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): January 22, 1997
STRUCTURAL DYNAMICS RESEARCH CORPORATION
(Exact name of Registrant as specified in its Charter)
(State or other jurisdiction of incorporation) Ohio
(Commission File No.) 0-16230
(IRS Employer Identification Number) 31-0733928
2000 Eastman Drive, Milford, Ohio 45150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (513) 576-2400
N/A
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
On December 16, 1996, Structural Dynamics Research
Corporation ("SDRC") and Control Data Systems, Inc. ("Control
Data") entered into an Acquisition Agreement (the "Acquisition
Agreement"), pursuant to which SDRC purchased all shares of
Metaphase Technology, Inc. ("Metaphase") owned by Control Data
(amounting to 50% of the total outstanding shares of Metaphase)
and certain assets of Control Data used in connection with Control
Data's activities as a reseller of Metaphase software. The
closing for such purchase was January 22, 1997. Metaphase is a
corporation formed as a joint venture between SDRC and Control
Data, and as a result of the purchase by SDRC of Control Data's
shares, Metaphase has become a wholly-owned subsidiary of SDRC.
The total purchase price for the shares of Metaphase and the
assets of Control Data was $21,150,000 cash, plus a two-year
warrant to purchase up to 750,000 shares of SDRC's Common Stock at
$28.00 per share. In addition, SDRC caused Metaphase to repay
$3,900,000 in debt to Control Data.
Metaphase develops and supports product data management
software applications. SDRC intends to use the assets purchased
from Control Data to further strengthen and expand its product
data management business.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired
No financial statements are required to be filed under Rule
3-05 of Regulation S-X.
(b) Proforma financial information
No proforma financial statements are required to be filed
under Rule 11-01 of Regulation S-X.
(c) Exhibits
Exhibit No. Description Page
2 Acquisition Agreement dated as of December 16, *
1996 by and among Structural Dynamics
Research Corporation and Control Data
Systems, Inc., as amended
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.
STRUCTURAL DYNAMICS
RESEARCH CORPORATION
Date: January 30, 1997 By:/s/ John A. Mongelluzzo
-------------------------
John A. Mongelluzzo,
Vice President,
Secretary and
General Counsel
ACQUISITION AGREEMENT
This Acquisition Agreement (the "Agreement") made this 16th
day of December, 1996 by and between Control Data Systems, Inc., a
Delaware corporation ("CDS") and Structural Dynamics Research
Corporation, an Ohio corporation ("SDRC").
WITNESSETH:
WHEREAS, CDS and SDRC are each owners of 50% of the
outstanding shares of common stock of Metaphase Technology, Inc.,
a Delaware corporation ("MTI");
WHEREAS, CDS wishes to sell to SDRC, and SDRC wishes to
purchase, all of the outstanding shares of common stock of MTI
owned by CDS (the "Shares"); and
WHEREAS, CDS wishes to sell to SDRC, and SDRC wishes to
purchase, certain assets of CDS related to its product data
management software sales and support organization and certain
other assets of CDS, each as more particularly described in
Section 1.2;
WHEREAS, in connection with certain promissory notes from MTI
to CDS and other advances by CDS to MTI, MTI is currently indebted
to CDS in the principal amount of $3,600,000, and the parties
hereto expect that MTI may require additional advances from CDS,
all of which SDRC desires to cause MTI to pay in full to CDS upon
SDRC's purchase of the Shares;
NOW THEREFORE, in consideration of the mutual promises and
covenants contained herein, the parties hereto hereby agree as
follows:
ARTICLE
PURCHASE AND SALE
Section 1.1 Sale of the Shares. Subject to the terms and
conditions of this Agreement, CDS agrees to sell, assign, transfer
and deliver, free and clear of all liens and encumbrances, to SDRC
and SDRC agrees to purchase and accept, the Shares.
Section 1.2 Sale of the Assets. Subject to the terms and
conditions of this Agreement, CDS agrees, or to the extent owned
by any subsidiary of CDS, CDS agrees to cause such subsidiary, to
sell, assign, transfer and deliver, free and clear of all liens
and encumbrances except as specifically assumed as part of the
Assumed Liabilities (defined below), to SDRC and SDRC agrees to
purchase and accept, the assets listed on Schedule 1.2A (the
"Assets"). SDRC shall not assume any liability and shall not be
liable for any debts of or claims against CDS or any subsidiary of
CDS of any nature whatsoever, whether arising out of its purchase
of the Assets or otherwise, except those specific trade payables
and other liabilities which are specifically described on Schedule
1.2B, including the liabilities and obligations from and after the
Closing (defined below) under the contracts, agreements and
proposals included within the Assets (the "Assumed Liabilities").
The Assets and the Assumed Liabilities are sometimes referred to
herein collectively as the "Acquired CDS Business".
Section 1.3 Employees of CDS. With respect to employees
of the Acquired CDS Business located in the United States, SDRC
may offer employment to such employees it desires to employ, but
nothing herein shall be construed to obligate SDRC to employ or
offer employment to any employee of CDS located in the United
States. SDRC may make an offer of employment to any employee of
CDS located in the United States at any time prior to or as of the
Closing. With respect to employees of the Acquired CDS Business
located in Europe, SDRC shall employ all such employees, each to
be listed on Schedule 1.3 to be delivered at Closing, subject to
the limitations described in Section 9.1.11 and CDS' obligations
pursuant to Article 12. To the extent SDRC assumes any pension
liability for any such employees, CDS shall transfer to SDRC fully
funded pension assets for each such employee to be employed by
SDRC hereunder to whom such assets are attributable. SDRC shall
assume no liability in connection with its employment of any such
employees of CDS, including any liability for severance pay,
wages, salaries, commissions, bonuses, vacation pay, benefits
(including any health, dental, expense, profit sharing, pension,
bonus, retirement or other benefit plans) attributable to such
employees' employment with CDS prior to the Effective Date
(defined below), which such liability shall remain the sole
obligation of CDS, and shall constitute "Excluded Liabilities"
pursuant to Section 1.4, except to the extent any adjustment for
such liability is made pursuant to Section 2.2. At the Closing,
SDRC shall deliver to CDS Schedule 1.3, which shall contain a
complete and accurate list of all employees of CDS to be employed
by SDRC hereunder, including those certain employees of CDS
located in the United States which SDRC desires to employ, and
each of the employees of the Acquired CDS Business located in
Europe.
Section 1.4 Excluded Liabilities. As used herein,
"Excluded Liabilities" shall refer to all liabilities of CDS other
than the Assumed Liabilities.
Section 1.5 Purchase and Sale by Subsidiaries. SDRC
hereby acknowledges and agrees that portions of the Acquired CDS
Business may be owned by wholly-owned subsidiaries of CDS, and CDS
hereby acknowledges that as applicable, the representations,
warranties, covenants or other agreements hereunder by CDS shall
be equally binding upon its wholly-owned subsidiaries. CDS hereby
acknowledges and agrees that portions of the Acquired CDS Business
may be purchased by wholly-owned subsidiaries of SDRC, and SDRC
hereby acknowledges that as applicable, all representations,
warranties, covenants or other agreements hereunder by SDRC shall
be equally binding upon its wholly-owned subsidiaries. SDRC and
CDS hereby agree to, and to cause each of its subsidiaries to,
execute any and all documents and instruments, or take any other
action, necessary to effectuate such purchase or sale on behalf of
its subsidiaries pursuant to this Section 1.5.
<PAGE>
ARTICLE 2.
PURCHASE CONSIDERATION
Section 2.1 Purchase Consideration. As consideration for
the Shares and the Assets, SDRC shall pay over to CDS the sum of
$21,150,000 cash (subject to adjustment as described in Section
2.2, subject to the provisions of Sections 2.3, and less any
amount loaned pursuant to Section 5.6) and shall issue to CDS a
warrant, substantially in the form attached hereto as Exhibit A
(the "Warrant"), to purchase 750,000 shares of SDRC Common Stock.
As used herein, the term "Purchase Consideration" shall
collectively refer to such sum of $21,150,000, as adjusted, and
the Warrant .
Section 2.2 Adjustment of Purchase Consideration. Not
later than 15 days after the Closing, CDS shall deliver to SDRC a
balance sheet reflecting the Assets and the Assumed Liabilities,
dated as of December 31, 1996 (the "Effective Date"), and prepared
in accordance with generally accepted accounting principles and
the guidelines of Securities and Exchange Commission Regulation
SX, except that such balance sheet shall not include any
indebtedness of MTI to CDS or any other intangible assets of the
Acquired CDS Business (the "Effective Date Balance Sheet").
Within 60 days after receipt by SDRC of the Effective Date Balance
Sheet, SDRC's auditors, at SDRC's sole cost, shall conduct a
review of the Effective Date Balance Sheet, as adjusted by SDRC
pursuant to Section 9.2.2, to determine the net tangible book
value of the Acquired CDS Business, applying generally accepted
accounting principles, consistently applied. If CDS disagrees
with such determination of SDRC's auditors, CDS' auditors, at CDS'
sole cost, shall have 15 days to review the workpapers of SDRC's
auditors related to such review. If, based on such review, CDS'
auditors, applying generally accepted accounting principles,
consistently applied, disagree with SDRC's auditors as to the net
tangible book value of the Acquired CDS Business, such workpapers
shall be submitted to Arthur Andersen Co. in Minneapolis,
Minnesota for its review, the costs of which shall be shared
equally by the parties hereto. Arthur Andersen Co. shall have 30
days to determine the net tangible book value of the Acquired CDS
Business, and such determination shall be final and binding on
both parties hereto. The Purchase Consideration shall be adjusted
(i) upward on a dollar-for-dollar basis to the extent the net
tangible book value of the Acquired CDS Business, as determined by
such procedure, exceeds $3,500,000, and (ii) downward on a dollar-for-
dollar basis to the extent the net tangible book value of the
Acquired CDS Business, as determined by such procedure, is less
than $2,000,000. The amount of any such downward adjustment shall
be deducted from the Escrow Amount (defined below). SDRC shall pay
the amount of any such upward adjustment to CDS within 15 days
after the completion of such review procedure.
Section 2.3 Escrow. At the Closing, SDRC shall deposit
$2,500,000 of the Purchase Consideration (the "Escrow Amount")
into an interest-bearing account maintained at a bank acceptable
to both SDRC and CDS, with all interest earned thereon to accrue
to CDS pursuant to an escrow agreement to be executed at the
Closing, substantially in the form attached hereto as Exhibit B
(the "Escrow Agreement"). The Escrow Amount shall provide a
source of funds out of which claims by SDRC for indemnification
under this Agreement may be satisfied. The Escrow Amount shall be
released from escrow and paid to CDS as follows, in accordance
with Escrow Agreement:
(a) Upon the completion of the review procedure described in
Section 2.2 with respect to the Effective Date Balance Sheet, the
amount of any downward adjustment shall be released from escrow
and paid over to SDRC, and an amount equal to $1,250,000 less the
amount of any such downward adjustment shall be released from
escrow and paid over to CDS; and
(b) Upon the later of (i) March 31, 1998, or (ii) a date 30
days following the release to the public of SDRC's audited
financial statements for fiscal year 1997, any remaining portion
of the Escrow Amount, less any amount for which SDRC has provided
notice to CDS of its claim for indemnification pursuant to Section
12.3, shall be released from escrow and paid over to CDS.
Section 2.4 Allocation of the Purchase Consideration.
The Purchase Consideration shall be allocated in accordance with
Schedule 2.4, to be provided by SDRC at the Closing, subject to
mutual agreement by the parties.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CDS
Section 3.1 Generally:
CDS hereby represents and warrants to SDRC, its successors
and assigns as follows:
3.1.1 Organization and Good Standing. CDS is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and duly authorized to
carry on the business presently conducted by it.
3.1.2 Corporate Power and Authorization. This
Agreement has been approved by all requisite corporation action,
in accordance with and as required by law and in accordance with
the Articles of Incorporation and Bylaws of CDS. CDS has the
corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. This Agreement has been duly
executed and delivered, and constitutes valid and binding
obligations of CDS, each enforceable in accordance with its terms,
except to the extent that (i) enforceability thereof may be
limited by insolvency, reorganization, liquidation, bankruptcy,
readjustment of debt or other laws of general application relating
to or affecting the enforcement of creditors' rights, and (ii) the
availability of certain remedies may be precluded by general
principles of equity.
3.1.3 No Violation. Neither the execution of this
Agreement, nor the consummation of the transactions contemplated
hereby, (i) materially conflicts with, results in a material
breach of, materially violates or constitutes a material default
under, CDS's Articles of Incorporation or Bylaws or any federal,
state or local law, statute, ordinance, rule, regulation or court
or administrative order, or any agreement, arrangement or
commitment to which CDS or any of its property is subject or
bound; or (ii) results in the creation of or gives any person the
right to create any material lien, charge, encumbrance, security
agreement or any other rights of others or other material adverse
interest upon any material right, property or asset belonging to
CDS.
3.1.4 Full Disclosure. No representation or warranty
made by CDS in this Agreement or any Schedule or Exhibit hereto
and any statement or certificate or memorandum addressed to SDRC
furnished or to be furnished by CDS pursuant hereto or in
connection with the transactions covered hereby contains or will
contain any untrue statement of a material fact, or omits any
material fact, the omission of which would be misleading.
Section 3.2 With respect to the Shares:
CDS hereby represents and warrants to SDRC, its successors
and assigns, to the knowledge of CDS (but absolutely as to Section
3.2.5), as follows:
3.2.1 Organization and Good Standing. MTI is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and duly authorized to
carry on the business presently conducted by it. MTI is qualified
to do business in all jurisdictions in which it is required to be
so qualified.
3.2.2 Capitalization. MTI's authorized capital stock
consists of 1,300 common shares, without par value per share, of
which 1,300 shares are issued and outstanding, fully paid and
nonassessable. MTI has no outstanding options, warrants or other
rights entitling another person to acquire any securities of MTI
of any kind.
3.2.3 Subsidiaries. MTI has no direct or indirect
subsidiaries or joint ventures.
3.2.4 Financial Statements. MTI has previously furnished
or made available to SDRC audited financial statements as of
December 31, 1995, 1994 and 1993 together with unaudited financial
statements for the nine month period ended September 30, 1996, for
MTI (collectively, the "Financial Statements"). The Financial
Statements fairly present in all material respects the financial
condition of MTI as of said dates and the results of MTI's
operations for the periods then ended, in conformity with
generally accepted accounting principles, consistently applied,
except that the September 30, 1996 Financial Statements do not
include footnotes in accordance with generally accepted accounting
principles or year end accruals or adjustments.
3.2.5 Title. CDS is the beneficial and record owner
of the Shares, free and clear of any liens or other encumbrances,
and will deliver the Shares at the Closing free and clear of any
liens or other encumbrances. MTI has good and marketable title to
all of the properties and assets reflected in the Financial
Statements for MTI as of the latest balance sheet contained in the
Financial Statements, and such properties and assets are in good
repair and operating condition, ordinary wear and tear excepted.
3.2.6 Accounts Receivable. Schedule 3.2.6 includes an
accurate aging schedule of all of the accounts receivable
reflected on MTI's latest balance sheet included in the Financial
Statements. The net accounts receivable reflected on the latest
balance sheet included in the Financial Statements will be fully
collectible after such date in the ordinary course of business.
3.2.7 Real Property. MTI does not own any real estate.
MTI is not a party to any lease for any real property, except as
disclosed on Schedule 3.2.7. MTI is not in material default under
any lease for real property and each such lease to which MTI is a
party constitutes a valid and binding obligation of the respective
parties thereto. There exist no material defaults under such
leases and no events have occurred that with notice, the lapse of
time, or otherwise, would constitute a material default under any
lease for real estate to which MTI is a party. With respect to
all real estate previously or currently leased, or to be leased by
MTI pursuant to Section 7.1.3: (i) CDS is the sole owner of any
and all interest in such real property subject to any such lease;
and (ii) MTI has been or will be the owner and holder of the
entire interest in the leasehold estate purported to be granted by
such lease.
3.2.8 Environmental Matters. (a) MTI is not in material
violation, nor has MTI received any notice of any material
violation, of any applicable federal, state or local environmental
law, regulation or ordinance (each hereinafter an "Environmental
Law"), including by way of illustration and not by way of
limitation, the Clean Air Act, the Federal Water Pollution
Control Act of 1972, the Resource Conservation and Recovery Act of
1976, the Comprehensive Environmental Response Compensation and
Liability Act of 1980, and the Toxic Substances Control Act
(including any amendments or extensions thereof, and rules,
regulations, standards or guidelines pursuant to any Environmental
Laws) and all other environmental standards or requirements; (b)
MTI is not subject to any existing, pending or threatened
investigation, inquiry or proceeding by any governmental authority
or to any material remedial obligations under any Environmental
Law, (c) there are no existing or pending requirements of any
governmental authority relating to environmental matters requiring
any material remedial action or other material work, repairs,
construction or capital expenditures with respect to the real
properties owned or leased by MTI, and (d) MTI has not been named
as a "potentially responsible party" in connection with any
litigation, investigation or similar matter.
3.2.9 Absence of Material Adverse Changes. Since
December 31, 1995, there have been no changes with respect to MTI
which have had a Material Adverse Effect, and no officer of CDS is
aware of any events with respect to MTI which have occurred since
December 31, 1995 or which are reasonably certain to occur in the
future and which reasonably can be expected to result in any
Material Adverse Effect.
3.2.10 Relationship with Distributors and Resellers. Set
forth on Schedule 3.2.10 is a list of all authorized distributors
and resellers of MTI. There exists no threat on the part of any
authorized distributor or reseller to materially reduce the volume
of its purchases from or sales to MTI or to otherwise materially
modify its business relationship with MTI.
3.2.11 Absence of Undisclosed Liabilities. Except to the
extent reflected or reserved against on the latest balance sheet
of MTI included in the Financial Statements, MTI has no known or
unknown liabilities or obligations (secured, unsecured, contingent
or otherwise), other than any liability or obligation which
individually or in the aggregate would not have a Material Adverse
Effect on MTI.
3.2.12 Litigation. There are no actions, suits,
proceedings, investigations or assessments of any kind pending or
threatened before any court, administrative agency, arbitration
association, or other regulatory body against MTI which could
reasonably be expected to result in any Material Adverse Effect on
MTI or which questions the validity or legality of this Agreement
or of any action taken or to be taken by MTI in connection with
this Agreement.
3.2.13 Taxes of MTI. Except to the extent reserved
against on the latest balance sheet included in the Financial
Statements, MTI has in all material respects (i) timely filed all
tax returns, schedules, declarations, and tax-related documents
(collectively, "Returns") required to be filed by any and all
jurisdictions to which it is or has been subject; (ii) timely paid
in full any taxes, interest and penalties with respect thereto,
subject to audit of the taxing authorities by such jurisdictions
and timely made any deposits of tax required by taxing
jurisdictions; (iii) fully accrued on its books an amount
sufficient to pay all taxes not yet due for any completed taxable
period; (iv) made timely payments of the taxes required to be
deducted and withheld from the wages paid to employees; and (v)
otherwise satisfied, in all material respects, all legal
requirements applicable to it with respect to all aforementioned
obligations to taxing jurisdictions. With the exception of the
Credit for Increased Research Expenditures under Section 41 of the
Internal Revenue Code, which has not yet been claimed for the tax
years 1993 and 1994, all Returns filed by MTI correctly reflect in
all material respects its income, expenses, deductions, credits
and loss carryovers and the taxes due and are otherwise accurate
and complete in all material respects. MTI has provided or made
available to SDRC true and complete copies of all federal income
tax returns of MTI for each of the taxable years ended 1994 and
1995, inclusive. The most recent period for which an assessment
can no longer be made by the IRS with respect to federal income
tax obligations of MTI is for the fiscal year ended 1992. MTI has
not experienced an audit of any of the Returns, and no audit of
any of the Returns is in progress and CDS has no reason to believe
that any such audit is contemplated. There are no other material
pending questions by any taxing authority relating to, or claims
asserted for (or any basis therefor), taxes or assessments of MTI.
For purposes of this Section, "tax" and "taxes" (when not modified
by other words such as "income" or "franchise") shall include all
income, gross receipts, franchise, excise, real and personal
property, and other taxes imposed by any federal, state,
municipal, local, or other governmental agency, including
assessments in the nature of taxes.
3.2.14 Contracts, Agreements, Commitments and
Proposals. Except as disclosed on Schedule 3.2.14, MTI is not a
party to any material contract, agreement or commitment, oral or
written, including with respect to distributors, subdistributors,
contractors, subcontractors, customers, service agreements or
commitments, and software development agreements, which is to be
performed in whole or in part at or after the date of this
Agreement. With respect to those contracts, agreements or
commitments disclosed on Schedule 3.2.14, there is no material
breach or violation thereof, or material default thereunder, and
no event has occurred which, with notice or lapse of time or both,
would constitute a material breach or violation thereof or
material default thereunder, or give rise to a right of
termination, modification, cancellation, prepayment or
acceleration thereunder. Other than disclosed on Schedule
3.2.14, MTI has made no offer or proposal to any person which, if
accepted, would result in any such contract, agreement or
commitment. With respect to those contracts, agreements or
commitments disclosed on Schedule 3.2.14, no consent is required
in connection with the purchase of the Shares by SDRC.
3.2.15 MTI Intellectual Property.
(a) Schedule 3.2.15 contains a complete and accurate
list of all MTI Intellectual Property, as defined herein. Except
as set forth in Schedule 3.2.15, MTI owns all right, title and
interest in and to, or holds valid licenses for the use of, the
MTI Intellectual Property. Schedule 3.2.15 sets forth a list of
all software products marketed by MTI within the three year period
prior to the date of this Agreement, and identifies the source or
method of intellectual property protection utilized or relied upon
by MTI with respect to each such product. None of the software
products marketed by MTI has entered the public domain or
otherwise lacks intellectual property protection.
(b) As of and since the date upon which it acquired
or developed any of the MTI Intellectual Property, MTI has not (i)
transferred, conveyed, sold, assigned, pledged, mortgaged or
granted a security interest in any of the MTI Intellectual
Property to any third party, (ii) entered into any license,
franchise or other agreement with respect to any of the MTI
Intellectual Property with any third person other than CDS or
SDRC, or (iii) otherwise encumbered any of the MTI Intellectual
Property. MTI has maintained and enforced the MTI Intellectual
Property in accordance with its customary practices in order to
safeguard the secrecy of all the MTI Intellectual Property that is
considered to be trade secrets.
(c) The conduct of the business of MTI as currently
conducted does not conflict, misappropriate or infringe in any way
with any intellectual property right of any third party that,
individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on MTI's business, and there is no claim,
suit, action or proceeding pending or threatened against MTI (i)
alleging that use of the MTI Intellectual Property or any
intellectual property licenses conflicts or infringes in any way
with any third party's intellectual property rights, or (ii)
challenging MTI's ownership of or right to use or the validity of
any MTI Intellectual Property. There are no material conflicts,
misappropriations, infringements or other violations by any third
party of any of the MTI Intellectual Property owned by or licensed
by or to MTI.
(d) Each copyright registration and trademark
registration and each application therefor listed in Schedule
3.2.15 is valid, subsisting and in proper form, and has been duly
maintained, including the submission of all necessary filings in
accordance with the legal and administrative requirements of the
appropriate jurisdictions. CDS has taken, and has caused MTI to
take, its customary precautions to maintain the secrecy of the MTI
Intellectual Property that is considered to be trade secrets, and
to protect MTI's trade secrets from disclosure to the extent
required under Minnesota law, and as may be required by the terms
and conditions of that certain OEM License Agreement, dated
October 1, 1992, between MTI and CDS (the "OEM License
Agreement"). There have been no failures in complying with such
requirements and no Copyright, Patent or Trademark, each as
defined herein, has lapsed and there has been no cancellation or
abandonment thereof.
(e) Neither MTI, nor any other person, has granted
any release, covenant not to sue, or non-assertion assurance or
entered into any indemnification or settlement agreement with any
person with respect to any part of the MTI Intellectual Property
or any intellectual property licenses associated with the MTI
Intellectual Property.
(f) Any software included within the MTI
Intellectual Property is free from any and all product
malfunctions or other "bugs" which would materially interfere with
the ability of such software to perform in the manner required by
customers of MTI, or as represented by MTI to its customers. The
MTI Intellectual Property is adequate for the business of MTI, and
except as disclosed on Schedule 3.2.15, no additional intellectual
property, including software, is necessary in connection with the
conduct of MTI's business.
(g) For the purpose of this Agreement, "MTI
Intellectual Property" shall be defined as (i) all know-how, show-how,
confidential or proprietary technical information, trade
secrets, designs, processes, computer software, databases
originating with or used by MTI (including any third-party owned
software incorporated into any MTI product or used in connection
with MTI), or as "work for hire" created by or on behalf of MTI,
research in progress, inventions or invention disclosures (whether
patentable or unpatentable) and drawings, schematics, blueprints,
flow sheets, designs and models; (ii) all copyrights, copyright
registrations, copyrights mask works and copyright applications
("Copyrights") owned or used by MTI; (iii) all patents, patent
applications, patents pending, patent disclosures on inventions
and all patents issued upon said patent applications or based upon
such disclosures ("Patents") owned or used by MTI; and (iv) all
registered and unregistered trade names, trademarks, service
marks, product designations, corporate names, trade dress, logos,
slogans, designs and general intangibles of like nature, together
with all registrations and recordings and all applications for
registration therefor and all translations, adaptations,
derivatives and combinations thereof ("Trademarks") owned or used
by MTI.
3.2.16 Business Operation. Since December 31,
1995, MTI has been operating in the ordinary course of business,
has not made any material changes in its capital or corporate
structures, nor any material changes in its methods of business
operation and has not provided any material increases in employee
salaries or benefits or made a commitment to materially change the
compensation of any employee, other than in the ordinary course.
Since December 31, 1995, MTI has not declared or paid any
dividends or made any distributions of any other kind to its
shareholders.
3.2.17 MTI's Employees and Employee Benefit Plans.
Schedule 3.2.17 contains a complete and accurate list and a brief
description of each employee contract and each plan or
arrangement, including the total number of MTI shares authorized
to be issued under each such contract, plan or arrangement, which
provides any of the following benefits: bonus, profit sharing,
employee stock ownership, stock option, stock appreciation right,
stock grant, phantom stock, pension, retirement, insurance,
medical, hospitalization, dental, disability, vacation, workers'
compensation, unemployment, deferred or incentive compensation,
severance or any other benefit, including, without limitation,
each "employee pension benefit plan" within the meaning of Section
3(2) of ERISA, and "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA (collectively, "Benefit Plans")
with respect to any one or more of the employees or former
employees of MTI. MTI is not and never has been obligated to make
contributions to any multi-employer plan within the meaning of
Section 3(37) of ERISA and there exist no material unfunded
liabilities under any of the Benefit Plans. MTI has provided to
SDRC an accurate and complete list of each employee of MTI with
each employee's job title and annual compensation set forth next
to each employee's name, and there has been no material change in
the compensation payable to such employees. MTI has not promised
to provide and is not providing any medical or life insurance
benefits to former employees or any other persons other than
current employees or former employees exercising their rights
under COBRA or similar laws. MTI has previously delivered or made
available to SDRC copies of all executory employment agreements
for employees of MTI.
3.2.18 Compliance of Plans with ERISA and Code. All
Benefit Plans comply in all material respects, and the execution
of this Agreement by CDS shall not cause any failure of such
compliance, with all applicable laws and regulations, including
with respect to (i) the requirements of the Code that the Benefit
Plans be non-discriminatory with regard to coverage, availability
of benefits and amount and level of benefits, except as may be
affected by the purchase of the Shares by SDRC, (ii) the provision
of notices and reports to participants of the Benefit Plans, and
(iii) any contribution required to be made to the Benefit Plans.
The execution and delivery of this Agreement by CDS will not cause
the termination of any of the Benefit Plans, involve any
prohibited transaction within the meaning of Section 406 of ERISA
or Section 4975 of the Code, nor constitute a breach of fiduciary
responsibility with respect to the Benefit Plans. CDS has
delivered or made available to SDRC all documents pertaining to
the Benefit Plans to or from any governmental agency or authority
having jurisdiction thereof.
3.2.19 Labor and Employment Matters. There has not
been filed with the National Labor Relations Board any complaint
alleging any unfair labor practices against MTI; there are no
facts that would lead to any such unfair labor practice charge;
and there has been no occurrence within the past two years of any
material work stoppage or strike or any significant labor troubles
at the facilities of MTI. MTI is not a party to any collective
bargaining agreements. No person or party (including, but not
limited to, governmental agencies of any kind) has any valid or
enforceable claim or any basis for any valid and enforceable
action or proceeding against MTI arising out of any federal and/or
state equal employment opportunity statutes, ordinances or
regulations, including, but not limited to, those pertaining to
race, age, religion, gender, sexual harassment and all other
similar claims, including for discrimination in employment or
employment practices or occupational safety and health standards
(including without limitation, the Occupational Safety and Health
Act, the Fair Labor Standards Act, Title VII of the Civil Rights
Act of 1964, the Age Discrimination in Employment Act of 1967 or
the Americans with Disabilities Act). All of MTI's employees are
United States citizens or are otherwise properly authorized to
work on a permanent basis in the United States.
3.2.20 Overtime, Back Wages, Vacation and Minimum
Wages. No present or former employee of MTI has any valid and
enforceable material claim (whether under federal or state law)
under any employment agreement, or otherwise, on account of or for
(i) overtime pay, other than overtime pay for the current payroll
period, (ii) wages or salary for any period other than the current
payroll period, (iii) vacation or time off (or pay in lieu
thereof), other than that earned in respect of the previous twelve
months, or (iv) any violation of any statute, ordinance or
regulation relating to minimum wages or maximum hours of work.
3.2.21 Insurance Policies of MTI. MTI has provided
or made available to SDRC an accurate and complete list of each
insurance policy currently providing coverage for the assets of
MTI, its directors, officers and all employees. MTI has at all
times maintained liability coverage with financially sound and
reputable insurance carriers in amounts which are reasonable in
light of the business of MTI and its claims experience. No
insurance carriers presently providing insurance coverage to MTI
intend to cancel or refuse to renew such policies or materially
increase the premiums payable for coverage comparable to present
coverage, except for premium increases to be generally applicable,
nor do any such insurance carriers intend to require MTI to
implement material changes in its present operating facilities or
methods or products as a condition to maintaining insurance.
3.2.22 Bank Matters. MTI has provide or made
available to SDRC a list of each bank account, including the name
and address of the bank and the account number, maintained by MTI.
The list identifies each person who has signature power with
respect to each such account. Schedule 3.2.22 also contains a
list of all bank loans held by MTI, including the name and address
of the bank, the loan number, the original loan amount and all
balances due. MTI has provided or made available SDRC copies of
all material documentation with respect to any bank loans of MTI.
3.2.23 Minute Books and Stock Record Books. The
minute books of MTI contain all records of any meetings and other
corporate actions of MTI's shareholders and its Board of
Directors, including any committees of MTI's Board of Directors.
The stock record books of MTI contain all records of transactions
involving the issuance or transfer of equity securities of MTI.
Other than the minute books and stock record books of MTI, there
exist no records of any such meetings, corporate actions, or
transactions involving the issuance or transfer of equity
securities of MTI.
3.2.24 International Business Matters. MTI has
complied in all material respects with all laws, regulations and
ordinances, both of foreign jurisdictions and of the United States
or any jurisdiction therein, in connection with its business in
any foreign jurisdiction. MTI is authorized to do business in all
foreign jurisdictions where MTI currently does or proposes to do
business and has all material foreign governmental licenses and
permits necessary for conducting the business it conducts and such
licenses and permits are in full force and effect. All revenues
resulting from sales made in foreign jurisdictions by MTI are
reported on MTI's Financial Statements in accordance with United
States generally accepted accounting principles.
3.2.25 Maintenance, Enhancement or Customization
Agreements. MTI has not entered into any software maintenance
agreement other than as incorporated in the written contracts and
agreements of MTI, and there exist no deviations thereto, orally
or in writing, which require increased maintenance obligations by
MTI. MTI has not, orally or in writing committed to provide
selective special enhancements or customization to any of its
software products, including for particular customers of CDS.
3.2.26 Compliance with Laws. MTI is in compliance
with all laws and regulations applicable to MTI or the business or
properties of MTI.
Section 3.3 With respect to the Acquired CDS Business:
CDS hereby represents and warrants to SDRC, its successors
and assigns as follows:
3.3.1 7/31 Balance Sheet. Prior to execution of
this Agreement, CDS delivered to SDRC an unaudited balance sheet,
dated July 31, 1996, reflecting the assets and liabilities of CDS'
product data management software sales and support organization as
of such date (the "7/31 Balance Sheet"). The 7/31 Balance Sheet
fairly presents the net tangible book value of the Acquired CDS
Business as of said date, in conformity with generally accepted
accounting principles, consistently applied, except that the 7/31
Balance Sheet does not include reference to any intangible assets,
including any pension-related assets or liabilities, of CDS.
There are no material liabilities, obligations or indebtedness of
CDS which are required by generally accepted accounting principles
to be disclosed on the 7/31 Balance Sheet, other than the
liabilities, obligations or indebtedness disclosed thereon. With
respect to assets and liabilities associated with CDS' European
product data management software sales and support organization,
the 7/31 Balance Sheet contains CDS' best estimates, based on all
information available to it at such time.
3.3.2 Title and Availability of Assets. CDS and one
or more of its wholly-owned subsidiaries have good and marketable
title to the Assets, free and clear of all mortgages, liens,
debts, creditors' claims or other third party interests of any
nature whatsoever, except as specifically assumed as part of the
Assumed Liabilities, including in connection with any personal
property tax. CDS has disclosed to SDRC which assets are
exclusively used in or otherwise material to its product data
management software sales and support organization and has made,
and has caused all of its subsidiaries to make, all such assets
available for purchase by SDRC hereunder.
3.3.3 Absence of Material Adverse Changes. Since
July 31, 1996, there have been no changes with respect to the
Acquired CDS Business which have had or would have a Material
Adverse Effect, and no events with respect to the Acquired CDS
Business have occurred since July 31, 1996, nor to the knowledge
of CDS are reasonably certain to occur in the future, which
reasonably can be expected to result in any Material Adverse
Effect.
3.3.4 Litigation. To the knowledge of CDS, there
are no actions, suits, proceedings, investigations or assessments
of any kind pending or threatened before any court, administrative
agency, arbitration association, or other regulatory body against
CDS or its affiliates, directors, officers or employees, which if
successful might result in any Material Adverse Effect, or which
questions the validity or legality of this Agreement or of any
action taken or to be taken by CDS in connection with this
Agreement.
3.3.5 Contracts, Agreements, Commitments and
Proposals. Except as disclosed on Schedule 3.3.5, as of the date
hereof, CDS is not a party to any contracts, agreements or
commitments, oral or written, including with respect to
distributors, subdistributors, contractors, subcontractors,
customers, service agreements or commitments, software development
agreements, or any agreement described in Section 3.3.7, which
materially affect the Acquired CDS Business or the value thereof
to SDRC. With respect to those contracts, agreements or
commitments disclosed on Schedule 3.3.5, there is no material
breach or violation thereof, or material default thereunder, and
no event has occurred which, with notice or lapse of time or both,
would constitute a material breach or violation thereof or
material default thereunder, or give rise to a right of
termination, material modification, cancellation, prepayment or
acceleration thereunder. Other than disclosed on Schedule 3.3.5,
CDS has made no offer or proposal to any person which, if
accepted, would result in any such contract, agreement or
commitment. CDS shall update Schedule 3.3.5 as of the Closing
Date to reflect contracts, proposals, agreements and commitments
existing as of the Closing Date.
3.3.6 CDS Intellectual Property.
(a) Schedule 3.3.6 contains a complete and accurate
list of all CDS Intellectual Property, and a complete and accurate
list of all material third-party owned software incorporated into
any product of the Acquired CDS Business or used in the conduct of
the Acquired CDS Business (except for MTI Intellectual Property
used by CDS in the Acquired CDS Business). Except as set forth in
Schedule 3.3.6, CDS owns all right, title and interest in and to,
or holds valid licenses for the use of, the CDS Intellectual
Property described thereon. To the knowledge of CDS, none of the
software products included within the Assets have entered the
public domain or otherwise lack intellectual property protection.
CDS holds no Patents, nor has filed any registration for any
Patent, in connection with any CDS Intellectual Property.
(b) As of and since the date CDS acquired or
developed any of the CDS Intellectual Property included within the
Assets, CDS has not, except to the extent it would not constitute
a material encumbrance thereon, (i) transferred, conveyed, sold,
assigned, pledged, mortgaged or granted a security interest
therein to any third party, (ii) entered into any license,
franchise or other agreement with respect thereto with any third
person, or (iii) otherwise encumbered any thereof. CDS has
maintained and enforced any CDS Intellectual Property in
accordance with its customary practices in order to safeguard the
secrecy of any CDS Intellectual Property that is considered to be
trade secrets.
(c) CDS current conduct of the Acquired CDS Business
does not conflict, misappropriate or infringe in any way with any
intellectual property right of any third party that, individually
or in the aggregate, is reasonably likely to have a Material
Adverse Effect on the Acquired CDS Business, and there is no
claim, suit, action or proceeding pending or, to the knowledge of
CDS, threatened against CDS (i) alleging that use of any CDS
Intellectual Property or any intellectual property licenses
conflicts or infringes in any way with any third party's
intellectual property rights, or (ii) challenging CDS' ownership
of or right to use or the validity of any CDS Intellectual
Property. To the knowledge of CDS, there are no conflicts,
misappropriations, infringements, or violations by any third party
of any such intellectual property owned by or licensed by or to
CDS.
(d) CDS has taken all of the proper precautions to
maintain the secrecy of any CDS Intellectual Property, including
the Original Source Code (defined below), that is considered to be
trade secrets, and to protect its trade secrets from disclosure to
the full extent required under Minnesota law and the OEM License
Agreement, and there have been no failures in complying with such
requirements.
(e) To the knowledge of CDS, neither CDS nor any
other person, has granted any release, covenant not to sue, or
non-assertion assurance or entered into any indemnification or
settlement agreement with any person with respect to any part of
the CDS Intellectual Property.
(f) Except for work-in-process, any software
included within the Assets or licensed to SDRC pursuant to Section
9.1.3 is free from any and all product malfunctions or other
"bugs" which would interfere in any material way with the ability
of such software to perform in the manner required by customers of
the Acquired CDS Business or as represented by CDS to its
customers. The CDS Intellectual Property included within the
Assets or licensed to SDRC pursuant to Section 9.1.3 is adequate
for the Acquired CDS Business, and except as disclosed on Schedule
3.3.6, no additional intellectual property, including software, is
necessary in connection with the conduct of the Acquired CDS
Business.
(g) For the purpose of this Agreement, "CDS
Intellectual Property" shall be defined as (i) all know-how, show-how,
confidential or proprietary technical information, trade
secrets, designs, processes, computer software, source code, work
in process, databases originating with CDS (in connection with the
Acquired CDS Business or MTI) or as "work for hire" created by or
on behalf of CDS (in connection with the Acquired CDS Business or
MTI), research in progress, inventions or invention disclosures
(whether patentable or unpatentable) and all design, user, and
maintenance documentation and any support manuals and the like,
drawings, schematics, blueprints, flow sheets, designs and models,
and including without limitation, all software licensed to MTI by
CDS pursuant to that certain Joint Venture Formation Agreement,
dated August 26, 1992, between CDS and SDRC (the "Original Source
Code"); and (ii) all Copyrights owned or used by CDS (in
connection with the Acquired CDS Business or MTI). All
Info*Engine, Rialto, ICEM, storage management and other messaging
and directory products of CDS are expressly excluded from the CDS
Intellectual Property and from the Assets.
3.3.7 Maintenance, Enhancement or Customization
Agreements. CDS has not entered into any software maintenance
agreement with respect to the Acquired CDS Business other than as
incorporated in its written contracts and agreements with
customers of the Acquired CDS Business, and there exist no
deviations thereto, orally or in writing, which require
significant increased maintenance obligations by SDRC or MTI in
connection with its purchase hereunder of the Assets or assumption
of the Assumed Liabilities. CDS has not orally or in writing
committed to provide selective special enhancements or
customization to any of its software products for particular
customers of the Acquired CDS Business, other than as provided in
the contracts and agreements with such customers.
3.3.8 Accounts Receivable. To the knowledge of CDS,
all information provided to SDRC by CDS related to accounts
receivable of CDS in connection with the Acquired CDS Business
prior to the date hereof is true and accurate in all material
respects. To the knowledge of CDS, all such accounts receivable
will be fully collectible after the Closing in the ordinary course
of business. At the Closing, CDS shall deliver to SDRC Schedule
3.3.8, which shall contain an accurate aging schedule as of the
Closing of all such accounts receivable.
3.3.9 Employees. Schedule 3.3.9 includes a list of
any and all CDS employees primarily involved with or otherwise
material to CDS' product data management software sales and
support organization, and accurately reflects each employee's
location, title, and whether such employee is deemed by CDS to be
a technical or non-technical employee.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SDRC
SDRC hereby represents and warrants to CDS, its successors
and assigns as follows:
Section 4.1 Organization and Good Standing. SDRC is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Ohio, and is duly authorized to
carry on the business presently conducted by it.
Section 4.2 Corporate Power and Authorization. The Board
of Directors of SDRC has duly approved this Agreement, in
accordance with and as required by law and in accordance with the
Articles of Incorporation and Code of Regulations of SDRC. SDRC
has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder subject to certain
required regulatory approvals. This Agreement, when executed and
delivered, will have been duly authorized and will constitute
valid and binding obligations of SDRC, each enforceable in
accordance with its terms, except to the extent that (i)
enforceability thereof may be limited by insolvency,
reorganization, liquidation, bankruptcy, readjustment of debt or
other laws of general application relating to or affecting the
enforcement of creditors' rights, and (ii) the availability of
certain remedies may be precluded by general principles of equity,
subject, however, to the receipt of requisite regulatory
approvals.
Section 4.3 No Violation. Neither the execution of this
Agreement, nor the consummation of the transactions contemplated
hereby, conflicts with, results in a breach of, violates or
constitutes a material default under SDRC's Articles of
Incorporation or Code of Regulations or any federal, state or
local law, statute, ordinance, rule, regulation or court or
administrative order, or any agreement, arrangement, or
commitment, to which SDRC or any of its property is subject or
bound.
Section 4.4 SEC Filings; No Material Adverse Change.
SDRC has filed all forms, reports, registration statements and
documents materially required to be filed by it with the SEC (the
"SEC Filings"). The SEC Filings comply as to form in all material
respects with the applicable requirements and do not contain any
materially untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements made therein not materially misleading. Since the
date of filing of SDRC's latest Quarterly Report on Form 10-Q with
the SEC, there has been no change in, and no event, occurrence or
development in the business of SDRC or any of the SDRC
subsidiaries that, taken together with other events, occurrences
and developments with respect to such business, has had or would
reasonably be expected to have a Material Adverse Effect on SDRC
or the ability of SDRC to consummate the transactions contemplated
hereby, except as disclosed in any SEC filings by SDRC.
Section 4.5 Litigation. To the knowledge of SDRC, except
as disclosed in SDRC's SEC Filings, there are no actions, suits,
proceedings, investigations or assessments of any kind pending
before any court, administrative agency, arbitration association,
or other regulatory body, or to the knowledge of SDRC, threatened
against SDRC or any of its subsidiaries which if successful might
have a Material Adverse Effect or which questions the validity or
legality of this Agreement or of any action taken or to be taken
by SDRC in connection with this Agreement.
Section 4.6 Governmental Authorities; Consents. To the
knowledge of SDRC, other than any premerger notification which may
be required pursuant the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, SDRC is not required to submit any notice, report or
other filing with any governmental authority in connection with
the execution or delivery by it of this Agreement or the
consummation of the transactions contemplated hereby or thereby.
To the knowledge of SDRC, other than any premerger notification
which may be required pursuant the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, no approval or authorization of any
governmental or regulatory authority or any other party or person
is required to be obtained by SDRC in connection with their
execution, delivery and performance of this Agreement or the
transactions contemplated hereby.
Section 4.7 No Knowledge of Breaches. To the actual
knowledge of SDRC, no representation or warranty of CDS hereunder
with respect to the matters set forth in Section 3.2 or otherwise
relating to MTI is untrue or inaccurate in any material respect.
ARTICLE 5.
CDS' OBLIGATIONS BEFORE CLOSING
Section 5.1 Cooperation. CDS shall cooperate with SDRC
in all reasonable respects, and shall take all other steps
necessary to carry out and consummate the transactions
contemplated by this Agreement at the earliest practicable time
including, without limitation, the filing of applications, notices
and other documents with, and obtaining approval from, appropriate
governmental regulatory agencies.
Section 5.2 Access to Information. CDS shall permit
SDRC, its officers, employees, accountants, agents and attorneys,
to have reasonable access during business hours to CDS books,
records, properties, personnel, and all workpapers of CDS'
auditors in connection with the preparation of the 7/31 Balance
Sheet or any audited or unaudited financial statements of CDS
relating to the Acquired CDS Business, for the purpose of making a
detailed examination or updating and amplifying prior examinations
of the financial condition, assets, liabilities, legal compliance,
affairs and the conduct of the business of MTI and CDS (with
respect to the Acquired CDS Business), and permitting SDRC to
undertake a complete due diligence investigation to its
satisfaction.
Section 5.3 Conduct of the Business of MTI and CDS Until
the Closing. Except for actions contemplated hereby or taken with
the prior written consent of SDRC, CDS will refrain from
conducting the Acquired CDS Business or taking any action which
would result in MTI conducting its business, in any way other than
in the ordinary course and consistent with past practices, or
which would result in a material breach of any representation and
warranty made by CDS herein, both with respect to MTI and the
Acquired CDS Business. Prior to the Closing, CDS shall not cause
MTI to, without prior written consent from SDRC, terminate any
employee, or license, sell or otherwise dispose of any asset,
property or intellectual property rights, in any form, in whole or
in part. Prior to the Closing, CDS shall not cause MTI to,
without prior written consent from SDRC, declare or pay any
dividends or make any distributions of any other kind to its
shareholders. CDS shall not take any action which would give rise
to or otherwise result in any lien, claim or other encumbrance on
the Assets, and to the extent any such lien, claim or other
encumbrance does arise, CDS shall promptly remove or cause the
removal thereof. CDS shall use reasonable efforts to preserve the
Assets intact, keep available the services of its officers,
employees, consultants and agents primarily involved with the
Acquired CDS Business, and maintain its suppliers, customers and
goodwill in connection with the Assets.
Section 5.4 Employees of CDS. CDS shall cooperate, and
shall cause its human resources personnel to cooperate with SDRC,
and make available to SDRC all records and other relevant
information pertaining to employees of CDS reasonably requested by
SDRC for the purpose of assisting SDRC in determining which of
CDS' employees (i) located in the United States SDRC desires to
employ pursuant to Section 1.3 and (ii) located in Europe SDRC
deems redundant to its operation of the Acquired CDS Business.
SDRC may interview any employees of CDS, and CDS shall make such
employees available for such interviews. Prior to the Closing,
CDS shall not terminate any of its employees primarily involved
with the Acquired CDS Business without SDRC's prior written
consent.
Section 5.5 Insurance of the Assets. CDS shall maintain
such insurance policies on the Assets as are appropriate therefor,
in an amount sufficient to cover the full replacement cost
thereof. Upon SDRC's request, CDS shall provide copies of all
insurance policies covering the Assets to SDRC. All premiums on
such policies shall be paid by CDS up to and including the date of
the Closing.
Section 5.6 Pre-Closing Funding of MTI. CDS hereby
acknowledges that MTI may require additional cash to support its
operations prior to the Closing. Between execution of this
Agreement and the public announcement thereof, CDS shall loan to
MTI an amount equal to 50% of MTI's cash requirements, which
amount shall be represented by a promissory note in favor of CDS,
which SDRC shall cause MTI to pay in full at the Closing pursuant
to Section 8.4. After such public announcement, CDS shall not be
obligated to advance any additional cash to MTI.
ARTICLE 6.
SDRC'S OBLIGATIONS PRIOR TO CLOSING
Section 6.1 Cooperation. SDRC shall cooperate with CDS
in all reasonable respects, and shall take all other steps
necessary to carry out and consummate the transactions
contemplated by this Agreement at the earliest practicable time
including, without limitation, the filing of applications, notices
and other documents with, and obtaining approval from, appropriate
governmental regulatory agencies.
Section 6.2 Pre-Closing Funding of MTI. SDRC hereby
acknowledges that MTI may require additional cash to support its
operations prior to the Closing. Between execution of this
Agreement and the public announcement thereof, SDRC shall loan to
MTI an amount equal to 50% of MTI's cash requirements, which
amount shall be represented by a promissory note in favor of SDRC.
ARTICLE 7.
CONDITIONS PRECEDENT TO CLOSING
Section 7.1 Conditions to the Obligations of Each of the
Parties. The obligation of each of the parties hereto to
consummate the transactions provided for herein is subject to the
fulfillment prior to or as of the Closing of each of the following
conditions:
7.1.1 Corporate Approvals. The directors of CDS and
SDRC each shall have duly approved and adopted this Agreement in
accordance with and as required by law and in accordance with each
party's Articles of Incorporation and Bylaws or Code of
Regulations.
7.1.2 No Orders. The transactions contemplated
hereby shall not have been restrained, enjoined, or prohibited by
any court or governmental authority of competent jurisdiction, and
there shall be no action or proceeding pending which seeks such
relief.
7.1.3 Lease. The execution by SDRC and CDS of a
mutually acceptable lease amendment between MTI and CDS for the
space currently occupied by MTI, in the form attached hereto as
Exhibit C.
7.1.4 Governmental Approvals. All necessary
governmental and regulatory orders, consents, clearance and
approvals and requirements shall have been secured and satisfied
and all applicable waiting periods expired, including, without
limitation, a pre-merger notification pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, if required.
Section 7.2 Conditions to the Obligation of SDRC. The
obligation of SDRC to consummate the transactions provided for
herein is subject to fulfillment prior to or as of the Closing of
each of the following conditions, unless waived by SDRC in a
writing delivered to CDS which specifically refers to the
condition or conditions being waived:
7.2.1 Representations and Warranties. All of the
representations and warranties of CDS set forth in this Agreement,
including without limitation those contained in Sections 3.2.9 and
3.3.3 with respect to any Material Adverse Effect, shall be true
and correct in all material respects at and as of the respective
dates set forth with respect to each, as of the date of this
Agreement and at and as of the date of the Closing, as if each
such representation and warranty was given on and as of the date
of the Closing.
7.2.2 CDS's Covenants. CDS shall have performed in
all material respects all covenants, agreements and obligations
required by this Agreement to be performed by it on or before the
Closing.
7.2.3 Revenue Sharing Agreements. All revenue
sharing agreements between CDS and SDRC shall have been
terminated.
7.2.4 Consents. CDS shall have delivered to SDRC
evidence satisfactory to it of receipt of any material consents,
licenses and authorizations from customers, lessors, licensors,
government agencies and any other persons or organizations, the
consent, license or authorization of which are necessary, in
SDRC's sole discretion, to permit SDRC to continue MTI's business
after the Closing or use or operate the Assets after the Closing
in the same manner in which they were used or operated by CDS
prior to the Closing, which are received by CDS prior to the
Closing. To the extent any such consents have not been obtained
with respect to any material contracts of MTI or the Acquired CDS
Business, such material contracts shall be subject to the
provisions of Section 9.1.10.
7.2.5 MTI Employees. Such employees of MTI shall
have agreed to continue employment with MTI as is necessary to
enable SDRC to conduct the business of MTI as conducted prior to
the Closing, provided, however, that such condition shall apply
only in the event SDRC shall have offered such employees, as
necessary, (i) a bonus based on performance during 1996, (ii)
compensation, salary, benefits and bonuses at least comparable to
those currently received, (iii) and for selected employees,
options to purchase common stock of SDRC. If SDRC deems that this
condition has not been satisfied, SDRC shall provide CDS with a
written notice that it desires to terminate this Agreement
pursuant to Article 11 hereof. Upon such termination, CDS and
SDRC shall commence the orderly liquidation of MTI in accordance
with the Joint Venture Formation Agreement, dated August 26, 1992,
between CDS and SDRC (the "Joint Venture Agreement"), unless both
parties shall otherwise agree in writing.
7.2.6 Completion of Due Diligence. SDRC shall have
had the opportunity to conduct, and shall have completed, a
customary due diligence review of all books, records, properties,
and personnel of MTI and CDS and any other information provided
pursuant to Section 5.2, and shall have determined that there
exist no facts or circumstances as of the Closing which would have
or result in a Material Adverse Effect on MTI or the Acquired CDS
Business.
7.2.7 Resignation of CDS Representatives. Any
officer, director, employee, shareholder, or other representative
or agent of CDS shall have resigned from the Board of Directors of
MTI.
Section 7.3 Conditions to the Obligation of CDS. The
obligation of CDS to consummate the transactions provided for
herein is subject to the fulfillment prior to or as of the Closing
of each of the following conditions unless waived by CDS in a
writing delivered to SDRC which specifically refers to the
condition or conditions being waived:
7.3.1 Representations and Warranties. All of the
representations and warranties of SDRC in this Agreement shall be
true and correct in all material respects at and as of the
respective dates set forth with respect to each, as of the date of
this Agreement and at and as of the date of the Closing as if each
such representation and warranty was given on and as of the date
of the Closing.
7.3.2 SDRC's Covenants. SDRC shall have performed
in all material respects all covenants, agreements and
obligations required by this Agreement to be performed by it on or
before the Closing.
ARTICLE 8.
THE CLOSING
Section 8.1 Time of the Closing. The date of the closing
for the transactions contemplated hereby (the "Closing") shall be
January 22, 1997, or if later, three days after the expiration of
the pre-merger notification period described in Section 7.1.4.
The Closing shall take place at the offices of Dinsmore & Shohl
LLP, 1900 Chemed Center, 255 East Fifth Street, Cincinnati, Ohio
45202.
Section 8.2 Deliveries by CDS. At the Closing, CDS shall
deliver the following to SDRC, any of which may be waived by SDRC,
in its sole discretion:
(a) All certificates representing the Shares, duly
endorsed in blank, or accompanied by stock powers duly endorsed in
blank, in proper form for transfer, with appropriate transfer
stamps, if any, affixed thereto;
(b) A Bill of Sale and Assignment and Assumption, in
the form attached hereto as Exhibit D, sufficient to vest
marketable title to the Assets with SDRC, free and clear of all
liens and other encumbrances;
(c) An Administrative Services Agreement, in the
form attached hereto as Exhibit E (the "Administrative Services
Agreement"), executed by a duly authorized representative of CDS;
(d) The Escrow Agreement, executed by a duly
authorized representative of CDS;
(e) The lease amendment described in Section 7.1.3,
executed by a duly authorized representative of CDS;
(f) Schedule 3.3.8;
(g) A customary opinion of legal counsel for CDS,
dated as of the date of the Closing, in the form attached hereto
as Exhibit F;
(h) A Certificate of CDS certifying (i) that all
representations and warranties of CDS in this Agreement and all
Exhibits and Schedules hereto are true and accurate in all
material respects, and that all covenants and agreements to be
performed by CDS have been duly performed in all material
respects, as of the Closing, and (ii) that as of the Closing, CDS
has no knowledge of any changes or events with respect to the
Acquired CDS Business since the Effective Date which have had, or
reasonably can be expected to result in, a Material Adverse
Effect;
(i) A copy of each of (i) the text of the
resolutions adopted by the Board of directors of CDS authorizing
the execution, delivery and performance of this Agreement and the
consummation of all of the transactions contemplated by this
Agreement, and (ii) the Bylaws of CDS; along with a certificate
executed on behalf of CDS by its corporate secretary certifying to
SDRC that such copies are true, correct and complete copies of
such resolutions and Bylaws and each was duly adopted and has not
been amended or rescinded;
(j) Possession of all of the Assets;
(k) Possession of all books, records and customer
lists used by CDS in connection with the Acquired CDS Business;
(l) A true and accurate copy of any contract or
agreement assumed by SDRC as part of the Assumed Liabilities;
(m) All necessary documents to effect the full and
complete assignment of all copyrights, licenses, trade secrets,
trademarks, trade names and other intellectual property included
within the Assets, in form sufficient to allow the completion of
any filings with the United States Patent and Trademark Office,
the United States Copyright Office, or any other governmental
entity or agency with which notice of such assignment must be
filed in order to be effective and enforceable in all respects;
(n) All consents of third parties required by SDRC
in connection with transactions contemplated by this Agreement,
subject to the provisions of Sections 7.2.4 and 9.1.10;
(o) MTI's minute books, stock transfer records,
corporate seal and all other materials related to MTI's corporate
administration;
(p) An incumbency certificate executed on behalf of
CDS by its corporate secretary certifying the signature and office
of each officer executing this Agreement;
(q) All originals and copies in CDS' possession as
of the Closing, whether electronic or written, of any non-public
or confidential information pertaining to MTI and SDRC, including
any MTI Intellectual Property; and
(r) All other documents reasonably requested by SDRC
to effectuate the transactions contemplated by this Agreement.
Section 8.3 Deliveries by SDRC. At the Closing, SDRC
shall deliver the following to CDS, any of which may be waived by
CDS, in its sole discretion:
(a) The sum of $21,150,000, minus all amounts
deposited in escrow pursuant to Section 2.3 and any amount loaned
to MTI pursuant to Section 5.6, in immediately available funds,
delivered by wire transfer to a bank account designated by CDS;
(b) The Warrant;
(c) The Administrative Services Agreement, duly
executed by an authorized representative of SDRC;
(d) The Escrow Agreement, duly executed by an
authorized representative of SDRC;
(e) A copy of each of (i) the text of the
resolutions adopted by the Board of directors of SDRC authorizing
the execution, delivery and performance of this Agreement and the
consummation of all of the transactions contemplated by this
Agreement, and (ii) the Code of Regulations of SDRC; along with a
certificate executed on behalf of SDRC by its corporate secretary
certifying to CDS that such copies are true, correct and complete
copies of such resolutions and Code of Regulations and each was
duly adopted and has not been amended or rescinded;
(f) An incumbency certificate executed on behalf of
SDRC by its corporate secretary certifying the signature and
office of each officer executing this Agreement;
(g) Schedule 1.3;
(h) A Certificate of SDRC certifying that all
representations and warranties of SDRC in this Agreement and all
Exhibits and Schedules hereto are true and accurate in all
material respects, and that all covenants and agreements to be
performed by SDRC have been duly performed in all material
respects, as of the Closing;
(i) Schedule 2.5, indicating the allocation of the
Purchase Consideration;
(j) A customary opinion of legal counsel to SDRC,
Dinsmore & Shohl LLP, dated as of the date of the Closing, in the
form attached hereto as Exhibit G; and
(k) All other documents reasonably requested by CDS
to effectuate the transactions contemplated by this Agreement.
Section 8.4 Repayment of MTI's Debt to CDS. At the
Closing, SDRC shall cause MTI to pay over to CDS the sum of
$3,600,000, plus any amount loaned to MTI pursuant to Section 5.6
and all current outstanding indebtedness of MTI to CDS incurred by
MTI in the ordinary course of business, as reflected by the books
and written records of MTI.
ARTICLE 9.
CERTAIN POST-CLOSING OBLIGATIONS
Section 9.1 Of CDS:
9.1.1 Effective Date Balance Sheet. Within 15 days
after the Closing, CDS shall deliver to SDRC the Effective Date
Balance Sheet, prepared in accordance with Section 2.2. Upon
delivery of the Effective Date Balance Sheet by CDS, the net
tangible book value shown thereon shall be not less than
$2,000,000 and, to the knowledge of CDS at such time, shall fairly
present the net tangible book value of the Acquired CDS Business
and shall otherwise be accurate in all material respects.
9.1.2 Non-Competition and Confidentiality.
(a) For a period of two years after the Closing, neither
CDS nor any affiliate of CDS shall (i) offer for license or sale
to any customer any PDM Software product, whether developed by CDS
or obtained from a third party for distribution by CDS; (ii)
jointly bid or team with any PDM Software vendor, other than SDRC,
for the sale or license of any PDM Software product to any
customer; or (iii) develop any PDM Software product for sale or
license to any third party.
(b) For purposes of this Section, "PDM Software" shall
mean any software which constitutes MTI Intellectual Property, and
any derivative thereof developed during a two year period after
the Closing, or any product which is substantially similar thereto
in form and functionality. Notwithstanding the foregoing, the
parties acknowledge and agree that "PDM Software" does not
include, and that CDS shall not be precluded from offering, its
Info*Engine, Rialto, x.500-based or other global directory,
enterprise messaging, global information sharing, security, or
storage management products or services, or any ICEM products
(including any drawing managers inherent in the ICEM product
line), so long as such products or services are not represented by
CDS to customers or prospective customers as constituting a
substitute or replacement for the PDM Software of MTI. CDS shall
not be precluded by this Agreement from offering or performing
systems integration services or licensing any CDS or third party
products to any customers or prospective customers which have
existing PDM Software or systems using PDM Software, so long as
CDS does not participate with a third-party vendor of PDM Software
in obtaining or attempting to obtain the PDM Software business at
such customer or prospective customer.
(c) For a period of two years after the Closing, neither
CDS nor any affiliate of CDS shall solicit or recruit any
employee of MTI or SDRC, or solicit or encourage any employee of
MTI or SDRC to leave the employment of MTI or SDRC. Nothing
herein shall be construed to prevent either CDS or SDRC from
employing any person who responds to a general advertisement for
employment.
(d) CDS shall refrain from disclosing or furnishing
to anyone any non-public or confidential information, including
all proprietary information and trade secrets, relating to MTI or
SDRC, or otherwise using such confidential information for its own
benefit or the benefit of any other person. After the Closing,
CDS shall deliver to SDRC any originals or copies, whether
electronic or written, of any non-public or confidential
information pertaining to MTI and SDRC, including MTI Intellectual
Property, immediately upon learning of its possession thereof.
Other than as specifically provided in this Agreement, CDS shall
refrain from using any MTI Intellectual Property. CDS shall
enforce the terms and conditions of all contracts with employees
of CDS, including its standard Employee Disclosure and Assignment
Agreement, which impose an obligation on such employees to
maintain the confidentiality of information obtained during the
course of such employee's employment. CDS shall not disclose, and
shall cause each of its employees, officers, directors, agents or
other representatives not to disclose, any information marked
"Confidential" obtained in connection with either negotiations
regarding the terms and conditions of this Agreement or the
consummation of the transactions contemplated by this Agreement,
whether or not received in relation to the employment or other
arrangement with such employees, officers, directors, agents or
other representatives. Such non-public or confidential
information hereunder may be in electronic or written form.
9.1.3 License of CDS Software.
(a) As of the Closing, CDS grants SDRC a fully-paid,
perpetual, non-exclusive right and license to use any and all
software, including without limitation any source code to the
extent owned by CDS, together with all design, user, and
maintenance documentation and any support manuals and the like,
which is not included within the Assets which CDS has used in the
conduct of the Acquired CDS Business or MTI, each as more
particularly described on Schedule 9.1.3, but only to the extent
such software is necessary (i) in the normal conduct of the
Acquired CDS Business as conducted by SDRC after the Closing, (ii)
to enable SDRC to continue the maintenance and servicing
requirements with respect to PDM Software of the existing
customers of the Acquired CDS Business in the manner required by
the contracts, agreements, commitments and proposals included in
the Assets, including with respect to any enhancements or
customization. For a one year period after the Closing, CDS shall
provide reasonable consulting and support services, as reasonably
available and without charge, to enable SDRC to use the software
licensed hereunder for the purposes described in this Section
9.1.3.
(b) The license granted hereby shall be subject to
vendors' consents, where applicable, and applies only to SDRC, and
SDRC may not sublicense, share with, rent or lease any such
software licensed hereunder to any other party, except that SDRC
may assign its rights hereunder to any subsidiary or affiliate of
SDRC, including MTI, or in connection with the sale of all or
substantially all of the Assets or the Acquired CDS Business. To
the extent that such software has been developed by CDS' vendors
in connection with such vendors' modules which have been added to
MTI's Metaphase product at any current customer site, CDS shall
use all reasonable efforts to obtain for SDRC the rights from such
vendors required to maintain all affected customer licenses in
full force and effect.
(c) CDS hereby represents and warrants that to its
knowledge any software included within the license granted hereby
is free from any and all product malfunctions or other "bugs"
which would interfere in any material way with the ability of such
software to perform in the manner required by customers of the
Acquired CDS Business, or as represented by CDS.
9.1.4 Noninterference. For a period of five
years after the Closing, CDS shall not (i) other than pursuant to
the Warrant, acquire, or act in concert with others to acquire,
shares of common stock or any other voting securities, or
securities convertible into such common stock or other voting
securities, of SDRC, (ii) submit, cause to be submitted, or act in
concert with others in submitting to the Board of Directors of the
Company, or any committee thereof, any matter or proposal for the
vote of the shareholders of the Company at any annual or special
meeting thereof, (iii) solicit any proxies with respect to SDRC or
initiate, propose or otherwise solicit stockholders for the
approval of any stockholder proposals with respect to SDRC, (iv)
call or seek to have called any meeting of the stockholders of
SDRC, or (v) otherwise act, directly or indirectly, alone or in
concert with others, to seek to control or otherwise influence the
management, Board of Directors, policies or affairs of SDRC.
9.1.5 Commencement of Employment by SDRC. The
employment of all CDS employees to be employed by SDRC or MTI, as
applicable, shall begin as of the date of the Closing.
9.1.6 Accounts Receivable. After the Closing,
CDS shall deliver to SDRC no later than the tenth business day of
the month any and all amounts received by CDS during the previous
month from any third party in connection with (i) any accounts
receivable included within the Assets, (ii) with respect to any
revenue sharing agreement between CDS and SDRC, or (iii) any other
amount to which SDRC may be entitled. For a period of 12 months
after the Closing, CDS shall provide SDRC a report on the tenth
business day of each month which accurately describes the accounts
receivable actually received by CDS prior to the first day of such
month and the status of any accounts receivable which CDS expects
to receive during such 12 month period. Such report shall be
prepared in accordance with generally accepted accounting
principles in a manner consistent with past practices of CDS.
9.1.7 Financial Statement Preparation. CDS
shall cooperate with SDRC, including providing SDRC with access to
all books and records of CDS relating to the Acquired CDS
Business, in connection with the preparation of any financial
statements of SDRC after the Closing, including any financial
statements required by applicable regulations promulgated under
the Securities Act of 1933 or the Securities Exchange Act of 1934.
9.1.8 Tax Files. CDS shall maintain and make
available to SDRC all of its files, working papers and Returns
associated with the federal income tax obligations of MTI for the
earliest fiscal year for which unused net operating loss carry
forwards exist through 1995, inclusive.
9.1.9 Further Assurances. At any time and from
time to time after the Closing, CDS will execute such additional
instruments and take such actions as may be reasonably requested
by SDRC to confirm or perfect title to any property transferred
hereunder or otherwise to carry out the intent and purposes of
this Agreement.
9.1.10 Cooperation with Respect to Contracts.
(a) Anything in this Agreement or any bill of sale
notwithstanding, to the extent that any contract or agreement to
be sold, assigned, transferred or conveyed by CDS to SDRC, or any
claim, right or benefit arising thereunder or resulting therefrom
(the "Interests"), is not capable of being sold, assigned,
transferred or conveyed without the approval, consent or waiver of
the other party thereto, or any third person (including a
government or governmental unit), or if such sale, assignment,
transfer or conveyance or attempted assignment, transfer or
conveyance would constitute a breach thereof or a violation of any
law, decree, order, regulation or other governmental edict, except
as expressly otherwise provided herein, this Agreement shall not
constitute a sale, assignment, transfer or conveyance thereof, or
an attempted assignment, transfer or conveyance thereof. After
the Closing, until any Interest has been validly and effectively
assigned to SDRC, (i) CDS shall hold such Interest in trust for
the benefit of SDRC and SDRC shall be entitled to receive all
benefits under such Interest and shall be responsible for the
obligations under such Interest to the extent relating to the
benefits received, and (ii) any such Interest shall,
notwithstanding the failure to receive any approval, consent or
waiver (but so long as the same shall not constitute a violation
of law), be deemed to be assigned, transferred or conveyed to SDRC
if (x) written notice of such assignment, transfer or conveyance
is given to the other party to such Interest on or before the date
of the Closing, and (y) within a 12 month period after initial
notice to the other party to such Interest, such party does not
object to such assignment, transfer or conveyance or otherwise act
in a manner inconsistent therewith. No later than the tenth
business day of any month, CDS shall pay over to SDRC all amounts
received in connection with the Interests during the previous
month.
(b) SDRC and CDS shall use commercially reasonable
efforts to obtain all necessary approvals, authorizations,
orders, consents or waivers, or to resolve any impracticalities of
transfer referred to in this Section necessary to convey to SDRC
each such Interest as soon as practicable after the Closing;
provided, however, that neither CDS nor SDRC shall be obligated to
pay any consideration therefor to the third party from whom such
approval, consent or waiver is requested or waive or compromise
any rights against such third party or commence any litigation or
other proceeding against any third party.
(c) To the extent necessary and not obtained or
transferred to SDRC by CDS as of the Closing, CDS shall cooperate
with SDRC to obtain all permits and licenses required to be
obtained by SDRC from any governmental agency with respect to the
operation of the Acquired CDS Business or the business of MTI
(including, without limitation, environmental and operating
permits).
9.1.11 CDS' European Employees. With respect
to employees of CDS located in Europe, SDRC shall have a period of
nine months after the Closing in which to determine which such
employees are redundant to SDRC's operation of the Acquired CDS
Business. Any and all costs and expenses associated with SDRC's
termination of employment of the employees identified pursuant to
this Section 9.1.11, including severance pay, wages, salaries,
commissions, bonuses, vacation pay, benefits (including any
health, dental, expense, profit sharing, pension, bonus,
retirement or other benefit plans) incurred after the date such
employee is notified that he or she is redundant (in the
aggregate, "Termination Costs"), shall be allocated between SDRC
and CDS as follows: (i) for employees so notified within one month
after the Closing, CDS shall bear 100% of the Termination Costs;
(ii) for employees so notified more than one month but within
three months after the Closing, CDS shall bear 75% and SDRC shall
bear 25% of the Termination Costs; (iii) for employees so notified
more than three months but within six months after the Closing,
CDS and SDRC shall each bear 50% of the Termination Costs; (iv)
for employees so notified more than six months but within nine
months after the Closing, CDS shall bear 25% and SDRC shall bear
75% of the Termination Costs; and (v) for employees so notified
more than nine months after the Closing, SDRC shall bear all
Termination Costs. CDS shall pay any such Termination Costs for
which it is responsible within ten days after the end of the month
during it receives written notice thereof from SDRC.
Notwithstanding anything in this Section 9.1.11 to the contrary,
SDRC shall bear all Termination Costs to the extent the Purchase
Consideration is adjusted downward therefor pursuant to Section
2.2.
9.1.12 CDS' U.S. Employees Not Employed by SDRC.
With respect to employees of CDS located in the United States to
which SDRC does not offer employment, all liability in connection
with any such employees of CDS, including any liability for
severance pay, wages, salaries, commissions, bonuses, vacation
pay, benefits (including any health, dental, expense, profit
sharing, pension, bonus, retirement or other benefit plans) shall
remain the sole obligation of CDS.
9.1.13 License for Info*Engine. After the
Closing, CDS shall discuss in good faith with SDRC the prospect of
entering into a mutually acceptable agreement for a license
granted to SDRC, on terms and conditions no less favorable than
similar licenses with other customers of CDS, for CDS' Info*Engine
and PDM Storage Management products.
Section 9.2 Of SDRC:
9.2.1 Accounts Receivable. SDRC shall be
responsible for collecting any accounts receivable included
within the Assets, and for billing any customers of the Acquired
CDS Business.
9.2.2 Review of Contracts. During a 60
day period after the delivery by CDS of the Effective Date Balance
Sheet, SDRC, together with its auditors, shall review all
contracts, proposals, or other commitments assumed by SDRC
hereunder in order to determine which such contracts, proposals,
or other commitments constitute a liability of the Acquired CDS
Business not adequately reflected on the Effective Date Balance
Sheet. Any adjustment therefor shall remain subject to the
procedure for adjustment of the Purchase Consideration described
in Section 2.2.
9.2.3 API Licenses. At the Closing, SDRC
shall enter into a mutually acceptable agreement for a license for
an initial three year term granted to CDS, on terms and conditions
no less favorable than similar licenses with other customers of
MTI or SDRC, to use MTI application programming interfaces,
including the "Message Send" application programming interface.
9.2.4 Systems Integrator License. After
the Closing, SDRC shall discuss in good faith with CDS the
prospect of entering into a mutually acceptable agreement for a
license granted to CDS for the establishment of CDS as a systems
integrator of MTI products.
9.2.5 Further Assurances. At any time and
from time to time after the Closing,
SDRC will execute such additional instruments and take such
actions as may be reasonably requested by CDS to confirm or
perfect the assumption of Assumed Liabilities or otherwise to
carry out the intent and purposes of this Agreement.
ARTICLE 10.
PUBLICITY
All notices to third parties and all other parties concerning
the transactions contemplated by this Agreement shall be jointly
planned and coordinated by and between the parties. None of the
parties shall cause or authorize any such notice or publicity
without the prior written approval of the other party; provided,
however, that in the case of an announcement which SDRC may be
required by law, by any governmental agency or by the Nasdaq
National Market to make, issue or release, such action by SDRC
without the prior approval by the other parties shall not
constitute a breach of this Article 10.
ARTICLE 11.
TERMINATION
Section 11.1 Circumstances of Termination. Prior to
the Closing, this Agreement may be terminated only as follows:
(i) By the mutual consent in writing of SDRC and
CDS;
(ii) By SDRC or CDS if the Closing shall not have
occurred on or before 90 days after the date hereof (provided that
the right to terminate hereunder shall not be available to any
party whose failure to fulfill any obligation under this Agreement
has been the cause of or resulted in the Closing not taking place
prior to such date); or
(iii) By SDRC or CDS if the conditions to such
party's obligations shall not have been met, and it is reasonably
likely that such conditions will not be met on or before 90 days
after the date hereof (provided that the right to terminate
hereunder shall not be available to any party who is directly or
indirectly responsible for the other party's failure to satisfy
the conditions to Closing under this Agreement).
Section 11.2 Effect of Termination. In the event of
a termination of this Agreement pursuant to Section 11.1 hereof,
each party shall pay the costs and expenses incurred by it in
connection with this Agreement and no party (or any of its
officers, directors or shareholders) shall be liable to any other
party for any costs, expenses, damage or loss of anticipated
profits hereunder.
ARTICLE 12.
INDEMNIFICATION
Section 12.1 Indemnification Obligation of CDS. In
the event SDRC incurs any expenses, losses, damages, deficiencies
or costs in an aggregate cumulative amount in excess of $275,000
(the "Basket"), or has received any written claim, demand, suit,
or other notice from a third party which, if such party were to
prevail against SDRC would result in any expense, loss, damage,
deficiency or cost in an aggregate cumulative amount in excess of
the Basket, resulting from any misrepresentation or breach by CDS
of any representation, warranty or covenant made by CDS in this
Agreement, or from the Excluded Liabilities, SDRC shall be
entitled to be indemnified by CDS and held harmless against such
expenses, losses, damages, deficiencies, and/or costs, including
all costs of enforcing the obligations of CDS under this Article
12, but only to the extent such amounts exceed the Basket. Until
the disbursement to SDRC of the entire Escrow Amount, SDRC shall
be indemnified by setting off any amount of such indemnification
against the Escrow Amount. Nothing herein shall be construed so
as to limit the obligations of CDS hereunder to the Escrow Amount.
The aggregate amount of all claims hereunder in connection with
MTI shall not exceed an amount equal to $12,500,000, and the
aggregate amount of all claims hereunder in connection with the
Acquired CDS Business shall not exceed an amount equal to
$12,500,000. Notwithstanding anything herein to the contrary,
CDS' obligation to provide indemnification hereunder shall on a
cumulative basis not exceed $25,000,000.
Section 12.2 Indemnification Obligation of SDRC. In
the event CDS incurs any expenses, losses, damages, deficiencies
or costs in an aggregate cumulative amount in excess of the Basket
during the Escrow Period, or has received any written claim,
demand, suit, or other notice from a third party which, if such
party were to prevail against CDS, would result in any expense,
loss, damage, deficiency or cost in an aggregate cumulative amount
in excess of the Basket during the Escrow Period, resulting from
any misrepresentation or breach by SDRC of any representation,
warranty or covenant made by SDRC in this Agreement, including as
a result of SDRC's failure to perform pursuant to any Assumed
Liability, CDS shall be entitled to be indemnified and held
harmless against such expenses, losses, damages, deficiencies,
and/or costs, including all costs of enforcing the obligations of
SDRC under this Article 12, but only to the extent such amounts
exceed the Basket. The total amount of all claims hereunder shall
not exceed $25,000,000.
Section 12.3 Procedure for Indemnification. In
connection with any claim for indemnification under Section 12.1
or 12.2, the procedure set forth below shall be followed:
(a) The party seeking indemnification shall give the
other party written notice of any matter for which indemnity may
be sought under Section 12.1 or 12.2, promptly but in any event
within 30 business days after the party seeking indemnification
receives written notice thereof. Failure to give such notice
shall not affect the obligations of the party from whom
indemnification is sought unless such party is materially
adversely affected by such failure.
(b) The party from whom indemnification is sought
shall have the right to adjust or settle any claim, suit or
judgment coming within the scope of this indemnity obligation and
shall have the right to control any litigation related thereto,
except that counsel for the party from whom indemnification is
sought shall be reasonably satisfactory to the other party.
Either party hereto desiring to participate in the handling of any
such claim, suit or judgment being handled by the other party
shall have the right, at its expense and with its counsel, to join
with the other party and participate fully in the defense of any
such claim or interest. The party from whom indemnification is
sought shall not settle any such claim, suit or judgment without
the prior written consent of the other party.
(c) CDS and SDRC shall cooperate in the defense of
any such claim or litigation and each shall make available all
books and records which are relevant in connection with such claim
or litigation.
Section 12.4 Indemnification Obligation of CDS for Tax
Liability. Notwithstanding any limitations hereunder, the
obligations of CDS under this Article 12 to indemnify SDRC for up
to 50% of any expenses, losses, damages, deficiencies or costs
incurred by SDRC, to the extent such amounts exceed the Basket,
arising out of the obligation of CDS to pay, or any failure by CDS
to pay when due, any tax or other assessment, which obligation to
make such payment arose prior to the Closing and was not an
Assumed Liability, or for any breach of CDS' representations and
warranties under Section 3.2.13, shall not be subject to any
limitation on the time within which SDRC must bring a claim for
indemnification or on the amount for which CDS is obligated.
Section 12.5 Indemnification Obligation of CDS for
Employees and Excluded Liabilities. Notwithstanding any
limitations hereunder, the obligations of CDS under this Article
12 to indemnify SDRC for any expenses, losses, damages,
deficiencies or costs incurred by SDRC in connection with the
Excluded Liabilities, or for any breach by CDS of its
representations or warranties under, or failure by CDS to perform
its obligations pursuant to, Sections 1.3, 5.4, 9.1.11, or 9.1.12,
shall not be subject to any limitation on the time within which
SDRC must bring a claim for indemnification or on the amount for
which CDS is obligated. Until the disbursement to SDRC of the
entire Escrow Amount, SDRC shall be indemnified by setting off any
amount of indemnification for any failure by CDS to perform its
obligations under, or a breach by CDS of its representations and
warranties under, Sections 1.3, 5.4, 9.1.11, or 9.1.12, against
the Escrow Amount.
ARTICLE 13.
TERMINATION OF PRIOR AGREEMENTS
The parties hereto acknowledge and agree that each of the
following contracts, agreements, commitments, or understandings
shall be terminated as of the Closing, notwithstanding any notice
provision or restriction on termination provided therein, and
thereafter each such contract, agreement, commitment, or
understanding shall be void and of no further force or effect:
(a) Joint Venture Agreement;
(b) OEM License Agreement;
(c) Any and all revenue sharing agreements or similar
agreements between SDRC and CDS, and any other contracts,
agreements, commitments, or understandings between CDS and MTI or
SDRC in connection with MTI or the Acquired CDS Business, provided
however, that such termination shall not be construed so as to
limit the obligations of CDS or SDRC under this Agreement.
ARTICLE 14.
MISCELLANEOUS
Section 14.1 Headings. The subject headings of the
sections, paragraphs and subparagraphs of this Agreement are
included for purposes of convenience only, and shall not affect
the construction or interpretation of any of its provisions.
Section 14.2 Entire Agreement, Modification and
Waiver. This Agreement constitutes the entire agreement between
the parties pertaining to its subject matter and supersedes all
prior and contemporaneous agreements, representations and
understandings of the parties. No supplement, modification or
amendment of this Agreement shall be binding unless executed in
writing by all the parties. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
Section 14.3 Knowledge. With respect to CDS, for
purposes of this Agreement, "knowledge" or "best knowledge" means
the knowledge of James Ousley, CEO, Joseph Killoran, CFO, Ralph
Beha, General Counsel, and the North American and European PDM
Managers of CDS, as such knowledge has been obtained in the normal
conduct of the business and following a reasonable investigation
by such individuals. With respect to SDRC, for purposes of this
Agreement, "knowledge" or "best knowledge" means the knowledge of
Albert Peter, CEO, Jeffrey Vorholt, Vice President and CFO, John
A. Mongelluzzo, Vice President, Secretary and General Counsel, and
Martin A. Neads, Vice President and General Manager of SDRC
Operations, Inc., as such knowledge has been obtained in the
normal conduct of the business and following a reasonable
investigation by such individuals.
Section 14.4 Material Adverse Effects. As used in
this Agreement, the term "Material Adverse Effect" means (i) with
respect to MTI or the Acquired CDS Business, any single or a
series of related conditions, events, changes or occurrences that
have or may reasonably be expected to have a financially adverse
effect on the business, operations, results of operations and/or
financial condition of MTI and the Acquired CDS Business, taken as
a whole, and (ii) with respect to SDRC, any single or a series of
related conditions, events, changes or occurrences that have or
may reasonably be expected to have a financially adverse effect on
the business, operations, results of operations and/or financial
condition of SDRC and its subsidiaries, taken as a whole.
Section 14.5 Expenses. Whether or not the
transactions contemplated hereby are consummated, except as
otherwise provided herein, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby, including any attorneys' fees, brokers' or finders' fees
or commissions, or accountants' fees, shall be paid by the party
incurring such costs and expenses.
Section 14.6 Consents. Where any consent or waiver
of SDRC is required or requested hereunder, John A. Mongelluzzo,
Vice President, Secretary and General Counsel shall be the
authorized person to provide any such consent or waiver. Where
any consent or waiver of CDS and its Subsidiaries is required or
requested hereunder, Joseph F. Killoran, Chief Financial Officer,
shall be the authorized person to provide any such consent or
waiver.
Section 14.7 Survivability; Time for Bringing an
Action. The representations, warranties, covenants and agreements
set forth in this Agreement shall survive the Closing and the
consummation of the transactions contemplated hereby until the
later of (i) March 31, 1998, or (ii) a date 30 days following the
release to the public of SDRC's audited financial statements for
fiscal year 1997, and no claims or causes of action arising out of
the transactions contemplated hereby shall be asserted unless
asserted in writing on or before March 31, 1999; provided however,
that this limitation shall not apply to the violation of any
covenants or agreements to be performed by any of the parties
after the Closing.
Section 14.8 Counterparts. This Agreement may be
executed simultaneously in one or more counterparts, each of which
shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Section 14.9 Assignment. This Agreement shall be
binding on, and shall inure to the benefit of, the parties to it
and their respective heirs, legal representatives, successors and
assigns; provided, however, that any assignment by either party of
its rights or obligations under this Agreement without written
consent of the other party shall be void.
Section 14.10 Effect of Certain Actions. No action
taken pursuant to or related to this Agreement, including without
limitation any investigation by or on behalf of any party, shall
be deemed to constitute a waiver by the party taking such action
of compliance with any representation, warrant, condition or
agreement contained herein.
Section 14.11 Effect of Actual Knowledge.
(a) SDRC hereby agrees that in the event any officer of
SDRC, through and including the Vice President level, has actual
knowledge (based solely on written documentary evidence made
available or delivered to any such officer no less than two
business days prior to the date of the Closing) that any
representation or warranty of CDS made herein or pursuant hereto
is untrue or incorrect, then (i) SDRC shall have no rights under
this Agreement or otherwise by reason of such untruth or
inaccuracy, and (ii) any such representation or warranty by CDS
shall be deemed to be amended to the extent necessary to render it
consistent with such knowledge of SDRC.
(b) CDS hereby agrees that in the event any officer of
CDS, through and including the Vice President level, has actual
knowledge (based solely on written documentary evidence made
available or delivered to any such officer no less than two
business days prior to the date of the Closing) that any
representation or warranty of SDRC made herein or pursuant hereto
is untrue or incorrect, then (i) CDS shall have no rights under
this Agreement or otherwise by reason of such untruth or
inaccuracy, and (ii) any such representation or warranty by SDRC
shall be deemed to be amended to the extent necessary to render it
consistent with such knowledge of CDS.
Section 14.12 Notices. All notices, requests, demands and
other communications under this Agreement shall be in writing and
shall be deemed to have been duly given on the date of service if
served personally on the party (including, without limitation,
service by overnight courier service) to whom notice is to be
given, or on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, registered or
certified, postage prepaid, at the address set forth below, or on
the date of service if delivered by facsimile to the facsimile
number set forth below, which facsimile is confirmed within three
days by deposit of a copy of such notice in first class mail,
registered or certified, postage prepaid at the address set forth
below. Any party may change its address for purposes of this
paragraph by giving the other parties written notice of the new
address in the manner set forth above.
If to SDRC:
Structural Dynamics Research Corporation
2000 Eastman Drive
Milford, Ohio 45150
Fax No. (513) 576-2049
Attn.: John A. Mongelluzzo
with a copy to:
Dinsmore & Shohl, P.L.L.
1900 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
Fax No. (513) 977-8141
Attn.: Charles F. Hertlein, Jr.
If to CDS:
Control Data Systems, Inc.
4201 Lexington Avenue North
Arden Hills, MN 55126-6198
Fax No. (612) 482-4510
Attn.: Joseph F. Killoran, C.F.O.
with a copy to:
Fredrikson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, MN 55402-3397
Fax No. (612) 347-7077
Attn.: Keith A. Libbey
Section 14.13 Governing Law. This Agreement shall
be construed, without regard to conflicts of laws, in accordance
with, and governed by the laws of, the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have duly
executed it as of the date set forth above.
CONTROL DATA SYSTEMS, INC.
By:____________________________
Its:____________________________
STRUCTURAL DYNAMICS RESEARCH
CORPORATION
By:___________________________
Its:__________________________
<PAGE>
EXHIBITS
Exhibit Description
------- -----------
A Stock Purchase Warrant
B Escrow Agreement
C Lease Amendment
D Bill of Sale and Assignment
and Assumption
E Administrative Services
Agreement
F Opinion of Counsel for CDS
G Opinion of Counsel to SDRC
<PAGE>
SCHEDULES
Schedule Description
-------- -----------
1.2A The Assets
1.2B Assumed Liabilities
1.3 Employees to Become Employed by SDRC
2.4 Purchase Price Allocation
3.2.6 Accounts Receivable of MTI
3.2.7 Real Property Leases
3.2.10 Authorized Distributors and Resellers
3.2.14 Material Contracts of MTI
3.2.15 MTI Intellectual Property
3.2.17 Employees of MTI; Employee Benefit
Plans of MTI
3.2.22 Bank Loans of MTI
<PAGE>
Schedule Description
-------- -----------
3.3.5 Material Contracts of CDS with
respect to the Acquired CDS
Business
3.3.6 CDS Intellectual Property
3.3.7 Maintenance Agreements of CDS.
3.3.8 Accounts Receivable of CDS
3.3.9 Acquired CDS Business Employees
9.1.3 Licensed CDS Software
