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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 14, 1997
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PLATINUM SOFTWARE CORPORATION
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(Exact name of Registrant as specified in charter)
Delaware 0-20740 33-0277592
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
195 Technology Drive, Irvine, California 92618
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (714) 453-4000
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Not Applicable
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(Former name or former address, if changed, since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 4, 1997, Platinum Software Corporation (the "Company"),
entered into a definitive agreement (the "Merger Agreement") providing for the
merger (the "Merger") of FS Acquisition Corp., a wholly owned subsidiary of the
Company (the "Merger Sub") with and into FocusSoft, Inc., a Kentucky
Corporation and pursuant to which FocusSoft would become a wholly owned
subsidiary of the Company. The Merger was effected on November 14, 1997, (the
"Effective Time") pursuant to the Articles of Merger by and between Merger Sub
and FocusSoft filed with the Secretary of State for the Commonwealth of
Kentucky. Pursuant to the terms of the Merger Agreement, the Company issued
2,474,794 shares of common stock in exchange for all of the outstanding shares
of common stock of FocusSoft. The exchange ratio used with respect to the
FocusSoft shares was 24.747937 ("Exchange Ratio"). In addition, each
outstanding employee stock option of FocusSoft was assumed by the Company and
has been converted to a right to acquire an aggregate of 225,206 shares of
common stock of the Company with appropriate adjustments made to the exercise
price based on the Exchange Ratio. Ten percent of the shares issued in the
Merger, or 247,479 shares were placed into an escrow to cover indemnification
claims in connection with the transaction.
The Merger is intended to be a tax-free reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended, and is intended to be
treated as a pooling of interests for financial reporting purposes in
accordance with generally accepted accounting principles.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(C) EXHIBITS.
Exhibit Number
2.1 Agreement and Plan of Reorganization By and Among the
Company, FS Acquisition Corp., FocusSoft, Inc. and
the Shareholders of FocusSoft, Inc. dated November 4,
1997. (Schedules not included pursuant to Rule
601(b)(2) of Regulation S-K.)
99.1 Press Release dated November 4, 1997.
99.2 Press Release dated November 17, 1997.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PLATINUM SOFTWARE CORPORATION
Date: November 21, 1997 By: /s/ Michael J. Simmons
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Michael J. Simmons
Chief Financial Officer
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EXHIBIT INDEX
The following exhibits are attached hereto and incorporated herein by
reference:
Exhibit Number
Sequentially
Numbered Page
2.1 Agreement and Plan of Reorganization By and
Among the Company, FS Acquisition Corp.,
FocusSoft, Inc. and the Shareholders of
FocusSoft, Inc. dated November 4, 1997.
(Schedules not included pursuant to Rule
601(b)(2) of Regulation S-K.)
99.1 Press Release dated November 4, 1997.
99.2 Press Release dated November 17, 1997.
4
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EXHIBIT 2.1
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AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PLATINUM SOFTWARE CORPORATION,
FS ACQUISITION CORP.
FOCUSSOFT, INC.
AND
THE SHAREHOLDERS NAMED HEREIN
DATED AS OF NOVEMBER__, 1997
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TABLE OF CONTENTS
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SECTION 1 - THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation; Bylaws; Directors; Officers . . . . . . . . . . . . . . . . . . . . 2
1.5 Tax-Free Reorganization; Pooling of Interests . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2 - EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Total Shares; Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Organization of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Company Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Authorization; Validity; Non-Contravention. . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Company Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 Tax and Other Returns and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.9 Restrictions on Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.10 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.12 Agreements, Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.13 Interested Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.15 Accounts Receivable; Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.16 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.18 Brokers' and Finders' Fees; Third Party Expenses . . . . . . . . . . . . . . . . . . . . . . . 22
3.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.21 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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3.22 Complete Copies of Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.23 Warranties; Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.24 Receipt and Review of SEC Documents; Execution of . . . . . . . . . . . . . . . . . . . . . . 27
3.25 No Ultimate Parent Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.26 Representations Complete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.2 Authorization; Validity; Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.3 SEC Document; Parent Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.4 Parent Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.5 Authorized Capital Stock of Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.7 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.8 Restrictions on Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5 - COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1 Conduct of Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.2 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.3 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.4 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.7 Public Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.8 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.9 FIRPTA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.10 Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.11 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.12 Pooling Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.13 Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.14 Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.15 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.16 Director Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.17 Form S-8 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.18 Bonuses and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6 - CONDITIONS TO THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.1 Conditions to Obligations of Each Party to Effect the Merger . . . . . . . . . . . . . . . . . 37
6.2 Additional Conditions to the Obligations of Parent and Sub . . . . . . . . . . . . . . . . . . 38
6.3 Additional Conditions to Obligations of Company . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 7 - INDEMNIFICATION; ESCROW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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7.1 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.2 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.3 Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.4 Shareholders' Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.5 Survival of Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8 - TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.5 Notice of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.4 Entire Agreement; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.6 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.8 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.9 Absence of Third Party Beneficiary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.10 Mutual Drafting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.11 Further Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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INDEX OF EXHIBITS
Exhibit A Articles of Merger
Exhibit B Form of Shareholder Certificate
Exhibit C Form of Affiliate Agreement
Exhibit D Form of Legal Opinion of Counsel to the Company
Exhibit E Form of Key Employee Agreement
Exhibit F Form of Shareholder Employment Agreement
Exhibit F-1 Form of John Lococo Employment Agreement
Exhibit F-2 Form of Michael Zimmerman Employment Agreement
Exhibit G Form of Escrow Agreement
Exhibit H Form of Registration Rights Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
and entered into as of November ___, 1997 among Platinum Software Corporation,
a Delaware corporation ("Parent"), FS Acquisition Corp., a Kentucky corporation
and a wholly-owned subsidiary of Parent ("Sub"), FocusSoft, Inc., a Kentucky
corporation (the "Company"), and John Lococo, Michael Zimmerman, and Joseph
Brumleve (each a "Shareholder" and collectively, the "Shareholders").
RECITAL
The Boards of Directors of each of the Company, Parent and Sub believe
it is in the best interests of each company and their respective shareholders
that Parent acquire the Company through the statutory merger of Sub with and
into the Company (the "Merger") pursuant to the terms of this Agreement and, in
furtherance thereof, have approved the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
parties agree as follows:
SECTION 1
THE MERGER
1.1 THE MERGER. Subject to and upon the terms and conditions of
this Agreement, the Articles of Merger attached as Exhibit A (the "Merger
Agreement") and the 1988 Business Corporation Act of the State of Kentucky (the
"State Code"), Sub will be merged with and into the Company (the "Merger").
The Merger Agreement provides, among other things, the mode of effecting the
Merger and the manner and basis of converting each issued and outstanding share
of capital stock of the Company ("Company Capital Stock") into shares of common
stock, $.001 par value, of Parent ("Parent Common Stock").
1.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing of the Merger (the "Closing") will take
place at a place and time and on a date reasonably agreed to by Parent and the
Company which date shall be no later than the business day following
satisfaction or waiver of the conditions set forth in Section 6 hereof, unless
another date is agreed to by Parent and the Company. The date upon which the
Closing actually occurs is herein referred to as the "Closing Date." On the
Closing Date, the parties hereto shall cause the Merger to be consummated by
filing the Merger Agreement in accordance with the relevant provisions of the
State Code (the time of acceptance by the appropriate authority of the Merger
Agreement is referred
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to as the "Effective Time").
1.3 EFFECTS OF THE MERGER. At the Effective Time, the separate
existence of Sub shall cease and Sub shall be merged with and into the Company,
and the effects of the Merger shall be as provided in this Agreement, the
Merger Agreement and the applicable provisions of the State Code. The Company
as the surviving corporation after the Merger is sometimes referred to as the
"Surviving Corporation." Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of the Company and Sub shall vest in the Surviving
Corporation, and all debts, liabilities, obligations and duties of the Company
and Sub shall become the debts, liabilities, obligations and duties of the
Surviving Corporation.
1.4 ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS. At
the Effective Time and unless otherwise determined by Parent prior to the
Effective Time, (i) the Articles of Incorporation of the Company shall be the
Articles of Incorporation of the Surviving Corporation; (ii) the Bylaws of Sub
as in effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation until altered, amended or repealed; (iii) L. George
Klaus, Michael J. Simmons and John Lococo shall be the initial directors of the
Surviving Corporation and will hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Articles of Incorporation and Bylaws of the Surviving
Corporation, as the same may be amended from time to time or otherwise as
provided by law; and (iv) John Lococo, L. George Klaus and Michael J. Simmons
shall be the initial officers of the Surviving Corporation.
1.5 TAX-FREE REORGANIZATION; POOLING OF INTERESTS. The Merger
is intended to constitute a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"), and to qualify for
accounting treatment for as a pooling of interests.
SECTION 2
EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES
2.1 TOTAL SHARES; EFFECT ON CAPITAL STOCK. The total number of
shares of Parent Common Stock issuable (including Parent Common Stock to be
reserved for issuance upon exercise of any of the Company's options to be
assumed by Parent) in exchange for the acquisition by Parent of all outstanding
Company Capital Stock and all unexpired and unexercised options, warrants and
other rights to acquire Company Capital Stock shall be equal to 2,700,000. No
adjustment shall be made in the number of shares of Parent Common Stock issued
in the Merger as a result of any cash proceeds received by the Company from the
date hereof to the Closing Date pursuant to the exercise of options or warrants
to acquire Company Capital Stock. Subject to the terms and conditions of this
Agreement (including, without limitation, Section 7 below), as of the
Effective Time, by virtue of the Merger and without any action on the part of
Sub, the Company or the holder of any shares of the Company Capital Stock, the
following shall occur:
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(a) Conversion of Company Common Stock. Each share of
Common Stock of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Common Stock to be canceled pursuant to Section 2.1(b) and any Dissenting
Shares (as defined and to the extent provided in Section 2.2(a)) will be
canceled and extinguished and be converted automatically into the right to
receive that number of shares of Parent Common Stock equal to the Common
Exchange Ratio (as defined in paragraph (g) below), upon surrender of the
certificate representing such share of Company Common Stock in the manner
provided in Section 1.8.
(b) Cancellation of Parent-Owned and Company-Owned
Stock. Each share of Company Capital Stock owned by Sub, Parent, the Company
or any direct or indirect wholly-owned subsidiary of Parent or of the Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(c) Company Stock Options. At the Effective Time, each
outstanding Company Stock Option (as defined in Section 3.2) outstanding
immediately prior to the Effective Time (including, but not limited to, all
outstanding vested and unvested stock options) shall be assumed by Parent and
shall, by virtue of the Merger and without any action on the part of any holder
thereof, be converted into the right to acquire (if and when vested) that
number of shares of Parent Common Stock determined by multiplying the number of
shares of Company Common Stock into which such Company Stock Options are
convertible immediately prior to the Effective Time by the Common Exchange
Ratio, at an exercise price per share of Parent Common Stock equal to the
exercise price per share of such Company Stock Option divided by the Common
Exchange Ratio. Such Company Stock Options shall be assumed by Parent pursuant
to Parent's assumption of the Company's rights and obligations under individual
option agreements that provide for the issuance of such Company Stock Options.
(d) Capital Stock of Sub. Each share of Common Stock of
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Sub evidencing ownership of any such shares shall continue to
evidence ownership of such shares of capital stock of the Surviving
Corporation.
(e) Adjustments to Common Exchange Ratio. The Common
Exchange Ratio shall be adjusted to reflect fully the effect of any stock
split, reverse split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Capital Stock),
reorganization, recapitalization or other like change with respect to Parent
Common Stock or Company Capital Stock occurring after the date hereof and prior
to the Effective Time.
(f) Fractional Shares. No fraction of a share of Parent
Common Stock will be issued, but in lieu thereof, each holder of shares of
Company Capital Stock who would otherwise be entitled to a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of
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Parent Common Stock to be received by such holder) shall be entitled to receive
from Parent an amount of cash (rounded to the nearest whole cent) equal to the
per share market value of Parent Common Stock (based on the last sales price of
Parent Common Stock as reported on the Nasdaq National Market on the Effective
Date) multiplied by the fraction of a share of Parent Common Stock to which
such holder would otherwise be entitled.
(g) Definitions.
(i) Common Exchange Ratio. The "Common
Exchange Ratio" shall be 2,700,000 divided by the sum of (A) the total number
of shares of Company Common Stock outstanding as of immediately prior to the
Effective Time and (B) the total number of shares of Company Common Stock
underlying Company Stock Options outstanding as of immediately prior to the
Effective Time.
(ii) Escrow Amount. The "Escrow Amount" shall
be equal to 270,000 shares of Parent Common Stock.
2.2 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to
the contrary, any shares of Company Capital Stock held by a holder who has
demanded and perfected appraisal or dissenters' rights for such shares in
accordance with the State Code and who, as of the Effective Time, has not
effectively withdrawn or lost such appraisal or dissenters' rights ("Dissenting
Shares"), shall not be converted into or represent a right to receive Parent
Common Stock pursuant to Section 2.1, but the holder thereof shall only be
entitled to such rights as are granted by the State Code.
(b) Notwithstanding the provisions of subsection (a), if
any holder of shares of Company Capital Stock who demands appraisal of such
shares under the State Code shall effectively withdraw or lose (through failure
to perfect or otherwise) the right to appraisal, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Parent
Common Stock and cash in lieu of fractional shares as provided in Section 2.1,
without interest thereon, upon surrender of the certificate representing such
shares.
(c) The Company shall give Parent (i) prompt notice of
any written demands for appraisal of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments served pursuant to the
State Code and received by the Company and (ii) the opportunity to participate
in all negotiations and proceedings with respect to demands for appraisal under
the State Code. The Company shall not, except with the prior written consent
of Parent (which consent will not be unreasonably withheld), voluntarily make
any payment with respect to any demands for appraisal of Company Capital Stock
or offer to settle or settle any such demands.
2.3 EXCHANGE OF CERTIFICATES.
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(a) Exchange Agent. Prior to the Effective Time, Parent
shall designate a bank or trust company, reasonably acceptable to the Company,
to act as exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the
Effective Time, Parent shall deliver to the Exchange Agent for exchange in
accordance with this Section 2 and the Merger Agreement, the aggregate number
of shares of Parent Common Stock issuable pursuant to Section 2.1 and the
Merger Agreement in exchange for outstanding shares of Company Capital Stock,
and cash in an amount sufficient for payment in lieu of fractional shares
pursuant to Section 2.1(f); provided that, on behalf of the holders of Company
Capital Stock, Parent shall deposit into an escrow account a number of shares
of Parent Common Stock equal to the Escrow Amount out of the aggregate number
of shares of Parent Common Stock otherwise issuable pursuant to Section 2.1.
The portion of the Escrow Amount contributed on behalf of each holder of
Company Capital Stock shall be in proportion to the aggregate number of shares
of Parent Common Stock which such holder would otherwise be entitled to receive
under Section 2.1 by virtue of ownership of outstanding shares of Company
Capital Stock.
(c) Exchange Procedures. As soon as practicable after
the Effective Time, the Surviving Corporation shall cause to be mailed to each
holder of record of a certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of Company Common Stock (the
"Certificates") whose shares are being converted into Parent Common Stock
pursuant to Section 2.1 and the Merger Agreement, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor the number of shares of Parent Common Stock (less
the number of shares of Parent Common Stock to be deposited in the Escrow Fund
on such holder's behalf pursuant to the terms of Section 7 below and the Escrow
Agreement (as defined below)) plus cash in lieu of fractional shares to which
the holder of Company Common Stock is entitled pursuant to Section 2.1(f). The
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock which is not registered on the
transfer records of the Company, the appropriate number of shares of Parent
Common Stock may be delivered to a transferee if the Certificate representing
such Company Capital Stock is presented to the Exchange Agent and accompanied
by all documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid. As soon as
practicable after the Effective Time, and subject to and in accordance with the
provisions of Section 7 below and the Escrow Agreement, Parent shall cause to
be distributed to the Escrow Agent (as defined in Section 7) a certificate or
certificates representing that number of shares of Parent Common Stock equal to
the Escrow Amount which shall be registered in the name of the
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Escrow Agent. Such shares shall be beneficially owned by the holders on whose
behalf such shares were deposited in the Escrow Fund and shall be available to
compensate Parent as provided in Section 7. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented shares
of Company Capital Stock will be deemed from and after the Effective Time, for
all corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full shares of Parent Common Stock into which such
shares of Company Capital Stock shall have been so converted and the right to
receive an amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 2.1(f). Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time after the Effective
Time to represent the right to receive upon such surrender the number of shares
of Parent Common Stock as provided by this Section 2 and the provisions of the
State Code.
(d) Distributions With Respect to Unexchanged Shares.
No dividends or other distributions declared or made after the Effective Time
with respect to Parent Common Stock with a record date after the Effective Time
will be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of record of
such Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock.
(e) Transfers of Ownership. If any certificate for
shares of Parent Common Stock is to be issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it will
be a condition of the issuance thereof that the Certificate so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the issuance
of a certificate for shares of Parent Common Stock in any name other than that
of the registered holder of the certificate surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been
paid or is not payable.
(f) No Further Ownership Rights in Capital Stock of the
Company. All Parent Common Stock delivered upon the surrender for exchange of
shares of Company Common Stock in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such shares of Company Common Stock, and following the Effective Time, the
Certificates shall have no further rights to, or ownership in, shares of
Company Capital Stock. There shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the shares of Company
Common Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section 2.
(g) Lost, Stolen or Destroyed Certificates. In the
event any certificates evidencing shares of Company Common Stock shall have
been lost, stolen or destroyed, the
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Exchange Agent shall make payment in exchange for such lost, stolen or
destroyed certificates, upon the making of an affidavit of that fact by the
holder thereof, such shares of Parent Common Stock and cash for fractional
shares, if any, as may be required pursuant to Section 2.1(f); provided,
however, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the certificates alleged to have been lost, stolen or
destroyed.
(h) No Liability. Notwithstanding anything to the
contrary in this Section 2.3, none of the Exchange Agent, the Surviving
Corporation or any party hereto shall be liable to a holder of shares of
Company Common Stock for any amount paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(i) Taking of Necessary Action; Further Action. If, at
any time after the Effective Time, any such further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Sub, the officers
and directors of the Company and Sub are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful
and necessary action.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDERS
Each of the Company and the Shareholders, jointly and severally,
represents and warrants to Parent and Sub, subject to such exceptions as are
specifically and accurately disclosed in the disclosure schedule (referencing
the appropriate section and paragraph numbers) supplied by the Company and the
Shareholders to Parent and Sub on or prior to the date of this Agreement (the
"Disclosure Schedule") that on the date hereof and continuing through the
Effective Time as follows:
3.1 ORGANIZATION OF THE COMPANY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Company has the corporate power to own
its properties and to carry on its business as now being conducted. The
Company is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified would,
individually or in the aggregate, have a material adverse effect on the
Company, which jurisdictions are set forth on Section 3.1 of the Disclosure
Schedule. The Company has delivered and certified a true and correct copy of
its Articles of Incorporation and Bylaws, including all amendments thereto, to
Parent, and the Company is not in violation of such Articles of Incorporation
and Bylaws, as amended. The minute books of the Company have been made
available to Parent and are correct and complete in all material respects.
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3.2 COMPANY CAPITAL STRUCTURE.
(a) The authorized Company Capital Stock consists of
100,000 shares of Class A Voting Common Stock and 100,000 shares of Class B
Non-Voting Common Stock Company Common Stock, of which 100,000 shares of Class
A Voting Common Stock are issued outstanding and no shares of Class B
Non-Voting Common Stock are issued and outstanding, and no authorized or issued
and outstanding shares of preferred stock. All of the issued and outstanding
shares of Company Capital Stock have been duly authorized, validly issued,
fully paid and non-assessable and have been issued in compliance with federal
and state securities laws (including any applicable exemptions thereunder).
Further, none of such shares are subject to preemptive rights created by
statute, the Articles of Incorporation or Bylaws of the Company, or any
agreement to which the Company is a party or by which it may be bound. There
are no voting agreements or voting trusts with respect to any of the
outstanding shares of the Company Capital Stock. The outstanding shares of the
Company Capital Stock of the Company are held by the persons and in the amounts
set forth on Section 3.2(a) of the Disclosure Schedule.
(b) Section 3.2(b) of the Disclosure Schedule hereto
contains a true, correct and complete list of all outstanding options,
warrants, rights, convertible securities or other instruments or obligations
entitling the holders to acquire Company Capital Stock (the "Company Stock
Options"), none of which have been issued in violation of applicable securities
laws or the preemptive rights of any person. Section 3.2(b) of the Disclosure
Schedule sets forth for each outstanding Company Stock Options the name of the
holder of such option, the number of shares of Company Capital Stock subject to
such option, the exercise price of such option and the vesting schedule for
such option, including the extent vested to date. The exercisability of the
Company Stock Options will not be accelerated by the transactions contemplated
by this Agreement. Except for the Company Stock Options described in Section
3.2(b) of the Disclosure Schedule, there are no options, warrants, calls,
rights, commitments or agreements of any character, written or oral, to which
the Company is a party or by which it is bound obligating the Company to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the Company Capital Stock or obligating
the Company to grant, extend, accelerate the vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. The holders of Company Stock Options have been or will be given,
or shall have properly waived, any required notice prior to the Merger and all
such rights to acquire Company Capital Stock will be terminated at or prior to
the Effective Time. As a result of the Merger, Parent will be the record and
beneficial owner of all outstanding Company Capital Stock and rights to acquire
Company Capital Stock. The Company has delivered to Parent true and complete
copies of all instruments governing or defining rights of the holders of the
Company Stock Options.
3.3 SUBSIDIARIES.
(a) The Company has no subsidiaries or affiliated
companies.
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(b) The Company does not presently own of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity, nor is the Company, directly or indirectly, a
participant in any joint venture, partnership or other noncorporate entity.
3.4 AUTHORIZATION; VALIDITY; NON-CONTRAVENTION. (a) Each of
the Shareholders has the full legal right and capacity to execute and deliver
this Agreement and each agreement referenced herein to which he or she is a
party and to consummate the transactions contemplated by, and comply with his
or her obligations under, such agreements. The Company has the all requisite
corporate power and authority to execute and deliver this Agreement and each
agreement referenced herein to which it is a party and to consummate the
transactions contemplated by, and comply with its obligations under, such
agreements. This Agreement and each agreement referenced herein to which the
Company is a party, and the consummation by the Company of its obligations
herein and therein, have been duly authorized by all necessary corporate action
of the Company other than the approval of its shareholders in accordance with
applicable law. This Agreement has been, and at the Closing each agreement
referenced herein will be, duly executed and delivered by the Company and, to
the extent he or she is a party thereto, the Shareholders.
(b) This Agreement is, and when duly executed and
delivered at the Closing each agreement referenced herein will be, the valid
and binding agreement of the Company and/or the Shareholders, as the case may
be, enforceable against the Company and/or the Shareholders, as the case may
be, in accordance with their respective terms, except as such enforceability
may be limited by (i) bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally and (ii) general principles of equity
relating to the availability of equitable remedies.
(c) The execution and delivery of this Agreement and
each agreement referenced herein by the Company and the Shareholders does not,
and the consummation of the transactions contemplated hereby and thereby will
not, conflict with, or result in any violation of (a "Conflict") any statute,
law, rule, regulation, judgment, order, decree, or ordinance applicable to the
Company or the Shareholders or any of their properties or assets, or conflict
with or result in any breach or default (or which with or without notice or
lapse of time, or both, would constitute a default) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a benefit under, or result in the creation of a lien or encumbrance on the
properties or assets of the Company or the Shareholders pursuant to (i) any
provision of the Articles of Incorporation or Bylaws of the Company or (ii) any
agreement, contract, note, mortgage, indenture, lease, instrument, permit,
concession, franchise or license to which the Company or the Shareholders is a
party or by which the Company or the Shareholders or their properties or assets
may be bound or affected. No consent, waiver, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other federal, state, county, local or foreign
governmental authority, instrumentality, agency or Commission ("Governmental
Entity") or any third party, including a party to any agreement with the
Company or the Shareholders (so as not to trigger any Conflict), is required by
or with respect to the Company or the Shareholders in connection with the
execution and delivery of this Agreement, the other agreements referenced
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<PAGE> 15
herein or the consummation of the transactions contemplated hereby or thereby,
except for (i) the filing of the Merger Agreement with the Secretary of State
of the State of Kentucky, and (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable federal and state securities laws.
3.5 COMPANY FINANCIAL STATEMENTS. Section 3.5 of the Disclosure
Schedule includes true, complete and correct copies of the Company's audited
financial statements (balance sheets, income statements and statements of cash
flows) as of and for the fiscal year ending December 31, 1996 and the Company's
unaudited financial statements (balance sheets, income statement and statement
of cash flow) as of and for the fiscal years ending December 31, 1994 and 1995
and the nine-month period ended September 30, 1997 (collectively, the
"Financial Statements"). The Financial Statements (i) were prepared in
accordance with the books and records of the Company; (ii) except as noted on
the auditors' report accompanying the Company's audited financial statements,
the Financial Statements comply in all material respects with applicable
accounting requirements, have been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied, subject in the
case of the Company's unaudited financial statements, (x) to normal year-end
audit adjustments, which individually or in the aggregate will not be material,
and (y) to the omission of footnote information; and (iii) are accurate in all
material respects and, with respect to the Company's audited financial
statements, fairly present the Company's financial condition and the results of
its operations as at the relevant dates thereof and for the periods covered
thereby. The balance sheet of the Company as of December 31, 1996 is referred
to as the "Balance Sheet" and the date of the Balance Sheet is referred to as
the "Balance Sheet Date." Since the Balance Sheet Date there has been no
change in the Company's accounting policies.
3.6 NO UNDISCLOSED LIABILITIES. The Company does not have any
liability, indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type, whether accrued, absolute, contingent, matured,
unmatured or other which has not been reflected in the Balance Sheet, except
for (i) obligations not required under GAAP to be set forth or reflected on a
balance sheet or the notes thereto or (ii) obligations that have arisen in the
ordinary course of the Company's business since the Balance Sheet Date, and
that, in the case of obligations referenced in clauses (i) and (ii) above, are
not individually or in the aggregate material to the Company.
3.7 NO CHANGES. Since the Balance Sheet Date, there has not
been, occurred or arisen any of the following:
(a) transaction by the Company except in the ordinary
course of business as conducted on that date;
(b) capital expenditure or commitment by the Company,
either individually or in the aggregate, exceeding $50,000;
(c) destruction of, damage to or loss of any assets of
the Company (whether or not covered by insurance) the value of which is in
excess of $20,000 in the aggregate;
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(d) labor trouble or claim of wrongful discharge or
other unlawful labor practice or action;
(e) change in accounting methods or practices (including
any change in depreciation or amortization policies or rates) by the Company or
the revaluation by the Company of any of its assets;
(f) except as set forth in Section 3.7(f) of the
Disclosure Schedule, declaration, setting aside or payment of a dividend or
other distribution with respect to the Company Capital Stock, or any direct or
indirect redemption, purchase or other acquisition by the Company of any
Company Capital Stock;
(g) except as set forth in Section 3.7(g) of the
Disclosure Schedule, increase in the salary or other compensation payable or
to become payable by the Company to any of its officers, directors, employees
or advisors, or the declaration, payment or commitment or obligation of any
kind for the payment, by the Company, of a bonus or other additional salary or
compensation to any such person except as otherwise contemplated by this
Agreement;
(h) acquisition, sale or transfer of any asset of the
Company in excess of $5,000 individually or in the aggregate, except in the
ordinary course of business as conducted on that date;
(i) breach, amendment or termination of any distribution
agreement or any material contract, agreement or license to which the Company
is a party or by which it is bound other than termination by the Company
pursuant to the terms thereof;
(j) any creation or assumption by the Company of any
mortgage, pledge, security interest or lien or other encumbrance on any asset
(other than liens arising under existing lease financing arrangements which are
not material and liens for taxes not yet due and payable);
(k) except as set forth in Section 3.7(k) of the
Disclosure Schedule, any entry into, amendment of, relinquishment, termination
or non-renewal by the Company of any contract, lease transaction, commitment or
other right or obligation requiring aggregate payments by the Company in excess
of $10,000;
(l) Any transfer or grant of a right under the Company
Intellectual Property Rights (as defined in Section 3.11 below), other than
those transferred or granted in the ordinary course of business consistent with
past practice;
(m) loan by the Company to any person or entity,
incurring by the Company of any indebtedness, guaranteeing by the Company of
any indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others;
(n) the commencement or notice or, to the knowledge of
the Company, threat of
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commencement of any lawsuit or proceeding against or investigation of the
Company or its affairs;
(o) claim of ownership by a third party of the Company
Intellectual Property Rights or infringement by the Company of any third
party's intellectual property rights;
(p) issuance, sale or offer to sell by the Company of
any of its shares of capital stock, or securities exchangeable, convertible or
exercisable therefor, or of any other securities;
(q) change in pricing or royalties set or charged by the
Company;
(r) any event, condition or change of any character
that, by itself or together with other events, conditions or changes, has
affected adversely, or is likely to affect adversely, the business, operations,
properties, assets, liabilities, obligations, profits or condition (financial
or otherwise) of the Company;
(s) negotiation or agreement by the Company or any
officer or employees thereof to do any of the things described in the preceding
clauses (a) through (r) (other than negotiations with Parent and its
representatives regarding the transactions contemplated by this Agreement).
3.8 TAX AND OTHER RETURNS AND REPORTS.
(a) Definition of Taxes. For the purposes of this
Agreement, "Tax" or, collectively, "Taxes", means any and all federal, state,
local and foreign taxes, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any agreements
or arrangements with any other person with respect to such amounts and
including any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) The Company has prepared and timely filed
all required federal, state, local and foreign returns, estimates, information
statements and reports ("Returns") relating to any and all Taxes concerning or
attributable to the Company or its operations and such Returns are true and
correct and have been completed in accordance with applicable law.
(ii) The Company has: (A) paid or accrued all
Taxes it is required to pay or accrue and (B) withheld with respect to its
employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld.
(iii) The Company has not been delinquent in the
payment of any Tax nor
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is there any Tax deficiency outstanding, proposed or assessed against the
Company, nor has the Company executed any waiver of any statute of limitations
on or extending the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return
of the Company is presently in progress, nor has the Company been notified of
any request for such an audit or other examination.
(v) Except as set forth in Section 3.8(b)(v) of
the Disclosure Schedule, the Company does not have any liabilities for unpaid
federal, state, local and foreign Taxes which have not been accrued or reserved
against on the Balance Sheet, whether asserted or unasserted, contingent or
otherwise, and the Company has no knowledge of any basis for the assertion of
any such liability attributable to the Company, its assets or operations.
(vi) The Company has provided to Parent or its
legal counsel access to or copies of all foreign, federal and state income and
all state sales and use Tax Returns filed since inception.
(vii) There are (and as of immediately following
the Closing there will be) no liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("Liens") on the assets of the
Company relating to or attributable to Taxes.
(viii) The Company has no knowledge of any basis for
the assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as
"tax exempt use property" within the meaning of Section 168(h) of the Code.
(x) As of the Effective Time, there will not be
any contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Section 280G, 404 or 162 of
the Code.
(xi) The Company has not filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing,
tax indemnity or allocation agreement nor does the Company owe any amount under
any such agreement.
(xiii) The Company is not, and has not been at any
time, a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
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(xiv) The Company's tax basis in its assets for
purposes of determining its future amortization, depreciation and other federal
income tax deductions is accurately reflected on the Company's tax books and
records.
(c) S Corporation Status. The Company has since
inception been an S Corporation within the meaning of Section 1361 of the Code.
3.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has or
reasonably could be expected to have the effect of prohibiting or impairing any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company.
3.10 TITLE OF PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES;
CONDITION OF EQUIPMENT.
(a) Section 3.10 of the Disclosure Schedule sets forth a
general description of each parcel of real property currently, or at any time
in the past, owned or leased by the Company, and, with respect to leases, the
name of the lessor, the date of the lease and each amendment thereto and, with
respect to any current lease, the aggregate annual rental and/or other fees
payable under any such lease. The Company is in possession of all such real
properties owned or leased by it and described in Section 3.10 of the
Disclosure Schedule. All such current leases are in full force and effect, are
valid and effective in accordance with their respective terms (subject, as to
the enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting creditors' rights, and, with
respect to the remedy of specific performance, equitable doctrines applicable
thereto), and there is not, under any of such leases, any existing default or
event of default (or event which with notice or lapse of time, or both, would
constitute a default). Such current leases consist only of those described in
Section 3.10 of the Disclosure Schedule hereto, complete and correct copies of
which have been provided by the Company to Parent. None of the buildings,
structure or appurtenances located upon the real properties described in
Section 3.10 of the Disclosure Schedule hereto or the operation and maintenance
thereof as now operated or maintained, contravenes any zoning ordinance or
other administrative regulation (whether or not permitted because of prior
nonconforming use) or violates any restrictive covenant or any provision of
law, the effect of which would materially interfere with or prevent the
continued use of such properties for the purposes for which they are now being
used or would materially adversely affect the value thereof.
(b) To the knowledge of the Company, the Company has
valid title to, or, in the case of leased properties and assets, valid
leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used or held for use in its business, free and clear of any
Liens (as defined in Section 3.8(vii)), except as reflected in the Financial
Statements and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are
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not material in character, amount or extent, and which do not materially
detract from the value, or materially interfere with the present use, of the
property subject thereto or affected thereby.
(c) To the knowledge of the Company, the equipment owned
or leased by the Company is (i) adequate for the conduct of the business of the
Company as currently conducted and (ii) in good operating condition, regularly
and properly maintained, subject to normal wear and tear.
3.11 INTELLECTUAL PROPERTY.
(a) For the purposes of this Agreement, the following
terms have the following definitions:
"Intellectual Property" shall mean any or all of the
following and all rights in, arising out of, or associated therewith: (i) all
United States and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights
registrations and applications therefor and all other rights corresponding
thereto throughout the world; (iv) all mask works, mask work registrations and
applications therefor; (v) all industrial designs and any registrations and
applications therefor throughout the world; (vi) all trade names, logos, common
law trademarks and service marks; trademark and service mark registrations and
applications therefor and all goodwill associated therewith throughout the
world; (vii) all databases and data collections and all rights therein
throughout the world; and (viii) all computer software including all source
code, object code, firmware, development tools, files, records and data, all
media on which any of the foregoing is recorded, all Web addresses, sites and
domain names, and (ix) any similar, corresponding or equivalent rights to any
of the foregoing and (x) all documentation related to any of the foregoing.
"Company Intellectual Property" shall mean any
Intellectual Property that is owned by or exclusively licensed to the Company.
"Registered Intellectual Property" shall mean all
United States, international and foreign: (i) patents, patent applications
(including provisional applications); (ii) registered trademarks, applications
to register trademarks, intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered copyrights and
applications for copyright registration; (iv) any mask work registrations and
applications to register mask works; and (v) any other Company Intellectual
Property that is the subject of an application, certificate, filing,
registration or other document issued by, filed with, or recorded by, any
state, government or other public legal authority.
(a) Section 3.11(a) of the Disclosure Schedule lists all
Registered Intellectual Property owned by, or filed in the name of, the Company
(the "Company Registered Intellectual
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Property") and lists any proceedings or actions before any court, tribunal
(including the United States Patent and Trademark Office (the "PTO") or
equivalent authority anywhere in the world) related to any of the Company
Registered Intellectual Property Rights.
(b) Each item of Company Intellectual Property,
including all Company Registered Intellectual Property listed in Section
3.11(a) of the Disclosure Schedule and all Intellectual Property licensed to
the Company, is free and clear of any Liens. The Company (i) is the exclusive
owner of all trademarks and trade names used in connection with the operation
or conduct of the business of the Company, including the sale of any products
or technology or the provision of any services by the Company and (ii) owns
exclusively, and has valid title to, all copyrighted works that are Company
products or other works of authorship that the Company otherwise purports to
own.
(c) To the extent that any Intellectual Property has
been developed or created by any person other than the Company for which the
Company has, directly or indirectly, paid, the Company has a written agreement
with such person with respect thereto and the Company thereby has obtained
ownership of, and is the exclusive owner of, all such Intellectual Property by
operation of law or by valid assignment.
(d) The Company has not transferred ownership of or
granted any license of or right to use or authorized the retention of any
rights to use any Intellectual Property that is or was Company Intellectual
Property, to any other person.
(e) The Company Intellectual Property constitutes all
the Intellectual Property used in and/or necessary to the conduct of its
business as it currently is conducted or is reasonably contemplated to be
conducted, including, without limitation, the design, development, manufacture,
use, import and sale of the products, technology and services of the Company
(including products, technology or services currently under development).
(f) Other than "shrink-wrap" and similar widely
available commercial end-user licenses, the contracts, licenses and agreements
listed in Section 3.11(f) of the Disclosure Schedule include all contracts,
licenses and agreements, to which the Company is a party with respect to any
Intellectual Property. No person who has licensed Intellectual Property to the
Company has ownership rights or license rights to improvements made by the
Company in such Intellectual Property which has been licensed to the Company.
(g) Section 3.11(g) of the Disclosure Schedule lists all
contracts, licenses and agreements between the Company and any other person
wherein or whereby the Company has agreed to, or assumed, any obligation or
duty to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise
assume or incur any obligation or liability or provide a right of rescission
with respect to the infringement or misappropriation by the Company or such
other person of the Intellectual Property of any person other than the Company.
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<PAGE> 22
(h) The operation of the business of the Company as it
currently is conducted, including but not limited to the Company's design,
development, use, import, manufacture and sale of the products, technology or
services (including products, technology or services currently under
development) of the Company does not infringe or misappropriate the
Intellectual Property of any person, violate the rights of any person
(including rights to privacy or publicity), or constitute unfair competition or
trade practices under the laws of any jurisdiction, and the Company has not
received notice from any person claiming that such operation or any act,
product, technology or service (including products, technology or services
currently under development) of the Company infringes or misappropriates the
Intellectual Property of any person or constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor is the Company or any
Shareholder aware of any basis therefor).
(i) Each item of Company Registered Intellectual
Property is valid and subsisting, all necessary registration, maintenance and
renewal fees in connection with such Registered Intellectual Property have been
paid and all necessary documents and certificates in connection with such
Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. Section 3.11(i) of the Disclosure Schedule
lists all actions that must be taken by the Company within sixty (60) days of
the Closing Date, including the payment of any registration, maintenance or
renewal fees or the filing of any documents, applications or certificates for
the purposes of maintaining, perfecting or preserving or renewing any Company
Intellectual Property. For each product or technology of the Company that
constitutes or includes a copyrightable work, the Company has registered the
copyright in the latest version of such work with the U.S. Copyright Office.
In each case in which the Company has acquired any Intellectual Property rights
from any person, the Company has obtained a valid and enforceable assignment
sufficient to irrevocably transfer all rights in such Intellectual Property
(including the right to seek past and future damages with respect to such
Intellectual Property) to the Company and, to the maximum extent provided for
by, and in accordance with, applicable laws and regulations, the Company has
recorded each such assignment with the relevant governmental authorities,
including the PTO, the U.S. Copyright Office, or their respective equivalents
in any relevant foreign jurisdiction, as the case may be.
(j) Except as set forth in Section 3.11(j) to the
Disclosure Schedule, there are no contracts, licenses or agreements between the
Company and any other person with respect to Company Intellectual Property
under which there is any dispute known to the Company or any Shareholder
regarding the scope of such agreement, or performance under such agreement
including with respect to any payments to be made or received by the Company
thereunder.
(k) To the knowledge of the Company and the
Shareholders, no person is infringing or misappropriating any Company
Intellectual Property.
(l) The Company has taken all commercially reasonable
steps that are required to protect the Company's rights in confidential
information and trade secrets of the Company or
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provided by any other person to the Company. Without limiting the foregoing,
the Company has, and enforces, a policy requiring each employee, consultant and
contractor to execute proprietary information, confidentiality and assignment
agreements substantially in the Company's standard forms, and all current and
former employees, consultants and contractors of the Company have executed such
an agreement.
(m) Except as set forth in Section 3.11(i) to the
Disclosure Schedule, no Company Intellectual Property or product, technology or
service of the Company is subject to any proceeding or outstanding decree,
order, judgment, agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
(n) No (i) product, technology, service or publication
of the Company (ii) material published or distributed by the Company or (iii)
conduct or statement of Company constitutes obscene material, a defamatory
statement or material, false advertising or otherwise violates any law or
regulation pertaining to such matters.
(o) All of the Company's products (including products
currently under development) will record, store, process, calculate and present
calender dates falling on and after (and if applicable, spans of time
including) January 1, 2000, and will calculate any information dependent on or
relating to such dates in the same manner, and with the same functionality,
data integrity and performance, as the products record, store, process,
calculate and present calendar dates on or before December 31, 1999, or
calculate any information dependent on or relating to such dates (collectively,
"Year 2000 Compliant"). All of the Company's products (i) will lose no
functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000 and (ii) will be interoperable with other
products used by Parent that may deliver records to the Company's products or
receive records from the Company's products, or interact with the Company's
products, including but not limited to back-up and archived data. All of the
Company's internal computer and technology products and systems are Year 2000
Compliant.
3.12 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth
on Section 3.12 of the Disclosure Schedule, the Company does not have, is not a
party to nor is bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain
any severance pay or post-employment liabilities or obligations,
(iii) except as set forth in Section 3.12(iii) to
the Disclosure Schedule, any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements,
(iv) except as set forth in Section 3.12(iv) to
the Disclosure Schedule any
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<PAGE> 24
employment or consulting agreement, contract or commitment with an employee or
individual consultant or salesperson or consulting or sales agreement, contract
or commitment with a firm or other organization,
(v) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement,
(vi) any fidelity or surety bond or completion
bond,
(vii) any lease of personal property having a value
individually in excess of $10,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment
containing any covenant limiting the ability of the Company to engage in any
line of business or to compete with any person,
(x) except as set forth in Section 3.7(k) to the
Disclosure Schedule any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $10,000,
(xi) any agreement, contract or commitment
relating to the disposition or acquisition of assets or any interest in any
business enterprise outside the ordinary course of the Company's business,
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, including guaranties referred to
in clause (viii) hereof,
(xiii) any purchase order or contract for the
purchase of raw materials involving $10,000 or more,
(xiv) except as set forth in Section 3.12(xiv) to
the Disclosure Schedule any construction contracts,
(xv) any distribution, joint marketing or development
agreement,
(xvi) any agreement, contract or commitment with
any customer which, during the last two fiscal years of the Company, accounted
for, or is expected to account for, more than 10% of the Company's revenue or
trade payables, or
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(xvii) except as set forth in Sections 3.12(iii),
3.12(iv), 3.12(xiv) and 3.7(k) to the Disclosure Schedule any other agreement,
contract or commitment that involves $10,000 or more or is not cancelable
without penalty within thirty (30) days.
The Company has not breached, violated or defaulted under, or received
notice that it has breached, violated or defaulted under, any of the terms or
conditions of any agreement, contract or commitment to which it is a party or
by which it is bound (any such agreement, contract or commitment, a "Contract")
which breach, violation or default would either give rise to a right to
terminate a Contract or a material portion thereof or would result in
additional liability to the Company in excess of $5,000 individually or in the
aggregate. Each Contract is valid and binding on the Company and is in full
force and effect and is not, to the knowledge of the Company and the
Shareholders after due investigation, subject to any default thereunder by any
party obligated to the Company pursuant thereto. The Company has obtained, or
will obtain prior to the Effective Time, all necessary consents, waivers and
approvals of parties to any Contract as are required in connection with the
Merger, or as are required in order that any such Contract remain in effect
without modification after the Merger ("Consents").
3.13 INTERESTED PARTY TRANSACTIONS. No officer, director,
shareholder or optionee of the Company (nor any ancestor, sibling, descendant
or spouse of any of such persons, or any trust, partnership or corporation in
which any of such persons has or has had an interest), has or has had, directly
or indirectly, (i) an interest in any entity which furnished or sold, or
furnishes or sells, services or products that the Company furnishes or sells,
or proposes to furnish or sell, or (ii) any interest in any entity that
purchases from or sells or furnishes to, the Company, any goods or services, or
(iii) a beneficial interest in any contract or agreement set forth in Section
3.13 of the Disclosure Schedule, or (iv) except by virtue of being a
shareholder of the Company, an interest in any property, asset or right which
is used by the Company in the conduct of the business, or (v) a contractual
relationship with the Company other than with respect to the performance of
services as an officer or director or (vi) been involved in any transaction
with the Company during the past three (3) years other than with respect to the
performance of service as an officer or director as to the issuance of
securities of the Company; provided, that ownership of no more than one percent
(1%) of the outstanding voting stock of a publicly traded corporation shall not
be deemed an "interest in any entity" for purposes of this Section 3.13.
3.14 LITIGATION. There is no action, suit, claim or proceeding
of any nature pending or, to the knowledge of the Company and Shareholders,
threatened against the Company, its properties or any of its officers or
directors. There is no investigation pending or, to the knowledge of the
Company and the Shareholders, threatened against the Company, its properties or
any of its officers or directors by or before any governmental entity. No
governmental entity has at any time challenged or questioned the legal right of
the Company to manufacture, offer or sell any of its products in the present
manner or style thereof.
3.15 ACCOUNTS RECEIVABLE; INVENTORY.
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(a) The Company has made available to Parent a list of
all accounts receivable of the Company ("Accounts Receivable") as of September
30, 1997 along with a range of days elapsed since invoice.
(b) All Accounts Receivable of the Company arose in the
ordinary course of business, are carried at values determined in accordance
with GAAP consistently applied and are collectible except to the extent of
reserves therefor set forth in the Balance Sheet. No person has any Lien on
any of such Accounts Receivable and no request or agreement for deduction or
discount has been made with respect to any of such Accounts Receivable.
(c) All of the inventories of the Company reflected on
the Balance Sheet and the Company's books and records on the date of this
Agreement were purchased, acquired or produced in the ordinary and regular
course of business and in a manner consistent with the Company's regular
inventory practices and are set forth on the Company's books and records in
accordance with the practices and principles of the Company consistent with the
method of treating said items in prior periods.
3.16 MINUTE BOOKS. The minute books of the Company made available
to counsel for Parent are the only minute books of the Company and contain a
reasonably accurate summary of all meetings of directors (or committees
thereof) and shareholders or actions by written consent since the date of
incorporation of the Company.
3.17 ENVIRONMENTAL MATTERS.
(a) Hazardous Material. The Company has not: (i)
operated any underground storage tanks at any property that the Company has at
any time owned, operated, occupied or leased; or (ii) illegally released any
material amount of any substance that has been designated by any Governmental
Entity or by applicable federal, state or local law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including,
without limitation, PCBs, asbestos, petroleum, and urea-formaldehyde and all
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, or
defined as a hazardous waste pursuant to the United States Resource
Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws (a "Hazardous Material"), but excluding
office and janitorial supplies properly and safely maintained. No Hazardous
Materials are present as a result of the deliberate actions of the Company or,
to the best of the Company's or the Shareholders' knowledge, as a result of any
actions of any other person or otherwise, in, on or under any property,
including the land and the improvements, ground water and surface water
thereof, that the Company has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has the Company
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<PAGE> 27
disposed of, transported, sold, or manufactured any product containing a
Hazardous Material (collectively, "Company Hazardous Materials Activities") in
violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company currently holds all
environmental approvals, permits, licenses, clearances and consents (the
"Environmental Permits") necessary for the conduct of the Company's Hazardous
Material Activities and other business of the Company as such activities and
business are currently being conducted other than any Environmental Permits.
All Environmental Permits are in full force and effect. The Company (A) is in
compliance with all material terms and conditions of the Environmental Permits
and (B) is in compliance in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the laws of all Governmental Entities
relating to pollution or protection of the environment or contained in any
regulation, code, plan, order, decree, judgment, notice or demand letter
issued, entered, promulgated or approved thereunder.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or, to the knowledge of the Company or the Shareholders, threatened
concerning any Environmental Permit, Hazardous Material or any Company
Hazardous Materials Activity. The Company is not aware of any fact or
circumstance which reasonably could involve the Company in any environmental
litigation or impose upon the Company any material environmental liability.
3.18 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Neither the
Company nor the Shareholders has incurred, and will not incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby. Section 3.18 of the Disclosure Schedule sets forth a
reasonable estimate of all Third Party Expenses (as defined in Section 5.6)
expected to be incurred by the Company in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby.
3.19 EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Section 3.19, the following
terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or
entity under common control with the Company within the meaning of Section
414(b), (c), (m) or (o) of the Code and the regulations thereunder.
(ii) "Employee Plan" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for bonuses, severance, termination pay, deferred compensation, pensions,
profit sharing, performance awards, stock or stock-related awards,
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fringe benefits or other employee benefits of any kind, whether formal or
informal, written or otherwise, funded or unfunded and whether or not legally
binding, including without limitation, any plan which is or has been
maintained, contributed to, or required to be contributed to, by the Company or
any Affiliate for the benefit of any "Employee" (as defined below), and
pursuant to which the Company or any Affiliate has or to the knowledge of the
Company and the Shareholders may have any material liability, contingent or
otherwise; and
(iii) "Employee" shall mean any current, former, or
retired employee, consultant, officer, or director of the Company or any
Affiliate.
(iv) "Employee Agreement" shall refer to each
offer letter or employment, severance, bonus, consulting or similar agreement
whether written or oral or contract between the Company or any Affiliate and
any Employee;
(b) Schedule. Schedule 3.19(b) contains an accurate and
complete list of each Employee Plan and each Employee Agreement, together with
a schedule of all liabilities, whether or not accrued, under each such Employee
Plan or Employee Agreement. The Company does not have any plan or commitment,
whether legally binding or not, to establish any new Employee Plan or Employee
Agreement, to modify any Employee Plan or Employee Agreement (except to the
extent required by law or to conform any such Employee Plan or Employee
Agreement to the requirements of any applicable law, in each case as previously
disclosed to Parent in writing, or as required by this Agreement), or to enter
into any Employee Plan or Employee Agreement, nor does it have any intention or
commitment to do any of the foregoing.
(c) Documents. The Company has provided to Parent, (i)
correct and complete copies of all documents embodying each Employee Plan and
each Employee Agreement including all amendments thereto and copies of all
forms of agreement and enrollment used therewith; (ii) the most recent annual
actuarial valuations, if any, prepared for each Employee Plan; (iii) the three
most recent annual reports (Series 5500 and all schedules thereto), if any,
required under ERISA or the Code in connection with each Employee Plan or
related trust; (iv) the most recent summary plan description together with the
most recent summary of material modifications, if any, required under ERISA
with respect to each Employee Plan; (v) all IRS determination letters and
rulings relating to Employee Plans and copies of all applications and
correspondence to or from the IRS or the Department of Labor ("DOL") with
respect to any Employee Plan; (vi) if the Employee Plan is funded, the most
recent annual and periodic accounting of Employee Plan assets; (vii) all
material agreements and contracts relating to each Employee Plan, including but
not limited to, administrative service agreements, group annuity contracts and
group insurance contracts; and (viii) all communications material to any
Employee or Employees relating to any Employee Plan and any proposed Employee
Plans, in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any liability to the Company.
(d) Employee Plan Compliance. (i) The Company has
performed all obligations
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required to be performed by it under each Employee Plan and each Employee Plan
has been established and maintained in accordance with its terms and in
compliance in all material respects with all applicable laws, statutes, orders,
rules and regulations, including ERISA and the Code; (ii) each Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination letter with respect to each such Plan from the IRS or has
remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such a determination letter and make any
amendments necessary to obtain a favorable determination; (iii) no "prohibited
transaction", within the meaning of Section 4975 of the Code or Section 406 or
407 of ERISA, has occurred with respect to any Company Employee Plan; (iv)
there are no actions, suits or claims pending, or, to the knowledge of the
Company and the Shareholders, threatened (other than routine claims for
benefits) against any Employee Plan or against the assets of any Employee Plan;
(v) each Employee Plan can be amended, terminated or otherwise discontinued
after the Effective Time in accordance with its terms, without liability to the
Company, Parent, Sub or any Affiliate (other than ordinary administration
expenses typically incurred in a termination event); (vi) there are no
inquiries or proceedings pending or, to the knowledge of the Company and the
Shareholders, threatened by the IRS or DOL with respect to any Employee Plan;
and (vii) neither the Company nor any Affiliate is subject to any penalty or
tax with respect to any Employee Plan under Section 402(i) of ERISA or Section
4975 through 4980 of the Code.
(e) Pension Plans. The Company now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA,
Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company
contributed to or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Employee Plan
provides, or has any liability to provide, life insurance, medical or other
employee benefits to any Employee upon his or her retirement or termination of
employment for any reason, except as may be required by statute, and the
Company has not represented, promised or contracted (whether in oral or written
form) to any Employee (either individually or to Employees as a group) that
such Employee(s) would be provided with life insurance, medical or other
employee welfare benefits upon their retirement or termination of employment,
except to the extent required by statute.
(h) No COBRA Violation. Neither the Company nor any
Affiliate has, prior to the Effective Time violated any of the health care
continuation requirements of the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended, or any similar provisions of state law applicable to its
employees.
(i) Effect of Transaction. The execution of this
Agreement and the consummation of the transactions contemplated hereby will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Employee Plan, Employee
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Agreement, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits with
respect to any Employee.
(j) Employment Matters. Except as set forth in Section
3.6 to the Disclosure Schedule, the Company (i) is in compliance with all
applicable laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each
case, with respect to Employees; (ii) has withheld all amounts required by law
or by agreement to be withheld from the wages, salaries and other payments to
Employees or other persons who by virtue of their activities performed on
behalf of the Company may be deemed employees within the meaning of applicable
law; (iii) is not liable for any arrears of wages or any taxes or any penalty
for failure to comply with any of the foregoing; and (iv) is not liable for any
payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for Employees or other persons who by virtue
of their activities performed on behalf of the Company may be deemed employees
within the meaning of applicable law (other than routine payments to be made in
the normal course of business and consistent with past practice).
(k) Labor. No work stoppage or labor strike against the
Company is pending or, to the knowledge of the Company and the Shareholders,
threatened. The Company is not involved in or, to the knowledge of the Company
and the Shareholders, threatened with any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters involving any
Employee, including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in liability to the Company, Parent or Sub. The
Company has not engaged in any unfair labor practices which could, individually
or in the aggregate, directly or indirectly result in a liability to the
Company, Parent, Sub or any Affiliate. The Company is not presently, nor has
it in the past, been a party to, or bound by, any collective bargaining
agreement or union contract with respect to Employees and no collective
bargaining agreement is being negotiated by the Company.
(l) No Interference or Conflict. No shareholder or
officer, and, to the knowledge of the Company and the Shareholders after due
investigation, employee or consultant of the Company is obligated under any
contract or agreement subject to any judgement, decree or order of any court or
administrative agency, that would interfere with such person's efforts to
promote the interests of the Company or that would interfere with the Company's
business. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business as presently conducted or proposed to be
conducted nor any activity of such officers, directors, employees or
consultants in connection with the carrying on of the Company's business as
presently conducted or proposed to be conducted, will conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any contract or agreement under which any of such officer's, directors,
employees or consultants is now bound.
3.20 INSURANCE. Section 3.20 of the Disclosure Schedule lists all
insurance policies and
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fidelity bonds covering the assets, business, equipment, properties,
operations, employees, officers and directors of the Company. There is no
claim by the Company pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such policies and
bonds have been paid and the Company is otherwise in material compliance with
the terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). The Company has not received any
notice that the insurers intend to terminate or materially increase the
premiums payable under any of such policies.
3.21 COMPLIANCE WITH LAWS. Except as set forth in Section 3.21 of
the Disclosure Schedule, the Company has complied with, has not received any
notices (whether written or oral) of violation with respect to, and to the
knowledge of the Company and the Shareholders after due investigation, and is
not in violation of any foreign, federal, state or local statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, assets or properties. There are no judgments of
orders, injunctions, decrees, stipulations or awards (whether rendered by a
court or administrative agency or by arbitration) against the Company or
against any of its properties or businesses.
3.22 COMPLETE COPIES OF MATERIALS. The Company has delivered to
Parent true and complete copies of each agreement, contract, commitment or
other document (or summaries of same) that is referred to in this Agreement
(including in any exhibit or schedule hereto) or that has been requested by
Parent or its counsel.
3.23 WARRANTIES; INDEMNITIES. Section 3.23 of the Disclosure
Schedule sets forth a list of all agreements containing warranties and
indemnities relating to products sold or services rendered by the Company and
copies of warranties relating to the Company's shrink wrap products, and no
warranty or indemnity has been given by the Company which differs therefrom in
any material respect. Section 3.23 of the Disclosure Schedule also indicates
all warranty and indemnity claims in excess of $15,000 individually or in the
aggregate made against the Company.
3.24 RECEIPT AND REVIEW OF SEC DOCUMENTS; EXECUTION OF SHAREHOLDER
CERTIFICATE. The Shareholders hereby acknowledge that they have received and
reviewed (i) a true and complete copy of the Company's Form 10-K for the fiscal
year ended June 30, 1997 which Parent filed with the SEC; (ii) Parent's Proxy
Statement that was mailed to stockholders of Parent in conjunction with
Parent's annual meeting of stockholders held on October 29, 1997 and (iii)
Parent's current report on Form 8-K pertaining to the Parent's earnings release
for the first quarter of fiscal year 1998. In addition, each of the
Shareholders shall have executed a Shareholder Certificate (as defined below).
3.25 NO ULTIMATE PARENT ENTITY. The Company and the Shareholders
hereby represent that the Company does not have an "ultimate parent entity" as
such term is defined in 16 C.F.R. Section 801.1.
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3.26 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Company or the Shareholders, nor any document, written
information, statement, financial statement, certificate, schedule or exhibit
prepared or furnished by the Company, the Shareholders or their
representatives pursuant to this Agreement or in connection with the
transactions contemplated hereby, or furnished in or in connection with any
materials provided to shareholders in connection with the approval of this
Agreement and the transactions contemplated hereby, contains or will contain at
the Effective Time, any untrue statement of a material fact, or omits or will
omit at the Effective Time to state any material fact necessary in order to
make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading. There is no event, fact or
condition that has resulted in having, or could reasonably be expected to have,
a material adverse effect on the business, operations, properties, assets,
liabilities, obligations, profits or condition (financial or otherwise) of the
Company that has not been set forth in this Agreement. Any and all financial
projections provided by the Company to Parent represent the Company's and the
Shareholders' reasonable best estimate of the matters addressed therein and to
the knowledge of the Company and the Shareholders, there is no event, fact or
condition that renders any such projections materially inaccurate.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
4.1 ORGANIZATION, STANDING AND POWER. Each of the Parent and Sub
is a corporation duly organized, validly existing and in good standing under
the laws of its state of incorporation. Each of Parent and Sub has the
corporate power to own its properties and to carry on its business as now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified would have a material
adverse effect on the ability of Parent and Sub to consummate the transactions
contemplated hereby.
4.2 AUTHORIZATION; VALIDITY; NON-CONTRAVENTION. (a) Parent and
Sub have all requisite corporate power and authority to enter into this
Agreement and each agreement referenced herein and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
Parent and Sub of this Agreement and each agreement referenced herein, Parent's
and Sub's compliance with the obligations under such agreements and the
consummation of the transactions contemplated by this Agreement and each
agreement referenced herein have been duly authorized by all necessary
corporate action on the part of Parent and Sub.
(b) This Agreement and each agreement referenced herein
has been duly executed and delivered by Parent and constitute the valid and
binding obligations of Parent, enforceable in accordance with its terms, except
as such enforceability may be limited by principles of public policy and
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive
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relief or other equitable remedies. This Agreement and each agreement
referenced herein have been duly executed and delivered by Sub and constitute
the valid and binding obligation of Sub, enforceable in accordance with their
terms, except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief and other equitable remedies.
(c) The execution and delivery of this Agreement and each
agreement referenced herein do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, any material statute, law, rule, regulation, judgment, order,
decree, or ordinance applicable to the Parent or Sub or any of their respective
properties or assets, or conflict with or result in any breach of or default,
with or without notice or lapse of time, or both) under, or give rise to right
of termination, cancellation or acceleration of any obligation or loss or to
loss of a material benefit under, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Parent or Sub pursuant to
(i) any provision of the Articles of Incorporation or Bylaws of the Parent or
Sub or (ii) any material agreement, contract, note, mortgage, indenture, lease,
instrument, permit, concession, franchise or license to which the Parent or Sub
is a party or by which the Parent or Sub or any other of their respective
properties or assets may be bound or affected other than any such conflicts,
violations, defaults, terminations, cancellations or accelerations which would
not prevent Parent from consummating the transactions contemplated hereby or
that would not have a material adverse effect on Parent. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
governmental entity, is required by or with respect to Parent and Sub in
connection with the execution and delivery of this Agreement and each agreement
referenced herein by Parent and Sub or the consummation by Parent and Sub of
the transactions contemplated hereby or thereby, except for (i) the filing of
the Merger Agreement with the Secretary of State of the State of Kentucky, (ii)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable state and federal securities
laws and the laws of any foreign country, (iii) filings with the Securities and
Exchange Commission (the "SEC") and state securities commissions (iv) such
other consents, authorizations, filings, approvals and registrations which if
not obtained or made would not prevent Parent from consummating the
transactions contemplated hereby or that would not have a material adverse
effect on Parent.
4.3 SEC DOCUMENT; PARENT FINANCIAL STATEMENTS. Parent has
furnished or made available to the Company a true and complete copy of its Form
10-K for the fiscal year ended June 30, 1997 (the "SEC Document"), which Parent
filed under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") with the SEC and has further provided any Forms 8-K or Forms 10-K/A that
have been filed with the SEC since the date of filing of the SEC Document. As
of its filing date, the SEC Document complied in all material respects with the
requirements of the Exchange Act and the SEC Document did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances in which they were made, not misleading, except to the
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extent corrected by a subsequently filed document with the SEC. The financial
statements of Parent, including the notes thereto, included in the SEC Document
(the "Parent Financial Statements") comply as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP consistently applied (except as may be indicated in the notes thereto
or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
and fairly present the consolidated financial position of Parent at the dates
thereof and of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal, recurring audit
adjustments). There has been no change in Parent accounting policies except as
described in the notes to the Parent Financial Statements. Parent has no
material obligations other than (i) those set forth in the Parent Financial
Statements and (ii) those not required to be set forth in the Parent Financial
Statements under generally accepted accounting principles.
4.4 PARENT COMMON STOCK. The shares of Parent Common Stock, when
issued in the Merger in compliance with this Agreement, will be validly issued,
fully paid and nonassessable. Such shares will be issued in compliance with
applicable state and federal securities laws.
4.5 AUTHORIZED CAPITAL STOCK OF PARENT. The authorized capital
stock of Parent consists of 60,000,000 shares of Common Stock, $.001 par value
per share, and 5,000,000 shares of Preferred Stock, $.001 par value per share,
of which 500,000 shares have been designated Series A Preferred Stock,
2,490,000 shares have been designated Series B Preferred Stock and 231,915
shares have been designated Series C Preferred Stock. As of September 12,
1997, Parent had 20,251,989 shares of Common Stock, no shares of Series A
Preferred Stock, 2,435,000 shares of Series B Preferred Stock and 213,803
shares of Series C Preferred Stock outstanding. All such shares are validly
issued and outstanding, and are fully paid and non-assessable. Each share of
Series B Preferred Stock is convertible into 1 shares of Parent Common Stock
and each share of Series C Preferred Stock is convertible into 10 shares of
Parent Common Stock. As of October 27, 1997, Parent has granted options to
purchase an aggregate of 3,943,774 shares of Parent Common Stock pursuant to
employee option plans.
4.6 LITIGATION. Except as disclosed on Schedule 4.6 to this
Agreement, there is no action, suit, claim or proceeding of any nature pending
or, to Parent's knowledge, threatened against Parent, its properties or any of
its officers or directors that is not disclosed in the SEC Document and that
would have a material adverse affect on Parent. Except as disclosed on
Schedule 4.6 to this Agreement, there is no investigation pending or, to
Parent's knowledge, threatened against Parent, its properties or any of its
officers or directors by or before any governmental entity that is not
disclosed in the SEC Document and that would have a material adverse effect on
Parent.
4.7 NO UNDISCLOSED LIABILITIES. Except as disclosed on Schedule
4.7 to this Agreement, Parent does not have any liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, contingent, matured, unmatured or other which has
not been reflected in the SEC Document and that would have a material adverse
effect on Parent.
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4.8 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which Parent is a party or otherwise binding upon Parent that is not disclosed
in the SEC Document which has or is reasonably likely to have the effect of
prohibiting or impairing any business practice of Parent, any acquisition of
property (tangible or intangible) by Parent or the conduct of business by
Parent and would result in a material adverse effect on Parent.
SECTION 5
COVENANTS
5.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, the Company shall carry on its
business in the usual, regular and ordinary course in substantially the same
manner as conducted prior to the date of this Agreement and, to the extent
consistent with such business, use all commercially reasonable efforts
consistent with past practice and policies to preserve intact its present
business organization, keep available the services of its present officers and
key employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with
it, with the objective that its goodwill and ongoing business shall be
unimpaired at the Effective Time. The Company shall promptly notify Parent of
any event or occurrence not in the ordinary course of business of the Company.
Except as expressly contemplated by this Agreement, the Company shall not,
without the prior written consent of Parent (which consent shall not be
unreasonably withheld):
(a) Except for the distributions set forth in Section
5.1(a) of the Disclosure Schedule, declare or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any of
its capital stock, or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or repurchase or
otherwise acquire, directly or indirectly, any shares of its capital stock;
(b) Issue, deliver or sell, authorize or propose the
issuance, delivery or sale of, or purchase or propose the purchase of, any
shares of its capital stock or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments of
any character obligating it to issue any such shares or other convertible
securities or authorize or propose any change in its equity capitalization;
(c) Accelerate, amend or change the period of
exercisability of the Company Stock Options or authorize cash payments in
exchange therefor;
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(d) Solicit approval for or effect any amendments to the
Company's Articles of Incorporation or Bylaws;
(e) Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to the Company;
(f) Sell, lease, license, pledge or otherwise dispose of
or encumber any of its properties or assets except in the ordinary course of
business consistent with past practice (including without limitation any
indebtedness owed to it or any claims held by it);
(g) Except in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or guarantee, endorse or
otherwise become responsible for the obligations of others, or make loans or
advances;
(h) Pay, discharge or satisfy in an amount in excess of
$10,000 in any one case any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business consistent with
past practice of liabilities reflected or reserved against in the Company's
Financial Statements or those incurred after the Balance Sheet in the ordinary
course of business;
(i) Except as disclosed in Schedule 5.1(i), adopt or
amend any Plan; enter into or amend any employment, severance or termination
contract with or pay any special bonus or special remuneration, including
without limitation any severance or termination pay to, any director, employee
or consultant, or increase the salaries or wage rates of its employees;
(j) Commence a lawsuit other than for the routine
collection of bills;
(k) Transfer to any person or entitle any person to any
rights to the Company Intellectual Property Rights except in the ordinary
course of business, or enter into or amend any agreements pursuant to which any
other party is granted marketing or other similar rights of any type or scope
with respect to any products of the Company;
(l) Except in the ordinary course of business with prior
notice to Parent, violate, amend or otherwise modify the terms of any of the
material contracts binding on the Company set forth on Schedule 3.12;
(m) Revalue any of its assets, including without
limitation, writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business and
consistent with past practice;
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(n) Make any material Tax election other than in the
ordinary course of business and consistent with past practice, change any
material Tax election, adopt any material Tax accounting method other than in
the ordinary course of business and consistent with past practice, change any
material tax accounting method, file any material Tax return (other than any
estimated tax returns, payroll tax returns or sale tax returns) or any
amendment to a material Tax return, enter into any closing agreement, settle
any Tax claim or assessment, or consent to any Tax claim or assessment;
(o) Engage in any activities or transactions that are
outside the ordinary course of its business consistent with past practice or
any commitment or transaction of the type described in Section 3.7 hereof;
(p) Fail to pay or otherwise satisfy its monetary
obligations as they become due, except such as are being contested in good
faith; or waive or commit to waive any rights of substantial value; or cancel,
materially amend or renew any insurance policy other than substituting a policy
providing substantially the same coverage as any existing policy; or
(q) Take, or agree (in writing or otherwise) to take, any
of the actions described in Sections 5.1(a) through (p) above, or any action
which would make any of the representations or warranties of the Company
contained in this Agreement untrue or incorrect or result in any of the
conditions to the Merger set forth in Section 6 not being satisfied.
5.2 NO SOLICITATION. (a) Until the earlier of the Effective Time
or the termination of this Agreement pursuant to the provisions of Section 8.1
(the "No Solicitation Period"), neither the Company nor the Shareholders will
(nor will the Company permit any of the Company's officers, directors, agents,
representatives or affiliates to) directly or indirectly, take any of the
following actions with any party other than Parent and its designees: take any
action to solicit, initiate, seek, entertain, encourage or support any inquiry,
proposal or offer from, furnish any information to, or participate in any
discussions or negotiations with, any third party other than Parent regarding
any acquisition of the assets or capital stock of the Company, or any merger,
consolidation or business combination with or involving the Company. The
Company agrees that any such discussions or negotiations (other than
discussions or negotiations with Parent) in progress as of the date of this
Agreement will be suspended during the No Solicitation Period and that, in no
event, will the Company accept or enter into an agreement concerning any such
third-party transaction during the No Solicitation Period. The Company and the
Shareholders will notify Parent immediately after receipt by the Company (or
any of its officers, directors, employees, affiliates or agents) and/or the
Shareholders of any unsolicited proposal for, or inquiry respecting, any third
party transaction of the type described above involving the Company and/or the
Shareholders, or any request for nonpublic information in connection with such
a proposal or inquiry, or for access to the properties, books or records of the
Company by any person, or entity that informs the Company and/or the
Shareholders that it is considering making, or has made, such a proposal or
inquiry. Such notice to Parent will indicate in reasonable detail the terms
and conditions of such proposal or inquiry. Furthermore, the Company and/or
the Shareholders will notify Parent of the identity
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of the person making such proposal immediately upon receipt of such proposal.
(b) During the No Solicitation Period, Parent will not,
directly or indirectly, through any officer, director, employee, affiliate or
agent of Parent, or otherwise, take any action to solicit, initiate, seek,
encourage or support any inquiry, proposal or offer to any manufacturing
software company other than the Company regarding any acquisition, merger,
consolidation or business combination with or involving such other
manufacturing software company. Parent agrees that any such discussions or
negotiations (other than discussions or negotiations with the Company) in
progress as of the date of this letter will be suspended during such period and
that, in no event, will Parent accept or enter into an agreement concerning any
such third-party transactions during such period. In addition, Parent will
notify the Company immediately after receipt by Parent (or any of its officers,
directors, employees, affiliates or agents) of any unsolicited proposal for, or
inquiry respecting, any third party transaction of the type described above
involving the acquisition by Parent of another manufacturing software company.
Such notice to the Company will indicate in reasonable detail the terms and
conditions of such proposal or inquiry. Furthermore, Parent will notify the
Company of the identity of the person making such proposal immediately upon
receipt of such proposal.
5.3 SHAREHOLDER APPROVAL. (a) Parent intends to issue the shares
of Parent Common Stock that comprise the consideration for the Merger by
relying on an exemption from registration (the "Private Placement Exemption")
pursuant to Section 4(2) and/or Rule 506 or similar exemptions under the
Securities Act. The certificates for shares of Parent Common Stock to be
issued in the Merger pursuant to the Private Placement Exemption shall bear
appropriate legends to identify such privately placed shares as being
restricted securities under the Securities Act, to comply with applicable state
securities laws and, if applicable, to notice the restrictions on transfer
pursuant to the Affiliate Agreements (as defined below). It is acknowledged
and understood that in order for Parent to rely upon the Private Placement
Exemption from registration under the Securities Act, Parent will be required
to rely upon certain representations made by each holder of the Company Capital
Stock, including, but not limited to, representations regarding investment
intent. Therefore, each of the Shareholders have, and each other shareholder
of the Company shall execute a shareholder certificate substantially in the
form of Exhibit B (a "Shareholder Certificate").
(b) The Shareholders shall vote all shares of Company
Capital Stock owned by them in favor of approval of this Agreement and the
Merger, and against any other business combination not including Parent, and
hereby grant to Parent an irrevocable proxy to vote the Shareholders' shares of
Company Capital Stock with respect to any matter requiring a shareholder vote
in favor of this Agreement and the Merger and against any other business
combination not including Parent. The Shareholders hereby agree to execute
such documentation as Parent shall deem necessary to carry out the intent of
this Section 5.3(b).
5.4 ACCESS TO INFORMATION. Upon reasonable notice, the Company
shall afford Parent and its accountants, counsel and other representatives,
reasonable access during normal business hours during the period prior to the
Effective Time to (a) all of the Company's properties, books,
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contracts, commitments and records, and (b) all other information concerning
the business, properties and personnel (subject to restrictions imposed by
applicable law) of the Company as Parent may reasonably request, including
without limitation access upon reasonable request to the Company's employees,
customers and vendors for due diligence inquiry. The Company agrees to provide
to Parent and its accountants, counsel and other representatives copies of
internal financial statements, business plans and projections promptly upon
request. No information or knowledge obtained in any investigation pursuant to
this Section 5.4 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties
to consummate the Merger.
5.5 CONFIDENTIALITY. (a) Each of the parties hereto hereby agrees
to keep the terms of this Agreement (except to the extent contemplated hereby)
and such information or knowledge obtained in any investigation pursuant to
Section 5.4, or pursuant to the negotiation and execution of this Agreement or
the effectuation of the transactions contemplated hereby, confidential;
provided, however, that the foregoing shall not apply to information or
knowledge which (a) a party can demonstrate was already lawfully in its
possession prior to the disclosure thereof by the other party, (b) is generally
known to the public and did not become so known through any violation of law,
(c) became known to the public through no fault of such party, (d) is later
lawfully acquired by such party without confidentiality restrictions from other
sources, (e) is required to be disclosed by order of court or government agency
with subpoena powers (provided that such party shall have provided the other
party with prior notice of such order and an opportunity to object or take
other available action) or (f) which is disclosed in the course of any
litigation between any of the parties hereto. Notwithstanding the foregoing,
it is acknowledged that Parent may publicly disclose the material terms of this
Agreement following the date hereof in a manner reasonably satisfactory to the
Company.
(b) In the event that this Agreement shall be terminated
prior to the Effective Time, all information, records and documents in any form
or upon any media delivered to or obtained by any party in an investigation
pursuant to Section 5.4 shall be promptly returned to such party or destroyed
and no copies thereof shall be retained.
5.6 EXPENSES. All fees and expenses incurred in connection with
the Merger including, without limitation, all legal, accounting, financial
advisory, consulting and all other fees and expenses of third parties ("Third
Party Expenses") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party incurring
such fees and expenses; provided, however, that if the Merger is consummated,
reasonable fees and expenses incurred by the Company and/or the Shareholders
shall be assumed by Parent up to $75,000 and any fees and expenses incurred by
the Company and/or the Shareholders that are in excess of $75,000 ("Excess
Expenses") shall be borne by the Shareholders on a pro-rata basis. In addition
to such $75,000 amount, in the event that the Merger is consummated, Parent
agrees to pay on behalf of the Company and/or the Shareholders reasonable fees
and expenses up to $25,000 pertaining to valuation services provided by Dain
Bosworth.
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5.7 PUBLIC DISCLOSURE. Unless otherwise required by law
(including, without limitation, foreign, federal and state, corporate and
securities laws) or, as to Parent, by the rules and regulations of the Nasdaq
Stock Market, Inc., prior to the Effective Time, no disclosure (whether or not
in response to an inquiry) of the subject matter of this Agreement shall be
made by any party hereto unless approved by Parent and the Company prior to
release, provided that such approval shall not be unreasonably withheld,
subject, in the case of Parent, to Parent's obligation to comply with
applicable securities laws.
5.8 CONSENTS. The Company shall promptly apply for or otherwise
seek, and use its reasonable efforts to obtain, all consents and approvals
required to be obtained by it for the consummation of the Merger, including,
but not limited to all consents, waivers and approvals under any of the
Company's agreements, contracts, licenses or leases in order to preserve the
benefits thereunder for the Surviving Corporation and otherwise in connection
with the Merger.
5.9 FIRPTA COMPLIANCE. On the Closing Date, the Company shall
deliver to Parent a properly executed statement in a form reasonably acceptable
to Parent for purposes of satisfying Parent's obligations under Treasury
Regulation Section 1.1445-2(c)(3).
5.10 REASONABLE EFFORTS. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto shall use all reasonable
efforts to take promptly, or cause to be taken, all actions, and to do
promptly, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings and to remove
any injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement; provided that Parent shall not be required to agree to any
divestiture by Parent or the Company or any of Parent's subsidiaries or
affiliates of shares of capital stock or of any business, assets or property of
Parent or its subsidiaries or affiliates or the Company or its affiliates, or
the imposition of any material limitation on the ability of any of them to
conduct their businesses or to own or exercise control of such assets,
properties and stock.
5.11 NOTIFICATION OF CERTAIN MATTERS. Each of the parties hereto
(each, a "Notifying Party") shall give prompt notice to the other parties
hereto (if reasonably possible, prior to the Effective Time) of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which may cause any representation or warranty of a Notifying Party contained
in this Agreement to be untrue or inaccurate in any material respect at or
prior to the Effective Time and (ii) any failure of a Notifying Party, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.11 shall not limit or
otherwise affect any remedies available to the party receiving such notice. No
disclosure by a Notifying Party pursuant to this Section 5.11, however, shall
be deemed to amend or supplement any
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disclosure pursuant to the terms of this Agreement or prevent or cure any
misrepresentations, breach of warranty or breach of covenant.
5.12 POOLING ACCOUNTING. Parent and the Company and the
Shareholders shall each use its reasonable best efforts to cause the business
combination to be effected by the Merger to be accounted for as a pooling of
interests. Each of Parent, the Company and the Shareholders shall use its
reasonable best efforts to cause its Affiliates (as defined in Section 5.13)
not to take any action that would adversely affect the ability of Parent to
account for the business combination to be effected by the Merger as a pooling
of interests.
5.13 AFFILIATE AGREEMENTS. Schedule 5.13 sets forth those persons
who are, in the Company's reasonable judgment, "affiliates" of the Company
within the meaning of Rule 144 (each such person an "Affiliate") promulgated
under the Securities Act ("Rule 144"). The Company shall provide Parent with
such information and documents as Parent shall reasonably request for purposes
of reviewing such list. The Company shall use its best efforts to deliver or
cause to be delivered to Parent, concurrently with the execution of this
Agreement (and in any case prior to the Effective Time) from each of the
Affiliates of the Company, an executed Affiliate Agreement in the form attached
as Exhibit C. Parent and Sub shall be entitled to place appropriate legends on
the certificates evidencing any Parent Common Stock to be received by such
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for Parent Common Stock,
consistent with the terms of such Affiliate Agreements.
5.14 BLUE SKY LAWS. Parent shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of Parent Common Stock pursuant hereto.
The Company shall use its best efforts to assist Parent as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of Parent Common Stock pursuant
hereto provided that all expenses related to compliance with such securities
and blue sky laws shall be the responsibility of Parent.
5.15 TAX RETURNS. The Shareholders shall timely file all federal
and state income tax returns for taxable periods ending on or prior to the
Effective Time and have paid or will pay all Taxes attributable to such
periods. Such returns will be prepared and filed in accordance with applicable
law and in a manner consistent with past practices and shall be subject to
review and approval by Parent, not to be unreasonably withheld. After the
Effective Time, Parent and the Company, on the one hand, and the Shareholders,
on the other hand, will make available to the other, as reasonably requested,
all information, records or documents relating to the liability for Taxes of
the Company for all periods prior to or including the Effective Time and will
preserve such information, records or documents until the expiration of any
applicable statute of limitations or extensions thereof.
5.16 DIRECTOR APPOINTMENT. Within sixty (60) days following the
Closing, Parent will
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take all actions necessary to, and shall appoint, John Lococo as a member of
the Board of Directors of Parent to serve until the next annual meeting of
stockholders of Parent provided that upon his appointment to the Board of
Directors, Mr. Lococo shall have five days from the date he is notified of such
appointment in which to accept such appointment and after time which the
Company shall have the right to revoke such appointment.
5.17 FORM S-8 REGISTRATION. On or before February 15, 1998, Parent
shall file a registration statement on Form S-8 (or any successor or other
appropriate form), or another appropriate form with respect to the shares of
Parent Common Stock subject to such assumed Company Stock Options (the "Assumed
Options") and shall use its reasonable efforts to maintain the effectiveness of
such registration statement (and maintain the current status of the prospectus
or prospectuses contained therein) for so long as such Assumed Options remain
outstanding.
5.18 BONUSES AND DISTRIBUTIONS. The distributions set forth in
Section 3.7(f) of the Disclosure Schedule and the bonuses set forth in Section
3.7(g) of the Disclosure Schedule shall be paid in full at such time as
determined by the Company but in no event later than November 30, 1997.
SECTION 6
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Shareholder Approval. This Agreement and the Merger
shall have been approved and adopted by the shareholders of the Company by the
requisite vote under applicable law and the Company's Articles of Incorporation
and Bylaws.
(b) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to
the Merger, which makes the consummation of the Merger illegal.
(c) No Injunctions or Restraints on Conduct of Business.
No temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal or
regulatory restraint or provision challenging Parent's
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proposed acquisition of the Company, or limiting or restricting Parent's
conduct or operation of the business of the Company (or its own business)
following the Merger shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
6.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB.
The obligations of Parent and Sub to consummate and effect this Agreement and
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Company and the Shareholders in this
Agreement shall be true and correct in all material respects on and as of the
date of this Agreement and as of the Closing Date as though such
representations and warranties were made on and as of such time and the Company
and the Shareholders shall have performed and complied with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by each of them as of the Closing Date. Parent shall have been
provided with a certificate dated as of the Closing Date signed on behalf of
the Company and by each of the Shareholder to such effect.
(b) Legal Opinion. Parent shall have received a legal
opinion from Sturm Paletti & Wilson, legal counsel to the Company, in a form
reasonably satisfactory to Parent and substantially in the form of Exhibit D.
(c) Litigation. There shall be no action, suit, claim or
proceeding of any nature pending, or overtly threatened, against the Parent,
Sub or the Company, their respective properties or any of their officers or
directors, arising out of, or in any way connected with, the Merger or the
other transactions contemplated by the terms of this Agreement, or that could
materially and adversely affect the business, assets, liabilities, financial
condition or results of operations of the Company.
(d) No Material Adverse Change. There shall be no event,
fact or condition that has resulted in or could reasonably be expected to
result in a material adverse change in the business, operations, properties,
assets, liabilities, obligations, profits or condition (financial or otherwise)
of the Company, taken as a whole; and Parent shall have received a certificate
signed on behalf of the Company and by each Shareholder dated the Closing Date
to such effect.
(e) Affiliate Agreements. Parent shall have received
from each of the Affiliates of the Company an executed Affiliate Agreement
which shall be in full force and effect.
(f) Employment of Key Employees. Each employee of the
Company listed on Schedule 6.2(g) (each, a "Key Employee") shall have executed
an employment agreement with Parent in the form attached hereto as Exhibit E
(the "Key Employee Agreement") and all such Key Employee Agreements shall be in
full force and effect. Schedule 6.2(g) also lists each Key
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Employee's base salary and the employment term that is to be included in his or
her individual Key Employee Agreement.
(g) Shareholder Employment Agreements. Messrs. John
Lococo and Michael Zimmerman shall each have executed an employment agreement
in substantially the forms attached hereto as Exhibits F-1 and F-2,
respectively, (the "Shareholder Employment Agreements") and such Shareholder
Employment Agreements shall be in full force and effect.
(h) Letter from Independent Accountants. Parent shall
have received a letter from Ernst & Young, LLP regarding such firm's
concurrence with Parent management's conclusions as to the appropriateness of
pooling of interests accounting for the Merger under Accounting Principles
Board Opinion No. 16 if closed and consummated in accordance with this
Agreement. Such letter shall be in form and substance satisfactory to Parent.
In addition, Strothman & Company PSC, the Company's accountants, shall have
provided a letter, satisfactory in form and substance to Parent, regarding the
appropriateness of pooling of interests accounting for a transaction involving
the Company (it being understood that the Company shall use its reasonable best
efforts to have such letter provided).
(i) Securities Law Compliance. Parent shall have
received from the shareholders of the Company executed investment
representation statements and completed questionnaires in form and substance
satisfactory to Parent that the issuance of the shares of Parent Common Stock
pursuant to the Merger is exempt from the registration requirements of the
Securities Act and is exempt from registration under applicable state
securities laws.
(j) S Corporation Status. The Company shall have
maintained intact its status as an S Corporation for federal and state income
tax purposes.
(k) Shareholder Certificate. Parent shall receive a
Shareholder Certificate executed by each shareholder of the Company in the form
of Exhibit B.
(l) Dissenters. Holders of no more than one percent of
the outstanding shares of Company Capital Stock shall have exercised, nor shall
they have any continued right to exercise, appraisal or similar rights under
applicable law with respect to their shares by virtue of the Merger.
(m) Escrow Agreement. Each of the Shareholders shall
have executed the escrow agreement in the form attached hereto as Exhibit G
(the "Escrow Agreement") and the Escrow Agreement shall be in full force and
effect.
(n) Licensed Property. Z Systems, Inc. and Michael
Zimmerman shall have irrevocably and unconditionally transferred or caused the
transfer to the Company all right, title and interest in and to any and all
Intellectual Property and/or other assets licensed to the Company pursuant to
that certain License Agreement among Z Systems, Inc., Michael Zimmerman and the
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Company, dated August 27, 1993 and such transfer shall be documented to the
reasonable satisfaction of Parent.
(o) Source Code. Parent shall have been provided with
the opportunity to review the source code to the Company's "Millenia" product
and such source code shall (i) not contain any unauthorized use of third-party
Intellectual Property and (ii) shall be adequately documented such that a
reasonably competent programmer can compile and support the program.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY AND THE
SHAREHOLDERS. The obligations of the Company the Shareholders to consummate
and effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, exclusively by
the Company:
(a) Representations, Warranties and Covenants. The
representations and warranties of Parent and Sub in this Agreement shall be
true and correct in all material respects on and as of the date of this
Agreement and as of the Closing Date as though such representations and
warranties were made on and as of such time and each of Parent and Sub shall
have performed and complied with all covenants, obligations and conditions of
this Agreement required to be performed and complied with by it as of the
Closing Date. The Company and the Shareholders shall have been provided with a
certificate dated as of the Closing Date signed by an executive officer of
Parent to such effect.
(b) Registration Rights Agreement. A Registration Rights
Agreement substantially in the form of Exhibit H shall have been executed and
delivered by Parent and the shareholders of the Company indicated therein.
(c) No Material Adverse Change. There shall be no event,
fact or condition that has resulted in or could reasonably be expected to
result in a material adverse change in the business, operations, properties,
assets, obligations, profits or condition (financial or otherwise) of Parent,
taken as a whole; and the Company and the Shareholders shall have received a
certificate signed on behalf of Parent dated the Closing Date to such effect.
` (d) Shareholder Employment Agreements. Parent shall have
executed and provided each of Messrs. John Lococo and Michael Zimmerman a
reasonable opportunity to enter into the Shareholder Employment Agreements.
(e) Key Employee Agreement. Parent shall have provided
each of the persons listed on Schedule 6.2(g) a reasonable opportunity to enter
into a Key Employee Agreement.
(f) Legal Opinion. The Company shall have received a
legal opinion from legal counsel to Parent, in a form reasonably satisfactory
to the Company.
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(g) Litigation. There shall be no action, suit, claim,
or proceeding of any nature pending, or overtly threatened, against the Parent,
its properties or any of its officers or directors, arising out of, or in any
way connected with, the Merger or the other transactions contemplated by the
terms of this Agreement, or that is reasonably likely to have a material and
adverse effect on the business, assets, liabilities, financial condition,
results of operations or prospects of Parent.
SECTION 7
INDEMNIFICATION; ESCROW
7.1 INDEMNIFICATION. (a) The Shareholders, jointly and
severally, agree to indemnify and hold Parent and its officers, directors and
affiliates harmless against all claims, losses, liabilities, damages,
deficiencies, costs and expenses, including reasonable attorneys' fees and
expenses of investigation and defense (hereinafter individually a "Loss" and
collectively "Losses") incurred by Parent, its officers, directors, or
affiliates (including the Surviving Corporation) directly or indirectly as a
result of (i) any inaccuracy or breach of a representation or warranty made by
the Company or the Shareholders in or pursuant to this Agreement or in any
document delivered pursuant hereto or (ii) any failure by the Company or the
Shareholders to perform or comply with any covenant contained in this Agreement
or in any document delivered pursuant hereto. The Shareholders shall not have
any right of contribution from the Company with respect to any Loss claimed by
Parent. Parent may not receive and the Shareholders shall not be obligated to
indemnify Parent for any Losses suffered by Parent unless and until Parent
shall have delivered to the Shareholders Representative (as defined below)
Claim Notices (as defined below) identifying Losses suffered by Parent, the
aggregate of which exceeds $50,000. Furthermore, the Shareholders shall only
be obligated to indemnify Parent for Losses in excess of $50,000 and up to the
value of amounts contained in the Escrow Fund as such amounts are valued
pursuant to the terms of the Escrow Agreement.
(b) Parent agrees to indemnify and hold the Shareholders harmless
against all Losses incurred by the Shareholders directly or indirectly as a
result of (i) any inaccuracy or breach of a representation or warranty made by
Parent in or pursuant to this Agreement or in any document delivered pursuant
hereto or (ii) any failure by Parent to perform or comply with any covenant
contained in this Agreement or in any document delivered pursuant hereto. The
Shareholders may not receive and Parent shall not be obligated to indemnify the
Shareholders for any Losses suffered by the Shareholders unless and until the
Shareholder's Representative shall have delivered to Parent Claim Notices
identifying Lossess suffered by the Shareholders, the aggregate of which
exceeds $50,000. Furthermore, Parent shall only be obligated to indemnify the
Shareholders for Losses in excess of $50,000 and up to an amount equal to the
value of the amounts held in the Escrow Fund, as such amounts are valued
pursuant to the terms of the Escrow Agreement. Notwithstanding the
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foregoing or any other term or provision contained in this Agreement, the
Shareholders shall be liable for payment of any and all Excess Expenses
regardless of the amount of any Losses set forth in Claim Notices. Any party
entitled to indemnification under this Section 7 is hereinafter referred to as
an "Indemnified Person" and any party obligated to indemnify another party
under this Section 7 is hereinafter referred to as an "Indemnifying Person".
(c) Notwithstanding any other term or provision of this Agreement, no
Indemnifying Person shall be held liable for Losses suffered by an Indemnified
Person if, and only to the extent that, such Indemnified Person is compensated
for such Losses pursuant to insurance held by such Indemnified Person.
7.2 INDEMNIFICATION PROCEDURES. All claims by an Indemnified
Person for Losses pursuant to this Section 7 ("Claims") shall be asserted and
resolved as follows:
(a) In the event that an Indemnified Person wishes to
make a Claim, such Indemnified Person shall deliver to the Indemnifying Person
(or if the Indemnifying Person shall be any or all of the Shareholders, the
Shareholders' Representative) a notice (a "Claim Notice"): (i) stating that
any Indemnified Person has paid or properly accrued or reasonably anticipates
that it will have to pay or accrue Losses, and (ii) specifying in reasonable
detail the individual items of Losses included in the amount so stated, the
date each such item was paid or properly accrued, or the basis for such
anticipated liability, and the nature of the misrepresentation, breach of
warranty, covenant, or agreement to which such item is related. If the
Indemnifying Person does not notify the Indemnified Person within 20 calendar
days after the date of delivery of the Claim Notice that the Indemnifying
Person disputes such Claim, with a detailed statement of the basis of such
position, the amount of such Claim shall be conclusively deemed a liability of
the Indemnifying Person hereunder. In case an objection is made in writing in
accordance with this Section 7.2(a), the Indemnified Person shall respond in a
written statement to the objection within 20 calendar days of delivery of such
written objection and, for a period of not less than 45 calendar days
thereafter, attempt in good faith to agree upon the rights of the respective
parties with respect to each of such Claim (and, if the parties should so
agree, a memorandum setting forth such agreement shall be prepared and signed
by both parties). If no such agreement can be reached after good faith
negotiation, either party may demand arbitration of the matter unless the
amount of the damage or loss is at issue in pending litigation with a third
party, in which event arbitration shall not be commenced until such amount is
ascertained or both parties agree to arbitration; and in either such event the
matter shall be settled by arbitration conducted by three arbitrators. Parent
and the Shareholders' Representative shall each select one arbitrator, and the
two arbitrators so selected shall select a third arbitrator, each of which
arbitrators shall be independent and have at least ten years relevant
experience. The arbitrators shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery while allowing
the parties an opportunity, adequate in the sole judgment of the arbitrators,
to discover relevant information from the opposing parties about the subject
matter of the dispute. The arbitrators shall rule upon motions to compel or
limit discovery and shall have the authority to impose sanctions, including
attorneys fees and costs, to the extent as a court of competent law or equity,
should the arbitrators determine
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that discovery was sought without substantial justification or that discovery
was refused or objected to without substantial justification. The decision of
a majority of the three arbitrators as to the validity and amount of any claim
in such Claim Notice shall be binding and conclusive upon the parties to this
Agreement, and notwithstanding anything contained herein or in the Escrow
Agreement, the Escrow Agent (as such term is defined in the Escrow Agreement)
shall be entitled to act in accordance with such decision and make or withhold
payments out of the Escrow Fund in accordance therewith. Such decision shall
be written and shall be supported by written findings of fact and conclusions
which shall set forth the award, judgment, decree or order awarded by the
arbitrators.
(b) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in Orange County, California under the rules then in effect of the
American Arbitration Association. For purposes of this Section 7.2, in any
arbitration hereunder in which any claim or the amount thereof stated in the
Claim Notice is at issue, the Indemnified Party shall be deemed to be the
Non-Prevailing Party in the event that the arbitrators award such Indemnified
Party less than the sum of one- half (1/2) of the disputed amount plus any
amounts not in dispute; otherwise, the Indemnifying Party shall be deemed to be
the Non-Prevailing Party. The Non-Prevailing Party to an arbitration shall pay
its own expenses, the fees of each arbitrator, the administrative costs of the
arbitration, and the expenses, including without limitation, reasonable
attorneys' fees and costs, incurred by the other party to the arbitration.
(c) In the event an Indemnified Party becomes aware of a
third-party claim which it believes may result in a demand for indemnification
pursuant to the terms of this Section 7, such Indemnified Party shall notify
the Indemnifying Party of such claim, and the Indemnifying Party, shall be
entitled, at its expense, to participate in any defense of such claim. The
Indemnified Party shall have the right in its sole discretion to settle any
such claim; provided, however, that except with the consent of the Indemnifying
Party, no settlement of any such claim with third-party claimants shall alone
be determinative of the amount of any Losses for which the Indemnifying Party
will be liable as a result of such settlement. In the event that the
Indemnifying Party has consented to any such settlement and acknowledged that
the claim is a valid claim, the Indemnifying Party shall have no power or
authority to object under any provision of this Section 7 to the amount of any
Claim with respect to such settlement.
7.3 ESCROW FUND.
(a) The deposit of the Escrow Amount, together with all
interest accruing thereon, shall constitute the "Escrow Fund" and shall be
governed by the terms set forth in this Agreement and in the Escrow Agreement.
(b) The parties agree and acknowledge that any and all
Claims made against the Shareholders by Parent pursuant to this Section 7 on or
prior to the Escrow Release Date (as defined below) may be applied, upon final
resolution of any such Claim pursuant to Section 7.2, against the
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Escrow Fund. By execution of this Agreement, the Shareholders will, without the
need for any further action on their part, have agreed and consented to all of
the terms and conditions of the Escrow Agreement and the establishment of the
Escrow Fund as partial security for their indemnification obligations under
this Agreement.
(c) For purposes of this Agreement, the "Escrow Release
Date" means (i) with respect to Claims for Losses of the nature and of
sufficient materiality typically expected to be encountered in the audit
process, the earlier of (a) the date of completion of the first independent
audit of financial statements of Parent containing combined operations (the
"First Audit") or (b) twelve (12) months after the Effective Time and (ii) with
respect to all Claims for Losses other than those referred to in clause (i),
the date twelve (12) months after the Effective Time.
7.4 SHAREHOLDERS' REPRESENTATIVE.
(a) Upon the execution of this Agreement and without
further action of any Shareholder, John Lococo shall be constituted and
appointed as agent and attorney-in-fact (the "Shareholders' Representative")
for and on behalf of each of the Shareholders to give and receive notices and
communications, to authorize delivery to Parent of amounts in the Escrow Fund
in satisfaction of Claims, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to
Claims, and to take all actions necessary or appropriate in the judgment of the
Shareholders' Representative for the accomplishment of the foregoing. Such
agency may be changed (whether pursuant to vacancy, removal or resignation) by
the vote of a majority of the Shareholders from time to time upon not less than
thirty (30) days prior written notice to Parent. No bond shall be required of
the Shareholders' Representative, and the Shareholders' Representative shall
receive no compensation for its services, except for payment by the
Shareholders of expenses, including fees of counsel, reasonably incurred by the
Shareholders' Representative in connection with the performance of its duties
hereunder and under the Escrow Agreement.
(b) The Shareholders' Representative shall not be liable
for any act done or omitted hereunder as Shareholders' Representative while
acting in good faith, and any act done or omitted pursuant to the advice of
counsel shall be conclusive evidence of such good faith. The Shareholders
shall severally indemnify the Shareholders' Representative and hold such agent
harmless against any loss, liability or expense incurred without bad faith on
the part of the Shareholders' Representative and arising out of or in
connection with the acceptance or administration of the Shareholders'
Representative's duties hereunder.
(c) A decision, act, consent or instruction of the
Shareholders' Representative shall constitute a decision of all Shareholders
and shall be final, binding and conclusive upon each Shareholder, and the
Escrow Agent and Parent may rely upon any decision, act, consent or instruction
of the Shareholders' Representative taken in such manner as being the decision,
act, consent or instruction of each and every Shareholder. The Escrow Agent
and Parent are hereby relieved from any liability to any person for any acts
done by them in accordance with such decision,
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act, consent or instruction of the Shareholders' Representative.
7.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made in this Agreement or in any document
delivered pursuant hereto will survive the Closing and will remain in effect
until, and will expire upon, the Escrow Release Date; provided, however, that
the indemnification obligations with respect to any claim asserted in a Claim
Notice pursuant to the procedures of this Section 7 that is pending as of the
Escrow Release Date will survive until the final resolution of such pending
claim.
SECTION 8
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval of the Merger by the shareholders of the Company:
(a) by mutual written consent of the Company and Parent;
(b) by Parent or the Company if the Closing has not
occurred by December 31, 1997;
(c) by Parent or the Company if there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable
to the Merger by any Governmental Entity which would make the consummation of
the Merger illegal;
(d) by Parent if it is not in breach of its obligations
under this Agreement and there has been a material breach of any representation
or warranty, or a breach of a covenant or agreement contained in this Agreement
on the part of the Company or the Shareholders and such breach has not been
cured within twenty (20) days after written notice to the Company and the
Shareholders (provided that no cure period shall be required for a breach which
by its nature cannot be cured); or
(e) by the Company if it is not in breach of its
obligations under this Agreement and there has been a material breach of any
representation or warranty, or a breach of a covenant or agreement contained in
this Agreement on the part of Parent or Sub and such breach has not been cured
within twenty (20) days after written notice to Parent (provided that no cure
period shall be required for a breach which by its nature cannot be cured).
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party
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taking such action.
8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Parent, Sub,
the Company or the Shareholders, or their respective officers, directors or
shareholders, provided that each party shall remain liable for any intentional
breaches of this Agreement prior to its termination; and provided further that,
the provisions of Sections 5.5, 5.6, 8 and 9 of this Agreement shall remain in
full force and effect and survive any termination of this Agreement.
8.3 AMENDMENT. This Agreement may be amended by the parties
hereto at any time prior to the Closing by execution of an instrument in
writing signed on behalf of each of the parties hereto, provided however that
no amendment shall be made which by law requires the further approval of the
shareholders of the Company without obtaining such approval.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time,
Parent and Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of such
party.
8.5 NOTICE OF TERMINATION. Any termination of this Agreement
under Section 8.1 above will be effective immediately upon the delivery of
written notice of the terminating party to the other parties hereto.
SECTION 9
MISCELLANEOUS
9.1 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by
commercial delivery service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Platinum Software Corporation
195 Technology Drive
Irvine, California 92618
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Attention: President
Telephone No.: (800) 999-1809
Facsimile No.: (714) 450-4496
with a copy at the same address to the attention of
General Counsel
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Larry W. Sonsini, Esq.
Telephone No.: (650) 493-9300
Facsimile No.: (650) 496-4084
(b) if to the Company or any Shareholder, to:
FocusSoft, Inc.
304 Whittington Parkway
Louisville, Kentucky 40222
Attention: President
Telephone No.: (502) 327-2800
Facsimile No.: (502) 327-2807
with a copy to:
Sturm Paletti & Wilson
1551 Starks Bldg.
455 S. Fourth Avenue
Louisville, KY 40202
Attention: Howard Sturm, Esq.
Facsimile No.: (502) 584-7311
9.2 INTERPRETATION. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
9.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being
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understood that all parties need not sign the same counterpart.
9.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the schedules
and Exhibits hereto, and the documents and instruments and other agreements
among the parties hereto referenced herein: (a) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, including the letter of
intent dated October 7, 1997 by and between Parent and the Company; (b) are not
intended to confer upon any other person any rights or remedies hereunder; and
(c) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided, except that Parent and Sub may assign their respective
rights and delegate their respective obligations hereunder to their respective
affiliates. This Agreement is binding upon and will inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
9.5 SEVERABILITY. In the event that any provision of this
Agreement or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
9.6 OTHER REMEDIES. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or
equity upon such party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy.
9.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
9.8 FURTHER ASSURANCES. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and
purposes of this Agreement.
9.9 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provision of
this Agreement is intended, nor will be interpreted, to provide any third party
beneficiary rights or any other rights of any kind in any client, customer,
affiliate, shareholder, employee, partner of any party hereto or any other
person or entity.
9.10 MUTUAL DRAFTING. This Agreement is the joint product of the
parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of each of
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<PAGE> 54
the parties, and shall not be construed for or against any party hereto.
9.11 FURTHER REPRESENTATIONS. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement,
with the opportunity to seek advice as to its legal rights from such counsel.
Each party further represents that it is being independently advised as to the
tax consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences. The Company also represents that it has communicated the
above to its shareholders and optionees.
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<PAGE> 55
IN WITNESS WHEREOF, Parent, Sub, the Company and the Shareholders have
entered into this Agreement as of the date first written above.
PLATINUM SOFTWARE CORPORATION
By____________________________________
Name__________________________________
Title_________________________________
FS ACQUISITION CORP.
By____________________________________
Name__________________________________
Title_________________________________
FOCUSSOFT, INC.
By____________________________________
Name__________________________________
Title_________________________________
[SIGNATURE PAGE TO REORGANIZATION AGREEMENT]
<PAGE> 56
SHAREHOLDERS:
______________________________________
JOHN LOCOCO
______________________________________
MICHAEL ZIMMERMAN
______________________________________
JOSEPH BRUMLEVE
[SIGNATURE PAGE TO REORGANIZATION AGREEMENT]
<PAGE> 57
EXHIBIT A
ARTICLES OF MERGER
OF
FS Acquisition Corp.
INTO
FocusSoft, Inc.
Pursuant to KRS 271B.11-050, the undersigned corporation executes the
following articles of merger:
(A) The plan of merger, attached as EXHIBIT A, was approved by the
shareholders of each of the constituent corporations in the manner prescribed
by the Kentucky Business Corporation Act:
(B) As to each of the constituent corporations, the designation,
number of shares outstanding, and number of votes entitled to be cast by each
voting group entitled to vote separately on such plan are as follows:
<TABLE>
<CAPTION>
Name of Corporation Designation and Number of Number of Votes Entitled to Be Cast
Shares Outstanding by Each Voting Group
- --------------------- ------------------------- -----------------------------------
<S> <C> <C>
FS Acquisition Corp. 1,000 Common Stock 1,000
FocusSoft, Inc. 100,000 Shares of Series A 100,000
Voting Common Stock
</TABLE>
(C) The total number of undisputed votes cast for the plan separately by
each voting group as to each of the constituent corporations was:
<TABLE>
<CAPTION>
Name of Corporation Voting Group Undisputed Votes Cast
for the Plan
- ----------------------- ---------------------- ---------------------
<S> <C> <C>
FS Acquisition Corp. 1,000
-----------------------
FocusSoft, Inc. -----------------------
</TABLE>
The number cast for the plan by each voting group was sufficient for
approval by that voting group.
November____, 1997 FocusSoft, Inc.
Name:
Title:
<PAGE> 58
EXHIBIT A
PLAN OF MERGER
<PAGE> 59
EXHIBIT B
FOCUSSOFT, INC.
SHAREHOLDER'S CERTIFICATE
The undersigned is aware that pursuant to an Agreement and Plan of
Reorganization, dated as of November__, 1997, (the "REORGANIZATION AGREEMENT"),
entered into by and among Platinum Software Corporation, a Delaware corporation
("PARENT"), FocusSoft Acquisition Corp., a Kentucky corporation and a wholly
owned subsidiary of Parent ("SUB"), FocusSoft, Inc., a Kentucky corporation
(the "COMPANY"), and John Lococo, an individual, and Michael Zimmerman, an
individual, and Joseph Brumleve, an individual, the principal shareholders of
the Company (each, a "PRINCIPAL SHAREHOLDER" and, collectively, the
"SHAREHOLDERS"), Sub will merge (the "MERGER") with and into the Company and
all shares of Company Capital Stock will be exchanged for certain consideration
set forth in the Reorganization Agreement (the "MERGER CONSIDERATION"). Unless
otherwise indicated, capitalized terms not defined herein have the meanings set
forth in the Reorganization Agreement.
The undersigned understands that the execution of this Certificate is
a condition precedent to Parent and Sub's obligation to consummate the Merger
and to the receipt of the shares of Parent Common Stock in connection with the
Merger (pursuant to the terms and conditions of the Reorganization Agreement).
The undersigned hereby represents and warrants as follows:
1. INVESTMENT REPRESENTATIONS.
(a) The Parent Common Stock issued to the undersigned will be
acquired for investment for the undersigned's own account, not as a nominee or
agent, and not with a view to the sale or distribution of any part thereof in
violation of the Securities Act of 1933, as amended (the "1933 ACT"), and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same. The undersigned represents that the entire
legal and beneficial interest of the Parent Common Stock will be held for the
undersigned's account only, and neither in whole or in part for any other
person other than a wholly owned subsidiary of the undersigned. By executing
this Shareholder's Certificate, the undersigned further represents that the
undersigned has no present contract, undertaking, agreement or arrangement with
any person to sell, transfer, or grant participation to such person or to any
third person, with respect to any of the Parent Common Stock.
(b) The undersigned understands and acknowledges that the issuance
of the Parent Common Stock pursuant to the Reorganization Agreement is being
effected on the basis that the issuance of such securities is exempt from
registration pursuant to Section 4(2) of the 1933 Act and Rule 506 promulgated
thereunder and that Parent's reliance upon such exemption is predicated upon
the undersigned's representations.
(c) The undersigned further represents that (without limiting or
affecting the representations and warranties of Parent or Sub under the
Reorganization Agreement) it: (i) has such
<PAGE> 60
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of the undersigned's prospective investment in
the shares of Parent Common Stock; (ii) has received copies of Parent's Form
10-K for its fiscal year ended September 30, 1997, Parent's 1997 Annual Report
to Stockholders, Parent's 1997 Proxy Statement, and Parent's current report on
Form 8-K to be filed in conjunction with Parent's earnings release for the
first quarter of fiscal 1998; (iii) has received all the information it has
requested from the Parent and the Company it considers necessary or appropriate
for deciding whether to accept the Parent Common Stock; (iv) has the ability to
bear the economic risks of the undersigned's prospective investment; and (v) is
able, without materially impairing its financial condition, to hold the Parent
Common Stock for an indefinite period of time and to suffer complete loss on
its investment.
(d) Each certificate representing Parent Company Stock issued
pursuant hereto to the undersigned and any shares issued or issuable in respect
of any such Parent Common Stock upon any stock split, stock dividend,
recapitalization, or similar event, shall be stamped or otherwise imprinted
with legends in the following form (in addition to any legend required under
applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THESE SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT
COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF
THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER, AS SET FORTH IN AN
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, A
COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION. SUCH TRANSFER RESTRICTIONS ARE BINDING ON
TRANSFEREES OF THESE SHARES.
(e) The certificates evidencing the Parent Common Stock shall also
bear any legend required pursuant to any state, local or foreign law governing
such securities.
(f) The undersigned understands and acknowledges that the Parent
Common Stock has not been registered under the 1933 Act and Parent Common Stock
must be held indefinitely unless
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<PAGE> 61
subsequently registered under the 1933 Act or an exemption from such
registration is available and, except as contemplated by the Registration
Rights Agreement attached as Exhibit F to the Reorganization Agreement, neither
Parent nor the Company is under any obligation to register the Parent Common
Stock.
(g) The undersigned acknowledges that the Parent Common stock
shall not be transferable except upon the conditions specified in this
Certificate and the Reorganization Agreement, except to a wholly owned
subsidiary of the undersigned.
(h) Prior to any proposed transfer of any Parent Common Stock,
unless there is in effect a registration statement under the Securities Act
covering the proposed transfer, the undersigned shall give written notice to
the Company of its intention to effect such transfer. Each such notice shall
describe the manner and circumstances of the proposed transfer in sufficient
detail, and shall, if the Parent so requests, be accompanied by either (i) a
written opinion of legal counsel who shall be satisfactory to Parent,
addressed to Parent and satisfactory in form and substance to the Company's
counsel, to the effect that the proposed transfer of Parent Common Stock may be
effected without registration under the 1933 Act, or (ii) a "No Action" letter
from the Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such Parent
Common Stock shall be entitled to transfer such shares of Parent Common Stock
in accordance with the terms of the notice delivered by the holder to Parent.
Each certificate evidencing the shares of Parent Common Stock transferred as
above provided shall bear the appropriate restrictive legend set forth in
Section (d) above, except that such certificate shall not bear such restrictive
legend if in the opinion of counsel for Parent such legend is not required in
order to establish compliance with any provisions of the 1933 Act.
(i) The undersigned is familiar with the provisions of Rule 144,
promulgated under the 1933 Act, which in substance, permits, limited public
resale of "restricted securities" acquired, directly or indirectly from the
issuer thereof (or from an affiliate of such issuer) in a non-public offering
subject to the satisfaction of certain conditions, including, among other
things: (i) a public trading market then exists for the Parent Common Stock;
(ii) the availability of certain public information about Parent; (iii) the
resale occurring not less than one (1) year after the party has purchased, and
made full payment for, within the meaning of Rule 144, the securities to be
sold; and (iv) the sale being made through a broker in an unsolicited "broker
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934) and the amount of securities
being sold during any three (3) month period not exceeding the specified
limitations stated therein, if applicable. The undersigned further understands
that at the time the undersigned wishes to sell the shares of Parent Common
Stock received from Parent there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, Parent may not
be satisfying the current public information requirements of Rule 144, and
that, in such event, the undersigned would be precluded from selling the shares
of Parent Common Stock received from Parent under Rule 144 even if the one (1)
year minimum holding period had been satisfied. The undersigned further
understands that in the event all of the applicable requirements of Rule 144
are not satisfied, registration under the 1933 Act, compliance with Regulation
A, or some
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<PAGE> 62
other registration exemption would be required to sell the shares of Parent
Common Stock received from Parent.
(j) The undersigned is the sole record and beneficial owner of
Company Capital Stock of the amount set forth next to its name on the signature
page hereto. Such Company Capital Stock is not subject to any claim, lien,
pledge, charge, security interest or other encumbrance or to any rights of
first refusal of any kind, and the undersigned has not granted any rights to
purchase such shares to any other person or entity. The undersigned has the
sole right to transfer such shares. Such shares constitute all of the Company
Capital Stock owned, beneficially or of record, by the undersigned, and the
undersigned has no other rights to acquire any capital stock of the Company
except as set forth on the signature page hereto.
(k) The undersigned has had an opportunity to review with its own
tax advisors the tax consequences to the undersigned of the Merger and the
transactions contemplated by the Reorganization Agreement. The undersigned
understands that it must rely solely on its advisors and not on any statements
or representations by Parent, the Company or any of their agents with respect
to tax matters. The undersigned understands that it (and not Parent or the
Company) shall be responsible for its own tax liability that may arise as a
result of the Merger or the transactions contemplated by the Reorganization
Agreement.
(l) The undersigned will have sufficient assets, after completion
of the Merger, to satisfy all of the undersigned's obligations to its
creditors, as the same become due and payable.
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<PAGE> 63
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
__ day of November, 1997.
______________________________________
Print Name of Stockholder
______________________________________
Signature of Authorized Signatory
NUMBER OF SHARES AND TYPE OF
COMPANY CAPITAL STOCK:
(indicate class of stock, i.e.,
common, preferred, etc.)
______________________________________
[SIGNATURE PAGE TO SHAREHOLDER'S CERTIFICATE]
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<PAGE> 64
EXHIBIT C
FOCUSSOFT, INC.
AFFILIATE AGREEMENT
This Affiliate Agreement ("AGREEMENT") dated_____, 1997, is between
Platinum Software Corporation, a Delaware corporation ("PARENT"), and the
undersigned shareholder ("AFFILIATE") of FocusSoft, Inc., a Kentucky
corporation (the "COMPANY").
WHEREAS, concurrently with the execution of this Agreement, Parent, FS
Acquisition Corp., a Kentucky corporation and a wholly owned subsidiary of
Parent ("SUB"), and the Company have entered into an Agreement and Plan of
Reorganization (the "REORGANIZATION AGREEMENT"), which provides for the merger
(the "MERGER") of Sub with and into the Company. Pursuant to the Merger, all
outstanding capital stock of the Company will be converted into the right to
receive common stock of Parent, as set forth in the Reorganization Agreement
(capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Reorganization Agreement);
WHEREAS, Affiliate has been advised that Affiliate may be deemed to be
an "affiliate" of the Company, as the term "affiliate" is used for purposes of
Rule 144 of the Rules and Regulations (the "RULES AND REGULATIONS") of the
Securities and Exchange Commission (the "COMMISSION");
WHEREAS, the execution and delivery of this Agreement by Affiliate is
a material inducement to Parent to enter into the Reorganization Agreement; and
WHEREAS, Affiliate has been advised that Affiliate may be deemed to be
an "affiliate" of Parent after the Merger as the term "affiliate" is used in
Accounting Series Releases 130 and 135, as amended, although nothing contained
herein shall be construed as an admission by Affiliate that Affiliate is in
fact an "affiliate" of Parent.
NOW, THEREFORE, intending to be legally bound, the parties hereby
agree as follows:
1. ACKNOWLEDGMENTS BY AFFILIATE. Affiliate acknowledges and
understands that the representations, warranties and covenants by Affiliate set
forth herein will be relied upon by Parent, the respective affiliates of Parent
and the Company, counsel and accounting firms, and that substantial losses and
damages may be incurred by these persons if Affiliate's representations,
warranties or covenants are breached. Affiliate has carefully read this
Agreement and the Reorganization Agreement and has discussed the requirements
of this Agreement with Affiliate's professional advisors, who are qualified to
advise Affiliate with regard to such matters.
2. COVENANTS RELATED TO POOLING OF INTERESTS. During the period
beginning from the date hereof and ending on the day that Parent publicly
announces financial results covering at least 30 days of combined operations of
Parent and the Company, Affiliate will not sell, exchange, transfer, pledge,
distribute, make any gift or otherwise dispose of or grant any option,
establish any "short" or put-equivalent position with respect to or enter into
any similar transaction (through derivatives or otherwise) intended or having
the effect, directly or indirectly, to reduce his risk relative to any shares
of Parent Common Stock, unless Parent's accountants have advised Affiliate in
writing that such sale, exchange, transfer, pledge, distribution, gift or other
disposition or transaction
<PAGE> 65
would not preclude pooling of interests accounting treatment of the Merger;
provided, however, that the foregoing will not restrict the ability of
Affiliate to transfer the Parent Common Stock to a wholly owned subsidiary of
Affiliate, provided that such subsidiary agrees in writing to be bound by the
provisions of this Agreement. Parent may, at its discretion, place a stock
transfer notice consistent with the foregoing with its transfer agent with
respect to Affiliate's shares. Notwithstanding the foregoing, Affiliate will
not be prohibited by the foregoing from selling or disposing of shares so long
as such sale or disposition is in accordance with the "de minimis" test set
forth in SEC Staff Accounting Bulletin No. 76.
3. BENEFICIAL OWNERSHIP OF COMPANY CAPITAL STOCK. The Affiliate
is the sole record and beneficial owner of the number of shares of Company
Capital Stock set forth next to its name on the signature page hereto (the
"SHARES"). The Shares are not subject to any claim, lien, pledge, charge,
security interest or other encumbrance or to any rights of first refusal of any
kind. There are no options, warrants, calls, rights, commitments or agreements
of any character, written or oral, to which the Affiliate is party or by which
it is bound obligating the Affiliate to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
Shares or obligating the Affiliate to grant or enter into any such option,
warrant, call, right, commitment or agreement. The Affiliate has the sole
right to transfer such Shares. The Shares constitute all shares of Company
Capital Stock owned, beneficially or of record, by the Affiliate. The Shares
are not subject to preemptive rights created by any agreement to which the
Affiliate is party. The Affiliate has not engaged in any sale or other
transfer of the Shares in contemplation of the Merger.
4. SPECIFIC PERFORMANCE. Affiliate agrees that irreparable
damages would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms, or were otherwise
breached. Accordingly, it is agreed that Parent shall be entitled to
injunctive relief to prevent breaches of the provisions of this Agreement, and
to enforce specifically the terms and provisions hereof, in addition to any
other remedy to which Parent may be entitled at law or in equity.
5. NOTICES. Any notice or other communication required or
permitted to be delivered to Parent or Affiliate under this Agreement shall be
in writing and shall be deemed properly delivered, given and received when
delivered (by hand, by registered mail, by courier or express delivery service
or by facsimile) to the address or facsimile telephone number set forth beneath
the name of such party below (or to such other address or facsimile telephone
number as such party shall have specified in a written notice given to the
other party):
if to Parent: Platinum Software Corporation
195 Technology Drive
Irvine, CA 92718-2402
Attention: Perry Tarnofsky
Telephone No.: (714)450-4594
Facsimile No: (714)450-4496
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<PAGE> 66
if to Affiliate:
__________________________________
Telephone: ______________________
Facsimile: ______________________
6. SEVERABILITY. In the event that any provision of this
Agreement, or the application of any such provision to any person, entity or
set of circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to persons, entities or circumstances other than
those as to which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and shall continue
to be valid and enforceable to the fullest extent permitted by law.
7. GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflicts of laws).
8. WAIVER. No failure on the part of Parent to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the
part of Parent in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. Parent shall not be deemed to have waived any
claim arising out of this Agreement, or any power, right, privilege or remedy
under this Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of Parent; and any such waiver shall not be applicable or
have any effect except in the specific instance in which it is given.
9. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10. FURTHER ASSURANCES. Affiliate shall execute and/or cause to
be delivered to Parent such instruments and other documents and shall take such
other actions as Parent may reasonably request to effectuate the intent and
purposes of this Agreement.
11. ENTIRE AGREEMENT. This Agreement, the Reorganization
Agreement and the other agreements referred to in the Reorganization Agreement
set forth the entire understanding of Affiliate and Parent relating to the
subject matter hereof and thereof and supersede all prior agreements and
understandings between Affiliate and Parent relating to the subject matter
hereof and thereof
12. AMENDMENTS. This Agreement may not be amended, modified,
altered, or
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<PAGE> 67
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Parent and the Affiliate.
13. BINDING NATURE. This Agreement will be binding upon Affiliate
and Affiliate's representatives, executors, administrators, estate, heirs,
successors and assigns, and shall inure to the benefit of Parent and its
successors and assigns.
14. SURVIVAL. The representations, warranties, covenants and
other provisions contained in this Agreement shall survive the Merger.
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<PAGE> 68
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
PLATINUM SOFTWARE CORPORATION
____________________________________________
Signature of Authorized Signatory
____________________________________________
Print Name and Title
AFFILIATE
____________________________________________
Signature of Authorized Signatory
____________________________________________
Print Name of Affiliate
SHARES BENEFICIALLY OWNED:
_______________ shares of the Company
Common Stock
_______________ shares of the Company Common
Stock issuable upon exercise of outstanding
options
[SIGNATURE PAGE TO COMPANY AFFILIATE AGREEMENT]
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<PAGE> 69
EXHIBIT D
SCHEDULE 6.3
LEGAL OPINION
The legal opinion of Sturm, Paletti & Wilson shall be delivered to Platinum
Software Corporation prior to the Closing.
<PAGE> 70
EXHIBIT E
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and
between Platinum Software Corporation (the "Company") and ________
("Employee"), as of the "Effective Time," as defined below.
RECITALS
A. The Company, FS Acquisition Corp., a wholly owned subsidiary
of the Company ("Subsidiary") and FocusSoft, Inc., a Kentucky corporation
("FocusSoft"), have entered into an Agreement and Plan of Reorganization, dated
as of November __, 1997 (the "Merger Agreement"), pursuant to which Subsidiary
will merge with and into FocusSoft (the "Merger") and FocusSoft will thereby
become a wholly-owned subsidiary of the Company.
B. The business conducted by FocusSoft prior to the date of the
Merger Agreement and the business to be conducted by FocusSoft after the
Effective Time of the Merger consists of development and licensing of software
products.
C. The undersigned is willing to enter into this Agreement to
assure the Company that it will receive the full benefit of the business that
it is acquiring pursuant to the Merger.
D. As a material inducement to the Company to enter in to the
Merger, Employee agrees to enter into this Agreement.
NOW, THEREFORE, in consideration of the covenants set forth in this
Agreement, the parties hereto agree as follows:
1. Effectiveness of Agreement. This Agreement shall become
effective only upon the "Effective Time" as such term is defined in the Merger
Agreement (the "Effective Time"). In the event that the Merger Agreement
terminates prior to the Effective Time, this Agreement will be of no force or
effect. The Company and Employee agree that this Agreement shall govern the
terms and conditions of Employee's provision of services to the Company (and/or
its parent and/or subsidiaries) from and after the Effective Time.
2. Term of Agreement. Unless terminated earlier in accordance
with the provisions of Section 7, this Agreement shall commence on the
Effective Time and shall end on _______________ (the "Employment Period").
3. Duties and Scope of Employment.
(a) Position; Employment Commencement Date; Duties. The
Company shall employ Employee as the _______________________ of the FocusSoft
Products division of the Company in Louisvlle, Kentucky (the "FocusSoft
Division"), reporting to the President of the FocusSoft Division. Employee's
duties in such position shall be those customarily associated with
<PAGE> 71
such position and as determined by the President of the FocusSoft Division.
(b) Obligations. During the Employment Period, Employee
shall devote all of his business efforts and time to the Company. Employee
agrees, during the Employment Period, not to actively engage in any other
employment, occupation or consulting activity for any direct or indirect
remuneration, without the prior approval of the President of the Company (the
"President") or the Board of Directors of the Company (the "Board").
4. Employee Benefits. During the Employment Period, Employee
shall be eligible to participate in (i) all employee benefit plans currently
and hereafter maintained by the Company for similarly situated employees of the
Company.
5. Compensation.
(a) Base Salary. During the Employment Period, the
Company shall pay Employee as compensation for his services a base salary at
the annualized rate of $________ (the "Base Salary"). The Base Salary shall be
paid periodically in accordance with normal Company payroll practices and
subject to the usual, required withholding. Employee understands and agrees
that neither his job performance nor promotions, commendations, bonuses or the
like from the Company give rise to or in any way serve as the basis for
modification, amendment, or extension, by implication or otherwise, of this
Agreement.
(b) Bonus. During the Employment Period Employee shall
be eligible to receive bonuses as determined by the President, the Board or its
Compensation Committee, provided, however, that the determination and payment
of any and all bonuses shall be at the sole discretion of the Board. The
Company shall pay any and all bonuses referred to in this Agreement only at the
same time as bonuses are normally paid to similarly situated of the Company.
6. Expenses. The Company will pay or reimburse Employee for
reasonable travel, entertainment or other expenses incurred by Employee in the
furtherance of or in connection with the performance of Employee's duties
hereunder in accordance with the Company's established policies.
7. Termination of Employment.
(a) Early Termination Generally. Prior to the expiration
of the Employment Period, the Company may only terminate Employee's employment
pursuant to this Agreement for Cause (as defined below). For purposes of this
Agreement, termination by Employee for Good Reason shall be construed as
termination by the Company without Cause and shll constitute a material breach
of this Agreement by the Company.
(b) Termination for Cause or Voluntary Resignation. In
the event the Company
2
<PAGE> 72
terminates Employee's employment with the Company for Cause or Employee
voluntarily terminates employment with the Company without Good Reason (as
defined below), then this Agreement shall terminate immediately and Employee
shall not be entitled to any benefits or compensation, whether arising
hereunder or otherwise, after the date of such termination.
For the purposes of this Agreement, "Cause" shall
mean (i) unsatisfactory job performance as determined in the reasonable
discretion of the President of the FocusSoft Division ("Unsatisfactory Job
Performance") (ii) a breach by Employee of any material obligation under this
Agreement that remains uncured for 10 business days after written notice is
delivered to Employee by the Company or the FocusSoft Division, (iii) any act
by Employee which constitutes gross misconduct of a type and kind which is
materially adverse to the Company or FocusSoft, (iv) a violation caused
directly and intentionally by Employee of a federal or state law, rule or
regulation applicable to the business of the Company or FocusSoft of a type and
kind that is materially adverse to the Company or FocusSoft, (v) improper
disclosure of the confidential information of the Company or any subsidiary of
the Company (including, but not limited to any violation of the Proprietary
Information Agreement (as defined below) resulting or likely to result in
adverse consequences to the Company or the FocusSoft Division or (vi) the
conviction of Employee of, or entry by Employee of a guilty or no contest plea
to, the commission of a crime involving moral turpitude or any felony or the
rendering of any civil judgement against Employee that materially and adversely
affects the Company's or FocusSoft's reputation.
Notwithstanding the foregoing, prior to terminating Employee or
materially and adversely reducing Employee's duties, authorities and
responsibilities for Unsatisfactory Job Performance, the Company must first
notify Employee in writing of the circumstances giving rise to the
Unsatisfactory Job Performance ( a "First Notice") and allow Employee not less
than thirty (30) days to adequately improve such Unsatisfactory Job
Performance. In the event that, in the reasonable discretion of the President
of the FocusSoft Division, Employee's performance has not adequately improved
his or her Unsatisfactory Job Performance within thirty (30) days after
delivery of the First Notice (or such other time period as is specified
therein), then the Company must provide Employee a second notice which
specifies the circumstances giving rise to the continued Unsatisfactory Job
Performance (a "Second Notice") and allow Employee not less than thirty (30)
days to adequately improve such continued Unsatisfactory Job Performance. In
the event that in the reasonable discretion of the President of the FocusSoft
Division, Employee's performance has not adequately improved within thirty
(30) days after delivery of the Second Notice (or such other time period as is
specified therein), then the Company shall be entitled to terminate Employee
for Cause due to Unsatisfactory Job Performance, or to impose a material
adverse reduction of Employee's duties, authorities, or responsibilities.
For the purposes of this Agreement, "Good Reason"
shall mean (i) a material breach of this Agreement by the Company which remains
uncured for 10 business days after written notice thereof is delivered to the
Company by Employee; (ii) without the express written consent of Employee, the
relocation of the Employee to a facility or a location more than fifty (50)
miles from the Employee's then present location; (iii) failure on the part of
any successor
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of the Company to assume the Company's obligations under this Agreement; and
(iv) a material adverse reduction of Employee's duties, authorities, or
responsibilities not accompanied by Unsatisfactory Job Performance.
(c) Termination for Good Reason. In the event that the
Company terminates Employee's employment pursuant to this Agrement without
cause or Employee terminates his employment pursuant to this Agreement for Good
Reason, the Company shall provide Employee with the following benefits:
(i) Severance Payments. Subject to Employee
entering into a Release of Claims arising out of Employee's employment (in a
form provided by the Company and reasonably satisfactory to Employee), Employee
shall be entitled to Base Salary continuation payments, at the Base Salary rate
in effect at the date of termination until the expiration of the Employment
Period to be paid periodically in accordance with the Company's normal payroll
policies; and
(ii) Continued Employee Benefits. The Company
shall provide to Employee, subject to Employee and his dependents electing
continuation coverage under COBRA, one hundred percent (100%) Company-paid
health, dental and vision coverage at the same level of coverage as was
provided to Employee immediately prior to the date of termination until the
earlier of (x) the expiration of the Employment Period or (y) the date that
Employee and his dependents become covered under another employer' group
health, dental and vision plans that provide Employee and his dependents with
comparable benefits and levels of coverage. Notwithstanding the foregoing, the
receipt of continued benefits or Base Salary continuation payments after the
date of termination of any Employee shall not be construed as a waiver or
limitation of damages or claims that may be asserted by Employee for the
Company's breach of the terms of this Agreement.
8. Non-Solicitation. Employee covenants and agrees with the
Company that during any period which the Employee is employed by the Company or
during any period which Employee is due and receiving Base Salary continuation
payments in accordance with Section 7(c)(i) above, Employee shall not solicit
any of the then-current employees of the Company or any affiliate of the
Company to terminate their employment with the Company or any such affiliate or
to become employed by any firm, company or other business enterprise with which
the Employee may then be connected. The Employee also covenants and agrees
with the Company that during any period which the Employee is employed by the
Company or during any period which Employee is due and receiving Base Salary
continuation payments in accordance with Section 7(c)(i) above, Employee shall
not solicit any of the then current customers of the Company or any of their
respective affiliates.
9. Non-Competition. The Employee covenants and agrees with the
Company that during any period which the Employee is employed by the Company or
during any period which Employee is due and receiving Base Salary continuation
payments in accordance with Section 7(c)(i) above, Employee shall not, whether
on his or its own behalf or on behalf of any
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other person, firm, partnership, corporation or other business venture (as
defined below, a "person"), own, manage, control, participate in, consult with,
be employed by, render services for or otherwise assist in any manner any
person that is engaged in, any Business Activity (as hereinafter defined)
competitive with the Business (as hereinafter defined). Nothing herein shall
prohibit the Employee from being an owner of not more than 2% of the equity or
debt securities of any such person, so long as the Employee has no active
participation (other than exercising voting or consensual rights with respect
to such interest of up to 2%) in the business of such person. As used herein:
(i) "Business Activity," with respect to any person, means any direct or
indirect primary business activity of such person; and (ii) "Business" means,
as of the date of determination, any Business Activity of the Company or any
subsidiary of the Company.
10. Assignment. Employee's rights and obligations under this
Agreement shall not be assignable by Employee. The Company's rights and
obligations under this Agreement shall be assignable by the Company.
11. Notices. Any notice required or permitted under this
Agreement shall be given in writing and shall be deemed to have been
effectively made or given if personally delivered, or if sent by facsimile, or
mailed or sent via Federal Express to the other party at its address set forth
below in this Section 11 or at such other address as such party may designate
by written notice to the other party hereto. Any effective notice hereunder
shall be deemed given on the date personally delivered or on the date sent by
facsimile or deposited in the United States mail (sent by certified mail,
return receipt requested), as the case may be, at the following addresses:
(i) If to the Company:
Platinum Software Corporation
195 Technology Drive
Irvine, California 92618-2402
Attention: Mr. Perry Tarnofsky, Esq.
(ii) If to Employee:
Employee
FocusSoft
_____________
_____________
Telephone No.: _______________
Facsimile No.: ______________
12. Arbitration. The parties hereto agree that any dispute or
controversy arising out of, relating to, or in connection with this Agreement,
or the interpretation, validity, construction, performance, breach, or
termination thereof, shall be finally settled by binding arbitration to be held
in Jefferson County, Kentucky under the Employment Dispute Resolution Rules of
the
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American Arbitration Association as then in effect (the "Rules"). The
arbitrator(s) may grant injunctions or other relief in such dispute or
controversy. The decision of the arbitrator(s) shall be final, conclusive and
binding on the parties to the arbitration, and judgment may be entered on the
decision of the arbitrator(s) in any court having jurisdiction.
The arbitrator(s) shall apply the laws of the State of California to
the merits of any dispute or claim, without reference to rules of conflicts of
law, and the arbitration proceedings shall be governed by federal arbitration
law and by the Rules, without reference to state arbitration law.
The parties shall each pay one-half of the costs and expenses of such
arbitration, and each party shall pay its own counsel fees and expenses.
EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION 12 WHICH
DISCUSSES ARBITRATION. EMPLOYEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EMPLOYEE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN
CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT
THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A JURY
TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO EMPLOYEE'S
EMPLOYMENT RELATIONSHIP WITH THE COMPANY.
13. Withholding. The Company shall be entitled to withhold, or
cause to be withheld, from payment any amount of withholding taxes required by
law with respect to payments made to Employee in connection with his employment
hereunder.
14. Severability. If any term or provision of this Agreement
shall to any extent be declared illegal or unenforceable by arbitrator(s) or by
a duly authorized court of competent jurisdiction, then the remainder of this
Agreement or the application of such term or provision in circumstances other
than those as to which it is so declared illegal or unenforceable, shall not be
affected thereby, each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law and the illegal or
unenforceable term or provision shall be deemed replaced by a term or provision
that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term of provision.
15. Entire Agreement. This Agreement and the agreements
referenced herein represent the entire agreement of the parties with respect to
the matters set forth herein, and to the extent inconsistent with other prior
contracts, arrangements or understandings between the parties, supersedes all
such previous contracts, arrangements or understandings between the Company and
Employee. The Agreement may be amended at any time only by mutual written
agreement signed by the parties hereto.
16. Governing Law. This Agreement shall be construed, interpreted,
and governed in
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accordance with the laws of the State of California without reference to rules
relating to conflict of law (other than any such rules directing application of
California law).
17. Headings. The headings of sections herein are included solely
for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
18. Counterparts. This Agreement may be executed by either of the
parties hereto in counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
EMPLOYEE ____________________________________
Name: ____________________________
PLATINUM SOFTWARE CORPORATION
____________________________________
Name:_______________________________
Title:______________________________
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<PAGE> 77
EXHIBIT F-1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and
between Platinum Software Corporation (the "Company") and John Lococo
("Employee"), as of the "Effective Time," as defined below.
RECITALS
A. The Company, FS Acquisition Corp., a wholly owned subsidiary
of the Company ("Subsidiary") and FocusSoft, Inc., a Kentucky corporation
("FocusSoft"), have entered into an Agreement and Plan of Reorganization, dated
as of November 4, 1997 (the "Merger Agreement"), pursuant to which Subsidiary
will merge with and into FocusSoft (the "Merger") and FocusSoft will thereby
become a wholly-owned subsidiary of the Company.
B. The business conducted by FocusSoft prior to the date of the
Merger Agreement and the business to be conducted by FocusSoft after the
Effective Time of the Merger consists of development and licensing of software
products.
C. The undersigned is willing to enter into this Agreement to
assure the Company that it will receive the full benefit of the business that
it is acquiring pursuant to the Merger.
D. As a material inducement to the Company to enter in to the
Merger, Employee agrees to enter into this Agreement.
NOW, THEREFORE, in consideration of the covenants set forth in this
Agreement, the parties hereto agree as follows:
1. Effectiveness of Agreement. This Agreement shall become
effective only upon the "Effective Time" as such term is defined in the Merger
Agreement (the "Effective Time"). In the event that the Merger Agreement
terminates prior to the Effective Time, this Agreement will be of no force or
effect. The Company and Employee agree that this Agreement shall govern the
terms and conditions of Employee's provision of services to the Company (and/or
its parent and/or subsidiaries) from and after the Effective Time.
2. Term of Agreement. Unless terminated earlier in accordance
with the provisions of Section 7, this Agreement shall commence on the
Effective Time and shall end on the one-year anniversary of the Effective Time
(the "Employment Period").
3. Duties and Scope of Employment.
(a) Position; Employment Commencement Date; Duties. The
Company shall employ Employee in Louisville, Kentucky as the President of the
FocusSoft Products division of the Company (the "FocusSoft Division") and a
Vice President of the Company, reporting to the Chief Executive Officer of the
Company. Employee shall have such duties as are customarily
<PAGE> 78
incident to such offices in accordance with the Company's policies (including
full authority to operate the FocusSoft Division's business, conduct its
operations and employ and discharge employees consistent with the Company's
policies).
(b) Obligations. During the Employment Period, Employee
shall devote his best efforts to the Company. Employee shall not be prohibited
from serving as a consultant to or a member of the board of directors of other
companies provided such activities do not materially conflict with Employee's
obligations under this Agreement.
(c) Board Membership. If Employee is serving as a member
of the Board of Directors of the Company (the "Board") and/or the board of
directors of any subsidiary of the Company on the date of termination of the
Employment Period, he shall tender to the Board and/or the board of any
subsidiary of the Company, as the case may be, his resignation from the Board
effective as of such date.
4. Employee Benefits. During the Employment Period, Employee
shall be eligible to participate in (i) all employee benefit plans currently
and hereafter maintained by the Company for similarly situated officers of the
Company according to their terms (including, without limitation, employee stock
plans, health insurance, 401(k) and other benefit plans). Additionally, until
the earlier of (i) two (2) years after the Effective Time or (ii) the date on
which the Company terminates Employee for Cause, the Company shall provide
Employee (at the Company's expense) with (A) health, dental and vision
insurance (employee and family coverage) (B) continued use of the automobile
currently leased by FocusSoft for Employee's use and the right to purchase such
automobile upon the conclusion of the applicable lease pursuant to the terms
thereof, (C) use of office space and services on the FocusSoft Division's
premises consistent with the space and services provided to Employee as of the
Effective Time and (D) four weeks of paid vacation leave per year worked
commencing as of the Effective Time. In addition, Employee shall receive a
one-time grant of four weeks of paid vacation that may be utilized at any time
during Employee's employment with the Company.
5. Compensation.
(a) Base Salary. During the Employment Period, the
Company shall pay Employee as compensation for his services a base salary at
the annualized rate of $200,000 (the "Base Salary"). The Base Salary shall be
paid periodically in accordance with normal Company payroll practices and
subject to the usual, required withholding. Employee understands and agrees
that neither his job performance nor promotions, commendations, bonuses or the
like from the Company give rise to or in any way serve as the basis for
modification, amendment, or extension, by implication or otherwise, of this
Agreement.
(b) Annual Bonus. During the Employment Period, Employee
will receive an annual bonus (which shall be pro-rated on a fiscal year basis)
of $100,000 based on a performance plan to be mutually agreed upon by Employee
and the President of the Company. Employee shall
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forfeit the right to any bonus under this Section 5(b) in the event that he is
terminated by the Company for Cause (as defined below).
(c) Additional Incentive Bonus. During the Employment
Period, Employee will be eligible to receive an annual "additional incentive
bonus" of $100,000. The performance criteria for this bonus will be mutually
agreed upon by Employee and the President of the Company. Employee shall
forfeit the right to any bonus under this Section 5(c) in the event that he is
terminated by the Company for Cause.
(d) Equity Compensation. The Board is granting Employee
a stock option to purchase 150,000 shares of the Company's common stock at a
price equal to the closing price of the Common Stock of the National Market
System of the National Association of Securities Dealers Automated Quotation
System as of the Effective Time (the "Option"). Fifty percent (50%) of the
Option will vest on the first anniversary of the Effective Time and fifty
percent (50%) of the Option will vest on the second anniversary of the
Effective Time. The Option shall be subject to the terms and conditions of the
form of option agreement (the "Option Agreement") attached hereto as Exhibit A.
In the event that Employee is terminated for Cause, any unvested portion of the
Option as of the time of such termination shall be canceled and Employee shall
have no further right to such unvested portion of the Option.
6. Expenses. The Company will pay or reimburse Employee for
reasonable travel, entertainment or other expenses incurred by Employee in the
furtherance of or in connection with the performance of Employee's duties
hereunder in accordance with the Company's established policies.
7. Termination of Employment.
(a) Early Termination Generally. The Company may
terminate Employee's employment at any time prior to the expiration of the
Employment Period whether or not such termination is for Cause. In the event of
such termination, any earned compensation as of such termination date not
otherwise addressed herein shall remain fully payable.
(b) Termination for Cause or Voluntary Resignation. In
the event the Company terminates Employee's employment with the Company for
Cause (as defined below) or Employee voluntarily terminates employment with the
Company without Good Reason (as defined below), then this Agreement shall
terminate immediately and Employee shall not be entitled to any benefits or
compensation hereunder arising after the date of such termination.
For the purposes of this Agreement, "Cause" shall
mean and be limited to (i) a breach by Employee of any material obligations
under this Agreement which breach remains uncured for 30 days after written
notice is delivered to Employee by the Company, (ii) any act by Employee which
constitutes gross misconduct of a type and kind which is materially adverse to
the
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<PAGE> 80
Company or the FocusSoft Division, (iii) a violation caused directly and
intentionally by Employee of a federal or state law, rule or regulation
applicable to the business of the Company or FocusSoft of a type and kind that
is materially adverse to the Company or the FocusSoft Division, (iv) improper
disclosure of the confidential information of the Company or any subsidiary of
the Company (including, but not limited to any violation of the Proprietary
Information Agreement (as defined below)) resulting in or likely to result in
adverse consequences to the Company or (v) the conviction of Employee of, or
entry by Employee of a guilty or no contest plea to, the commission of a crime
involving moral turpitude or any felony or the rendering of any civil judgement
against Employee that materially and adversely affects the Company's or
FocusSoft's reputation.
For the purposes of this Agreement, "Good Reason"
shall mean (i) without the express written consent of Employee, a material
reduction of Employee's duties, authority or responsibilities, relative to
Employee's duties, authority or responsibilities as in effect immediately prior
to such reduction, or the assignment to Employee of such reduced duties,
authority or responsibilities; provided, however, that any change in Employee's
duties, authority or responsibilities directly resulting from FocusSoft
becoming a subsidiary of the Company pursuant to the Merger shall not
constitute Good Reason; (ii) a material breach of this Agreement by the
Company; (iii) a material reduction in benefits for which Employee is eligible
and in effect immediately prior to such reduction, other than a reduction in
the benefits of substantially all other similarly situated employees of the
Company; (iv) without the express written consent of Employee, the relocation
of the Employee to a facility or a location more than twenty (20)miles from the
Employee's then present location; (v) failure on the part of any successor of
the Company to assume the Company's obligations under this Agreement or (vi) a
material reduction in the compensation payable to Employee pursuant to the
terms of Section 5 of this Agreement.
(c) Termination Without Cause; Termination for Good
Reason. In the event (i) the Company terminates Employee's employment with the
Company other than for Cause, or (ii) Employee terminates employment for Good
Reason, the Company shall provide Employee with the following benefits:
(i) Severance Payments. Subject to Employee
entering into a Release of Claims arising out of Employee's employment (in a
form provided by the Company and reasonably satisfactory to Employee), Employee
shall be entitled to (A) Base Salary continuation payments, at the Base Salary
rate in effect at the date of termination until the expiration of the
Employment Period to be paid periodically in accordance with the Company's
normal payroll policies and (B) all bonus payments as determined pursuant to
the terms of Sections 5(b) and 5(c) of this Agreement; and
(ii) Continued Employee Benefits. Employee shall
be entitled to the benefits set forth in Section 4 of this Agreement. In
addition, in the event that Employee is terminated by the Company other than
for Cause, or Employee terminates his employment for Good Reason, then any
unvested portion of the Option will continue to vest for so long as Employee
shall be available to provide Consulting Services (as defined below) to the
Company. In
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<PAGE> 81
the event that Employee is terminated for Cause, then any unvested portion of
the Option will be automatically canceled and of no further force and effect as
of the date of such termination.
(d) Consulting Services. Notwithstanding Section
2 hereof or this Section 7, in the event that this Agreement or Employee's
employment with the Company terminates at any time prior to the second
anniversary of the Effective Time other than for Cause, Employee hereby agrees
to make himself available to provide consulting services to the Company on an
as requested and reasonable basis (the "Consulting Services") through the
second anniversary of the Effective Time such that Employee will be considered
a service provider to the Company during such period. Employee alone shall
determine the time and manner in which he shall engage in any such services (if
and when requested by the Company) and his obligation to provided Consulting
Services shall be subject to his availability, existing commitments and
schedule. Employee will be paid for Consulting Services at a rate to be
negotiated by the parties at the time such services are requested and as shall
be reasonably acceptable to Employee.
8. Non-Solicitation. Employee covenants and agrees with the
Company that during any period which the Employee is employed by the Company
and for a period expiring eighteen (18) months after the date of termination or
expiration thereof, neither Employee nor his Controlled Affiliates (as defined
below) shall solicit any of the then-current employees of the Company or any
affiliate of the Company to terminate their employment with the Company or any
such affiliate or to become employed by any firm, company or other business
enterprise with which the Employee may then be connected. Employee also
covenants and agrees with the Company that during any period which Employee is
employed by the Company and for a period expiring eighteen (18) months after
the date of termination or expiration thereof, neither the Employee nor his
Controlled Affiliates shall solicit any of the then current customers of the
Company or any of their respective affiliates. As used herein, "Controlled
Affiliate" of the Employee means any member of the Employee's immediate family
(including, without limitation, his spouse, children, parents and siblings) and
any other person or entity which, directly or indirectly, is at any time
controlled by the Employee and shall be operating or performing on behalf of,
at the direction of or for the benefit of Employee in whole or in part either
directly or indirectly. For purposes of this definition, "control" of a person
or entity means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person, whether by contract or
otherwise.
9. Non-Competition. The Employee covenants and agrees with the
Company that during any period which the Employee is employed by the Company
and for a period expiring eighteen (18) months after the date of termination or
expiration thereof, neither the Employee nor any Controlled Affiliate shall,
whether on his or its own behalf or on behalf of any other person, firm,
partnership, corporation or other business venture (as defined below, a
"person"), own, manage, control, participate in, consult with, be employed by,
render services for or otherwise assist in any manner any person that is
engaged in, any Business Activity (as hereinafter defined) competitive with the
Business (as hereinafter defined). Nothing herein shall prohibit the Employee
or any Controlled Affiliate from being an owner of not more than 5% of the
equity or debt
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securities of any such person, so long as the Employee has no active
participation (other than exercising voting or consensual rights with respect
to such interest of up to 5%) in the business of such person. As used herein:
(i) "Business Activity," with respect to any person, means any direct or
indirect primary business activity of such person; and (ii) "Business" means,
as of the date of determination, any Business Activity of the Company or any
subsidiary of the Company. Employee hereby acknowledges that he has offered
this agreement not to compete to the Company as a material inducement to the
Company to enter into the Merger.
10. Assignment. Employee's rights and obligations under this
Agreement shall not be assignable by Employee. The Company's rights and
obligations under this Agreement shall be assignable by the Company provided
that, in the event of an assignment by the Company other than pursuant to a
change of control of the Company or the sale by the Company of all or a
substantial portion of its assets, the Company provides Employee with prior
written notice of such assignment.
11. Notices. Any notice required or permitted under this
Agreement shall be given in writing and shall be deemed to have been
effectively made or given if personally delivered, or if sent by facsimile, or
mailed or sent via overnight express service to the other party at its address
set forth below in this Section 11, or at such other address as such party may
designate by written notice to the other party hereto. Any effective notice
hereunder shall be deemed given on the date personally delivered or on the date
sent by facsimile or deposited in the United States mail (sent by certified
mail, return receipt requested), as the case may be, at the following
addresses:
(i) If to the Company:
Platinum Software Corporation
195 Technology Drive
Irvine, California 92618-2402
Attention: Mr. Perry Tarnofsky, Esq.
(ii) If to Employee:
Employee
FocusSoft
_____________
_____________
Telephone No.: ______________
Facsimile No.: ______________
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12. Arbitration. The parties hereto agree that any dispute or
controversy arising out of, relating to, or in connection with this Agreement,
or the interpretation, validity, construction, performance, breach, or
termination thereof, shall be finally settled by binding arbitration to be held
in Orange County, California under the Employment Dispute Resolution Rules of
the American Arbitration Association as then in effect (the "Rules"). The
arbitrator(s) may grant injunctions or other relief in such dispute or
controversy. The decision of the arbitrator(s) shall be final, conclusive and
binding on the parties to the arbitration, and judgment may be entered on the
decision of the arbitrator(s) in any court having jurisdiction.
The arbitrator(s) shall apply the laws of the State of California to
the merits of any dispute or claim, without reference to rules of conflicts of
law, and the arbitration proceedings shall be governed by federal arbitration
law and by the Rules, without reference to state arbitration law.
The parties shall each pay one-half of the costs and expenses of such
arbitration, and each party shall pay its own counsel fees and expenses.
EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION 12, WHICH
DISCUSSES ARBITRATION. EMPLOYEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EMPLOYEE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN
CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT
THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A JURY
TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO EMPLOYEE'S
EMPLOYMENT RELATIONSHIP WITH THE COMPANY.
13. Withholding. The Company shall be entitled to withhold, or
cause to be withheld, from payment any amount of withholding taxes required by
law with respect to payments made to Employee in connection with his employment
hereunder.
14. Severability. If any term or provision of this Agreement
shall to any extent be declared illegal or unenforceable by arbitrator(s) or by
a duly authorized court of competent jurisdiction, then the remainder of this
Agreement or the application of such term or provision in circumstances other
than those as to which it is so declared illegal or unenforceable, shall not be
affected thereby, each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law and the illegal or
unenforceable term or provision shall be deemed replaced by a term or provision
that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
15. Proprietary Information Agreement. In conjunction with the
execution and effectiveness of this Agreement, Employee agrees to
simultaneously execute the Company's standard form of proprietary information
and invention assignment agreement (the "Proprietary Information Agreement").
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<PAGE> 84
16. Entire Agreement; Termination. This Agreement and the
agreements referenced herein represent the entire agreement of the parties with
respect to the matters set forth herein, and to the extent inconsistent with
other prior contracts, arrangements or understandings between the parties,
supersedes all such previous contracts, arrangements or understandings between
the Company and Employee. The Agreement may be amended at any time only by
mutual written agreement signed by the parties hereto. In addition, by
execution hereof, Employee hereby agrees to the cancellation of any and all
existing employment, compensation or similar agreements (other than
arrangements specifically provided for as a continuing obligations of the
Company or FocusSoft in the Section 5.18 of the Merger Agreement) he may have
with FocusSoft or by which FocusSoft may be bound, including, but not limited
to that certain employment agreement dated November 14, 1993.
17. Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of Kentucky
without reference to rules relating to conflict of law (other than any such
rules directing application of Kentucky law).
18. Headings. The headings of sections herein are included solely
for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
19. Counterparts. This Agreement may be executed by either of the
parties hereto in counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
EMPLOYEE __________________________________
Name: John Lococo
PLATINUM SOFTWARE CORPORATION __________________________________
Name: ___________________________
Title: _________________________
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE> 86
EXHIBIT F-2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and
between Platinum Software Corporation (the "Company") and Michael Zimmerman
("Employee"), as of the "Effective Time," as defined below.
RECITALS
A. The Company, FS Acquisition Corp., a wholly owned subsidiary
of the Company ("Subsidiary") and FocusSoft, Inc., a Kentucky corporation
("FocusSoft"), have entered into an Agreement and Plan of Reorganization, dated
as of November __, 1997 (the "Merger Agreement"), pursuant to which Subsidiary
will merge with and into FocusSoft (the "Merger") and FocusSoft will thereby
become a wholly-owned subsidiary of the Company.
B. The business conducted by FocusSoft prior to the date of the
Merger Agreement and the business to be conducted by FocusSoft after the
Effective Time of the Merger consists of development and licensing of software
products.
C. The undersigned is willing to enter into this Agreement to
assure the Company that it will receive the full benefit of the business that
it is acquiring pursuant to the Merger.
D. As a material inducement to the Company to enter in to the
Merger, Employee agrees to enter into this Agreement.
NOW, THEREFORE, in consideration of the covenants set forth in this
Agreement, the parties hereto agree as follows:
1. Effectiveness of Agreement. This Agreement shall become
effective only upon the "Effective Time" as such term is defined in the Merger
Agreement (the "Effective Time"). In the event that the Merger Agreement
terminates prior to the Effective Time, this Agreement will be of no force or
effect. The Company and Employee agree that this Agreement shall govern the
terms and conditions of Employee's provision of services to the Company (and/or
its parent and/or subsidiaries) from and after the Effective Time.
2. Term of Agreement. Unless terminated earlier in accordance
with the provisions of Section 7, this Agreement shall commence on the
Effective Time and shall end on the one-year anniversary of the Effective Time
(the "Employment Period").
3. Duties and Scope of Employment.
(a) Position; Employment Commencement Date; Duties. The
Company shall employ Employee in Louisville, Kentucky as the Chief Technical
Officer and Senior Vice-President of the FocusSoft Products division of the
Company (the "FocusSoft Division"), reporting to the Chief Executive Officer of
the FocusSoft Division. Employee shall have such duties as are
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customarily incident to such offices in accordance with the Company's policies.
(b) Obligations. During the Employment Period, Employee
shall devote his best efforts to the Company. Employee shall not be prohibited
from serving as a consultant to or a member of the board of directors of other
companies provided such activities do not materially conflict with Employee's
obligations under this Agreement.
4. Employee Benefits. During the Employment Period, Employee
shall be eligible to participate in (i) all employee benefit plans currently
and hereafter maintained by the Company for similarly situated officers of the
Company according to their terms (including, without limitation, employee stock
plans, health insurance, 401(k) and other benefit plans). Additionally, until
the earlier of (i) two (2) years after the Effective Time or (ii) the date on
which the Company terminates Employee for Cause, the Company shall provide
Employee (at the Company's expense) with (A) health, dental and vision
insurance (employee and family coverage) (B) continued use of the automobile
currently leased by FocusSoft for Employee's use and the right to purchase such
automobile upon the conclusion of the applicable lease pursuant to the terms
thereof, (C) use of office space and services on the FocusSoft Division's
premises consistent with the space and services provided to Employee as of the
Effective Time and (D) four weeks of paid vacation leave per year worked
commencing as of the Effective Time.
5. Compensation.
(a) Base Salary. During the Employment Period, the
Company shall pay Employee as compensation for his services a base salary at
the annualized rate of $150,000 (the "Base Salary"). The Base Salary shall be
paid periodically in accordance with normal Company payroll practices and
subject to the usual, required withholding. Employee understands and agrees
that neither his job performance nor promotions, commendations, bonuses or the
like from the Company give rise to or in any way serve as the basis for
modification, amendment, or extension, by implication or otherwise, of this
Agreement.
(b) Annual Bonus. During the Employment Period, Employee
will receive an annual bonus (which shall be pro-rated on a fiscal year basis)
of $75,000 based on a performance plan to be mutually agreed upon by Employee
and the President of the Company. Employee shall forfeit the right to any
bonus under this Section 5(b) in the event that he is terminated by the Company
for Cause (as defined below).
(c) Additional Incentive Bonus. During the Employment
Period, Employee will be eligible to receive an annual "additional incentive
bonus" of $75,000. The performance criteria for this bonus will be mutually
agreed upon by Employee and the President of the Company. Employee shall
forfeit the right to any bonus under this Section 5(c) in the event that he is
terminated by the Company for Cause.
(d) Equity Compensation. The Board is granting Employee
a stock option to purchase 150,000 shares of the Company's common stock at a
price equal to the closing price of
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the Common Stock of the National Market System of the National Association of
Securities Dealers Automated Quotation System as of the Effective Time (the
"Option"). Fifty percent (50%) of the Option will vest on the first
anniversary of the Effective Time and fifty percent (50%) of the Option will
vest on the second anniversary of the Effective Time. The Option shall be
subject to the terms and conditions of the form of option agreement (the
"Option Agreement") attached hereto as Exhibit A. In the event that Employee
is terminated for Cause, any unvested portion of the Option as of the time of
such termination shall be canceled and Employee shall have no further right to
such unvested portion of the Option.
6. Expenses. The Company will pay or reimburse Employee for
reasonable travel, entertainment or other expenses incurred by Employee in the
furtherance of or in connection with the performance of Employee's duties
hereunder in accordance with the Company's established policies.
7. Termination of Employment.
(a) Early Termination Generally. The Company may
terminate Employee's employment at any time prior to the expiration of the
Employment Period whether or not such termination is for Cause. In the event of
such termination, any earned compensation as of such termination date not
otherwise addressed herein shall remain fully payable.
(b) Termination for Cause or Voluntary Resignation. In
the event the Company terminates Employee's employment with the Company for
Cause (as defined below) or Employee voluntarily terminates employment with the
Company without Good Reason (as defined below), then this Agreement shall
terminate immediately and Employee shall not be entitled to any benefits or
compensation hereunder arising after the date of such termination.
For the purposes of this Agreement, "Cause" shall
mean and be limited to (i) a breach by Employee of any material obligations
under this Agreement which breach remains uncured for 30 days after written
notice is delivered to Employee by the Company, (ii) any act by Employee which
constitutes gross misconduct of a type and kind which is materially adverse to
the Company or the FocusSoft Division, (iii) a violation caused directly and
intentionally by Employee of a federal or state law, rule or regulation
applicable to the business of the Company or FocusSoft of a type and kind that
is materially adverse to the Company or the FocusSoft Division, (iv) improper
disclosure of the confidential information of the Company or any subsidiary of
the Company (including, but not limited to any violation of the Proprietary
Information Agreement (as defined below)) resulting in or likely to result in
adverse consequences to the Company or (v) the conviction of Employee of, or
entry by Employee of a guilty or no contest plea to, the commission of a crime
involving moral turpitude or any felony or the rendering of any civil judgement
against Employee that materially and adversely affects the Company's or
FocusSoft's reputation.
For the purposes of this Agreement, "Good Reason" shall mean (i) without
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<PAGE> 89
the express written consent of Employee, a material reduction of Employee's
duties, authority or responsibilities, relative to Employee's duties, authority
or responsibilities as in effect immediately prior to such reduction, or the
assignment to Employee of such reduced duties, authority or responsibilities;
provided, however, that any change in Employee's duties, authority or
responsibilities directly resulting from FocusSoft becoming a subsidiary of the
Company pursuant to the Merger shall not constitute Good Reason; (ii) a
material breach of this Agreement by the Company; (iii) a material reduction in
benefits for which Employee is eligible and in effect immediately prior to such
reduction, other than a reduction in the benefits of substantially all other
similarly situated employees of the Company; (iv) without the express written
consent of Employee, the relocation of the Employee to a facility or a location
more than twenty (20)miles from the Employee's then present location; (v)
failure on the part of any successor of the Company to assume the Company's
obligations under this Agreement or (vi) a material reduction in the
compensation payable to Employee pursuant to the terms of Section 5 of this
Agreement.
(c) Termination Without Cause; Termination for Good
Reason. In the event (i) the Company terminates Employee's employment with the
Company other than for Cause, or (ii) Employee terminates employment for Good
Reason, the Company shall provide Employee with the following benefits:
(i) Severance Payments. Subject to Employee
entering into a Release of Claims arising out of Employee's employment (in a
form provided by the Company and reasonably satisfactory to Employee), Employee
shall be entitled to (A) Base Salary continuation payments, at the Base Salary
rate in effect at the date of termination until the expiration of the
Employment Period to be paid periodically in accordance with the Company's
normal payroll policies and (B) all bonus payments due as determined pursuant
to the terms of Sections 5(b) and 5(c) of this Agreement; and
(ii) Continued Employee Benefits. Employee shall
be entitled to the benefits set forth in Section 4 of this Agreement. In
addition, in the event that Employee is terminated by the Company other than
for Cause or Employee terminates his employment for Good Reason, then any
unvested portion of the Option will continue to vest in the event that and for
so long as the Company shall have elected and continue to engage Employee to
provide Consulting Services (as defined below). Employee shall be available to
provide Consulting Services (as defined below) to the Company. In the event
that Employee is terminated for Cause, then any unvested portion of the Option
will be automatically canceled and of no further force and effect as of the
date of such termination.
(d) Consulting Services. Notwithstanding Section
2 hereof or this Section 7, in the event that this Agreement or Employee's
employment with the Company terminates at any time prior to the second
anniversary of the Effective Time other than for Cause, the Company may, but
shall not be obligated to, engage Employee to provide consulting services to
the Company on an as requested and reasonable basis (the "Consulting Services")
through the second anniversary of the Effective Time such that Employee will be
considered a service provider
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<PAGE> 90
to the Company during such period. In the event that the Company chooses to
engage Employee to provide Consulting Services, Employee will make himself
available to provide such services and the Employee and the Company shall
mutually determine the time and manner in which he shall engage in any such
services (if and when requested by the Company). Employee will be paid for
Consulting Services at a rate to be negotiated by the parties at the time such
services are requested and as shall be reasonably acceptable to Employee.
8. Non-Solicitation. Employee covenants and agrees with the
Company that during any period which the Employee is employed by the Company
and for a period expiring eighteen (18) months after the date of termination or
expiration thereof, neither Employee nor his Controlled Affiliates (as defined
below) shall solicit any of the then-current employees of the Company or any
affiliate of the Company to terminate their employment with the Company or any
such affiliate or to become employed by any firm, company or other business
enterprise with which the Employee may then be connected. Employee also
covenants and agrees with the Company that during any period which Employee is
employed by the Company and for a period expiring eighteen (18) months after
the date of termination or expiration thereof, neither the Employee nor his
Controlled Affiliates shall solicit any of the then current customers of the
Company or any of their respective affiliates. As used herein, "Controlled
Affiliate" of the Employee means any member of the Employee's immediate family
(including, without limitation, his spouse, children, parents and siblings) and
any other person or entity which, directly or indirectly, is at any time
controlled by the Employee and shall be operating or performing on behalf of,
at the direction of or for the benefit of Employee in whole or in part either
directly or indirectly. For purposes of this definition, "control" of a person
or entity means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person, whether by contract or
otherwise.
9. Non-Competition. The Employee covenants and agrees with the
Company that during any period which the Employee is employed by the Company
and for a period expiring eighteen (18) months after the date of termination or
expiration thereof, neither the Employee nor any Controlled Affiliate shall,
whether on his or its own behalf or on behalf of any other person, firm,
partnership, corporation or other business venture (as defined below, a
"person"), own, manage, control, participate in, consult with, be employed by,
render services for or otherwise assist in any manner any person that is
engaged in, any Business Activity (as hereinafter defined) competitive with the
Business (as hereinafter defined). Nothing herein shall prohibit the Employee
or any Controlled Affiliate from being an owner of not more than 5% of the
equity or debt securities of any such person, so long as the Employee has no
active participation (other than exercising voting or consensual rights with
respect to such interest of up to 5%) in the business of such person. As used
herein: (i) "Business Activity," with respect to any person, means any direct
or indirect primary business activity of such person; and (ii) "Business"
means, as of the date of determination, any Business Activity of the Company or
any subsidiary of the Company. Employee hereby acknowledges that he has
offered this agreement not to compete to the Company as a material inducement
to the Company to enter into the Merger.
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10. Assignment. Employee's rights and obligations under this
Agreement shall not be assignable by Employee. The Company's rights and
obligations under this Agreement shall be assignable by the Company provided
that, in the event of an assignment by the Company other than pursuant to a
change of control of the Company or the sale by the Company of all or a
substantial portion of its assets, the Company provides Employee with prior
written notice of such assignment.
11. Notices. Any notice required or permitted under this
Agreement shall be given in writing and shall be deemed to have been
effectively made or given if personally delivered, or if sent by facsimile, or
mailed or sent via overnight express service to the other party at its address
set forth below in this Section 11, or at such other address as such party may
designate by written notice to the other party hereto. Any effective notice
hereunder shall be deemed given on the date personally delivered or on the date
sent by facsimile or deposited in the United States mail (sent by certified
mail, return receipt requested), as the case may be, at the following
addresses:
(i) If to the Company:
Platinum Software Corporation
195 Technology Drive
Irvine, California 92618-2402
Attention: Mr. Perry Tarnofsky, Esq.
(ii) If to Employee:
Employee
FocusSoft
_____________
_____________
Telephone No.: ______________
Facsimile No.: _____________
12. Arbitration. The parties hereto agree that any dispute or
controversy arising out of, relating to, or in connection with this Agreement,
or the interpretation, validity, construction, performance, breach, or
termination thereof, shall be finally settled by binding arbitration to be held
in Orange County, California under the Employment Dispute Resolution Rules of
the American Arbitration Association as then in effect (the "Rules"). The
arbitrator(s) may grant injunctions or other relief in such dispute or
controversy. The decision of the arbitrator(s) shall be
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<PAGE> 92
final, conclusive and binding on the parties to the arbitration, and judgment
may be entered on the decision of the arbitrator(s) in any court having
jurisdiction.
The arbitrator(s) shall apply the laws of the State of California to
the merits of any dispute or claim, without reference to rules of conflicts of
law, and the arbitration proceedings shall be governed by federal arbitration
law and by the Rules, without reference to state arbitration law.
The parties shall each pay one-half of the costs and expenses of such
arbitration, and each party shall pay its own counsel fees and expenses.
EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION 12, WHICH
DISCUSSES ARBITRATION. EMPLOYEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EMPLOYEE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN
CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT
THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A JURY
TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO EMPLOYEE'S
EMPLOYMENT RELATIONSHIP WITH THE COMPANY.
13. Withholding. The Company shall be entitled to withhold, or
cause to be withheld, from payment any amount of withholding taxes required by
law with respect to payments made to Employee in connection with his employment
hereunder.
14. Severability. If any term or provision of this Agreement
shall to any extent be declared illegal or unenforceable by arbitrator(s) or by
a duly authorized court of competent jurisdiction, then the remainder of this
Agreement or the application of such term or provision in circumstances other
than those as to which it is so declared illegal or unenforceable, shall not be
affected thereby, each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law and the illegal or
unenforceable term or provision shall be deemed replaced by a term or provision
that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
15. Proprietary Information Agreement. In conjunction with the
execution and effectiveness of this Agreement, Employee agrees to
simultaneously execute the Company's standard form of proprietary information
and invention assignment agreement (the "Proprietary Information Agreement").
16. Entire Agreement; Termination. This Agreement and the
agreements referenced herein represent the entire agreement of the parties with
respect to the matters set forth herein, and to the extent inconsistent with
other prior contracts, arrangements or understandings between the parties,
supersedes all such previous contracts, arrangements or understandings between
the Company and Employee. The Agreement may be amended at any time only by
mutual written
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<PAGE> 93
agreement signed by the parties hereto. In addition, by execution hereof,
Employee hereby agrees to the cancellation of any and all existing employment,
compensation or similar agreements (other than arrangements specifically
provided for as a continuing obligations of the Company or FocusSoft in the
Section 5.18 of the Merger Agreement) he may have with FocusSoft or by which
FocusSoft may be bound, including, but not limited to that certain employment
agreement dated November 14, 1993.
17. Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of Kentucky
without reference to rules relating to conflict of law (other than any such
rules directing application of Kentucky law).
18. Headings. The headings of sections herein are included solely
for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
19. Counterparts. This Agreement may be executed by either of the
parties hereto in counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
EMPLOYEE __________________________________
Name: Michael Zimmerman
PLATINUM SOFTWARE CORPORATION
__________________________________
Name: ___________________________
Title: _________________________
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<PAGE> 94
EXHIBIT G
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is made and entered into as
of November __, 1997 (the "Effective Date") by and among Platinum Software
Corporation, a Delaware corporation ("Parent"), the parties listed on Exhibit A
attached hereto (collectively, the "Shareholders," and each individually, a
"Shareholder"), John Lococo as the representative of the Shareholders (the
"Shareholders' Representative"), and Bankers Trust Company of California, N.A.
as escrow agent (the "Escrow Agent").
RECITALS
A. The Shareholders are shareholders of FocusSoft, Inc., a
Kentucky corporation ("FS"). FS and Parent have entered into an Agreement and
Plan of Reorganization dated as of November __, 1997 (the "Merger Agreement"),
pursuant to which FS Acquisition Corp., a Kentucky corporation and wholly owned
subsidiary of Parent, shall be merged with and into FS (the "Merger"), with FS
to be the surviving corporation of the Merger. In the Merger, the outstanding
shares of FS Common Stock ("FS Stock") will be converted into shares of Parent
Common Stock, $.001 par value ("Parent Common Stock") and FS will become a
wholly-owned subsidiary of Parent.
B. The Merger Agreement provides that ten percent (10%) of the
total number of shares of Parent Common Stock issued in respect of the
conversion of outstanding FS Stock and outstanding securities convertible or
exchangeable for FS Stock in the Merger will be withheld from the FS
Shareholders and will be placed in an escrow established in accordance with
this Agreement to secure the indemnification obligations of the Shareholders
set forth in Section 7 of the Merger Agreement.
C. The parties desire to enter into this Agreement to establish
the terms and conditions under which the escrow will be established and
maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. CERTAIN DEFINED TERMS.
1.1 TERMS DEFINED IN MERGER AGREEMENT. Capitalized terms
used in this Agreement and not otherwise defined herein shall have the same
meanings given to such terms in the Merger Agreement.
1.2 ESCROW. As used herein, the "Escrow" means the
escrow and the Escrow Account (as defined in Section 3.1 below) established
pursuant to this Agreement in which the Escrowed Property (as defined in
Section 1.4 below) will be held to secure indemnification
<PAGE> 95
obligations of the Shareholders in accordance with Section 7 of the Merger
Agreement.
1.3 ESCROW SHARES. As used herein, the "Escrow Shares"
shall mean those shares of common stock of Parent that comprise the Escrow
Amount, as such term is defined in the Merger Agreement.
1.4 ESCROWED PROPERTY. As used herein, the "Escrowed
Property" means, collectively: (a) the Escrow Amount, including Stock Powers
(as defined in Section 3.1 below) executed and delivered by the Shareholders
with respect to such Escrow Shares, and (b) all other property (not including
cash dividends but including Distributions and Secondary Distributions (as
defined in Section 3.2 below)) other than cash dividends issued or paid with
respect to any Escrow Shares that are deposited in the Escrow Account pursuant
to this Agreement, all of which items shall be deemed to be "Escrowed Property"
upon deposit in the Escrow Account.
2. AGREEMENT.
2.1 OBLIGATIONS OF SHAREHOLDERS. As a material
inducement to Parent to enter into the Merger Agreement and consummate the
transactions contemplated thereby, the Shareholders agree to be expressly
subject to the terms and conditions of this Agreement:
(a) to establish the Escrow pursuant to this
Agreement as partial security for the indemnification obligations of the
Shareholders pursuant to Section 7 of the Merger Agreement;
(b) that in the event Parent (hereinafter,
"Parent") incurs or suffers any Losses, then the Escrowed Property shall,
subject to the provisions of the Merger Agreement and this Agreement, be
transferred to Parent to compensate Parent for such Losses, with the portion of
the Escrowed Property to be so transferred to be pro rata among the
Shareholders according to each Shareholder's proportionate contribution of the
Escrowed Property (the "Pro Rata Share");
(c) to appoint the Shareholders' Representative
as the Shareholders' representative, attorney-in-fact and agent for purposes of
this Agreement to act for and on behalf of each Shareholder as provided herein,
and to the taking by the Shareholders' Representative of any and all actions
and the making of any decisions required or permitted to be taken or made by
the Shareholders' Representative on the Shareholders' behalf under this
Agreement; and
(d) to all of the other terms and conditions of
this Agreement.
2.2 NOTIFICATION OF ESCROW AGENT. The Parent and the
Shareholders hereby agree to provide the Escrow Agent with written notice of
the occurrence of the effective time of the Merger and the consummation of the
transactions contemplated by the Merger Agreement.
3. FORMATION OF ESCROW ACCOUNTS.
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3.1 DELIVERY AND DEPOSIT OF ESCROWED PROPERTY. Upon the
execution of this Agreement by the parties hereto:
(a) Parent will promptly deliver to the Escrow
Agent the Escrow Shares in the form of duly authorized and executed stock
certificates issued in the respective names of the Shareholders, representing
each Shareholder's Pro Rata Share of the Escrow Shares, and
(b) Each Shareholder will promptly deliver to the
Escrow Agent duly executed Stock Powers and Assignments Separate From
Certificate for such Shareholder's Escrow Shares in the form of Exhibit B
("Stock Powers"), signed in blank by such Shareholder.
The Escrow Agent agrees to accept delivery, as evidenced by a receipt, of the
above-mentioned Escrowed Property, which shall be clearly designated by Parent
as "Escrowed Property", and to hold the same in escrow in an escrow account
(the "Escrow Account"), subject to the terms and conditions of this Agreement.
3.2 DISTRIBUTIONS, CONVERSIONS, VOTING AND RIGHTS OF
OWNERSHIP. So long as the Escrow is in effect, dividends payable in stock or
securities of Parent or of any other person, firm or entity or any other
property, other than cash dividends which shall be distributed to Shareholders,
or other distributions of any kind (including without limitation shares of
Parent Common Stock issued in connection with a subdivision or split of Parent
Common Stock) that are paid, issued or made by Parent in respect of the Escrow
Shares that are issuable by Parent or a third party upon the conversion or
other exchange of Escrow Shares in a merger, consolidation or other transaction
affecting the Escrow Shares (the "Distributions"), or in respect of any such
Distributions ("Secondary Distributions"), will be immediately delivered to the
Escrow Agent and will be held in the Escrow on the same terms and conditions as
those applied hereunder to the Escrow Shares and the Shareholders will promptly
sign and deliver to the Escrow Agent new Stock Powers or other applicable
instruments of transfer for such Distributions and/or Secondary Distributions
(duly executed in blank by the Shareholders), to be held in the Escrow as
Escrowed Property pursuant to this Agreement. Escrowed Property includes all
Distributions and Secondary Distributions on Escrowed Property (whether cash,
stock or otherwise). The Shareholders will have the right to exercise any and
all rights to vote the shares of Parent Common Stock deposited in the Escrow
Account (the "Escrow Shares") for their account so long as such Escrow Shares
are held in the Escrow and have not been released to Parent as provided herein
and Parent will take all steps necessary to allow the exercise of such rights.
While the stock certificates representing, and Stock Powers for, Escrow Shares
remain in the Escrow Agent's possession pursuant to this Agreement, the
Shareholders, will (subject to the provisions of Sections 3.3 and 3.4 below)
retain and be able to exercise all other incidents of ownership of the Escrow
Shares that are not inconsistent with the terms and conditions of this
Agreement. If reasonably requested to do so by Parent or the Escrow Agent,
each Shareholder shall promptly execute and deliver to the Escrow Agent (or to
Parent, as to Escrow Shares that are released to Parent as provided herein)
replacement Stock Powers for any Escrow Shares or other shares of stock or
securities that are or become Escrowed Property. If requested by Parent, due
to the failure of any Shareholder to promptly execute and deliver
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<PAGE> 97
replacement Stock Powers as herein provided, the Shareholders' Representative,
acting as attorney-in-fact for each Shareholder, shall promptly execute on
behalf of such Shareholder, and deliver to the Escrow Agent, replacement Stock
Powers for any Escrow Shares or other shares of stock or securities that are or
become Escrowed Property.
3.3 NO TRANSFER OR ENCUMBRANCE. Except to the extent
expressly permitted by the provisions of this Section 3.3, no Escrowed Property
or any beneficial interest therein may be sold, assigned, pledged, encumbered
or otherwise transferred (including without limitation by operation of law,
other than a conversion of shares in a merger or consolidation) by any
Shareholder or be taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of a Shareholder (other than such
Shareholder's obligations under this Agreement and the Merger Agreement) prior
to the delivery and release to the Shareholders of the Escrowed Property by the
Escrow Agent in accordance with the provisions of this Agreement, provided,
however, a Shareholder may transfer its share of the Escrowed Property
hereunder so long as such transfer is by gift or upon death or permanent
incapacity to his guardian, conservator, executor, administrator, trustees or
beneficiaries under his will, spouse, children, stepchildren, grandchildren,
parents, siblings or legal dependents, to a trust of which the beneficiary or
beneficiaries of the corpus and the income shall be such a person and all such
persons agree to be bound by the terms hereof or to partners of an Shareholder
that is a partnership, provided that all of such partners agree to be bound by
the terms hereof.
3.4 TREATMENT OF ESCROWED PROPERTY. The Escrowed
Property shall be held by the Escrow Agent as a trust fund and shall not be
subject to any lien, attachment, trustee process or any other judicial process
of any creditor of any party hereto.
4. ADMINISTRATION OF ESCROW ACCOUNT. The Escrow Agent shall
administer the Escrow Account as follows:
4.1 CLAIM NOTICE. If Parent asserts a claim for
indemnification pursuant to the terms of Section 7 of the Merger Agreement on
or prior to the Escrow Release Date (as such term is defined in the Merger
Agreement) and delivers a Claim Notice to the Shareholders' Representative in
accordance with Section 7 of the Merger Agreement, then Parent shall also
deliver a copy of such Claim Notice to the Escrow Agent.
4.2 RELEASE OF ESCROWED PROPERTY. If, with respect to
any given Claim Notice and the Losses specified therein, the Shareholders'
Representative either (i) makes no objection in accordance with the terms
(including the time limits) of Section 7.2 of the Merger Agreement or (ii)
agrees to indemnify Parent for all or any portion of the Losses set forth in
such Claim Notice (such portion, an "Agreed Amount"), then the Escrow Agent
shall promptly thereafter deliver to Parent from the Escrow Account Escrowed
Property having a value (computed in accordance with Section 4.3 below) equal
to the Agreed Amount (or such lesser amount as is then held in the Escrow
Account).
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4.3 VALUE OF ESCROWED PROPERTY. For purposes of
determining the amount of Escrowed Property to be delivered out of the Escrow
to Parent as compensation for Losses and determining the value of any Escrowed
Property for any other purpose hereunder, shares of Parent Common Stock will be
deemed to have a value per share as computed in accordance with the closing
price of the shares as traded on National Market System of the National
Association of Securities Dealers Automated Quotation system on the date on
which the Escrow Agent receives the applicable Claim Notice or other
appropriate request for a determination of value of the Escrowed Property.
5. ARBITRATION OF CONTESTED RELEASES.
5.1 ARBITRATION OF DISPUTES OVER ESCROW RELEASE. If the
Shareholders' Representative contests the release of Escrowed Property with
respect to all or any portion of Losses set forth in a Claim Notice, then such
dispute shall be settled in accordance with the arbitration procedures set
forth in Section 7.2 of the Merger Agreement.
5.2 ACTIONS OF ESCROW AGENT PENDING ARBITRATION. In the
event that any or all Losses specified in a Claim Notice are contested by the
Shareholders' Representative (the "Contested Amount"), the Escrow Agent shall
continue to hold in the Escrow Account Escrowed Property having a value
(computed in accordance with Section 4.3 of this Agreement) sufficient to cover
the Contested Amount, notwithstanding the occurrence of the Escrow Release
Date, until: (a) delivery of a copy of a settlement agreement executed by
Parent and the Shareholders' Representative setting forth instructions to the
Escrow Agent as to the release of such Escrowed Property that shall be made
with respect to the Contested Amount; (b) delivery of a copy of the final
decision of the arbitrator setting forth instructions to the Escrow Agent as to
the release of Escrowed Property that shall be made with respect to the
Contested Amount; or (c) receipt of a court order or judgment directing Escrow
Agent to act with respect to the distribution of any Escrowed Property. The
Escrow Agent shall thereupon release Escrowed Property from the Escrow Account
in accordance with such settlement agreement, arbitrator's instructions, court
order or judgment, as applicable. The Escrowed Property released by the Escrow
Agent to Parent from the Escrow Account shall be in such proportions of Escrow
Shares and/or other Escrowed Property, as may be requested by the Parent
(subject to the availability of such type(s) of Escrowed Property at such
time).
5.3 NO RESPONSIBILITY OF ESCROW AGENT TO RESOLVE DISPUTE.
If any controversy arises involving any party to this Agreement (other than the
Escrow Agent) concerning the subject matter of this Agreement, including a
Contested Amount, the Escrow Agent will not be required to determine the
controversy or to take any action until such dispute has been resolved.
5.4 RIGHT TO COUNSEL. Parent (on behalf of itself and
any Indemnified Person(s)) and the Shareholders' Representative shall each have
the right to employ its or his own legal counsel to represent such person in
any disputes arising under this Agreement.
5.5 EXCLUSIVE REMEDY. Except to the extent provided in
Section 7 of the Merger Agreement, and except as specifically otherwise
provided in this Agreement, arbitration in
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accordance with this Section 7 of the Merger Agreement will be the sole and
exclusive remedy of the parties for any dispute arising over the release of
Escrowed Property from the Escrow hereunder.
6. PAYMENT OF REMAINING ESCROWED PROPERTY TO SHAREHOLDERS.
6.1 PAYMENT OF REMAINING ESCROWED PROPERTY ON ESCROW
RELEASE DATE. On the Escrow Release Date, the Escrow Agent shall deliver to
Parent and the Shareholders' Representative a statement of the value (computed
in accordance with Section 4.3 hereof) of the remaining balance of the Escrowed
Property then remaining in the Escrow Account, and the total amount of all
pending Claims made in connection with the Escrow Account and not previously
resolved and paid (the excess, if any, of such remaining balance in such Escrow
Account over the total amount of pending Claims against such Escrow Account
shall be referred to as the "Final Escrow Balance"). Parent and the
Shareholders' Representative each shall review the accuracy of the Final Escrow
Balance and notify the Escrow Agent and each other of any asserted discrepancy
within ten (10) business days of receipt of the foregoing statement. If the
Escrow Agent has not been notified of any discrepancy by Parent or the
Shareholders' Representative within the ten (10) business day period specified
in the preceding sentence, then within twenty (20) business days after receipt
by Parent and the Shareholders' Representative of such statement, the Escrow
Agent shall deliver to each of the Shareholders an amount of the Escrowed
Property representing such Shareholder's Pro Rata Share of the Final Escrow
Balance, free and clear of the Escrow created by this Agreement. In the event
that the Escrow Agent is properly informed of a discrepancy in the statement of
the Final Escrow Balance, then the Escrow Agent shall not deliver to the
Shareholders any Escrowed Property until Parent and the Shareholders'
Representative shall have agreed in writing as to the Final Escrow Balance.
After the last Claim has been resolved pursuant to this Agreement and the
Merger Agreement and all Escrowed Property deliverable to Parent upon the
resolution of all such Claims has been delivered to Parent, the remaining
balance, if any, of the Escrowed Property shall be delivered by the Escrow
Agent to each Shareholder pro rata, based on the Shareholder's Pro Rata Share.
6.2 DISTRIBUTION OF THE ESCROWED PROPERTY. All
distributions of Escrowed Property to the Shareholders, to be made by the
Escrow Agent under this Section 6 shall be made so that each Shareholder
receives his or her Pro Rata Share of the Escrowed Property held in the Escrow
immediately before such distribution.
6.3 DELIVERY METHODS. Delivery of Escrowed Property by
the Escrow Agent shall be by registered mail or by nationally recognized
overnight courier. The Escrow Agent shall not be responsible for obtaining
insurance in connection with such delivery.
6.4 POWER TO TRANSFER ESCROW SHARES AND DISTRIBUTIONS.
The Escrow Agent is hereby granted the power to effect any transfer of Escrowed
Property permitted or required by this Agreement in accordance with its terms.
7. FEES AND EXPENSES OF ESCROW AGENT AND SHAREHOLDERS'
REPRESENTATIVE.
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7.1 ESCROW AGENT. Parent shall pay the fees of the
Escrow Agent for the services to be rendered by the Escrow Agent hereunder;
provided, however, that any extraordinary fees and expenses referred to in
Section 7.3 below, including, without limitation, any fees or expenses incurred
by the Escrow Agent in connection with a dispute over the distribution of
Escrowed Property will be paid 50% by Parent and 50% by the Shareholders.
7.2 SHAREHOLDERS' REPRESENTATIVE. The Shareholders'
Representative will not be entitled to receive any compensation from Parent in
connection with this Agreement; however, the Shareholders shall indemnify and
promptly reimburse the Shareholders' Representative for all reasonable expenses
actually incurred by the Shareholders' Representative in connection with the
performance of his duties hereunder (including, but not limited to, all losses,
costs and expenses which the Shareholders' Representative may incur as a result
of involvement in any legal proceedings arising from the performance of his
duties hereunder) pro rata according to each Shareholder's respective Pro Rata
Share. Parent shall not have any obligation to reimburse the Shareholders'
Representative for any expenses whatsoever.
7.3 ESCROW AGENT'S EXTRAORDINARY FEES. Parent and the
Shareholders' Representative hereby acknowledge that all fees and usual charges
for services of the Escrow Agent hereunder shall be considered compensation for
ordinary services as contemplated by this Agreement. In the event that the
Escrow Agent renders any service not provided for in this Agreement, or if the
parties hereto request a substantial modification of the terms of this
Agreement, or if any controversy arises and the Escrow Agent is made a party to
any litigation pertaining to this Agreement or its subject matter, then the
Escrow Agent shall be reasonably compensated for such extraordinary services
and reimbursed for all reasonable costs, attorney's fees and expenses incurred
by the Escrow Agent in rendering such extraordinary services, which costs, fees
and expenses shall be borne by Parent and the Shareholders as provided in
Section 7.1 above.
8. LIABILITY AND AUTHORITY OF SHAREHOLDERS' REPRESENTATIVE;
SUCCESSORS AND ASSIGNEES.
8.1 LIMITS ON LIABILITY. The Shareholders'
Representative shall incur no liability with respect to any action taken or
suffered by him in his capacity as Shareholders' Representative in reliance
upon any note, direction, instruction, consent, statement or other documents
believed by him to be genuinely and duly authorized, nor for other action or
inaction except his own willful misconduct or gross negligence. The
Shareholders' Representative may, in all questions arising under this Escrow
Agreement, rely on the advice of counsel, and for anything done, omitted or
suffered in good faith by the Shareholders' Representative based on such
advice, the Shareholders' Representative shall not be liable to anyone.
8.2 SUCCESSOR SHAREHOLDERS' REPRESENTATIVES. In the
event of the death or permanent disability of the Shareholders' Representative,
or the resignation of Shareholders' Representative as the representative of the
Shareholders hereunder, a successor Shareholders'
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Representative shall be elected in accordance with the terms of Section 7.4 of
the Merger Agreement.
9. LIMITATION OF ESCROW AGENT'S RESPONSIBILITY AND LIABILITY.
9.1 LIMITATION OF RESPONSIBILITY. The Escrow Agent's
duties are limited to those set forth in this Agreement and the Merger
Agreement, and the Escrow Agent, acting as such under this Agreement, is not
charged with knowledge of or any duties or responsibilities under any other
document or agreement. The Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either directly or
by or through its agents or attorneys. Nothing in this Escrow Agreement will
be deemed to impose upon the Escrow Agent any duty to qualify to do business or
to act as a fiduciary or otherwise in any jurisdiction. The Escrow Agent will
not be responsible for, and will not be under a duty to examine into or pass
upon, the validity, binding effect, execution or sufficiency of this Escrow
Agreement or of any agreement mandatory or supplemental hereto.
9.2 LIMITATION OF LIABILITY. The Escrow Agent will incur
no liability with respect to any action taken, not taken or suffered by it in
reliance upon any notice, direction, instruction, consent, statement or other
document believed by it to be genuine and duly authorized, nor for any other
action or inaction, except its own willful misconduct or gross negligence. In
all questions arising under this Agreement, the Escrow Agent may rely on the
advice of counsel, and for anything done, omitted or suffered in good faith by
the Escrow Agent based on such advice, the Escrow Agent will not be liable to
anyone. The Escrow Agent will not be required to take any action hereunder
involving any expense unless the payment of such expense is made or provided
for in a manner satisfactory to it. The Escrow Agent will not be liable for
any action taken or omitted to be taken by it in good faith unless a court of
competent jurisdiction determines that the Escrow Agent's willful misconduct or
gross negligence was the cause of any loss to Parent, the Shareholders'
Representative, any Shareholder. The Escrow Agent makes no representation or
warranty with respect to, and is not responsible for the validity of, the
Escrowed Property. The Escrow Agent is not responsible for the receipt of any
dividend or other distribution on behalf of any Shareholder or for the voting
of or exercise of any other rights with respect to the Escrowed Property. The
Escrow Agent will have no duty to solicit the delivery of any Escrowed
Property. The Escrow Agent will have no obligation with respect to the
Escrowed Property other than either to withhold the release of Escrowed
Property to the Shareholders or to release Escrowed Property to Parent, as the
case may be, to the extent expressly provided in this Agreement. The Escrow
Agent will have no obligations with respect to the investment of any cash that
becomes Escrowed Property except as expressly provided in Section 3.
9.3 INDEMNITY. Parent and each of the Shareholders (each
an "Indemnifying Party" and together the "Indemnifying Parties"), each hereby
jointly and severally covenants and agrees to reimburse, indemnify and hold
harmless the Escrow Agent and its employees and agents from and against any
loss, damage or liability suffered, incurred by or asserted against the Escrow
Agent (including amounts paid in settlement of any action, suit, proceeding, or
claim brought or
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threatened to be brought and including reasonable expenses of legal counsel)
arising out of, in connection with or based upon any act or omission by the
Escrow Agent relating in any way to this Agreement or the Escrow Agent's
services hereunder. This indemnity will not apply to any such loss, damage or
liability arising from the gross negligence or willful misconduct on the Escrow
Agent's part. Anything in this Agreement to the contrary notwithstanding, in
no event will the Escrow Agent be liable for special, indirect or consequential
damage or loss of any kind whatsoever (including but not limited to lost
profits), even if the Escrow Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action. The indemnification
provided in this Section 9.3 shall survive the termination of this Agreement or
the resignation or removal of the Escrow Agent hereunder.
9.4 PARTICIPATION IN DEFENSE OF THE ESCROW AGENT. Each
Indemnifying Party may participate at its own expense in the defense of any
claim or action that may be asserted against the Escrow Agent, and if the
Indemnifying Parties so elect, the Indemnifying Parties may assume the defense
of such claim or action; provided, however, that if there exists a conflict of
interest that would make it inappropriate for the same counsel to represent
both the Escrow Agent and the Indemnifying Parties, the Escrow Agent's
retention of separate counsel will be reimbursable as provided in Section 9.3.
The Escrow Agent's right to indemnification hereunder will survive the Escrow
Agent's resignation or removal as escrow agent hereunder and will survive the
termination of this Agreement by lapse of time or otherwise.
9.5 NOTICE OF CLAIMS AGAINST ESCROW AGENT. The Escrow
Agent will notify each Indemnifying Party by letter, or by telephone or
telecopy confirmed by letter sent U.S. first class mail, registered or
certified, of any receipt by the Escrow Agent of a written assertion of a claim
against the Escrow Agent related to this Agreement, or any action commenced
against the Escrow Agent, within ten (10) business days after the Escrow
Agent's receipt of written notice of such claim. However, the Escrow Agent's
failure to so notify each Indemnifying Party will not operate in any manner
whatsoever to relieve an Indemnifying Party from any liability that it may have
otherwise than on account of this Section 9. In the event the Escrow Agent
fails to so notify each Indemnifying Party and an Indemnifying Party is
prejudiced thereby, then such Indemnifying Party will not have liability to
Escrow Agent under this Section 9.
10. SUCCESSOR ESCROW AGENT. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, the Escrow Agent
may resign at any time and be discharged from its duties or obligations
hereunder by giving a written resignation to the parties to this Escrow
Agreement, specifying not less than thirty (30) days prior written notice of
the date when such registration, shall take effect; provided, however, that no
such resignation shall become effective until the appointment of a successor
Escrow Agent and acceptance of such appointment by such successor Escrow Agent.
Parent may appoint a successor Escrow Agent without the consent of the
Shareholders' Representative so long as such successor is a bank with assets of
at least Five Hundred Million Dollars ($500,000,000) which has no direct
depository or lending relationship with Parent and which is qualified to do
business in the State of California, and may appoint any other successor Escrow
Agent with the consent of the Shareholders' Representative, which shall not be
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<PAGE> 103
unreasonably withheld. If, within such notice period, Parent provides to the
Escrow Agent written instructions with respect to the appointment of a
successor Escrow Agent in accordance with this Section 10 and directions for
the transfer of any Escrowed Property then held by the Escrow Agent to such
successor, the Escrow Agent shall act in accordance with such instructions and
promptly transfer such Escrowed Property to such designated successor. If no
successor Escrow Agent is appointed within sixty (60) days of the date
specified for the Escrow Agent's resignation to take effect, the Escrow Agent
shall have the right to apply to a court of competent jurisdiction for such
appointment at the expense of Parent. Each successor Escrow Agent shall
execute and deliver an instrument accepting such appointment and shall, without
further acts, be vested in all the estates, properties, rights, powers and
duties of the Escrow Agent or any other predecessor Escrow Agent as if
originally named as Escrow Agent hereunder.
11. TERMINATION. This Agreement shall terminate upon the earlier
of (a) the Escrow Release Date, or (b) the release by the Escrow Agent of all
of the Escrowed Property in accordance with this Agreement.
12. NOTICES. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be deemed to have been
properly given or made on the date personally delivered or on the date mailed,
by first class registered or certified mail with postage prepaid, by private
nationally recognized courier service or by facsimile and confirmed, if
delivered, mailed, courier or facsimile to the respective parties hereto at the
following addresses:
If to the Escrow Agent:
Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irvine, California 92614
Attn: Joe Campbell
If to Parent or Merger Sub, to:
Platinum Software Corporation
195 Technology Drive
Irvine, California 92618-2402
Attention: Mr. Perry Tarnofsky, Esq.
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: Larry W. Sonsini, Esq.
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<PAGE> 104
If to Shareholders, to:
With a copy to:
Sturm, Paletti & Wilson
The Starks Building - Suite 1551
455 S. Fourth Avenue
Louisville, KY 40202
Attention: Howard S. Sturm
Any party hereto may designate a different address by
providing written notice of such new address to the other parties hereto.
13. MISCELLANEOUS.
13.1 GOVERNING LAW; ASSIGNS. This Agreement will be
governed by and construed in accordance with the internal laws of the State of
California without regard to conflict-of-law principles and will be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
13.2 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
13.3 ENTIRE AGREEMENT; SEVERABILITY. Except as otherwise
set forth in the Merger Agreement, this Agreement constitutes the entire
understanding and agreement of the parties with respect to the subject matter
of this Agreement and supersedes all prior agreements or understandings,
written or oral, between the parties with respect to the subject matter hereof.
If any provision of this Agreement is held to be illegal or unenforceable by a
tribunal of competent jurisdiction, then such provision shall not be voided,
but shall be deemed modified to the extent necessary to make such provision
lawful and enforceable, and the other provisions of this Agreement shall remain
in full force and effect.
13.4 WAIVERS. No waiver by any party hereto of any
condition or of any breach of
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<PAGE> 105
any provision of this Agreement will be effective unless in writing. No waiver
by any party of any such condition or breach, in any one instance, will be
deemed to be a further or continuing waiver of any such condition or breach or
a waiver of any other condition or breach of any other provision contained
herein.
13.5 AMENDMENT. This Agreement may be amended by the
written agreement of Parent, the Escrow Agent and the Shareholders'
Representative, provided that, if the Escrow Agent does not agree to an
amendment agreed upon by Parent and the Shareholders' Representative, the
Escrow Agent will resign (which resignation shall be effective immediately and,
in any event, prior to the effective date of the amendment) and Parent win
appoint a successor Escrow Agent accordance with Section 10 hereof. No such
amendment may treat any one Shareholder differently from the other Shareholders
unless consented to in writing by Shareholders having beneficial ownership in a
majority of the outstanding Escrowed Property, including the consent of any
Shareholder who is to be treated differently.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
PLATINUM SOFTWARE CORPORATION,
CORPORATION,
"Company"
By:_______________________________________
Its:______________________________________
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
"Escrow Agent"
By:_______________________________________
Its:______________________________________
SHAREHOLDERS' REPRESENTATIVE and SHAREHOLDER
By:_______________________________________
Its:______________________________________
SHAREHOLDERS
__________________________________________
__________________________________________
__________________________________________
[SIGNATURE PAGE TO ESCROW AGREEMENT]
<PAGE> 107
EXHIBIT A
LISTING OF SHAREHOLDERS/INDEMNITORS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
NAME FSI PLATINUM ESCROW
SHARES SHARES SHARES
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Shareholders:
- -----------------------------------------------------------------------------------
John Lococo
- -----------------------------------------------------------------------------------
Michael Zimmerman
- -----------------------------------------------------------------------------------
Joseph Brumleve
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
TOTALS
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE> 108
EXHIBIT B
STOCK POWER
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------
- -------------------------------------
(*___________________________*) shares of the Common Stock of PLATINUM
SOFTWARE CORPORATION standing in my name on the books of said Corporation,
represented by Certificate NO._____ herewith and do hereby irrevocably
constitute and appoint attorneys to transfer said stock on
the books of the within named Corporation with full power of substitution.
November __, 1997
THE SIGNATURES ON THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) ON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE.
THE SIGNATURE(S) OF THE ASSIGNORS MUST BE GUARANTEED HEREON.
<PAGE> 109
EXHIBIT H
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT entered into this _____ day of November 1997, by and
among Platinum Software Corporation, a Delaware corporation (the "COMPANY"),
and John Lococo, Michael Zimmerman and Joseph Brumleve (each a "SHAREHOLDER"
and together the "SHAREHOLDERS").
R E C I T A L S
A. The Shareholders are the shareholders of FocusSoft, Inc., a
Kentucky corporation ("FOCUSSOFT"), and as such have voted to permit a wholly
owned subsidiary of the Company to merge with and into FocusSoft thereby
causing FocusSoft to become a wholly owned subsidiary of the Company (the
"MERGER") and the Shareholders to become holders of the Common Stock of the
Company (the "SHARES"); and
B. The execution of this Agreement by the Company is a condition
to the obligation of FocusSoft to close the Agreement and Plan of
Reorganization between the Company, FocusSoft and the Shareholders (the
"AGREEMENT OF MERGER").
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the Shareholders and the Company agree as follows:
1. Definitions
As used herein:
1.1 The term "SECURITIES ACT" means the Securities Act of
1933, as amended.
1.2 The term "EXCHANGE ACT" means the Securities Exchange
Act of 1934, as amended.
1.3 The terms "REGISTER," "REGISTERED," and
"REGISTRATION" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.
1.4 The term "REGISTRABLE SHARES" means all shares of
Common Stock of the Company acquired by a Shareholder as consideration in the
Merger. A Share shall cease to be a Registrable Share at such time as when the
Holder is entitled to sell all of his Shares in any three month period pursuant
to Rule 144 under the Securities Act.
1.5 The term "HOLDER" means any holder of Registrable
Shares.
1.6 The term "SEC" refers to the Securities Exchange
Commission.
<PAGE> 110
2. Registration Rights
2.1 Required Registration. The Company shall use
reasonable best efforts to register the Registrable Shares as listed below;
provided, however, that the Shareholders shall each have provided all such
information and materials relating to such Shareholder and taken all such
action as may be reasonably requested by the Company in order for the Company:
(i) to comply with all applicable SEC requirements; and (ii) to obtain
acceleration of the effective date of a registration statement filed pursuant
to this Section 2.1, such provision and action to be conditions precedent to
the obligations of the Company pursuant to this Agreement.
(a) On or before February 15, 1998, the Company
shall prepare and file a registration statement to be held open as a shelf
registration on Form S-3 (or any successor form which may be adopted by the
SEC) with respect to the Registrable Shares (the "S-3 Registration Statement")
and will use reasonable best efforts to cause such registration statement to
become effective thereafter and remain effective until the earlier of (i) one
year from the date such registration statement was filed with the SEC, or (ii)
the date upon which all of the Registrable Shares so registered are sold.
Notwithstanding anything contained in this Section
2.1 to the contrary, (a) if the Company furnishes to the Holders a certificate
signed by the President of the Company stating that, in the good faith judgment
of the Board of Directors of the Company, such registration would be
detrimental to the Company and that it is in the best interests of the Company
to defer the filing of the S-3 Registration Statement, then the Company shall
have the right to defer the filing of the S-3 Registration Statement for a
period of not more than ninety (90) days; provided, however, that the Company
may not exercise such right more than once in any twelve-month period; (b) the
Shareholders agree that, upon receipt of any notice from the Company of the
occurrence of an event during the period that the S-3 Registration Statement is
required to be effective, which, in the reasonable judgment of the Company,
results in such registration statement or the related prospectus containing any
untrue statement of a material fact or omitting to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, each Shareholder will forthwith discontinue disposition of the
Registrable Shares until such Shareholder's receipt of copies of supplemented
or amended prospectuses prepared by the Company, and, if so directed by the
Company, the Shareholders will deliver to the Company all copies in their
possession of the prospectus covering such Registrable Shares current at the
time of receipt of such notice; and (c) each of the Holders agrees that it will
not sell or otherwise transfer any Registrable Shares until the date after the
Company has filed a report with the SEC which included financial statements
reporting combined results of the Company and FocusSoft for at least thirty
(30) days.
2.2 Indemnification of Holders of Registrable Shares. In
the event that the Company registers any of the Registrable Shares under the
Securities Act, the Company will indemnify and hold harmless each Holder and
each underwriter, if any, of the Registrable Shares so registered (including
any broker or dealer through whom such shares may be sold) and each person, if
any, who controls such Holder or such underwriter within the meaning of Section
15 of the Securities Act from and against any and all losses, claims, damages,
expenses or liabilities, joint or several, to which they or any of them become
subject under the Securities Act or under any other
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<PAGE> 111
statute or at common law or otherwise, and, except as hereinafter provided,
will reimburse each such Holder, each such underwriter and each such
controlling person, if any, for any legal or other expenses reasonably incurred
by them or any of them in connection with investigating or defending any
actions whether or not resulting in any liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the registration statement, in any preliminary or amended
preliminary prospectus or in the prospectus (or the registration statement or
prospectus as from time to time amended or supplemented by the Company) or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances in which they
are made, not misleading or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company and
relating to action or inaction required of the Company in connection with such
registration; provided such untrue statement or omission was not made in such
registration statement, preliminary or amended, preliminary prospectus or
prospectus in reliance upon and in conformity with information furnished in
writing to the Company in connection therewith by such Holder of Registrable
Shares, any such underwriter or any such controlling person expressly for use
therein; and provided further that a Holder, or any person who controls such
Holder within the meaning of Section 15 of the Securities Act, shall not be so
indemnified for any losses, claims, damages or liabilities which arise out of
or are based upon an untrue statement, alleged untrue statement, omission or
alleged omission contained in any preliminary prospectus which did not appear
in the final prospectus, as such final prospectus may be amended or
supplemented, if such Holder delivered a copy of the preliminary prospectus to
the person alleging such losses, claims, damages or liabilities and failed to
deliver a copy of the final prospectus (together with any applicable amendment
or supplement) to such person at or prior to the written confirmation of the
sale to such person. Promptly after receipt by any Holder of Registrable
Shares, any underwriter or any controlling person, of notice of the
commencement of any action in respect of which indemnity may be sought against
the Company, such Holder of Registrable Shares, or such underwriter or such
controlling person, as the case may be, will notify the Company in writing of
the commencement thereof, and, subject to the provisions hereinafter stated,
the Company shall assume the defense of such action (including the employment
of counsel, who shall be counsel reasonably satisfactory to such Holder of
Registrable Shares, such underwriter or such controlling person, as the case
may be), and the payment of expenses insofar as such action shall relate to any
alleged liability in respect of which indemnity may be sought against the
Company. Such Holder of Registrable Shares, any such underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action and to participate in the defense thereof but the fees and expenses of
such counsel shall not be at the expense of the Company unless the employment
of such counsel has been specifically authorized by the Company in its sole
discretion. The Company shall not be liable to indemnify any person for any
settlement of any such action effected without the Company's consent.
2.3 Indemnification of Company. In the event that the
Company registers any of the Registrable Shares under the Securities Act, each
Holder of the Registrable Shares so registered will indemnify and hold harmless
the Company, each of its directors, each of its officers who have signed the
registration statement, each underwriter, if any, of the Registrable Shares so
registered (including any broker or dealer through whom such of the shares may
be sold) and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act from and
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<PAGE> 112
against any and all losses, claims, damages, expenses or liabilities, joint or
several, to which they or any of them may become subject under the Securities
Act or under any other statute or at common law or otherwise, and, except as
hereinafter provided, will reimburse the Company and each such director,
officer, underwriter or controlling person for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any actions whether or not resulting in any liability, insofar as
such losses, claims, damages, expenses, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the registration statement, in any preliminary or amended
preliminary prospectus or in the prospectus (or the registration statement or
prospectus as from time to time amended or supplemented) or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; provided that any such statement or omission was made
in reliance upon and in conformity with information furnished in writing to the
Company in connection therewith by such Holder of Registrable Shares, expressly
for use therein; and provided further, that such Holder's obligations hereunder
shall be limited to an amount equal to the proceeds to such Holder of the
Registrable Shares sold in such registration. Promptly after receipt of notice
of the commencement of any action in respect of which indemnity may be sought
against such Holder of Registrable Shares, the Company will notify such Holder
of Registrable Shares in writing of the commencement thereof, and such Holder
of Registrable Shares may, subject to the provisions hereinafter stated, assume
the defense of such action (including the employment of counsel, who shall be
counsel satisfactory to the Company) and the payment of expenses insofar as
such action shall relate to the alleged liability in respect of which indemnity
may be sought against such Holder of Registrable Shares. The Company and each
such director, officer, underwriter or controlling person shall have the right
to employ separate counsel in any such action and to participate in the defense
thereof but the fees and expenses of such counsel shall not be at the expense
of such Holder of Registrable Shares unless employment of such counsel has been
specifically authorized by such Holder of Registrable Shares in his sole
discretion. Notwithstanding the two preceding sentences, if the action is one
in which the Company may be obligated to indemnify any Holder of Registrable
Shares pursuant to Section 2.2, the Company shall have the right to assume the
defense of such action, subject to the right of such Holders to participate
therein as permitted by Section 2.2. Such Holder of Registrable Shares shall
not be liable to indemnify any person for any settlement of any such action
effected without such Holder's consent. Such Holder shall not, except with the
approval of the Company, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the party being so indemnified of a release from
all liability in respect to such claim or litigation.
2.4 Further Obligations of the Company. Whenever the
Company is required under this Agreement to register Registrable Shares, it
agrees that it shall do the following:
(a) Furnish to each selling Holder such copies of
each preliminary and final prospectus and any other documents that such Holder
may reasonably request to facilitate the public offering of its Registrable
Shares;
(b) Use its best efforts to register or qualify
the Registrable Shares to be registered pursuant to this Section 2 under the
applicable securities or "blue sky" laws of such
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<PAGE> 113
jurisdictions as any selling Holder may reasonably request; provided, however,
that the Company shall not be obligated to qualify to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to the service of process in suits other than those arising out of
the offer or sale of the securities covered by the registration statement in
any jurisdiction where it is not then so subject;
(c) Furnish to each selling Holder a signed
counterpart of:
(i) an opinion of counsel for the
Company, dated the effective date of the registration statement, and
(ii) "comfort" letters signed by the
Company's independent public accountants who have examined and reported on the
Company's financial statements included in the registration statement, to the
extent permitted by the standards of the American Institute of Certified Public
Accountants, covering substantially the same matters with respect to the
registration statement (and the prospectus included therein) and (in the case
of the accountants "comfort" letters) with respect to events subsequent to the
date of the financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' "comfort" letters delivered to the
underwriters in underwritten public offerings of securities, but, with regard
to clauses (i) and (ii) of this paragraph 2.5(c), only if and to the extent
that the Company is required to deliver or cause the delivery of such opinion
and/or "comfort" letters to the underwriters in an underwritten public offering
of securities;
(d) Permit each selling Holder or his counsel or
other representatives to inspect and copy such corporate documents and records
as may reasonably be requested by them in connection with the offering;
(e) Furnish to each selling Holder, upon request,
a copy of all documents filed and all correspondence from or to the SEC in
connection with any such offering unless confidential treatment of such
information has been requested of the SEC; and
(f) In connection with any registration of
Registrable Shares pursuant to this Section 2, Holders shall use one counsel
for all selling shareholders in such offering, which counsel shall be selected
by agreement by the holders of a majority of Registrable Shares being
registered therein. In addition, Holders shall appoint as their
attorney-in-fact such person or entity acceptable to the Company to act as
attorney in-fact for all selling shareholders in connection with such offering.
2.5 Expenses. In the case of a registration under
Section 2.1 the Company shall bear all costs and expenses of each such
registration, including, but not limited to, printing, legal and accounting
expenses, SEC filing fees and "blue sky" fees and expenses; provided, however,
that the Company shall have no obligation to pay or otherwise bear (i) any
portion of the fees or disbursements of counsel for the selling Holders of
Registrable Shares in connection with the registration of their Registrable
Shares, (ii) any portion of the underwriter's commissions or discounts
attributable to the Registrable Shares being offered and sold by the Holders of
Registrable Shares, (iii) any transfer taxes, or (iv) any of such expenses if
the payment of such expenses by the
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<PAGE> 114
Company is prohibited by the laws, rules or regulations of a state in which
such offering is qualified and only to the extent so prohibited.
2.6 Transfer of Registration Rights. Except as expressly
provided in this Section 2.6 the registration rights of the Holders of
Registrable Shares under this Section 2 may not be transferred. A Holder may
transfer the registration rights hereunder to a transferee of Registrable
Shares so long as such transfer is by gift or upon death or permanent
incapacity to his guardian, conservator, executor, administrator, trustees or
beneficiaries under his will, spouse, children, stepchildren, grandchildren,
parents, siblings or legal dependents, to a trust of which the beneficiary or
beneficiaries of the corpus and the income shall be such a person and all such
persons agree to be bound by the terms hereof or to partners of a Holder which
is a partnership, provided that all of such partners agree to be bound by the
terms hereof.
2.7 Contribution. In the event the offer and sale of the
Registrable Shares is effected in a firm underwriting, the selling Holders
shall execute an underwriting agreement with respect to the registration of the
Registrable Shares providing for contribution by the parties thereto under
reasonable circumstances.
3. Amendment. Any modification, amendment, or waiver of this
Agreement or any provision hereof shall be in writing and executed by the
Company and the Holders of not less than a majority of the Registrable Shares
then outstanding.
4. Notices. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be deemed to have been
properly given or made on the date personally delivered or on the date mailed,
by first class registered or certified mail with postage prepaid, by private
nationally recognized courier service or by facsimile and confirmed, if
delivered, mailed, courier or facsimile to the respective parties hereto at the
following addresses for the persons listed below and to the addresses on
Exhibit A to the Holders:
If to the Company, to:
Platinum Software Corporation
195 Technology Drive
Irvine, CA 92618-2402
Attention: Mr. Perry Tarnofsky, Esq.
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Page Mailliard, Esq.
If to FocusSoft, to:
FocusSoft, Inc.
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<PAGE> 115
Attention: ______________________________
With a copy to:
Louisville, Kentucky _____________
Attention: Howard Sturm, Esq.
Any party hereto may designate a different address by providing
written notice of such new address to the other parties hereto.
5. Heirs, Successors and Assigns. Except as otherwise provided
herein, this Agreement shall inure to the benefit of and be binding upon the
heirs, successors and assigns of each of the parties.
6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
7. Severability. The provisions of this Agreement are severable.
The invalidity, in whole or in part, of any provision of this Agreement shall
not affect the validity or enforceability of any other of its provisions. If
one or more provisions hereof shall be declared invalid or unenforceable, the
remaining provisions shall remain in full force and effect and shall be
construed in the broadest possible manner to effectuate the purposes hereof.
The parties further agree to replace such invalid or unenforceable provisions
of this Agreement with valid and enforceable provisions which will achieve, to
the extent possible, the economic, business and other purposes of the void or
unenforceable provisions.
8. Entire Agreement. This Agreement is intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect to the subject matter contained herein.
9. Attorneys' Fees. In any action at law or in equity to enforce
any of the provisions or rights under this Agreement, the unsuccessful party to
such litigation, as determined by the court in a final judgment or decree,
shall pay the successful party all costs, expenses and reasonable attorneys'
fees incurred by the successful party (including without limitation, costs,
expenses and fees on any appeal).
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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<PAGE> 116
IN WITNESS WHEREOF, the undersigned holders of securities and the
Company have executed this Agreement on the day and year first above written.
PLATINUM SOFTWARE CORPORATION
By: ________________________________________
Its: _______________________________________
SHAREHOLDERS
____________________________________________
John Lococo
____________________________________________
Michael Zimmerman
____________________________________________
Joseph Brumleve
IRREVOCABLE TRUST F/B/O ASHLEY CLAIRE LOCOCO
By:_________________________________________
Name:_______________________________________
Title:______________________________________
IRREVOCABLE TRUST F/B/O JOSHUA VINCENT LOCOCO
By:_________________________________________
Name:_______________________________________
Title:______________________________________
[Signature Page to Registration Rights Agreement]
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<PAGE> 117
IRREVOCABLE TRUST F/B/O AMY LOCOCO O'DANIEL
By:_________________________________________
Name:_______________________________________
Title:______________________________________
[Signature Page to Registration Rights Agreement]
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<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Platinum Software Contacts:
Knox Richardson Jennifer J. Bourgoin
Phase Two Strategies Platinum Software Corporation
415/772-8450 888/450-4520
[email protected] [email protected]
FocusSoft Contacts:
Matthew Scherzinger Celia Fleishaker
Ruder-Finn, Inc. FocusSoft, Inc.
312/644-8600 502/327-2800
Platinum Software Corporation
To Acquire FocusSoft, Inc.
Momentum Continues as Platinum Software Delivers on its Midmarket ERP
Strategy with the Acquisition of Manufacturing/Distribution Software
IRVINE, Calif., (Nov. 4, 1997) - Platinum(R) Software Corporation (NASDAQ:
PSQL), a leading provider of midmarket, high-performance client/server
financial accounting and business applications, announced today at Perspectives
'97, Platinum's annual user conference, that it has entered into a definitive
agreement to acquire privately held FocusSoft, Inc., of Louisville, Kentucky.
FocusSoft is a leading provider of midmarket manufacturing and distribution
software solutions. This acquisition demonstrates Platinum Software's continued
progress toward delivering on its corporate strategy to offer integrated
business applications to midmarket customers.
The acquisition is structured as a merger and is being accounted for
as a pooling of interests, based on an exchange of stock. It is anticipated
that the
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<PAGE> 2
Platinum Software To Acquire FocusSoft, Inc. - p. 2
transaction will close within seven days when Platinum Software will issue up
to 2.7 million shares of common stock for all the outstanding shares and stock
options of FocusSoft.
"The acquisition of FocusSoft represents a strategic expansion of
Platinum Software's product and customer base. FocusSoft has worked closely
with Platinum as an integrated third-party software application for three
years. This long-term relationship has delivered 15 joint customers using
Millenia, FocusSoft's flagship product, integrated with Platinum(R) SQL. Our
joint customers demonstrate the valuable benefits of the integrated solution,"
said George Klaus, chairman, president and CEO of Platinum Software
Corporation. "The Millenia manufacturing and distribution applications are key
components to Platinum Software's transformation from an accounting software
provider to a midmarket enterprise resource planning (ERP) provider."
"After years of partnering with Platinum Software and sharing a
successful third-party integration relationship, we are extremely excited about
the opportunities now that we're part of Platinum Software. Together we will
deliver powerful new integrated solutions to midmarket ERP customers," said
John Lococo, CEO for FocusSoft. "Through this acquisition we combine the
strength of Platinum Software's expansive sales channels and strong Platinum
branding with the FocusSoft product which we have been driving toward market
leadership."
CONSISTENT PLATFORM STRATEGY
FocusSoft Millenia is an integrated client/server application suite
designed for the manufacturing and distribution industry. The architecture
utilizes Microsoft(R) SQL Server(TM) and Windows NT(R).
"The consistency in platform strategy for the two companies - based on
the Microsoft(R) BackOffice(TM) platform - is key to our success as an
integrated midmarket ERP solution provider for the future," said Bill Pieser,
senior vice president of marketing and business development for Platinum
Software Corporation. "The entire FocusSoft customer base has implemented
Millenia on
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Platinum Software To Acquire FocusSoft, Inc. - p. 3
this BackOffice platform, which is also the platform of choice for Platinum
Software's product strategy."
As with Platinum's recent acquisition of Clientele Software, now the
Clientele Products Division of Platinum Software, the plan for this FocusSoft
acquisition includes the timely integration of FocusSoft's sales, marketing,
packaging and promotion with the other Platinum Software products.
ABOUT FOCUSSOFT, INC.
FocusSoft, Inc. is a leading developer and marketer of midmarket
manufacturing and distribution solutions. Its flagship product, Millenia,
delivers business solutions for mid-sized manufacturers and distributors on the
Microsoft BackOffice platform.
ABOUT PLATINUM SOFTWARE CORPORATION
Platinum Software Corporation develops and markets leading
client/server software products for corporations worldwide. The company's
products enable organizations to scale their technology investments to meet the
changing needs of their businesses. Founded in 1984, Platinum Software is based
in Irvine, California. More information about Platinum Software Corporation and
its products and services is available at the Platinum World Wide Web site
(http://www.platsoft.com).
# # #
Platinum and Clientele are registered trademarks of Platinum Software
Corporation. FocusSoft is a trademark of FocusSoft, Inc. Microsoft, Windows,
BackOffice and Windows NT are registered trademarks of Microsoft Corporation in
the United States and/or other countries. All other company and product names
mentioned in this document are trademarks of the respective companies with
which they are associated and are acknowledged.
<PAGE> 1
EXHIBIT 99.2
FOR IMMEDIATE RELEASE
Contacts:
Knox Richardson Jennifer J. Bourgoin
Phase Two Strategies Platinum Software Corporation
415/772-8450 888/450-4520
[email protected] [email protected]
Platinum Software Corporation
Completes FocusSoft Acquisition
Combined Product Lines Give Platinum Software Compelling Midmarket
ERP Solution for Microsoft Windows NT/SQL Server Platform
IRVINE, Calif., (Nov. 17, 1997) - Platinum(R) Software Corporation (NASDAQ:
PSQL), today announced the completion of its acquisition of FocusSoft Inc., of
Louisville, Kentucky. The closing took place on Friday, Nov. 14, 1997. Platinum
Software Corporation is a leading provider of midmarket business applications
including financial accounting and customer management software. FocusSoft is a
leading provider of midmarket manufacturing and distribution software
solutions. On Nov. 4, 1997, Platinum Software announced that it had entered
into a definitive agreement to acquire FocusSoft, demonstrating Platinum
Software's continued commitment and progress toward delivering on its corporate
strategy to offer integrated business applications to midmarket customers.
"Platinum Software has assembled a unique midmarket ERP (enterprise
resource planning) offering which is equally strong in accounting and
manufacturing functionality. Platinum(R) SQL, winner of the Microsoft Industry
Solutions Award for Best Functionality in Accounting, is a powerful combination
with FocusSoft's comprehensive Millenia manufacturing and distribution
applications," said Bill Pieser,
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Platinum Software Completes FocusSoft Acquisition - p. 2
senior vice president of marketing and business development. "With Platinum's
acquisition of Clientele in June, along with today's FocusSoft acquisition, our
midmarket ERP suite will deliver enhanced integration between customer
management, accounting and manufacturing/distribution."
POSITIVE CUSTOMER ENDORSEMENT
For more than three years, FocusSoft has worked closely with Platinum
Software as an integrated third-party software application. This ongoing
relationship has delivered 15 joint customers using FocusSoft's Millenia, an
integrated client/server application suite designed for manufacturing and
distribution industries, integrated with Platinum SQL, a leading client/server
financial application suite. Millenia and Platinum SQL both leverage the
technology of Microsoft(R) BackOffice(TM) -- Microsoft(R) SQL Server(TM) and
Windows NT(R).
Princeton Instruments is a leading developer of scientific measuring
equipment and high performance cameras used for scientific research in more
than 25 countries. To streamline their manufacturing and distribution
operations and more accurately track their finances, Princeton conducted an
extensive search for a comprehensive solution based on the latest technology --
choosing Microsoft SQL Server, Microsoft Windows NT, Platinum SQL and Millenia.
"Platinum Software Corporation and FocusSoft both have the technical
expertise and the extensive experience with Microsoft SQL Server that we were
looking for," said Tom Wisner, controller for Princeton Instruments. "Through
this acquisition, we anticipate a great combination of the strength of Platinum
Software's service and support with the flexible and scalable FocusSoft
product."
Harden Manufacturing Corporation, a manufacturer of bedroom and
occasional furniture, distributes their products to retailers worldwide. Harden
Manufacturing uses Platinum SQL and Millenia at all five manufacturing
factories.
"The links between the two software applications provide us an
integrated manufacturing and financial system with an easy-to-use interface,"
said Gene Matthews, vice president and chief financial officer for Harden
Manufacturing Corporation. "We are always proactive in getting the best for our
company, and
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<PAGE> 3
Platinum Software Completes FocusSoft Acquisition - p. 3
Platinum SQL and Millenia running on the Microsoft BackOffice platform render a
powerful, scalable solution that will continue to grow with our company."
ACQUISITION TRANSACTION DETAILS
Platinum Software will issue up to 2.7 million shares of common stock
for all the outstanding shares and stock options of FocusSoft. The acquisition
is structured as a merger and is being accounted for as a pooling of interests.
ABOUT PLATINUM SOFTWARE CORPORATION
Platinum Software Corporation develops and markets leading
client/server software products for corporations worldwide. The company's
products enable organizations to scale their technology investments to meet the
changing needs of their businesses. Founded in 1984, Platinum Software is based
in Irvine, California. More information about Platinum Software Corporation and
its products and services is available at the Platinum World Wide Web site
# # #
Platinum is a registered trademark of Platinum Software Corporation. FocusSoft
is a trademark of FocusSoft, a subsidiary of Platinum Software Corporation.
Microsoft, Windows, BackOffice and Windows NT are registered trademarks of
Microsoft Corporation in the United States and/or other countries. All other
company and product names mentioned in this document are trademarks of the
respective companies with which they are associated and are acknowledged.
Certain of the statements contained in this press release are forward-looking
statements which involve a number of risks and uncertainties that could cause
actual results to differ materially. Specifically, comments related to the
timing of integration between Platinum and FocusSoft products is subject to a
number of risks and uncertainties. Some factors impacting the accuracy of the
forward-looking statement include: unexpected delays in integrating Platinum
and FocusSoft products; rapid technological change; frequent new product
introductions and other factors which may be discussed from time to time in the
Company's SEC filings. For a more detailed description of the risk factors
associated with the Company, please refer to the Company's Form 10-Q for the
quarter ending Sept. 30, 1997.
