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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): FEBRUARY 19, 1998
__________________
CONSILIUM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-17754 94-2523965
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
485 CLYDE AVENUE, MOUNTAIN VIEW, CA 94043
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 691-6100
(Former name, former address and former fiscal year, if changed since last
report)
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This report consists of 7 pages.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) Consilium, Inc. (the "Registrant") sold its Healthcare Products and
Process Industries Group that focused on the FlowStream product line (the
"Healthcare Group"), pursuant to an Asset Purchase Agreement dated February 19,
1998 (the "Asset Purchase Agreement") by and among Base Ten FlowStream, Inc.
(the "Buyer"), Base Ten Systems, Inc. (the "Parent" and together with the Buyer,
"Base Ten") and the Registrant, for consideration consisting of $1,500,000 in
cash ($1,350,000 of which was paid on February 19, 1998 (the "Closing Date") and
$150,000 of which is subject to certain indemnification provisions pursuant to
the Asset Purchase Agreement and shall be paid within ninety days after the
Closing Date), 20% of all annual revenues in excess of $3,200,000 recognized by
Base Ten from the licensing of the Registrant's FlowStream product line during
the 1998 and 1999 calendar years, and assumption by Base Ten of substantially
all of the Healthcare Group's liabilities on a going-forward basis, with some
specific obligations being retained by the Registrant (the "Sale"). Pursuant to
the Asset Purchase Agreement, the Registrant agreed not to compete in the
business of developing, producing, manufacturing and selling manufacturing
execution systems under the trademarks of "FlowStream" for healthcare products
(pharmaceutical, medical device and biotechnology) and chemical industries (the
"FlowStream Business") for three years, and Base Ten assumed certain liabilities
as of the acquisition date, purchased fixed assets with a net book value of
approximately $500,000 and the Registrant's rights under certain contracts with
customers and other third parties relating to the FlowStream product line,
except certain patents used by both the Healthcare Group and the Semiconductor
and Electronics Business Group. With regards to these patents, the Registrant
granted to Base Ten a worldwide royalty-free, non-transferable (except with
substantially all of the assets of the FlowStream Business) license, for the
lives of the patents, without the rights to sublicense, to the exclusive use of
such patents in the FlowStream Business. Also pursuant to the Asset Purchase
Agreement, the Registrant agreed to indemnify Base Ten, within certain
limitations, for breach of certain representations, warranties, covenants,
agreements or obligations made by the Registrant therein.
Prior to the Sale, no material relationship existed between the principal
stockholders of Base Ten and the Registrant, any affiliates of the Registrant,
any director or officer of the Registrant, or any associate of any such director
or officer.
(b) Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not applicable.
(b) The pro forma financial statements that are required pursuant to
Article 11 of Registration S-X are attached hereto.
(c) A copy of the Asset Purchase Agreement is attached hereto as Exhibit
2.1, the terms of which are incorporated herein by reference.
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CONSILIUM, INC.
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PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
On February 19, 1998, the Company sold certain assets of its Healthcare
Products and Process Industries Group that focused on the FlowStream product
line (the "Healthcare Group") to Base Ten Systems, Inc. (the "Buyer"). The Buyer
purchased certain tangible and intangible assets and assumed certain liabilities
of the Healthcare Group. The transaction was accounted for as a sale of an
asset.
The accompanying pro forma condensed consolidated balance sheet has been
prepared as if the sale was consummated on October 31, 1997. The accompanying
pro forma condensed consolidated statement of operations for the year ended
October 31, 1997 has been prepared as if the sale was consummated at the
beginning of fiscal 1997. The pro forma condensed consolidated statement of
operations does not include the effect of any nonrecurring charges directly
attributable to the sale.
The pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the consolidated operating results or
consolidated financial position that would have been reported had the sale
occurred on the date indicated, nor is it necessarily indicative of future
operating results or financial position.
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CONSILIUM, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, unaudited)
<TABLE>
<CAPTION>
As of October 31, 1997
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Historical Pro Forma Pro Forma
Consilium Adjustments Consilium
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,865 $ 1,500 (a) $ 9,365
Accounts receivable, net 11,014 - (c) 11,014
Other current assets 590 - 590
------- ------- -------
Total current assets 19,469 1,500 20,969
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Property and equipment (net) 4,312 (500) (b) 3,812
Software development costs (net) 2,688 (1,123) (f) 1,565
Goodwill (net) 3,092 - 3,092
Other assets 406 - 406
------- ------- -------
TOTAL ASSETS $29,967 $ (123) $29,844
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 3,051 $ - $ 3,051
Accounts payable 6,587 - 6,587
Other current liabilities
and accrued expenses 3,799 - 3,799
Accrued acquisition costs 1,662 - 1,662
Deferred revenue 6,437 (882) (b) 5,555
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Total current liabilities 21,536 (882) 20,654
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Total stockholders' equity 8,431 759 (d) 9,190
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $29,967 $ (123) $29,844
======= ======= =======
</TABLE>
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CONSILIUM, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data; unaudited)
<TABLE>
<CAPTION>
For the Year Ended October 31, 1997
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Historical Pro Forma Pro Forma
Consilium Adjustments Consilium
<S> <C> <C> <C>
REVENUES:
Product $14,181 $ 1,610 (e) $12,571
Services 25,940 3,204 (e) 22,736
Development 514 365 (e) 149
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Total revenues 40,635 5,179 35,456
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COST OF REVENUES:
Product 3,245 712 (e) 2,533
Services 15,449 3,121 (e) 12,328
Development 369 230 (e) 139
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Total cost of revenues 19,063 4,063 15,000
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GROSS MARGIN 21,572 1,116 20,456
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OPERATING EXPENSES:
Research and development 12,165 2,409 (e) 9,756
Selling and marketing 13,739 3,813 (e) 9,926
General and administrative 3,993 496 (e) 3,497
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Total operating expenses 29,897 6,718 23,179
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Loss from operations (8,325) (5,602) (2,723)
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Interest income (expense), net (138) (8) (e) (130)
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LOSS BEFORE
INCOME TAX PROVISION (8,463) (5,610) (2,853)
PROVISION FOR INCOME TAXES 301 - 301
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NET LOSS (8,764) (5,610) (3,154)
PREFERRED STOCK DIVIDENDS (305) - (305)
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NET LOSS ATTRIBUTABLE TO
COMMON STOCK $(9,069) $(5,610) $(3,459)
======= ======= =======
DILUTED LOSS PER COMMON SHARE $ (1.13) $ (0.70) $ (0.43)
SHARES USED IN PER SHARE
CALCULATIONS 8,045 8,045 8,045
</TABLE>
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CONSILIUM, INC.
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NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated financial statements
included herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. However,
the Company believes that the disclosures are adequate to make the information
presented not misleading. These pro forma consolidated financial statements
should be read in conjunction with the financial statements and the notes
thereto included in the Company's annual report for the year ended October 31,
1997.
NOTE 2. PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the accompanying pro forma
condensed consolidated balance sheet and statement of operations as described
below:
(a) Entry to record cash received from the sale assuming the sale had
occurred as of October 31, 1997.
(b) Entry to reflect the sale of certain of the Company's assets and
assumption of certain of the Company's liabilities by the Buyer.
(c) As of October 31, 1997, included in accounts receivable is
approximately $1,697,000 of receivables related to previous sales of
FlowStream products. Such receivables were not purchased by the Buyer
and any cash collected for these receivables will be retained by the
Company.
(d) Entry to recognize the gain from the sale of the Healthcare Group.
(e) Entry to eliminate all revenues and expenses of the Healthcare Group.
(f) Entry to write off previously capitalized software development costs
related to the Healthcare Group.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: March 3, 1998 CONSILIUM, INC.
By: /s/ Clifton Wong
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Clifton Wong
Vice President, Finance
and Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Exhibit Title
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2.1 Asset Purchase Agreement dated February 19, 1998 by and
among the Registrant, Base Ten FlowStream, Inc. and
Base Ten Systems, Inc.
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (together with all Exhibits, Schedules
and Appendices attached hereto and incorporated herein by reference, the
"Agreement"), dated as of February 19, 1998, is among CONSILIUM, INC., a
Delaware corporation having its principal place of business and chief executive
offices located at 485 Clyde Avenue, Mountain View, California 94043 (the
"Seller"), BASE TEN FLOWSTREAM, INC., a New Jersey corporation having its
principal place of business and chief executive offices located at One
Electronics Drive, P.O. Box 3151, Trenton, New Jersey 08619 (the "Buyer") and
BASE TEN SYSTEMS, INC., a New Jersey corporation having its principal place of
business and chief executive offices located at One Electronics Drive, P.O. Box
3151, Trenton, New Jersey 08619 (the "Parent").
WHEREAS, the Seller, through its healthcare and process industries
division, engages in the business of developing, producing, manufacturing and
selling manufacturing execution systems under the trademark of "FlowStream" for
healthcare products (pharmaceutical, medical device and biotechnology) and
chemical industries (the "Business"), with its principal product being
FlowStream (together with all other products of the Business, the "Products");
and
WHEREAS, the Seller wishes to sell to the Buyer, and the Buyer is
willing to purchase from the Seller, all of Seller's right, title and interest
in, to and under certain assets relating to the Products and the Business;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties to this Agreement agree as follows:
1. PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions
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of this Agreement, the Seller shall sell, transfer and deliver to the Buyer, and
the Buyer shall purchase and acquire from the Seller, at the Closing (as
hereinafter defined), all of Seller's right, title and interest in, to and under
the Acquired Assets (as hereinafter specified), and the Buyer shall assume the
Assumed Liabilities (as hereinafter defined). The Seller agrees that the
Acquired Assets shall be conveyed free and clear of all liabilities (other than
the Assumed Liabilities), obligations, liens, claims and encumbrances of any
kind, except Permitted Liens (as hereinafter defined). The Acquired Assets shall
consist of:
(a) all computer programs, software, data bases
incorporated in the Products, source codes, magnetic tapes, diskettes and
punchcards used in or necessary for the conduct of the Business including
without limitation the items listed or described on Schedule 1(a) (the
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"Software"), provided that, with respect to the four U.S. patents and one
foreign patent identified on Schedule 1(a) as "shared" (the "Shared
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Technology"), the Acquired Assets (and Software) shall not include the title to
the Shared Technology but shall include a worldwide, royalty free,
non-transferable (except with substantially all of the assets of the Business)
license, for the respective lives of the said patents, without the rights to
sublicense, to the exclusive use of the Shared Technology for developing,
producing, manufacturing and selling manufacturing
<PAGE>
execution systems limited to the field of healthcare products (pharmaceutical,
medical device and biotechnology) and chemical industries and provided that the
Acquired Assets (and Software) shall not include software used by the Seller
with respect to the administration (including without limitation financial,
operational, electronic mail, voice mail and word processing services, and the
like) of the Seller's businesses other than the Business (the "Administrative
Software");
(b) all machinery, equipment, tools, furniture, fixtures,
fixed assets, supplies, and other personal property used exclusively in the
conduct of the Business, on as "as-is where-is" basis, without any express or
implied warranty, and as listed or described on Schedule 1(b) (the "Equipment");
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(c) all inventories (including raw materials, magnetic
tapes, diskettes, supplies, work-in-process, finished parts and finished goods)
used in or necessary for the conduct of the Business or the manufacture of the
Products on an "as-is where-is" basis without any express or implied warranty
Schedule 1(c) (the "Inventory");
- -------------
(d) the Seller's rights under all contracts, purchase
orders, commitments, and arrangements (the "Customer Contracts"), copies of all
of which have been delivered to the Buyer, in respect of all customer accounts
arising from or serviced by the Business a complete listing of which is attached
hereto as Schedule 1(d) (the "Serviced Accounts");
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(e) the Seller's rights under all contracts, purchase
orders, commitments and arrangements in respect of services, leased machinery or
equipment and, including without limitation services, machinery or equipment of
the type described in Section 1(b) hereof, used in the Business and included
hereto as Appendix I (the "Leases");
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(f) the Seller's rights under all contracts, purchase
orders, licenses, commitments and arrangements with third-parties for supplies,
requirements or services relating to the Business or the Products attached
hereto as Appendix II (the "Vendor Contracts"), provided that, with respect to
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supplies used in the Business and also used in other business of the Seller,
only such rights as may be applicable to or necessary for the conduct of the
Business;
(g) all records, books, documents, files, vendor lists,
lists of all consultants used to create, audit, revise or supplement the
Software, customer documentation, order, sales and receivables histories,
operation sheets, routing sheets, notebooks, research reports, quality control
records, inventory records, books of account, accounting records and business
plans and forecasts relating to the Acquired Assets (specifically including
without limitation installation manuals, instruction manuals, quality standards
and procedures, test archiving for all products previously delivered and
currently in-process, material on hard-drives, results of unit tests, modules
tests and code reviews, problem reports, field problems and resolutions,
upgrades, configuration records, specifications (including without limitation
user requirement, functional, software module design and software top level
specifications and platform specifications by installation), validation
protocols, validation results by site, internal training materials, customer
training materials and all records, books and other documents between Seller and
the United States Food and Drug Administration and representatives thereof (the
"Books and Records");
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(h) all of the Seller's proprietary rights in respect of
the Acquired Assets and the Business (other than the Shared Technology and the
Administrative Software), including without limitation all worldwide rights,
title and interests in an to trademarks (registered or unregistered), trade
names (including without limitation "FlowStream"), service marks (including
without limitation "FlowStream"), assumed names, copyrights, all applications
for any of the foregoing, formulae, trade secrets, processes, know-how,
confidential information, inventions, research, inventors' notes, laboratory
reports, drawings, designs, customer lists, vendor lists, all information
similar to any of the foregoing, goodwill relating to the Business and the
Acquired Assets, and marketing rights in connection with all of the foregoing,
including without limitation all of those items listed or described on Schedule
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1(h) (the "Intellectual Property");
- ----
(i) all records (including without limitation compensation
information and job descriptions) relating to managers and employees of the
Business excluding records relating to managers and employees of the Business
who do not become employees of the Buyer within ten days after the Closing;
(j) all licenses, consents, permits, variances,
certifications, and approvals, if any, of government agencies held by the Seller
relating solely to the Business or the Acquired Assets, to the extent
transferable under applicable law, attached hereto as Appendix III (the
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"Licenses");
(k) all warranties, claims and causes of action (and the
benefit of any and all collateral or security given in connection therewith)
inuring to the benefit of the Seller relating to the Business or any of the
Acquired Assets excluding such warranties, claims and causes of action which may
be asserted as a counterclaim, crossclaim or setoff to any Excluded Obligation;
(l) all prepaid maintenance payments in excess of an
aggregate of $1.2 million under all Customer Contracts; and
(m) all of the Seller's rights pursuant to the leases for
the locations listed on Schedule 6(f) (other than the Clyde Avenue, Mountain
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View, California location and the Chennai, India locations), copies of all of
which have been delivered to the Buyer, pursuant to the Lease Assignments, in
substantially the form of Exhibit A, and all of the Seller's rights to the real
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estate located at Clyde Avenue, Mountain View, California, pursuant to the Real
Estate License Agreement, in substantially the form of Exhibit B.
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The Buyer and the Seller agree that the Seller is not making representations in
this Agreement that the Acquired Assets are all those that may be necessary for
the conduct of the Business by the Buyer after the Closing Date (as hereinafter
defined). Notwithstanding any other provision of this Agreement, the Buyer and
the Seller agree that the Acquired Assets shall not include (i) cash and cash
equivalents on hand or deposited in banks or other financial institutions as of
the Closing Date, (ii) the rights to any of the Seller's claims for any federal,
state, local or foreign tax refund including tax credits and net operating loss
carry forwards, (iii) policies of insurance (including proceeds thereof and
refunds thereunder) acquired by the Seller in connection with the Acquired
Assets, (iv) any assets, properties or rights of the Seller not used in or
necessary for the
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conduct of the Business, (v) tax returns, books of account or other records
having to do with the corporate organization of the Seller, (vi) life insurance
policies (including proceeds thereof and refunds thereunder) relating to
officers and other employees of the Seller, (vii) all assets owned or held by
any employee benefit plans of the Seller, (viii) the minute books, stock
transfer books and corporate seal of the Seller and all books and records
relating to businesses of the Seller other than the Business, (ix) all rights
(including indemnification) and claims and recoveries under litigation of the
Seller against third parties arising out of or relating to events prior to the
Closing Date, (x) the Seller's rights under this Agreement, (xi) accounts
receivable as of the Closing Date for work or services provided by the Seller
on or before the Closing Date, (xii) security deposits as of the Closing Date,
(xiii) prepaid expenses as of the Closing Date and (xiv) leasehold improvements,
furniture and fixtures located at the Seller's Mountain View, California
offices, (the "Excluded Assets").
2. ASSUMPTION OF CERTAIN LIABILITIES; EXCLUDED OBLIGATIONS.
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(a) At the Closing, the Buyer shall assume, subject to the
limitations set forth in this Agreement, (i) only those obligations of the
Seller which are set forth in and by the terms of the Customer Contracts,
Leases, source code escrow agreements (listed on Schedule 2(a)), and Vendor
Contracts; provided, that the Buyer does not and shall not be deemed to
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assume any obligations, responsibilities and liabilities arising after the
Closing Date under Customer Contracts for prepaid maintenance, listed on
Schedule 2(a), in excess of an aggregate of $1.2 million under all such Customer
- -------------
Contracts, (ii) all obligations, responsibilities and liabilities of the
Business or relating to the Acquired Assets arising after the Closing Date;
provided that the Buyer shall not be deemed to have assumed any undisclosed
- --------
obligations under this Section 2(a)(ii) or otherwise to the extent that
----------------
such undisclosed obligations were due to be performed prior to the Closing Date
and are in default as of the Closing Date, (iii) all obligations,
responsibilities and liabilities arising under the severance agreement between
Seller and Lloyd Payton, as described on Schedule 2(a), and (iv) obligations of
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the Seller with respect to trade shows relating to the Business; (the "Assumed
Liabilities").
(b) Notwithstanding anything to the contrary in this
Agreement, except only as set forth in Section 2(a), the Buyer does not assume
------------
and shall not be liable for any of the Seller's debts, liabilities or
obligations, including, without limitation, any debts, liabilities or
obligations arising out of the following (the "Excluded Obligations");
(i) the Seller's operation of any of the Acquired
Assets or the Business prior to the Closing Date;
(ii) any violation of any of the representations,
warranties, covenants or agreements of the Seller contained in this
Agreement;
(ii) Federal, state, county, local, foreign or other
income, sales, use, real estate, excise, employee payroll or other
taxes or assessments (including interest and penalties thereon) of any
kind whatsoever payable in or attributable to any period prior to the
Closing Date;
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(iv) any claims for personal injury, property damage,
product liability or strict liability, incurred or relating to any
period prior to the Closing Date (whether or not then asserted),
including workers' compensation;
(v) any claims alleging damage to the environment
under any existing law or similar claims with respect to the operation
of any of the Acquired Assets or the Business prior to the Closing
Date (notwithstanding any disclosure in Schedule 6(n) of this
-------------
Agreement of any matters, conditions or facts which might give rise to
any such claims, which matters, conditions or facts shall be and
continue to be Excluded Obligations under this Agreement);
(vi) any claim of violation or infringement of any
copyright, patent, trademark or trade name right or other intellectual
property right or any person or entity occurring, or arising from
events occurring, prior to the Closing Date;
(vii) any claim of civil or criminal liabilities or
penalties (including interest) imposed on account of any act or
omission of the Seller or its officers, directors, employees or
agents, occurring, arising or existing prior to the Closing Date;
(viii) contingent liabilities of the Seller of any kind
incurred, arising, accruing, or existing prior to the Closing Date,
other than those included in the Assumed Liabilities;
(ix) any pension, profit sharing, savings,
retirement, health, medical, life, disability, dental, deferred
compensation, stock option, bonus, incentive, severance pay, group
insurance or other employee plans or arrangements, or any policies,
handbooks, or custom or practice, or any employment agreements,
whether express or implied, and any claims by employees for vacation,
sick pay, leave or other benefits, applicable to, or accrued with
respect to, any of the Seller's employees at any time prior to the
Closing Date; and
(x) liabilities resulting from the failure to comply
with statutory provisions relating to bulk sales and transfers.
3. PURCHASE PRICE; ADJUSTMENTS; ALLOCATION.
---------------------------------------
(A) PURCHASE PRICE. The purchase price, in consideration
--------------
for the sale and delivery by the Seller to the Buyer of the Acquired Assets is
$1,500,000 to be paid by the Buyer to the Seller, in reliance upon the
representation and warranties made by the Seller in this Agreement as follows:
(i) $1,350,000 shall be paid at Closing (the "Closing Cash Payment"), and (ii)
$150,000, subject to indemnification claims made pursuant to Section 11 hereof,
shall be paid within 90 days after the Closing (the "Final Cash Payment") (the
Closing Cash Payment and the Final Cash Payment, the "Purchase Price").
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(b) ALLOCATION. The allocation of the Purchase Price among
----------
the Acquired Assets shall be as set forth on Schedule 3(b). The Buyer and the
-------------
Seller hereby covenant and agree that neither will take a position on any income
tax return or with any governmental agency charged with the collection of any
income tax or in any judicial proceeding that is in any way inconsistent with
such allocation or the characterization of any other payments described in this
Agreement.
4. CLOSING DATE. Subject to the terms of this Agreement, the closing
------------
of the purchase of the Acquired Assets (the "Closing") shall take place at 5:00
p.m. pacific standard time, on February 19, 1998. The term "Closing Date" means
the date on which the Closing occurs.
5. DELIVERY AND PAYMENT; FURTHER ASSURANCES.
----------------------------------------
(a) MUTUAL DELIVERIES. At the Closing and subject to the
-----------------
terms of this Agreement, the following documents shall be duly executed and
delivered by each of the parties thereto;
(i) the Lease Assignments;
(ii) the Real Estate License Agreement;
(iii) a Patent License Agreement between the Seller
and the Buyer with respect to the Buyer's right to obtain from the
Seller certain rights, including without limitation, the right to use
the Shared Technology, in substantially the form of Exhibit D; and
---------
(iv) a Bill of Sale and Assumption Agreement between
the Buyer and the Seller with respect to the Acquired Assets and the
Assumed Liabilities, in substantially the form of Exhibit E.
---------
(b) THE SELLER AT CLOSING. At the Closing and subject to
---------------------
the terms of this Agreement, the Seller shall deliver or cause to be delivered
to the Buyer.
(i) full and actual possession of, or reasonable
access to, all of the Acquired Assets;
(ii) a release of each lien, security interest,
judgment, claim or other encumbrance to which any of the Acquired
Assets may be subject other than the Permitted Liens, in form and
substance reasonably satisfactory to the Buyer;
(iii) an opinion of the Seller's counsel in form and
substance reasonably satisfactory to the Buyer, in substantially the
form of Exhibit F;
---------
(iv) within 20 days after the Closing, all documents
and other information required to make each Schedule and Appendix
hereto complete and current (it being understood and agreed that to
the extent that any of the Books and Records are items susceptible to
duplication and are either (x) used in connection with any of the
Seller's businesses other than the Business or (y) are required by law
to be retained by the Seller, the Seller may deliver photostatic
copies or other
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reproductions from which information solely concerning the Seller's
business other than the Business has been deleted);
(v) a certificate of the Secretary of the Seller
respecting (i) the Seller's Certificate of Incorporation and By-Laws,
(ii) resolutions of the Seller's Board of Directors authorizing the
entry into, and the transactions contemplated by, this Agreement, and
(iii) the incumbency of the Seller's officers;
(vi) the Officer's Certificate described in Section
-------
9(f) hereof;
----
(vii) certificates as to the Seller's qualification
and status, dated no more than 10 days prior to the Closing Date,
issued by the Secretary of State of Delaware, and for the States of
California and Georgia, a certificate that it is qualified to do
business therein; and
(viii) within 20 days after the Closing, all other
documents, agreements, certificates, consents and assignments,
including without limitation assignments in the form required by the
United States Patent and Trademark Office and trademark offices of
relevant foreign jurisdictions, required to be delivered to the Buyer
under the provisions of this Agreement or reasonably requested by the
Buyer to effect the transfer of the Acquired Assets to the Buyer and
the other transactions contemplated by this Agreement. Notwithstanding
the foregoing, the Seller is allowed 40 days after the Closing to
transfer all relevant foreign trademarks, tradenames and service marks
to the Buyer.
(c) THE BUYER AND THE PARENT AT CLOSING. At the Closing and
-----------------------------------
subject to the terms of this Agreement, the Buyer and/or the Parent shall
deliver or cause to be delivered to the Seller;
(i) wire transfer or immediately available funds, in
the amount of the Closing Cash Payment;
(ii) an opinion of the Buyer's counsel, in form and
substance reasonably satisfactory to the Seller, in substantially the
form of Exhibit G;
---------
(iii) a certificate of the Secretary of the Buyer
respecting (i) the Buyer's Certificate of Incorporation and By-Laws,
(ii) resolutions of the Buyer's Board of Directors authorizing the
entry into, and the transactions contemplated by, this Agreement, and
(iii) the incumbency of the Buyer's officers;
(iv) a certificate of the Secretary of the Parent
respecting (i) the Parent's Certificate of Incorporation and By-Laws,
(ii) resolutions of the Parent's Board of Directors, and (iii) the
incumbency of the Parent's officers;
(v) the Officers' Certificates described in Section
-------
10(f) hereof;
-----
7
<PAGE>
(vi) certificate as to the Buyer's qualification and
status, dated no more than ten (10) days prior to the Closing Date,
issued by the Secretary of State of New Jersey;
(vii) a certificate as to the Parent's qualification
and status, dated no more than (10) days prior to the Closing Date,
issued by the Secretary of State of New Jersey; and
(viii) all other documents, agreements and certificates
required to be delivered to the Seller under the provisions of this
Agreement or reasonably requested by the Seller to effect the
transactions contemplated by this Agreement.
(d) FURTHER ASSURANCES. From time to time after the Closing, at
------------------
the Buyer's request and without further consideration, the Seller shall execute
and deliver bills of sale and assignments of the Acquired Assets and such other
instruments of sale, transfer, conveyance, and confirmation and take such other
action as the Buyer may reasonably deem necessary in order to transfer to the
Buyer and confirm the Buyer's title to the Acquired Assets, free and clear of
any and all liabilities (other than the Assumed Liabilities and the Permitted
Liens) and to put the Buyer in actual possession and operating control thereof.
6. REPRESENTATIONS AND WARRANTIES BY THE SELLER. The Seller
--------------------------------------------
represents and warrants to the Buyer as follows:
(a) ORGANIZATION, STANDING AND QUALIFICATION. The Seller is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and is duly qualified to do business and, except as
set forth on Schedule 6(a), in good standing under the laws of each other
jurisdiction where the character of the properties owned or leased by it or the
nature of the business transacted by it requires it to be so qualified, except
where the lack of qualification would not have a material adverse effect on the
Acquired Assets. The Seller has all requisite corporate power and authority and
is entitled to carry on its business as it is now being conducted, and to own,
lease or operate its properties as and in the places where such business is now
conducted and where such properties are now owned, leased or operated. The
Seller's principal place of business and chief executive office is and as of the
Closing Date will be located at 485 Clyde Avenue, Mountain View, California
94043. The Seller has not conducted the Business in any name other than its
actual name during the five year period preceding the Closing Date and as of the
Closing Date, except in the name "FlowStream."
8
<PAGE>
(b) AUTHORITY AND BINDING EFFECT. The Seller has all power
----------------------------
and authority necessary to enter into this Agreement and to carry out the
transactions contemplated hereby and all corporate and other proceedings
required to be taken by the Seller to authorize the execution, delivery and
performance of this Agreement and the agreements, instruments and other
documents relating hereto have been properly taken and have been approved by the
Seller's Board of Directors and shareholders. This Agreement has been duly
executed and delivered by a duly authorized officer of the Seller, and
constitutes, and will constitute on the Closing Date, the valid and binding
obligation of the Seller, enforceable in accordance with its terms.
(c) APPROVALS, ETC.
---------------
(i) No approval, consent, withholding of objection or
other authorization is required from, and no filing or registration is required
to be made with, any court, administrative agency or governmental authority in
connection with this Agreement or the transactions contemplated hereby, other
than (i) compliance with and filings under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), solely with respect to disclosure of the transactions contemplated by
this Agreement, and (ii) approvals, consents, withholdings of objection or other
authorizations, filings and registrations where the failure to obtain the same
would not have a material adverse effect on the Acquired Assets.
(ii) The Seller has not been advised by any third party
that the consents or approvals described in Sections 10(e) and 12(c) hereof of
-------------- -----
such third party will not be given or is otherwise unavailable. The Seller will
make reasonable efforts to obtain the third party approvals described in Section
-------
10(e) and 12(c) hereof.
- ----- -----
(d) NO CONFLICT. Except as set forth on Schedule 6(d),
----------- -------------
neither execution and delivery not performance by the Seller of this Agreement
or the transactions contemplated hereby will, with or without the giving of
notice or passage of time or both, conflict with, result in a default which has
not been waived on or before the Closing, right to accelerate or loss of rights
under, or result in the creation of any lien, charge or encumbrance on any of
the Acquired Assets pursuant to, (i) any provision of the Seller's Charter or
By-Laws, (ii) the terms of any equity securities or debt instruments issued by
the Seller, (iii) any (A) franchise, mortgage, deed of trust, lease, license,
loan agreement or other agreement or understanding, (B) law, ordinance, rule or
regulation, or (C) order, judgment, award, decree, permit, license or
registration, to which the Seller is a party or by which the Seller or any of
the Acquired Assets may be bound or affected, or (iv) any license, permit,
approval, or registration issued by any governmental authority or other
organization and held by the Seller, except where the conflict, default, right
to accelerate, loss of rights, lien, charge or encumbrance would not have a
material adverse effect on the Acquired Assets; nor will such execution,
delivery or performance by the Seller give any party with rights under any
equity security, debt instrument, franchise, mortgage, deed of trust, lease,
license, loan agreement or other material agreement or understanding the right
to terminate, modify, accelerate or otherwise change the existing rights or
obligations of the Seller thereunder, except for such rights as to which
requiaite waivers or consents have been obtained
9
<PAGE>
and except for rights, the exercise of which would not have a material adverse
effect on the Acquired Assets.
(e) FINANCIAL INFORMATION. The Seller has delivered to the
---------------------
Buyer unaudited income statements for the years ended October 31, 1996 and
October 31, 1997 (the "Financial Statements"), a copy of which is annexed hereto
as Appendix IV. The Financial Statements are in the aggregate and in all
-----------
material respects accurate, complete and in accordance with the books and
records of the Business and present fairly the financial condition of the
Business as of their respective dates and the results of operations of the
Business for the periods then ended, in conformity with generally accepted
accounting principles applied on a consistent basis ("GAAP"), provided that all
of the footnotes required by GAAP for complete financial statements are not
included. The books of account of the Business reflect in all material respects
the items of income and expense, and the assets, liabilities and accruals
required to be reflected therin in accordance with GAAP.
(f) TITLE TO PROPERTIES; LOCATION OF ASSETS. The Seller
---------------------------------------
currently has (except only as set forth on Schedule 6(f), and as of the Closing
-------------
(except for sales of Inventory between the date hereof and the Closing in the
ordinary course of business) the Seller will have and convey to the Buyer
without exception, good and marketable title or other rights to use to all of
the Acquired Assets, free and clear of all liens, leases, encumbrances, taxes
(except such sales taxes, excise taxes and other taxes required under law to be
paid by the Buyer under this Agreement), claims, liabilities, equities, security
interests, charges and restrictions of any kind or nature whatsoever, except for
liens for current real or personal property taxes not yet due and payable, liens
disclosed on Schedule 6(f), worker's carriers and materialmen's liens, and
-------------
liens that would not have a material adverse effect on the Acquired Assets and
which will not interfere with the present use of the properties they affect and
which in the aggregate do not result in the Buyer incurring an expense or cost
in excess of $10,000.00 ("Permitted Liens"). All of the Acquired Assets are, and
as of the Closing Date will be, located at the address of the Seller office
locations set forth in Schedule 6(f).
-------------
(g) ASSETS NECESSARY TO OPERATE THE BUSINESS. The Acquired
----------------------------------------
Assets currently are and as of the Closing will be (i) owned by the Seller, (ii)
(other than the Shared Technology) used in the conduct of the Business,
exclusive of any other business conducted by Seller, and (iii) in conformity
with all applicable laws, ordinances, codes, rules and regulations relating to
their construction, use, operation and maintenance, except where the
nonconformity would not have a material adverse effect on the Acquired Assets.
The Seller represents and warrants to the Buyer that all the rights that are
used by the Seller to conduct the Business as it is presently operated are (A)
conveyed to the Buyer pursuant to the Patent License Agreement, (B) conveyed to
the Buyer pursuant to this Agreement, (C) conveyed to the Buyer pursuant to the
Real Estate License and the Lease Assignments, or (D) held by the Seller (but
are not being conveyed to the Buyer) and related to the Administrative Software.
(h) DEVELOPMENT, OWNERSHIP AND PERFORMANCE OF THE SOFTWARE
------------------------------------------------------
AND PRODUCTS: YEAR 2000 COMPLIANT SOFTWARE. All programming and development of
- ------------------------------------------
the Software and the Products was performed by persons who, at the time they
performed the work, were
10
<PAGE>
employees of the Seller, or engaged by the Seller under agreements by which the
Seller was assigned all ownership in the work, or was performed pursuant to a
license from a third party. The Software and the Products perform in accordance
with their respective specifications without errors which materially adversely
effect its performance. The Books and Records contain a true and complete list
of problem reports and field problems and resolutions that have occurred
within the past 3 years. The Software and the Products shall record, store,
process and present calendar dates falling on or after January 1, 2000 in the
same manner and with the same functionality as the Software and the Products
record, restore, process and present calendar dates falling on or before
December 31, 1999, and in all other aspects, the Software and the Products shall
not in any way lose functionality or degrade in performance as a consequence of
such Software or Products operating at a date later than December 31, 1999. The
Acquired Assets include any compatibility information and technical information,
including without limitation software interfaces and source codes, that is
required to (i) perform regular maintenance of the Software and the Products and
(ii) design equipment and/or software which is functionally interconnetable with
the Software and the Products. The codes and manuals included in the Software
describe completely all of the application programs and operating programs
included in the Software.
(i) INVENTORY. The Inventory was acquired and has been
---------
maintained in accordance with the Seller's regular business practices, consists
of items of a quality and quantity useable or saleable in the ordinary course of
business of the Business consistent with past practice, is valued at the lower
of the Seller's cost and market value on the Financial Statements, and with
respect to Inventory intended for sale, is saleable at prices at least equal to
the value thereof on the books of the Business.
(j) LABOR MATTERS.
-------------
(i) Except as set forth on Schedule 6(j), (a) The
-------------
Seller is not a party to or bound by any written or oral agreement, contract,
commitment or arrangement with (A) any present or former shareholder, director,
officer, employee or consultant or for the employment of any person, including
any consultant, in connection with the Business, or (B) any labor union or other
representative of employees associated with the Business, (b) the Seller has
operated the Business, and the Business is, in compliance in all material
respects with all applicable laws respecting employment and employment
practices, (c) there is no unfair labor practice charge or complaint against the
Seller or the Business pending or to the knowledge of the Seller threatened
before the National Labor Relations Board nor is there any grievance or any
arbitration proceeding arising out of or under collective bargaining agreements
pending or to the knowledge of the Seller threatened with respect to the
Business, (d) there is no labor strike, slow-down or work stoppage pending or to
the knowledge of the Seller threatened against the Seller or the Business, (e)
there is no charge or complaint pending or to the knowledge of the Seller
threatened against the Seller or the Business before the Equal Employment
Opportunity Commission or any state, local or foreign agency responsible for the
prevention of unlawful employment practices, and (f) except for a pending audit
from the United States Department of Labor relating to affirmative action, the
Seller has no knowledge that any federal, state or local agency responsible for
the enforcement of labor or employment laws intends to conduct an
11
<PAGE>
investigation of or relating to the Seller or the Business, and no such
investigation of which the Seller is aware is in progress.
(k) CLAIMS AND LITIGATION. Except as set forth on Schedule
--------------------- --------
6(k):
- ----
(i) there is no claim, legal action, suit,
arbitration, governmental investigation or other legal, regulatory or
administrative proceeding, or any order, judgment, decree or award pending or to
the best of the Seller's knowledge threatened, against or affecting any of the
transactions contemplated by this Agreement, the Business or any or the Acquired
Assets, and the Seller knows of no basis for the same;
(ii) there is no litigation, arbitration, investigation
or other proceeding of or before any court, arbitrator or governmental,
regulatory or administrative official, body or authority pending or to the
knowledge of the Seller threatened against or affecting the Acquired Assets; and
(iii) Within the three year period ending on the date of
this Agreement, the Seller has not been a defendant in any product liability
litigation in respect of the Products, nor to the Seller's knowledge has any
such litigation been threatened against the Seller during such period.
(l) LICENSES. All Licenses are in good standing, valid and
--------
effective in accordance with their respective terms, and there is not under any
License any existing default or event which, with notice or lapse of time, or
both, would constitute a default which would have a material adverse effect on
the Acquired Assets. The Seller has all licenses, consents, permits, variances,
certifications and approvals of government agencies necessary for the Seller to
conduct the Business as presently operated (the "Permits").
(m) COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS. The Seller
-------------------------------------------
has not received notice of noncompliance with, and has complied in all material
respects with, all laws, rules, regulations, ordinances, orders, judgments, and
awards applicable to the Acquired Assets, the Products, the Business, and the
Real Property or to which any of the Acquired Assets, the Products, the
Business, and the Real Property is subject. The Seller has not failed to obtain
or to adhere to the material requirements of any license, permit or
authorization (including without limitation the Licenses) necessary to the
ownership of the Acquired Assets, the Products, or the Real Property, or the
conduct of the Business.
(n) ENVIRONMENTAL MATTERS.
---------------------
(i) Except as set forth on Schedule 6 (n), the Seller
--------------
has obtained all permits, licenses and other authorizations which are required
under "Environmental Laws" for the use and operation of the Acquired Assets and
the conduct of the Business. As used in this Agreement, "Environmental Laws"
shall include, without limitation, any and all federal, state, local and foreign
laws and requirements relating to health and safety and pollution or protection
of the environment currently in effect, including laws and requirements relating
to emissions, discharge, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial,
12
<PAGE>
toxic or hazardous substances or wastes into the environment (including without
limitation ambient air, surface water, groundwater or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes. As used herein, "hazardous
substances or wastes" shall include, without limitation, (A) gasoline, petroleum
products, explosives, radioactive materials, polychlorinated biphenyls,
alcohols, chemical solvents or related or similar materials, (B) any substance
or material defined as a hazardous, extremely hazardous or toxic substance,
material or waste or as a pollutant or contaminant under any Environmental Law,
and (C) any asbestos or asbestos-containing substance.
(ii) Except as set forth on Schedule 6(n), the Seller
-------------
is in all material respects in compliance with all limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in any and all Environmental Laws or contained in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder by any federal, state
or local court or other governmental authority, agency or instrumentality and
applicable to the use or operation of the Acquired Assets, the Products or the
conduct of the Business.
(iii) Except as set forth on Schedule 6(n), the Seller
-------------
has not received and, to the Seller's knowledge, is not party to a civil,
criminal or administrative action, suit, demand, claim, hearing, notice or
demand letter, notice of violation, investigation, or proceeding pending or to
the Seller's knowledge threatened against the Seller in respect of the Business,
the Acquired Assets or the Products and pursuant to any Environmental Law or any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, and the Seller knows
of no basis for the same.
(o) OSHA. Except as set forth on Schedule 6(o), the Seller
---- -------------
has not violated, or received a notice or charge asserting any violation of, the
Occupational Safety and Health Act of 1970 or any other federal, state, local or
foreign law (including rules and regulations thereunder) regulating or otherwise
affecting the health and safety of employees associated with the Business.
(p) CONTRACTS.
---------
(i) The Customer Contracts, the Vendor Contracts and
the Leases are valid, binding and enforceable in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency or other laws affecting the rights of creditors generally or general
principles of equity whether asserted in an action at law or in equity or
otherwise. The Seller and, to the Seller's knowledge, the other parties to the
Customer Contracts, the Vendor Contracts and the Leases (A) are in compliance in
all material respects with the provisions thereof; and (B) are not in default in
the performance, observance or fulfillment of any obligation, covenant or
condition (except, in connection with the Closing, conditions relating to
assignment) contained in any Customer Contract, Vendor Contract or Lease. To the
Seller's knowledge, no event has occurred which with or without the giving of
13
<PAGE>
notice or lapse of time, or both, would constitute a default under any thereof
which default would have a material adverse effect on the Acquired Assets.
(ii) Except as disclosed on Schedule 6(p), no Customer
-----------
Contract, Vendor Contract or Lease contains any contractual requirement with
which there is a reasonable likelihood that the Business or to the Seller's
knowledge any other party thereto will be unable to comply.
(q) INTELLECTUAL PROPERTY. Except as disclosed on Schedule
--------------------- --------
6(q), the Business does not utilize any patent, trademark, trade name, service
- ----
mark, copyright, trade secret or proprietary rights other than the Intellectual
Property, and to the knowledge of the Seller, the use of the Intellectual
Property does not, and the Seller has not received any notice or demand claiming
that the Intellectual Property does, conflict with, or infringe upon, any
patent, trademark, trade name, service mark, copyright, trade secret or other
proprietary rights owned or claimed by another. The Seller owns free and clear
of all liens, encumbrances and similar rights, or has rights to use, all
proprietary rights (including without limitation all patents, trademarks, trade
names, service marks, copyrights and trade secrets) that are necessary for or
used in the conduct of the Business as now conducted and are included in the
Acquired Assets. Except as disclosed on Schedule 6(q), the Seller has not
-------------
granted, conveyed, assigned, licensed, leased or otherwise transferred to any
other person or entity any proprietary, financial or other interest, whether
joint or sole, direct or indirect, (not including any interest provided to
customers in the ordinary course of Seller's sale of the Products) in any
unpatented design or device which the Seller is using or the use of which is
necessary in the operation of the Business as it is now, or within the past five
(5) years has been, conducted.
(r) NO MATERIAL ADVERSE CHANGE. Since the October 31, 1997,
--------------------------
there has not occurred any material adverse change in the Acquired Assets.
(s) BROKERS. No broker, finder or financial advisor or
-------
other person is entitled to any brokerage fees, commissions, finders' fees or
financial advisory fees in connection with the transactions contemplated hereby
for the Buyer or the Parent by reason of any action taken by the Seller or any
of its directors, officers, employees, representatives or agents.
(t) RELATIONSHIP WITH VENDORS AND CUSTOMERS. Except as
---------------------------------------
described on Schedule 6(t), the Seller is not aware of any facts or information
-------------
upon which the Seller concludes in its reasonable opinion that any customer
(whether under a Serviced Account, Customer Contract or otherwise) or
third-party (whether under a Vendor Contract or otherwise) intends to cease
doing any material amount of business with the Business.
(u) OTHER BUSINESSES. The business of Seller, other than
----------------
the Business, does not compete in the Business.
7. REPRESENTATIONS AND WARRANTIES BY THE BUYER AND THE PARENT. The
----------------------------------------------------------
Buyer and the Parent represent and warrant to the Seller as follows:
14
<PAGE>
(a) ORGANIZATION STANDING QUALIFICATION. Each of the Buyer
-----------------------------------
and the Parent is a corporation validly existing and in good standing under the
laws of the State of New Jersey and in each other jurisdiction where the
character of the properties owned or leased by it or the nature of the business
transacted by it requires it to be so qualified. Each of the Buyer and the
Parent has all requisite corporate power and authority and is entitled to carry
on its business as described in Parent's Annual Report on Form 10-K for the year
ended October 31, 1997, and to own, lease or operate its properties as and in
the places where such business is now conducted and where such properties are
now owned, leased or operated.
(b) AUTHORITY AND BINDING EFFECT. Each of the Buyer and the
----------------------------
Parent has all power and authority necessary to enter into this Agreement and to
carry out the transactions contemplated hereby and all corporate and other
proceedings required to be taken by the Buyer and the Parent to authorize the
execution, delivery and performance of this Agreement and the agreements,
instruments and other documents relating hereto have been properly taken and
have been approved by the Buyer's and the Parent's respective Boards of
Directors. This Agreement has been duly executed and delivered by a duly
authorized officer of the Buyer and of the Parent, and constitutes, and will
constitute on the Closing Date, the valid and binding obligation of the Buyer
and the Parent enforceable in accordance with its terms.
(c) APPROVALS ETC. No approval, consent, withholding of
-------------
objection or other authorization is required from, and no filing or registration
is required to be made with, any court, administrative agency or governmental
authority in connection with this Agreement or the transactions contemplated
hereby, other than compliance with and filings under the Exchange Act solely
with respect to disclosure of the transactions contemplated by this Agreement.
(d) NO CONFLICT. Neither execution and delivery nor
-----------
performance by the Buyer or the Parent of this Agreement or of the transactions
contemplated hereby will, with or without the giving of notice or passage of
time or both, conflict with or result in a default, right to accelerate or loss
of rights under, (i) any provision of the Buyer's or the Parent's respective
Certificate of Incorporation or By-Laws, (ii) the terms of any entity securities
or debt instruments issued by the Buyer or the Parent, (iii) any (A) franchise,
mortgage, deed of trust, lease, license, loan agreement, or any other agreement
or understanding, (B) law, ordinance, rule or regulation, or (C) order,
judgment, award, decree, permit, license or registration to which the Buyer or
the Parent is a party or by which either the Buyer or the Parent or their
respective assets (excluding the Acquired Assets) may be bound or affected, or
(iv) any license, permit, approval or registration issued by any governmental
authority or other organization and held by the Buyer or the Parent, except
where the conflict, default, right to accelerate or loss of rights under the
same would not have a material adverse effect on the operations, properties,
prospects or financial condition of the Buyer or the Parent.
(e) CLAIMS AND LITIGATION. There is no claim, legal action,
---------------------
suit, arbitration, governmental investigation or other legal, regulatory or
administrative proceeding, or any order, judgment, decree or award pending or to
the best of the Buyer's or the Parent's knowledge threatened, against or
relating to acquisition of the Acquired Assets by the Buyer or the Parent and
neither the Buyer nor the Parent knows of any basis for the same.
<PAGE>
(f) FINANCING. The Buyer has sufficient cash and/or
---------
available borrowing capacity under existing credit facilities to pay the
Purchase Price in its entirety and to make all other necessary payments in
connection with the consummation of the transactions contemplated by this
Agreement.
(g) BROKERS. No broker, finder or financial advisor or
-------
other person is entitled to any brokerage fees, commissions, finders' fees or
financial advisory fees in connection with the transactions contemplated hereby
from the Seller by reason of any action taken by the Buyer or the Parent or any
of their respective directors, officers, employees, representatives or agents.
8. PRE-CLOSING COVENANTS AND AGREEMENTS.
------------------------------------
(a) CONDUCT OF BUSINESS PRIOR TO CLOSING. From the date
------------------------------------
hereof until the Closing Date, the Seller will use the Acquired Assets and
conduct the Business only in the ordinary course, will use commercially
reasonable efforts to maintain and preserve the Acquired Assets in their current
condition (except for changes in the ordinary course of business). The Seller
shall not, without the prior written consent of the Buyer, engage in any
transaction related to the Acquired Assets or the Business not in the ordinary
course or engage in any activity which could have a material and substantial
adverse effect thereon. The Seller shall use commercially reasonable efforts to
preserve the Acquired Assets (except sales of Inventory in the ordinary course
of business) and the Business, to keep available the services of the employees,
agents and consultants of the Business, and to maintain the goodwill of the
suppliers to and the customers of the Business. Without limiting the generality
of the foregoing, the Seller shall not, between the date of this Agreement and
the Closing Date, without the prior written consent of the Buyer:
(i) enter into any agreement, contract, commitment or
arrangement (A) with any present or former shareholder, director, officer,
employee or consultant or for the employment of any person, including any
consultant, in connection with the Business, (B) with any labor union or other
representative of employees of the Business, (C) for the future lease or
purchase of, or payment for, supplies, products, machinery or equipment for the
Business, or for the performance of services for the Business by a third party,
involving in any one case $10,000.00 or more, other than Inventory purchases for
the Business in the ordinary course of business consistent with the Seller's
levels of prior Inventory purchases, (D) to sell or supply products or to
perform services for the Business, involving in any one case $10,000.00 or more,
(E) with any representative, sales agency, dealer or distributor, for the
Business (F) limiting or restraining the Business from engaging or competing in
any liens of business with any person, or (G) any other agreement, contract,
commitment or arrangement for the Business exceeding $10,000.00 in value;
(ii) grant rights under any license, franchise, or
distributorship agreement in respect of the Business or the Products;
(iii) modify, amend, terminate, assign, waive, release
or relinquish any rights or claims pursuant to any Customer Contract, Vendor
Contract or Lease;
<PAGE>
(iv) grant any increase in the salary or other
compensation of, or grant any bonus to, managers or other employees of the
Business who may be employed by the Buyer after the Closing, or make any loan to
or enter into any material transaction of any other nature with such managers or
employees;
(v) take any action to institute any new severance or
termination pay practices with respect to any managers or other employees of the
Business who may be employed by the Buyer after Closing, or to increase benefits
payable under existing severance or termination pay policies; or
(vi) adopt or amend, in any respect, except as may be
required by applicable law or regulation, any bonus, profit sharing,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust, fund
plan or arrangement for the benefit or welfare of any managers of other
employees of the Business who may be employed by the Buyer after the Closing.
(b) CONTINUED INFORMATION. Between the date of this
---------------------
Agreement and the Closing Date, the Seller shall (i) advise the Buyer of each
significant business decision affecting the Business made by the senior
management of the Business before each such decision is implemented or
announced, and (ii) give the Buyer prompt written notice of any material change
in any of the information contained in the Seller's representations and
warranties set forth herein.
(c) ACCESS. At all reasonable times during normal business
------
hours prior to the Closing, the Seller shall give the Buyer, the Parent and
their representatives access to (i) the Acquired Assets (and the Seller's
documentation related thereto) in order to verify the existence and condition
thereof, (ii) the Seller's sales records relating to the Products, the Business
and the Serviced Accounts, and (iii) the Seller's employees involved in the
Business in order to review and discuss transition matters. Access to the
Seller's employees shall be subject to the Seller's approval (which shall not be
unreasonably withheld), at the Seller's option shall be made in the presence of
the Seller or the Seller's designee, and shall not disrupt or interfere with the
Seller's business operations.
(d) NO INCONSISTENT ACTIVITIES. Neither the Seller nor
--------------------------
any of its officers, shareholders and other representatives will, directly or
indirectly, from the date hereof to and including the Closing Date or the
earlier termination of this Agreement, initiate, solicit, or participate in any
way in proposals, discussions or negotiations with, or provide any information
or assistance to, any third party concerning any acquisition of all or any part
of the Acquired Assets or the Business (whether by merger, purchase of assets,
tender offer or otherwise).
(e) CONFIDENTIALITY. The parties acknowledge their
---------------
respective obligations pursuant to the Mutual Nondisclosure and Confidentiality
Agreement between the Seller and the Parent dated January 22, 1998.
9. CONDITIONS PRECEDENT TO THE BUYER'S AND THE PARENT'S OBLIGATIONS.
----------------------------------------------------------------
The obligations of the Buyer and the Parent under this Agreement are subject, at
the option of the Buyer and the Parent, to fulfillment or waiver of each of the
following conditions at or prior to
17
<PAGE>
the Closing, and the Seller shall exert all reasonable efforts to cause each
such condition to be so fulfilled:
(a) All representations and warranties of the Seller
contained herein, or in any document delivered in connection with this
Agreement, shall be correct and complete in all material respects when made and
shall be deemed to have been made again at and as of the Closing.
(b) Except for product development and product deliveries
set forth in Schedule 2(a), all material agreements and obligations required by
-------------
this Agreement to be performed by the Seller at or before the Closing shall have
been duly performed insofar as such performance is reasonably practical.
(c) Since the date of this Agreement, there shall not
have occurred any material adverse change, or the discovery of a condition or
the occurrence of any event which would result in a material adverse change in
the Acquired Assets or the Business.
(d) All documents and agreements required to be delivered
to the Buyer at or prior to the Closing shall have been so delivered and the
Seller shall be able to deliver and convey full, actual and unimpeded possession
of, and unencumbered title (except for the Permitted Liens or relating to the
Assumed Liabilities) to, all of the Acquired Assets.
(e) No governmental agency (federal, state, or local) or
any other person or entity shall have: (i) objected to or sought to prevent or
limit (by notice, legal process or otherwise) the consummation of any of the
transfers, payments or other transactions contemplated hereby, (ii) indicated an
intention to attempt to set aside any of such transfers, payments or other
transactions, whether before or after its consummation, or to cause the Buyer to
withhold any payment to the Seller or to divest itself of any of the property
acquired, or (iii) asserted that any of such transfers, payments or other
transactions are not in compliance with law. All consents, approvals and actions
of, filings with and notices to any governmental or regulatory authority
necessary to permit the Seller and the Buyer to perform their obligation under
this Agreement and to consummate the transactions contemplated hereby shall have
been duly obtained, made or given and shall be in full force and effect.
(f) There shall be delivered to the Buyer a certificate
executed by the President or a Vice President of the Seller, dated as of the
Closing Date, certifying that the conditions set forth in paragraphs (a) through
(e), inclusive, of this Section 9 have been fulfilled.
---------
10. CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS. The
------------------------------------------------
obligations of the Seller at the Closing shall be subject, at the option of the
Seller, to fulfillment or waiver of each of the following conditions at or prior
to the Closing, and the Buyer and the Parent shall exert all reasonable efforts
to cause each such condition to be so fulfilled:
(a) All representations and warranties of the Buyer and the
Parent contained herein, or in any document delivered in connection with this
Agreement, shall be correct
18
<PAGE>
and complete in all material respects when made and shall be deemed to have been
made again at and as of the Closing.
(b) All agreements and obligations required by this
Agreement to be performed by the Buyer and the Parent at or before the Closing
shall have been duly performed in all material respects.
(c) All documents and agreements required to be delivered
to the Seller at or prior to the Closing shall have been so delivered.
(d) No governmental agency (federal, state, or local) or
any other person or entity shall have: (i) objected to or sought to prevent or
limit (by notice, legal process or otherwise) the consummation of any of the
transfers, payments or other transactions contemplated hereby, (ii) indicated an
intention to attempt to set aside any of such transfers, payments or other
transactions, whether before or after its consummation, or to cause the Buyer to
withhold any payment to the Seller or to divest itself of any of the property
acquired, or (iii) asserted that any of such transfers, payments or other
transactions are not in compliance with law. All consents, approvals and actions
of, filings with and notices to any governmental or regulatory authority
necessary to permit the Seller and the Buyer to perform their obligations under
this Agreement and to consummate the transactions contemplated hereby shall have
been duly obtained, made or given and shall be in full force and effect.
(e) The Seller shall have received the consent of the
Imperial Bank to transfer the Acquired Assets to the Buyer in accordance with
the terms of this Agreement free of all liens and security interests of the
Imperial Bank.
(f) There shall be delivered to the Seller certificates
executed by the President or Vice President of the Buyer and of the Parent,
dated as of the Closing Date, certifying that the conditions set forth in
paragraphs (a) through (e), inclusive, of this Section 10 have been fulfilled.
-----------
11. INDEMNIFICATION.
---------------
(A) INDEMNITY FROM THE SELLER. Subject to the limitations
-------------------------
set forth in Section 11(d), the Seller hereby agrees to indemnify, defend and
hold harmless from and after the Closing the Buyer and the Parent and their
respective officers, directors, shareholders, subsidiaries, affiliated
companies, successors and assigns from and against all losses, judgments,
settlements, claims, fines, penalties, liabilities, damages, costs or expenses
(including without limitation attorneys' fees) (collectively, "Losses") asserted
against or incurred or sustained by the Buyer, the Parent or both to the extent
of the Losses arising out of or resulting, in whole or in part, from:
(i) any breach of any warranty or any
misrepresentation by the Seller, or the non-performance of any
covenant, agreement or obligation to be performed on the part of the
Seller (and not assumed by the Buyer pursuant to this Agreement) under
this Agreement or any of the related agreements;
19
<PAGE>
(ii) any claim, liability or obligation arising out of
or relating to any Excluded Obligation:
(iii) any claims or actions by third parties
(including, without limitation, employees, former employees, and
governmental entities) relating to any of the Acquired Assets, the
Products, or the Business, and accruing on or before the Closing Date,
or any acts or omissions of the Seller with respect to third parties,
whether or not disclosed to the Buyer, and whether accrued or
occurring before or at the Closing that do not relate to the Assumed
Liabilities;
(iv) any claim or allegation that any of the
Intellectual Property or the ownership, marketing, licensing, sale or
use thereof or of any of the other Acquired Assets or the Products
infringes any patent, copyright, trademark, or other proprietary third
party right;
(v) any and all other debts, obligations or
liabilities of the Seller at any time or any third party claims or
claims from the Seller's creditors attributable thereto (except to the
extent that any such debt, obligation or liability is expressly
assumed by the Buyer pursuant to Section 2 hereof);
---------
(vi) any claim, liability or obligation arising
out of or relating to the disclosure on Schedule 6(a); and
(vii) all reasonable costs, fees and expenses
(including attorneys' fees) incident to any of the foregoing or
incurred in enforcing this indemnity.
(b) INDEMNITY FROM THE BUYER AND THE PARENT. The Buyer and
---------------------------------------
the Parent hereby agree to indemnify, defend and hold harmless the Seller and
its officers, directors, shareholders, subsidiaries, affiliated companies,
successors and assigns from and against and to the extent of all Losses
asserted against or incurred or sustained by the Seller arising out of or
resulting from in whole or in part:
(i) any breach of any warranty or any
misrepresentation by the Buyer or the Parent, or the non-performance
of any covenant, agreement or obligation to be performed by the Buyer
or the Parent under this Agreement or any of the related agreements;
(ii) any claims, liability or obligation arising out
of or relating to any Assumed Obligation;
(iii) any claims or actions by third parties (including
without limitation, employees, and governmental entities) relating to
any of the Acquired Assets, the Products or the Business, accruing
after the Closing Date, or any acts or omissions of the Buyer with
respect to its conduct of the Business that do not relate to the
Excluded Obligations; and
(iv) all reasonable costs, fees and expenses
(including attorneys' fees) incident to any of the foregoing or
incurred in enforcing this indemnity.
20
<PAGE>
(C) NOTICE AND OPPORTUNITY TO DEFEND.
--------------------------------
(i) Promptly after the receipt by any person or
entity entitled to indemnification hereunder (the "Indemnified Party") of
notice of any claim or the commencement of any action or proceeding by a third
party covered by the indemnification hereunder, the Indemnified Party will, if a
claim with respect thereto is to be made against another party hereto (the
"Indemnifying Person") pursuant to Section 11(a) or 11(b), as the case may be,
------------- -----
give such Indemnifying Person written notice of such claim or the commencement
of such action or proceeding, provided that failure of the Indemnified Party to
give reasonably prompt notice of any claim or claims shall not release, waive or
otherwise affect the obligations under this Section 11 of the Indemnifying
----------
Person with respect thereto except to the extent that such Indemnifying Person
can demonstrate actual loss or prejudice as a result of such failure.
(ii) Unless the Indemnified Party reasonably believes
that the Indemnifying Person will be unable or not required to fully indemnify
the Indemnified Party for any such claim, action or proceeding, the Indemnifying
Person may elect to defend against such claim or defend such action or
proceeding, at its sole cost and expense, and in such event the Indemnified
Party shall, at its sole expense, have the right to participate in (but not
control) the defense through counsel chosen by the Indemnified Party. So long as
the Indemnified Person (A) is in good faith so defending, and complying with
each of its obligations under this Section 11 or (B) is not given the
----------
opportunity to so defend pursuant to the preceding sentence, as the case may be,
the Indemnified Party shall not compromise or settle any such claim without the
prior written consent of the Indemnifying Person, which consent shall not be
unreasonably withheld or delayed. In no event shall the Seller, if it is the
Indemnifying Person in respect of any claim described in Section 11(a)(iv)
-----------------
hereof, be entitled to settle any such claim without the Buyer's written
consent, provided that if the Buyer refuses to accept a settlement offer for
--------
which the Seller is prepared to provide complete indemnification in accordance
with the Seller's obligations under this Section 11, the Buyer thereafter shall
----------
be responsible for paying the Buyer's attorneys' fees and expenses arising from
continued litigation, but the Seller shall remain responsible for payment of the
ultimate judgment, if any, to the extent of the Seller's obligations under this
Section 11.
- ----------
(iii) If the Indemnifying Person cannot or does not
elect to defend a claim against the Indemnified Party or does not so defend and
continue to so defend in compliance with all of the terms of this Section 11,
----------
the Indemnified Party may defend such claim, action or proceeding in such manner
as the Indemnified Party may deem appropriate, including, but not limited to,
settling such claim, action or proceeding on such terms as the Indemnified Party
may deem appropriate (but after giving notice of the same to the Indemnifying
Person and obtaining the consent of the Indemnifying Person to settle such
claim, action or proceeding, which consent shall not be unreasonably withheld),
and the Indemnifying Person will promptly indemnify the Indemnified Party in
accordance with the provisions of Section 11(a) or 11(b), as the case may be.
------------- -----
(D) LIMITATION ON LIABILITY OF SELLER. The Seller shall not
---------------------------------
have any obligation to indemnify the Buyer or the Parent under this Section 11
----------
until the Buyer and the Parent
21
<PAGE>
have suffered Losses that, in the aggregate, exceed $30,000,00, provided that
--------
Losses arising out of or resulting from the failure of the Seller to pay all
taxes, penalties and interest related thereto, and other charges of a
comparable nature irrespective of how designated, which have been incurred, due
or claimed to be due from the Seller or imposed on the Seller or the Seller's
properties, assets, income, payroll, franchises, licenses, sales or use by any
federal, state, local or foreign taxing authorities with respect to periods
ending on or prior to the Closing (collectively, "Tax Losses") shall not be
included in such calculation, and the Seller shall be obligated to indemnify the
Buyer or the Parent for all such Tax Losses in accordance with Section 11(a)
above. The seller shall be obligated to indemnify the Buyer and the Parent from
and against any Loss(es) upon such Loss(es) (other than Tax Losses) exceeding
$30,000,00. In no event shall the Seller be obligated to indemnify the Buyer or
the Parent from and against any Losses, if the Seller has paid an aggregate of
$150,000 to the Buyer or the Parent pursuant to this Section 11; provided that
---------- --------
the Seller's obligation to indemnify the Buyer and the Parent for Losses arising
out of or resulting from a breach of Section 6(q) hereof shall be limited to the
------------
Purchase Price; further provided that there shall be no limit on the Seller's
------- --------
obligation to indemnity the Buyer and the Parent for Losses arising out of or
resulting from (i) a breach of any covenant or agreement contained in Section
-------
12 hereof, (ii) any Excluded Obligation, and (iii) Tax Losses.
- --
(e) LIMITATION ON LIABILITY OF BUYER AND THE PARENT. The
-----------------------------------------------
Buyer and the Parent shall not have any obligation to indemnify the Seller under
this Section 11 until the Seller has suffered Losses that, in the aggregate,
----------
exceed $30,000.00, provided that Losses arising out of or resulting from the
--------
failure of the Buyer or the Parent to pay all taxes, penalties and interest
related thereto, and other charges of a comparable nature irrespective of how
designated, which have been incurred, due or claimed to be due from the Buyer
and the Parent or imposed on the Buyer and the Parent or their properties,
assets, income, payroll, franchises, licenses, sales or use by any federal,
state, local or foreign taxing authorities with respect to periods beginning
after the Closing (collectively, "Tax Losses") shall not be included in such
calculation, and the Buyer and the Parent shall be obligated to indemnify the
Seller for all such Tax Losses in accordance with Section 11(b) above. The
Buyer and the Parent shall be obligated to indemnify the Seller from and against
any Loss(es) upon such Loss(es) (other than Tax Losses) exceeding $30,000,00. In
no event shall the Buyer or the Parent be obligated to indemnify the Seller
from and against any Losses, if the Buyer and the Parent have paid an aggregate
of $150,000 to the Seller pursuant to this Section 11; provided that there shall
--------------------
be no limit on the Buyer's and the Parent's obligation to indemnify the Seller
for Losses arising out of or resulting from (i) a breach of any covenant or
agreement described in Section 12 hereof, (ii) any Assumed Liability, and (iii)
----------
Tax Losses.
(f) NON-THIRD PARTY CLAIMS. If any Indemnified Party
----------------------
should have a claim pursuant to Section 11(a) or 11(b) hereof, as the case may
------------- -----
be, against any Indemnifying Party that does not involve a third-party claim,
the Indemnified Party shall deliver, with reasonable promptness, a written
notice describing the claim and the Losses to the Indemnifying Person (the
"Indemnity Notice"). If the Indemnifying Person notifies the Indemnified Party
that it does not dispute the claim described in the Indemnity Notice within 30
days (the "Dispute Period") following receipt of the Indemnity Notice or fails
to notify the Indemnified Party within the Dispute Period whether the
Indemnifying Person disputes the claim described in the Indemnity Notice, the
Loss(es) in the amount specified in the Indemnity Notice will be conclu-
<PAGE>
sively deemed a liability of the Indemnifying Person hereunder and the
Indemnifying Person shall pay the amount of such Loss(es) to the Indemnified
Party on demand (subject to Sections 11(d) or 11(e) hereof, as the case may be).
------------- -----
If the Indemnifying Person has timely disputed its liability with respect to
such claim, the Indemnifying Person and the Indemnified Party will proceed in
good faith to negotiate a resolution of such dispute within 30 days following
expiration of the Dispute Period (the "Resolution Period"). If the dispute is
not resolved through negotiations within the Resolution Period, such dispute
shall be resolved by litigation in a court of competent jurisdiction.
(g) INDEMNITY; FINAL CASH PAYMENT. Any claim for
-----------------------------
indemnification made by the Buyer or the Parent under this Section 11 made
----------
within the 90 day period following the Closing Date, shall be with recourse
first to any amount of the Purchase Price then remaining unpaid (subject to
Section 11(d) hereof) but any such recourse is not a limitation of any claim for
- -------------
indemnification.
(h) ADJUSTMENTS. The Buyer and the Seller shall make
-----------
appropriate adjustments for the receipt by the Indemnified Party of tax benefits
and insurance proceeds, if any, in determining the amount of the Loss for
purposes of this Section 11.
----------
(i) TAX TREATMENT. Amounts payable in respect of the
-------------
parties' indemnification obligation shall be treated as an adjustment to the
Purchase Price. The Buyer and the Seller agree to cooperate in the preparation
of a supplemental Form 8594 as required by Treasury Regulations Sections
1.1060-1T(f) and (h)(2)(ii) as a result of any adjustment to the Purchase Price
pursuant to the preceding sentence.
(j) REMEDIES. The Buyer's and the Parent's sole and
--------
exclusive remedy for all Losses occasioned by, related to or arising out of any
breach (other than a willful breach) of the Seller's representations and
warranties in this Agreement or covenants or agreements made by the Seller in
the Agreement shall be to seek indemnification from the Seller under the
provisions of this Section 11 and 12. The Seller's sole and exclusive remedy for
---------- --
all Losses occasioned by, related to or arising out of any breach (other than a
willful breach) of the Buyer's and the Parent's representations and warranties
in this Agreement or covenants or agreements made by the Buyer and the Parent in
the Agreement shall be to seek indemnification from the Buyer and the Parent
under the provisions of this Section 11 and 12.
---------- --
12. MISCELLANEOUS COVENANTS AND AGREEMENTS.
--------------------------------------
(a) ROYALTY PAYMENTS. The Buyer shall pay to the Seller
----------------
amounts (the "Royalty Payments") equal to 20% of all annual revenue in excess of
$3.2 million recognized on the books of the Buyer from the licensing of
"FlowStream," a manufacturing execution system developed by Seller, for the
remainder of the 1998 calendar year following the Closing Date and for the
entire 1999 calendar year. Each Royalty Payment shall be payable within 30
business days after the end of the respective calender year. The Buyer shall, at
the Seller's reasonable request within 30 business days after receipt of each
Royalty Payment, provide the Seller with sufficiently detailed information
relating to the annual revenues recognized by the Buyer from the licensing of
"FlowStream," by the Buyer during the applicable calender year. In the event
23
<PAGE>
that there exists a discrepancy greater than $10,000 between the Buyer's and the
Seller's independent calculations as to the amount of any Royalty Payment, an
independent auditor mutually agreed upon by the Buyer and the Seller, or if not
so agreed upon by the Buyer and the Seller within 30 days after such dispute
shall have arisen, and independent auditor mutually agreed upon the respective
auditors of the Buyer and the Seller, shall determine the amount of the Royalty
Payment. All fees and expenses relating to the services provided by the
independent auditor shall by paid by the Seller, provided however, if the amount
of the Royalty Payment determined by the independent auditor exceeds the Buyer's
calculated amount by more than $10,000, then the Buyer shall pay the fees and
expenses of such independent auditor.
(b) BULK SALES COMPLIANCE. The Buyer and the Seller hereby
---------------------
waive compliance with the provisions of any applicable bulk sales law of the
Uniform Commercial Code of any state including California ("Bulk Sales Law") to
the extent applicable to any of the transactions contemplated by this
Agreement. The Seller hereby agrees to discharge when due all claims of
creditors or other persons, entities or governmental agencies which could be
asserted against the Buyer, by reason of any noncompliance with any Bulk Sales
Laws or other tax provisions, without recourse or liability of the Buyer. The
Seller hereby agrees to indemnify, defend and hold harmless the Buyer, its
affiliates, successors and assigns from and against (and shall, on demand,
reimburse the Buyer for) any Losses suffered or incurred by the Buyer or its
affiliates, successors or assigns in connection with any failure to comply with
the provisions of any Bulk Sales Law or any tax laws or provisions or any
failure of the Seller timely to discharge any such claims relating thereto.
(c) CONSENTS TO ASSIGNMENT. To the extent that any of the
----------------------
Customer Contracts, Vendor Contracts, Licenses or Leases are not assignable
without the consent of, or transfer of the Acquired Assets cannot be effected as
contemplated by this Agreement without the approval of, a third party and such
consent or approval is not obtained, neither this Agreement nor any related
document shall constitute an assignment or transfer, or an attempted assignment
or transfer thereof, if such assignment, transfer, or attempted assignment or
transfer would constitute a breach thereof. From and after the execution hereof,
the Seller agrees to use all reasonable efforts to obtain the consent or
approval of the other party to each Customer Contract, Vendor Contract and
Lease and the issuer of each License to the assignment thereof or the transfer
of the Acquired Assets to the Buyer. If such consent or approval is not
obtained, each of the parties agrees to cooperate with the other in any
reasonable alternative arrangement to provide the Buyer the benefits of the
Customer Contracts, Vendor Contracts, Leases and Licenses and all of the
Acquired Assets.
(d) EMPLOYEE MATTERS. The Seller agrees that the Buyer may, but
----------------
need not, make offers to any of the employees of the Seller engaged in the
Business for employment, at will, by the Buyer within 10 days following the
Closing; provided offers to employees that would be seconded to the Buyer may be
--------
made by the Buyer within 12 months following the Closing. The Seller shall bear
all resulting liabilities, if any, caused by or arising from any termination of
its employees (other than termination after the Closing of employees of the
Buyer), including but not limited to, severance pay, accrued wages or vacation
pay, sick leave, unemployment compensation, claims for back pay and/or
reinstatement, claims for contributions
24
<PAGE>
or benefits under the provisions of any employee benefit plan, claims asserting
the right to participate in any medical insurance program under COBRA or
comparable state law, any funding or withdrawal liability relating to any
employee benefit plan, and any and all claims arising out of employment on or
prior to the Closing Date. The Seller agrees that it will not notify, promise,
represent, advise, or otherwise communicate to any employee that the Buyer will
be hiring any or all such employees or otherwise make any offer of employment on
behalf of the Buyer. The parties acknowledge and agree that, immediately
following the Closing, the Buyer may, but is not obligated to, hire as at-will
employees any or all of the employees currently employed by the Seller in
connection with the Business, except that the Buyer agrees to employ Lloyd
Payton on terms and with benefits generally no less favorable than the terms and
benefits currently provided to him by the Seller, as described on Schedule
--------
12(d).
- -----
(e) NON COMPETITION. Seller shall not, until the third
---------------
anniversary of the Closing Date (or sooner, if the Buyer is no longer engaged in
the Business), directly or indirectly through any corporation, partnership or
other legal entity in the capacity of a partner, holder of more than a 5%
ownership interest thereof or otherwise, participate or engage in the Business
or otherwise lend assistance (financial or otherwise) to any person or entity
participating or engaged in the Business except at the direction of and with the
consent of the Buyer.
(f) CONFIDENTIALITY. Subject to Section 12(g) hereof with
--------------- -------------
respect to information concerning the terms of this Agreement, from and after
the Closing the Seller, with respect to information relating to the Acquired
Assets, the Products and the Business, and the Buyer and the Parent, with
respect to any other information disclosed by the Seller to the Buyer which is
confidential and proprietary to the Seller, shall keep confidential all such
information and shall not use any such information or disclose any such
information to any third parties (other than (i) to professional advisors who
have agreed to maintain such information in confidence, (ii) as shall be
required in testimony pursuant to a subpoena issued by a court of competent
jurisdiction, after first having given sufficient written notice thereof to
the other party or parties, as the case may be, so that the other party or
parties have an opportunity to contest same, (iii) as shall be required by the
rules and regulations of the Securities and Exchange Commission, or (iv) as
shall be required for the completion of tax returns). The Seller has notified
the Buyer that customers identified in Schedule 1(d) have certain rights to
-------------
source codes relating to the Business pursuant to agreements with respect
thereto identified in Schedule 1(d). Information generally known to the public
-------------
and to the industry, other than as a result of a breach of this Section 12(f) by
-------------
the party charged with disclosure in violation of this Section 12(f), shall not
-------------
be deemed confidential and is not subject to the terms and conditions of this
Section 12(f). If a breach of such obligation occurs or is threatened, in
- -------------
addition to any other rights and remedies provided in this Agreement or in law
or at equity (each of which shall be independent and severally enforceable), the
aggrieved party shall have the right and remedy to have this Section 12(f)
-------------
specifically enforced by any court having jurisdiction, it being agreed that
such breach or threatened breach will cause irreparable injury to such aggrieved
party and that money damages alone will not provide an adequate remedy. The
prevailing party shall be entitled to recover from the losing party reasonable
attorneys' fees and expenses and other costs of any such legal action.
25
<PAGE>
(G) RELEASE OF INFORMATION. The parties hereto agree to
----------------------
cooperate in releasing information concerning this Agreement and the
transactions contemplated herein. Until after the Closings, each of the parties
hereto shall furnish to the other party drafts of all releases prior to
publication thereof, all filings to be made with governmental authorities prior
to the filing thereof, and all notices to customers and vendors of the Business
prior to the distribution thereof, to the extent such releases, filings or
notices relate to this Agreement or the transactions contemplated hereby.
Nothing contained herein shall prevent any party at any time from (i) furnishing
any information to any governmental agency or (ii) disclosing any information if
required by law.
(h) FINDERS. With respect to all Losses, if any, arising from
-------
the employment or other engagement by either party hereto of, or from services
rendered to such party by, any finder, broker, agent or other intermediary in
connection with the introduction or bringing together of the parties hereto, or
the negotiation or consummation of this Agreement or any related agreement
referred to herein (or any allegation having a reasonable basis as to any such
employment or other engagement or services), such party shall indemnify, defend
and hold the other party and the affiliates, successors and assigns of such
other party harmless against such Losses.
(i) ACCESS TO CUSTOMERS, SUPPLIERS AND EMPLOYEES. At the
--------------------------------------------
election of the Buyer from time to time prior to or within 2 days subsequent to
the Closing Date, the Seller shall provide reasonable access and introductions
to the customers of, suppliers to and employees of the Business.
(j) ACCESS. (i) After the Closing, the Buyer and its authorized
------
agents, attorneys and accountants, shall have access upon reasonable notice to
any business records of the Seller to the extent reasonably required by the
Buyer in connection with any administrative, court or other governmental
proceedings (including tax audits) or for any other reasonable and proper
purpose. (ii) After the Closing, the Seller and its authorized agents,
attorneys and accountants, shall have access upon reasonable notice to any
business records of the Buyer to the extent reasonably required by the Seller in
connection with any administrative, court or other governmental proceedings
(including tax audits) or for any other reasonable and proper purpose. (iii)
After the Closing, the Buyer and its employees, agents and accounts, shall have
access upon reasonable notice to any business records of the Buyer which have
not yet been delivered by the Seller to the Buyer. (iv) For one year after the
Closing, the Seller shall make reasonably accessible to the Buyer, its
employees who may have information concerning the Business, to be responsive to
questions the Buyer may have as to the Business, its customers, and the
Software.
(k) SURVIVAL. Each representation, warranty, indemnity,
--------
covenant and agreement made by the Seller or the Buyer in this Agreement
shall survive the Closing through but not beyond the first anniversary
of the Closing Date except that each representation, warranty, indemnity,
covenant and agreement contained in Sections 6(a) (but, notwithstanding the
-------------
disclosure on Schedule 6(a), limited solely to the representation relating to
-------------
the disclosure on such Schedule 6(a)), 6(f), 6(q), 12(a), 12(e) and 11
------------- ---- ---- ----- ----- --
(only to the extent related to representations, warranties,covenants and
and agreements contained in Sections 6(a) (but, notwithstanding the
-------------
disclosure on Schedule 6(a), limited solely to the representation relating to
-------------
the disclosure on such Schedule 6 (a)), 6(f), 6(q), 12(a) and 12(e) of this
-------------- ---- ---- ----- -----
Agreement) shall survive until the third anniversary of the the Closing Date,
and any claims relating to a breach of such designated representations,
warranties, covenants or
26
<PAGE>
agreements or claims to recover under such indemnities shall not be subject to
any defense based upon non-survival of such representations, warranties,
indemnities, covenants and agreements. Notwithstanding the foregoing provisions
of this Section 12(k), the representations, warranties, indemnities, covenants
-------------
and agreements set forth in the Secondment Agreement by and between the Seller
and the Buyer and the documents delivered pursuant to Sections 5(a), 5(b)(viii),
5(c)(viii) and 5(d) of this Agreement, shall be governed by the terms thereof.
(l) ADDITIONAL PAYMENTS. The Buyer will make additional payments
-------------------
to the Seller for rental of space from the Seller after the Closing, secondment
of employees and services rendered by the Seller to the Buyer after the Closing
(including without limitation, the provision of services by the Seller through
the Seller's employees and expenses borne by the Seller for providing services
and equipment) in such amounts and upon such terms and conditions as the Buyer
and the Seller shall agree. The Buyer will make additional payments to the
Seller for reimbursement of equipment, lease, trade show, utility and other
deposits or prepayments made by the Seller prior to the Closing and uninvoiced
services rendered by the Seller to customers on a dollar-for-dollar basis.
(m) CERTAIN SERVICES. The Seller is a party to an agreement with
----------------
EDS for the provision of MIS and related services to the Seller, including the
Business (the "EDS Agreement") and is a party to an agreement with HCL America,
Inc. ("HCL") dated May 21, 1997 for the provision of consulting services in
hardware and software development to the Seller, including the Business (the
"HCL Agreement"). The EDS Agreement and the HCL Agreement will not be
transferred to the Buyer. The Seller and the Buyer shall cooperate in
introducing the Buyer to EDS and HCL and each shall use reasonable commercial
efforts in negotiating agreements as soon as possible after the Closing between
the Buyer and each of EDS and HCL for similar services to those provided the
Seller under the respective agreements with the Seller. During the transition
period, the Seller shall arrange for MIS services to be provided to the Buyer
for the Business under the EDS Agreement and for consulting services for
hardware and software development to be provided to the Buyer for the Business
under the HCL Agreement. The Seller and the Buyer agree that all intellectual
property developed on behalf of the Buyer for the Business under the HCL
Agreement during the transition period shall be owned by the Buyer.
(n) EMPLOYEE CONFIDENTIALITY AND NON-COMPETITION MATTERS. The
----------------------------------------------------
parties acknowledge that the Seller has rights in and to confidentiality and or
non-competition agreements or arrangements (which may be in writing or exist by
operation of law) between the Seller and its employees and consultants (the
"Rights"). In order for the Buyer to benefit from the Rights, the Seller agrees
that, upon the request of the Buyer, on an as-needed basis and in order to
protect the Business, the Products or the Acquired Assets, the Seller will
either (i) grant to the Buyer third-party beneficiary rights to the Rights, or
(ii) bring an action to enforce the Rights on behalf of, for the benefit of or
as agent for the Buyer at the Buyer's cost and expense.
(o) DELIVERIES. When delivered pursuant to Section 5 (i) Appendix
---------- --------
I will contain true and complete copies (or, to the extent oral, descriptions)
- -
of all contracts, purchase orders, commitments and arrangements in respect of
services, leased machinery or equipment and owned or leased real property used
in or necessary for the conduct of the Business, (ii) Appendix II will contain
-----------
true and complete copies (or, to the extent oral, descriptions) of all
contracts, purchase orders, commitments and arrangements with third-parties for
supplies, requirements or services relating to the Business or the Products,
(iii) Appendix III will contain
------------
27
<PAGE>
true and complete copies of all Licenses material to the Business, and (iv) all
Schedules will contain true and complete information.
(p) PERMITS. Within 10 days following the Closing, the Seller
-------
will provide to the Buyer and the Parent copies of all materials Permits.
13. TERMINATION.
-----------
(a) TERMINATION GENERALLY. This Agreement may be terminated at
---------------------
any time prior to the Closing by any one of the following methods:
(i) MUTUAL CONSENT. By the Buyer and the Seller mutually
--------------
agreeing in writing to terminate this Agreement; or
(ii) BY THE BUYER. By the Buyer in writing if any of the
------------
conditions provided in Section 9 hereof has not been fulfilled, and
---------
has not been waived by the Buyer in writing, on or before March 15,
1998; or if any of the following has occurred; appointment of a
receiver or liquidator for the Seller or any of its properties or the
filing of any petition by or against the Seller seeking adjudication
of the Seller as a bankrupt or insolvent or the making of any
assignment for the benefit of creditors of the Seller or admission by
the Seller in writing of its inability to pay its debts as they mature
or the institution of any proceeding for the purpose of effecting an
arrangement or composition with creditors or any reorganization of the
Seller under any federal or state law relating to bankruptcy or the
relief of debtors; or
(iii) BY THE SELLER. By the Seller in writing if any of the
-------------
conditions provided in Section 10 hereof has not been fulfilled, and
----------
has not been waived by the Seller in writing on or before March 15,
1998; or if any of the following has occurred; appointment of a
receiver or liquidator for the Buyer or for the Parent or any of their
respective properties or the filing of any petition by or against the
Buyer or the Parent seeking adjudication of it as a bankrupt or
insolvent or the making of any assignment for the benefit of its
creditors or admission by the Buyer or the Parent in writing of its
inability to pay its debts as they mature or the institution of any
proceeding for the purpose of effecting an arrangement or composition
with creditors or any reorganization of the Buyer or the Parent under
any federal or state law relating to bankruptcy or the relief of
debtors.
In the event this Agreement is terminated in accordance with this Section 13(a)
-------------
or in accordance with Section 13(b); no party to this Agreement shall have any
-------------
obligation or liability of any nature whatsoever (including without limitation
any right to specific performance) to any other party hereto except as
specifically set forth in this Agreement and in the Mutual Nondisclosure and
Confidentiality Agreement between the Seller and the Parent dated January 22,
1998.
(b) EFFECT OF TERMINATION. In the event that any termination of
---------------------
this Agreement pursuant to this Section 13 is due to (i) the intentional
----------
non-fulfillment of any
28
<PAGE>
covenant or agreement by any party hereto or (ii) the misrepresentation or
breach or warranty on the part of any party hereto and such party had actual
knowledge of such misrepresentation or breach of warranty or had actual
knowledge of facts creating a substantial risk of such misrepresentation or
breach, the party in breach or default shall be liable to the other parties to
the extent of the expenses (including without limitation reasonable legal,
accounting and consulting fees and expenses) incurred by such other parties in
connection with this Agreement and for damages. The Buyer, the Seller and the
Parent agree that the obligations set forth in this Section 13(b) are intended
-------------
to survive any termination of this Agreement.
14. NOTICES. All notices or other communications required or
-------
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (i) when personally delivered, (ii) when
delivered via telecopier (and immediately confirmed by mail), or (iii) three
business days after having been mailed by first class registered or certified
mail, return receipt requested, postage prepaid, to the party to receive notice
at the address set forth below or to such other or additional address as either
party shall have specified by notice to the other party in accordance with this
Section 14.
- ----------
If to the Seller, at:
Consilium, Inc.
485 Clyde Avenue
Mountain View, California 94043
Attention: Senior Vice President
Facsimile:(650) 691-6150
with a copy concurrently to:
Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto California 94301-1825
Attention: Diane Holt Frankle
Facsimile:(415) 327-3699
If to the Buyer, at:
Bass Ten FlowStream, Inc.
One Electronics Drive
P.O.Box 3151
Trenton, New Jersey 08619
Attention: President
Facsimile:(609) 586-1593
29
<PAGE>
with a copy concurrently to:
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
Post Office Box 1945
Morristown, New Jersey 07962-1945
Attention: Joseph Lunin
Facsimile:(973) 966-1550
If to the Parent, at:
Base Ten Systems, Inc.
One Electronics Drive
P.O.Box 3151
Trenton, New Jersey 08619
Attention: President
Facsimile:(609) 586-1593
with a copy concurrently to:
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
Post Office Box 1945
Morristown, New Jersey 07962-1945
Attention: Joseph Lunin
Facsimile:(973) 966-1550
15. MISCELLANEOUS.
-------------
(a) ENTIRE AGREEMENT. This Agreement and the Schedules, Exhibits
----------------
and Appendices hereto constitutes the entire agreement and sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all prior agreements, covenants, arrangements, letters,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party (except that certain Mutual
Nondisclosure and Confidentiality Agreement dated January 22, 1998 between the
Seller and the Parent), and may not be modified, amended or terminated except by
mutual consent of the Buyer, the Seller and the Parent by a written agreement
specifically referring to this Agreement and signed by the Buyer, the Seller and
the Parent.
(b) NO WAIVER REMEDIES. No waiver of any breach or default
------------------
hereunder shall be considered valid unless in writing and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature. No failure on the
part of any party to exercise, and no delay in exercising, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or
30
<PAGE>
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege, and no waiver whatever shall be valid unless in writing
signed by the party or parties to be charged and then only to the extent
specifically set forth in such writing. All remedies, rights, powers and
privileges afforded the parties to this Agreement shall be cumulative and shall
not be exclusive of any remedies, rights, powers and privileges provided by law.
Each party hereto may exercise all such remedies afforded to it in any order of
priority.
(c) SPECIFIC PERFORMANCE. The parties hereto acknowledge
--------------------
that prior to the Closing (and following the Closing solely with respect to a
breach of Section 12(c) hereof) the legal remedy for breach by any of them of
-------------
their respective obligations hereunder will be inadequate and, therefore, in the
event of any actual or threatened breach of any such obligation prior to the
Closing (and provided this Agreement has not been terminated in accordance with
Section 13 hereof), the Buyer, the Seller and the Parent agree that, in addition
to any other available remedy, such obligation may be specifically enforced
against any of them through injunctive or other equitable relief obtained from a
court with appropriate jurisdiction. The prevailing party shall be entitled to
recover from the losing party actual, reasonable, and documented out-of-pocket
attorneys' fees and expenses and other costs of any such legal action.
(d) ASSIGNMENT; BENEFITS. This Agreement shall be binding
--------------------
upon and inure to the benefit of the respective successors and assigns of the
parties hereto; provided that no party may transfer or assign its rights or
delegate its performance hereunder without the prior written consent of the
other parties. This Agreement shall be for the sole benefit of the Seller, the
Buyer and the Parent and their respective successors and assigns, and shall not
be construed to provide any benefits to any third parties.
(e) HEADINGS; REFERENCES. The Index of Schedules, Exhibits
--------------------
and Appendices and the Section and paragraph headings contained herein are for
the purposes of convenience only and are not intended to define or limit the
contents of any Schedule, Exhibit Appendix, Section or paragraph. Unless
otherwise expressly stated herein, (i) references to Exhibits, Schedules,
Appendices, Sections and clauses shall refer to Exhibits, Schedules, Appendices,
Sections and clauses of this Agreement; (ii) words of any gender include each
other gender; (iii) words using the singular or plural number also include the
plural or singular number, respectively; (iv) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire Agreement; (v) the
phrase "ordinary course of business" refers to the Business; (vi) whenever this
Agreement refers to a number of days, such number shall refer to calendar days
unless Business Days are specified; (vii) all accounting terms used herein and
not expressly defined herein shall have the meanings given to them under GAAP;
(viii) any representation or warranty contained herein as to the enforceability
of a contract, agreement, or understanding shall be subject to the effect and
limitations of any bankruptcy, insolvency, reorganization, moratorium or other
similar law affecting the enforcement of creditors' rights generally and to
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law); (ix) whenever the words
"include," "includes" or "including" are used in this Agreement they shall be
deemed to be followed by the words "without limitation"; (x) the phrase "made
available" in this Agreement shall mean that the information referred to has
been made
31
<PAGE>
available to the party to whom such information is to be made available; (xi)
the phrases "the date of this Agreement", "the date hereof," and terms of
similar import, unless the context otherwise requires, shall be deemed to refer
to February 19, 1998, and (xii) the phrases "material adverse effect on the
Assets," "material adverse change in the Assets", "material to the assets" and
phrases of similar import shall be construed to refer to the Assets taken as a
whole and not to any single Asset individually.
(f) COOPERATION. Each party hereto shall cooperate and
-----------
shall take such further action and shall execute and deliver such further
documents as may reasonably be requested by the other parties in order to carry
out the provisions and purposes of this Agreement.
(g) TRANSACTION EXPENSES. Whether or not the transactions
--------------------
contemplated hereby are consummated, all legal and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses.
(h) COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
(i) SEVERABILITY. Should any provision of this Agreement
------------
for any reason be declared invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity or enforceability of any of the
other provisions of this Agreement, which other provisions shall remain in full
force and effect; and the application of any such invalid or unenforceable
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable shall be valid and be enforced to the fullest extent
permitted by law.
(j) GOVERNING LAW; JURISDICTION. This Agreement and all
---------------------------
amendments hereto shall be governed by and construed in accordance with the
internal laws of the State of New Jersey or the State of California applicable
to contracts made and to be performed therein. Each party submits to the
jurisdiction of any state court sitting in New Jersey or California or any
federal court for the District of New Jersey or for the _____________ of
California in any action or proceeding arising out of or relating to this
Agreement and brought in such court, and agrees that all claims in respect of
such action or proceeding may be heard and determined in any such court.
32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first above
written.
SELLER
------
CONSILIUM, INC.
By: /s/ Laurence R. Hootnick
________________________________________
Name: Laurence R. Hootnick
Title: President and Chief Executive Officer
BUYER:
-----
BASE TEN FLOWSTREAM, INC.
By: /s/ Thomas E. Gardner
________________________________________
Name: Thomas E. Gardner
Title: President and Chief Executive Officer
PARENT
------
BASE TEN SYSTEMS, INC.
By: /s/ Thomas E. Gardner
________________________________________
Name: Thomas E. Gardner
Title: President and Chief Executive Officer
33
<PAGE>
INDEX OF OMITTED EXHIBITS, SCHEDULES AND APPENDICES
---------------------------------------------------
TO THE ASSET PURCHASE AGREEMENT*
-------------------------------
Exhibit A Lease Assignments
Exhibit B Real Estate License Agreement
Exhibit C [This exhibit was deleted by the parties and is not a part of
the agreement.]
Exhibit D Form of Patent License Agreement
Exhibit E Form of Bill of Sale and Assumption Agreement
Exhibit F Form of Legal Opinion of the Seller's Counsel
Exhibit G Form of Legal Opinion of the Buyer's Counsel
Schedule 1(a) Software;
Shared Technology
Schedule 1(b) Equipment
Schedule 1(d) Serviced Accounts
Schedule 1(h) Intellectual Property
Schedule 2(a) Prepaid Maintenance Obligations;
Certain Employee Severance Information
Schedule 3(a) Allocation of Purchase Price
Schedule 6(a) Organization, Standing and Qualification
Schedule 6(d) Conflicts
Schedule 6(f) Encumbrances and Liens;
Locations of Business and Acquired Assets
Schedule 6(j) Labor Matters
Schedule 6(k) Claims and Litigation
Schedule 6(n) Environmental Matters
Schedule 6(o) OSHA Matters
Schedule 6(p) Non-Compliance with Contractual Requirements
Schedule 6(q) Intellectual Property Matters
Schedule 6(t) Relationship with Vendors and Customers
Schedule 12(d) Certain Employee Information
Appendix I Leases
Appendix II Vendor Contracts
Appendix III Licenses
Appendix IV Financial Statements
* The Registrant agrees to furnish supplementally a copy of any omitted exhibit,
schedule or appendix to the Commission upon request.
