereunder unless it
was prejudiced thereby, nor will it relieve it of any liability which
it may have other than under this Article 11.
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b) Upon receipt of a notice of a Third Party Action, the Indemnifying
Person shall have the right, at its option and at its own expense, to
participate in and be present at the defense of such Third Party
Action, but not to control the defense, negotiation or settlement
thereof, which control shall remain with the Indemnified Person,
unless the Indemnifying Person makes the election provided in
paragraph (c) below.
c) By written notice within forty five (45) days after receipt of a
notice of a Third Party Action, an Indemnifying Person may elect to
assume control of the defense, negotiation and settlement thereof,
with counsel reasonably satisfactory to the Indemnified Person;
provided, however, that the Indemnifying Person agrees (i) to promptly
indemnify the Indemnified Person for its expenses to date, and (ii) to
hold the Indemnified Person harmless from and against any and all
Losses caused by or arising out of any settlement of the Third Party
Action approved by the Indemnifying Person or any judgment in
connection with that Third Party Action. The Indemnifying Person shall
not in the defense of the Third Party Action enter into any settlement
which does not include as a term thereof the giving by the third party
claimant of an unconditional release of the Indemnified Person, or
consent to entry of any judgment except with the consent of the
Indemnified Person. No Indemnified Person shall have the right to
settle any Third Party Action without the prior written approval of
the Indemnifying Person.
d) Upon assumption of control of the defense of a Third Party Action
under paragraph (c) above, the Indemnifying Person will not be liable
to the Indemnified Person hereunder for any legal or other expenses
subsequently incurred in connection with the defense of the Third
Party Action.
e) If the Indemnifying Person does not elect to control the defense of a
Third Party Action under paragraph (c), the Indemnifying Person shall
promptly reimburse the Indemnified Person for expenses incurred by the
Indemnified Person in connec tion with defense of such Third Party
Action, as and when the same shall be incurred by the Indemnified
Person.
f) Any person who has not assumed control of the defense of any Third
Party Action shall have the duty to cooperate with the party which
assumed such defense.
11.5 MISCELLANEOUS. If any Loss is recoverable under more than one provision
hereof, the Indemnified Person shall be entitled to assert a claim for such
Loss until the expiration of the longest period of time within which to
assert a claim for Loss under any of the provisions which are applicable.
11.6 PAYMENT OF INDEMNIFICATION. Claims for indemnification under this
Article 11 shall be paid or otherwise satisfied by an Indemnifying Person
within thirty (30) days after notice thereof is given by the Indemnified
Person.
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11.7 SETOFF. Buyer has the right to offset and credit any and/or all payments
and performance to be made by it under this Agreement to or for the benefit
of the Seller by reason of any claim by Buyer against Seller or against any
other Seller for indemnification pursuant to Article 11 if the amount of
the Loss underlying such claim has become fixed and determinable; provided
that Buyer shall not be required to recover such claims in such manner and
may proceed against the Indemnifying Party at any time or times for
recovery of indemnification claims.
11.8 PLEDGE. As security for the full and timely payment and performance by
Seller and its Affiliates of Seller's obligations under this Article 11,
Texcel Sweden will pledge the Warrant and 125,000 shares of Stock to the
Buyer, pursuant to the Stock Pledge Agreement attached as Exhibit C.
a) The Stock, Warrant and proceeds which are pledged under this Section
11.8 shall be released to Texcel Sweden upon the expiration of 12
months from the Closing, subject to the receipt by Buyer of evidence
reasonably satisfactory to Buyer of the existence of the Release
Conditions.
b) The Warrant shall be released within three business days from the day
on which the holder gives notice of exercise thereof; subject to the
receipt by Buyer of evidence reasonably satisfactory to Buyer of the
existence of the Release Conditions.
c) "Release Conditions" means (i) the distribution of the Purchase Price
paid to Texcel Sweden and certain other proceeds in the manner
required under Section 10.4 above as it applies to Texcel Sweden, (ii)
the absence of insolvency proceedings as a result of or in connection
with which a claim or lien has arisen or been asserted which adversely
affects any of the Purchased Assets, and (iii) the absence of any
liens, claims or encumbrances of any kind or nature which have
attached to or been asserted against the Purchased Assets resulting
from or arising out of any act or omission of any of the Sellers, (iv)
the absence of any claims by Buyer's Indemnified Persons under this
Article 11, (v) the Fair Value of the Stock remaining subject to the
pledge equals or exceeds the amounts outstanding under the Note (see
Section 2.3(c)(ii) above), and (vi) Sellers' compliance with all other
provisions of this Agreement, the Warrant, the Pledge Agreement and
the Note, which has not been cured following notice from Buyer.
ARTICLE 12. GENERAL PROVISIONS
12.1 FEES AND EXPENSES. Except as otherwise expressly set forth above, each of
the parties will bear its own expenses (including any commission, broker's
or finder's fees) in connection with the negotiation and the consummation
of the transactions contemplated by this Agreement, and no expenses of the
Sellers relating in any way to the purchase and sale of the Purchased
Assets hereunder shall be charged to or included on any of the Purchased
Assets as of the Closing. Except for sales taxes which may be payable in
connection with the transfer of the Purchased Assets and which will be paid
by the Buyer
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when due and payable, the Sellers shall pay all transfer or other taxes, if
any, which may be payable in connection with the transfer of the Purchased
Assets pursuant to this Agreement. The Buyer will bear the expense of its
auditors, if any, engaged in the review or audit of the Sellers' financial
statements.
12.2 NOTICES. Any and all notices and other communications required or permitted
to be given under this Agreement on behalf of any or all of the Sellers
shall be given by Texcel Sweden. Any and all notices or other
communications required or permitted to be given in connection with this
Agreement shall be in writing (or in the form of a facsimile transmission)
addressed as provided below shall be (i) delivered by hand, (ii)
transmitted by facsimile with receipt confirmed, (iii) delivered by
overnight courier service with confirmed receipt or (iv) mailed by first
class U.S. mail, postage prepaid and registered or certified, return
receipt requested:
If to any Seller or all If to the Buyer, to:
of the Sellers, to:
Texcel International AB Interleaf, Inc.
c/o Upright Engineering AB 62 Fourth Avenue
Gavlegatan 16 Waltham, MA 02451
Stockholm, 113 30 Sweden USA
Attention: Mr. Magnus Hedencrona Attention: General Counsel
Facsimile Number: 46 8 33 1671 Facsimile Number: (781) 768-1145
with a copy to: with a copy to:
Donald H. Siegel, P.C. David H. Murphree, Esq.
Posternak, Blankstein & Lund, L.L.P. Brown, Rudnick, Freed & Gesmer, P.C.
100 Charles River Plaza One Financial Center
Boston, MA 02114 Boston, Massachusetts 02111
Facsimile Number: (617) 367-2315 Facsimile Number: (617) 856-8201
and in any case at such other address as the addressee shall have specified
by written notice. Any notice or other communication given in accordance
with this Section 13.2 shall be deemed delivered and effective upon
receipt, except those notices and other communications sent by mail, which
shall be deemed delivered and effective five (5) business days following
deposit with the United States Postal Service. All periods of notice shall
be measured from the date of delivery thereof.
12.3 OMITTED.
12.4 PUBLICITY AND DISCLOSURES. Except as required by law, the parties shall
each keep the terms and conditions of this Agreement confidential, and
permit disclosure thereof only as required by law, or to such of its
respective employees, agents, accountants and attorneys to whom such
disclosure is required in order for such party to implement the
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<PAGE>
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terms hereof or comply with reporting or audit requirements, provided that
such persons are bound by written confidentiality agreements.
12.5 ENTIRE AGREEMENT. This Agreement (including all exhibits or schedules
appended to this Agreement, all of which are hereby incorporated herein by
reference) constitutes the entire agreement between the parties, and all
promises, representations, understandings, warranties and agreements with
reference to the subject matter hereof and inducements to the making of
this Agreement relied upon by any party hereto, have been expressed herein
or in the documents incorporated herein by reference. Each of the following
are hereby terminated: (i) that certain letter agreement between the Buyer
and Texcel Sweden dated March 15, 1999, except that Sections 1(a) and 8(b)
thereof shall survive, and (ii) that certain letter agreement between the
Buyer and Texcel US dated March 15, 1999, except that Section 1(a) thereof
shall survive.
12.6 SEVERABILITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision hereof. In the event that Texcel Sweden's shareholders have not
voted to approve this Agreement and the transactions contemplated herein on
or before April 20, 1999, then (without limiting its rights and remedies at
law or in equity) at Buyer's sole option by notice in writing to Texcel
Sweden: (A) such portion(s) of this Agreement (or any Collateral Agreement
or any other document, instrument or agreement executed by any of the
Sellers in connection herewith) which have been duly authorized on behalf
of Texcel Sweden or by the applicable Seller shall remain in full force and
effect in accordance with its terms and may be enforced by Buyer, including
the Distribution Agreement between Texcel Sweden and Buyer of even date
herewith, or (B) all provisions hereof or of a Collateral Agreement or any
other document, instrument or agreement executed by, or requiring
performance by, Texcel Sweden shall be declared void and of no further
force or effect, in which event (i) any or all consideration payable by
Buyer hereunder to Texcel Sweden shall be immediately refunded to Buyer;
(ii) the Note shall be accelerated and due; (iii) the Warrant shall be
cancelled; (iv) the Buyer may foreclose on all property pledged under the
Pledge Agreement; and (v) the Buyer may continue to employ any personnel
who had previously been employed by any Seller.
12.7 ASSIGNABILITY. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns.
12.8 AMENDMENT. This Agreement may be amended only by a written agreement
executed by the Buyer and the Seller.
12.9 COUNTERPARTS. This Agreement may be executed in multiple counterparts, each
of which shall be deemed in original but all of which together shall
constitute one and the same instrument.
12.10 EFFECT OF TABLE OF CONTENTS AND HEADING. The table of contents and the
titles of article and section headings herein contained has been provided
for convenience of reference only and shall not affect the meaning of
construction of any of the provisions hereof.
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12.11 PRONOUNS. The use of a particular pronoun herein shall not be restrictive
as to gender or number but shall be interpreted in all cases as the context
may require.
12.12 TIME PERIODS. Any action required hereunder to be taken within a certain
number of days shall be taken within that number of calendar days;
provided, however, that if the last day for taking action falls on a
weekend or a holiday, the period during which such action may be taken
shall be automatically extended to the next business day.
12.13 NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against either
party.
12.14 GOVERNING LAW. This Agreement and the Collateral Agreements shall be
governed by and construed in accordance with the laws of the Commonwealth
of Massachusetts, United States of America (other than the choice of law
principles thereof).
12.15 CONSENT TO EXCLUSIVE JURISDICTION. Any disputes hereunder shall be
resolved by binding arbitration in Boston, Massachusetts under the rules of
the American Arbitration Association. Subject to the preceding sentence,
the parties hereto agree that all actions or proceedings arising in
connection with this Agreement, the agreements referred to herein and the
transactions contemplated hereby shall be tried and litigated solely in the
state or federal courts located in Suffolk or Middlesex County,
Massachusetts. THE PARTIES HERETO WAIVE ANY RIGHT EACH MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NONCONVENIENS, TO ASSERT THAT IT IS NOT SUBJECT TO
THE JURISDICTION OF THE AFORESAID COURTS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 12.15.
12.16 ACTIONS BY THE SELLERS. Each of the Sellers hereby represents, warrants
and covenants that Texcel Sweden is authorized to accept all notices given
to them by the Buyer, and that any notice, communication, determination,
decision or other action taken by Texcel Sweden under this Agreement shall
be binding as to all Sellers. Buyer shall be entitled to rely on any
notice, communication, determination, decision or other action taken by
Texcel Sweden as binding on all Sellers.
12.17 BUYER AND BUYER'S AFFILIATES. Buyer may at its option make payment of the
Cash Amounts, or fund the Loan, through any of its designated Affiliates,
in which case such obligation(s) of the Buyer shall be satisfied. Buyer may
at its option take title to a portion of the Purchased Assets, through any
of its designated Affiliates other than as indicated on SCHEDULE 1.1.
ARTICLE 13. DEFINITIONS.
"Affiliate" means a company which controls, is controlled by, or is under common
control with a party to this Agreement, where "control" is defined as the direct
or indirect ownership of more
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INTERLEAF CONFIDENTIAL
than 50% of such company's capital stock, or the right to elect a majority of
such company's directors. Each of the Sellers is an Affiliate of each other
Seller.
"Assumed Contract" means a contract between a Seller and a third party which is
specifically identified by the Buyer, and as to which the Buyer after the
Closing executes a written undertaking to assume such contract (and which, if
required under the terms of the contract, as been consented to in writing by
such third party).
"Average Daily Volume" means the average of the daily trading volume of the
Stock on the Nasdaq National Market for the 20 trading days preceding the day in
question, divided by two to adjust for Nasdaq reporting of both sides of a
trade.
"Base Balance Sheet" has the meaning specified in Section 6.7.
"Base Balance Sheet Date" means December 31, 1998.
"Closing" means the closing of the purchase and sale provided for in this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Court Order" means any court order, judgment, administrative or judicial order,
writ, decree, stipulation, arbitration award or injunction.
"Earnout Period" means the 12 month period commencing six weeks after the
Closing.
"Encumbrance" means any lien, option (including right of first refusal or first
offer), encumbrance, restriction, mortgage, pledge, security interest, claim or
charge of any kind or character.
"Fair Value" means the volume-weighted average of the closing sale price of the
Stock on the Nasdaq National Market for the 20 trading days prior to the date of
valuation.
"Government Authority" means any governmental authority, whether foreign,
federal, state, local or other political subdivision or agency of any of the
foregoing.
"Government Authorizations" means any license, permit, order, concession, grant,
authorization, consent or approval.
"Gross Revenue" means revenue recognized by Buyer in accordance with U.S. GAAP
during the Earnout Period from (i) Product sales, (ii) consulting and training
services provided with respect to implementation of the Product, and (iii)
Product maintenance and support. Notwithstanding anything to the contrary in the
definition of Earnout Period, Gross Revenue will also include amounts collected
by Buyer from and after March 15, 1999 through the end of the Earnout Period as
otherwise defined herein, in respect of CSC account receivable described in
Section 1.1(d) above.
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"Intellectual Property" means (i) all patents, patent applications, trade marks
(whether registered or unregistered) or service marks, trade mark or service
mark applications, trade names and copyrights (collectively, "Statutory
Intellectual Property"), (ii) all Trade Secrets, and (iii) all industrial or
intellectual property rights of every kind and description related to the
Products.
"Laws" means all applicable statutes, laws, ordinances, rules and regulations.
"Priority Claims" means (a) all claims entitled to priority under Section 507
of the Bankruptcy Code (11 U.S.C. sections 101 ET SEQ.), or the insolvency
laws of any other applicable jurisdiction; (b) all claims for wages,
salaries, benefits or compensation payable to or for the benefit of employees
(including payroll and payroll-related taxes) under the laws of any
applicable jurisdiction, including claims for severance or otherwise payable
in connection with termination of employment; and (c) all claims which under
the laws of any applicable jurisdiction are secured by liens or priority
rights in or to the assets of any person obligated with respect thereto, or
which impose personal liability not only on the principal obligor, but other
parties deemed, by operation of law, to be responsible, including the
officers, directors or owner of the principal obligor.
"Product" means the software programs which perform the functions more
particularly described on SCHEDULE 1.1, and includes all prior and future
versions thereof, all work in progress, all derivatives, portions, adaptations,
extracts, copies, documentation, manuals, programmers' note, architecture, data
models, logic models, and all Intellectual Property embodied, contained reduced
to practice, expressed, displayed, used or exploited therein or through the use
thereof.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock" means the Buyer's Common Stock, $ .01 par value.
"Taxes" means all applicable taxes, including without limitation, income,
profit, franchise, sales, use, real property, personal property, ad valorem,
excise, employment, social security and wage withholding taxes, severance,
stamp, occupation, and windfall taxes, of every kind, character or description
imposed by any governmental or quasi-governmental authority (domestic or
foreign), and any interest or fines, and any and all penalties or additions
relating to such taxes, charges, fees, levies or assessments.
"Tax Returns" means all Federal, state, local, and foreign, government income,
excise, gross receipts and franchise tax returns, real estate and personal
property tax returns, sales and use tax returns, employee tax and contribution
returns and all other tax returns, reports and declarations, including valid
extensions therefor, or estimated taxes required to be filed by it, with respect
to all Taxes.
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INTERLEAF CONFIDENTIAL
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in multiple counterparts as of the date set forth above by their duly authorized
representatives.
TEXCEL INTERNATIONAL AB
By:
----------------------------------------
Name:
Title:
TEXCEL RESEARCH, INC.
By:
----------------------------------------
Name:
Title:
INTERLEAF CONFIDENTIAL
TEXCEL (UK) LIMITED
By:
----------------------------------------
Name:
Title:
INTERLEAF, INC.
By:
----------------------------------------
Name: Jaime W. Ellertson
Title: President
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INTERLEAF CONFIDENTIAL
GUARANTY OF TEXCEL SWEDEN
By executing where provided below, Texcel International AB hereby (i)
acknowledges the terms and conditions of this Agreement, consents to the
transactions contemplated hereby and agrees to take such actions and to execute
such documents, agreements and instruments as may be reasonably requested by the
Buyer in order to consummate such transactions which are required to be
performed by it or by any of its Affiliates, (ii) confirms and warrants the
accuracy and completeness of each of the Seller's representations and warranties
contain in this Agreement, and (iii) guaranties the full and timely payment and
performance of the Sellers' obligations under Section 11 of this Agreement.
TEXCEL INTERNATIONAL AB
By:
----------------------------------
Name:
Title:
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<PAGE>
INTERLEAF CONFIDENTIAL
ASSET PURCHASE AGREEMENT
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
- --------
Exhibit A Form of Warrant
Exhibit B Form of Secured Term Note
Exhibit C Form of Stock Pledge Agreement
SCHEDULES
- ---------
Schedule 1.1 Purchased Assets
Schedule 1.2 Assumed Contracts
Schedule 2.6 Allocation of Purchase Price
Schedule 6.7 Financial Statements
Schedule 6.8 Tax Matters
Schedule 6.10 Undisclosed Liabilities
Schedule 6.12 Title to Purchased Assets
Schedule 6.13 Intellectual Property Rights
Schedule 6.14 Material Contracts
Schedule 6.15 Litigation
Schedule 6.18 Employee Matters
<PAGE>
Exhibit 5.1 & 23.3
May 4, 1999
Interleaf, Inc.
62 Fourth Avenue
Waltham, MA 02451
Gentlemen:
I have assisted in the preparation of a Registration Statement on Form S-3 to be
filed with the Securities and Exchange Commission (the "Registration
Statement"), relating to 1,037,501 shares of Common Stock, $.01 par value per
share (the "Shares"), of Interleaf, Inc., a Massachusetts corporation (the
"Company"), pursuant to the Stock Purchase Agreement between the Company and
Finpiave S.p.A. dated as of February _, 1999 and the Asset Purchase Agreement by
and among the Company, Texcel International AB, Texcel Research, Inc. and Texcel
(UK) Limited (collectively, the "Agreements").
I have examined (i) the Restated Articles of Organization and By-laws of the
Company and all amendments thereto, (ii) the Agreements, and (iii) such records
of meetings of the directors and stockholders of the company, documents and
other instruments as in my judgment are necessary or appropriate to enable me to
render the opinion expressed below.
In my examination of the foregoing documents, I have assumed the genuineness of
all signatures and the authenticity of all documents submitted to me as
originals, the conformity to original documents of all documents submitted to me
as certified or photostatic copies, and the authenticity of the originals of
such latter documents.
Based upon the foregoing, I am of the opinion that the Shares have been duly
authorized for issuance and, when issued pursuant to the terms of the Agreement,
will be legally issued, fully paid and nonassessable.
I hereby consent to the use of my name in the Registration Statement and consent
to the filing of this opinion with the Securities and exchange Commission as an
exhibit to the Registration Statement.
Very truly yours,
/s/ Craig Newfield
- -----------------------
Craig Newfield,
General Counsel
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related prospectus of Interleaf, Inc.
for the registration of 1,037,501 shares of its common stock and to the
incorporation by reference therein of our report dated May 13, 1998 with
respect to the consolidated financial statements and schedule of Interleaf,
Inc. included in its Annual Report (Form 10-K) for the year ended March 31,
1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
Boston, Massachusetts
April 30, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
April 30, 1999
The Board of Directors
PDR Automated Systems and Publications, Inc.
800 Corporate Drive, Suite 200
Lexington, KY 40503
To the Board of Directors:
We agree to the inclusion by reference in the Form S-3 of Interleaf, Inc., dated
on or before May 10, 1999, of our independent auditors' report and independent
accountants' compilation report, dated September 17, 1998, on our audit of the
financial statements of PDR Automated Systems and Publications, Inc., as of
June 30, 1998, and December 31, 1997, and for the six months ended June 30,
1998, and for the year ended December 31, 1997, and our compilation of the
financial statements for the six months ended June 30, 1997.
Yours truly,
/s/ Dulworth, Breeding & Karns, LLP
- ------------------------------------
Dulworth, Breeding & Karns, LLP
