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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: July 31, 1996
(Date of earliest event reported)
Allegro New Media, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-14076 22-3270045
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification Number)
16 Passaic Avenue, Fairfield, New Jersey 07004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
including area code (201) 808-1992
(Former name or former address, if changed since last report)
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ITEM 2. Acquisition or Disposition of Assets
(a) As of July 31, 1996, the Registrant entered into and consummated
the transactions contemplated by an agreement and plan of reorganization to
acquire all of the outstanding capital stock of Serif Inc, a Delaware
corporation ("Serif Inc.") with its principal office located in Nashua, New
Hampshire, from the stockholders thereof, and an agreement and plan of
reorganization to acquire all of the outstanding capital stock of Serif (Europe)
Limited, an English limited company ("Serif Limited"; and together with Serif
Inc., collectively referred to herein as "Serif"), with its principal office
located in Nottingham, England, from the stockholders thereof. The Registrant
issued an aggregate of 1,000,000 shares of its authorized and unissued common
stock in connection with these agreements, one-third of which is being held in
escrow until May 1, 1998 in respect of possible claims for breaches of
representations and warranties.
(b) Serif's facilities were used by it in the development,
warehousing, marketing and sales of desktop publishing computer software
products. The Registrant will continue such operations under leases thereof,
except that all operations at the Nashua, New Hampshire facility other than
telephone sales are expected to be transferred to the Registrant's New Jersey
facility.
ITEM 5. Other Events
On July 23, 1996, Richard Bergman resigned as a director and as Vice
President of product development of the Registrant. Gwyn Jones, the former
controlling stockholder of Serif, is expected to be elected as the Registrant's
Executive Vice President of product development. On July 24, 1996, Joseph
Cirillo, President of H. Betti Industries, Inc. and Mark E. Leininger, the
Registrant's Vice President-Finance, were elected as directors of the Registrant
in classes II and III, respectively.
ITEM 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(a) Financial Statements of business acquired. Since it is
impractical at this time to provide the required audited financial statements of
Serif Inc. and Serif (Europe) Limited as of December 31, 1995 and 1994 and for
the years then ended and unaudited financial statements of such companies for
the six months ended June 30, 1996 and 1995, the Registrant will file such
required financial statements on Form 8-K/A as soon as practicable, but not
later than sixty days after the required filing date of this report.
(b) Pro forma financial information. Since it is impractical to
provide the required pro forma financial statements at this time, the Company
will file the required pro forma financial statements on Form 8-K/A as soon as
practicable, but not later than sixty days after the required filing date of
this report.
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(c) Exhibits.
4.3 Agreement and Plan of Reorganization dated as of July 31, 1996 among
the Registrant, Serif Inc., Gwyn Jones and all other stockholders of
Serif Inc.
4.4 Agreement and Plan of Reorganization dated as of July 31, 1996 among
the Registrant, Serif (Europe) Limited, Gwyn Jones and the other
stockholders of Serif (Europe) Limited.
10.30 Form of Lock-Up Agreements dated as of July 31, 1996 between
the Registrant and each of the stockholders of Serif Inc.
and Serif (Europe) Limited relating to
limitations on stock sales.
10.31 Registration Rights Agreement dated as of July 31, 1996 between the
Registrant and the stockholders of Serif Inc. and Serif (Europe)
Limited.
10.32 Settlement and General Release Agreement dated as of July 23, 1996
among the Registrant, Richard Bergman and Barry A. Cinnamon.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLEGRO NEW MEDIA, INC.
By: /s/ Barry A. Cinnamon
Barry A. Cinnamon
Chairman, President and Chief
Executive Officer
Date: August 12, 1996
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EXHIBIT INDEX
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4.3 Agreement and Plan of Reorganization dated as of July 31, 1996 among
the Registrant, Serif Inc., Gwyn Jones and all other stockholders of
Serif Inc.
4.4 Agreement and Plan of Reorganization dated as of July 31, 1996 among
the Registrant, Serif (Europe) Limited, Gwyn Jones and the other
stockholders of Serif (Europe) Limited.
10.30 Form of Lock-Up Agreements dated as of July 31, 1996 between
the Registrant and each of the stockholders of Serif Inc.
and Serif (Europe) Limited relating to
limitations on stock sales.
10.31 Registration Rights Agreement dated as of July 31, 1996 between the
Registrant and the stockholders of Serif Inc. and Serif (Europe)
Limited.
10.32 Settlement and General Release Agreement dated as of July 23, 1996
among the Registrant, Richard Bergman and Barry A. Cinnamon.
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EXHIBIT 4.3
AGREEMENT AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated as of this 31st day of July,
1996, by and among ALLEGRO NEW MEDIA, INC., a Delaware corporation ("Allegro"),
SERIF, INC., a Delaware corporation ("Serif, Inc.", and together with its
subsidiaries or affiliates, the "Company"), and the persons whose signatures
appear on the signature pages hereof (individually a "Stockholder" and
collectively the "Stockholders"), being the owners of all of the issued and
outstanding capital stock of the Company.
W I T N E S S E T H:
WHEREAS, Allegro and Stockholders have agreed to the exchange by the
Stockholders and Allegro of all of the outstanding capital stock of the Company
for an aggregate of 245,403 shares of Common Stock, par value $.001 per share
(the "Allegro Common Stock"), of Allegro (the "Exchange Stock") in a transaction
intended to qualify as a reorganization within the meaning of Section 368 (a)
(i) (B) of the Code, upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the covenants, warranties and
mutual agreements herein set forth and in reliance upon the representations and
warranties contained herein, the parties do hereby adopt this Plan of
Reorganization and agree as follows:
1. Exchange of Stock.
In reliance on the representations and warranties contained herein and
subject to all of the terms and conditions hereof, the Stockholders hereby agree
to transfer to Allegro at the Closing, all of the issued and outstanding Common
Stock, par value $.001 per share, of Serif, Inc. (the "Serif, Inc. Common Stock"
or the "Stock") in exchange for the Exchange Stock, as set forth in Section 2
below.
2. Exchange Rate.
In full consideration of the delivery of the Stock to Allegro, and
subject to the terms and conditions hereinafter set forth, Allegro hereby agrees
at the Closing to deliver in exchange for the Stock to the Stockholders'
Representative on behalf of the Stockholders, an aggregate of two hundred
forty-five thousand four hundred three (245,403) shares of Allegro Common Stock,
in the respective amounts set forth next to each Stockholder's name on Schedule
2 hereof. The Allegro Common Stock delivered hereunder to the Stockholders is
sometimes referred to hereinafter as the "Exchange Rate" or the "Exchange
Stock." The exchange of the Stock for the Exchange Stock as set forth herein is
intended to qualify as a tax-free reorganization under Section 368(a) (i) (B) of
the Code.
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3. The Closing.
3.1. Place and Date.
The closing of the transactions provided for in Section 1
shall take place at the offices of Blau, Kramer, Wactlar & Lieberman, P.C., (or
at such other place as the parties may agree upon in writing), on July 31, 1996
(or at such other time as the parties may agree in writing). The closing is
referred to in this agreement as the "Closing" and date of the closing is
referred to herein as the "Closing Date."
3.2. Reserved.
3.3. Documents to be Delivered by the Stockholders.
At the Closing:
(a) the Stockholders or the Company or their duly appointed
attorneys, as the case may be, shall execute and deliver to Allegro the
following:
(i) duly issued certificates for all of the Stock
duly endorsed in blank and with blank stock powers attached and with
all required stock transfer stamps attached and signatures guaranteed
by a commercial bank or trust company or a member firm of a national
securities exchange;
(ii) the Employment Agreements between the Company
and each of Gwyn Jones, James Bryce and Peter Beedham, in the forms
attached hereto as Exhibits A-1, A-2 and A-3, respectively (the
"Employment Agreements");
(iii) a Lock-Up Agreement between each Stockholder
and Allegro relating to limitations on sales of the Stock, in the form
attached hereto as Exhibit B (the "Lock-Up Agreements");
(iv) Intentionally Omitted;
(v) the Registration Rights Agreement between Allegro
and the Stockholders, relating to the registration of Allegro Common
Stock, in the form attached hereto as Exhibit D (the "Registration
Rights Agreement");
(vi) the Escrow Agreement between Allegro the
Stockholders and the holders of capital stock of Serif (Europe)
Limited, in the form attached hereto as Exhibit E (the "Escrow
Agreement"), providing for, among other things, the deposit with the
Escrow Agent (as defined in the Escrow Agreement) by the Stockholders
of one-third of the Exchange Stock to be received by the Stockholders
pursuant hereto (the "Escrow Stock");
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(vii) a copy of resolutions of the Stockholders and
Board of Directors of Serif, Inc. authorizing the execution, delivery
and performance of this Agreement by Serif, Inc., and a certificate of
its secretary or assistant secretary, dated the Closing Date, to the
effect that such resolutions were duly adopted and are in full force
and effect;
(viii) the opinions, certificates and other documents
or instruments specified in Section 7.1 of this Agreement; and
(b) each of the Stockholders and the Company shall each
execute such other documents and instruments and take such action as may be
necessary or reasonably requested by Allegro to fully vest in Allegro full title
to the Stock respectively sold by such Stockholder hereunder, and place Allegro
in possession and control of the Company and its assets.
3.4. Documents to be Delivered by Allegro.
At the Closing, Allegro shall execute and/or deliver to the
Stockholders the following:
(i) a copy of resolutions of the board of directors
of Allegro authorizing the execution, delivery and performance of this
Agreement by Allegro, and a certificate of its secretary or assistant
secretary, dated the Closing Date, to the effect that such resolutions
were duly adopted and are in full force and effect;
(ii) the Employment Agreements;
(iii) the Lock-Up Agreements;
(iv) the Registration Rights Agreement;
(v) the opinions, certificates and other documents
or instruments specified in Section 7.2 of this Agreement;
(vi) certificates representing Allegro Common Stock
comprising the Exchange Stock; and
(vii) the Escrow Agreement.
3.5. Form of Documents.
Unless specifically otherwise provided herein, all documents
to be delivered pursuant to this Section 3 by one party to the other party to
this Agreement shall be in form and substance reasonably satisfactory to such
other party and its counsel.
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4. Representations and Warranties of the Stockholders and the Company.
The Stockholders and the Company jointly and severally represent and
warrant (except with respect to the first sentence of Section 4.2 below, which
the Stockholders severally represent and warrant) to Allegro as of the date
hereof and as of the Closing Date as follows:
4.1. Organization and Authority.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware with all requisite
power and authority (corporate and governmental) to own, operate and lease its
properties and to carry on its business as now being conducted. Except as set
forth in Schedule 4.1, the Company is duly licensed or qualified to do business
and are in good standing in the states and countries set forth on Schedule 4.1
hereto, which, except as set forth in Schedule 4.1, are all the jurisdictions in
which it is required to be so qualified or licensed.
4.2. Stock Ownership.
The Stockholders own all of the shares of the issued and
outstanding capital stock of the Company, all of which shares are validly
issued, fully paid and non-assessable and are owned by the Stockholders free and
clear of any security interest, claim, lien, pledge, option, encumbrance or
restriction whatsoever. The Company does not have any subsidiaries or direct or
indirect interest or interests by stock ownership or otherwise in any firm,
association, corporation or business enterprise, except as set forth on Schedule
4.2.
4.3. Authorization of Agreements.
The Stockholders have the legal capacity and the Company has
the power and authority to execute, deliver and perform their respective
obligations under this Agreement. This Agreement has been duly executed and
delivered by the Stockholders and constitutes the legal, valid and binding
obligation of the Stockholders enforceable against them in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally now or hereafter in effect and subject to the application of equitable
principles and the availability of equitable remedies.
4.4. Capital Stock.
The authorized, issued and outstanding capital stock of all
classes of the Company are set forth on Schedule 4.4. All of the outstanding
capital stock of the Company has been duly authorized and is validly issued,
fully paid and nonassessable. All outstanding capital stock and any other
outstanding securities of the Company (including any employee stock options)
were issued in compliance with all applicable United Kingdom, federal and state
securities laws. The lawful, registered and beneficial owners of all shares of
the capital stock of the Company and the number of shares held by each
beneficial owner is as indicated on Schedule 4.4 hereto. The Stockholders have
and on the Closing Date will convey to Allegro good title to the Stock free and
clear of any security interest, claim, lien, pledge, option, encumbrance or
restriction whatsoever. Except as set forth on Schedule 4.4, there are no
rights,
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subscriptions, warrants, options, conversion rights, commitments or agreements
of any kind authorized or outstanding to purchase or otherwise acquire from the
Stockholders, the Company or any other person, any shares of capital stock, or
securities or obligations of any kind convertible into or exchangeable for any
shares of capital stock, or any other security of the Company or any other
equity interest in the Company. There is no proxy, or any agreement, arrangement
or understanding of any kind authorized or outstanding which restricts, limits
or otherwise affects the right to vote any share of Stock or any share of
capital stock issued by the Company.
4.5. No Conflicts.
Except as set forth on Schedule 4.5 hereto, the execution,
delivery and performance of this Agreement, any other agreement or document
contemplated herein or therein and the consummation of all of the transactions
contemplated hereby and thereby: (i) do not and will not require the consent,
waiver, approval, license, designation or authorization of, or declaration with,
any person or public authority; (ii) do not and will not with or without the
giving of notice or the passage of time or both, violate or conflict with or
result in a breach or termination of any provision of, or constitute a default
under, or accelerate or permit the acceleration of the performance required by
the terms of, or result in the creation of any mortgage, security interest,
claim, lien, charge or other encumbrance upon any of the assets of the Company
pursuant to, or otherwise give rise to any liability or obligation under, the
certificate of incorporation or other charter documents or bylaws of the
Company, any agreement, mortgage, deed of trust, indenture, license, permit or
any other agreement or instrument or any order, judgment, decree, statute,
regulation or any other restriction of any kind or description to which the
Stockholders or the Company is a party or by which the Stockholders, or the
Company or any of their assets may be bound; and (iii) will not terminate or
result in the termination of any such agreement or instrument, or in any way
affect or violate the terms and conditions of, or result in the cancellation,
modification, revocation or suspension of, any rights of the Company.
4.6. Financial Statements.
Attached hereto as Schedule 4.6 are the consolidated and
consolidating Financial Statements of the Company for the calendar years ended
December 31, 1995, 1994 and 1993.
(a) For the relevant periods, the Financial Statements: (1)
are complete and correct in all material respects; (2) present fairly the
consolidated financial position of the Company at such dates and the results of
operations and cash flows for the respective periods ended on such dates; and
(3) were prepared in accordance with United States generally accepted accounting
principles ("GAAP"), consistently applied during the periods, and are in
accordance with the books and records maintained by the Company, with no
differences between such Financial Statements and the financial records
maintained and accounting methods applied by the Company for tax purposes,
except as disclosed in the notes to the Financial Statements.
(b) As at December 31, 1995, of the Company had no liabilities,
commitments or obligations of any nature, whether absolute, accrued, contingent
or otherwise not shown and adequately provided for in the Financial Statements
as of such date or in the Schedules to this Agreement.
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4.7. Taxes.
(a) True and correct copies of the Company's federal, state,
local and foreign (including without limitation the United Kingdom and all
jurisdictions therein), income tax returns for the years ended December 31,
1995, 1994, and 1993 have been delivered to Allegro. All tax returns (including
information returns) required by any jurisdiction to have been filed by or with
respect to the Company have been timely filed, except for returns with respect
to which extensions have been granted, and each such return is true, correct and
complete.
(b) Except as set forth in Schedule 4.7, all liabilities of
the Company to any jurisdiction for taxes of every kind and nature, including
interest thereon and penalties with respect thereto, (collectively "Taxes")
relating to any period prior to the Closing Date have been timely paid by the
Company or are accrued and provided for in the Financial Statements for the
period ended December 31, 1995. Any liability for Taxes incurred by the Company
since December 31, 1995 was incurred in the ordinary course of business.
(c) The U.S. or U.K. consolidated (or separate, as the case
may be) federal income tax returns of the Company have not been audited by the
Internal Revenue Service or Inland Revenue within the past five years. Neither
the Internal Revenue Service, Inland Revenue nor any state, local or other
taxing authority has proposed any additional taxes, interest or penalties with
respect to the Company or any of their operations or business; there are no
pending or threatened tax claims or assessments; and there are no pending or
threatened tax examinations by any taxing authorities.
(d) The Company has not given any waivers of rights (which are
currently in effect) under applicable statutes of limitations with respect to
the federal income tax returns for any fiscal year. The Company has not
consented to the application of Section 341(f) of the Code or any similar United
Kingdom law.
(e) Since inception, the Company has been a "C" corporation,
as defined in Section 1361(a) of the Code.
4.8. No Adverse Changes.
Except as set forth on Schedule 4.8 hereto, since December 31,
1995: (i) the business of the Company has been conducted only in the ordinary
course; (ii) there has been no adverse change in the condition (financial or
otherwise), assets, liabilities, business, operations, affairs or prospects of
the Company, other than changes in the ordinary course of business none of which
singly and no combination of which in the aggregate has been material; and (iii)
there has been no damage, destruction or loss or other occurrence or
development, whether or not insured against, which either singly or in the
aggregate materially adversely affects, and the Stockholders have no knowledge
of any threatened occurrence or development which would materially adversely
affect, the condition (financial or otherwise), assets, liabilities, business,
operations, affairs or prospects of the Company.
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4.9. Conduct of Business.
Except as disclosed on Schedule 4.9 hereto, since December 31,
1995, the Company has not: (i) created or incurred any liability (absolute,
accrued, contingent or otherwise) except unsecured current liabilities incurred
in the ordinary course of business consistent with past practice for other than
money borrowed and disclosed on Schedule 4.9 hereto; (ii) mortgaged, pledged or
subjected to any lien or otherwise encumbered any of its assets, tangible or
intangible; (iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute, accrued, contingent or otherwise) other than
current liabilities shown on the Financial Statements as at December 31, 1995
and taxes and current liabilities incurred since December 31, 1995 in the
ordinary course of business for other than money borrowed or under contracts or
agreements entered into in the ordinary course of business and disclosed on
Schedule 4.9 hereto (other than as a result of any default or breach of, or
penalty under, any such contracts of agreements); (iv) waived, released or
compromised any claims or rights of substantial value, or experienced any labor
trouble (including without limitation any actual or threatened strike or
lock-out) or lost, or been threatened with the termination of, any key employees
or any substantial number of employees; (v) entered into any settlement,
compromise or consent with respect to any claim, proceeding or investigation;
(vi) made capital expenditures or capital additions or betterments; (vii) sold,
assigned, transferred, leased or otherwise disposed of any of its assets,
tangible or intangible, or canceled any debts or claims except, in each case,
for fair consideration in the ordinary course of business (it being understood
that the disposition of any asset, other than inventory consisting of finished
products, or cancellation of any debt or claim carried on the books at more than
$10,000 shall be deemed not to be a disposition or cancellation in the ordinary
course of business); (viii) declared or paid any dividends, or made any other
distribution on or in respect of, or directly or indirectly purchased, retired,
redeemed or otherwise acquired any shares of its capital stock, paid any notes
or open accounts or paid any amount or transferred any asset to any Stockholder,
any member of any Stockholders' family or any other holder of any capital stock
of the Company; (ix) made or become a party to, or become bound by, any contract
or commitment or renewed, extended, amended, modified or terminated any contract
or commitment which in anyone case involved an amount in excess of $10,000 (or
in the aggregate an amount in excess of $25,000) or a term in excess of thirty
days; (x) issued or sold any shares of its capital stock; (xi) paid or agreed to
pay, other than in the ordinary course of business, conditionally or otherwise,
any bonus, extra compensation, pension or severance pay to any of its officers
or employees, whether under any existing profit sharing, pension or other plan
or otherwise, or increased the rate or altered the form of compensation,
including without limitation salaries, fees, commission rates, bonuses, profit
sharing, incentive, pension, retirement or other similar payments, from that
being paid at December 31, 1995 to any of its stockholders, directors, officers
or employees; (xii) entered into any transaction not in the ordinary course of
business (except for transactions contemplated hereby); (xiii) made or announced
any change in the terms, including but not limited to price, of the sale of any
of its goods or services or made or announced any change in the form or manner
of distribution of any of its products or services; (xiv) changed any of its
accounting methods or principles used in recording transactions on its books or
records or in preparing the Financial Statements; or (xv) entered into any
contract or commitment to do any of the foregoing.
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4.10. Title to Assets.
The Company has valid title to all of its personal property
and valid leasehold interests in all real and personal property leased by it,
free and clear of all claims, liens, charges, mortgages, pledges, security
interests, restrictions and other encumbrances of any kind whatsoever except as
set forth in Schedule 4.10. To the knowledge of the Company or the Stockholders,
no instrument, easement, license or grant of record, applicable zoning or
building law, ordinance or administrative regulation or other impediment of any
kind prohibits or interferes with, limits or impairs, or would, if not permitted
by any prior nonconforming use, prohibit or interfere with or limit or impair,
the use, operation, maintenance of, or access to, or the value of, the real or
personal property owned or leased by the Company. All of the assets and
properties owned or leased by the Company are (i) sufficient and adequate to
carry on their business as presently conducted; (ii) are in good condition and
repair, normal wear and tear excepted, and are in a state of maintenance, repair
and operating condition required for the proper operation and use thereof in the
ordinary course of business; (iii) to the knowledge of the Company or the
Stockholders, comply with all material applicable federal, state or local laws,
ordinances, rules and regulations and with the terms and conditions of all
leases and other agreements affecting or relating to any such property; and (iv)
are adequate to provide the products and services of the Company in accordance
with the most current standards established by customers, clients and
governmental bodies.
4.11. Real Property.
The Company does not own any real property. Schedule 4.11 sets
forth a true and complete list of all leases of real property to which the
Company is a party. The Company enjoys quiet possession under all of its leases,
each of which is enforceable in accordance with its terms against the lessor
thereunder and is not in material default under the terms of any of its leases;
and no condition exists and no event has occurred which, with or without the
passage of time or the giving of notice or both, could constitute such a default
by the Company.
4.12. Personal Property.
Schedule 4.12 hereto sets forth a true and complete list of
all items of personal property having an original cost of more than $5,000,
owned or leased by the Company and the location of each such item. No shortage
or damage exists in (i) any raw materials, supplies, work in process or finished
goods owned by customers or suppliers of the Company and stored upon the
premises of the business or (ii) any other items of personal property owned by
another for which the Company is accountable to another, and any such items
referred to in clauses (i) or (ii) are described in Schedule 4.12 hereto.
4.13. Inventory.
Schedule 4.13 hereto sets forth a true and complete
description of all of the inventory of the Company as of December 31, 1995. The
items listed in Schedule 4.13 together with the assets listed in Schedules 4.11
and 4.12 constitute all of the material tangible assets used in the business of
the Company. The inventory included in Schedule 4.13 and all additions thereto
acquired since December 31, 1995 and now on hand are in good condition, of a
quantity and quality usable and saleable in the ordinary course of business and,
except as disclosed in Schedule 4.13, are adequate and appropriate for
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the business of the Company as now conducted. Obsolete, discontinued, returned,
damaged, overage or off-quality items do not constitute a substantial part of
such inventory and are carried on the Financial Statements for the period ending
December 31, 1995 at realizable market value. Finished goods in inventory
conform to specifications, including without limitation all applicable
governmental regulations, are free from defects and are marketable in their
current condition.
4.14. Accounts Receivable.
All accounts receivable shown on the Financial Statements for
the period ending December 31, 1995 less the bad debt reserves provided for in
such Financial Statements as such reserves may have thereafter been adjusted on
the books of the Company in the ordinary course of business to date and
consistent with the practices used in preparing the Financial Statements, and
except as set forth on Schedule 4.14 hereto, have been collected. All such
accounts receivable have been generated in the ordinary course of business and
reflect a bona fide obligation for the payment of goods or services provided by
the Company and are subject to no known counterclaims or setoffs.
4.15. Material Agreements; Other Contracts.
(a) Schedule 4.15 sets forth a complete list with regard to
the Company of (i) all bids, applications or proposals submitted by any of them
to provide materials or services to any Person and for which the award, approval
or selection is pending (ii) all contracts or agreements for the provision of
materials or services to which the Company is a party and which has not yet been
performed in full, in each case involving the payment or provision of goods or
services in an amount equal to or exceeding $2,000 (the items referred to in the
going clauses (i) and (ii) being herein collectively called the "Agreements").
All of the Agreements are fully performable by the Company in compliance with
their terms and consistent with the Company's expense budget therefore. No
grounds exist for the termination or cancellation of any Agreement by the other
party thereto. Schedule 4.15 sets forth for each Agreement: (i) the branch of
the Company responsible; (ii) the customer; (iii) the total contract amount;
(iv) revenue recognized to date; (v) remaining revenue to be earned; (vi)
approximated total projected expense and (vi) approximated projected
profitability, if any, or loss; all of which items are complete and correct. The
complete performance of each Agreement in accordance with its terms will not
result in any material variance from the revenue, expense or profitability
amounts set forth with respect thereto on Schedule 4.15.
(b) Except as disclosed in Schedule 4.15 hereto, the Company
is not a party to or bound by any oral or written contracts, obligations or
commitments, including without limitation any:
(i) contract, commitment or arrangement involving, in
any one case, $10,000 or more;
(ii) contract with a term of, or requiring
performance, more than six months from its date and involving more than $10,000
in the aggregate;
(iii) commitment, contract or undertaking which is
not terminable upon notice of 30 days or less without penalty, cost or liability
and involving more than $10,000 in the aggregate;
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(iv) lease or lease purchase agreement, mortgage,
conditional sale or title retention agreement, indenture, security agreement,
credit agreement, pledge or option with respect to any property, real or
personal (tangible or intangible), in any capacity;
(v) commitment, contract or undertaking for the
purchase or use of services, materials, supplies, inventory, machinery or
equipment and involving more than $10,000 in the aggregate;
(vi) commitment, contract or undertaking for the sale
or use of the Company's products and involving more than $10,000 in the
aggregate;
(vii) employment contract, undertaking, understanding
or arrangement;
(viii) contract or agreement with any labor union or
other collective bargaining group;
(ix) bonus, pension, savings, welfare, profit
sharing, stock option, retirement, commission, executive compensation,
hospitalization, insurance or similar plan providing for employee benefits or
any other arrangement providing for benefits for any former or current employees
or for the remuneration, direct or indirect, of the directors, officers or
employees of the Company;
(x) note, loan, credit or financing agreement or
other contract for money borrowed, and all related security agreements and
collateral documents, including any agreement for any commitment for future
loans, credit or financing;
(xi) guarantee;
(xii) contract or arrangement regarding any capital
expenditures;
(xiii) agency (sales or otherwise), distribution,
brokerage (including, without limitation, any brokerage or finder's agreement or
arrangement with respect to any of the transactions contemplated by this
Agreement) or advertising agreement;
(xiv) contract with investment bankers, accountants,
attorneys, consultants or other independent contractors;
(xv) shareholder agreement or contract with any
Stockholders (or family member thereof), director or officer of the Company or
any Affiliate of such persons;
(xvi) contract, commitment or arrangement which would
restrain the Company from engaging or competing in any business or to maintain
the confidentiality of any matter;
(xvii) contract, commitment or arrangement not made
in the ordinary course of business;
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(xviii) license, permit, franchise or royalty
agreement.
(c) The Stockholders have delivered to Allegro correct and
complete copies of all of the contracts, agreements and other documents listed
in Schedule 4.15 hereto and all amendments thereto and any waivers granted
thereunder (the "Scheduled Contracts"). Except as specifically set forth on
Schedule 4.15, the exchange of the Stock with Allegro and the consummation of
the other transactions contemplated by this Agreement are not a violation of or
grounds for the modification or cancellation of any of the Scheduled Contracts
or for the imposition of any penalty or security interests thereunder. Except as
set forth on Schedule 4.15 hereto, the Company enjoys good working relationships
under all Scheduled Contracts, and no unresolved disputes are pending or, to the
best of the Company's or the Stockholders' knowledge, threatened under or in
respect of any such Scheduled Contracts. The consideration to be received or
paid by the Company under all Scheduled Contracts have been determined in
accordance with its established policies. The Company has no outstanding power
of attorney other than routine power of attorney relating to representation
before governmental agencies or given in connection with qualification to do
business in another jurisdiction.
(d) Except as described in Schedule 4.15 hereto, all Scheduled
Contracts described in Schedule 4.15 are valid and effective in accordance with
their respective terms, and there is not, under any of such documents or
agreements or any obligation, or covenant or condition contained therein, any
existing default by the Company, or to the knowledge of the Company or the
Stockholders, by any other party, or any event which with notice, lapse of time,
or both, would constitute a default and which would have a material adverse
effect on the continued operation of the Company or its business.
4.16. Intellectual Property.
Schedule 4.16 hereto sets forth a true and complete list of
all of trademarks, service marks and trade names, and the federal, state and
foreign registrations and applications thereof, patents, patents pending and
patent applications and extensions and renewals thereof, copyrights and
copyright applications and renewals thereof, Trade Secrets and all other
industrial, intellectual property, and similar property rights, including
without limitation, all inventions, product designs or methods and know-how
used, employed or exploited by the Company (the "Intellectual Property"). Except
as set forth on Schedule 4.16, all the Intellectual Property is owned by the
Company free and clear of any and all licenses, liens, claims, security
interests, charges or other encumbrances or restrictions of any kind, and no
licenses for the use of any of such rights have been granted by the Company to
any third parties. Except as set forth on Schedule 4.16 hereto, all of such
rights are valid, enforceable and in good standing, and are sufficient and
appropriate for the conduct of business of the Company as currently conducted or
as contemplated in their plans for future activities. The sale of the Stock to
Allegro and the consummation of the other transactions contemplated hereby will
not adversely affect any rights in the Intellectual Property of the Company. The
operation of the business of the Company does not infringe in any way on or
conflict with any registered or unregistered patent, trademark, trade name,
copyright, Trade Secret, contract, license or other right, of any Person and the
Company licenses no such right from others except as set forth on Schedule 4.16.
Except as set forth on Schedule 4.16, no claim is pending or has been made
within the past five years, or, to the knowledge of the Company or the
Stockholders, is threatened, to the effect that any such infringement or
conflict has occurred. No other Intellectual Property other than those owned or
licensed by the Company are required by any of them for their business as
presently
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conducted. The Stockholders have no knowledge of any infringement by any third
parties upon any of the Intellectual Property. True, correct and complete copies
of all documentation describing or relating to the Intellectual Property have
been delivered by the Company to Allegro.
4.17. Insurance.
Schedule 4.17 hereto contains a complete and correct list of
all insurance policies maintained by the Company together with a schedule of
required premiums, premium payment dates an any prepaid premiums under each such
policy. The Stockholders have furnished to Allegro complete and correct copies
of all such policies together with all riders and amendments thereto. Such
policies are in full force and effect, and all premiums due thereon have been
paid. The Company has complied in all material respects with the provisions of
such policies. No notice has been received canceling or threatening to cancel or
refusing to renew any of such insurance. The rights of the insured under such
policies will not be terminated or adversely affected by the Closing or the
consummation of the other transactions contemplated hereby. To the knowledge of
the Company or the Stockholders, there is currently no basis for any insurance
claim by the Company, except as set forth in Schedule 4.17.
4.18. Customer and Supplier Relationships.
Attached as Schedule 4.18 is a complete and correct list of
all current customers of the Company whose purchases from the Company amounted
to more than $10,000 and showing such sales for the year ended December 31,
1995, and of all suppliers whose sales to the Company amounted to more than
$10,000 during such year showing the sales of each. With respect to any such
customer or supplier or group of related customers or suppliers listed on
Schedule 4.18, to the knowledge of the Company or the Stockholders, no such
customer, supplier or group of related customers or suppliers has terminated or
expects to terminate a material portion of its normal business with the Company.
Except as disclosed in Schedule 4.18 hereto, no Stockholders or director or
officer of the Company or any of their family members or Affiliates has any
direct or indirect interest, either by way of stock ownership or otherwise, in
any firm, corporation, association or business enterprise, which competes with,
is a supplier or customer of, or is a distributor or sales agent for, or is a
party to any contract with the Company.
4.19. Employees.
The Stockholders have furnished to Allegro a true and complete
list setting forth all of the employees and officers of the Company (listing
each such person individually by name) with a description of their job
designations, compensation, benefits (including severance pay and bonuses),
outstanding loans to officers or employees and all understandings not in the
ordinary course of business relating to terms and conditions of employment,
whether or not legally binding. Subject to the accuracy of declarations made by
employees, proper and accurate amounts have been withheld by the Company from
their employees for all periods in full compliance with tax withholding
provisions of applicable federal, state, local or foreign law. Proper and
accurate federal, state, local and foreign returns have been filed by the
Company for all periods for which returns were due with respect to employee
income tax withholding, social security and unemployment taxes, and the amounts
shown thereon to be due and payable have been paid.
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4.20. Labor Relations.
There has been no material violation of any federal, state or
local statutes, laws, ordinances, rules, regulations, orders or directives with
respect to the employment of individuals by, or the employment practices or work
conditions of, the Company, or their respective terms and conditions of
employment, wages and hours. The Company is not engaged in any unfair labor
practice or other unlawful employment practice and there are no unfair labor
practice charges or other employee related complaints against the Company
pending or threatened before the National Labor Relations Board, the Equal
Employment Opportunity Commission, the Occupational Safety and Health Review
Commission, the Department of Labor, or any other federal, state, local, foreign
or other governmental authority by or concerning the employees of the Company.
No representation question, grievance or arbitration proceedings arising out of
collective bargaining agreements covering employees of the Company exists or is
pending or threatened respecting the employees of the Company. There is no work
stoppage, strike, slowdown, lockout, picketing or other labor problem involving
persons employed by the Company pending or threatened. The Company has good
labor relations with its employees. There are no labor union contracts or
collective bargaining agreements relating to the business of the Company.
4.21. Benefit Plans.
(a) Schedule 4.21 hereto sets forth a true and complete list
of each "employee welfare benefit plan" (as defined in Section 3(1) of ERISA)
maintained by the Company or an Affiliate or to which the Company or an
Affiliate contributes or is required to contribute, including any multiemployer
employee welfare benefit plan, on behalf of officers and employees of the
Company or an Affiliate (such multiemployer and other employee welfare benefit
plans being hereinafter collectively referred to as the "Welfare Benefit
Plans"). With respect to each Welfare Benefit Plan, all contributions or
premiums due by, or attributable to the period ending on, the Closing Date have
been paid.
(b) Schedule 4.21 hereto sets forth a true and complete list
of each "employee pension benefit plan" (as defined in Section 3(2) of ERISA)
maintained by the Company or an Affiliate or to which the Company or an
Affiliate contributes or is required to contribute, including any multiemployer
employee pension benefit plan, on behalf of officers and employees of the
Company or an Affiliate (such multiemployer and other employee pension benefit
plans being hereinafter collectively referred to as the "Pension Benefit
Plans"). No Pension Benefit Plan is a "defined benefit plan" (as defined in
Section 3(35) of ERISA). With respect to each Pension Benefit Plan including an
"individual account plan" (as defined in Section 3(34) of ERISA), all
contributions due by or attributable to the period ending on the Closing Date
have been made or will be made prior to the Closing Date.
(c) Each Pension Benefit Plan, each Welfare Benefit Plan and
each related trust agreement and annuity contract and insurance policy (and any
other funding instruments) complies currently, and has complied in the past,
both as to form and operation, with the provisions of (i) the Code in order to
be tax qualified under Section 401(a) or 403(a) of the Code; (ii) ERISA; and
(iii) all other applicable laws, rules and regulations; all necessary government
approvals for the Pension Benefit Plans have been obtained; and favorable
determination letters, copies of which have been provided to Allegro, as to the
qualification under the Code of each of the Pension Benefit Plans and each
amendment thereto
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<PAGE> 14
have been received from the Internal Revenue Service and no event has occurred
or condition exists which would adversely affect such determination.
(d) Each Welfare Benefit Plan and each Pension Benefit Plan
has been administered to date in material compliance with the requirements of
the Code, ERISA and all other applicable laws and all reports required by any
government agency with respect to each Welfare Benefit Plan and each Pension
Benefit Plan have been timely filed. Future compliance with the requirements of
the Code, ERISA or any other applicable laws as in effect on the date of the
Closing or any collective bargaining agreements to which the Company or an
Affiliate is a party will not result in any increase in the rate of benefit
accrual under any Pension Benefit Plan.
(e) Neither the Company, nor any Affiliate, nor any plan
fiduciary of any Welfare Benefit Plan or Pension Benefit Plan has engaged in any
transaction in violation of Section 406 of ERISA or any "prohibited transaction"
(as described in Section 4975(c) of the Code).
(f) Schedule 4.21 lists each deferred compensation plan, bonus
plan, stock option plan, employee stock purchase plan and any other employee
benefit plan, agreement, arrangement or commitment not required under a previous
subsection to be listed on Schedule 4.21 maintained by the Company or an
Affiliate with respect to the compensation of any of their employees.
(g) No liability to the PBGC has been incurred by the Company
or other trade or business under common control with the Company (as determined
under Sections 414(b), 414(c), 414(m) or 414(o) of the Code) ("Common Control
Entity") on account of any termination of an employee pension benefit plan
subject to Title IV of ERISA. No filing has been made by the Company (or any
Common Control Entity) with the PBGC (and no proceeding has been commenced by
the PBGC) to terminate any employee pension benefit plan subject to Title IV of
ERISA maintained, or wholly or partially funded, by the Company (or any Common
Control Entity). Neither the Company nor any Common Control Entity has (i)
ceased operations at a facility so as to become subject to the provisions of
Section 4062(e) of ERISA, (ii) withdrawn as a substantial employer so as to
become subject to the provisions of Section 4063 of ERISA, (iii) ceased making
contributions on or before the date of the Closing to any employee pension
benefit plan subject to Section 4064(a) of ERISA to which the Company (or any
Common Control Entity) made contributions during the five years prior to the
date of the Closing, or (iv) made a complete or partial withdrawal (as each is
defined in Sections 4203 and 4205, respectively, of ERISA) or a reduction in
contribution base units which if sustained for three years would constitute a
partial withdrawal under Section 4205 of ERISA, from a multiemployer plan (as
defined in Section 3(37) of ERISA) so as to incur withdrawal liability as
defined in Section 4201 of ERISA (without regard to subsequent reduction or
waiver of such liability under Section 4207 or 4208 of ERISA). Neither the
Company, any Affiliate nor any Common Control Entity, including both single
employer and multi-employer pension plans, has engaged in a transaction designed
to avoid or evade liability until Title IV of ERISA within the five years
preceding the Closing Date.
(h) There are no actions, suits or claims (other than routine
claims for benefits) pending or which could reasonably be expected to be
asserted against any Pension Benefit Plan or Welfare Benefit Plan; there are no
civil or criminal actions pending or threatened against any fiduciary, Pension
Benefit Plan or Welfare Benefit Plan with respect to the plan; and no Pension
Benefit Plan or
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<PAGE> 15
Welfare Benefit Plan is the direct or indirect subject of any audit,
investigation or examination by any governmental or quasi governmental agency,
and no such completed audit, investigation or examination, if any, has resulted
in the imposition of any fine or penalty on any person.
(i) True and complete copies of each Welfare Benefit Plan and
each Pension Benefit Plan, related trust agreements or annuity contracts (or any
other funding instruments), each plan, agreement, arrangement, and commitment
referred to in subsection (vi) of this Section 4.21, summary plan descriptions,
the most recent determination letter issued by the Internal Revenue Service with
respect to each Pension Benefit Plan, Annual Reports on Form 5500 Series
required to be filed with any governmental agency for each Welfare Benefit Plan
and each Pension Benefit Plan for the three most recent plan years, investment
management agreements and amendments thereto, all financial statements
reflecting plan assets other than group annuity and insurance contracts as of
the most recent valuation date, summaries of material modifications, any
material communication received by the Company from PBGC, the United States
Department of Labor ("DOL") and the U.S. Internal Revenue Service ("IRS")
regarding any of the Welfare Benefit Plans and Pension Benefit Plans, and the
trustee's report for the most recent plan year of each Pension Benefit Plan have
heretofore been delivered by the Company to Allegro.
(j) All Welfare Benefit Plans, Pension Benefit Plans, related
trust agreements or annuity contracts (or any other funding instruments), and
all plans, agreements, arrangements and commitments referred to in subsection
(vi) of this Section are legally valid and binding and in full force and effect.
(k) No Pension Benefit Plan containing a Section 401(R) cash
or deferred arrangement in which employees of the Company or an Affiliate,
participated has been terminated on or after December 31, 1995.
4.22. Litigation; Compliance; Permits.
(a) Except as disclosed in Schedule 4.22 hereto, there are
no actions, suits, proceedings or arbitrations governmental investigations
pending or, to the knowledge of the Company or Stockholders, threatened against,
by or affecting the Company in which, individually or in the aggregate, an
unfavorable determination could materially affect the business of the Company or
its prospects, earnings or condition (financial or otherwise) or any of its
assets or result in any liability on the part of the Company or prevent, hinder
or delay the execution and performance of this Agreement or any of the
transactions or events contemplated hereby or could declare this Agreement
unlawful or cause the rescission of any of the transactions hereunder or require
Allegro to divest itself of the Stock, nor has any such suit been pending within
the two years prior to the date hereof. The Company has not been charged with or
received notice of any violation of any applicable federal, state, local or
foreign law, rule, regulation, ordinance, order or decree relating to it, or the
operation of its business, and the Stockholders are not aware of any threatened
claim of such violation (including any investigation) or any basis therefor.
(b) The Company has complied in all material respects and is
in compliance in all material respects with, all laws, rules, regulations,
ordinances, orders, judgments, decrees, writs,
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injunctions, building codes, safety, fire and health approvals, certificates of
occupancy or other governmental restrictions applicable to them, their assets,
employees and employment practices.
(c) The Company has all governmental licenses, permits,
approvals or other authorizations required for the conduct of its business as
now conducted, all of which are in full force and effect and all of which are
listed on Schedule 4.22 hereto; there is no action pending or, to the knowledge
of the Stockholders, threatened, to terminate any rights under any such
governmental licenses, permits or authorizations; and except as disclosed on
Schedule 4.22, none of such licenses, permits, approvals and authorizations will
be adversely affected by the transfer of the Stock to Allegro or the
consummation of the other transactions contemplated by this Agreement.
4.23. Environmental Compliance.
Except as set forth in Schedule 4.23, (i) all of the assets
and properties presently or, to the knowledge of the Company or the
Stockholders, formerly owned, leased or operated by the Company, its Affiliates
or divisions are in compliance with all Environmental Laws and are not subject
to any outstanding or threatened Environmental Actions; (ii) none of the assets
and properties presently or, to the knowledge of the Company or the
Stockholders, formerly owned, leased or operated by the Company, its divisions
and Affiliates have been used for the generation, storage, manufacture, use,
transportation, disposal or treatment of Hazardous Substances; (iii) there has
been no Hazardous Discharge on or from any of the assets and properties
presently or, to the knowledge of the Company or the Stockholders, formerly
owned, leased or operated by the Company, its divisions or Affiliates; (iv)
there are no threatened or outstanding Environmental Actions against the Company
or, to the knowledge of the Company or the Stockholders, any of the owners or
operators of any facilities that may have received solid waste or Hazardous
Substances from any of the assets, former assets and properties presently or
formerly owned, leased or operated by the Company, its divisions or Affiliates;
and (v) to the knowledge of the Company or the Stockholders, the Company has not
owned, possessed or arranged for the transportation of Hazardous Substances at
any site where remediation services have been performed. No employee or other
person has ever made a claim or demand against the Company based on alleged
damage to health caused by any Hazardous Substance. All services performed by
the Company, including, without limitation, remediation activities, were and are
in full compliance with all Environmental Laws and provide no basis for an
Environmental Action against the Company or any other Person or any other claim
that such services were not properly performed.
4.24. Corporate Records.
The copy of the certificate of incorporation of the Company
and all amendments thereof to date, certified by the Secretary of State, or
equivalent government official, of their respective jurisdictions of
incorporation and of the by-laws of the Company, as amended to date, certified
by the Secretary or an Assistant Secretary of the Company, all under a date not
more than seven (7) days prior to the Closing Date, which have been be delivered
to Allegro are complete and correct, and the minute books of the Company
correctly reflect all material corporate actions taken at all meetings of
directors (including committees thereof) and Stockholders, and correctly record
all resolutions certified copies of which have been delivered to other parties.
The stock transfer books (with all cancelled and unused stock
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<PAGE> 17
certificates attached) and stock ledgers are complete and correct and correctly
reflect all issuances and transfers of the capital stock of the Company.
4.25. Bank Accounts; Power of Attorney.
Schedule 4.25 hereto correctly sets forth: (i) a list of all
banks in which the Company has an account or safety deposit box, account number,
purpose of such account or safety deposit box and the names of all persons
authorized to draw thereon or have access thereto; and (ii) the names of all
persons holding powers of attorney from the Company and a description of the
power of attorney.
4.26. Warranties.
Except as described in Schedule 4.26 during the past three
years the Company has not given any written warranties with respect to any of
its respective products or services. Schedule 4.26 also sets forth a description
of all claims in excess of $10,000 concerning product liability or arising from
services provided which have been made against the Company during the past three
years.
4.27. Disclosure.
(a) No representation or warranty by the Stockholders or the
Company and no statement or certificate furnished or to be furnished by or on
behalf of the Stockholders or the Company to Allegro or its agents pursuant to
this Agreement or in connection with the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
(b) As used in this Section 4.27 and elsewhere in this
Agreement the term "to the knowledge of the Company or the Stockholders" or "to
the best knowledge of the Company or the Stockholders" means the actual
knowledge of any Stockholder or any executive officer or director of the
Company.
4.28. Foreign Corrupt Practices Act.
To the knowledge of the Company or the Stockholders, the
Company has not made, offered or agreed to offer anything of value to any
government official, political party or candidate for government office nor has
it taken any action which would cause the Company to be in violation of any law
or any foreign jurisdiction or the United States, including the Foreign Corrupt
Practices Act of 1977.
4.29. Investment Representations,
(a) The Stockholders are acquiring Allegro Common Stock for
the Stockholders' own account for investment only and not with a view to, or for
sale in connection with, a distribution of Allegro Common Stock within the
meaning of the Securities Act of 1933, as amended, and the rules and regulations
thereunder (the "Securities Act") and any applicable state, securities or
blue-sky laws.
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(b) No Stockholder is a party or subject to or bound by any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or pledge Allegro Common Stock or any part thereof to any person, or
has any present intention to enter into such a contract, undertaking, agreement
or arrangement.
(c) The Stockholders acknowledge to and agree with Allegro
that:
(i) Allegro has advised the Stockholders that Allegro
Common Stock has not been registered under the Securities Act
or under the laws of any state on the basis that the issuance
thereof contemplated by this Agreement is exempt from such
registration;
(ii) The Company's reliance on the availability of such
exemption is, in part, based upon the accuracy and
truthfulness of the Stockholder' representations contained
herein;
(iii) Allegro Common Stock cannot be resold without
registration or an exemption under the Securities Act and
such state securities laws, and that the certificates
representing the shares of Allegro Common Stock to be issued
pursuant hereto will bear a restrictive legend to such
effect;
(iv) The Stockholders have evaluated the merits and risks
of acquiring Allegro Common Stock, and have such knowledge
and experience in financial and business matters that the
Stockholder are capable of evaluating the merits and risks of
such purchase, are aware of and have considered the financial
risks and financial hazards of acquiring Allegro Common
Stock, and are able to bear the economic risk of acquiring
Allegro Common Stock, including the possibility of a complete
loss with respect thereto;
(v) The Stockholders have had access to such information
regarding the business and finances of Allegro, including
without limitation Allegro's Annual Report on Form 10-KSB
for the fiscal year ending December 31, 1995 and Allegro's
Quarterly Report on Form 10-QSB for the fiscal quarter ending
March 31, 1996, including the financial statements contained
therein, the receipt and careful reading of which is hereby
acknowledged by the Stockholders, and have been provided the
opportunity to discuss with Allegro's management the
business, affairs and financial condition of Allegro and such
other matters with respect to Allegro as would concern a
reasonable person considering the transactions contemplated
by this Agreement and/or concerned with the operation of
Allegro, including without limitation pursuant to a meeting
and/or discussions with management of Allegro; and
(vi) The Stockholders hereby covenant and agree that, except
as provided in the Lock-Up Agreements, the Stockholders shall
not, directly or indirectly, offer, offer to sell, contract
to sell, pledge, hypothecate, grant any option to purchase or
otherwise dispose or transfer (or announce any offer, offer
of sale, sale, contract of sale, grant of any option to
purchase or other disposition or transfer), or agree to do
any of the foregoing, with respect to Allegro Common Stock,
without the prior written consent of
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Allegro, until the second anniversary of the Closing Date.
The certificates representing Allegro Common Stock will bear
a restrictive legend to such effect;
(vii) All of the Stockholders' representations and warranties
set forth herein are correct and complete as of the date of
this Agreement, shall be true and correct in all material
respects as of the Closing Date, shall survive such closing
and if there should by any material change in such
information prior to the sale to the Stockholder of Allegro
Common Stock, the Stockholder will immediately furnish such
revised or corrected information to Allegro;
(viii) The acquisition of Allegro Common Stock involves a
high degree of risk and may result in a loss of the entire
amount invested. The Stockholders further acknowledge and
agree that the Company has a limited operating history. There
is no assurance that the Company's operations will be
profitable in the future.
5. Representations and Warranties of Allegro.
Allegro represents and warrants to the Stockholders and the Company on
the date hereof and on the Closing Date as follows:
5.1. Corporate Status.
Allegro is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with all requisite
power and authority (corporate and governmental) to own, operate and lease its
properties and to carry on its business as now being conducted. Except as set
forth in Schedule 5.1, Allegro is duly licensed or qualified to do business and
is in good standing in the states and countries set forth on Schedule 5.1
hereto, which, except as set forth in Schedule 5.1, are all the jurisdictions in
which Allegro is required to be so qualified or licensed.
5.2. Authority for Agreements.
Allegro has the power and authority to execute and deliver
this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance by Allegro of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Allegro. This Agreement has been duly executed
and delivered by Allegro and constitutes the legal, valid and binding obligation
of Allegro enforceable against Allegro in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to or affecting
the rights and remedies of creditors.
5.3 No Conflicts.
The execution, delivery and performance of this Agreement,
any other agreement or document contemplated herein or therein and the
consummation of all of the transactions contemplated hereby and thereby: (i) do
not and will not require the consent, waiver, approval, license, designation or
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authorization of, or declaration with, any person or public authority; (ii) do
not and will not with or without the giving of notice or the passage of time or
both, violate or conflict with or result in a breach or termination of any
provision of, or constitute a default under, or accelerate or permit the
acceleration of the performance required by the terms of, or result in the
creation of any mortgage, security interest, claim, lien, charge or other
encumbrance upon any of the assets of Allegro pursuant to, or otherwise give
rise to any liability or obligation under, the certificate of incorporation or
other charter documents or bylaws of Allegro, any agreement, mortgage, deed of
trust, indenture, license, permit or any other agreement or instrument or any
order, judgment, decree, statute, regulation or any other restriction of any
kind or description to which the Allegro is a party or by which Allegro or any
of its assets may be bound; and (iii) will not terminate or result in the
termination of any such agreement or instrument, or in any way affect or violate
the terms and conditions of, or result in the cancellation, modification,
revocation or suspension of, any rights of Allegro.
5.4 Allegro Common Stock.
Allegro Common Stock, when issued in accordance with the
terms hereof, will be validly issued, fully paid and non-assessable.
5.5. No Adverse Changes.
Since March 31, 1996: (i) there has been no adverse change in
the condition (financial or otherwise), assets, liabilities, business,
operations, affairs or prospects of Allegro, other than changes in the ordinary
course of business none of which singly and no combination of which in the
aggregate has been material; and (ii) there has been no damage, destruction or
loss or other occurrence or development, whether or not insured against, which
either singly or in the aggregate materially adversely affects, and Allegro has
no knowledge of any threatened occurrence or development which would materially
adversely affect, the condition (financial or otherwise), assets, liabilities,
business, operations, affairs or prospects of Allegro.
5.6. Litigation; Compliance; Permits.
(a) There are no actions, suits, proceedings or arbitrations
governmental investigations pending or, to the knowledge of Allegro, threatened
against, by or affecting the Company in which, individually or in the aggregate,
an unfavorable determination could materially affect the business of Allegro or
its prospects, earnings or condition (financial or otherwise) or any of its
assets or result in any liability on the part of Allegro or prevent, hinder or
delay the execution and performance of this Agreement or any of the transactions
or events contemplated hereby or could declare this Agreement unlawful or cause
the rescission of any of the transactions hereunder or require Allegro to divest
itself of the Stock, nor has any such suit been pending within the two years
prior to the date hereof. Allegro has not been charged with or received notice
of any violation of any applicable federal, state, local or foreign law, rule,
regulation, ordinance, order or decree relating to it, or the operation of its
business, and Allegro is not aware of any threatened claim of such violation
(including any investigation) or any basis therefor.
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(b) Allegro has complied in all material respects and is in
compliance in all material respects with, all laws, rules, regulations,
ordinances, orders, judgments, decrees, writs, injunctions, building codes,
safety, fire and health approvals, certificates of occupancy or other
governmental restrictions applicable to it, its assets, employees and employment
practices.
(c) Allegro has all governmental licenses, permits,
approvals or other authorizations required for the conduct of its business as
now conducted, all of which are in full force and effect; there is no action
pending or, to the knowledge of Allegro, threatened, to terminate any rights
under any such governmental licenses, permits or authorizations; and none of
such licenses, permits, approvals and authorizations will be adversely affected
by the transfer of the Stock to Allegro or the consummation of the other
transactions contemplated by this Agreement.
5.7 Investment Representations.
(a) Allegro is acquiring the Stock for Allegro's own
account for investment only and not with a view to, or for sale in connection
with, a distribution of the Stock within the meaning of the Securities Act of
1933, as amended, and the rules and regulations thereunder (the "Securities
Act") and any applicable state, securities or blue-sky laws. Allegro is an
accredited investor (as defined under Regulation D under the Securities Act).
(b) Allegro is not a party or subject to or bound by any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or pledge the Stock or any part thereof to any person, and has no
present intention to enter into such a contract, undertaking, agreement or
arrangement.
(c) Allegro acknowledges to and agrees with the Company and
the Stockholders that:
(i) The Company and the Stockholders have advised Allegro
that the Stock has not been registered under the Securities
Act or under the laws of any state on the basis that the
issuance thereof contemplated by this Agreement is exempt
from such registration;
(ii) The Company's and the Stockholders' reliance on the
availability of such exemption is, in part, based upon the
accuracy and truthfulness of Allegro's representations
contained herein;
(iii) The Stock cannot be resold without registration or
an exemption under the Securities Act and such state
securities laws, and the certificates representing the Stock
may bear a restrictive legend to such effect;
(iv) Allegro has evaluated the merits and risks of
acquiring the Stock, and has such knowledge and experience
in financial and business matters that Allegro is capable of
evaluating the merits and risks of such purchase, is aware
of and has considered the financial risks and financial
hazards of acquiring the Stock, and is able to bear the
economic risk of acquiring the Stock, including the
possibility of a complete loss with respect thereto;
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(v) Allegro has had access to such information regarding
the business and finances of the Company, the receipt and
careful reading of which is hereby acknowledged by Allegro,
and has been provided the opportunity to discuss with the
Company's management the business, affairs and financial
condition of the Company and such other matters with respect
to the Company as would concern a reasonable person
considering the transactions contemplated by this Agreement
and/or concerned with the operation of the Company,
including without limitation pursuant to a meeting and/or
discussions with management of the Company.
6. Covenants.
6.1. Operation of Business.
From the date hereof until the Closing Date the Company
shall, and the Stockholders shall cause the Company to, operate its business in
the ordinary course and in a manner consistent with past practice. The
Stockholders and the Company shall use all reasonable efforts (but without
making any commitment on behalf of Allegro) to maintain contact and preserve the
Company's present business organization, keep available the services of their
employees and preserve their relationships with customers, suppliers and others
having business dealings with them. The Company shall, and the Stockholders
shall cause the Company to:
(a) maintain all its material structures, equipment and other
tangible personal property currently in use in good operating condition and
repair, except for ordinary wear and tear and damage by unavoidable casualty;
(b) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by it;
(c) perform in all material respects all of its obligations
under agreements, contracts and instruments relating to or affecting its
properties, assets and business;
(d) maintain its books of account and records in the usual,
regular and ordinary manner; and
(e) effect no change in the accounting methods employed to
prepare the Financial Statements.
6.2. Access to Information; Confidentiality.
Prior to the Closing, Allegro may make such investigation of
the business of the Company as Allegro may desire and the Stockholders and the
Company shall cause Allegro and its counsel, accountants and other
representatives to be given reasonable access during normal business hours
throughout the period prior to the Closing to the assets, books, commitments,
agreements, records and files of the Company and the Stockholders shall cause to
be furnished to Allegro during that period all documents and copies of documents
and information concerning the business and affairs of the Company
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as Allegro may reasonably request. Allegro shall hold, and cause its
representatives to hold, all such information and documents confidential pending
the Closing or indefinitely, if the purchase and sale contemplated by this
Agreement is not consummated for any reason, except Allegro shall not be
required to keep confidential any information which (i) is or subsequently may
become, through no fault of Allegro, generally available to the public, (ii) was
available on a non-confidential basis to Allegro prior to its disclosure by the
Company or the Stockholders, (iii) becomes available to Allegro on a
nonconfidential basis from a source not bound by any obligation of
confidentiality with respect to such information, (iv) is independently acquired
by Allegro as a result of work carried out by an employee of Allegro to whom no
disclosure of such information has been made, (v) is required to be disclosed by
law, rule, regulation or judicial process, or (vi) Allegro may consider
necessary for the purpose of enforcing its rights hereunder. Pending the Closing
(or any earlier termination of this Agreement) the Company and the Stockholders
shall keep confidential and after the Closing the Stockholders will not use
(except while employed by the Company and for Company purposes) or disclose to
others and keep confidential any Trade Secrets used or usable by the Company or
Allegro in connection with its business.
6.3. Conduct of the Business Pending the Closing.
Until the Closing the Stockholders and the Company:
(a) shall promptly notify Allegro in writing of, and furnish
any information that Allegro reasonably may request with respect to the
occurrence of any event or the existence of any state of facts (whether or not
permitted by the provisions of this agreement) that would result in any of their
representations and warranties not being true or his covenants not fulfilled as
of the Closing Date;
(b) shall not permit the amendment of, or the adoption of
resolutions increasing the amount to be funded or awarded under, any of the
Pension Benefit Plans, Welfare Benefit Plans or any of the plans, agreements or
arrangements described in subsection (f) of Section 4.21, except as may
otherwise be required by law; and
(c) will not, and will not permit its officers, directors,
employees, stockholders or agents to negotiate directly or indirectly with, or
furnish any information relating to, any potential sale of the Company or its
business or assets to any other third parties until the earlier of September 30,
1996 or the termination by Allegro in writing of this Agreement.
6.4. Other Action.
Except for action contemplated or permitted by this Agreement
(resulting from the operation of business in the ordinary course), the Company
shall not and the Stockholders shall not and shall cause the Company not to take
any action that would result in any of the Stockholders's and the Company's
representations and warranties not being true as of the Closing Date. Without
limiting the foregoing, the Company shall not and the Stockholders shall not
permit the Company or any Subsidiaries, without the prior written consent of
Allegro, to (i) incur any extraordinary expense or become a party to or become
obligated by any contract, commitment or agreement for the sale, lease or other
disposition of a material part of its assets or which would be required to be
listed on Schedule 4.15 hereto; (ii) create or incur any liability (absolute or
contingent) except unsecured current liabilities incurred for other than
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money borrowed and liabilities under contracts entered into in the ordinary
course of business and will not do any of the things required to be listed on
Schedule 4.9 by the provisions of Section 4.9; (iii) discontinue the insurance
in the amounts and of the types now carried; (iv) enter into any compromise or
settlement of any litigation, proceeding or governmental investigation relating
to its properties or business, except settlements made by insurers which are
fully covered by existing insurance policies of the Company; (v) enter into any
agreement or commitment to make capital expenditures of more than $10,000 in any
single instance or more than $25,000 in the aggregate; and (vi) make any changes
in its Certificate of Incorporation or By-laws. The Stockholders, the Company
and Allegro shall each use its best efforts to cause the fulfillment at the
earliest practicable date of all of the conditions to their respective
obligations to consummate the sale and purchase under this Agreement.
6.5. Consents.
The Stockholders and the Company shall use their best efforts
to obtain at the earliest practicable date, by instruments in form and substance
reasonably satisfactory to Allegro, all consents and approvals, if any, required
by any governmental entity or under any of the Scheduled Contracts to the sale
of the Stock to Allegro.
6.6. Employment Agreements.
On the Closing Date, Messrs. Gwyn Jones, James Bryce and Peter
Beedham shall execute and deliver the Employment Agreements.
6.7. Interim Financial Statements.
Prior to the Closing Date, the Stockholders and the Company
shall provide Allegro after they are available in accordance with past practice
any financial statements or financial reports generated by the Company.
6.8. Expenses.
Allegro, on the one hand, and the Company and the
Stockholders, on the other hand, shall bear their own respective expenses
incurred in connection with this Agreement and the transactions contemplated
hereby and in connection with all obligations required to be performed by each
of them under this Agreement.
6.9. Resignations of Directors and Officers.
The Stockholders shall provide to Allegro written resignations
effective as of the Closing Date of such directors, officers and bank
signatories of the Company as Allegro may request prior to the Closing Date. In
the event that Allegro requests any resignations, the Stockholders and the
Company shall cause to be delivered to Allegro written instructions to each bank
at which the Company has an account or credit facility or at which the Company
rents a safe deposit box informing such bank of the said resignations and
revoking the authority of said persons to act with respect to said account or
credit facility and to have access to said safe deposit box. The Stockholders
and the Company shall also cause
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to be delivered to Allegro effective the Closing Date the written surrender by
all persons holding powers of attorney from the Company of their authority and
power to act under such powers of attorney.
6.10. Minute Books, Stock Books and Corporate Records.
The complete and correct minute books, certificate of
incorporation, Memorandum and Articles of Association or equivalent charter
document, by-laws, stock certificate and transfer books, stock ledgers,
financial and other corporate records and the corporate seal of the Company
shall be delivered to Allegro by the Company on or before the Closing Date.
6.11. Taxes.
The Stockholders shall pay any federal, state or local sales,
transfer or stamp taxes payable in connection with the exchange of the Stock
pursuant to this Agreement.
7. Conditions Precedent.
7.1. Conditions to Obligations of Allegro.
The obligation of Allegro to deliver the Exchange Stock to the
Stockholders and to satisfy its other obligations hereunder shall be subject to
the fulfillment (or waiver by Allegro) at or prior to the Closing, of the
following additional conditions, which the Company and the Stockholders agree to
use their best efforts to cause to be fulfilled:
(a) Representations, Performance. The representations and
warranties contained in Section 4 hereof shall be true at and as of the date
hereof and shall be repeated and shall be true at and as of the Closing Date
with the same effect as though made at and as of the Closing Date, except as
affected by the transactions contemplated hereby. The Stockholders and the
Company shall have each duly performed and complied with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by it or them prior to or on the Closing Date. The Stockholders'
Representatives, on behalf of the Stockholders, shall have delivered to Allegro
a certificate dated the Closing Date to the effect set forth above in this
Section 7.1(a).
(b) Consents under Scheduled Contracts. All required consents
to the delivery of the Stock or any of the other transactions contemplated
hereby under any Scheduled Contracts shall have been obtained.
(c) Litigation. No suit, action or other proceeding or
investigation shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain material
damage or other material relief in connection with this Agreement or the
consummation of the transactions contemplated hereby or which is likely to
affect materially the value of the assets, business, condition (financial or
otherwise) or prospects of the Company.
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(d) Opinions of Counsel. Allegro shall have received a
favorable opinion, addressed to Allegro and dated the Closing Date, of Deutsch
Williams Brooks DeRensis Holland & Drachman, P.C. et al., counsel for the
Stockholders, in the form annexed hereto as Exhibit F.
(e) Proceedings and Documentation. All corporate and other
proceedings of the Company and the Stockholders in connection with the
transactions contemplated by this Agreement, and all documents and instruments
incident to such corporate proceedings, shall be satisfactory in substance and
form to Allegro and Allegro's counsel, and Allegro and Allegro's counsel shall
have received all such receipts, documents and instruments, or copies thereof,
certified if requested, to which the Company is entitled and as may be
reasonably requested.
(f) Damage to Property. No portion of the plants, machinery or
equipment of or occupied by the Company material to the operation of the
business of the Company as a whole shall, after the date hereof and before the
Closing Date, be damaged, destroyed or taken by condemnation or eminent domain.
(g) Consents and Approvals. All material licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
or regulatory bodies which are necessary for the consummation of the
transactions contemplated hereby shall have been obtained.
(h) Agreements. Messrs. Gwyn Jones, James Bryce and Peter
Beedham shall have executed and delivered to the Company the Employment
Agreements. Each Stockholder shall have executed and delivered the Lock-up
Agreements and the Registration Rights Agreement.
(i) Good Standing Certificates. The Stockholders shall have
delivered to Allegro certificates as of a date not more than 7 days prior to the
Closing Date attesting to the good standing of the Company as a corporation in
the State of Delaware by the Secretary of State of the State of Delaware.
(j) Examination Satisfactory. The results of Allegro's
examination of the business and affairs of the Company, shall be satisfactory to
Allegro in all respects, in its sole discretion.
(k) Accountant Letter. Ernst & Young, LLP shall have delivered
a letter to Allegro indicating that there are no serious internal control issues
relating to the Company and that such firm has not discovered any fraudulent
practices engaged in by the Company, other than as previously disclosed in
writing by the Stockholders to Allegro.
(l) Intentionally Omitted.
(m) Intentionally Omitted.
(n) Intentionally Omitted.
(o) Intentionally Omitted.
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(p) Financial Certificate. The Stockholders Representative, on
behalf of the Stockholders, shall have delivered to Allegro at the Closing, a
certificate setting forth (i) the Company's monthly revenues to date for the
calendar year 1996; (ii) the working capital of the Company as of the most
recent practicable date prior to the Closing Date; and (iii) the Company's
consolidated expenses and liabilities through the Closing Date for the calendar
year 1996.
(q) Secretary's Certificate. The Secretary of the Company
shall have executed and delivered a certificate to Allegro in the form attached
hereto as Exhibit G.
(r) U.K. Closing. The transactions contemplated by the
Agreement and Plan of Reorganization of even date herewith among Allegro, Serif
(Europe) Limited, an English private limited company, and the stockholders
thereof (the "Serif (Europe) Agreement") shall have been consummated.
7.2. Conditions to Obligations of the Stockholders.
The obligation of the Stockholders to deliver the Stock and to
satisfy their other obligations hereunder shall be subject to the fulfillment
(or waiver by the Stockholders' Representative, on behalf of the Stockholders),
on or prior to the Closing Date, of the following conditions, which Allegro
agrees to use its best efforts to cause to be fulfilled:
(a) Representations, Performance. Etc. The representations and
warranties of Allegro contained in Section 5 hereof shall be true at and as of
the date hereof and shall be repeated and shall be true at and as of the Closing
Date with the same effect as though made at and as of such time. Allegro shall
have duly performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by it prior to or on
the Closing Date. Allegro shall have delivered to the Stockholders an officer's
certificate dated the Closing Date to the effect set forth above in this Section
7.2.(a).
(b) Opinion of Counsel. The Stockholders shall have received a
favorable opinion, addressed to the Stockholders and dated the Closing Date, of
Blau, Kramer, Wactlar & Lieberman, P.C., counsel for Allegro, in the form
annexed hereto as Exhibit H.
(c) Proceedings and Documentation. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement,
including, but not limited to, the approval of the transactions contemplated in
this Agreement by Allegro's Board of Directors, and all documents and
instruments incident thereto, shall be satisfactory in substance and form to the
Stockholders and Stockholders's counsel, and the Stockholders and Stockholders's
counsel shall have received all such receipts, documents and instruments, or
copies thereof, certified if requested, to which the Stockholders is entitled
and as may be reasonably requested.
(d) Agreements. Allegro, the Company or Serif (Europe) Limited
shall have executed and delivered to each of Messrs. Gwyn Jones, James Bryce and
Peter Beedham the Employment Agreements and shall have executed and delivered
the Registration Rights Agreement.
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(e) Nomination for Election to Board of Directors. Allegro
shall have nominated Gwyn Jones for election as a member of the Board of
Directors of Allegro.
(f) Consents and Waivers. Allegro shall have received all
consents and waivers from all appropriate parties which Allegro deems necessary
for the approval of the transactions contemplated in this Agreement.
(g) Secretary's Certificate. The Secretary of Allegro shall
have delivered to the Stockholders' Representative a certificate in the form
attached hereto as Exhibit I.
(h) U.K. Closing. The transactions contemplated by the Serif
(Europe) Agreement shall have been consummated.
8. Non-Competition.
(a) During the period commencing on the Closing date and
ending on the fourth anniversary of the Closing Date (subject to Section 8.2
below, the "Restricted Period"), Gwyn Jones, Peter Beedham and James Bryce (the
"Covenantees") shall not, without the written consent of Allegro, directly or
indirectly,
(i) become associated with, render services to, invest in,
represent, advise or otherwise participate in as an officer, employee, director,
stockholder, partner, promoter, agent of, consultant for or otherwise, any
business which is conducted in any of the jurisdictions in which the Company's
or Allegro's business is conducted and which is engaged in the business of
developing, marketing, licensing or selling desktop publishing and/or
publication computer software;
(ii) for the Covenantees's own account or for the account of
any other person or entity (A) interfere with the Company's or Allegro's
relationship with any of its suppliers, customers, licensors, licensees,
independent contractors, representatives or agents or (B) contact, telephone,
meet, solicit or transact any business with any material customer or any
supplier, licensor or licensee of the Company or Allegro who or which transacts
or has transacted business with the Company or Allegro at any time during the
Restricted Period; or
(iii) employ or otherwise engage, or solicit, entice or
induce on behalf of any Covenantee or any other person or entity, the services,
retention or employment of any person who has been an employee, officer,
director, principal, partner, stockholder, independent contractor, sales
representative, consultant to or agent of the Company or Allegro within one year
of the date of such offer or solicitation.
(b) The provisions of this Section 8 shall survive the
termination of this Agreement.
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8.2. Non-Exclusivity.
Nothing herein contained shall be construed as prohibiting the
Company or Allegro from pursuing any other remedies available to it for such
violation, including but not limited to any injunctive or other equitable relief
or the recovery of damages from the Stockholders.
8.3. Equitable Relief.
The Covenantees acknowledge that the covenants contained in
this Section 8 are fair and reasonable in order to protect the Company's and
Allegro's business and were a material and necessary inducement for Allegro to
agree to the transactions contemplated hereby. The Covenantees further
acknowledge that they have realized significant monetary benefit from these
transactions, that any remedy at law for any breach or threatened or attempted
breach of the covenants contained in this Section 8 may be inadequate and that
the violation of any of the covenants contained in this Section 8 will cause
irreparable and continuing damage to Allegro and the Company. Accordingly, the
Company or Allegro shall be entitled to specific performance or any other mode
of injunctive and/or other equitable relief to enforce their rights hereunder,
including without limitation an order restraining any further violation of such
covenants, or any other relief a court might award, without the necessity of
showing any actual damage or irreparable harm or the posting of any bond or
furnishing of other security, and that such injunctive relief shall be
cumulative and in addition to any other rights or remedies to which Allegro may
be entitled. The covenants in this Section 8 shall run in favor of Allegro, the
Company and their successors and assigns. In addition, the Covenantees agree to
pay Allegro and Company the costs they incur, including reasonable attorneys'
fees and expenses, in bringing and prosecuting any proceeding to enforce the
terms of this Agreement.
8.4. Severability.
In case any one or more of the terms or provisions contained
in this Section 8 shall for any reason be held invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability shall not affect
any other terms or provisions hereof, but such term or provision shall be deemed
modified or deleted as or to the extent required by applicable law, and such
modification or deletion shall not affect the validity of the other terms or
provisions of this Section 8. In addition, if any one or more of the
restrictions contained in this Section 8 shall for any reason be held to be
unreasonable with regard to time, duration, geographic scope or activity, the
parties contemplate and hereby agree that such restriction shall be modified and
shall be enforced to the full extent compatible with applicable law. The parties
hereto intend that the covenants contained in this Section 8 shall be deemed a
series of separate covenants for each country, state, county and city. If, in
any judicial proceeding, a court shall refuse to enforce all the separate
covenants deemed included in this Section 8 because, taken together, they cover
too extensive a geographic area, the parties intend that those of such covenants
(taken in order of the cities, counties, states and countries therein which are
lease populous) which if eliminated would permit the remaining separate
covenants to be enforced in such proceeding shall, for the purpose of such
proceeding, be deemed eliminated from the provisions of this Section 8.
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9. Termination; Amendment; Waiver.
9.1. Termination.
This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual written consent of the parties.
(b) by Allegro upon notice to the Stockholders and the Company
if any of the conditions set forth in Section 7.1 hereof shall not have been, or
it becomes apparent that any of such conditions will not be fulfilled by
September 30, 1996, or (ii) if any default under or breach of any covenant,
agreement or condition of this Agreement, or any misrepresentation or breach of
any warranty contained herein, on the part of the Stockholders shall have
occurred and shall not have been cured to the satisfaction of Allegro; or
(c) by the Company or the Stockholders upon notice to Allegro,
(i) if any of the conditions set forth in Section 7.2 hereof shall not have
been, or it becomes apparent that any of such conditions will not be fulfilled
by September 30, 1996, or (ii) if any default under or breach of any agreement
or condition of this Agreement, or any misrepresentation or breach of any
warranty contained herein, on the part of Allegro shall have occurred and shall
not have been cured to the satisfaction of the Stockholders.
9.2. Effect of Termination.
In the event of the termination of this Agreement pursuant to
the provisions of Section 9.1 hereof, this Agreement shall become void and have
no effect, without any liability on the part of any party hereto or its
directors, officers or stockholders in respect of this Agreement, except as
specified in Section 11 and except for the confidentiality provisions set forth
in Section 6.2 hereof.
9.3. Amendment.
This Agreement may not be amended except by an instrument in
writing duly executed and delivered on behalf of each of the parties hereto.
10. Definitions; Miscellaneous.
10.1. Definition of Certain Terms.
In addition to capitalized terms defined elsewhere in this
Agreement, as used herein, the following terms shall have the following
meanings:
Affiliate: with respect to any Person, any Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. The term "control" (including, with correlative meaning, the
terms "controlled by" and "under common control with"), as used with respect to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction
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of the management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise.
Agreement: this Agreement.
Agreements: as defined in Section 4.15(a).
Closing: as defined in Section 3.1.
Closing Date: as defined in Section 3.1.
Closing Date Working Capital: as defined in Section 7.1(n).
Company: as defined in the Preamble to this Agreement.
Company's Pension Benefit Plans: as defined in Section
4.21(b).
Code: the Internal Revenue Code of 1986, as amended,
together with the U.S. Treasury rulings and regulations promulgated thereunder.
Covenantees: those persons named in Section 8.1 hereof.
Employment Agreements: the Employment Agreements between
each of Messrs. Gwyn Jones, James Bryce and Peter Beedham and the Company,
Allegro or Serif (Europe) Limited in the forms attached hereto as Exhibits A-1,
A-2 and A-3.
Employee Benefit Plan: any pension, retirement,
profit-sharing, deferred compensation, bonus or other incentive plan, or other
employee benefit program, arrangement, agreement or understanding, or medical,
vision, dental or other health plan, or life insurance or disability plan, or
any other employee benefit plan, including, without limitation, any Employee
benefit plan" as defined in Section 3(3) of ERISA to which the Company
contributes or is a party or is bound or under which it may have liability and
which employees or former employees of the Company (or their beneficiaries) are
eligible to participate or derive a benefit.
Environmental Actions: refers to any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation,
proceeding, judgment, letter or other communication from any federal, state,
local or municipal agency, department, bureau, office or other authority or any
third party involving a Hazardous Discharge or any violation of any order,
permit or Environmental laws.
Environmental Laws: as defined in the definition of
Hazardous Substances.
ERISA: the Employee Retirement Income Security Act of 1974,
as amended.
Exchange Rate: as defined in Section 3.
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Financial Statements: the consolidated financial statements
of the Company as at, and for the years ended December 31, 1995, 1994 and 1993,
audited by Ernst & Young, L.L.P., which financial statements include in each
case a balance sheet, a statement of earnings and accumulated earnings, and a
statement of cash flows.
Hazardous Discharge: means any releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping of Hazardous Substances.
Hazardous Substance: means any substance, compound, chemical
or element which is (i) defined as a hazardous substance, hazardous material,
toxic substance, hazardous waste, pollutant or contaminant under any
Environmental Law, (ii) a petroleum hydrocarbon, including crude oil or any
fraction thereof, (iii) hazardous, toxic, corrosive, flammable, explosive,
infectious, radioactive, carcinogenic or a reproductive toxicant, or (iv)
regulated pursuant to any Environmental Law. The term "Environmental Law" means
each and every applicable federal, state, local and foreign law, statute,
ordinance, regulation, rule, judicial or administrative order or decree, permit
license, approval, authorization or similar requirement of each and every
federal, and pertinent state, local and foreign governmental agency or other
governmental authority, pertaining to the protection of human health and safety
or the environment including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA), 42 U.S.C. 9601
et set, the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. 6901 et
seq., the Toxic Substances Control Act (TSCA), 15 U.S.C. 2601 et seq., the Water
Pollution Control Act (FWPCA), 33 U.S.C. 1251 et seq., and the Occupational
Safety and Health Act (OSHA), 42 U.S.C. 655. The term "Hazardous Substance"
shall also include raw materials used or stored by the Company, building
components including, without limitation, asbestos-containing materials and
manufactured products containing Hazardous Substances.
Indemnified Party: as defined in Section 11.1.
Indemnifying Party: as defined in Section 11.1.
Intellectual Property: as defined in Section 4.16.
Pension Benefit Guaranty Corporation: as defined in Section
4.21.
Person: any natural person, firm, partnership, association,
corporation, trust, public body or government.
Plan: each Pension Benefit Plan and each Welfare Benefit
Plan.
Stockholders: as defined in the Preamble to this Agreement.
Stockholders' Representative: Gwyn Jones.
Taxes: as defined in Section 4.7.
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Trade Secret: any information used by the Company in its
business, including a formula, pattern, compilation, program, software, device,
method, technique, or process, that has a material economic value, actual or
potential, not being generally known to, and not being readily ascertainable by
proper means by other Persons.
Welfare Benefit Plans: as defined in Section 4.21(i).
11. Indemnification; Survival.
11.1 Indemnification.
(a) The Stockholders, jointly and severally (and the
Company, only if the transactions contemplated hereby are not consummated), will
indemnify Allegro against, and hold Allegro harmless from, any and all
liability, damage, deficiency, loss, cost or expense (including reasonable
attorneys' fees) (individually, any one such item being called a "Loss" and more
than one such item, "Losses"), that are based upon or that arise out of (i) any
misrepresentation or breach of any representation, warranty, covenant or
agreement made by the Stockholders or the Company herein or in any certificate
delivered pursuant hereto; and, (ii) to the extent exceeding $40,000 and not
reflected as a liability on the Company's accounts payable aging included as
part of Schedule 4.8 (A) the expiration of the license agreement with Adobe
(f/k/a Mastersoft) as disclosed in Schedule 4.15 in part II thereof; (B) the
expiration of the license agreement with Pantone as disclosed in Schedule 4.15
in part II thereof; (C) the use by the Company of software bearing the name or
trade style "Twain" as set forth in Schedule 4.16 as item 6 of the final
paragraph thereof; (D) the use by the Company of software bearing the name and
trade style "GIF" as set forth in Schedule 4.16 as item 7 of the final paragraph
thereof; and (E) the use by the Company of technology obtained from Andover
Advanced Technology but not properly covered by a license as disclosed in
Schedule 4.16. No cost or expense shall be included as part of any Loss if and
to the extent that the Loss is paid or accrued after the date of such aging as
and for a royalty or a license fee in accordance with the regular royalties and
fees disclosed for such matter in a Schedule to this Agreement. Royalties
incurred after the date hereof for the use of Twain and GIF or any alternative
technology replacing either of them shall not be included as part of any Loss.
(b) Allegro will indemnify the Stockholders (and the
Company, only if the transactions contemplated hereby are not consummated)
against, and hold the Stockholders harmless from, any and all Losses that are
based upon or that arise out of any misrepresentation or breach of any
representation, warranty, covenant or agreement made by Allegro herein or in any
certificate delivered pursuant hereto.
(c) Each party entitled to indemnification under this
Agreement (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party (at its expense) to assume the
defense of any claim or any litigation resulting therefrom; provided that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be reasonably satisfactory to the Indemnified Party, and
the Indemnified Party may participate in such defense, but only at such
Indemnified Party's expense; and provided, further, that the omission by any
Indemnified Party to give notice as provided herein shall not
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<PAGE> 34
relieve the Indemnifying Party of its indemnification obligations under this
Agreement except and only to the extent that the omission results in a failure
of actual notice to the Indemnifying Party and such Indemnifying Party is
damaged as a result of the failure to give notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
with respect to such claim or litigation. In the event that the Indemnifying
Party does not accept the defense of any matter as above provided, or after so
accepting fails to diligently prosecute such defense, the Indemnified Party
shall have the full right to defend against any such claim or demand, at the
expense of the Indemnifying Party, and shall be entitled to settle or agree to
pay in full such claim or demand, in its sole discretion. In any event, the
Company, the Stockholders and Allegro shall cooperate in the defense of such
action and the records of each shall be available to the other with respect to
such defense.
11.2. Time and Manner of Claims; Survival.
Allegro or the Company and each Stockholder shall be liable for
damages arising from its or his misrepresentations or breaches of its or his
representations, warranties or covenants hereunder only pursuant to the terms of
this Section 11 and other than with respect to Sections 4.2 and 4.4, only to the
extent that notice of a claim therefor is asserted by the other in writing and
delivered prior to May 1, 1998. The Company and each Stockholder shall be liable
for damages arising from its or his misrepresentations or breaches of its or his
representations and warranties pursuant to Sections 4.2 and 4.4 at any time
whatsoever. Any notice of a claim by reason of any of the representations,
warranties or covenants contained in this Agreement shall state the
representation, warranty or covenant with respect to which the claim is asserted
and the amount of liability asserted against the other party by reason of the
claim. The representations, warranties, covenants, agreements and indemnities
contained in this Agreement shall survive the execution and delivery of this
Agreement, any examination by or on behalf of such parties, and the completion
of the transactions contemplated herein.
11.3 Limitation on Claims.
Notwithstanding anything contained in this Agreement to the contrary,
(i) neither the Company and the Stockholders, on one hand, nor Allegro, on the
other hand, shall be entitled to claim for the breach of any representation,
warranty, covenant or agreement set forth herein (other than with respect to a
breach of Section 4.2 or 4.4 or Section 11.1(a)(ii)) except to the extent that
the aggregate amount of its present claims in respect of (a) such breaches, and
(b) all prior claims for breaches of representations, warranties covenants and
agreements hereunder, exceeds an aggregate of $25,000, at which time the
claiming party shall be entitled to claim the full amount of its damages for all
breaches by the other parties hereto of such representations, warranties,
covenants and agreements to the extent such claims exceed $25,000; (ii) the
liability hereunder of the Stockholders other than for any misrepresentation or
breach of Section 4.2 or 4.4 hereof (the liability for which shall be unlimited)
shall not exceed an amount equal to the product of (A) the number of shares of
Escrow Stock issued to such Stockholder hereunder and deposited with the Escrow
Agent under the Escrow Agreement, times (B) the last reported sale price of the
Allegro Common Stock on the date on which such liability is determined (or May
1, 1998 in respect of claims delivered under Section 12.2 after that date), and,
except with respect to claims relating to Section 4.2 or 4.4 arising after the
Escrow Stock is released from escrow pursuant to the Escrow
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<PAGE> 35
Agreement, shall be satisfied exclusively from the Escrow Stock; and (iii) the
Stockholders and the Company shall not be liable to Allegro under this Section
11 for Losses arising from the inaccuracy or breach of any representation or
warranty contained in Section 4 hereof to the extent such inaccuracy or breach
is caused by events beyond the control of the Company or the Stockholders which
occur after the date hereof and prior to the Closing Date.
12. Miscellaneous.
12.1. Consent to Jurisdiction and Waivers.
Allegro, the Company and the Stockholders each irrevocably
consents that any legal action or proceeding against any of them under, arising
out of or in any manner relating to, this Agreement or any other document
delivered in connection herewith, may be brought in any court of the State of
New York located within Nassau County or in the United States District Court for
the Eastern District of New York. Allegro, the Company and the Stockholders by
the execution and delivery of this Agreement, expressly and irrevocably consent
and submit to the personal jurisdiction of any of such courts in any such action
or proceeding. Allegro, the Company and the Stockholders further irrevocably
consent to the service of any complaint, summons, notice or other process
relating to any such action or proceeding by delivery thereof to it by hand or
by any other manner provided for in Section 12.3. Allegro and the Stockholders
hereby expressly and irrevocably waive any claim or defense in any such action
or proceeding based on any alleged lack of personal jurisdiction, improper venue
or forum non convenient or any similar basis. Nothing in this Section 12.1 shall
affect or impair in any manner or to any extent the right of Allegro to commence
legal proceedings or otherwise proceed against the Company or the Stockholders
in any jurisdiction or to serve process in any manner permitted by law.
12.2. Severability.
If any provision of this Agreement, and, in particular, if
any provision of the covenant not to compete, shall be held or deemed to be or
shall, in fact, be inoperative or unenforceable as applied in any particular
case because it conflicts with any other provision or provisions hereof or any
constitution or statute or rule of public policy, or for any other reason, such
circumstances shall not have the effect of rendering the provision in question
inoperative or unenforceable in any other case or circumstance, or of rendering
any other provision or provisions herein contained invalid, inoperative, or
unenforceable to any extent whatever. The invalidity of any one or more phrases,
sentences, clauses, sections, or subsections of this Agreement shall not affect
the remaining portions of this Agreement.
12.3. Notices.
All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process in regard hereto
shall be validly given, made or served, if in writing and delivered personally
or sent by registered or certified mail (return receipt requested), postage
prepaid, recognized national or international air courier or by facsimile
transmission electronically confirmed:
35
<PAGE> 36
if to Allegro:
Allegro New Media, Inc.
16 Passaic Avenue
Fairfield, New Jersey 07006
Fax: (201) 808-2645
Attn.: Barry A. Cinnamon
Chairman of the Board
with a copy to:
Neil M. Kaufman, Esq.
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York ll753
Fax: (516) 822-4824
if to the Company or Stockholders,
to the Stockholder's Representative:
Gwyn Jones
Serif Inc.
One Chestnut Street
Suite 305
Nashu, New Hampshire 03060
with a copy to:
Neil Schauer, Esq.
Deutsch Williams Brooks DeRensis Holland
& Drachman, P.C.
99 Summer Street
Boston, MA 02110-1235
Fax: (617) 951-2323
(if to the Company prior to the Closing Date,
to the Stockholders' Representative, as aforesaid,
and after the Closing Date, to Allegro, as aforesaid)
or, in each case, at such other address as may be specified in writing to the
other parties.
12.4. Waiver.
Any party may waive compliance by another with any of the
provisions of this agreement. No waiver of any provisions shall be construed as
a waiver of any other provision. Any waiver must be in writing.
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<PAGE> 37
12.5. Publicity.
Neither the Company nor the Stockholders shall issue any
press release or public announcement of any kind concerning the transactions
contemplated by this Agreement without the prior written consent of Allegro.
12.6. Brokers, Finders, etc.
The Stockholders and Allegro represent and warrant to each
other that they have not dealt with or employed any broker, finder, investment
banker or financial advisor in connection with the negotiation, execution or
performance of this Agreement, other than Frost Capital. Allegro agrees to pay
all such compensation which may be due Frost Capital and to indemnify and hold
harmless the Stockholders and the Company therefrom. Other than the claim of
Frost Capital, Allegro and the Stockholders each agree to indemnify and hold
harmless each other from and against and in respect to any claim for finder's
fees or brokerage claims relating to the transactions contemplated by this
Agreement or the consummation of the transactions contemplated therein based in
any way on agreements or understandings claimed to have been made by the
indemnifying party with any third party.
12.7. Miscellaneous.
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. This Agreement, together with the documents and certificates
delivered in connection therewith and contemplated hereby or thereby,
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and all of which shall constitute one
and the same instrument. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of New
York, applicable to contracts made and to be performed in New York. This
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the parties hereto. The rights and obligations contained in this
Agreement are solely for the benefit of the parties hereto and are not intended
to benefit or be enforceable by any other party, under the third party
beneficiary doctrine or otherwise.
12.8. Stockholder Representative.
(a) Each Stockholder does hereby irrevocably appoint Gwyn
Jones (herein called the "Stockholders' Representative") as its true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to act solely and exclusively on behalf of such Stockholder with respect to any
and all matters relating to this Agreement and any document, certificate or
other agreement to be executed and delivered by or on behalf of any Stockholder
pursuant hereto or in connection with the transactions contemplated hereby, with
the full power, without the consent of the Stockholders or any of them, to
exercise as he in his sole discretion deems appropriate, all of the powers which
any Stockholder could exercise under the provisions of this Agreement or any
document, certificate or other agreement to be executed and delivered by or on
behalf of any Stockholder pursuant hereto or in connection with the transactions
contemplated hereby, including, without limitation, to (i) receive all or
37
<PAGE> 38
any part of the Exchange Rate, (ii) execute and deliver any receipt therefor,
(iii) accept and give notices hereunder or thereunder on behalf of any or all of
the Stockholders, (iv) consent to any modification or amendment hereof or
thereof or (v) give any waiver or consent hereunder or thereunder; provided,
that any modification, amendment, waiver or consent does not involve a decrease
in the Exchange Rate set forth in Section 2 hereof. Allegro shall be entitled to
rely exclusively upon such notices, waivers, consents, amendments, modifications
and other acts of the Stockholders' Representative as being the binding acts of
the Stockholders or any and all of them, and Allegro shall be entitled to
deliver any notices, payments or other items required to be delivered by it to
any Stockholder hereunder or thereunder only to the Stockholders'
Representative, and any such delivery shall be fully effective as if it were
made directly to any relevant Stockholder; and
(b) Gwyn Jones shall not effect any substitution for himself
as the Stockholders' Representative without the prior written consent of
Allegro, which consent shall not be unreasonably withheld.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
ALLEGRO NEW MEDIA, INC.
By: /s/Barry A. Cinnamon
----------------------------
Barry A. Cinnamon
Chairman of the Board
SERIF, INC.
By:/s/Gwyn Jones
----------------------------
Gwyn Jones, President
STOCKHOLDERS
Number of Shares
of Exchange Stock Name
202,133 /s/ Gwyn Jones
----------------------------------------
Gwyn Jones
6,000 /s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------------
Norman Alexander
6,000 /s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------------
Michael LaRocque
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<PAGE> 39
6,000 /s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------------
Joseph Ossai
3,000 /s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------------
Leo Belodeau
3,000 /s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------------
Mike Clowe
12,270 /s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------------
Ingrid Regen
3,000 /s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------------
Jay Jackson
4,000 /s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------------
Gary Howe
39
<PAGE> 40
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A-1: Employment Agreement between Serif Ltd. and Gwyn
Jones
Exhibit A-2: Employment Agreement between the Serif Ltd. and
James Bryce
Exhibit A-3: Employment Agreement between Serif Ltd. and Peter
Beedham
Exhibit B: Lock-Up Agreement
Exhibit C: Intentionally Omitted
Exhibit D: Form of Registration Rights Agreement
Exhibit E: Form of Escrow Agreement
Exhibit F: Form of Opinion of Stockholders' Counsel
Exhibit G: Form of Opinion of Allegro's Counsel
Exhibit H: Form of Company Secretary's Certificate
Exhibit I: Form of Allegro Secretary's Certificate
SCHEDULES
2 Stockholders' Allocated Allegro Common Stock
4.1 Jurisdictions of Qualification
4.4 Capital Stock
4.5 Conflicts
4.6 Financial Statements
4.7 Tax Matters
4.8 Adverse Changes
40
<PAGE> 41
4.9 Conduct of Business
4.10 Title Defects
4.11 Real Property Interests
4.12 Personal Property
4.13 Inventory
4.14 Accounts Receivable
4.15 Contracts
4.16 Intellectual Property
4.17 Insurance
4.18 Customers and Suppliers
4.21 Welfare Plans, Pension Plans and Other Plans and Compensation
Arrangements
4.22 Litigation and Permits
4.23 Environmental Matters
4.25 Bank Accounts and Powers of Attorney
4.26 Warranties
5.1 Allegro's Jurisdictions of Qualification
7.1 Projections
41
<PAGE> 1
EXHIBIT 4.4
AGREEMENT AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated as of this ____ day of July,
1996, by and among ALLEGRO NEW MEDIA, INC., a Delaware corporation ("Allegro"),
SERIF (EUROPE) LIMITED, an English company with registered number 02117968 ("the
Company", and together with its subsidiaries or Affiliates, "Serif"), and the
persons whose signatures appear on the signature pages hereof (individually a
"Stockholder" and collectively the "Stockholders"), being the owners of all of
the entire issued share capital of the Company.
W I T N E S S E T H:
WHEREAS, Allegro and the Stockholders have agreed to the sale by the
Stockholders to Allegro of the entire issued share capital of the Company (other
than the shares held by Serif Inc.) for an aggregate of 754,597 shares of Common
Stock, par value $.001 per share (the "Allegro Common Stock"), of Allegro (the
"Exchange Stock") in a transaction intended to qualify as a reorganization
within the meaning of Section 368 (a) (i) (B) of the Code, upon the terms and
conditions hereinafter set forth and a reorganisation for the purposes of
Section 135 of TCGA;
NOW, THEREFORE, in consideration of the covenants, warranties and
mutual agreements herein set forth and in reliance upon the representations and
warranties contained herein, the parties do hereby adopt this Plan of
Reorganization and agree as follows:
1. SALE OF STOCK
1.1 In reliance on the representations and warranties contained herein and
subject to all of the terms and conditions hereof, the Stockholders hereby agree
to sell or procure to be sold to Allegro at the Closing, in exchange for the
Exchange Stock, as set forth in Section 2 below:-
(i) all of the issued ordinary shares of (pound)1 each in the Company (other
than the shares held by Serif Inc.) ("the Ordinary Shares"); and
(ii) all of the issued 8% non-convertible redeemable preference shares in the
Company ("Preference Shares") (the Ordinary Shares and the Preference Shares are
referred to collectively herein as "the Stock").
1.2 Each of the Stockholders shall procure that Allegro acquires good title to
the Stock respectively set forth next to such Stockholder's name in Schedule 2
is free from all liens, charges, encumbrances, equities and claims whatsoever
and together with all rights now or hereafter attaching to them.
1.3 Allegro shall not be obliged to complete the purchase of any of the Stock
unless the purchase of all of the Stock is completed simultaneously.
1.4 Each of the Stockholders hereby waives and undertakes to procure that any
other person having such rights shall waive any pre-emption rights that he or
such other person may have relating to the Stock whether conferred by the
articles of association of the Company or otherwise.
<PAGE> 2
- 2 -
2. EXCHANGE RATE
In full consideration of the delivery of the Stock to Allegro, and subject to
the terms and conditions hereinafter set forth, Allegro hereby agrees at the
Closing to deliver in exchange for the Stock to the Stockholders' Representative
on behalf of the Stockholders, an aggregate of 754,597 shares of Allegro Common
Stock, in the respective amounts set forth next to each Stockholder's name on
Schedule 2 hereof. The Allegro Common Stock delivered hereunder to the
Stockholders is sometimes referred to hereinafter as the "Exchange Rate" or the
"Exchange Stock". The exchange of the Stock for the Exchange Stock as set forth
herein is intended to qualify as a tax-free reorganization under Section 368(a)
(i) (B) of the Code and as a reorganisation for the purposes of Section 135 of
TCGA.
3. THE CLOSING
3.1 Place and Date
The closing of the transactions provided for in Section 1 shall take place at
the offices of Blau, Kramer, Wactlar & Lieberman, P.C., (or at such other place
as the parties may agree upon in writing), on July 31, 1996 (or at such other
time as the parties may agree in writing). The closing is referred to in this
agreement as the "Closing" and date of the closing is referred to herein as the
"Closing Date". On such date the Stockholders and Allegro shall each perform
their respective obligations in relation to the exchange of the Stock in
accordance with and as set out in this Article 3.
3.2 Reserved
3.3 Documents to be Delivered by the Stockholders.
At the Closing:
(a) the Stockholders or the Company or their duly appointed attorneys, as the
case may be, shall execute and deliver to Allegro the following:
(i) duly executed transfers of the Stock by the registered holders in favour of
Allegro or persons nominated by Allegro and the share certificates (or where
applicable the indemnities in the agreed terms attached hereto as Exhibit K)
relating to the Stock and any additional documentation necessary to authorise
the executions of such transfers and to allow the transferees (subject to due
stamping) to be registered in the register of members of the Company as holders
of the Stock;
(ii) the common seal, statutory books and other record books of the Company
written up to Closing;
(iii) resignation letters in the approved terms from each existing director of
the company with the exception of Gwyn Jones;
<PAGE> 3
- 3 -
(iv) evidence reasonably satisfactory to the Purchaser that all sums owed by the
Company to any of the Vendors or by any of the Vendors to the Company have been
repaid;
(v) an unqualified letter of resignation from the auditors of the Company;
(vi) the deed in the approved terms attached hereto at Exhibit I relating to
taxation to be executed at Closing ("the Tax Deed");
(vii) powers of attorney in the approved form attached hereto as Exhibit J
executed by or on behalf of each of the Stockholders in respect of the rights
attaching to the Stock;
(viii) a lock-up agreement between each Stockholder and Allegro relating to
limitations on sales of the Stock, in the form attached hereto as Exhibit A (the
"Lock-Up Agreements");
(ix) the Registration Rights Agreement between Allegro and the Stockholders,
relating to the registration of Allegro Common Stock, in the form attached
hereto as Exhibit C (the "Registration Rights Agreement");
(x) the escrow agreement between Allegro and the Stockholders, in the form
attached hereto as Exhibit D (the "Escrow Agreement"), providing for, among
other things, the deposit with the Escrow Agent (as defined in the Escrow
Agreement) by the Stockholders of one-third of the Exchange Stock to be received
by the Stockholders pursuant hereto (the "Escrow Stock");
(xi) a copy of resolutions of the Stockholders and Board of Directors of the
Company authorizing the execution, delivery and performance of this Agreement by
the Company, and a certificate of its secretary or assistant secretary, dated
the Closing Date, to the effect that such resolutions were duly adopted and are
in full force and effect;
(xii) the opinions, certificates and other documents or instruments specified in
Section 7.1 of this Agreement; and
(xiii) the stockholders agreement relating to the Exchange Stock, in the form
attached as Exhibit L (the "Stockholder Agreement");
(b) each of the Stockholders and the Company shall each execute such other
documents and instruments and take such action as may be necessary or reasonably
requested by Allegro to fully vest in Allegro legal and beneficial title to the
Stock respectively sold by such Stockholder hereunder, and place Allegro in
possession and control of the Company and its assets.
3.4 Documents to be Delivered by Allegro
At the Closing, Allegro shall conditionally upon the implementation of the
matters set out in clause 3.3 execute and/or deliver to the Stockholders the
following:
(i) a copy of resolutions of the board of directors of Allegro authorizing the
execution, delivery and performance of this Agreement by Allegro, and a
certificate of its secretary or assistant secretary, dated the Closing Date, to
the effect that such resolutions were duly adopted and are in full force and
effect;
(ii) the Lock-Up Agreements;
<PAGE> 4
- 4 -
(iii) the Registration Rights Agreement;
(iv) the opinions, certificates and other documents or instruments specified in
Section 7.2 of this Agreement;
(v) certificates representing Allegro Common Stock comprising the Exchange
Stock;
(vi) the Escrow Agreement;
(vii) the Tax Deed; and
(viii) the Stockholder Agreement.
3.5 Form of Documents
Unless specifically otherwise provided herein, all documents to be delivered
pursuant to this Section 3 by one party to the other party to this Agreement
shall be in form and substance reasonably satisfactory to such other party and
its counsel.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders jointly and severally represent and warrant (except with
respect to the first sentence of Section 4.3 below, which the Stockholders
severally represent and warrant) to Allegro as of the date hereof and as of the
Closing Date as follows:
4.1 Organization
The Company is a company duly incorporated under the laws of England.
4.2 Authority
The Company has all requisite power and authority (including all licenses) to
own, operate and lease its properties and to carry on its business as now being
conducted in all the jurisdictions in which it is required to be so licensed.
4.3 Stock Ownership
Except as set forth in Schedule 4.3 the Stockholders own the entire issued and
allotted share capital of the Company all of which shares are legally and
beneficially owned by them, validly issued, fully paid and are owned by the
Stockholders free and clear of any security interest, claim, lien, pledge,
option, encumbrance or restriction whatsoever. The Company does not have any
subsidiaries or direct or indirect interest or interests by stock ownership or
otherwise in any firm, association, corporation or business enterprise nor has
it agreed to acquire any such shares, except as set forth on Schedule 4.3.
4.4 Authorization of Agreements
Each of the Stockholders and the Company have the legal capacity the power and
authority to execute, deliver and perform their respective obligations under
this Agreement. This Agreement has been duly executed and delivered by or on
behalf of the Stockholders and constitutes the legal, valid and binding
obligation of the Stockholders enforceable against them in accordance with its
terms.
<PAGE> 5
- 5 -
4.5 Share Capital
The authorized and issued share capital of all classes of the Company is set
forth on Schedule 4.5. The lawful, registered and beneficial owners of all the
issued shares in the Company and the number of shares held by each beneficial
owner is as indicated on Schedule 4.5. hereto. The Stockholders on the Closing
Date will transfer to Allegro good title to the Stock free of any security
interest, claim, lien, pledge, option, encumbrance or restriction whatsoever.
Except as set forth in Schedule 4.5, there are no rights, subscriptions,
warrants, options, conversion rights, commitments or agreements of any kind
(whether exercisable now or in the future and whether contingent or not) to
purchase or otherwise acquire from the Stockholders, the Company or any other
person, any share or loan capital or securities or obligations of any kind
convertible into or exchangeable for any shares, or any other security of the
Company or any other equity interest in the Company. Except for the Proxies,
there is no proxy, or any agreement, arrangement or understanding of any kind
which is still outstanding to restrict, limit or otherwise affect the right to
vote in relation to any share issued by the Company.
4.6 No Conflicts
Except as set forth on Schedule 4.6. hereto, the execution, delivery and
performance of this Agreement, any other agreement or document contemplated
herein or therein and the completion of all of the transactions contemplated
hereby and thereby: (i) do not and will not require the consent, waiver,
approval, license, designation or authorization of, or declaration with, any
person or public authority; (ii) do not and will not with or without the giving
of notice or the passage of time or both, violate or conflict with or result in
a breach or termination of any provision of, or constitute a default under, or
accelerate or permit the acceleration of the performance required by the terms
of, or result in the creation of any mortgage, security interest, claim, lien,
charge or other encumbrance upon any of the assets of the Company pursuant to,
or otherwise give rise to any liability or obligation under, the certificate of
incorporation, memorandum and articles of association of the Company, any
agreement, mortgage, deed of trust, indenture, license, permit or any other
agreement or instrument or any order, judgment, decree, statute, regulation or
any other restriction of any kind or description to which the Stockholders or
the Company is a party or by which the Stockholders, or the Company or any of
their assets may be bound; and (iii) will not terminate or result in the
termination of any such agreement or instrument, or in any way affect or violate
the terms and conditions of, or result in the cancellation, modification,
revocation or suspension of, any rights of the Company.
4.7 Financial Statements
Attached hereto as Schedule 4.7 are the audited accounts of the Company for the
calendar years ended December 31, 1995, 1994 and 1993 ("the Financial
Statements").
(a) For the relevant periods, the Financial Statements: (1) are complete and
correct in all material respects; (2) present fairly the consolidated financial
position of the Company at such dates and the results of operations and cash
flows for the respective periods ended on such dates; and (3) were prepared in
accordance with United States generally accepted accounting practices,
consistently applied during the periods, and are in accordance with the books
and records maintained by the Company, with no differences between such
Financial Statements and the financial records maintained and accounting methods
applied by the Company for tax purposes, except as disclosed in the notes to the
Financial Statements or in Schedule 4.7.
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(b) As at December 31, 1995, the Company had no liabilities, commitments or
obligations of any nature, whether absolute, accrued, contingent or otherwise
not shown and adequately provided for in the Financial Statements as of such
date or in the Schedules to this Agreement.
4.8 Taxes
4.8.1. General
4.8.1.1 There has not been any transaction, arrangement, event or omission
occurring after 31 December 1995 the taxation treatment of which is the subject
of any dispute with any taxation authority.
4.8.1.2 Since 31 December 1995 no accounting period of the Company has ended.
4.8.2. Compliance
4.8.2.1 The Company has made all returns, claims for relief, applications,
notifications and computations (whether physically in existence or
electronically stored) ("Returns") it is required by law to make. All Returns
have been properly and punctually submitted (whether physically or
electronically) by the Company to all relevant taxation authorities (whether of
the United Kingdom or elsewhere) and the Returns are complete, true and
accurate, give full disclosure of all material facts and circumstances and are
not the subject of any question or dispute nor so far as the Company is aware
are likely to become the subject of any question or dispute with any taxation
authority.
4.8.2.2 The Company has filed a corporation tax return for the period ended on
31 December 1995.
4.8.2.3 Since 31 December 1995 the Company has not filed any amended corporation
tax return.
4.8.2.4 The Company is not a party to any special arrangement for the making of
joint amended returns (as referred to in Inland Revenue Statement of Practice
10/93).
4.8.2.5 All payments by the Company to any person which ought to have been made
under deduction of taxation have been so made and the Company has (if required
by law to do so) accounted to the relevant taxation authority for the taxation
so deducted.
4.8.2.6 The Company is not liable as agent or lessee for any taxation liability
of another person.
4.8.2.7 The Company has duly and punctually paid all taxation which it has
become liable to pay and it has never paid or become liable to pay any penalty,
fine or surcharge in connection with taxation.
4.8.3 Distributions
4.8.3.1 The Company has not since the Accounts Date made or agreed to make any
distributions within the meaning of section 209 ICTA 1988 (meaning of
"distribution").
4.8.4 Value Added Tax
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4.8.4.1 The Company is a registered and taxable person for the purposes of the
Value Added Tax Act 1994 and has complied with and observed in all respects the
terms of all statutory provisions, directions, conditions, notices and
agreements with H.M. Customs and Excise relating to value added tax. The Company
has maintained and obtained accounts, records, invoices and other documents (as
the case may be) appropriate or requisite for the purposes of value added tax
which are complete, correct and up-to-date.
4.8.5 Employees
4.8.5.1 The Company has complied with sections 203 to 203L Income and
Corporation Taxes Act 1988 (pay as you earn) and the regulations made thereunder
in respect of all payments within the meaning of those sections and with the
Social Security (Contributions) Regulations 1979 in respect of all earnings
which are subject to those regulations.
4.8.6 International
4.8.6.1 The Company is and always has been resident only in the United Kingdom
for taxation purposes. The Company is not liable to taxation in any jurisdiction
other than the United Kingdom.
4.9 No Adverse Changes
Except as set forth on Schedule 4.9 hereto, since December 31, 1995: (i) the
business of the Company has been conducted only in the ordinary course; (ii)
there has been no adverse change in the condition (financial or otherwise),
assets, liabilities, business, operations, affairs or prospects of the Company,
other than changes in the ordinary course of business none of which singly and
no combination of which in the aggregate has been material; and (iii) there has
been no damage, destruction or loss or other occurrence or development, whether
or not insured against, which either singly or in the aggregate materially
adversely affects, and the Stockholders have no knowledge of any threatened
occurrence or development which would materially adversely affect, the condition
(financial or otherwise), assets, liabilities, business, operations, affairs or
prospects of the Company.
4.10 Conduct of Business
Except as disclosed in Schedule 4.10 hereto, since December 31, 1995, the
Company has not: (i) created or incurred any liability (absolute, accrued,
contingent or otherwise) except unsecured current liabilities incurred in the
ordinary course of business consistent with past practice for other than money
borrowed and disclosed in Schedule 4.10 hereto; (ii) mortgaged, pledged or
subjected to any lien or otherwise encumbered any of its assets, tangible or
intangible; (iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute, accrued, contingent or otherwise) other than
current liabilities shown in the Financial Statements as at December 31, 1995
and taxes and current liabilities incurred since December 31, 1995 in the
ordinary course of business for other than money borrowed or under contracts or
agreements entered into in the ordinary course of business and disclosed in
Schedule 4.10 hereto (other than as a result of any default or breach of, or
penalty under, any such contracts of agreements); (iv) waived, released or
compromised any claims or rights of substantial value, or experienced any labour
trouble (including without limitation any actual or threatened dispute between
the Company and any trade union or other organisation formed for a similar
purpose and there is no collective bargaining agreement or other arrangement to
which the Company is a party) or lost, or been threatened with the termination
of, any key employees or any substantial number of employees; (v) entered into
any settlement, compromise or consent with respect to any litigation or
arbitration proceedings or investigation; (vi) made capital expenditures; (vii)
sold, assigned, transferred, leased or otherwise disposed of any of its assets,
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tangible or intangible, or cancelled or compromised any debts or claims except,
in each case, for fair consideration in the ordinary course of business (it
being understood that the disposition of any asset, other than inventory
consisting of finished products, or cancellation or compromise of any debt or
claim carried on the books at more than $10,000 shall be deemed not to be a
disposition or cancellation in the ordinary course of business); (viii) declared
or paid any dividends, or made any other distribution on or in respect of, or
directly or indirectly purchased, redeemed or otherwise acquired any of its own
shares, paid any notes, made any loan or paid any amount or transferred any
asset to any Stockholder, any member of any Stockholders' family or any other
holder of any shares of the Company; (ix) made or become a party to, or become
bound by, any contract or commitment or renewed, extended, amended, modified or
terminated any contract or commitment which in any one case involved an amount
in excess of $10,000 (or in the aggregate an amount in excess of $25,000) or a
term in excess of thirty days; (x) issued, sold or transferred any of its
shares; (xi) paid or agreed to pay, other than in the ordinary course of
business, conditionally or otherwise, any bonus, extra remuneration, pension or
severance pay to any of its officers or employees, whether under any existing
profit sharing, pension or other plan or otherwise, or increased the rate or
altered the form of remuneration, including without limitation salaries, fees,
commission rates, bonuses, profit sharing, incentive, pension, retirement or
other similar payments, from that being paid at December 31, 1995 to any of its
stockholders, directors, officers or employees; (xii) entered into any
transaction not in the ordinary course of business (except for transactions
contemplated hereby); (xiii) made or announced any change in the terms,
including but not limited to price, of the sale of any of its goods or services
or made or announced any change in the form or manner of distribution of any of
its products or services; (xiv) changed any of its accounting methods or
principles used in recording transactions on its books or records or in
preparing the Financial Statements; or (xv) entered into any contract or
commitment to do any of the foregoing.
4.11 Title to Assets
The Company has good title to all of its personal property and valid leasehold
interests in all real and personal property leased by it, free and clear of all
claims, liens, charges, mortgages, pledges, security interests, restrictions and
other encumbrances of any kind whatsoever except as set forth in Schedule 4.11.
To the knowledge of the Company or the Stockholders, no instrument, easement,
license or grant of record, applicable zoning or building law, ordinance or
administrative regulation or other impediment of any kind prohibits or
interferes with, limits or impairs, or would, if not permitted by any prior
nonconforming use, prohibit or interfere with or limit or impair, the use,
operation, maintenance of, or access to, or the value of, the real or personal
property owned or leased by the Company. All of the assets and properties owned
or leased by the Company are (i) sufficient and adequate to carry on their
business as presently conducted; (ii) are in good condition and repair, normal
wear and tear excepted, and are in a state of maintenance, repair and operating
condition required for the proper operation and use thereof in the ordinary
course of business; (iii) to the knowledge of the Company or the Stockholders,
comply with all material applicable federal, state or local laws, ordinances,
rules and regulations and with the terms and conditions of all leases and other
agreements affecting or relating to any such property; and (iv) are adequate to
provide the products and services of the Company in accordance with the most
current standards established by customers, clients and governmental bodies.
4.12 Real Property
The Company does not own any real property. Schedule 4.12 sets forth a true and
complete list of all leases of real property to which the Company is a party.
The Company enjoys quiet possession under all of its leases, each of which is
enforceable in accordance with its terms
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against the lessor thereunder and is not in material default under the terms of
any of its leases; and no condition exists and no event has occurred which, with
or without the passage of time or the giving of notice or both, could constitute
such a default by the Company.
4.13 Personal Property
Schedule 4.13 hereto sets forth a true and complete list of all items of
personal property having an original cost of more than $5,000, owned or leased
by the Company and the location of each such item. No shortage or damage exists
in (i) any raw materials, supplies, work in process or finished goods owned by
customers or suppliers of the Company and stored upon the premises of the
business or (ii) any other items of personal property owned by another for which
the Company is accountable to another, and any such items referred to in clauses
(i) or (ii) are described in Schedule 4.13 hereto.
4.14 Stock
Schedule 4.14 hereto sets forth a true and complete summary of all of the stock
of the Company as of December 31, 1995. The items listed in Schedule 4.14
together with the assets listed in Schedules 4.11, 4.12 and 4.13constitute all
of the material tangible assets used in the business of the Company. The stock
included in Schedule 4.14 and all additions thereto acquired since December 31,
1995 and now on hand are in good condition, of a quantity and quality usable and
saleable in the ordinary course of business and are adequate and appropriate for
the business of the Company as now conducted, except as disclosed in Schedule
4.14. Obsolete, discontinued, returned, damaged, overage or off-quality items do
not constitute a substantial part of such stock and are carried on the Financial
Statements for the period ending December 31, 1995 at realizable market value.
Finished goods in stock conform to specifications, including without limitation
all applicable statutes and regulations, are free from defects and are
marketable in their current condition.
4.15 Debtors
Each debt now owed to the Company less the bad debt provisions or reserves
provided for in such Financial Statements as such reserves may have thereafter
been adjusted on the books of the Company in the ordinary course of business to
date and consistent with the practices used in preparing the Financial
Statements, and except as set forth on Schedule 4.15 hereto, have been
collected. All such debts have been generated in the ordinary course of business
and reflect a bona fide obligation for the payment of goods or services provided
by the Company and are subject to no known counterclaims or set-offs.
4.16 Material Agreements; Other Contracts
(a) Schedule 4.16 sets forth a complete list with regard to the Company of (i)
all bids, applications or proposals submitted by it to provide materials or
services to any Person and for which the award, approval or selection is pending
(ii) all contracts or agreements for the provision of materials or services to
which the Company is a party and which has not yet been performed in full, in
each case involving the payment or provision of goods or services in an amount
equal to or exceeding $2,000 (the items referred to in the going clauses (i) and
(ii) being herein collectively called the "Agreements"). All of the Agreements
are fully performable by the Company in compliance with their terms and
consistent with the Company's expense budget therefore. No grounds exist for the
termination or cancellation of any Agreement by the other party thereto.
Schedule 4.16 sets forth for each Agreement: (i) the branch of the Company
responsible; (ii) the customer; (iii) the total contract amount; (iv) revenue
recognized to date;
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(v) remaining revenue to be earned; (vi) approximated total projected expense
and (vi) approximated projected profitability, if any, or loss; all of which
items are complete and correct. The complete performance of each Agreement in
accordance with its terms will not result in any material variance from the
revenue, expense or profitability amounts set forth with respect thereto on
Schedule 4.16.
(b) Except as disclosed in Schedule 4.16 hereto, the Company is not a party to
or bound by any oral or written contracts, obligations or commitments, including
without limitation any:
(i) contract, commitment or arrangement involving, in any one case, $10,000 or
more;
(ii) contract with a term of, or requiring performance, more than six months
from its date and involving more than $10,000 in the aggregate;
(iii) commitment, contract or undertaking which is not terminable upon notice of
30 days or less without penalty, cost or liability whatsoever and involving more
than $10,000 in the aggregate;
(iv) hire or hire purchase agreement, mortgage, conditional sale or title
retention agreement, indenture, security agreement, credit agreement, pledge or
option with respect to any property, real or personal (tangible or intangible),
in any capacity;
(v) commitment, contract or undertaking for the purchase or use of services,
materials, supplies, inventory, machinery or equipment and involving more than
$10,000 in the aggregate;
(vi) commitment, contract or undertaking for the sale or use of the Company's
products and involving more than $10,000 in the aggregate;
(vii) employment contract, undertaking, understanding or arrangement;
(viii) contract or agreement with any trade union or other organisation formed
for a similar purpose;
(ix) bonus, pension, savings, profit sharing, incentive, retirement, commission,
cash remuneration, insurance or similar plan providing for employee benefits of
any kind whatsoever or any other arrangement providing for benefits for any
former or current employees or for the remuneration, direct or indirect, of the
directors, officers or employees of the Company;
(x) note, loan facility, credit or financing agreement or other agreement for
money borrowed from whatever source, or other financial facilities, and all
related security agreements and collateral documents, including any agreement
for any commitment for future loans, credit or financing;
(xi) guarantee, indemnity or security;
(xii) contract or arrangement regarding any capital expenditures;
(xiii) agency (sales or otherwise), distribution, brokerage (including, without
limitation, any brokerage or finder's agreement or arrangement with respect to
any of the transactions contemplated by this Agreement) or advertising
agreement;
(xiv) contract with investment bankers, accountants, lawyers, consultants or
other professional advisers or independent contractors;
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(xv) shareholder agreement or contract with any Stockholders (or family member
thereof), director or officer of the Company or any Affiliate of such persons;
(xvi) contract, commitment, covenant or arrangement which would restrain the
Company from engaging or competing in any business or to maintain the
confidentiality of any matter;
(xvii) contract, commitment or arrangement not made in the ordinary course of
business;
(xviii) license, permit, franchise or royalty agreement.
(c) The Stockholders have delivered to Allegro correct and complete copies of
all of the contracts, agreements and other documents listed in Schedule 4.16
hereto and all amendments thereto and any waivers granted thereunder (the
"Scheduled Contracts"). Except as specifically set forth on Schedule 4.16, the
exchange of the Stock with Allegro and the completion of the other transactions
contemplated by this Agreement will not result in a breach of or constitute a
default under or grounds for the modification or cancellation of any of the
Scheduled Contracts or for the imposition of any penalty or security interests
thereunder. Except as set forth on Schedule 4.16 hereto, the Company enjoys good
working relationships under all Scheduled Contracts, and no unresolved disputes
are pending or, to the best of the Company's or the Stockholders' knowledge,
threatened under or in respect of any such Scheduled Contracts. The
consideration to be received or paid by the Company under all Scheduled
Contracts have been determined in accordance with its established policies.
(d) Except as described in Schedule 4.16 hereto, all Scheduled Contracts
described in Schedule 4.16 are valid and enforceable in accordance with their
respective terms and are not void or voidable, and there is not, under any of
such documents or agreements or any obligation, or covenant or condition
contained therein, any existing default by the Company, or to the knowledge of
the Company or the Stockholders, by any other party, or any event which with
notice, lapse of time, or both, would constitute a default and which would have
a material adverse effect on the continued operation of the Company or its
business.
4.17 Intellectual Property
Schedule 4.17 hereto sets forth a true and complete list of all of trademarks,
service marks and trade names, and the federal, state and foreign registrations
and applications thereof, patents, patents pending and patent applications and
extensions and renewals thereof, copyrights and copyright applications and
renewals thereof, Trade Secrets and all other industrial, intellectual property,
and similar property rights, including without limitation, all inventions,
product designs or methods and know-how used, employed or exploited by the
Company (the "Intellectual Property"). Except as set forth in Schedule 4.17, all
the Intellectual Property is beneficially and legally owned solely by the
Company free and clear of any and all licenses, liens, claims, security
interests, charges or other encumbrances or restrictions of any kind, and no
licenses for the use of any of such rights have been granted by the Company to
any third parties. Except as set forth in Schedule 4.17 hereto, all of such
rights are valid, enforceable and in good standing, and are sufficient and
appropriate for the conduct of business of the Company as currently conducted or
as contemplated in their plans for future activities. The sale of the Stock to
Allegro and the completion of the other transactions contemplated hereby will
not adversely affect any rights in the Intellectual Property of the Company. The
operation of the business of the Company does not infringe in any way on or
conflict with any registered or unregistered patent, trademark, trade name,
copyright, Trade Secret, contract, license or other right, of any Person and the
Company licenses no such right from others except as set forth on Schedule 4.17.
Except as set forth on Schedule 4.17, no claim is pending
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or has been made within the past five years, or, to the knowledge of the Company
or the Stockholders, is threatened, to the effect that any such infringement or
conflict has occurred. No other Intellectual Property other than those owned or
licensed by the Company are required by it for its business as presently
conducted. The Stockholders have no knowledge of any infringement by any third
parties upon any of the Intellectual Property. True, correct and complete copies
of all documentation describing or relating to the Intellectual Property have
been delivered by the Company to Allegro.
4.18 Insurance
Schedule 4.18 hereto contains a complete and correct list of all insurance
policies maintained by the Company together with a schedule of required
premiums, premium payment dates and any prepaid premiums under each such policy.
The Stockholders have furnished to Allegro complete and correct copies of all
such policies together with all riders and amendments thereto. Such policies are
in full force and effect and are not voidable, and all premiums due thereon have
been paid. The Company has complied in all material respects with the provisions
of such policies. No notice has been received cancelling or threatening to
cancel or refusing to renew any of such insurance. The rights of the insured
under such policies will not be terminated or adversely affected by the Closing
or the completion of the other transactions contemplated hereby. To the
knowledge of the Company or the Stockholders, there is currently no basis for
any insurance claim by the Company, except as set forth in Schedule 4.18.
4.19 Customer and Supplier Relationships
Attached as Schedule 4.19 is a complete and correct list of all current
customers of the Company whose purchases from the Company amounted to more than
$10,000 and showing such sales for the year ended December 31, 1995, and of all
suppliers whose sales to the Company amounted to more than $10,000 during such
year showing the sales of each. With respect to any such customer or supplier or
group of related customers or suppliers listed on Schedule 4.19, to the
knowledge of the Company or the Stockholders, no such customer, supplier or
group of related customers or suppliers has terminated or expects to terminate a
material portion of its normal business with the Company. Except as disclosed in
Schedule 4.19 hereto, no Stockholders or director or officer of the Company or
any of their family members or Affiliates has any direct or indirect interest,
either by way of stock ownership or otherwise, in any firm, corporation,
association or business enterprise, which competes with, is a supplier or
customer of, or is a distributor or sales agent for, or is a party to any
contract with the Company.
4.20 Employees
The Stockholders have furnished to Allegro a true and complete list setting
forth all of the employees and officers of the Company (listing each such person
individually by name) with a description of their job designations, cash
remuneration, benefits receivable otherwise than in cash (including severance
pay and bonuses), outstanding loans to officers or employees and all
understandings not in the ordinary course of business relating to terms and
conditions of employment, whether or not legally binding. Subject to the
accuracy of declarations made by employees, proper and accurate amounts have
been withheld by the Company from their employees for all periods in full
compliance with tax withholding provisions of applicable federal, state, local
or foreign law. Proper and accurate returns have been filed by the Company for
all periods for which returns were due with respect to all taxes including
without limitation employee income tax and National Insurance contributions, and
the amounts shown thereon to be due and payable have been paid.
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4.21 Employee Relations
There has been no material breach of any statute, laws, rules, regulations,
orders or directives with respect to the employment of individuals by, or the
employment practices or work conditions of, the Company, or their respective
terms and conditions of employment, wages and hours (including obligations under
statute concerning the health and safety at work of the employees). The Company
is not engaged in any unfair employment practice or other unlawful employment
practice and there are no employee related complaints against the Company
pending or threatened. There is no dispute between the Company and any trade
union or other organisation formed for a similar purpose existing, pending or
threatened nor has there been any dispute in the last five years and there is no
collective bargaining agreement or other arrangement (whether binding or not) to
which the Company is a party.
4.22 Litigation; Compliance; Permits
(a) Except as disclosed in Schedule 4.22 hereto, the Company is not engaged in
any litigation, arbitration proceedings or governmental investigations pending
or, to the knowledge of the Company or Stockholders, threatened against, by or
affecting the Company in which, individually or in the aggregate, an
unfavourable determination could materially affect the business of the Company
or its prospects, earnings or condition (financial or otherwise) or any of its
assets or result in any liability on the part of the Company or prevent, hinder
or delay the execution and performance of this Agreement or any of the
transactions or events contemplated hereby or could declare this Agreement
unlawful void or voidable or cause the rescission of any of the transactions
hereunder nor has any such litigation been pending within the two years prior to
the date hereof.
(b) The Company has complied in all material respects and is in compliance in
all material respects with, all laws, rules, regulations, orders, judgments,
decrees, writs, injunctions, building codes, safety, fire and health approvals
or other statutory regulations applicable to them, their assets, employees and
employment practices. Neither the Company nor its officers, agents or employees
in the course of their respective duties to the Company have done or omitted to
do anything in breach of the law of the United Kingdom or of any foreign country
in which the Company conducts business.
(c) The Company has all licenses, consents, permits, approvals or other
authorizations required for the conduct of its business as now conducted, all of
which are valid and subsisting and all of which are listed on Schedule 4.22
hereto; there is no action pending or, to the knowledge of the Stockholders,
threatened, to terminate any rights under any such licenses, consents, permits
or authorizations; and except as disclosed in Schedule 4.22, none of such
licenses, consents, permits, approvals and authorizations will be adversely
affected by the transfer of the Stock to Allegro or the completion of the other
transactions contemplated by this Agreement.
4.23 Environmental Compliance
Except as set forth in Schedule 4.23, (i) all of the assets and properties
presently or, to the knowledge of the Company or the Stockholders, formerly
owned, leased, occupied or operated by the Company, its Affiliates or divisions
are in compliance with all Environmental Laws and are not subject to any
outstanding or threatened Environmental Actions; (ii) none of the assets and
properties presently or, to the knowledge of the Company or the Stockholders,
formerly owned, leased, occupied or operated by the Company, its divisions and
Affiliates have been used for the generation, storage, manufacture, use,
transportation, disposal or treatment of Hazardous Substances; (iii) there has
been no Hazardous Discharge on or from any of the assets and
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properties presently or, to the knowledge of the Company or the Stockholders,
formerly owned, leased, occupied or operated by the Company, its divisions or
Affiliates; (iv) there are no threatened or outstanding Environmental Actions
against the Company or, to the knowledge of the Company or the Stockholders, any
of the owners or operators of any facilities that may have received solid waste
or Hazardous Substances from any of the assets, former assets and properties
presently or formerly owned, leased, occupied or operated by the Company, its
divisions or Affiliates; and (v) to the knowledge of the Company or the
Stockholders, the Company has not owned, possessed or arranged for the
transportation of Hazardous Substances at any site where remediation services
have been performed. No employee or other person has ever made a claim or demand
against the Company based on alleged damage to health caused by any Hazardous
Substance. All services performed by the Company, including, without limitation,
remediation activities, were and are in full compliance with all Environmental
Laws and provide no basis for an Environmental Action against the Company or any
other Person or any other claim that such services were not properly performed.
4.24 Corporate Records
The copy of the memorandum and articles of association of the Company annexed to
the Disclosure Letter is true and complete and has embodied in it or annexed to
it a copy of every such resolution or agreement as is referred to in section
380(1) Companies Act and sets out in full the rights and restrictions attaching
to each class of the share capital of the Company. The Company has properly and
punctually made all returns which it is required to make to the Registrar of
Companies, to any other governmental or regulatory body and to any local
authority. Due compliance has been made with all the provisions of the Companies
Act and other legal requirements, in connection with the formation of the
Company, the allotment, issue, purchase and redemption of shares, debentures and
other securities in the Company, the reduction of the authorised and issued
share capital of the Company, any amendment to the memorandum or articles of
association of the Company and the passing of resolutions and the payment of
dividends by the Company. The Company has at all times conducted its business
intra vires, has not entered into any transaction ultra vires the Company or
outside of the authority or powers of the directors of the Company and is not in
breach of the provisions of the Articles.
4.25 Bank Accounts; Power of Attorney
Schedule 4.25 hereto correctly sets forth: (i) a list of all banks in which the
Company has an account or safety deposit box, account number, purpose of such
account or safety deposit box and the names of all persons authorized to draw
thereon or have access thereto; and (ii) the names of all persons holding bank
mandates or powers of attorney from the Company and a description of the bank
mandates or power of attorney.
4.26 Warranties
Except as described in Schedule 4.26 during the past three years the Company has
not given any written warranties with respect to any of its respective products
or services. Schedule 4.26 also sets forth a description of all claims in excess
of $10,000 concerning product liability or arising from services provided which
have been made against the Company during the past three years.
4.27 Pensions
The Company is not under any legal liability to pay pensions, gratuities,
superannuation allowances or the like to any of its past or present directors,
officers or employees or their dependants nor is it
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in the habit of making ex gratia or voluntary payments by way of superannuation
allowance or pension and there are no pension schemes or arrangements for
payment of pensions or death benefits or similar arrangements in operation or
contemplated in relation to the Company.
4.28 Disclosure
(a) No representation or warranty by the Stockholders and no statement or
certificate furnished or to be furnished by or on behalf of the Stockholders to
Allegro or its agents pursuant to this Agreement or in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
(b) As used in this Agreement the term "to the knowledge of the Company or the
Stockholders" or "to the best knowledge of the Company or the Stockholders"
means the actual knowledge of any Stockholder or any executive officer or
director of the Company.
4.29 Investment Representations
(a) The Stockholders are acquiring Allegro Common Stock for the Stockholders'
own account for investment only and not with a view to, or for sale in
connection with, a distribution of Allegro Common Stock within the meaning of
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act") and any applicable state, securities or blue-sky laws.
(b) No Stockholder is a party or subject to or bound by any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
pledge Allegro Common Stock or any part thereof to any person, or has any
present intention to enter into such a contract, undertaking, agreement or
arrangement.
(c) The Stockholders acknowledge to and agree with Allegro that:
(i) Allegro has advised the Stockholders that Allegro Common Stock have not been
registered under the Securities Act or under the laws of any state on the basis
that the issuance thereof contemplated by this Agreement is exempt from such
registration;
(ii) The Company's reliance on the availability of such exemption is, in part,
based upon the accuracy and truthfulness of the Stockholders' representations
contained herein;
(iii) Allegro Common Stock cannot be resold without registration or an exemption
under the Securities Act and such state securities laws, and that the
certificates representing the shares of Allegro Common Stock to be issued
pursuant hereto will bear a restrictive legend to such effect;
(iv) The Stockholders have evaluated the merits and risks of acquiring Allegro
Common Stock, and have such knowledge and experience in financial and business
matters that the Stockholder are capable of evaluating the merits and risks of
such purchase, are aware of and have considered the financial risks and
financial hazards of acquiring Allegro Common Stock, and are able to bear the
economic risk of acquiring Allegro Common Stock, including the possibility of a
complete loss with respect thereto;
(v) The Stockholders have had access to such information regarding the business
and finances of Allegro, including without limitation Allegro's Annual Report on
Form 10-KSB for the fiscal year ending December 31, 1995 and Allegro's Quarterly
Report on Form 10-QSB for the fiscal quarter
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ending March 31, 1996, including the financial statements contained therein, the
receipt and careful reading of which is hereby acknowledged by the Stockholders,
and have been provided the opportunity to discuss with Allegro's management the
business, affairs and financial condition of Allegro and such other matters with
respect to Allegro as would concern a reasonable person considering the
transactions contemplated by this Agreement and/or concerned with the operation
of Allegro, including without limitation pursuant to a meeting and/or
discussions with management of Allegro; and
(vi) The Stockholders hereby covenant and agree that, except as provided in the
Lock-Up Agreements, the Stockholders shall not, directly or indirectly, offer,
offer to sell, contract to sell, pledge, hypothecate, grant any option to
purchase or otherwise dispose or transfer (or announce any offer, offer of sale,
sale, contract of sale, grant of any option to purchase or other disposition or
transfer), or agree to do any of the foregoing, with respect to Allegro Common
Stock, without the prior written consent of Allegro, until the second
anniversary of the Closing Date. The certificates representing Allegro Common
Stock will bear a restrictive legend to such effect;
(vii) All of the Stockholders' representations and warranties set forth herein
are correct and complete as of the date of this Agreement, shall be true and
correct in all material respects as of the Closing Date, shall survive such
closing and if there should by any material change in such information prior to
the sale to the Stockholder of Allegro Common Stock, the Stockholder will
immediately furnish such revised or corrected information to Allegro;
(viii) The acquisition of Allegro Common Stock involves a high degree of risk
and may result in a loss of the entire amount invested. The Stockholders further
acknowledge and agree that the Company has a limited operating history. There is
no assurance that the Company's operations will be profitable in the future.
5. Representations and Warranties of Allegro
Allegro represents and warrants to the Stockholders and the Company on the date
hereof and on the Closing Date as follows:
5.1 Corporate Status
Allegro is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware with all requisite power and authority
(corporate and governmental) to own, operate and lease its properties and to
carry on its business as now being conducted. Except as set forth in Schedule
5.1, Allegro is duly licensed or qualified to do business and is in good
standing in the states and countries set forth on Schedule 5.1 hereto, which,
except as set forth in Schedule 5.1, are all the jurisdictions in which Allegro
is required to be so qualified or licensed.
5.2 Authority for Agreements
Allegro has the power and authority to execute and deliver this Agreement and to
carry out its obligations hereunder. The execution, delivery and performance by
Allegro of this Agreement and the completion of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Allegro. This Agreement has been duly executed and delivered by Allegro and
constitutes the legal, valid and binding obligation of Allegro enforceable
against Allegro in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization and similar laws
of general application relating to or affecting the rights and remedies of
creditors.
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5.3 No Conflicts
The execution, delivery and performance of this Agreement, any other agreement
or document contemplated herein or therein and the consummation of all of the
transactions contemplated hereby and thereby: (i) do not and will not require
the consent, waiver, approval, license, designation or authorization of, or
declaration with, any person or public authority; (ii) do not and will not with
or without the giving of notice or the passage of time or both, violate or
conflict with or result in a breach or termination of any provision of, or
constitute a default under, or accelerate or permit the acceleration of the
performance required by the terms of, or result in the creation of any mortgage,
security interest, claim, lien, charge or other encumbrance upon any of the
assets of Allegro pursuant to, or otherwise give rise to any liability or
obligation under, the certificate of incorporation or other charter documents or
bylaws of Allegro, any agreement, mortgage, deed of trust, indenture, license,
permit or any other agreement or instrument or any order, judgment, decree,
statute, regulation or any other restriction of any kind or description to which
the Allegro is a party or by which Allegro or any of its assets may be bound;
and (iii) will not terminate or result in the termination of any such agreement
or instrument, or in any way affect or violate the terms and conditions of, or
result in the cancellation, modification, revocation or suspension of, any
rights of Allegro.
5.4 Allegro Common Stock
Allegro Common Stock, when issued in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable.
5.5 No Adverse Changes
Since March 31, 1996: (i) there has been no adverse change in the condition
(financial or otherwise), assets, liabilities, business, operations, affairs or
prospects of Allegro, other than changes in the ordinary course of business none
of which singly and no combination of which in the aggregate has been material;
and (ii) there has been no damage, destruction or loss or other occurrence or
development, whether or not insured against, which either singly or in the
aggregate materially adversely affects, and Allegro has no knowledge of any
threatened occurrence or development which would materially adversely affect,
the condition (financial or otherwise), assets, liabilities, business,
operations, affairs or prospects of Allegro.
5.6 Litigation; Compliance; Permits
(a) There are no actions, suits, proceedings or arbitrations or governmental
investigations pending or, to the knowledge of Allegro, threatened against, by
or affecting the Company in which, individually or in the aggregate, an
unfavourable determination could materially affect the business of Allegro or
its prospects, earnings or condition (financial or otherwise) or any of its
assets or result in any liability on the part of Allegro or prevent, hinder or
delay the execution and performance of this Agreement or any of the transactions
or events contemplated hereby or could declare this Agreement unlawful or cause
the rescission of any of the transactions hereunder or require Allegro to divest
itself of the Stock, nor has any such suit been pending within the two years
prior to the date hereof. Allegro has not been charged with or received notice
of any breach of any applicable federal, state, local or foreign law, rule,
regulation, ordinance, order or decree relating to it, or the operation of its
business, and Allegro is not aware of any threatened claim of such violation
(including any investigation) or any basis therefor.
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(b) Allegro has complied in all material respects and is in compliance in all
material respects with, all laws, rules, regulations, ordinances, orders,
judgments, decrees, writs, injunctions, building codes, safety, fire and health
approvals, certificates of occupancy or other governmental restrictions
applicable to it, its assets, employees and employment practices.
(c) Allegro has all governmental licenses, permits, consents, approvals or other
authorizations required for the conduct of its business as now conducted, all of
which are in full force and effect; there is no action pending or, to the
knowledge of Allegro, threatened, to terminate any rights under any such
governmental licenses, permits or authorizations; and none of such licenses,
permits, consents, approvals and authorizations will be adversely affected by
the transfer of the Stock to Allegro or the completion of the other transactions
contemplated by this Agreement.
5.7 Investment Representations
(a) Allegro is acquiring the Stock for Allegro's own account for investment only
and not with a view to, or for sale in connection with, a distribution of the
Stock within the meaning of the Securities Act and any applicable state,
securities or blue-sky laws.
(b) Allegro is not a party or subject to or bound by any contract, undertaking,
agreement or arrangement with any person to sell, transfer or pledge the Stock
or any part thereof to any person, and has no present intention to enter into
such a contract, undertaking, agreement or arrangement.
(c) Allegro acknowledges to and agrees with the Company and the Stockholders
that:
(i) Allegro has evaluated the merits and risks of acquiring the Stock, and has
such knowledge and experience in financial and business matters that Allegro is
capable of evaluating the merits and risks of such purchase, is aware of and has
considered the financial risks and financial hazards of acquiring the Stock, and
is able to bear the economic risk of acquiring the Stock, including the
possibility of a complete loss with respect thereto;
(ii) Allegro has had access to such information regarding the business and
finances of the Company, the receipt and careful reading of which is hereby
acknowledged by Allegro, and has been provided the opportunity to discuss with
the Company's management the business, affairs and financial condition of the
Company and such other matters with respect to the Company as would concern a
reasonable person considering the transactions contemplated by this Agreement
and/or concerned with the operation of the Company, including without limitation
pursuant to a meeting and/or discussions with management of the Company.
6. COVENANTS
6.1 Operation of Business
From the date hereof until the Closing Date the Company shall, and the
Stockholders shall cause the Company to, operate its business in the ordinary
course and in a manner consistent with past practice. The Stockholders and the
Company shall use all reasonable efforts (but without making any commitment on
behalf of Allegro) to maintain contact and preserve the Company's present
business organization, keep available the services of their employees and
preserve their relationships with customers, suppliers and others having
business dealings with them. The Company shall, and the Stockholders shall cause
the Company to:
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(a) maintain all its material structures, equipment and other tangible personal
property currently in use in good operating condition and repair, except for
ordinary wear and tear and damage by unavoidable casualty;
(b) keep in full force and effect insurance comparable in amount and scope of
coverage to insurance now carried by it;
(c) perform in all material respects all of its obligations under agreements,
contracts and instruments relating to or affecting its properties, assets and
business;
(d) maintain its books of account and records in the usual, regular and ordinary
manner; and
(e) effect no change in the accounting methods employed to prepare the Financial
Statements.
6.2 Access to Information; Confidentiality
Prior to the Closing, Allegro may make such investigation of the business of the
Company as Allegro may desire and the Stockholders and the Company shall cause
Allegro and its counsel, accountants and other representatives to be given
reasonable access during normal business hours throughout the period prior to
the Closing to the assets, books, commitments, agreements, records and files of
the Company and the Stockholders shall cause to be furnished to Allegro during
that period all documents and copies of documents and information concerning the
business and affairs of the Company as Allegro may reasonably request. Allegro
shall hold, and cause its representatives to hold, all such information and
documents confidential pending the Closing or indefinitely, if the purchase and
sale contemplated by this Agreement is not consummated for any reason, except
Allegro shall not be required to keep confidential any information which (i) is
or subsequently may become, through no fault of Allegro, generally available to
the public, (ii) was available on a non-confidential basis to Allegro prior to
its disclosure by the Company or the Stockholders, (iii) becomes available to
Allegro on a non-confidential basis from a source not bound by any obligation of
confidentiality with respect to such information, (iv) is independently acquired
by Allegro as a result of work carried out by an employee of Allegro to whom no
disclosure of such information has been made, (v) is required to be disclosed by
law, rule, regulation or judicial process, or (vi) Allegro may consider
necessary for the purpose of enforcing its rights hereunder. Pending the Closing
(or any earlier termination of this Agreement) the Company and the Stockholders
shall keep confidential and after the Closing the Stockholders will not use
(except while employed by the Company and for Company purposes) or disclose to
others and keep confidential any Trade Secrets used or usable by the Company or
Allegro in connection with its business.
6.3 Conduct of the Business Pending the Closing
Until the Closing the Stockholders and the Company:
(a) shall promptly notify Allegro in writing of, and furnish any information
that Allegro reasonably may request with respect to the occurrence of any event
or the existence of any state of facts (whether or not permitted by the
provisions of this agreement) that would result in any of their representations
and warranties not being true or his covenants not fulfilled as of the Closing
Date;
(b) shall not permit the amendment of, or the adoption of resolutions increasing
the amount to be funded or awarded under, any employee benefit plan of any kind
whatsoever except as may otherwise be required by law; and
<PAGE> 20
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(c) will not, and will not permit its officers, directors, employees,
stockholders or agents to negotiate directly or indirectly with, or furnish any
information relating to, any potential sale of the Company or its business or
assets to any other third parties until the earlier of September 30, 1996 or the
termination by Allegro in writing of this Agreement.
6.4 Other Action
Except for action contemplated or permitted by this Agreement (resulting from
the operation of business in the ordinary course), the Company shall not and the
Stockholders shall not and shall cause the Company not to take any action that
would result in any of the Stockholders's and the Company's representations and
warranties not being true as of the Closing Date. Without limiting the
foregoing, the Company shall not and the Stockholders shall not permit the
Company or any Subsidiaries, without the prior written consent of Allegro, to
(i) incur any extraordinary expense or become a party to or become obligated by
any contract, commitment or agreement for the sale, lease or other disposition
of a material part of its assets or which would be required to be listed on
Schedule 4.16 hereto; (ii) create or incur any liability (absolute or
contingent) except unsecured current liabilities incurred for other than money
borrowed and liabilities under contracts entered into in the ordinary course of
business and will not do any of the things required to be listed on Schedule
4.10 by the provisions of Section 4.10; (iii) discontinue the insurance in the
amounts and of the types now carried; (iv) enter into any compromise or
settlement of any litigation, proceeding or governmental investigation relating
to its properties or business, except settlements made by insurers which are
fully covered by existing insurance policies of the Company; (v) enter into any
agreement or commitment to make capital expenditures of more than $10,000 in any
single instance or more than $25,000 in the aggregate; and (vi) make any changes
in its Memorandum and Articles of Association. The Stockholders, the Company and
Allegro shall each use its best efforts to cause the fulfilment at the earliest
practicable date of all of the conditions to their respective obligations to
consummate the sale and purchase under this Agreement.
6.5 Consents
The Stockholders and the Company shall use their best efforts to obtain at the
earliest practicable date, by instruments in form and substance reasonably
satisfactory to Allegro, all consents and approvals, if any, required by any
governmental entity or other regulatory body or under any of the Scheduled
Contracts to the sale of the Stock to Allegro.
6.6 Interim Financial Statements
Prior to the Closing Date, the Stockholders and the Company shall provide
Allegro after they are available in accordance with past practice any financial
statements or financial reports generated by the Company.
6.7 Expenses
Allegro, on the one hand, and the Company and the Stockholders, on the other
hand, shall bear their own respective expenses incurred in connection with this
Agreement and the transactions contemplated hereby and in connection with all
obligations required to be performed by each of them under this Agreement.
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6.8 Resignations of Directors and Officers
The Stockholders shall provide to Allegro written resignations effective as of
the Closing Date of such directors, officers and bank signatories of the Company
as Allegro may request prior to the Closing Date. In the event that Allegro
requests any resignations, the Stockholders and the Company shall cause to be
delivered to Allegro written instructions to each bank at which the Company has
an account or credit facility or at which the Company rents a safe deposit box
informing such bank of the said resignations and revoking the authority of said
persons to act with respect to said account or credit facility and to have
access to said safe deposit box. The Stockholders and the Company shall also
cause to be delivered to Allegro effective the Closing Date the written
surrender by all persons holding powers of attorney or bank mandates from the
Company of their authority and power to act under such powers of attorney or
bank mandates.
6.9 Taxes
The Stockholders shall pay any stamp duty payable in connection with the
exchange of the Stock pursuant to this Agreement.
7. CONDITIONS PRECEDENT
7.1 Conditions to Obligations of Allegro
The obligation of Allegro to deliver the Exchange Stock to the Stockholders and
to satisfy its other obligations hereunder shall be subject to the fulfilment
(or waiver by Allegro) at or prior to the Closing, of the following additional
conditions, which the Company and the Stockholders agree to use their best
efforts to cause to be fulfilled:
(a) Representations, Performance. The representations and warranties contained
in Section 4 hereof shall be true at and as of the date hereof and shall be
repeated and shall be true at and as of the Closing Date with the same effect as
though made at and as of the Closing Date, except as affected by the
transactions contemplated hereby. The Stockholders and the Company shall have
each duly performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by it or them prior
to or on the Closing Date. The Stockholders' Representatives, on behalf of the
Stockholders, shall have delivered to Allegro a certificate dated the Closing
Date to the effect set forth above in this Section 7.1(a).
(b) Consents under Scheduled Contracts. All required consents to the delivery of
the Stock or any of the other transactions contemplated hereby under any
Scheduled Contracts shall have been obtained.
(c) Litigation. Save as disclosed in Schedule 4, no suit, action or other
proceeding or investigation shall be threatened or pending before any court or
governmental agency in which it is sought to restrain or prohibit or to obtain
material damage or other material relief in connection with this Agreement or
the consummation of the transactions contemplated hereby or which is likely to
affect materially the value of the assets, business, condition (financial or
otherwise) or prospects of the Company.
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(d) Opinions of Counsel. Allegro shall have received a favourable opinion,
addressed to Allegro and dated the Closing Date, of Eking Manning, counsel for
the Stockholders, in the form annexed hereto as Exhibit E.
(e) Proceedings and Documentation. All corporate and other proceedings of the
Company and the Stockholders in connection with the transactions contemplated by
this Agreement, and all documents and instruments incident to such corporate
proceedings, shall be satisfactory in substance and form to Allegro and
Allegro's counsel, and Allegro and Allegro's counsel shall have received all
such receipts, documents and instruments, or copies thereof, certified if
requested, to which the Company is entitled and as may be reasonably requested.
(f) Damage to Property. No portion of the plants, machinery or equipment of or
occupied by the Company material to the operation of the business of the Company
as a whole shall, after the date hereof and before the Closing Date, be damaged,
destroyed or taken by condemnation or eminent domain.
(g) Consents and Approvals. All material licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental or regulatory bodies
which are necessary for the consummation of the transactions contemplated hereby
shall have been obtained.
(h) Agreements. Each Stockholder shall have executed and delivered the Proxies,
Lock-up Agreements, Powers of Attorney and the Registration Rights Agreement.
(i) Examination Satisfactory. The results of Allegro's examination of the
business and affairs of the Company, shall be satisfactory to Allegro in all
respects, in its sole discretion.
(j) Accountant Letter. Ernst & Young shall have delivered a letter to Allegro
indicating that there are no serious internal control issues relating to the
Company and that such firm has not discovered any fraudulent practices engaged
in by the Company, other than as previously disclosed in writing by the
Stockholders to Allegro.
(k) Financial Certificate. The Stockholders Representative, on behalf of the
Stockholders, shall have delivered to Allegro at the Closing, a certificate
setting forth (i) the net combined revenues of the Company and Serif, Inc as at
December 31, 1995; (ii) the Company's monthly revenues to date for the calendar
year 1996; (iii) the Closing Date Working Capital; and (iv) the Company's
consolidated expenses and liabilities through the Closing Date for the calendar
year 1996.
(l) Secretary's Certificate. The Secretary of the Company shall have executed
and delivered a certificate to Allegro in the form attached hereto as Exhibit F.
(m) U.S. Closing. The transactions contemplated by the Agreement and Plan of
Reorganization of even date herewith among Allegro, Serif, Inc., a Delaware
corporation, and the stockholders thereof (the "Serif (Inc.) Agreement") shall
have been consummated.
7.2 Conditions to Obligations of the Stockholders
The obligation of the Stockholders to deliver the Stock and to satisfy their
other obligations hereunder shall be subject to the fulfilment (or waiver by the
Stockholders' Representative, on behalf of the Stockholders), on or prior to the
Closing Date, of the following conditions, which Allegro agrees to use its best
efforts to cause to be fulfilled:
(a) Representations, Performance. Etc. The representations and warranties of
Allegro contained in Section 5 hereof shall be true at and as of the date hereof
and shall be repeated and shall be true
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at and as of the Closing Date with the same effect as though made at and as of
such time. Allegro shall have duly performed and complied with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by it prior to or on the Closing Date. Allegro shall have delivered to the
Stockholders an officer's certificate dated the Closing Date to the effect set
forth above in this Section 7.2.(a).
(b) Proceedings and Documentation. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement, including, but
not limited to, the approval of the transactions contemplated in this Agreement
by Allegro's Board of Directors, and all documents and instruments incident
thereto, shall be satisfactory in substance and form to the Stockholders and
Stockholders's counsel, and the Stockholders and Stockholders's counsel shall
have received all such receipts, documents and instruments, or copies thereof,
certified if requested, to which the Stockholders is entitled and as may be
reasonably requested.
(c) Agreements. The Company shall have executed and delivered the Registration
Rights Agreement.
(d) Nomination for Election to Board of Directors. Allegro shall have nominated
Gwyn Jones for election as a member of the Board of Directors of Allegro.
(e) Consents and Waivers. Allegro shall have received all consents and waivers
from all appropriate parties which Allegro deems necessary for the approval of
the transactions contemplated in this Agreement.
(f) Secretary's Certificate. The Secretary of Allegro shall have delivered to
the Stockholders' Representative a certificate in the form attached hereto as
Exhibit H.
(g) U.S. Closing. The transactions contemplated by the Serif (Inc.) Agreement
shall have been consummated.
8. NON-COMPETITION
8.1 Non-competition
(a) During the period commencing on the Closing date and ending on the fourth
anniversary of the Closing Date (subject to Section 8.2 below, the "Restricted
Period"), Gwyn Jones, Peter Beedham and James Bryce (the "Covenantees") shall
not, without the written consent of Allegro, directly or indirectly,
(i) become associated with, render services to, invest in, represent, advise or
otherwise participate in as an officer, employee, director, stockholder,
partner, promoter, agent of, consultant for or otherwise, any business which is
conducted in any of the jurisdictions in which the Company's or Allegro's
business is conducted and which is engaged in the business of developing,
marketing, licensing or selling desktop publishing and/or publication computer
software;
(ii) for the Covenantees's own account or for the account of any other person or
entity (A) interfere with the Company's or Allegro's relationship with any of
its suppliers, customers, licensors, licensees, independent contractors,
representatives or agents or (B) contact, telephone, meet, solicit or transact
any business with any material customer or any supplier, licensor or licensee of
the Company or Allegro who or which transacts or has transacted business with
the Company or Allegro at any time during the Restricted Period; or
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(iii) employ or otherwise engage, or solicit, entice or induce on behalf of any
Covenantee or any other person or entity, the services, retention or employment
of any person who has been an employee, officer, director, principal, partner,
stockholder, independent contractor, sales representative, consultant to or
agent of the Company or Allegro within one year of the date of such offer or
solicitation.
(b) The provisions of this Section 8 shall survive the termination of this
Agreement.
8.2 Non-Exclusivity
Nothing herein contained shall be construed as prohibiting the Company or
Allegro from pursuing any other remedies available to it for any breach,
including but not limited to any injunctive or other equitable relief or the
recovery of damages from the Stockholders.
8.3 Equitable Relief
The Covenantees acknowledge that the covenants contained in this Section 8 are
fair and reasonable in order to protect the Company's and Allegro's business and
were a material and necessary inducement for Allegro to agree to the
transactions contemplated hereby. The Covenantees further acknowledge that they
have realized significant monetary benefit from these transactions, that any
remedy at law for any breach or threatened or attempted breach of the covenants
contained in this Section 8 may be inadequate and that the breach of any of the
covenants contained in this Section 8 will cause irreparable and continuing
damage to Allegro and the Company. Accordingly, the Company or Allegro shall be
entitled to specific performance or any other mode of injunctive and/or other
equitable relief to enforce their rights hereunder, including without limitation
an order restraining any further breach of such covenants, or any other relief a
court might award, without the necessity of showing any actual damage or
irreparable harm or the posting of any bond or furnishing of other security, and
that such injunctive relief shall be cumulative and in addition to any other
rights or remedies to which Allegro may be entitled. The covenants in this
Section 8 shall run in favour of Allegro, the Company and their successors and
assigns. In addition, the Covenantees agree to pay Allegro and Company the costs
they incur, including reasonable attorneys' fees and expenses, in bringing and
prosecuting any proceeding to enforce the terms of this Agreement.
8.4 Severability
In case any one or more of the terms or provisions contained in this Section 8
shall for any reason be held invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect any other terms or provisions
hereof, but such term or provision shall be deemed modified or deleted as or to
the extent required by applicable law, and such modification or deletion shall
not affect the validity of the other terms or provisions of this Section 8. In
addition, if any one or more of the restrictions contained in this Section 8
shall for any reason be held to be unreasonable with regard to time, duration,
geographic scope or activity, the parties contemplate and hereby agree that such
restriction shall be modified and shall be enforced to the full extent
compatible with applicable law. The parties hereto intend that the covenants
contained in this Section 8 shall be deemed a series of separate covenants for
each country, state, county and city. If, in any judicial proceeding, a court
shall refuse to enforce all the separate covenants deemed included in this
Section 8 because, taken together, they cover too extensive a geographic area,
the parties intend that those of such covenants (taken in order of the cities,
counties, states and countries therein which are lease populous) which if
eliminated would permit the remaining separate covenants to be enforced in such
proceeding shall, for the purpose of such proceeding, be deemed eliminated from
the
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provisions of this Section 8. Each of the covenants contained in Section 8 is a
separate undertaking by each covenantee in relation to himself and his interests
and shall be enforceable by Allegro separately and independently of its right to
enforce any one or more of the other covenants contained in Section 8.
9. RESTRICTIVE TRADE PRACTICES ACT 1976
Where this Agreement is or forms part of an agreement which is subject to
registration under the Restrictive Trade Practices Act 1976 ("RTPA"), no
restriction accepted or information provision made under that agreement shall
come into effect until the day after particulars of the agreement have been
furnished to the Director General of Fair Trading under section 24 RTPA. If any
party shall wish to furnish such particulars, the other parties will render such
co-operation and undertake such action as may reasonably be required of them for
such purpose so that particulars may be furnished as soon as practicable
following the signature of this Agreement and each of the parties consents to
the disclosure of all information so furnished. In this clause the words and
terms "agreement" and "subject to registration" shall have the meanings
respectively given to them by the RTPA and the reference to "restrictions
accepted" or "information provision made" under the agreement shall be to
restrictions accepted or information provisions made by virtue of which the
agreement is subject to registration.
10. TERMINATION; AMENDMENT; WAIVER
10.1 Termination
This Agreement may be terminated at any time prior to the Closing Date:
(a) by mutual written consent of the parties.
(b) by Allegro upon notice to the Stockholders and the Company if any of the
conditions set forth in Section 7.1 hereof shall not have been, or it becomes
apparent that any of such conditions will not be fulfilled by September 30,
1996, or (ii) if any default under or breach of any covenant, agreement or
condition of this Agreement, or any misrepresentation or breach of any warranty
contained herein, on the part of the Stockholders shall have occurred and shall
not have been cured to the satisfaction of Allegro; or
(c) by the Company or the Stockholders upon notice to Allegro, (i) if any of the
conditions set forth in Section 7.2 hereof shall not have been, or it becomes
apparent that any of such conditions will not be fulfilled by September 30,
1996, or (ii) if any default under or breach of any agreement or condition of
this Agreement, or any misrepresentation or breach of any warranty contained
herein, on the part of Allegro shall have occurred and shall not have been cured
to the satisfaction of the Stockholders.
10.2 Effect of Termination
In the event of the termination of this Agreement pursuant to the provisions of
Section 9.1 hereof, this Agreement shall become void and have no effect, without
any liability on the part of any party hereto or its directors, officers or
stockholders in respect of this Agreement, except as specified in Section 11 and
except for the confidentiality provisions set forth in Section 6.2 hereof.
<PAGE> 26
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10.3 Amendment
This Agreement may not be amended except by an instrument in writing duly
executed and delivered on behalf of each of the parties hereto.
11. DEFINITIONS; MISCELLANEOUS
11.1 Definition of Certain Terms.
In addition to capitalized terms defined elsewhere in this Agreement, as used
herein, the following terms shall have the following meanings:
Affiliate: with respect to any Person, any Person which, directly or indirectly,
controls, is controlled by, or is under common control with, such Person. The
term "control" (including, with correlative meaning, the terms "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
Agreement: this Agreement
Agreements: as defined in Section 4.16(a).
Closing: as defined in Section 3.1.
Closing Date: as defined in Section 3.1.
Closing Date Working Capital: as defined in Section 7.1(n).
Code: the Internal Revenue Code of 1986, as amended, together with the US
Treasury rulings and regulations promulgated thereunder.
Company: as defined in the Preamble to this Agreement.
Covenantees: those persons named in Section 8.1 hereof.
Environmental Actions: refers to any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, proceeding, judgment, letter
or other communication from any regulatory body or any third party involving a
Hazardous Discharge or any breach of any order, permit or Environmental laws.
Environmental Laws: as defined in the definition of Hazardous Substances.
Exchange Rate: as defined in Section 3.
Financial Statements: the audited consolidated accounts of the Company as at,
and for the years ended December 31, 1995, 1994 and 1993, audited by Ernst &
Young, which financial statements include in each case a balance sheet, a
statement of earnings and accumulated earnings, and a statement of cash flows.
<PAGE> 27
- 27 -
Hazardous Discharge: means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping of Hazardous Substances.
Hazardous Substance: means any substance, compound, chemical or element which is
(i) defined as a hazardous substance, hazardous material, toxic substance,
hazardous waste, pollutant or contaminant under any Environmental Law, (ii) a
petroleum hydrocarbon, including crude oil or any fraction thereof, (iii)
hazardous, toxic, corrosive, flammable, explosive, infectious, radioactive,
carcinogenic or a reproductive toxicant, or (iv) regulated pursuant to any
Environmental Law. The term "Environmental Law" means all European Community,
national, regional or local statutes or other laws concerning all matters
relating to pollution or human health or the environment, including but not
limited to those relating to Hazardous Discharges, all rules, regulations,
by-laws, codes of practice, circulars, guidance notes and notices made
thereunder, and judicial and administrative interpretation of each of the
foregoing. The term "Hazardous Substance" shall also include raw materials used
or stored by the Company, building components including, without limitation,
asbestos-containing materials and manufactured products containing Hazardous
Substances.
ICTA: Income and Corporation Taxes Act 1988 of the United Kingdom.
Indemnified Party: as defined in Section 12.1.
Indemnifying Party: as defined in Section 12.1.
Intellectual Property: as defined in Section 4.17.
Person: any natural person, firm, partnership, association, corporation, trust,
public body or government.
Stockholders: as defined in the Preamble to this Agreement.
Stockholders' Representative: Gwyn Jones.
TCGA: Taxation of Chargeable Gains Act 1992 of the United Kingdom.
Trade Secret: any information used by the Company in its business, including a
formula, pattern, compilation, program, software, device, method, technique, or
process, that has a material economic value, actual or potential, not being
generally known to, and not being readily ascertainable by proper means by other
Persons.
$: US Dollars.
12. INDEMNIFICATION; SURVIVAL
12.1 Indemnification
(a) The Stockholders, jointly and severally, will indemnify Allegro against, and
hold Allegro harmless from, any and all liability, damage, deficiency, loss,
cost or expense (including reasonable attorneys' fees) (individually, any one
such item being called a "Loss" and more than one such item, "Losses"), that are
based upon or that arise out of (i) misrepresentation or breach of any
representation, warranty, covenant or agreement made by the Stockholders herein
or in any certificate delivered pursuant hereto and, (ii) to the extent
exceeding $40,000 and not reflected as a liability on the Company's accounts
payable aging included as part of Schedule 4.8 to the Serif Inc. Agreement
<PAGE> 28
- 28 -
(A) the expiration of the license agreement with Adobe (f/k/a Mastersoft) as
disclosed in Schedule 4.15 of the Serif Inc. Agreement in part II thereof; (B)
the expiration of the license agreement with Pantone as disclosed in Schedule
4.15 of the Serif Inc. Agreement in part II thereof; (C) the use by the Company
of software bearing the name or trade style "Twain" as set forth in Schedule
4.16 of the Serif Inc. Agreement as item 6 of the final paragraph thereof; (D)
the use by the Company of software bearing the name and trade style "GIF" as set
forth in Schedule 4.16 of the Serif Inc. Agreement as item 7 of the final
paragraph thereof; and (E) the use by the Company of technology obtained from
Andover Advanced Technology but not properly covered by a license as disclosed
in Schedule 4.16 of the Serif Inc. Agreement. No cost or expense shall be
included as part of any Loss if and to the extent that the Loss is paid or
accrued after the date of such aging as and for a royalty or a license fee in
accordance with the regular royalties and fees disclosed for such matter in a
Schedule to the Serif Inc. Agreement of this Agreement. Royalties incurred after
the date hereof for the use of Twain and GIF or any alternative technology
replacing either of them shall not be included as part of any Loss.
(b) Allegro will indemnify the Stockholders against, and hold the Stockholders
harmless from, any and all Losses that are based upon or that arise out of any
misrepresentation or breach of any representation, warranty, covenant or
agreement made by Allegro herein or in any certificate delivered pursuant
hereto.
(c) Each party entitled to indemnification under this Agreement (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party (at its expense) to assume the defense of any
claim or any litigation resulting therefrom; provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be reasonably satisfactory to the Indemnified Party, and the Indemnified
Party may participate in such defense, but only at such Indemnified Party's
expense; and provided, further, that the omission by any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
indemnification obligations under this Agreement except and only to the extent
that the omission results in a failure of actual notice to the Indemnifying
Party and such Indemnifying Party is damaged as a result of the failure to give
notice. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation. In the event that the Indemnifying Party does not accept the defense
of any matter as above provided, or after so accepting fails to diligently
prosecute such defense, the Indemnified Party shall have the full right to
defend against any such claim or demand, at the expense of the Indemnifying
Party, and shall be entitled to settle or agree to pay in full such claim or
demand, in its sole discretion. In any event, the Company, the Stockholders and
Allegro shall cooperate in the defense of such action and the records of each
shall be available to the other with respect to such defense.
12.2 Time and Manner of Claims; Survival
Allegro and each Stockholder shall be liable for damages arising from its or his
misrepresentations or breaches of its or his representations, warranties or
covenants hereunder pursuant to the terms of this Section 12 and other than with
respect to Sections 4.3, 4.5 and 4.8 only to the extent that notice of a claim
therefor is asserted by the other in writing and delivered prior to May 1, 1998.
The Stockholders shall be liable for damages arising from its or his
misrepresentations or breaches of its or his representations and warranties
pursuant to Sections 4.3 and 4.5 at any time until the applicable statute of
limitations with respect thereto has expired and shall be liable for damages
<PAGE> 29
- 29 -
arising from its or his representations, warranties or covenants pursuant to
Section 4.8 only to the extent that a claim therefor is asserted by the other in
writing and delivered prior to 31 March 2003. Any notice of a claim by reason of
any of the representations, warranties or covenants contained in this Agreement
shall state the representation, warranty or covenant with respect to which the
claim is asserted and the amount of liability asserted against the other party
by reason of the claim. The representations, warranties, covenants, agreements
and indemnities contained in this Agreement shall continue in full force and
effect notwithstanding the execution and delivery of this Agreement, any
examination by or on behalf of such parties, and the completion of the
transactions contemplated herein.
12.3 Limitation on Claims
Notwithstanding anything contained in this Agreement to the contrary, (i)
neither the Stockholders nor Allegro shall be entitled to claim for the breach
of any representation, warranty, covenant or agreement set forth herein (other
than with respect to a breach of Section 4.3 and 4.5) except to the extent that
the aggregate amount of its present claims in respect of (a) such breaches, and
(b) all prior claims for breaches of representations, warranties, covenants and
agreements hereunder or under the Tax Deed, exceeds an aggregate of $25,000, at
which time the claiming party shall be entitled to claim the full amount of its
damages for all breaches by the other parties hereto of such representations,
warranties, covenants and agreements to the extent such claims exceed $25,000;
(ii) the liability hereunder or under the Tax Deed of the Stockholders other
than for any claim for breach of Section 4.3 or 4.5 (the liability for which
shall be unlimited) shall not exceed an amount equal to the product of (A) the
number of shares of Escrow Stock issued to such Stockholder hereunder and
deposited with the Escrow Agent under the Escrow Agreement less the number of
shares of Escrow Stock transferred to Allegro under the Escrow Agreement from
time to time, times (B) the last reported sale price of the Allegro Common Stock
on the date on which such liability is determined (or May 1, 1998 in respect
only of claims delivered under Section 12.2 after that date), and shall be
satisfied (save in respect of claims under Sections 4.3 or 4.5 or under the Tax
Deed delivered under Section 12.2 after May 1, 1998) exclusively from the Escrow
Stock; and (iii) the Stockholders shall not be liable to Allegro under this
Section 11 for Losses arising from the inaccuracy or breach of any
representation or warranty contained in Section 4 hereof to the extent such
inaccuracy or breach is caused by events beyond the control of the Company or
the Stockholders which occur after the date hereof and prior to the Closing
Date.
12.4 Allegro will not be entitled to claim that any fact or combination of facts
constitutes a breach of any of the representations, warranties, covenants or
agreements hereunder if and to the extent that such fact or combination of facts
has been fairly disclosed in the schedules to Section 4.
12.5 Allegro acknowledges that it does not enter into this agreement in reliance
on any representation warranty covenant or agreement other than those contained
in this agreement and that its only remedies other than with respect to Sections
6 and 8 hereof are for indemnification pursuant to this Section 12 provided that
this shall not exclude any liability which any of the Stockholders would
otherwise have to Allegro in respect of any statements made fraudulently by that
Stockholder on or prior to the date of this agreement or the completion of the
transactions contemplated hereby.
<PAGE> 30
- 30 -
13. MISCELLANEOUS
13.1 Consent to Jurisdiction and Waivers
Allegro, the Company and the Stockholders each irrevocably consents that any
legal action or proceeding against any of them under, arising out of or in any
manner relating to, this Agreement or any other document delivered in connection
herewith, may be brought in any court of the State of New York located within
Nassau County or in the United States District Court for the Eastern District of
New York. Allegro, the Company and the Stockholders by the execution and
delivery of this Agreement, expressly and irrevocably consent and submit to the
personal jurisdiction of any of such courts in any such action or proceeding.
Allegro, the Company and the Stockholders further irrevocably consent to the
service of any complaint, summons, notice or other process relating to any such
action or proceeding by delivery thereof to it by hand or by any other manner
provided for in Section 13.3. Allegro and the Stockholders hereby expressly and
irrevocably waive any claim or defense in any such action or proceeding based on
any alleged lack of personal jurisdiction, improper venue or forum non
convenient or any similar basis. Nothing in this Section 13.1 shall affect or
impair in any manner or to any extent the right of Allegro to commence legal
proceedings or otherwise proceed against the Company or the Stockholders in any
jurisdiction or to serve process in any manner permitted by law.
13.2 Severability
If any provision of this Agreement, and, in particular, if any provision of the
covenant not to compete, shall be held or deemed to be or shall, in fact, be
inoperative or unenforceable as applied in any particular case because it
conflicts with any other provision or provisions hereof or any statute,
regulation or rule of public policy, or for any other reason, such circumstances
shall not have the effect of rendering the provision in question inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision or provisions herein contained invalid, inoperative, or unenforceable
to any extent whatever. The invalidity of any one or more phrases, sentences,
clauses, sections, or subsections of this Agreement shall not affect the
remaining portions of this Agreement.
13.3 Notices
All notices, consents, requests, instructions, approvals and other
communications provided for herein and all legal process in regard hereto shall
be validly given, made or served, if in writing and delivered personally or sent
by registered or certified mail (return receipt requested), postage prepaid,
recognized national or international air courier or by facsimile transmission
electronically confirmed:
if to Allegro:-
Allegro New Media, Inc.
16 Passaic Avenue
Fairfield, New Jersey 07006
Fax: (201) 808-2645
Attn.: Barry A. Cinnamon
Chairman of the Board
<PAGE> 31
- 31 -
with a copy to:-
Neil M. Kaufman, Esq.
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York ll753
Fax: (516) 822-4824
if to the Company or Stockholders,
to the Stockholder's Representative:-
Gwyn Jones
Serif Inc.
One Chestnut Street
Suite 305
Nashu, New Hampshire 03060
with a copy to:-
Neil Schauer, Esq.
Deutsch Williams Brooks DeRensis Holland
& Drachman, P.C.
99 Summer Street
Boston, MA 02110-1235
Fax: (617) 951-2323
(if to the Company prior to the Closing Date,
to the Stockholders' Representative, as aforesaid,
and after the Closing Date, to Allegro, as aforesaid)
or, in each case, at such other address as may be specified in writing to the
other parties.
13.4 Waiver
Any party may waive compliance by another with any of the provisions of this
agreement. No waiver of any provisions shall be construed as a waiver of any
other provision. Any waiver must be in writing.
13.5 Publicity
Neither the Company nor the Stockholders shall issue any press release or public
announcement of any kind concerning the transactions contemplated by this
Agreement without the prior written consent of Allegro.
13.6 Brokers, Finders, etc.
The Stockholders and Allegro represent and warrant to each other that they have
not dealt with or employed any broker, finder, investment banker or financial
advisor in connection with the negotiation, execution or performance of this
Agreement, other than Frost Capital. Allegro agrees to pay all such compensation
which may be due Frost Capital and to indemnify and hold harmless the
Stockholders and the Company therefrom. Other than the claim of Frost Capital,
Allegro and
<PAGE> 32
- 32 -
the Stockholders each agree to indemnify and hold harmless each other from and
against and in respect to any claim for finder's fees or brokerage claims
relating to the transactions contemplated by this Agreement or the completion of
the transactions contemplated therein based in any way on agreements or
understandings claimed to have been made by the indemnifying party with any
third party.
13.7 Miscellaneous
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
This Agreement constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of New York, applicable to contracts made and to be performed in New York.
This Agreement shall be binding upon and inure to the benefit of the successors
and assigns of the parties hereto. The rights and obligations contained in this
Agreement are solely for the benefit of the parties hereto and are not intended
to benefit or be enforceable by any other party, under the third party
beneficiary doctrine or otherwise.
13.8 Stockholder Representative
(a) Each Stockholder does hereby irrevocably appoint Gwyn Jones (herein called
the "Stockholders' Representative") as its true and lawful attorney-in-fact and
agent, with full power of substitution or resubstitution, to act solely and
exclusively on behalf of such Stockholder with respect to any and all matters
relating to this Agreement and any document, certificate or other agreement to
be executed and delivered by or on behalf of any Stockholder pursuant hereto or
in connection with the transactions contemplated hereby, with the full power,
without the consent of the Stockholders or any of them, to exercise as he in his
sole discretion deems appropriate, all of the powers which any Stockholder could
exercise under the provisions of this Agreement or any document, certificate or
other agreement to be executed and delivered by or on behalf of any Stockholder
pursuant hereto or in connection with the transactions contemplated hereby,
including, without limitation, to (i) receive all or any part of the Exchange
Rate, (ii) execute and deliver any receipt therefor, (iii) accept and give
notices hereunder or thereunder on behalf of any or all of the Stockholders,
(iv) consent to any modification or amendment hereof or thereof or (v) give any
waiver or consent hereunder or thereunder; provided, that any modification,
amendment, waiver or consent does not involve a decrease in the Exchange Rate
set forth in Section 2 hereof. Allegro shall be entitled to rely exclusively
upon such notices, waivers, consents, amendments, modifications and other acts
of the Stockholders' Representative as being the binding acts of the
Stockholders or any and all of them, and Allegro shall be entitled to deliver
any notices, payments or other items required to be delivered by it to any
Stockholder hereunder or thereunder only to the Stockholders' Representative,
and any such delivery shall be fully effective as if it were made directly to
any relevant Stockholder; and
(b) Gwyn Jones shall not effect any substitution for himself as the
Stockholders' Representative without the prior written consent of Allegro, which
consent shall not be unreasonably withheld.
<PAGE> 33
- 33 -
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.
ALLEGRO NEW MEDIA, INC.
By: /s/ Barry A. Cinnamon
--------------------------------
Barry A. Cinnamon
Chairman of the Board
/s/ Gwyn Jones
--------------------------------
Gwyn Jones, Director
for and on behalf of
SERIF (EUROPE) LIMITED
<PAGE> 34
- 34 -
STOCKHOLDERS
Name Signature
- ---- ---------
G Jones /s/ Gwyn Jones
---------------
N Alexander By: /s/ Gwyn Jones, Attorney-in-Fact
--------------------------------
J Bryce By: /s/ Gwyn Jones, Attorney-in-Fact
--------------------------------
P Beedham By: /s/ Gwyn Jones, Attorney-in-Fact
--------------------------------
R Mellor By: /s/ Gwyn Jones, Attorney-in-Fact
--------------------------------
Esprit Automation Ltd By: /s/ Gwyn Jones, Attorney-in-Fact
--------------------------------
M Gee By: /s/ Gwyn Jones, Attorney-in-Fact
--------------------------------
R O'Mara By: /s/ Gwyn Jones, Attorney-in-Fact
--------------------------------
D Darvill By: /s/ Gwyn Jones, Attorney-in-Fact
--------------------------------
M Ramsey By: /s/ Gwyn Jones, Attorney-in-Fact
--------------------------------
M Daintree By: /s/ Gwyn Jones, Attorney-in-Fact
--------------------------------
D Brailsford By: /s/ Gwyn Jones, Attorney-in-Fact
--------------------------------
D Harris By: /s/ Gwyn Jones, Attorney-in-Fact
--------------------------------
R Bryce By: /s/ Gwyn Jones, Attorney-in-Fact
--------------------------------
W Bryce By: /s/ Gwyn Jones, Attorney-in-Fact
--------------------------------
Serif (Europe) Trustees Limited
Barry A. Cinnamon as co-trustee of the Serif
(Europe) Limited Employee Share Option
Scheme /s/ Barry A. Cinnamon
-----------------------
Mark E. Leininger, as co-trustee of the Serif
(Europe) Limited Employee Share Option
Scheme /s/ Mark E. Leininger
-----------------------
<PAGE> 35
- 35 -
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
- --------
Exhibit A: Lock-Up Agreement
Exhibit B: Intentionally Omitted
Exhibit C: Form of Registration Rights Agreement
Exhibit D: Form of Escrow Agreement
Exhibit E: Form of Opinion of Stockholders' Counsel
Exhibit F: Form of Company Secretary's Certificate
Exhibit G: Intentionally Omitted
Exhibit H: Form of Allegro Secretary's Certificate
Exhibit I: Tax Deed
Exhibit J: Vendor Power of Attorney
Exhibit K: Indemnity for Lost Share Certificates
Exhibit L: Stockholder Agreement
SCHEDULES
2 Stockholders' Allocated Allegro Common Stock
4.3 Stock Ownership
4.5 Share Capital of the Company
4.6 No Conflicts
4.7 Financial Statements
4.8 Tax Matters
4.9 Adverse Changes
4.10 Conduct of Business
4.11 Title Defects
4.12 Real Property Interests
4.13 Personal Property
<PAGE> 36
- 36 -
4.14 Inventory
4.15 Accounts Receivable
4.16 Contracts
4.17 Intellectual Property
4.18 Insurance
4.19 Customers and Suppliers
4.22 Litigation and Permits
4.23 Environmental Matters
4.25 Bank Accounts and Powers of Attorney
4.26 Warranties
5.1 Allegro's Jurisdictions of Qualification
7.1 Projections
<PAGE> 37
- 37 -
SCHEDULE 2
<TABLE>
<CAPTION>
SERIF
ORDINARY SERIF PREFERENCE ALLEGRO
NAME SHARES SHARES SHARES
-------- ---------------- ------
<S> <C> <C> <C>
Gwyn Jones 64,850 267,671
Norman Alexander 15,000 61,913
Jim Bryce 6,040 1,320 26,250
Serif Inc. 11,000 Not Sold
Peter Beedham 10,000 10,000 51,276
Ralf Mellor 7,540 3,820 34,942
Esprit Automations 6,040 1,320 26,250
Mark Gee 3,000 12,383
Robert O'Mara 2,500 10,319
Darren Darvill 1,000 4,128
Mark Ramsey 1,000 4,128
Mark Daintree 1,000 4,128
David Brailsford 650 2,683
David Harris 4,250 17,542
Robin Bryce 5,000 2,500 23,138
Wallace Bryce 5,000 2,500 23,138
Serif (Europe) Trustees Limited 44,750 184,708
TOTAL 188,620 21,460 754,597
</TABLE>
<PAGE> 1
EXHIBIT 10.30
LOCK-UP AGREEMENT
This AGREEMENT (the "Agreement") is made as of the 31st day of
July, 1996, between the undersigned former stockholder (the "Undersigned") of
Serif, Inc. , a Delaware corporation (the "Company") and Allegro New Media,
Inc., a Delaware corporation ("Allegro").
NOW, THEREFORE, for good and valuable consideration, including the
agreements by certain other former stockholders of the Company to be similarly
bound, the sufficiency and receipt of which consideration are hereby
acknowledged, the Undersigned agrees as follows:
1. BACKGROUND. The Undersigned acknowledges that Allegro has
required, and the Company has agreed to assist Allegro in obtaining, agreements
from all former stockholders of the Company, to refrain from selling certain
quantities of securities of Allegro for a period of up to 24 months following
the completion of Allegro's acquisition (the "Acquisition") of all of the
capital stock of the Company pursuant to the Stock Purchase Agreement dated the
date hereof among Allegro, the Company, Serif (Europe) Limited and the other
stockholders of the Company and Serif (Europe) Limited. To induce Allegro to
proceed with the Acquisition and other stockholders of the Company to make
similar agreements, the Undersigned has entered into this Agreement.
2. RESTRICTION. The Undersigned hereby agrees that from the
closing of the Acquisition to and including a date 24 months thereafter, the
Undersigned will not directly or indirectly, issue, offer to sell, grant an
option for the sale of, assign, transfer, pledge, hypothecate or otherwise
encumber or dispose of any shares of common stock, par value $.001 per share
(the "Common Stock") or securities convertible into, exercisable or exchangeable
for or evidencing any right to purchase or subscribe for any shares of Common
Stock (either pursuant to Rule 144 under the Securities Act of 1933, as amended,
or otherwise) or dispose of any beneficial interest therein without the prior
written consent of the President of Allegro, except that the Undersigned may
sell in brokerage transactions in the aggregate (a) up to ten percent (10%) of
the shares of Common Stock owned beneficially or of record (the "Stock") during
the period from six (6) months after the date hereof (the "Closing Date") until
twelve (12) months thereafter, (b) an additional ten (10%) of the Stock during
the period from twelve (12) months after the Closing Date until eighteen (18)
months thereafter, and (c) an additional ten percent (10%) during the period
from eighteen (18) months after the Closing Date until twenty-four (24) months
thereafter. The Undersigned further agrees that Allegro is authorized to place
"stop orders" on its books to prevent any transfer of securities of Allegro by
the Undersigned in violation of this Agreement.
3. RELIANCE BY THE COMPANY, UNDERWRITERS AND OTHER STOCKHOLDERS.
The Undersigned acknowledges that Allegro is relying upon the agreements of the
Undersigned contained herein, and that the failure of the Undersigned to perform
the agreements contained herein
<PAGE> 2
could have a detrimental effect upon any proposed offering. Accordingly, the
Undersigned understands and agrees that the Undersigned's agreements herein are
irrevocable.
4. MISCELLANEOUS.
(a) At any time, and from time to time, after the signing
of this Agreement, the Undersigned will execute such additional instruments and
take such action as may be reasonably requested by Allegro to carry out the
intent and purposes of this Agreement.
(b) This Agreement shall be governed, construed and
enforced in accordance with the laws of the State of New York, except to the
extent that the securities laws of the State in which the Undersigned resides
and federal securities laws may apply.
(c) This Agreement contains the entire agreement of the
Undersigned with respect to the subject matter hereof.
(d) This Agreement shall be binding upon the Undersigned,
his legal representatives, successors and assigns.
IN WITNESS WHEREOF, and intending to be legally bound
hereby, the parties hereto have executed this Agreement as of the day and year
first above written.
/s/ Gwyn Jones
-----------------------------
Name:
ALLEGRO NEW MEDIA, INC.
By:/s/ Barry A. Cinnamon
-----------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.31
REGISTRATION RIGHTS AGREEMENT
This Agreement (this "Agreement") is made and entered into as
of July 31, 1996, by and between Allegro New Media, Inc., a Delaware corporation
(the "Company"), and each of the persons or entities executing this Agreement
(collectively referred to herein as the "Holders").
The parties hereby agree as follows:
1. Definitions.
(a) Registerable Securities. The terms "Registerable
Securities" and "Restricted Securities" shall mean the Company's common stock,
par value $.001 per share (the "Common Stock"), which is acquired by the Holders
pursuant to the terms of the Stock Purchase Agreement (the "Stock Purchase
Agreement") dated the date hereof by and among the Company, Serif, Inc., a
Delaware corporation, Serif (Europe) Limited, an English company and the
Holders, including in each case any shares received in connection with any stock
split, stock divided, recapitalization, reclassification or other distribution
payable or issuable in shares of Common Stock.
(b) Restricted Securities. For the purposes of this
Agreement, shares will cease to be Restricted Securities when (i) a registration
statement covering such Restricted Securities has been declared effective and
they have been disposed of pursuant to such effective registration statement, or
(ii) they are distributed to the public under the Securities Act of 1933, as
amended (the "Securities Act"), or (iii) they have been otherwise transferred
and the Company, in accordance with applicable law and regulations, has
delivered new certificates or other evidences of ownership for them not subject
to any stop transfer order or other restriction on transfer.
(c) Registerable Securities. As to any particular
shares, such shares will cease to be Registerable Securities when they cease to
be Restricted Securities.
(d) Stockholders Representative. For purposes of this
Agreement, Gwyn Jones.
2. Piggy-Back Registration.
At any time, if the Company proposes to file a
registration statement under the Securities Act with respect to an offering by
the Company of any class of equity security similar to any Registerable
Securities (other than a registration statement on Form S-4 or S-8 or any
successor form or a registration statement filed solely in connection with an
exchange offer, a business combination transaction or an offering of securities
solely to the existing stockholders or employees of the Company), then the
Company shall give written notice of such proposed filing to the Stockholders
Representative at least 15 days before the anticipated filing date, and such
notice
<PAGE> 2
shall offer such holders the opportunity to register such aggregate number of
Registerable Securities as each such holder may request. The Company shall use
diligent efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit, within 25 days of the giving of the written
notice provided for in the immediately preceding sentence, the holders of
Registerable Securities requested to be included in the registration to include
such securities in such underwritten offering on the same terms and conditions
as any similar securities of the Company included therein. Notwithstanding
anything to the contrary in the foregoing, if the managing underwriter or
underwriters of such offering delivers a written opinion (or, in the case of an
offering not being underwritten, the Company, a resolution of its Board of
Directors certified by the President of the Company) to the Stockholders
Representative that the total amount and kind of securities which they, the
Company and any other person intend to include in such offering is such as to
materially and adversely affect the success of such offering, then the amount of
securities to be offered for the accounts of holders of Registerable Securities
and persons other than the Company shall be eliminated or reduced pro rata
(based on the amount of securities owned which carry registration rights) to the
extent necessary to reduce the total amount of securities to be included in such
offering to the amount recommended by such managing underwriter or underwriters
in its written opinion (or the Board of Directors in its resolution).
3. Demand Registration.
(a) Right to Demand. Subject to Section 3(b) hereof,
at any time after December 7, 1996, and not earlier than 60 days after the
effective date of a registration statement in connection with which the holders
of Registrable Securities shall have had the number of Registrable Securities
subject thereto eliminated or reduced pursuant to the terms of Section 2, the
Initiating Holders (as defined below) may make a written request to the Company
for registration under the Securities Act of all or part of their Registerable
Securities (a "Demand Registration"). Within 10 days after receipt of such
request, the Company will deliver a written notice (the "Notice") of such
registration request to all holders of Registerable Securities. The Company will
include in such registration all Registerable Securities with respect to which
the Company has received written requests for inclusion therein within 15
business days after the receipt by the applicable holder of the Notice. All
requests made pursuant to this Section 3(a) will specify the aggregate amount of
the Registerable Securities to be registered and will also specify the intended
methods of disposition thereof.
(b) Number of Demand Registrations. The holders of
Registerable Securities shall be entitled, in the aggregate, to one Demand
Registration, the Registration Expenses of which shall be borne by the Company.
The "Initiating Holders" with respect to this Demand Registration shall mean the
Stockholders Representative. The Company shall not be deemed to have effected a
Demand Registration unless and until such Demand Registration is declared
effective.
(c) Priority on Demand Registrations. If a Demand
Registration is being underwritten and if the managing underwriter or
underwriters of such Demand Registration (or, in the case of a Demand
Registration not being underwritten, holders of a majority of the Registerable
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<PAGE> 3
Securities sought to be registered therein) advise the Company in writing that
in their opinion the number of securities proposed to be sold in such Demand
Registration exceeds the number which can be sold in such offering, the Company
will include in such registration only the number of securities that, in the
opinion of such managing underwriter or underwriters (or holders of Registrable
Securities, as the case may be), can be sold, selected pro rata (based on the
amount of securities owned which carry registration rights) among the holders of
Registrable Securities which have requested to be included in such Demand
Registration.
(d) Selection of Underwriters. If any Demand
Registration is an underwritten offering, the Company will select a managing
underwriter or underwriters to administer the offering, which managing
underwriter or underwriters shall be reasonably satisfactory to the holders of a
majority of the Registerable Securities to be included in such Demand
Registration.
(e) Notwithstanding anything in the foregoing Section
3 to the contrary, the Company shall not be obligated to effect a Demand
Registration at any time when the Company, in the good faith judgment of its
Board of Directors, reasonably believes that the filing thereof at the time
requested, or the offering of securities pursuant thereto, would be detrimental
to the interests of Company or its shareholders. The effectuation of a Demand
Registration cannot be suspended, pursuant to the provisions of the preceding
sentence, for more than 90 days after the date of the Board's determination
referenced in the preceding sentence.
4. Registration Procedures.
The Company will, in connection with any registration
pursuant to Section 3 or 4 in which sellers of Registerable Securities are
included, as expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement on any appropriate form
under the Securities Act, which form shall be available for the sale of
Registerable Securities in accordance with the intended method or methods of
distribution thereof, and use its best efforts to cause such registration
statement to become effective; provided that at least three business days before
filing with the Commission a registration statement or prospectus or any
amendments or supplements thereto, including documents incorporated by reference
after the initial filing of any registration statement, the Company will furnish
to the Stockholders Representative draft copies of such registration statement,
and, upon the request of any seller of Registerable Securities, shall continue
to provide such number of copies of such registration statement, each amendment
and supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as the
Stockholders Representative may reasonably request in order to facilitate the
disposition of the Registerable Securities owned by the Holders and to change
the registration statement as it relates to any seller as reasonably requested
by the Stockholders Representative on a timely basis, and to reasonably consider
other changes to the registration statement (but not including any document
incorporated therein by reference) reasonably requested by the Stockholders
Representative on a timely basis, in light of the requirements of the Securities
Act and any other applicable laws and
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<PAGE> 4
regulations; and provided, further, that as to documents incorporated by
reference, the Company shall provide documents incorporated by reference
promptly upon request after the filing of such documents;
(b) prepare and file with the Commission such
amendments and post-effective amendments to a registration statement as may be
necessary to keep such registration statement effective for up to 9 months; and
cause the related prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed to the extent required pursuant
to Rule 424 under the Securities Act, during such 9 month period; and otherwise
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during the applicable
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement or supplement to such
prospectus;
(c) notify the Stockholders Representative and the
managing underwriters, if any, promptly, and confirm such advice in writing, (1)
when a prospectus or any prospectus supplement or post-effective amendment has
been filed, and, with respect to a registration statement or any post-effective
amendment, when the same has become effective, (2) of any request by the
Commission for amendments or supplements to a registration statement or related
prospectus or for additional information, (3) of the issuance by the Commission
of any stop order suspending the effectiveness of a registration statement or
the initiation of any proceedings for that purpose, (4) if at any time the
representations and warranties of the Company contemplated by paragraph (j)
below cease to be true and correct, (5) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any of the
Registerable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (6) of the happening of any
event which makes any statement made in any registration statement, the
prospectus or any document incorporated therein by reference untrue or which
requires the making of any changes in any registration statement or prospectus
so that they will not contain any untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading;
(d) make diligent efforts to obtain the withdrawal of
any order suspending the effectiveness of a registration statement at the
earliest possible moment and to prevent the entry of such an order;
(e) use diligent efforts to register or qualify such
Registerable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests in writing and do any and all
other acts and things which may be necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registerable
Securities owned by such seller; provided that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (e), (ii) subject itself
to taxation in any such jurisdiction or (iii) take any action which would
subject it to general service of process in any such jurisdiction;
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<PAGE> 5
(f) make available for inspection by the Stockholders
Representative, any underwriter participating in any disposition pursuant to
such registration statement, and any attorney or accountant retained by any such
seller or underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility (or establish a due diligence
defense), and cause the officers, directors and employees of the Company to
supply all information reasonably requested by any such Inspector in connection
with such registration statement. Records which the Company determines, in good
faith, to be confidential and which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the release of such Records
is ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or (ii) the disclosure of such Records is required by any
applicable law or regulation or any governmental regulatory body with
jurisdiction over any holder of Registerable Securities. Each seller of
Registerable Securities agrees that it will, upon learning the disclosure of
such Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of the Records deemed confidential;
(g) cooperate with the selling holders of
Registerable Securities and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing Registerable
Securities to be sold and not bearing any restrictive legends and enable such
Registerable Securities to be in such denominations and registered in such names
as the selling holders of Registerable Securities or any managing underwriters
may request at least two business days prior to any sale of Registerable
Securities;
(h) comply with all applicable rules and regulations
of the Commission and promptly make generally available to its security holders
an earnings statement covering a period of twelve months, (1) in an underwritten
offering, commencing at the end of any fiscal quarter in which Registerable
Securities are sold to underwriters, or (2) in a non-underwritten offering,
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the registration statement, which earnings statement
in each case shall satisfy the provisions of Section 11(a) of the Securities
Act;
(i) provide a CUSIP number for all Registerable
Securities, not later than the effective date of the registration statement
relating to the first public offering of Registerable Securities of the Company
pursuant hereto;
(j) enter into such customary agreements (including
an underwriting agreement in customary form) and take all such other actions
reasonably requested by the Stockholders Representative or the managing
underwriter or underwriters in order to expedite or facilitate the disposition
of such Registerable Securities and in such connection, whether or not an
underwriting agreement is entered into and whether or not the registration is an
underwritten registration (1) make such representations and warranties, if any,
to any underwriters with respect to the registration statement, prospectus and
documents incorporated by reference, if any, in form,
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<PAGE> 6
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same if and when requested, (2) obtain
opinions of counsel to the Company and updates thereof addressed to the
underwriters, if any, with respect to the registration statement, prospectus and
documents incorporated by reference, if any, covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by such holders and underwriters, (3) obtain a
"cold comfort" letter and updates thereof from the Company's independent
certified public accountants addressed to the underwriters, if any, which
letters shall be in customary form and cover matters of the type customarily
covered in "cold comfort" letters by accountants in connection with underwritten
offerings, and (4) the Company shall deliver such documents and certificates as
may be reasonably requested by the Stockholders Representative and the managing
underwriters, if any, to evidence compliance with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company. The above shall be done at each closing under such underwriting or
similar agreement or as and to the extent required thereunder; and
(k) if requested by the Stockholders Representative
use its best efforts to cause all Registerable Securities which are included in
such registration statement to be listed, subject to notice of issuance, by the
date of the first sale of Registerable Securities pursuant to such registration
statement, on each securities exchange, if any, on which the Company's Common
Stock is then listed.
The Company may require each seller of Registerable
Securities as to which any registration is being effected to furnish to the
Company such information regarding the distribution of such securities as the
Company may from time to time reasonably request in writing.
Each Holder agrees, and each other holder of
Registerable Securities will be required, in its request to register securities
pursuant to this Agreement, to agree, that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 4(c)(2),
4(c)(3), 4(c)(5) or 4(c)(6) hereof, such holder will forthwith discontinue
disposition of Registerable Securities pursuant to the registration statement
covering such Registerable Securities until such holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 4(c)(1)
hereof, or until it is advised in writing (the "Advice") by the Company that the
use of the applicable prospectus may be resumed, and until it has received
copies of any additional or supplemental filings which are incorporated by
reference in such prospectus, and, if so directed by the Company, such holder
will deliver to the Company (at the expense of the Company) all copies, other
than permanent file copies then in such holder's possession, of the prospectus
covering such Registerable Securities current at the time of receipt of such
notice.
5. Registration Expenses.
All expenses incident to the performance of or
compliance with this Agreement by the Company, including, without limitation,
all registration and filing fees of the Commission, the National Association of
Securities Dealers Inc. and other agencies, fees and
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<PAGE> 7
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualifications of
the Registerable Securities), rating agency fees, printing expenses, messenger
and delivery expenses, internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the fees and expenses incurred in connection with the
listing, if any, of the securities to be registered on any securities exchange
and fees and disbursements of counsel for the Company and the Company's
independent certified public accountants (including the expenses of any special
audit or "cold comfort" letters required by or incident to such performance),
securities acts liability insurance (if the Company elects to obtain such
insurance), the fees and expenses of any special experts retained by the company
in connection with such registration, and the fees and expenses of any other
person retained by the company (but not including any underwriting discounts or
commissions attributable to the sale of Registerable Securities or other
out-of-pocket expenses of the holders of Registerable Securities (or the agents
who act on their behalf) unless reimbursement is specifically approved by the
Company) will be borne by the Company. All such expenses are herein called
"Registration Expenses". Notwithstanding the foregoing, the Company shall not be
required to pay for any Registration Expenses of any Demand Registration if such
registration request is subsequently withdrawn at the request of the
Stockholders Representative or the holders of a majority of the Registerable
Securities to be registered (in which case all holders which requested the
withdrawal of the registration request shall bear such expenses pro rata).
6. Indemnification; Contribution.
(a) Indemnification by the Company. The Company
agrees to indemnify and hold harmless, to the full extent permitted by law, each
holder of Registerable Securities, its officers and directors and each person
who controls such holder (within the meaning of the Securities Act), and any
agent thereof against all losses, claims, damages, liabilities and expenses
incurred by such party pursuant to any actual or threatened suit, action,
proceeding or investigation (including reasonable expenses of investigation)
arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in any registration statement, prospectus or preliminary
prospectus or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
the case of a prospectus, in the light of the circumstances under which they
were made) not misleading, except insofar as the same arise out of or are based
upon, any such untrue statement or omission based upon information with respect
to such holder furnished in writing to the Company by such holder expressly for
use therein.
(b) Indemnification by Holder of Registerable
Securities. In connection with any registration statement in which a holder of
Registerable Securities is participating, each such holder will be required to
furnish to the Company in writing such information with respect to such holder
as the Company reasonably requests for use in connection with any such
registration statement or prospectus, and each Purchaser agrees to the extent it
is such a holder, and each other such holder will be required to agree, to
indemnify, to the full extent permitted by law, the Company, the directors and
officers of the Company and each person who controls the Company (within the
meaning of the Securities Act) and any agent thereof, against any losses,
claims, damages, liabilities
-7-
<PAGE> 8
and expenses (including reasonable attorney's fees and expenses of
investigation) incurred by such party pursuant to any actual or threatened suit,
action, proceeding or investigation arising out of or based upon any untrue or
alleged untrue statement of a material fact or any omission or alleged omission
of a material fact necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they are made) not
misleading, to the extent, but only to the extent, that such untrue statement or
omission is based upon information relating to such holder furnished in writing
to the Company expressly for use therein.
(c) Conduct of Indemnification Proceedings. Promptly
after receipt by an indemnified party under this Section 6 of written notice of
the commencement of any action, proceeding, suit or investigation or threat
thereof made in writing for which such indemnified party may claim
indemnification or contribution pursuant to this Agreement, such indemnified
party shall notify in writing the indemnifying party of such commencement or
threat; but the omission so to notify the indemnifying party shall not relieve
it from any liability which it may have to any indemnified party (x) hereunder,
unless the indemnifying party is actually prejudiced thereby or (y) otherwise
than under this Section 6. In case any such action, suit or proceeding shall be
brought against any indemnified party, and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and the indemnifying party shall assume the defense thereof,
with counsel reasonably satisfactory to the indemnified party and the payment of
all expenses. The indemnified party shall have the right to employ separate
counsel in any such action, suit or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party has agreed to pay such
fees and expenses, (ii) the indemnifying party shall have failed to assume the
defense of such action, suit or proceeding or to employ counsel reasonably
satisfactory to the indemnified party therein or to pay all expenses or (iii)
the named parties to any such action or proceeding (including any impleaded
parties) include both the indemnifying party and the indemnifying party and the
indemnifying party shall have been advised by counsel that there may be one or
more legal defenses available to the indemnified party which are different from
or additional to those available to the indemnifying party and which may result
in a conflict between the indemnifying party and such indemnified party (in
which case, if the indemnified party notifies the indemnifying party in writing
that the indemnified party elects to employ separate counsel at the expense of
the indemnifying party, the indemnifying party shall not have the right to
assume the defense of such action or proceeding on behalf of the indemnified
party, it being understood, however, that the indemnifying party shall not, in
connection with any one such action, suit or proceeding or separate but
substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys at
any time for the indemnified party, which firm shall be designated in writing by
the indemnified party).
(d) Contribution. If the indemnification provided for
in this Section 6 from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such
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<PAGE> 9
indemnified party as a result of such losses, claims, damages, liabilities or
expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnifying party on the one hand
and the indemnified party on the other but also the relative fault of the
indemnifying party and indemnified party as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and the
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitation set forth in Section 6(e), any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to in clauses (i) and (ii) of
the immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) Limitation. Anything to the contrary contained in
this Section 6 or in Section 11 hereof notwithstanding, no holder of
Registerable Securities shall be liable for indemnification and contribution
payments aggregating an amount in excess of the maximum amount received by such
holder in connection with any sale of Registerable Securities as contemplated
herein.
7. Participation in Underwritten Registrations.
No holder of Registerable Securities may participate
in any underwritten registration hereunder unless such holder (a) agrees to sell
such holder's securities on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and to
comply with Rules 10b-6 and 10b-7 under the Exchange Act, and (b) completes and
executes all questionnaires, appropriate and limited powers of attorney, escrow
agreements, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangement.
8. Additional Provisions.
(a) Amendments and Waivers. Except as otherwise
provided herein, the provisions of this Agreement may not be amended, modified
or supplemented, and waivers or
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<PAGE> 10
consents to departures from the provisions hereof may not be given without the
written consent of the Company and the Holders.
(b) Notices. All communications under this Agreement
shall be sufficiently given if delivered by hand or by overnight courier or
mailed by registered or certified mail, postage prepaid, addressed,
(1) if to the Company, to:
Allegro New Media, Inc.
16 Passaic Avenue, #6
Fairfield, New Jersey 070042
Attention: Mr. Barry A. Cinnamon
with a copy to:
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York 11753
Attention: Neil M. Kaufman, Esq.
(2) if to the Holders,
to:
Mr. Gwyn Jones
Serif (Europe) Limited
Sterling House
1 Loughborough Road
West Bridgford
Nottingham
England NG 7LJ
or, in the case of the Holders, at such other address
as such Purchaser shall have furnished in writing to the Company; or, in the
case of the Company, at such other address as the Company shall have furnished
in writing to each Purchaser.
(c) Successors and Assigns; Holders as Beneficiaries.
This Agreement shall inure to the benefit of and be binding upon the parties and
their respective successors and assigns, and the agreements of the Company
herein shall inure to the benefit of all holders of Registerable Securities and
their respective successors and assigns. Nothing in this Agreement shall be
deemed to impose on any of the Holders any obligations to or in respect of any
other holder of Registerable Securities.
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<PAGE> 11
(d) Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall
be deemed to be an original and all of which taken together shall constitute one
and the same agreement.
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(f) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
regard to the conflicts of laws principles thereof.
(g) Severability; Specific Enforcement. In the event
that any one or more of the provisions contained herein, or the application
thereof in any circumstances, is held invalid, illegal, or unenforceable in any
respect of any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be in any way impaired thereby, it being intended that all of
the rights and privileges of the Holders, the Company and the holders of
Registerable Securities shall be enforceable to the fullest extent permitted by
law. Each of the Holders and the Company acknowledges that the other party would
not have an adequate remedy at law for money damages in the event that any of
the covenants or agreements of the other party in this Agreement were not
performed in accordance with its terms and therefore agrees that the other party
shall be entitled to specific enforcement of such covenants or agreements and to
injunctive and other equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity.
(h) Entire Agreement; Survival; Termination. This
Agreement is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Stock Purchase Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
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<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
ALLEGRO NEW MEDIA, INC.
By: /s/ Barry A. Cinnamon
-------------------------------
Barry A. Cinnamon
President
HOLDERS:
/s/ Gwyn Jones
----------------------------------
Gwyn Jones, individually and
as Stockholders Representative
/s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------
James Bryce
/s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------
Peter Beedham
/s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------
Norman Alexander
/s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------
Ralf Mellor
/s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------
Esprit Automations
/s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------
Mark Gee
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<PAGE> 13
/s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------
Robert O'Mara
/s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------
Darren Darvill
/s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------
Mark Ramsey
/s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------
Mark Daintree
/s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------
David Brailsford
/s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------
David Harris
/s/ By Gwyn Jones, Attorney-in-Fact
----------------------------------
Ingrid Regen
----------------------------------
Michael LaRocque
----------------------------------
Joseph Ossai
----------------------------------
Leo Belodeau
----------------------------------
Michael Clough
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<PAGE> 14
----------------------------------
John L. Jackson, Jr.
----------------------------------
David Gareth Howe
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<PAGE> 1
EXHIBIT 10.32
SETTLEMENT AND GENERAL RELEASE AGREEMENT
THIS SETTLEMENT AND GENERAL RELEASE AGREEMENT (the
"Agreement") is made and entered into by and between Richard Bergman, an
individual residing at 98 Laurelwood Court, Rockaway, New Jersey 07866
("Bergman"), Barry A. Cinnamon, an individually residing at 25 Old Chester Road,
Essex Fells, New Jersey 07021 ("Cinnamon") and Allegro New Media, Inc., a
Delaware corporation ("the Company"). The parties acknowledge that the terms and
conditions of this Agreement have been voluntarily agreed to and that such terms
are final and binding.
WHEREAS, Bergman has been employed by the Company as Vice
President of Product Development, has served as a director of the Company and
owns certain shares of common stock, par value $.001 per share (the "Common
Stock"), of the Company; and
WHEREAS, Bergman has asserted several claims against the
Company, and the Company has asserted several claims against Bergman, arising
out of his employment by the Company; and
WHEREAS, the parties hereto now desire to settle fully and
finally all claims Bergman may have against the Company and that the Company may
have against Bergman, including, but not limited to, any matters arising out of
Bergman's employment with the Company and the termination thereof;
NOW, THEREFORE, in consideration of the premises and mutual
promises herein contained, it is agreed as follows:
1. Non-Admission of Liability or Wrongdoing
This Agreement shall not be construed in any way as an
admission by the Company, Cinnamon or Bergman that he or it has acted wrongfully
with respect to the other or any other person or that either has any rights
whatsoever against the other.
2. Consideration
(a) The Company shall pay to Bergman the sum of $100,000 (the
"Payment"), payable as follows:
(i) $50,000, representing the sum of (A) a
certified or bank cashiers check in the amount
of $44,000, less any taxes withheld pursuant to
clause (c) below; and (B) the forgiveness of
the $6,000 indebtedness of Bergman to the
Company incurred in May 1996, in each case on
the date of execution by all the parties hereto
of this Settlement and General Release; and
(ii) $50,000, plus interest from the date hereof on
such amount at a rate equal to 8% per annum, on
December 31, 1996, pursuant to the
<PAGE> 2
promissory note dated the date hereof, the form
of which is attached hereto as Exhibit A (the
"Note"), less any taxes withheld pursuant to
clause (c) below.
(b) Upon the compliance by Bergman with the requirements of
Section 15 hereof and the completion by Bergman of his duties listed on Schedule
A hereto, in addition to the foregoing, the Company shall pay to Bergman (i)
$1,057.69 of accrued but unpaid salary through the date hereof and (ii) $571.54
in reimbursement of expenses incurred by Bergman on behalf of the Company.
Bergman shall not be entitled to any other payment from the Company.
(c) Bergman shall be responsible for the payment of all
applicable federal, state or local taxes and other governmental assessments, if
any, with respect to the Payment. The Company shall withhold from any amounts
payable to Bergman hereunder, the appropriate amounts in respect of taxes based
on the information provided by Bergman to the Company.
3. Complete Release
(a) As a material inducement to the Company and Cinnamon to
enter into this Agreement, Bergman hereby waives, remits, releases and forever
discharges the Company, its directors, officers, stockholders, advisory
committee members, employees, agents, attorneys, subsidiaries, servants,
successors, affiliates and their successors and assignees, including without
limitation Cinnamon, from any and all manner of action, claims, liens, demands,
liabilities, causes of action, charges, complaints, suits (judicial,
administrative, or otherwise), damages, debts, demands, obligations of any other
nature, past or present, known or unknown, whether in law or in equity, whether
founded upon contract (expressed or implied), tort (including, but not limited
to, defamation), statute or regulation (State, Federal or local), common law
and/or any other theory or basis, from the beginning of the world to the date
hereof, including, but not limited to, any claim that Bergman has asserted, now
asserts or could have asserted, other than with respect to the payment of the
amount set forth in Section 2(a)(i) hereof and the Note, the indemnification of
Bergman by the Company for acts and omissions by him as an officer, director,
employee or agent of the Company and the benefit of insurance, if any, with
respect thereto, to the extent applicable, and the agreements of the Company and
Cinnamon contained herein and in the Note, none of which are released hereby.
This includes, but is not limited to, claims for additional compensation or
benefits, claims for commissions, tortious claims arising out of the employment
relationship, claims of an expressed or implied contract of employment, claims
under the Family and Medical Leave Act, claims arising under Federal, State or
local laws prohibiting employment, age, health, handicap or other discrimination
or claims growing out of any legal restrictions on the Company's rights to
terminate its employees, including without limitation any claims arising under
Title VII of the United States Code, and the Age Discrimination in Employment
Act. It is expressly understood by Bergman that among the various rights and
claims being waived by him in this release are those arising under the Age
Discrimination in Employment Act of 1967 (29 U.S.C. Section 621, et seq.) and
the Americans with Disabilities Act. Included in this General Release are any
and all claims for future damages allegedly arising from the alleged
continuation of the effect of any past action, omission or event. Bergman
further agrees to waive any rights he may have to reinstatement or reemployment
with the Company. This
2
<PAGE> 3
General Release expressly represents a complete and absolute extinguishment of
all known and unknown claims, except as expressly provided herein.
(b) As a material inducement to Bergman to enter into this
Agreement, the Company and Cinnamon each hereby irrevocably and unconditionally
waives, releases and forever discharges Bergman, his agents and attorneys,
heirs, personal representatives, successors and assigns from any and all manner
of action, claims, liens, demands, liabilities, causes of action, claims, liens,
demands, liabilities, causes of action, charges, complaints, suits (judicial,
administrative or otherwise), damages debts, demands, obligations of any other
nature, past or present, known or unknown, whether in law or in equity, whether
founded upon contract (expressed or implied, tort (including, but not limited
to, defamation), statute or regulation (State, Federal or local), common law
and/or implied, regulation (State, Federal or local), common law and/or any
other theory or basis from the beginning of the world to the date hereof,
including, but not limited to, any claims that the Company or Cinnamon has
asserted, now asserts or could have asserted, other than with respect to any
violation by Bergman of Section 16(b) of the Securities Exchange Act of 1934, as
amended, and the agreements of Bergman contained herein, none of which are
released hereby. Included in this General Release are any and all claims for
future damages allegedly arising from the alleged continuation of the effect of
any past action, omission or event. This General Release expressly represents a
complete and absolute extinguishment of all known and unknown claims, except as
expressly provided herein.
4. Acknowledgments
(a) Bergman acknowledges that:
(i) He has had a full twenty-one (21) days within
which to consider this Agreement before executing it.
(ii) He has carefully read and fully understands all
of the provisions of this Agreement.
(iii) He is, through this Agreement, releasing the
Company from any and all claims he may have against the Company.
(iv) He knowingly and voluntarily agrees to all of the
terms set forth in this Agreement.
(v) He knowingly and voluntarily intends to be legally
bound by the same.
(vi) He was advised and hereby is advised in writing
to consider the terms of this Agreement and consult with an attorney of his
choice prior to executing this Agreement.
(vii) He has a full seven (7) days following the
execution of this Agreement to revoke this Agreement and has been and hereby is
advised in writing that this Agreement shall not
3
<PAGE> 4
become effective or enforceable until the revocation period has expired. In the
event that Bergman exercises this right of revocation, he shall do so only if
and to the extent that he returns to the Company, concurrently with such
revocation, all consideration delivered to Bergman pursuant to Section 2 of this
Agreement.
(viii) He understands that rights or claims under the
Age Discrimination in Employment Act of 1967 (29 U.S.C. Section 621, et seq.)
that may arise after the date this Agreement is executed are not waived.
(b) The Company and Cinnamon each acknowledge that:
(i) He or it has had a full twenty-one (21) days
within which to consider this Agreement before executing it.
(ii) He or it has carefully read and fully understands
all of the provisions of this Agreement.
(iii) He and it are, through this Agreement, releasing
Bergman from any and all claims he or it may have against Bergman.
(iv) He and it knowingly and voluntarily agree to all
of the terms set forth in this Agreement.
(v) He and it knowingly and voluntarily intend to be
legally bound by the same.
(c) The Company agrees to continue to indemnify and insure
Bergman for acts and omissions as a director, officer, employee or agent of the
Company if and to the extent that the Company so indemnifies and insures its
then current directors, officers, employees or agents so long as, with respect
to such insurance of Bergman, it can be maintained at no additional cost to the
Company. Bergman agrees to cooperate fully with the Company in all respects upon
the occurrence of any event giving rise to a claim with respect to any such
indemnification or insurance.
5. Resignation
On the date of this Settlement and General Release, Bergman
shall, and does hereby, resign as an officer, employee and director of the
Company.
6. Termination of Employment Agreement
The Employment Agreement (the "Employment Agreement") dated as
of December 27, 1993, as amended, between the Company and Bergman, including
without limitation the letter agreement dated July 18, 1994 among the Company,
Bergman and Cinnamon and Section 8 of the Employment Agreement, is hereby
terminated in all respects and shall be of no further force or effect.
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<PAGE> 5
7. Sales of Common Stock
Cinnamon and Bergman each hereby agree that to the extent that
either of them is afforded an opportunity to sell any of their shares of Common
Stock to M.S. Farrell & Co., Inc., or to have released the restrictions imposed
pursuant to the Lock-Up Agreements dated December 12, 1995 executed by each of
Cinnamon and Bergman in favor of M.S. Farrell & Co., Inc., then such person
shall use his reasonable best efforts to cause such benefit to be afforded to
the other in the same proportion as each of their common stock holdings bear to
the total common stock holdings of both of them in the aggregate.
8. Non-Disclosure; Non-Solicitation; Proprietary
Information
(a) Bergman shall not disclose or deliver to any other party
certain trade secrets or confidential or proprietary information gained through
employment with the Company. This includes, but is not limited to, proprietary
technologies, software programs, codes and tools, financial information,
business plans, systems, files, file structures, customer lists, supplier lists,
internal program structures and data developed by the Company or any subsidiary
or division thereof. Bergman agrees that any breach of this paragraph would
cause the Company substantial and irreparable damages that would not be
qualifiable and therefore, in the event of any such breach, in addition to other
remedies that may be available, the Company shall have the right to seek
specific performance and other injunctive and equitable relief. Bergman agrees
that he shall not for a period of two (2) years after the date hereof, solicit
on behalf of himself or any other person or entity the services of any employee,
consultant, independent contractor or other agent of the Company or any of its
subsidiaries or affiliates who was such at the time of such solicitation.
(b) Bergman hereby represents and warrants to the Company that
Bergman has disclosed to the Company any and all inventions, improvements or
procedural or methodological innovations, programs, methods, forms, systems,
services, designs, marketing ideas, products or processes (whether or not
capable of being trademarked, copyrighted or patented) conceived or developed or
created by Bergman during or in connection with Bergman's employment by the
Company ("Intellectual Property"). Bergman agrees that all such Intellectual
Property shall be the sole property of the Company. Bergman further agrees that
Bergman will execute such instruments and perform such acts as may reasonably be
requested by the Company to transfer to and perfect in the Company all legally
protectable rights in such Intellectual Property.
9. Non-Disparagement
The Company and Bergman mutually agree not to publish,
communicate or disseminate any negative information as regards each other, or to
make public any information regarding this Agreement to the media, present,
former or future employees of the Company, suppliers, vendors and other industry
participants, or in any way to any other person, except that they may disclose
its contents to their respective financial advisors, accountants and attorneys
and as required by law.
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<PAGE> 6
10. No Representations
The parties represent that in signing this Agreement,
they do not rely on nor have they relied on any representation or statement not
specifically set forth in this Agreement by any of the Releasees or by any of
the Releasees' agents, representatives or attorneys with regard to the subject
matter, basis or effect of this Agreement or otherwise.
11. Severability
Should any of the provisions of this Agreement be
declared or be determined to be illegal or invalid, the validity of the
remaining parts, terms or provisions shall not be affected thereby and said
illegal or invalid part, term or provision shall be deemed not be a part of this
Agreement.
12. Entire Agreement
This Agreement sets forth the entire agreement between
the parties hereto, and fully supersedes any and all prior agreements or
understandings between the parties hereto pertaining to the subject matter
hereof. All other contracts, agreements or understandings between Bergman and
Cinnamon and/or the Company, other than the escrow agreements referred to in
Section 7 hereof, are null and void.
13. Successors
This Agreement shall be binding upon and inure to the benefit
of the Company, Cinnamon and Bergman and their respective administrators,
representatives, executors, successors and assigns.
14. Governing Law
This Agreement is made and entered into in the State of New
York, and shall in all respects be interpreted, enforced and governed under the
laws of the State of New York.
15. Return of the Company Property
Upon execution of this Agreement, Bergman agrees to return to
the Company all of the Company's equipment and property that is presently in his
possession, if any. This shall include, without limitation, computer equipment,
computer software, records, documents, files and other equipment.
16. Counterparts
This Agreement may be executed in counterparts and/or
by facsimile transmission. Each counterpart shall be deemed an original, and
when taken together with the other signed counterpart, shall constitute one
fully executed Agreement.
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<PAGE> 7
PLEASE READ CAREFULLY. THIS SETTLEMENT AND GENERAL RELEASE
AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
IN WITNESS WHEREOF, the parties hereto have executed this Settlement
and General Release Agreement on the 23rd day of July, 1996.
ALLEGRO NEW MEDIA, INC.
By:/s/ Barry A. Cinnamon
----------------------------
Barry A. Cinnamon
Chairman of the Board
/s/ Richard Bergman
----------------------------
Richard Bergman
/s/ Barry A. Cinnamon
----------------------------
Barry A. Cinnamon
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<PAGE> 8
Schedule A
Complete Request for Proposal for new MIS System.
8
