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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): June 28, 1996
ASTEA INTERNATIONAL INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
0-26330 23-2119058
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(Commission File Number) (IRS Employer Identification No.)
100 HIGHPOINT DRIVE, CHALFONT, PENNSYLVANIA 18914
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(215) 822-8888
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(Former name or former address, if changed since last report)
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PAGE 2
SECURITIES AND EXCHANGE COMMISSION
CURRENT REPORT ON FORM 8-K
DATE OF REPORT, JUNE 28, 1996
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Astea International Inc. ("ASTEA") has entered into a Share Purchase
Agreement (the "AGREEMENT"), dated as of June 20, 1996, among Astea and Per
Edstrom, Orjan Grinndal, and Henrik Lindberg, the sole shareholders (the "ABALON
PRINCIPALS") of Abalon AB, a Swedish company, and its affiliated entities
("ABALON"), pursuant to which Astea acquired (the "ACQUISITION") Abalon through
the acquisition from the Abalon Principals of all of the outstanding shares of
Abalon.
Under the terms of the Agreement, which closed on June 28, 1996, the
Abalon Principals will receive consideration valued at $14,550,000 (the
"PURCHASE PRICE"), payable as follows: (i) $8,550,000 in cash, and (ii) 233,236
shares (the "SHARES") of Common Stock of Astea (the "COMMON STOCK"), valued at
$6,000,000. The calculation of the Shares was based on the average of closing
prices of the Common Stock on the Nasdaq National Market for the twenty trading
days ending on the last trading day prior to the closing date of June 28, 1996.
The parties intend that the transaction be accounted for as a purchase of
in-process research and development. It was structured under purchase accounting
rules as an acquisition of stock directly from the Abalon Principals.
The Shares issued to the Abalon Principals contain shelf registration
rights; however, the Shares are also subject to transfer restrictions for a
period of 2-1/2 years. A total of 15% of the Shares will be released from these
transfer restrictions on December 31, 1996, 19% on April 30, 1997, 19% on
September 30, 1997, 15% on December 31, 1997, 16% on June 30, 1998, and 16% on
December 31, 1998.
The Agreement also contains an escrow arrangement providing that Shares
equaling fifteen percent (15%) of the Purchase Price, or 84,840 Shares (the
"ESCROW SHARES"), are to be deducted from the aggregate of 233,236 Shares issued
to the Abalon Principals under the Agreement and held in escrow by an escrow
agent, selected by Astea, to secure certain indemnification obligations of the
Abalon Principals under the Agreement. In the event that Astea has
indemnification claims against the Abalon Principals, it shall first recover
such claims directly from the Escrow Shares, and second, from the remaining
Shares received by the Abalon Principals, or the proceeds from any sale of such
Shares by the Abalon Principals. One-half of the Escrow Shares are available for
release after April 30, 1997, and the balance are available for release after
September 30, 1997 (except as to claims for indemnification arising as of each
such date).
In connection with the Acquisition, Astea and Abalon have entered into
three-year employment agreements with each of the Abalon Principals. Each Abalon
Principal will be paid an annual salary of $70,000 per year during the term of
the employment agreement, and each is eligible to receive a bonus based on
certain revenue and profitability milestones of the Abalon
PAGE 3
SECURITIES AND EXCHANGE COMMISSION
CURRENT REPORT ON FORM 8-K
DATE OF REPORT, JUNE 28, 1996
business in the 1996 calendar year. The Abalon Principals have also agreed to
certain noncompetition provisions extending until the later of two years
following termination of employment with Astea or four years from the closing of
the Acquisition, pursuant to which, among other things, the Abalon Principals
are prohibited from competing with Astea, Abalon or their affiliated entities
with respect to the business of providing sales force automation and customer
interaction software applications and related professional and consulting
services.
Each of the Abalon Principals also received stock options to purchase
35,000 shares of Common Stock at an exercise price of $24.50 per share. These
options vest in three equal annual installments commencing one year after the
closing of the Acquisition.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Audited financial statements of Abalon are currently in
preparation. Since it is impracticable for the Registrant to provide complete
financial statements of Abalon's business together with this filing, such
statements will be provided as soon as they have been made available to
Registrant. In no event will the Registrant provide Abalon's financial
statements later than September 11, 1996, even if it becomes necessary to file
unaudited statements.
(b) PRO FORMA FINANCIAL INFORMATION.
Pro forma financial information of the Registrant combined
with Abalon is currently in preparation. Since it is impracticable for the
Registrant to provide complete pro forma financial information of the combined
business together with this filing, such information will be provided as soon as
it is made available to the Registrant. In no event will Registrant provide
pro forma financial information later than September 11, 1996.
(c) Exhibits.
7.01 - Share Purchase Agreement, dated as of June 20,
1996, among Astea International Inc., Per Edstrom,
Orjan Grinndal, and Henrik Lindberg.
7.02 - Escrow Agreement, dated as of June 28, 1996, among
Astea International Inc., Abalon AB, Midlantic Bank,
N.A., Per Edstrom, Orjan Grinndal, and Henrik
Lindberg, and Per Edstrom, as representative.
7.03 - Registration Rights Agreement, dated as of June 28,
1996, among Astea International Inc., Per Edstrom,
Orjan Grinndal and Henrik Lindberg.
PAGE 4
SECURITIES AND EXCHANGE COMMISSION
CURRENT REPORT ON FORM 8-K
DATE OF REPORT, JUNE 28, 1996
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this Current Report on Form 8-K to be signed on its behalf by the
undersigned hereunto duly authorized.
ASTEA INTERNATIONAL INC.
By: /s/ Leonard W. von Vital
_________________________
Leonard W. von Vital
Vice President, Chief Financial Officer
Date: July 12, 1996
PAGE 5
SECURITIES AND EXCHANGE COMMISSION
CURRENT REPORT ON FORM 8-K
DATE OF REPORT, JUNE 28, 1996
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description
<S> <C> <C>
7.01 Share Purchase Agreement, dated as of June 20, 1996, among
Astea International Inc., Per Edstrom, Orjan Grinndal, and
Henrik Lindberg.
7.02 Escrow Agreement, dated as of June 28, 1996, among
Astea International Inc., Abalon AB, Midlantic Bank,
N.A., Per Edstrom, Orjan Grinndal, and Henrik
Lindberg, and Per Edstrom, as representative.
7.03 Registration Rights Agreement, dated as of June 28, 1996,
among Astea International Inc., Per Edstrom, Orjan Grinndal
and Henrik Lindberg.
</TABLE>
Exhibit 7.01
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Dated 20 June 1996
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THE ABALON GROUP
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SHARE PURCHASE AGREEMENT
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BETWEEN
PER EDSTROM
ORJAN GRINNDAL
HENRIK LINDBERG
AND
ASTEA INTERNATIONAL INC.
Baker & McKenzie
Eriksbergsgatan 46
PO Box 26163
100 41 Stockholm
Sweden
Tel: 46 8 676 7700
2
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement is made this 20 day of June, 1996, between:
Per Edstrom
Orjan Grinndal
Henrik Lindberg
(each a "Seller" and collectively "Sellers")
and
ASTEA INTERNATIONAL INC. (the "Buyer" or "Astea").
RECITALS
A. Sellers are the registered shareholders of all the issued and outstanding
Shares (each a "Share", collectively the "Shares") of Bebalon AB, 556502-4972,
(the "Parent Company") which is the sole registered Shareholder of all the
issued and outstanding shares of E.L.G. Data AB, 556327-4066, which is the sole
registered shareholder of all the issued and outstanding shares of Abalon AB,
556329-9741, (the "Company"), Shareholders of the Parent Company are allocated
as follows:
Per Edstrom 170 Shares approx. 33.3 %
Orjan Grinndal 170 Shares approx. 33.3 %
Henrik Lindberg 170 Shares approx. 33.3 %
Total 510 Shares 100 %
Further particulars of the Group, as defined below, are set out in Exhibit 1.
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B. Sellers wish to sell and Buyer wishes to purchase the Shares and therefore
acquire all of the outstanding equity securities of all types of the Parent
Company and therefore acquire, through various subsidiaries, the Company.
C. Buyer has based its decision to purchase the Shares for the Purchase Price on
the business, operations and affairs and conditions of the Company, and upon a
due diligence of the Group undertaken by Buyer, Arthur Andersson & Co.
Revisionsbyra AB and Baker & McKenzie Advokatbyra KB, and subject to the
warranties and conditions set forth in this Agreement. In said due diligence
Baker & McKenzie Advokatbyra has received copies of the documents listed in
Exhibit 2a.
D. The Sellers have based their decision to sell the Shares for the Purchase
Price on the presentation made by the Buyer and subject to the representations
and warranties set forth in this Agreement.
The Parties therefore agree as follows:
1. DEFINITIONS
1.1 In addition to the definitions in other Articles in this Agreement the
following terms shall have the meaning as defined below.
"Accounting Date" means 31 December 1995;
"Agreement Date" means the date of this Agreement;
"Audited Financial Statements" means the audited consolidated financial
statements of the Company comprising the consolidated balance sheet and profit
and loss account and cash flow statements of the Company together with notes and
directors' and auditors' reports for the accounting reference period ended on
the Accounting Date, attached as Exhibit 3;
4
"Auditors" means Price Waterhouse Revisionsbyra AB with Christer Nirland as
responsible auditor;
"Business" means the business of each Group Company as defined in the articles
of association (Sw. "bolagsordning") of each Group Company and other activites
of the Group at the locations listed in Exhibit 4;
"Closing" means completion of the Sale;
"Closing Date" means on or before June 28, 1996 as the parties may agree;
"Confidential Information" means all information which is a business or trade
secret in the business of a Party and its affiliates, including, without
limitation, technology, market, and business information, know-how, trade
secrets, pricing, products, processes, business strategies, information
concerning research, customer lists, supplier lists, marketing plans, product
development, manner of operation or financial condition or prospects.
Confidential information does not include any information which (i) at the time
of disclosure is in the public domain; (ii) after disclosure has become part of
the public domain by publication or otherwise, except by breach of this
Agreement by the receiving Party; (iii) the receiving Party can establish by
competent proof was in its possession at the time of disclosure; (iv) the
receiving Party receives, without restriction, from a third party, provided that
such information was not obtained by said third party directly or indirectly
from the disclosing Party under an obligation of confidence; (v) the receiving
Party independently develops without the use of the disclosures hereunder or
(vi) is required to be disclosed by any Party by law or regulation having force
of law;
"Employees" means all employees of each Group Company, as listed in Exhibit 6;
"Escrow Account" means the Account as defined in Exhibit 12;
"Escrow Agreement" means the escrow arrangement covering the Holdback Shares,
substantially in the form of Exhibit 12;
5
"Executive Agreements" means the employment agreements to be entered into
between the Company and each Seller being an individual, as attached in Exhibit
13a-c;
"Financial Statements" means the Audited Financial Statements and the Unaudited
Financial Statements;
"Group" means all companies listed in Exhibit 1 with the exception of Xplan
Affarsutveckling AB;
"Group Company" means any of the companies listed in Exhibit 1 with the
exception of Xplan Affarsutveckling AB;
"Intellectual Property" means trade marks, trade names, moral rights, rights of
trade dress, privacy or publicity, copyrights, patents, patent applications and
other intellectual property rights, and license or contract rights relating to
the foregoing;
"Laws" means any of the following which are in effect on or prior to the
Agreement Date, including any amendment of any of the following from time to
time subsequent to the original enactment, adoption, issuance, announcement or
promulgation and in each case in force prior to the Agreement Date with regard
to the Sellers in the countries of EU and Norway and with regard to the Buyer in
the U.S.: any statute, law, act, ordinance, code, resolution, rule, regulation,
order, decree or judgement;
"Licenses" means all the licenses and consents necessary to operate the Group
Companies and to carry on the Business, including licenses to Intellectual
Property;
"Liens" means liens, security interests, mortgages, pledges, charges and other
encumbrances of a similar nature;
"Purchase Price" has the meaning set out in Section 2.2;
6
"Sale" means the sale and purchase of the Shares contemplated by this Agreement;
"Taxes" means all taxes of any nature, including but not limited to income,
excise, withholding, value-added, payroll, and real and personal property taxes
and any interest or penalties on these;
"Unaudited Financial Statements" means the unaudited management accounts of the
Company comprising the balance sheet and profit and loss account of the Company
for the period 1 January - 31 March 1996, attached as Exhibit 5.
2. TERMS OF SALE
2.1 On the Closing Date, Sellers shall sell to Buyer and Buyer shall buy the
Shares. Each Seller hereby waives all restrictions on transfer (including but
not limited to pre-emption rights and rights of first refusal in the Company's
Articles of Association and in any shareholders agreement among Sellers) of the
Shares.
2.2 Purchase Price. As of the Closing Date, by virtue of the transaction, Buyer
shall pay for the shares to be sold by the Sellers hereunder (the "Purchase
Price") as follows: (i) the Buyer shall deliver to the Sellers an aggregate of
US$ eight million five hundred fifty thousand (8,550,000) (the "Cash
Consideration") in immediately available funds, to be divided among the Sellers
as their interests appear in the Parent Company as outlined above; and (ii) such
number of shares of Common Stock of Astea (the "Share Consideration") as shall
equal US $ six million (6,000,000) divided by the average of the per share
closing sale prices of Astea Common Stock on the NASDAQ National Market System
on the 20 trading days ending one trading day prior to the Closing ("Closing
Date Price"); provided, however, that the Share Consideration shall not be (a)
less than 200,668 shares of Astea Common Stock or (b) more than 271,493 shares
of Astea Common Stock. The Share Consideration shall be divided among the
Sellers as their interests appear in the Parent Company. The Purchase Price as
defined herein shall also include 35,000 Stock Options per Seller in accordance
with the Stock Option Agreement.
7
As soon as practicable after the Closing Date, Buyer shall make available, and
each Seller will be entitled to receive certificates representing the number of
shares of Astea Common Stock that such Seller is entitled to receive pursuant to
this Agreement; provided, however, that the certificates representing the
Holdback Shares, as defined below, shall be held in escrow in accordance with
the Escrow Agreement. The shares of Astea Common Stock that each Seller shall be
entitled to receive pursuant to the Transaction shall be deemed to have been
issued to the Sellers at the Closing Date.
3. CLOSING
3.1 On the Closing Date the Parties shall arrange for the performance of the
following acts, each of which shall be deemed to have been made subject to and
simultaneously with the due performance of all other such acts.
3.2 Each Seller shall deliver to Buyer:
3.2.1 the certificates representing all his Shares duly endorsed to Buyer with
all attached coupons;
3.2.2 jointly with the other Sellers:
(a) the share ledger of the Parent Company;
(b) all shares and share ledgers of each of the other Group
Companies;
(c) duly executed Executive Agreements between the Company and
each of the individual Sellers attached as Exhibit 13a-c;
(d) duly executed Escrow Agreement among the Buyer and the
Sellers;
8
(e) duly executed Registration Rights Agreement among the
Buyer and the Sellers.
(f) unconditional waiver by Sellplan Affarsutveckling AB to
exercise the right to cancel the Shareholders Agreement with
the Company regarding the shares in Xplan Affarsutveckling AB.
3.3 Buyer shall be entered into Parent Company's share ledger as the sole owner
of all Shares.
3.4 Each Seller and Buyer shall execute the Escrow Agreement.
3.5 Each Seller and Buyer shall execute the Registration Rights Agreement
attached as Exhibit 9.
3.6 Each Seller and Buyer shall execute the Stock Option Agreement.
3.7 An extra general meeting shall be held in each Group Company, at which Buyer
shall vote for all the shares. At the meeting, all Directors shall resign from
the board of each Group Company with the exception of the Company where one
Seller shall remain as a Director on the Company's board. Sellers shall procure
that the resigning Directors shall have no claim against any Group Company for
board directorship fees or any other compensation. Buyer shall nominate
directors and auditors and such nominees shall be elected.
3.8 The election of new directors and auditors shall be filed by Buyer for
registration.
3.9 The Sellers shall have the right to prepare a closing balance sheet as of 30
June, 1996 and have such closing balance sheet audited by the Auditors at the
cost of the Sellers.
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4. WARRANTIES OF SELLER
Sellers jointly as of Closing, warrant to Buyer with regard to each Group
Company that:
4.1 The particulars of the Group set out in Exhibit 1 are true and accurate.
Sellers own, directly or indirectly, all the shares set out in Exhibit 1 in the
Group, free of any Liens or any option rights, rights of first refusal,
redemption rights or any other restrictions on transfer. No Seller has any
contracts or commitments for the disposal of any Share and each Seller has good
and marketable title to his Shares and full right and power to sell, assign and
transfer the Shares to Buyer.
4.2 Each Group Company is duly organized, existing and in good standing under
the laws of Sweden, and has the legal authority to own its properties and carry
on its business as now conducted. Exhibit 2b contains copies of the certificates
of registration and articles of association of each Group Company. Each Group
Company has complied with and is not in default in any material respect under
any Laws applicable with respect to its business or property. There is no
requirement for Buyer to pay additional share capital into the Parent Company or
for the Parent Company to pay additional share capital into any other Group
Company. All shares of the Group Company are valid, fully paid and have been
issued in compliance with the laws of Sweden. There are no outstanding
subscriptions, options, conversion rights or other agreements obligating any
Group Company to issue any additional shares.
4.3 Except as set forth on Schedule 4.3, the performance of this Agreement and
the consummation of the transactions contemplated hereby will not to the best of
Sellers' knowledge (i) constitute a violation of any provision of Law or any
regulation or rule of any governmental authority, (ii) require any consent (the
consent of all such persons to be duly obtained by the Group at or prior to the
Closing), approval or filing with any entity or regulatory authority except for
potential notification if so required under the Swedish Competition Act , (iii)
result in a default under any agreement, to which any Group is a party or by
which it is bound or to which any assets of a Group Company are subject, (iv)
result in the creation of any Lien upon the assets of any Group Company.
10
4.4 Sellers' execution and performance of this Agreement will not constitute a
violation of the articles of association of the Parent Company or any Group
Company.
4.5 All action on the part of each Group Company necessary for the
authorization, delivery and performance of this Agreement and the Operative
Documents, the consummation of the Transactions, has been taken or will be taken
as of or prior to the Closing Date.
4.6 The Audited Financial Statements present a true and fair financial
representation of the Group as of the Accounting Date and the results of its
operations for the period then ended. The Unaudited Financial Statements present
a true and fair financial representation of the Group as of 31 March 1996 and
the results of its operations for the period then ended. The Financial
Statements have been prepared in conformity with generally accepted accounting
principles in Sweden ("GAAP") and consistent with those applied with respect to
previous three years except for year-end adjustments and accrued accounting for
certain income. Since the Accounting Date and up to and including the Closing
Date there has been no material adverse change in the properties except for
depreciation and normal wear and tear, business or financial condition of the
Group, and the business of the Group has been and shall be carried on in the
same manner and in the ordinary course of business up to the Closing Date. The
books and records of each Group Company have been properly maintained and are
accurate in all material respects and contain a true and complete record of the
business of the Group. The Company complies in all material respects with the
provisions of GAAP relating to the recognition of revenue with respect to the
booking and recording of revenue relating to the distribution, sales and
licenses of its software products and the provision of maintenance under its
service contracts. License revenues are recognized according to the realization
concept at the time of invoicing, i.e. after delivery. Maintenance revenues are
correctly accounted for at year-end closing by deferring a pro rata portion of
revenue (1/12). During the year revenues are recognized when invoiced. In
accruing liabilities for outstanding claims, as of 31 March 1996 the estimated
ultimate cost of all claims incurred but not settled at 31 March 1996 whether
reported or not, has been taken into account. Such liabilities have been
calculated in a manner which is consistent with previous years and in accordance
with GAAP. Each Group Company has no material liabilities or
11
obligations of any nature (absolute, contingent or otherwise) which are not
fully reflected or reserved against in Audited Financial Statements of each
Group Company, except liabilities or obligations incurred since the Accounting
Date in the ordinary course of business and consistent with past practice.
4.7 Other than assets disposed of in the ordinary course of its business, each
Group Company owns, possesses and has good and marketable title to or have
license to use all assets included in its balance sheet at Accounting Date and
all assets acquired between Accounting Date and the Closing Date, free of all
Liens.
4.8 All accounts receivable of each Group Company reflected in the relevant
Balance Sheet of that company, or existing at the Closing Date, were recorded in
the company's books consistently with the advice of the Company's accountants
regarding revenue recognition matters. Except as described on Schedule 4.8a, the
bad debt reserves and sales return allowances reflected in each Group Company's
Balance Sheet are adequate to the Sellers best knowledge. Set forth on Schedule
4.8b, is a full and complete list and ageing study of all consolidated accounts
receivable of the Company existing as of 31 May 1996.
4.9 No Seller claims any title to or payment due in connection with any of the
assets of the Group. No Seller has any further claims against any Group Company.
4.10 Set forth on Schedule 4.10a is a true and complete list of all inventions,
patents, trademarks, trade names, brand names, copyrights, Software Products (as
defined below), and trade secrets or software algorithms now used or anticipated
(to the best of Sellers' knowledge) to be used in the business of the Group and
to which the title belongs to any of Group Company (collectively, the "LISTED
INTELLECTUAL Property"). Schedule 4.10b contains a complete and accurate list of
all licenses or agreements which in any way affect the rights of the Group to
any of the Listed Intellectual Property or which otherwise implies a license to
intellectual property to which the title belongs to a third party (the
"INTELLECTUAL PROPERTY LICENSES"). The Group's Listed Intellectual Property does
not infringe, or to the Seller's knowledge provide any basis to believe that the
Listed Intellectual Property would infringe, upon any intellectual property
right
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of any other Person, nor, to the knowledge of the Sellers, is there any
infringement by any other Person of any of the Listed Intellectual Property of
the Group. The consummation of the transactions contemplated hereby will not
materially alter or impair the Group's rights to any of the Listed Intellectual
Property or under any Intellectual Property License. The manner in which the
Group has manufactured, packaged, shipped, advertised, labeled and sold its
software products complies in all material respects with all applicable Laws.
For the purpose of this Agreement the term "SOFTWARE" shall mean software
products which are Listed Intellectual Property listed on Schedule 4.10a, with
all modifications, versions, enhancements and additions thereto, including,
without limitation, all rights in and to all versions thereof and all source
code, object code, manuals and other documentation and related materials thereof
(collectively, the "SOFTWARE PRODUCTS"). The Software Products also include all
of the Group's related programs, trade secrets, algorithms and processes
relating to the Software Products or such programs, the Group's copyright in and
to each of the Software Products and all works derivative therefrom, all
current, previous, enhanced and developmental versions of the source and object
code and any variations thereof, all user and programmer documentation, all
design specifications, all maintenance and installation job control language,
all system documentation (including all flow charts, logic diagrams, systems
procedures and program component descriptions), all procedures for modification
and preparation for the release of enhanced versions and all betatest data
available (excluding all proprietary information of third parties) with respect
to the Software Products.
The Company is the sole and exclusive owner of the Listed Intellectual Property.
The Software Products listed on Schedule 4.10a have, in its current versions,
been developed by employees after January 1, 1993 or, to the extent a consultant
has been involved in the development of such Software products, the consultant
has signed an agreement under which the consultant is under obligation not to
disclose confidential information and the consultant has assigned all
intellectual property to the result of his work to the Company.
Each of the Intellectual Property Licenses is valid, binding and enforceable in
accordance with its terms against the parties thereto, the Group has performed
all material obligations imposed
13
upon it thereunder, and neither the Group nor, to the Sellers' knowledge, any
other party thereto is in default thereunder. To the best of the Sellers'
knowledge, each of the Agreements relating to the Intellectual Property Licenses
is valid, binding and enforceable in accordance with its terms against the
parties thereto. Any Group Company has performed all material obligations
imposed upon it thereunder, and neither any Group Company nor any other party
thereto is in default thereunder. No Group Company has received notice that any
party to any of the Intellectual Property Licenses intends to cancel, terminate
or refuse to renew the same or to exercise or decline to exercise any option or
other right thereunder. Except as set forth in Schedule 4.10c no licenses,
sublicenses, or agreements have been granted or entered into by any Group
Company in respect of any of the Listed Intellectual Property except in the
ordinary course of business. No director, officer, shareholder or employee of
any Group Company owns, directly or indirectly, in whole or in part, any of the
Listed Intellectual Property. None of the Group Company, nor to the Sellers'
knowledge any of any Group Company's consultants, has entered into any agreement
with respect to any Group Company's business regarding Listed Intellectual
Property, or prohibition or restriction of competition or solicitation of
customers, or any other similar restrictive covenant, whether written or oral,
with any Person other than the Group.
To the Sellers' knowledge, no Person has asserted any claim of infringement or
other interference with third-party rights with respect to the Listed
Intellectual Property. Except as set forth on Schedule 4.10d-e, (i) the Group
has not disclosed any source code regarding the Software Products to any person
other than an employee of the Group or to the Buyer; (ii) the Group has at all
times maintained reasonable procedures to protect and has enforced all trade
secrets of the Group; (iii) neither any Group Company nor any escrow agent is
under any contractual or other obligation to disclose the source code or any
other proprietary information included in or relating to the Software Products
and no event has taken place, including the execution of this Agreement or any
related change in any Group Company's business activities, which would give rise
to such obligation; and (iv) any Group Company has not deposited any source code
regarding the Software Products into any source code escrows or similar
arrangements. If, as disclosed on Schedule 4.10e, the Group has deposited any
source code to Software Products into source code escrows or similar
arrangements, no event has occurred that has or could reasonably form the basis
for a release of such source code from such arrangements.
14
There are no significant defects in the Software Products which would imply a
breach of the Company's Standard License Agreement.
4.11 Each Group Company has filed with the appropriate governmental authorities
all required Tax returns and all returns made for the purposes of any Taxes and
all other information supplied to any authority for such Taxes and any records
maintained for such purposes are complete and correct in all material respects
and were made or supplied on a timely basis. Each Group Company has paid all
taxes due on or before the Closing Date. No Group Company is in formal dispute
with any authority in relation to any Taxes not provided for in the Audited
Financial Statements. There is no contingent tax liability for any Group Company
that could result in any Lien.
4.12 The Group has received all currently required governmental approvals,
consents, licenses and permits. The Group has not received any notifications of
any asserted present failure by it to have obtained any such approval, consent,
license or permit, or past and unremedied failure to obtain such items.
4.13 To the best of Sellers' knowledge, each Group Company has at all times
complied, and is in compliance, with all Laws, applicable to it, to its
employees, or to the Listed Intellectual Property or Personal Property as
defined in Article 4.20 below. The Group has not received any notification of
any asserted present or past unremedied failure by any Group Company to comply
with any of such Laws.
4.14 Except as set out in Schedule 4.14, there is no litigation, arbitration or
other proceeding in process, pending or, to the Sellers' knowledge, threatened
and no currently outstanding injunction or judicial or administrative order or
restriction has been imposed or is threatened or expected, and there is no
investigation, inquiry or enforcement proceeding or process by any governmental
body, which may adversely affect the business, property, Licenses or assets of
any Group Company.
15
4.15 Exhibit 6 lists all Employees with information as to length of employment,
salary and notice period (except when set forth by law) of each Employee.
4.16 Exhibit 7 lists all employment contracts, and all bonus, deferred
compensation, pension, retirement or other similar arrangements providing for
employee benefits, to which any Group Company is a party. The Company has
covered the payment of pensions to employees except as set forth in Exhibit 7
and has met all its legal obligations toward them.
4.17 There is no labor strike, dispute, slowdown or stoppage pending or, to the
Sellers' best knowledge, threatened against or affecting any Group Company, and
the Group has not experienced any work stoppage or other labor difficulty. No
collective bargaining agreement is binding on any Group Company. The Sellers
have no knowledge of any organizational efforts presently being made or
threatened by or on behalf of any labor union, and each Group Company has not
been requested by any group of employees or others to enter into any collective
bargaining agreement or other agreement with any labor union or other employee
organization.
4.18 No Group Company has any loans outstanding to any Seller or Employee or to
any other legal entity or individual affiliated directly or indirectly with a
Seller or an Employee which, in the aggregate, exceed SEK 100,000.
4.19 Exhibit 8 lists all outstanding powers of attorney and identifies all
persons authorized to sign on behalf of and commit any Group Company; and banks
where any Group Company has an account and the names of all persons authorized
to make deposits and withdrawals from each account.
4.20 Schedule 4.20 contains a complete and accurate list of each item of
tangible personal property (Sw. "Inventarielista") having a value in excess of
SEK 20,000, which is owned, leased, rented or used by any Group Company (the
"PERSONAL PROPERTY"). Each Group Company has delivered to Buyer true and
complete copies of all material leases, subleases, rental agreements, contracts
of sale, tenancies or licenses relating to the Personal Property. The
16
Personal Property includes all real property and tangible personal property
(other than, in the case of the Personal Property, property rights with an
individual value of less than SEK 20,000) reflected in the Audited Financial
Statements and all the properties and assets purchased by each Group Company
since the date of the Audited Financial Statements (except for such properties
or assets sold in the ordinary course of business and consistent with past
practice). Each Group Company owns, or has a valid leasehold interest in, all of
the real property and tangible personal property used in the business of such
Company.
4.21 Exhibit 11 lists all real property owned or leased by any Group Company and
includes copies of all real property leases involving any Group Company (as
landlord or tenant). The Group has valid and enforceable interests in all real
property leased to any Group Company which are necessary to the operations of
the Group as presently conducted, and all such interests are to the extent
necessary reflected in the financial statements.
4.22 Schedule 4.22 contains a complete and accurate list (other than the
Employment Agreements and Intellectual Property Licenses) of all material
contracts (i.e. contracts which during its term involves costs or income in
excess of SEK 70,000), agreements and understandings, oral or written, to which
each Group Company is currently a party or by which the Company is currently
bound, including, without limitation, security agreements, license agreements
entered into other than in the ordinary and recurring course of the Company's
business, software development agreements, distribution agreements, joint
venture agreements, reseller agreements, credit agreements and instruments
relating to the borrowing of money. No Group Company is in material default
under any such agreements or contractual instrument or understanding, and no
threat thereof has been made or is outstanding.
4.23 The Group has no single customer accounting for 10% or more of the Group's
turnover during the fiscal year last ended. The Group has no supplier from whom
the Group has purchased 10% or more of the goods or services purchased by the
Group in the fiscal year last ended. The Sellers have no reasonable basis to
expect any material modification to the Group's
17
relationship with any customer or supplier except which may result as of the
transfer of shares in this Agreement.
4.24 Except as specifically set forth on Schedule 4.24 and except for
transactions specifically contemplated in this Agreement, since the dates of the
Audited Financial Statements and up to and including the Closing Date, neither
any Group Company nor any of its officers or directors in their representative
capacities on behalf of any Group Company has:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement or commitment other than in the ordinary course
of business;
(b) suffered any material adverse change in its business, operations,
assets, liabilities, sales, margins, profitability or condition
(financial or other);
(c) borrowed or agreed to borrow any funds, incurred or become subject
to, whether directly or by way of assumption or guarantee or otherwise,
any obligations or liabilities in excess of SEK 175,000, except
liabilities and obligations incurred in the ordinary course of business
and consistent with past practice;
(d) paid, discharged or satisfied any claims or obligations other than
the payment in the ordinary course of business and consistent with past
practice of claims and obligations reflected or reserved against in the
Audited Financial Statements or incurred in the ordinary course of
business and consistent with past practice since the date of the
Audited Financial Statements, or prepaid any obligation having a fixed
maturity of more than 90 days from the date such obligation was
incurred;
(e) permitted or allowed any of its property or assets to be subjected
to any Lien except (i) assessments for current taxes not yet due and
payable, (ii) landlord's liens for rental payments not yet due and
payable, and (iii) statutory
18
liens securing indebtedness that was incurred in the ordinary course of
business and is not yet due and payable;
(f) disposed of or permitted to lapse any rights to the use of any
trademark, trade name, patent or copyright, or disposed of or disclosed
to any Person without obtaining an appropriate confidentiality
agreement from any such Person any trade secret, formula, process or
know-how not theretofore a matter of public knowledge;
(g) entered into or agreed to enter into, or otherwise suffered to be
outstanding, any power of attorney of any Group Company or any
obligations or liabilities (absolute, accrued, contingent or otherwise)
of such Group Company, as guarantor, surety, cosigner, endorser,
comaker, indemnitor or otherwise in respect of the obligation of any
other Person;
(h) entered into or agreed to any sale, assignment, transfer or license
of any intellectual property assets of any Group Company or any
amendment or change to any existing license or other agreement relating
to intellectual property, other than in the ordinary course of
business;
(i) except for intraGroup contributions no Group Company has declared
or paid any dividend, in cash or assets, and no Group Company has
declared or paid any stock dividend, or made any distribution of assets
or cash or issued, or sold or agreed to issue or sell, any securities
intended to be acquired by Buyer pursuant to this Agreement; or
(j) no Seller has received or procured the transfer of any assets,
including but not limited to cash, securities or accounts receivable,
from any Group Company to a Seller or any company or individual
affiliated (directly or indirectly) with a Seller.
19
4.25 Except as disclosed in Schedule 4.25, no Group Company has entered into any
agreement with any person for brokerage, commissions or fees in connection with
this Agreement or the transactions contemplated hereby.
4.26 No Seller is directly or indirectly involved in any business competing with
the Group. Each Seller undertakes to sell his shares in such competing
businesses within 90 days from Buyer's request to do so.
4.27 Exhibit 10 includes a list of minutes from all board and shareholders
meetings of each Group Company and the original minutes from the listed meetings
are available at each Group Company, and except as set out in Exhibit 10, no
Group Company has had any other meetings.
4.28 Each Group Company maintains insurance in accordance with Schedule 4.28,
and nothing has been done or omitted to be done whereby any insurance policy may
become void or voidable.
4.29 All information communicated by Sellers to Buyer in connection with this
Agreement is to the best of Sellers knowledge accurate and complete in all
material respects, and no Seller has to the best of his knowledge failed to
disclose any information to Buyer which may materially and adversely affect the
business, assets and properties of any Group Company, as per the Closing Date.
5. WARRANTIES BY SELLERS RE PARENT COMPANY
Sellers represent that the Parent Company is a company which has been
incorporated for the sole purpose of being the owner of 30 shares in E.L.G. Data
AB and that the Parent Company has never entered into any business or other
relation with any entity except for (i) the purpose of acquiring said 30 shares
and (ii) providing management services to the Company and that the Parent
Company has no existing or contingent liability of any nature to any third party
except as may be the result of such management services to the Company.
20
6. WARRANTIES AND COVENANTS OF BUYER
Buyer represent and warrant to the Sellers, subject to the exceptions disclosed
in Astea's public filings with the Securities and Exchange Commission as
follows:
6.1 It shall for the period up to December 31, 1997, maintain at least one
Seller as a Director on the Company's board.
6.2 Each Resigning Director shall be acquitted from liability at the next annual
general shareholders meeting of the relevant Group Company, subject to the
approval of such company's auditors.
6.3 Astea is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, has the corporate power
to own, lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted. Astea has delivered or made available
a true and correct copy of its Certificate of Incorporation and Bylaws or other
charter documents each as amended to date, to counsel for the Sellers.
6.4 The authorized stock of Astea consists of 25,000,000 shares of Common Stock,
$.01 par value, of which approximately 13,000,000 shares were issued and
outstanding as of 31 May, 1996, and 5,000,000 shares of Preferred Stock. No
shares of Preferred Stock are issued or outstanding. As of 31 May, 1996, Astea
has also reserved approximately 2,800,000 shares of Common Stock for reserved
issuance pursuant to outstanding stock options under its various stock option
and stock purchase plans.
The Shares of Astea Common Stock to be issued to the Sellers will, upon issuance
and the receipt of the consideration set forth in this Agreement, be duly
authorized, validly issued, fully paid and non-assessable.
21
6.5 Astea has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Astea. This Agreement has been duly executed and delivered by
Astea and constitutes the valid and binding obligations of Astea, enforceable in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other similar laws and general principles of equity. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of a benefit under (i) any provision of the Certificate of Incorporation or
Bylaws of Astea or (ii) any material agreement or law, rule or regulation
applicable to Astea its properties or assets other than any such conflicts,
violations, defaults, terminations, cancellations or accelerations which would
not have a material adverse effect on the ability of Astea to consummate the
transactions contemplated hereby.
No consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental entity, is required by or with respect to Astea in
connection with the execution and delivery of this Agreement by Astea or the
consummation by Astea of the transactions contemplated hereby, except for (i)
the filing of a Form 8-K with the Securities and Exchange Commission, (ii)
listing of the Share Consideration on the Nasdaq National Market, and (iii) such
other consents, authorizations, filings, approvals and registrations which, if
not obtained, or made would not have a Material Adverse Effect on Astea.
6.6 Astea has filed all forms, reports and documents required to be filed with
the Securities and Exchange Commission (the "SEC") since July 27, 1995 and has
made available to United States Counsel to the Sellers, in the form filed with
the SEC, (i) its Annual Reports on Form 10-K for the fiscal year ended December
31, 1995, (ii) its Quarterly Reports on Form 10-Q for the periods ended
September 30, 1995 and March 31, 1996, (iii) all proxy statements relating to
Astea's meetings of stockholders (whether annual or special) held since July 27,
1995, (iv) all other reports or registration statements filed by Astea with the
SEC since July 27, 1995 and (v)
22
all amendments and supplements to all such reports and registration statements
filed by Astea with the SEC. All such required forms, reports and documents
(including those enumerated in clauses (i) through (v) of the preceding
sentence) are referred to herein as the "Astea SEC Reports". As of their
respective dates, the Astea SEC Reports (i) were prepared in all material
respects in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Astea SEC Reports and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading in any material
respect.
6.7 Since the date of the Astea Balance Sheet, except with respect to the
actions contemplated by this Agreement, Astea and its subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (i) any
Material Adverse Change in Astea; (ii) any damage, destruction or loss (whether
or not covered by insurance) having a Material Adverse Effect on Astea; (iii)
any material change by Astea in its accounting methods, principles or practices;
or (iv) any material revaluation by Astea of any of its assets including,
without limitation, writing down the value of capitalized software or inventory
or writing off notes or accounts receivable other than in the ordinary course of
business.
6.8 There is no action, suit, proceeding, claim, arbitration or investigation
pending, or as to which Astea has received any notice of assertion nor, to
Astea's knowledge, is there a reasonable basis to expect such notice of
assertion against Astea which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated by this
Agreement.
7. COVENANT OF SELLERS
7.1 Each Seller covenants not to compete with the Business, on the terms set out
in the relevant Executive Agreement which forms part also of this Agreement. Any
breach of this
23
covenant - notwithstanding other appropriate remedies available to Buyer -
entitles Buyer to liquidated damages of SEK 500,000 for each breach or to
compensation for damage actually suffered, whichever is higher. Each Seller is
individually responsible for damages under this Article.
7.2 Unless Buyer shall otherwise agree in writing, the business of each Group
Company shall from the date hereof through the Closing Date be conducted in, and
each Group Company shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; and each Group Company
shall use its commercially reasonable efforts to preserve substantially intact
the business organization of each Group Company, to keep available the services
of the current personnel and consultants of each Group Company and to preserve
the current relationships of each Company with customers, suppliers and other
persons with which each Company has significant business relations.
7.3 From the date hereof through Closing Date, the Sellers in their capacity as
managers of the Group shall, and shall cause the officers, directors, employees,
auditors and agents of each Group Company to, afford the personnel and agents of
Buyer complete access at all reasonable times during normal business hours to
the other facilities, books and records of each Group Company, and shall furnish
Buyer with all financial, operating and other data and information as Buyer may
reasonably request. The parties shall continue to comply with and to perform
their respective obligations under the Confidentiality Agreement between Buyer
and Abalon AB. Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby, including,
without limitation, using its reasonable best efforts to obtain all waivers,
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts as are necessary for
the consummation of the transactions contemplated hereby and to fulfil the
conditions to the transaction. No Seller will undertake any course of action
inconsistent with this Agreement or which would make any representations,
warranties or agreements made
24
by such party in this Agreement untrue or any conditions precedent to this
Agreement unable to be satisfied at or prior to the Closing.
8. NO MATERIAL ADVERSE CHANGE AS OF CLOSING
8.1 As of the Closing, there shall not, unless agreed with the Buyer, have
occurred any Material Adverse Change in the business, operations, assets,
liabilities, sales, margins, profitability, intellectual property, or prospects
of each Group Company or in any material third party contractual or other
business relationships of each Group Company. In this Agreement, the term
"Material Adverse Change" used with respect to a party means any event, change
or effect that (a) is materially adverse to the business and financial status of
the Group; provided, however, that a Material Adverse Effect shall not include
any adverse effect resulting from changes in general market or economic
conditions or conditions generally affecting the personal computer application
software industry.
As of the Closing, the results of Buyer's due diligence investigation of each
Group Company shall be satisfactory in all respects to Buyer in its sole and
absolute discretion.
8.2 As of the Closing, there shall not have occurred any Material Adverse Change
in the business, operations, assets, liabilities, sales, margins, profitability,
intellectual property, or prospects of Astea. In this Agreement, the term
"Material Adverse Change" has been defined, however in the context of Astea the
term shall not include any adverse effect resulting from changes in general
market or economic conditions or conditions generally affecting the personal
computer application software industry, except that either (a) cessation of
trading of Buyer's stock or (b) a decrease of US$5 per share in the price of
Buyer's stock (measured from the date of this Agreement) on the NASDAQ Stock
Market shall be deemed a Material Adverse Change.
25
8.3 The consummation of the transactions contemplated by this Agreement shall be
legally permitted by all laws and regulations to which Astea, the Sellers and
each Group Company is subject, except for such noncompliance which would not
result in a Material Adverse Change in the business, prospects or condition of
Astea, the Sellers and each Group Company.
8.4 The consummation of the transactions contemplated by this Agreement shall be
legally permitted by all laws and regulations to which Buyer, the Sellers and
each Group Company is subject.
9. INDEMNIFICATION OF SELLERS AND BUYER
9.1 All representations and warranties contained in this Agreement shall survive
the Closing until September 30, 1997, and shall not be affected by any
investigation made or any knowledge acquired with respect thereto, except as
expressly provided in this Article 9.
9.2 (a) From and after the Closing, the Sellers shall indemnify and hold the
Buyer, on a pro rata basis, based on each Seller's proportionate interest in the
Purchase Price, harmless from and against, and shall reimburse the Indemnified
Parties for, any and all losses, damages, liabilities, obligations, judgements,
decrees, penalties, taxes, or expenses (including but not limited to any
reasonable legal or accounting fees or expenses) ("LOSSES") arising out of or in
connection with:
(i) any inaccuracy in any representation or warranty made by the
Sellers in Article 4 and 5 of this Agreement or the Disclosure
Schedules; or
(ii) any failure by the Sellers, or the Group, to perform or comply, in
whole or in part, with any covenant in this Agreement.
26
(b) From and after the Closing Date the Buyer shall hold the Sellers
harmless from and against, and shall reimburse the Sellers for any and all
Losses arising out of or in connection with:
(i) any inaccuracy in any representation or warranty made by the Buyer
in this Agreement; and
(ii) any failure by the Buyer to perform or comply, in whole or in
part, with any covenant or agreement contained in this Agreement.
9.3
(a) No indemnified party shall be entitled to receive any
indemnification payment with respect to any claims for indemnification
under this Article 9 ("CLAIMS") until the aggregate Losses for which
such Indemnified Parties would be otherwise entitled to receive
indemnification from Buyer or Sellers jointly exceed SEK 500,000 (the
"THRESHOLD"); provided, however, that once such aggregate Losses exceed
the Threshold, such indemnified parties shall be entitled to
indemnification only for the aggregate amount of all Losses which
exceed SEK 500,000 of Claims.
(b) In no event shall the liability of the Sellers hereunder for Losses
incurred by indemnified parties exceed the value of the Share
Consideration issued to the Sellers pursuant to this Agreement (that
is, the total number of shares of Astea Common Stock issued to the
Sellers hereunder) multiplied by the average of the last reported sale
prices of Astea Common Stock on the Nasdaq National Market System over
the 20 consecutive trading days ending with the day prior to the
Closing Date. In no event shall the liability of Astea hereunder exceed
US$ 6,000,000.
(c) The parties agree that the Sellers shall have a right, if possible,
to cure a loss within 60 days after receipt of notification of a Claim
and prior to submitting
27
any Claim, the parties shall use reasonable efforts to determine the
amount, if any, by which their Losses would be offset by recovery of
insurance proceeds, reduction of tax liabilities or the creation of a
tax benefit to Buyer, and to provide the indemnifying party notice of
and a description of such determination. Any liability for
indemnification shall be reduced to the extent any Losses specified in
a Claim are reduced by such a recovery or reduction.
(d) No Indemnified Party shall be entitled to receive any
indemnification payment with respect to any Claims under this Article 9
which are first asserted by an Indemnified Party after September 30,
1997 provided such Claim or Claims do not relate to Sellers' or Buyer's
respective covenants surviving said date in which case claims may be
asserted after September 30, 1997.
(e) Should the Buyer become aware of any Loss for which the Sellers
might be liable the Buyer shall within ninety (90) days after the date
when the Buyer became aware of the claim, issue a written notice
thereof to the Sellers, and has no right to claim compensation should
such notice not be issued.
9.4
(a) An indemnified party shall notify the indemnifying party in writing
within sixty (60) days after the assertion against the indemnified
party of any claim by a third party (a "THIRD PARTY CLAIM") in respect
of which the indemnified party intends to base a Claim for
indemnification hereunder, but the failure or delay so to notify the
indemnifying party shall not relieve it of any obligation or liability
that it may have to the indemnified party except to the extent that the
indemnifying party demonstrates that its ability to defend or resolve
such Third Party Claim is adversely affected thereby.
(b) (i) Subject to the rights of or duties to any insurer or other
third party having potential liability therefor, the indemnifying party
shall have the right, upon written notice given to the indemnified
party within 30 days after receipt of the
28
notice from the indemnified party of any Third Party Claim, to assume
the defense or handling of such Third Party Claim, at the indemnifying
party's sole expense, in which are the provisions of Section 9.4
(b)(ii) thereof shall govern.
(ii) The indemnifying party shall select counsel reasonably acceptable
to the indemnified party in connection with conducting the defense or
handling of such Third Party Claim, and the indemnifying party shall
defend or handle the same in consultation with the indemnified party
and shall keep the indemnified party timely apprised of the status of
such Third Party Claim. The indemnifying party shall not, without the
prior written consent of the indemnified party, agree to a settlement
of any Third Party Claim, unless (A) the settlement provides an
unconditional release and discharge of the indemnified party and the
indemnified party is reasonably satisfied with such discharge and
release and (B) Buyer shall not have reasonably objected to any such
settlement on the ground that the circumstances surrounding the
settlement could result in a material adverse impact on the business or
operation Buyer or the business conducted by the Group. The indemnified
party shall cooperate with the indemnifying party and shall be entitled
to participate in the defence of any claim with its own counsel and at
its own expense.
(c) (i) If the indemnifying party does not give written notice to the
indemnified party within 30 days after receipt of the notice from the
indemnified party of any Third Party Claim of the indemnifying party's
election to assume the defense or handling of such Third Party Claim,
the provisions of Section 9.4(c)(ii) below shall govern.
(ii) The indemnified party may, at the indemnifying party's expense
(which shall be paid from time to time by the indemnifying party as
such expenses are incurred by the Indemnified Party), select counsel,
who shall be reasonably satisfactory to the indemnifying party in
connection with conducting the defense or handling of such Third Party
Claim and defend or handle such Third Party Claim in such
29
manner as it may deem appropriate, provided, however, that the
indemnified party shall keep the indemnifying party timely apprised of
the status of such Third Party Claim and shall not settle such Third
Party Claim without the prior written consent of the indemnifying
party, which consent shall not be unreasonably withheld, conditioned or
delayed. If the indemnified party defends or handles such Third Party
Claim, the indemnifying party shall cooperate with the Indemnified
Party.
9.5 Notwithstanding Article 8.3 and 8.4 the limitations therein shall not apply
to Sellers' indemnification for any inaccuracy in the representation given by
Sellers in Article 5 above.
9.6 At Closing, the Sellers shall pledge Share Consideration equal to 15 % of
the Purchase Price to Buyer as a mechanism to satisfy potential claims for
indemnification by Astea and its affiliates under this Article 9, (the "HOLDBACK
SHARES"). Any liability of the Sellers for indemnification for Losses under this
Agreement shall be satisfied, first, from Holdback Shares pursuant to a setoff
under this Article 9.6 and, second, to the extent the Holdback Shares are
insufficient to satisfy such liability for Losses in full, from the other Share
Consideration issued to the Sellers under this Agreement, or the proceeds from
any disposition thereof, as the Sellers may elect in writing.
9.6.1 The Holdback Shares shall be deemed as of the Closing Date to be pledged
by the Sellers to, and shall be held by, Escrow Agent pursuant to the Escrow
Agreement. The Sellers shall deliver to Buyer at the Closing appropriate stock
powers endorsed in blank and such other documentation as Buyer may reasonably
prescribe to pledge the Holdback Shares to the Escrow Agent. So long as any
Holdback Shares are held by Escrow Agent hereunder, Buyer shall have, and the
Sellers hereby grant, effective as of the Closing Date, a perfected Lien in such
Holdback Shares to secure payment of amounts payable by the Sellers in respect
of indemnification Claims under this Article 9.
9.6.2 Except as otherwise set forth in Article 9.6.4 below, for purposes of this
Agreement, the "HOLDBACK TERMINATION DATE" shall mean the date which is April
30, 1997, with respect to
30
one-half of the Holdback Shares, and September 30, 1997, with respect to
one-half of the Holdback Shares.
With respect to Escrow Agent's release of the Holdback Shares, Section 1.5.2 of
Exhibit B of the Escrow Agreement shall apply.
9.6.3 The procedure for payment from the Holdback Shares of indemnification
amounts to which Astea or other Indemnified Parties may become entitled under
this Section shall be as follows:
(a) Subject to the limitation that written notice of any Claim for
indemnification hereunder must be given to the Sellers not later than
the Holdback Termination Date, from time to time as Buyer determines
that it or another Indemnified Party is entitled to an indemnification
payment under this Article 9, Buyer may give written notice of the
Claim to the Sellers describing in such notice the nature of the Claim,
the amount thereof if then ascertainable and, if not then
ascertainable, the estimated maximum amount thereof.
(b) If Buyer has not received written objection to a Claim in
accordance with the preceding subparagraph (a) from Sellers
representing at least a majority in interest of the Holdback Shares
within 30 days after notice of such Claim is delivered (the "RESPONSE
PERIOD"), the Claim stated in such notice shall be conclusively deemed
to be approved by the Sellers, and Escrow Agent shall promptly
thereafter transfer to the Indemnified Party from the Holdback Shares
an amount of Holdback Shares equal in value to the amount of such
Claim. The Holdback Shares to be transferred shall be rounded to the
nearest whole share and shall be valued on the basis of the higher of
the Closing Date Price or the last reported sale price of Astea's
Common Stock on the Nasdaq National Market on the date the notice of
claim was delivered.
31
(c) If within the Response Period Astea shall have received from the
Sellers representing at least a majority in interest in the Holdback
Shares, a written objection to the claim specifying the nature of and
grounds for such objection, then such claim shall be deemed to be an
"OPEN CLAIM," and Astea shall reserve within the Holdback Shares an
amount of Holdback Shares equal to the amount of such Open Claim (which
amount designated for each Open Claim is referred to herein as the
"CLAIM RESERVE AMOUNT"). The number of Holdback Shares to be reserved
shall be determined (rounded to the nearest whole share) by dividing
the amount of the Open Claim by the higher of the Closing Date Price or
the average of the last reported sale prices of Astea's Common Stock on
the Nasdaq National Market over the 20 trading days preceding such
written objection.
(d) The Claim Reserve Amount for each Open Claim shall be transferred
by Astea from the Holdback Shares only in accordance with either (i) a
mutual agreement among Astea and Sellers representing at least a
majority in interest in all the Holdback Shares, which shall be
memorialized in writing, or (ii) a final and binding arbitration
decision or order pertaining to the Open Claim.
9.6.4 The Holdback Shares shall be held of record by the Sellers, who shall have
full right of a shareholder including but not limited to the right to vote the
Holdback Shares on all matters coming before the stockholders of Astea. In the
event of any merger or recapitalization or similar transaction involving Astea
prior to the time when all Holdback Shares have been transferred or released in
accordance with the terms of this Section 9.6, such Holdback Shares shall be
converted or exchanged in accordance with such transaction in the same manner as
other shares of Astea Common Stock, and any securities or property issued in
conversion or exchange thereof shall then be included within the definition of
Holdback Shares and shall otherwise become subject to this Agreement in lieu of
such shares of Astea Common Stock. If as a result of any such transaction the
stockholders of the Buyer immediately before the transaction will not own in
excess of 50% of the voting capital stock of Astea immediately after the
transaction, the Holdback Termination Date shall be deemed to be the closing
date of such transaction and the
32
Holdback Shares shall be re-transferred to the Buyer or released to the Sellers,
as the case may be, as provided herein.
9.7 The indemnification provisions of this Section are the sole and exclusive
remedy of any party to this Agreement for a breach of any representation,
warranty or covenant contained herein, except with respect to any claim based on
fraud in the inducement or a similar theory. Each of the parties hereto agrees
that the other parties hereto shall be entitled to an injunction to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof (including the indemnification
provisions hereof) in any competent court having jurisdiction over the parties,
in addition to any other remedy to which they may be entitled at law or in
equity.
9.8 All of the representations and warranties of the parties hereto contained in
the Agreement shall survive the Closing (even if the damaged party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing; provided, however, if the damaged party knew or had reason to know of
such a breach prior to the Closing and failed to object thereto in writing prior
to the Closing, the damaged party shall not be entitled to indemnification under
this Article 9 except and only to the extent of the increase in damages beyond
the amount known by the damaged party at the Closing) and continue in full force
and effect until September 30, 1997. Any claims with respect to the foregoing
must be asserted in writing with reasonable particularity by the party making
such claim prior to the end of the period referenced above in order to perfect
any right of indemnity, and the obligations of the indemnifying party with
respect to such claims shall continue until such claims have been finally
resolved.
9.9 The respective covenants and agreements of the parties contained in this
Agreement shall survive the Closing without limitation as to time.
9.10 Notwithstanding anything herein to the contrary, this Article 9 shall
survive termination of this Agreement.
32
9.11 The following provisions shall apply with respect to the assertion of
claims and the indemnification provisions of this Article 9 of the Sellers
against Buyer or Buyer against the Sellers.
(a) If a claim is asserted by the Buyer against the Sellers the Buyer
shall continue to hold in reserve the Holdback Shares until the rights
of the Sellers and Buyer with respect thereto have been agreed upon
between the Sellers and Buyer or until such matters are settled by
arbitration.
(b) The Sellers and Buyer shall attempt promptly and in good faith to
agree upon the rights of the parties with respect to each of such
claims. If the Sellers and Buyer should so agree, a memorandum setting
forth such agreement shall be prepared and signed by both parties and
the Holdback Shares shall be distributed or forfeited in accordance
with the terms thereof.
(c) If no such agreement can be reached after good faith negotiation,
either Buyer or the Sellers may demand arbitration of the matter unless
the amount of the damage or loss is at issue in pending litigation with
a third party, in which event arbitration shall not be commenced until
such amount is ascertained or both parties agree to arbitration.
9.12 In no event shall the aggregate liability of the Sellers for
indemnification hereunder or otherwise arising out of or relating to this
Agreement exceed the Share Consideration. In no event shall the aggregate
liability of Buyer for indemnification hereunder or otherwise arising out of or
relating to this Agreement exceed the Share Consideration. The foregoing shall
not limit any indemnification to which a Seller would be entitled as an officer
or director of Buyer or a Group Company, unless any proceeding directly involves
a matter for which indemnification is being specifically sought by Buyer against
the Sellers pursuant to the terms of this Agreement and in such event only to
the extent that Buyer is entitled to indemnification under this Article 9
(except that expenses will not be advanced to the Sellers in any such matter for
which Buyer is seeking indemnification until a final determination that the
Sellers are not obligated to indemnify
34
Buyer hereunder). Buyer shall have the right to recover the proceeds of any such
Shares that are sold by Sellers to settle claims of indemnification. The
limitation set forth in this Article 9 shall not apply in the event that the
Sellers' or Buyer's liability for indemnification, as the case may be, is based
upon intentional misrepresentations or other fraudulent conduct.
10. TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. This Agreement may be terminated and the transaction may be
abandoned at any time prior to the Closing Date:
(a) by mutual written consent duly authorized by the Boards of
Directors of each Group Company and Buyer;
(b) by either the Sellers (jointly) or Buyer, if the transaction has
not been consummated by June 28, 1996; provided, however, that the
right to terminate this Agreement under this subsection (b) shall not
be available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of
the Closing to occur on or before such date;
(c) by either the Sellers jointly or Buyer, if there shall be any law
or regulation that makes consummation of the transaction illegal or
otherwise prohibited or if any judgement, injunction, order or decree
enjoining Buyer, or the Sellers from consummating the transaction is
entered and such judgement, injunction, order or decree shall become
final and nonappealable; provided, however, that the party seeking to
terminate this Agreement pursuant to this subsection (c) shall have
used all reasonable efforts to remove such judgement, injunction, order
or decree;
(d) by the Sellers jointly, in the event of a material breach by Buyer
of any material representation, warranty or covenant contained herein
which has not been cured or is not curable by June 28, 1996;
35
(e) by Buyer, in the event of a material breach by the Sellers or any
Group Company of any material representation, warranty or covenant
contained herein which has not been cured or is not curable by June 28,
1996;
(f) by Buyer, in its discretion, in the event that the average of the
Closing Sale Price of the Astea Common Stock shall be less than (USD
26.00/share x.85 =) USD 22.10 per share; or
(g) by the Sellers, in its discretion, in the event that the Closing
Sale Price of the Astea Common Stock shall be greater than (USD
26.00/Share x 1.15=) USD 29.90 per share.
10.2 Effect of Termination. In the event of the termination of this Agreement
pursuant to Article 10.1 hereof, there shall be no further obligation on the
part of any party hereto, except that nothing herein shall relieve any party
from liability for any wilful breach hereof.
11. MISCELLANEOUS
11.1 Each Party will bear its own costs associated with its negotiation, signing
and implementation of this Agreement, except that the Buyer shall pay the
closing costs related to this transaction as such costs relate to fees and
expenses of accountants, attorneys N S Affarsutveckling AB and Hambrect & Quist
LLP incurred by Sellers, up to an aggregate amount not exceeding US$ 900,000.
11.2 This Agreement may be terminated and the transaction may be abandoned at
any time prior to the Closing by either the Company or Buyer, if the Closing has
not been consummated by June 28, 1996; provided, however, that the right to
terminate this Agreement under this Article shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Closing to occur on or before such date;
36
11.3 If any part of any provision of this Agreement is to any extent invalid or
unenforceable the remainder of such provision and all other provisions hereof
shall be unaffected thereby and shall remain valid and enforceable to the
fullest extent permitted by law.
11.4 No Party shall disclose any Confidential Information of the other Party to
any third party without its prior written consent.
11.5 No failure to exercise or delay in the exercise of any right or remedy
which either Party may have under this Agreement or in connection herewith shall
operate as a waiver thereof nor shall any single or partial exercise of any such
right or remedy prevent any further or other exercise thereof or of any other
such right or remedy.
11.6 In the event of any conflict between this Agreement and any Exhibit, this
Agreement shall prevail and the Parties shall procure that the other document is
amended so as to reflect the provisions of this Agreement.
11.7 Each Party shall cooperate with the other to facilitate the implementation
of the transactions contemplated by this Agreement in the most expeditious
manner. To this end, each Party shall do all such things (including executing
any further documents) as may be reasonably required or requested by the other
Party.
11.8 No waiver or amendment to this Agreement will be effective unless it is in
writing and is signed by the Party sought to be bound thereby.
11.9 The construction, validity and performance of this Agreement shall be
governed by the laws of Sweden.
11.10 Any controversy or claim arising out of or relating to this Agreement, the
breach hereof or the rights or liabilities of either party hereunder shall be
referred to and finally settled by arbitration. The arbitral proceedings shall
be held in Stockholm, Sweden, in accordance with
37
Swedish law on arbitration as amended at the date of instigation of arbitral
proceedings. The arbitration shall be conducted in the Swedish language but oral
or written evidence may be presented in English. Sellers may only appear as one
party and neither Seller may be represented other than jointly with the other
Sellers. Sellers may elect only one single arbitrator to represent all Sellers
jointly. Judgement upon the award rendered may be entered in any court having
jurisdiction or application may be made to such court for judicial acceptance of
the award and an order of enforcement, as the case may be. The arbitrators'
ruling regarding legal fees shall be consistent with the rules and regulations
of the Swedish Procedural Code.
11.11 All notices under this Agreement shall be in English and in writing and
shall be delivered in person or sent by telex or fax, or special air courier,
addressed to the Parties at addresses set out above or to another address or
addresses that a Party may notify the others under this Section. A notice
delivered in person is deemed received when delivered, and a notice sent by
special air courier is deemed to have received at 10:00 a.m. at the place of
receipt on the 3rd business day after being duly dispatched. A notice sent by
telex or fax is deemed to have been received 1 hour after being sent, if sent on
a business day before 4:00 p.m. at the place of receipt, and 10:00 a.m. at the
place of receipt on the following business day in any other case.
Buyer and Seller have executed this Share Purchase Agreement on the Agreement
Date to be effective from that date.
38
ASTEA INTERNATIONAL INC.
/s/ Per Edstrom By: /s/ Zack Bergreen
- ------------------------------- -------------------------
Per Edstrom Zack Bergreen
Its Chairman and CEO
/s/ Orjan Grinndal
- -------------------------------
Orjan Grinndal
/s/ Henrik Lindberg
- -------------------------------
Henrik Lindberg
39
EXHIBITS
EXHIBIT 1 Particulars of the Group
EXHIBIT 2 Certificate of Registration and Good Standing;
Articles of Association for the Group
EXHIBIT 3 Locations at Which the Business of the Company is
Operated
EXHIBIT 4 Audited Financial Statements
EXHIBIT 5 Unaudited Financial Statements
EXHIBIT 6 Employees
EXHIBIT 7 Employment Contracts, etc.
EXHIBIT 8 Powers of Attorney; Bank Accounts, etc.
EXHIBIT 9 Assets
EXHIBIT 10 Licenses
EXHIBIT 11 Real Property
EXHIBIT 12 Material Agreements
EXHIBIT 13 Executive Agreements
EXHIBIT 14 Escrow Agreement
EXHIBIT 15 List of Minutes From Board and Shareholders Meetings
DISCLOSURE SCHEDULES
SCHEDULE 5.6 Encumbrances
SCHEDULE 5.10 Pending Litigation
SCHEDULE 5.13 Loans to Employees
SCHEDULE 5.20.1 Dividends Declared or Paid
SCHEDULE 5.20.3 Transfer of Assets
SCHEDULE 5.23 Sellers' Involvement in Competing Business
Exhibit 7.02
------------
ESCROW AGREEMENT
This Escrow Agreement (this "AGREEMENT") is entered into as of June 28,
1996, by and among Astea International Inc., a Delaware corporation (the
"COMPANY" or "ASTEA"), Per Edstrom (the "REPRESENTATIVE") as representative of
the shareholders, Per Edstrom, Henrik Lindberg and Orjann Grinndal (the
"HOLDERS") of Abalon AB and its affiliated entities ("ABALON"), the Holders, and
Midlantic Bank, N.A., a national banking association, as escrow agent (the
"ESCROW AGENT").
A. The Holders, Astea, Abalon and its affiliated entities entered into
a Share Purchase Agreement dated as of June 20, 1996 (the "SHARE AGREEMENT")
pursuant to which the Holders sold, transferred and assigned their interests in
Abalon and its affiliated entities to Astea (the "TRANSACTION"). The capitalized
terms used in this Agreement and not otherwise defined herein will have the
meanings given them in the Share Agreement.
B. Pursuant to the Share Agreement, Astea is paying to the Holders cash
consideration of approximately $8,550,000 and is issuing to the Holders an
aggregate of 233,236 shares of Astea Common Stock with a fair market value of
approximately $6,000,000.
C. The Share Agreement provides that shares of Astea Common Stock
equaling fifteen percent (15%) of the value of the Transaction, or 84,840 shares
of Astea Common Stock ($2,182,500 / $25.725 per share = 84,840 shares, that are
to be issued to the Holders in the Transaction (collectively, the "ESCROW
SHARES"), and are to be deducted from the aggregate of 233,236 shares of Astea
Common Stock to be issued to the Holders in the Transaction and placed in an
escrow account (the "ESCROW ACCOUNT") held by the Escrow Agent to secure certain
indemnification obligations of the Holders to indemnified persons under the
Share Agreement, pursuant to the terms and conditions set forth therein and
herein. The number of Escrow Shares required to be deposited in the Escrow
Account pursuant to the Share Agreement by the Holders are set forth on EXHIBIT
A attached hereto.
D. The parties hereto desire to establish the terms and conditions
pursuant to which the Escrow Shares will be deposited, held in, and disbursed
from the Escrow Account.
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NOW THEREFORE, the parties hereto hereby agree as follows:
1. ESCROW AND INDEMNIFICATION.
(a) ESCROW OF SHARES. Promptly after the Closing, Midlantic
Bank, N.A. as transfer agent (the "TRANSFER AGENT") will deliver to and deposit
with the Escrow Agent the Escrow Shares, who will hold them in escrow as
collateral for the indemnification obligations of the Holders under the Share
Agreement until such time that the Escrow Agent is required to release such
Escrow Shares pursuant to the terms of the Share Agreement and this Agreement.
The Escrow Shares will include "ADDITIONAL ESCROW SHARES" as that term is
defined in Section 2(b) of this Agreement. The Escrow Agent agrees to accept
delivery of the Escrow Shares and to hold such Escrow Shares in escrow subject
to the terms and conditions of this Agreement.
(b) INDEMNIFICATION. Astea and the other indemnified persons
are indemnified pursuant to the terms of Article 9 of the Share Agreement (which
terms are incorporated herein by reference) and EXHIBIT B hereto (which terms
are intended to be identical in substance to the terms of Article 9 of the Share
Agreement as incorporated herein by reference) from and against any Damages,
subject to the limitations set forth in the Share Agreement and EXHIBIT B
attached hereto. (For purposes of this Agreement, references will include all
other indemnified persons, as applicable.) In the event of a conflict or
inconsistency between the terms of this Agreement and the Share Agreement, the
rights and obligations, as between the Holders and Astea, shall be determined by
the Share Agreement. The Escrow Shares will be security for this indemnity
obligation, subject to the limitations, and in the manner provided, in Article 9
of the Share Agreement regarding indemnification and in this Agreement and
EXHIBIT B hereto. Promptly after the receipt of notice or discovery of any
claim, damage or legal action or proceeding giving rise to indemnification
rights under the Share Agreement, Astea will give the Representative and the
Escrow Agent written notice of such claim, damage, legal action or proceeding (a
"CLAIM") in accordance with Section 3 hereof. Within ten (10) days of delivery
of such written notice, the Representative may, at the expense of the Holders
(to be incurred by each Holder in proportion to their percentage interests in
the Escrow Shares as set forth on EXHIBIT A hereto), elect to take all necessary
steps to properly contest any Claim involving third parties or to prosecute such
Claim to conclusion or settlement satisfactory to the Representative. If the
Representative makes the foregoing election, Astea will have the right to
participate at its own expense in all proceedings. If the Representative does
not make such election, Astea shall be free to handle the prosecution or defense
of any such claim and will notify the Representative of the progress of any such
Claim, will permit the Representative, at the sole cost of the Holders (to be
incurred by each Holder in proportion to their percentage interests in the
Escrow Shares as set forth on EXHIBIT A hereto), to participate in such
prosecution or defense and will provide the Representative with reasonable
access to all relevant information and documentation relating to the Claim and
Astea's prosecution or defense thereof. In any case, the party not in control of
the Claim will cooperate with the other party in the conduct of the prosecution
or defense of such Claim. Neither party will compromise or
-3-
settle any such Claim unless (A) the settlement provides for an unconditional
release and discharge of the indemnified person and the indemnified person is
reasonably satisfied with such discharge and release, and (B) the written
consent of either Astea (if the Representative defends the Claim) or the
Representative (if Astea defends the Claim), has been granted, such consent not
to be unreasonably withheld, conditioned or delayed in accordance with EXHIBIT B
hereto.
(c) LIMITATION ON LIABILITY. The maximum liability of each
Holder under the Share Agreement or applicable law (including, but not limited
to, Section 9.3 of the Share Agreement), and Astea's sole and exclusive remedy
under the Share Agreement or applicable law (other than for intentional fraud or
willful misconduct) will be as set forth in EXHIBIT B attached hereto and in
Article 9 of the Share Agreement.
2. DEPOSIT OF ESCROW SHARES; RELEASE FROM ESCROW.
(a) DELIVERY OF ESCROW SHARES. On the Closing Date, Astea and
the Holders will deliver written instructions to the Transfer Agent to deliver
to the Escrow Agent and deposit in the Escrow Account the Escrow Shares
allocable to the Holders (the "INITIAL ESCROW SHARES"). The Escrow Agent will
deposit in the Escrow Account the Escrow Shares in the form of duly authorized
stock certificates issued in the respective names of the Holders in the
respective amounts set forth on EXHIBIT A (each, a "HOLDER'S ESCROW SHARES"). In
the event Astea issues any Additional Escrow Shares (as defined below), such
shares will be issued and delivered to the Escrow Agent in the same manner as
the Initial Escrow Shares delivered on the Closing Date.
(b) DIVIDENDS, VOTING AND RIGHTS OF OWNERSHIP. Except for
tax-free dividends paid in stock declared with respect to the Escrow Shares
pursuant to Section 305(a) of the Code ("ADDITIONAL ESCROW SHARES"), any cash
dividends, dividends payable in securities or other distributions of any kind
made in respect of the Initial Escrow Shares will be distributed currently by
Astea to the Holders. Each Holder will have the right to vote the Escrow Shares
deposited in the Escrow Account for the account of such Holder so long as such
Escrow Shares are held in escrow, and Astea and the Escrow Agent will each take
all reasonable steps necessary to allow the exercise of such rights. While the
Escrow Shares remain in the Escrow Agent's possession pursuant to this
Agreement, each Holder will retain and will be able to exercise all rights set
forth in Section 1.5.4 of EXHIBIT B, as well as all other incidents of ownership
of said Escrow Shares that are not inconsistent with the terms and conditions
hereof.
(c) DISTRIBUTION TO HOLDERS. (i) Upon the occurrence of any
event set forth in Section 1.5.4 of EXHIBIT B;
(ii) Within five business days after April 30, 1997,
upon the receipt by the Escrow Agent of joint written instructions from Astea
and the Representative, the Escrow Agent will release from the Escrow Account
and deliver to each Holder the LESSER of (A) fifty percent (50%) of such
Holder's Escrow Shares (as
-4-
defined below) then remaining in escrow (after subtracting all Escrow Shares
previously released from escrow to satisfy indemnification claims pursuant to
the Share Agreement and this Agreement) or (B) the number of Escrow Shares such
that the Escrow Shares remaining in the Escrow Account after release of such
Escrow Shares would equal the number of Escrow Shares (the "PENDING CLAIMS
ESCROW SHARES") subject to possible delivery in accordance with Sections 1.5 and
1.6 of EXHIBIT B and the Share Agreement with respect to any then pending but
unresolved Claims of Astea or any third party, which pending or unresolved
Claims expressly include, without limitation, (i) any Claims for which Astea has
provided a written Notice of Claim (as defined below) to the Sellers but the
Representative has not yet filed a written objection and the Response Period has
not elapsed and (ii) all Open Claims (as defined below); or
(iii) Within five business days after September 30,
1997, upon the receipt by the Escrow Agent of joint written instructions from
Astea and the Representative, the Escrow Agent will release from the Escrow
Account and deliver to each Holder the LESSER of (A) all of such Holder's Escrow
Shares then remaining in the Escrow Account (after subtracting all Escrow Shares
previously released from escrow pursuant to clause (i) of this Section or to
satisfy indemnification claims pursuant to the Share Agreement or this
Agreement) or (B) the number of Escrow Shares such that the Escrow Shares
remaining in the Escrow Account after release of such Escrow Shares would equal
the Pending Claims Escrow Shares.
Any Pending Claims Escrow will be released to the Holders or released
to Astea for cancellation (as appropriate) promptly upon final resolution of
each specific Claim involved.
(d) RELEASE OF SHARES. The Escrow Shares will be held by the
Escrow Agent until required to be released pursuant to the Share Agreement and
this Agreement. After each release condition is met pursuant to Section 2(c)
above, the Escrow Agent will deliver to the Holders the requisite number of
Escrow Shares to be released on such dates. Such delivery will be in the form of
stock certificate(s) issued in the name of each Holder. The Representative
undertakes to deliver a timely prior notice to the Escrow Agent identifying the
number of Escrow Shares to be released. Astea will take such action as may be
necessary to cause stock certificates to be issued in the name of the Holders.
Cash will be paid in lieu of fractions of Escrow Shares in an amount equal to
the product determined by multiplying such fraction by the closing sale price of
Astea Common Stock reported by the NASDAQ Stock Market on the day immediately
preceding the applicable release (the "CLOSING PRICE"). Within five business
days after written request from the Representative, Astea will submit a
certified schedule of the cash amounts payable for fractional shares and will
deposit with Escrow Agent sufficient funds to pay such cash amounts for
fractional shares.
(e) NO ENCUMBRANCE. No Escrow Shares or any beneficial
interest therein may be pledged, sold, assigned or transferred, including by
operation of law, by the Holders or be taken or reached by any legal or
equitable process in satisfaction of any debt
-5-
or other liability of the Holders (other than such Holders' obligations under
Article 9 of the Share Agreement), prior to the delivery to such Holders of the
Escrow Shares by the Escrow Agent in accordance with the Share Agreement and
this Agreement.
(f) POWER TO TRANSFER ESCROW SHARES. The Escrow Agent is
hereby granted the power to effect any transfer of Escrow Shares as directed by
any Holder in accordance with the terms and conditions of this Agreement and to
hold the proceeds therefrom, and, absent any specific written instructions of
such Holder, to invest such proceeds in a money market fund managed by Midlantic
Bank, N.A. Astea will cooperate with the Escrow Agent in promptly issuing stock
certificates to effect such transfer.
(g) LEGEND. The Escrow Shares will bear the legends
substantially in the form set forth in EXHIBIT C.
3. NOTICE OF CLAIM
(a) Each notice of a Claim by (the "NOTICE OF CLAIM") will be
in writing and will contain the following information to the extent it is
reasonably available.
(i) Astea's good faith estimate of the reasonably
foreseeable maximum amount of the alleged damages (which amount may be the
amount of damages claimed by a third party plaintiff in an action brought
against Abalon or any Holder or Holders based on alleged facts, which if true,
would constitute a breach of Abalon's or such Holder's or Holders'
representations and warranties); and
(ii) A brief description in reasonable detail of the
facts, circumstances or events giving rise to the alleged damages based on
Astea's good faith belief thereof, including, without limitation, the identity
and address of any third-party claimant (to the extent reasonably available to
Astea) and copies of any formal demand or complaint.
(b) The Escrow Agent will not transfer any of the Escrow
Shares held in the Escrow Account pursuant to a Notice of Claim until such
Notice of Claim has been resolved in accordance with Section 4 below.
4. RESOLUTION OF NOTICE OF CLAIM AND TRANSFER OF ESCROW SHARES.
Any Notice of Claim received by the Representative and the
Escrow Agent pursuant to Section 3 above will be resolved, in accordance with
Article 9 of the Share Agreement and EXHIBIT B attached hereto, as follows:
(a) UNCONTESTED CLAIMS. In the event that the Representative
does not contest a Notice of Claim in writing to the Escrow Agent and the amount
demanded is not paid within 30 calendar days after a Notice of Claim containing
a statement of the Claim is delivered pursuant to Section 7 below, Astea will
instruct the Escrow Agent to
-6-
promptly transfer to the indemnified party that number of Escrow Shares having a
value (determined by Astea and the Representative in accordance with Article 9
of the Share Agreement and Section 1.5 of EXHIBIT B) equal to the amount of such
Claim.
(b) OPEN CLAIMS. In the event that Sellers representing at
least a majority in interest of the Escrow Shares give written notice contesting
all, or a portion of, a Notice of Claim to Astea and the Escrow Agent (an "OPEN
CLAIM") within the 30-day period provided above, the Escrow Agent shall reserve
within the Escrow Shares an amount of Escrow Shares equal to the amount of such
Open Claim, in accordance with Article 9 of the Share Agreement and EXHIBIT B
hereto, and matters that are subject to third party claims brought against Astea
or Abalon in litigation or arbitration, and matters that arise between Astea on
the one hand and Abalon or the Holders on the other hand ("ARBITRABLE CLAIMS"),
will be resolved in accordance with the arbitration provisions set forth in
Section 11.10 of the Share Agreement.
(i) ARBITRATION. In the event that an agreement and
accord cannot be reached between the parties after good faith negotiation,
either Astea or the Representative may demand to settle any Open Claim not in
pending litigation with a third party by arbitration in accordance with the
procedures and terms set forth in Section 11.10 of the Share Agreement and
Section 1.12 of EXHIBIT B.
(ii) TERMS OF ARBITRATION. The arbitrator(s) chosen
in accordance with Section 11.10 of the Share Agreement and Section 1.12 of
EXHIBIT B will not have the power to alter, amend or otherwise affect the terms
of the provisions of this Agreement, EXHIBIT B or the Share Agreement.
(iii) EXCLUSIVE REMEDY. The indemnification
provisions of Article 9 of the Share Agreement, also set forth as EXHIBIT B
hereto, will be the sole and exclusive remedy of the parties for any Claim
arising out of the Share Agreement or this Agreement.
(c) DETERMINATION OF AMOUNT OF CLAIMS. Any amount owed to
Astea hereunder, determined pursuant to Section 4(a) or (b) above, will be
immediately payable out of the Escrow Shares then held by the Escrow Agent
valued as set forth in Section 9.6.3 of the Share Agreement and Section 1.5.3 of
EXHIBIT B.
5. LIMITATION OF ESCROW AGENT'S LIABILITY.
(a) NO LIABILITY OF ESCROW AGENT. The Escrow Agent will incur
no liability with respect to any action taken or suffered by it in reliance upon
any notice, direction, instruction, consent, statement or other document
believed by it to be genuine and duly authorized, nor for any other action or
inaction, except its own willful misconduct or negligence. The Escrow Agent will
not be responsible for the validity or sufficiency of this Agreement. In all
questions arising under this Agreement, the Escrow Agent may rely on the advice
or opinion of counsel, and for anything done, omitted or
-7-
suffered in good faith by the Escrow Agent based on such advice, the Escrow
Agent will not be liable to anyone. The Escrow Agent will not be required to
take any action hereunder involving any expense unless the payment of such
expense is made or provided for in a manner satisfactory to it.
(b) RESIGNATION BY ESCROW AGENT. In the event conflicting
demands are made or conflicting notices are served upon the Escrow Agent with
respect to the Escrow Account, the Escrow Agent will have the absolute right, at
the Escrow Agent's election, to do either or both of the following: (i) resign
so a successor can be appointed pursuant to Section 10 hereof or (ii) file a
suite in interpleader and obtain an order from a court of competent jurisdiction
requiring the parties to interplead and litigate in such court their several
claims and rights among themselves. In the event such interpleader suit is
brought, the Escrow Agent will thereby be fully released and discharged from all
further obligations imposed upon it under this Agreement, and Astea will pay the
Escrow Agent (subject to reimbursement from the Holders pursuant to Section 9
hereof) all costs, expenses and reasonable attorney's fees expended or incurred
by the Escrow Agent pursuant to the exercise of Escrow Agent's right under this
Section 5 (such costs, fees and expenses will be treated as extraordinary fees
and expenses for the purpose of Section 9 hereof).
(c) INDEMNIFICATION OF ESCROW AGENT. Each other party hereto,
jointly and severally (each an "INDEMNIFYING PARTY" and together the
"INDEMNIFYING PARTIES"), hereby covenants and agrees to reimburse, indemnify and
hold harmless Escrow Agent, Escrow Agent's employees and agents (severally and
collectively, "ESCROW AGENT"), from and against any loss, damage, liability or
loss suffered, incurred by, or asserted against Escrow Agent (including amounts
paid in settlement of any action, suit, proceeding, or claim brought or
threatened to be brought and including reasonable expenses of legal counsel)
arising out of, in connection with or based upon any act or omission by Escrow
Agent relating in any way to this Agreement or Escrow Agent's services
hereunder. This indemnity shall exclude gross negligence and willful misconduct
on Escrow Agent's part.
(d) PARTICIPATION IN DEFENSE. Each Indemnifying Party may
participate at its own expense in the defense of any claim or action that may be
asserted against Escrow Agent, and if the Indemnifying Parties so elect, the
Indemnifying Parties may assume the defense of such claim or action; provided,
however, that if there exists a conflict of interest that would make it
inappropriate for the same counsel to represent both Escrow Agent and the
Indemnifying Parties, Escrow Agent's retention of separate counsel shall be
reimbursable as hereinabove provided. Escrow Agent's right to indemnification
hereunder shall survive Escrow Agent's resignation or removal as Escrow Agent
and shall survive the termination of this Agreement by lapse of time or
otherwise.
(e) NOTICE BY ESCROW AGENT. Escrow Agent hereby warrants that
Escrow Agent will notify each Indemnifying Party by letter, or by telephone or
telex confirmed by letter, of any receipt by Escrow Agent of a written assertion
of a claim
-8-
against Escrow Agent, or any action commenced against Escrow Agent, within ten
(10) business days after Escrow Agent's receipt of written notice of such claim.
However, Escrow Agent's failure to so notify each Indemnifying Party shall not
operate in any manner whatsoever to relieve an Indemnifying Party from any
liability that it may have otherwise than on account of this Section 5.
6. HOLDERS' REPRESENTATION. For purposes of this Agreement, the Holders
have consented to the appointment of the Representative, as representative of
the Holders, and as attorney-in-fact for and on behalf of each Holder, and,
subject to the express limitations set forth below, the taking by the
Representative of any and all actions and the masking of any decisions required
or permitted to be taken by him under this Agreement, including, without
limitation, the exercise of the power to (i) authorize delivery to Astea of the
Escrow Shares, or any portion thereof, in satisfaction of Claims, (ii) agree to,
negotiate, enter into settlement and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
Claims, (iii) resolve any claims, and (iv) take all actions necessary in the
judgment of the Representative for the accomplishment of the foregoing and all
of the other terms, conditions and limitations of this Agreement. The
Representative will have unlimited authority and power to act on behalf of each
Holder with respect to this Agreement and the disposition, settlement or other
handling of all Claims, rights or obligations arising under this Agreement so
long as all Holders are treated in the same manner. The Holders will be bound by
all actions taken by the Representative in connection with this Agreement, and
Astea will be entitled to rely on any action or decision of the Representative.
In performing his functions hereunder, the Representative will not be liable to
the Holders in the absence of gross negligence or willful misconduct by the
Representative. The Representative may resign from such position, effective upon
a new representative being appointed in writing by Holders who beneficially own
a majority of the Escrow Shares.
7. NOTICES. All notices, instructions and other communications required
or permitted to be given hereunder or necessary or convenient in connection
herewith must be in writing and will be deemed delivered (i) when personally
served or when delivered by telex or facsimile (to the telex or facsimile number
of the person to whom the notice is given), (ii) the first business day
following the date of deposit with an overnight courier service or (iii) on the
earlier of actual receipt of the third business day following the date on which
the notice is deposited in first class air mail, postage prepaid, addressed as
follows:
If to the Escrow Agent:
Midlantic Bank
c/o Corporate Trust Department
P.O. Box 600
Edison, New Jersey 08818
Attn: Mr. John H. Gaffney
-9-
If to Astea:
Astea International Inc.
55 Middlesex Turnpike
Bedford, Massachusetts 01730
Attn: Caesar J. Belbel, Esq.
If to the Representative of the Holders:
Per Edstrom
c/o Abalon AB
c/o Abalon AB
P.O. Box 111 29
161 11 Bromma
Sweden
With copies to:
Advokatfirman Delphi Lawyers
P.O. Box 1432
111 84
Stockholm, Sweden
Attn: Mr. Per Berglof
Foley, Hoag & Eliot
1 Post Office Square
Boston, MA 02109
Attn: Mr. Adam Sonnenschein
or to such other address as the Holders, the Representative or the Escrow Agent,
as the case may be, designates in a writing delivered to each of the other
parties hereto.
8. GENERAL
(a) GOVERNING LAW, ASSIGNS. This Agreement will be governed by
and construed in accordance with the internal laws of the State of Delaware
without regard to conflict-of-law principles, except that EXHIBIT B hereto will
be governed by and construed in accordance with the laws of Sweden. This
Agreement will be binding upon, and inure to the benefit of, the parties hereto
and their respective successors and permitted assigns.
(b) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, any one or more of which may be by facsimile signature, each
of which will
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be deemed an original, but all of which together will constitute one and the
same instrument.
(c) ENTIRE AGREEMENT. Except as otherwise set forth in the
Share Agreement, this Agreement constitutes the entire understanding and
agreement of the parties with respect to the subject matter of this Agreement
and supersedes all prior agreements or understandings, written or oral, between
the parties with respect to the subject matter hereof.
(d) WAIVERS. No waiver by any party hereto of any condition or
of any breach of any provision of this Agreement will be effective unless in
writing. No waiver by any part of any such condition or breach, in any one
instance, will be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
9. EXPENSES OF ESCROW AGENT
(a) ESCROW AGENT. All fees and expenses of the Escrow Agent
incurred in the ordinary course of performing its responsibilities hereunder
will be paid by Astea upon receipt of a written invoice by Astea.
(b) REPRESENTATIVE. The Representative will not be entitled to
receive any compensation from Astea or the Holders in connection with this
Agreement. Any out-of-pocket costs and expenses reasonably incurred by the
Representative in connection with actions taken pursuant to the terms of this
Agreement will be paid by the Holders to the Representative in proportion to
their percentage interests in the Escrow Shares set forth on Exhibit A hereto.
10. SUCCESSOR ESCROW AGENT. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, the Escrow Agent
may resign and be discharged from its duties or obligations hereunder by giving
notice of its resignation to the parties to this Agreement, specifying a date
not less than thirty days' following such notice date of when such resignation
will take effect. Astea will designate a successor Escrow Agent prior to the
expiration of such ten-day period by giving written notice to the Escrow Agent
and the Representative. Astea may appoint a successor Escrow Agent without the
consent of the Representative, and may appoint any other successor Escrow Agent
with the consent of the Representative, which will not be unreasonably withheld.
The Escrow Agent will promptly transfer the Escrow Shares to such designated
successor.
11. LIMITATION OF RESPONSIBILITY. The Escrow Agent's duties are limited
to those set forth in this Agreement, and Escrow Agent, acting as such under
this Agreement, is not charged with knowledge of or any duties or
responsibilities under any other document or agreement, including without
limitation the Share Agreement. Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights
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hereunder either directly or by or through its agents or attorneys. Nothing in
this Escrow Agreement shall be deemed to impose upon the Escrow Agent any duty
to qualify to do business or to act as a fiduciary or otherwise in any
jurisdiction. Escrow Agent shall not be responsible for and shall not be under a
duty to examine into or pass upon the validity, binding effect, execution or
sufficiency of this Escrow Agreement or of any agreement amendatory or
supplemental hereto.
12. AMENDMENT. This Agreement may be amended by the written agreement
of Astea, the Escrow Agent and the Representative, provided that, if the Escrow
Agent does not agree to an amendment agreed upon by Astea and the
Representative, the Escrow Agent will resign and Astea will appoint a successor
Escrow Agent in accordance with Section 10 above.
[SIGNATURE PAGE ON FOLLOWING PAGE
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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SIGNATURE PAGE TO
ESCROW AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed this Escrow
Agreement as of the day and year first above written.
ASTEA INTERNATIONAL INC. THE REPRESENTATIVE:
By: /s/ Caesar J. Belbel /s/ Per Edstrom
_____________________________ ________________________________
PER EDSTROM
Title: Vice President and
General Counsel
_______________________
ESCROW AGENT HOLDERS:
MIDLANTIC BANK
By: /s/ John H. Gaffney /s/ Per Edstrom
_____________________________ ________________________________
Authorized Signatory PER EDSTROM
/s/ Orjann Grinndal
--------------------------------
ORJANN GRINNDAL
/s/ Henrik Lindberg
--------------------------------
HENRIK LINDBERG
ABALON AB
BY: /s/ Per Edstrom
______________________________
PER EDSTROM
CHAIRMAN AND CEO
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EXHIBIT A
AGGREGATE
HOLDER SHARES AT CLOSING ESCROW SHARES
- --------------------------- -------------------------- -------------------------
PER EDSTROM 77,746 28,280
ORJANN GRINNDAL 77,745 28,280
HENRIK LINDBERG 77,745 28,280
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EXHIBIT B -- INDEMNIFICATION PROCEDURES
The parties to the foregoing Escrow Agreement agree and acknowledge that
the indemnification procedures set forth in this Exhibit B are to be identical
in substance to the indemnification procedures set forth in Article 9 of the
Share Agreement. Terms not otherwise defined herein shall have the meanings
assigned to such terms in the Share Agreement or in the foregoing Escrow
Agreement.
1.1 All representations and warranties contained in the Share Agreement
and the Escrow Agreement shall survive the Closing until September 30, 1997, and
shall not be affected by any investigation made or any knowledge acquired with
respect thereto, except as expressly provided in Article 9 of the Share
Agreement or in the Escrow Agreement.
1.2 (a) From and after the Closing, the Sellers shall indemnify and
hold the Buyer, on a pro rata basis, based on each Seller's proportionate
interest in the Purchase Price, harmless from and against, and shall reimburse
the Indemnified Parties for, any and all losses, damages, liabilities,
obligations, judgments, decrees, penalties, taxes, or expenses (including but
not limited to any reasonable legal or accounting fees or expenses) ("LOSSES")
arising out of or in connection with:
(i) any inaccuracy in any representation or warranty made by
the Sellers in Article 4 or 5 of the Share Agreement or the Disclosure Schedules
thereto; or
(ii) any failure by the Sellers, or the Group, to perform or
comply, in whole or in part, with any covenant in the Share Agreement.
(b) From and after the Closing Date the Buyer shall hold the
Sellers harmless from and against, and shall reimburse the Sellers for any and
all Losses arising out of or in connection with:
(i) any inaccuracy in any representation or warranty made by
the Buyer in the Share Agreement; and
(ii) any failure by the Buyer to perform or comply, in whole
or in part, with any covenant or agreement contained in the Share Agreement.
1.3 (a) No indemnified party shall be entitled to receive any
indemnification payment with respect to any claims for indemnification under
Article 9 of the Share Agreement and this Exhibit B ("CLAIMS") until the
aggregate Losses for which such Indemnified Parties would be otherwise entitled
to receive indemnification from Buyer or Sellers jointly exceed Swedish Krona
500,000 ("SEK") (the "THRESHOLD"); provided, however, that once such aggregate
Losses exceed the Threshold, such indemnified parties shall be entitled to
indemnification only for the aggregate amount of all Losses which exceed SEK
500,000 of Claims.
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(b) In no event shall the liability of the Sellers under the
Share Agreement and this Exhibit B for Losses incurred by Indemnified Parties
exceed the value of the Share Consideration issued to the Sellers pursuant to
the Share Agreement (that is, the total number of shares of Astea Common Stock
issued to the Sellers under the Share Agreement) multiplied by the average of
the last reported sale prices of Astea Common Stock on the Nasdaq National
Market System over the 20 consecutive trading days ending with the day prior to
the Closing Date. In no event shall the liability of Astea under the Share
Agreement exceed US $6,000,000.
(c) The parties agree that the Sellers shall have a right, if
possible, to cure a loss within 60 days after receipt of notification of a Claim
and prior to submitting any Claim, the parties shall use reasonable efforts to
determine the amount, if any, by which their Losses would be offset by recovery
of insurance proceeds, reduction of tax liabilities or the creation of a tax
benefit to Buyer, and to provide the indemnifying party notice of and a
description of such determination. Any liability for indemnification shall be
reduced to the extent any Losses specified in a Claim are reduced by such a
recovery or reduction.
(d) No indemnified party shall be entitled to receive any
indemnification payment with respect to any Claims under Article 9 of the Share
Agreement and this Exhibit B which are the first asserted by an indemnified
party after September 30, 1997 provided such Claim or Claims do not relate to
Sellers' or Buyer's respective covenants surviving said date in which case
claims may be asserted after September 30, 1997.
(e) Should the Buyer become aware of any Loss for which the
Sellers might be liable the Buyer shall within ninety (90) days after the date
when the Buyer became aware of the claim, issue a written notice thereof to the
Sellers, and has no right to claim compensation should such notice not be
issued.
1.4 (a) An indemnified party shall notify the indemnifying party in
writing within sixty (60) days after the assertion against the indemnified party
of any claim by a third party (a "THIRD PARTY CLAIM") in respect of which the
indemnified party intends to base a Claim for indemnification hereunder, but the
failure or delay so to notify the indemnifying party shall not relieve it of any
obligation or liability that it may have to the indemnified party except to the
extent that the indemnifying party demonstrates that its ability to defend or
resolve such Third Party Claim is adversely affected thereby.
(b) (i) Subject to the rights of or duties to any insurer or other
third party having potential liability therefor, the indemnifying party shall
have the right, upon written notice given to the indemnified party within 30
days after receipt of the notice from the indemnified party of any Third Party
Claim, to assume the defense or handling of such Third Party Claim, at the
indemnifying party's sole expense, in which case the provisions of Section 9.4
(b)(ii) of the Share Agreement shall govern.
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(ii) The indemnifying party shall select counsel reasonably
acceptable to the indemnified party in connection with conducting the defense or
handling of such Third Party Claim, and the indemnifying party shall defend or
handle the same in consultation with the indemnified party and shall keep the
indemnified party timely apprised of the status of such Third Party Claim. The
indemnifying party shall not, without the prior written consent of the
indemnified party, agree to a settlement of any Third Party Claim, unless (A)
the settlement provides an unconditional release and discharge of the
indemnified party and the indemnified party is reasonably satisfied with such
discharge and release and (B) Buyer shall not have reasonably objected to any
such settlement on the ground that the circumstances surrounding the settlement
could result in a material adverse impact on the business or operation Buyer or
the business conducted by the Group. The indemnified party shall cooperate with
the indemnifying party and shall be entitled to participate in the defense of
any claim with its own counsel and at its own expense.
(c) (i) If the indemnifying party does not give written notice to
the indemnified party within 30 days after receipt of the notice from the
indemnified party of any Third Party Claim of the indemnifying party's election
to assume the defense or handling of such Third Party Claim, the provisions of
Section 9.4(c)(ii) of the Share Agreement shall govern.
(ii) The indemnified party may, at the indemnifying party's
expense (which shall be paid from time to time by the indemnifying party as such
expenses are incurred by the indemnified party), select counsel, who shall be
reasonably satisfactory to the indemnifying party in connection with conducting
the defense or handling of such Third Party Claim and defend or handle such
Third Party Claim in such manner as it may deem appropriate, provided, however,
that the indemnified party shall keep the indemnifying party timely apprised of
the status of such Third Party Claim and shall not settle such Third Party Claim
without the prior written consent of the indemnifying party, which consent shall
not be unreasonably withheld, conditioned or delayed. If the indemnified party
defends or handles such Third Party Claim, the indemnifying party shall
cooperate with the indemnified party.
1.4.1. Notwithstanding Article 8.3 and 8.4 of the Share Agreement, the
limitations therein shall not apply to Sellers' indemnification for any
inaccuracy in the representation given by the Sellers in Article 5 of the Share
Agreement.
1.5 At Closing, the Sellers shall pledge Share Consideration equal to
15% of the Purchase Price to Buyer as a mechanism to satisfy potential claims
for indemnification by Astea and its affiliates under Article 9 of the Share
Agreement and this Exhibit B (the "HOLDBACK SHARES"). Any liability of the
Sellers for indemnification for Losses under the Share Agreement and this
Exhibit B shall be satisfied, first, from Holdback Shares pursuant to a setoff
under Article 9.6 of the Share Agreement and this Section of Exhibit B, second,
to the extent the Holdback Shares are insufficient to satisfy such liability for
Losses in full, from the other Share Consideration issued to the Sellers under
the Share
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Agreement, or the proceeds from any disposition thereof, as the Sellers may
elect in writing.
1.5.1 The Holdback Shares shall be deemed as of the Closing Date to be
pledged by the Sellers to, and shall be held by, Escrow Agent pursuant to the
Escrow Agreement. The Sellers shall deliver to Buyer at the Closing appropriate
stock powers endorsed in blank and such other documentation as Buyer may
reasonably prescribe to pledge the Holdback Shares to the Escrow Agent. So long
as any Holdback Shares are held by Escrow Agent hereunder, Buyer shall have, and
the Sellers hereby grant, effective as of the Closing Date, a perfected Lien in
such Holdback Shares to secure payment of amounts payable by the Sellers in
respect of indemnification Claims under Article 9 of the Share Agreement.
1.5.2 The Escrow Agent shall hold the Holdback Shares in accordance
with the Share Agreement and this Exhibit B and shall transfer the Holdback
Shares only as follows:
(a) Holdback Shares shall be delivered in respect of
indemnification Claims made on behalf of Astea or any Indemnified Party in
accordance with the terms of the Share Agreement and this Exhibit B.
(b) (i) A transfer in accordance with Section 1.5.4 hereof;
(ii) Within five business days after April 30, 1997, upon
the receipt by the Escrow Agent of joint written instructions from Astea and the
Representative, the Escrow Agent will release from the Escrow Account and
deliver to each Holder the LESSER of (A) fifty percent (50%) of such Holder's
Escrow Shares then remaining in escrow (after subtracting all Escrow Shares
previously released from escrow to satisfy indemnification claims pursuant to
the Share Agreement and this Exhibit B) or (B) the number of Escrow Shares such
that the Escrow Shares remaining in the Escrow Account after release of such
Escrow Shares would equal the number of Escrow Shares (the "PENDING CLAIMS
ESCROW SHARES") subject to possible release and delivery in accordance with this
Exhibit B and the Share Agreement with respect to any then pending but
unresolved Claims of Astea or any Indemnified Party, which pending or unresolved
Claims expressly include, without limitation, (i) any Claims for which Astea has
provided a written Notice of Claim to the Sellers but the Representative has not
yet filed a written objection and the Response Period has not elapsed and (ii)
all Open claims (as defined below); or
(iii) Within five business days after September 30, 1997,
upon the receipt by the Escrow Agent of joint written instructions from Astea
and the Representative, the Escrow Agent will release from the Escrow Account
and deliver to each Holder the LESSER of (A) all of such Holder's Escrow Shares
then remaining in the Escrow Account (after subtracting all Escrow Shares
previously released from escrow pursuant to clause (i) of this Section or to
satisfy indemnification claims pursuant to the
-18-
Share Agreement or this Exhibit B) or (B) the number of Escrow Shares such that
the Escrow Shares remaining in the Escrow Account after release of such Escrow
Shares would equal the Pending Claims Escrow Shares.
1.5.2.1 Except as otherwise set forth in this Exhibit B, for purposes
of the Share Agreement and this Agreement, the "HOLDBACK TERMINATION DATE" shall
mean the date which is April 30, 1997, with respect to one-half of the Holdback
Shares, and September 30, 1997, with respect to one-half of the Holdback Shares.
1.5.3 The procedure for payment from the Holdback Shares of
indemnification amounts to which Astea or other Indemnified Parties may become
entitled under this Section shall be as follows:
(a) Subject to the limitation that written notice of any Claim
for indemnification hereunder must be given to the Sellers not later than the
Holdback Termination Date, from time to time as Buyer determines that it or
another indemnified party is entitled to an indemnification payment under
Article 9 of the Share Agreement, Buyer may give written notice of the Claim to
the Sellers describing in such notice the nature of the Claim, the amount
thereof if then ascertainable and, if not then ascertainable, the estimated
maximum amount thereof.
(b) If Buyer has not received written objection to a Claim in
accordance with the preceding subparagraph (a) from Sellers representing at
least a majority in interest of the Holdback Shares within 30 days after notice
of such Claim is delivered (the "RESPONSE PERIOD"), the Claim stated in such
notice shall be conclusively deemed to be approved by the Sellers, and Escrow
Agent shall promptly thereafter transfer to the indemnified party from the
Holdback Shares an amount of Holdback Shares equal in value to the amount of
such Claim. The Holdback Shares to be transferred shall be rounded to the
nearest whole share and shall be valued on the basis of the higher of the
Closing Date Price or the last reported sale price of Astea's Common Stock on
the Nasdaq National Market on the date the Notice of Claim was delivered.
(c) If within the Response Period Astea shall have received
from the Sellers representing at least a majority in interest in the Holdback
Shares, a written objection to the claim specifying the nature of and grounds
for such objection, then such claim shall be deemed to be an "OPEN CLAIM," and
Astea shall reserve within the Holdback Shares an amount of Holdback Shares
equal to the amount of such Open Claim (which amount designated for each Open
Claim is referred to herein as the "CLAIM RESERVE AMOUNT"). The number of
Holdback Shares to be reserved shall be determined (rounded to the nearest whole
share) by dividing the amount of the Open Claim by the higher of the Closing
Date Price or the average of the last reported sale prices of Astea's Common
Stock on the Nasdaq National Market over the 20 trading days preceding such
written objection.
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(d) The Claim Reserve Amount for each Open Claim shall be
transferred by Astea from the Holdback Shares only in accordance with either (i)
a mutual agreement among Astea and Sellers representing at least a majority in
interest in all the Holdback Shares, which shall be memorialized in writing, or
(ii) a final and binding arbitration decision or order pertaining to the Open
Claim.
1.5.4 The Holdback Shares shall be held of record by the Sellers, who
shall have full right of a shareholder including but not limited to the right to
vote the Holdback Shares on all matters coming before the stockholders of Astea.
In the event of any merger or recapitalization or similar transaction involving
Astea prior to the time when all Holdback Shares have been transferred or
released in accordance with the terms of Section 9.6 of the Share Agreement and
Section 1.5 of this Exhibit B, such Holdback Shares shall be converted or
exchanged in accordance with such transaction in the same manner as other shares
of Astea Common Stock, and any securities or property issued in conversion or
exchange thereof shall then be included within the definition of Holdback Shares
and shall otherwise become subject to the Share Agreement and this Escrow
Agreement in lieu of such shares of Astea Common Stock. If as a result of any
such transaction the stockholders of the Buyer immediately before the
transaction will not own in excess of 50% of the voting capital stock of Astea
immediately after the transaction, the Holdback Termination Date shall be deemed
to be the closing date of such transaction and the Holdback Shares shall be
re-transferred to the Buyer or released to the Sellers, as the case may be, as
provided herein.
1.6 The indemnification provisions of Article 9 of the Share Agreement
and this Exhibit B are the sole and exclusive remedy of any party to the Share
Agreement or Escrow Agreement for a breach of any representation, warranty or
covenant contained therein or herein, except with respect to any claim based on
fraud in the inducement or a similar theory. Each of the parties hereto agrees
that the other parties hereto shall be entitled to an injunction to prevent
breaches of the provisions of the Escrow Agreement and to enforce specifically
the Share Agreement and the Escrow Agreement and the terms and provisions
thereof and hereof (including the indemnification provisions thereof and hereof)
in any competent court having jurisdiction over the parties, in addition to any
other remedy to which they may be entitled at law or in equity.
1.7 All of the representations and warranties of the parties hereto
contained in the Share Agreement and the Escrow Agreement shall survive the
Closing (even if the damaged party knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing; provided,
however, if the damaged party knew or had reason to know of such a breach prior
to the Closing and failed to object thereto in writing prior to the Closing, the
damaged party shall not be entitled to indemnification under Article 9 of the
Share Agreement except and only to the extent of the increase in damages beyond
the amount known by the damaged party at the Closing) and continue in full force
and effect until September 30, 1997. Any claims with respect to the foregoing
must be asserted in writing with reasonable particularity by the party making
such claim prior to the end of the period referenced above in order to perfect
any right of indemnity, and the
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obligations of the indemnifying party with respect to such claims shall continue
until such claims have been finally resolved.
1.8 The respective covenants and agreements of the parties contained in
the Share Agreement and the Escrow Agreement shall survive the Closing without
limitation as to time.
1.9 Notwithstanding anything herein to the contrary, this Exhibit B
shall survive termination of the Escrow Agreement.
1.10 The following provisions shall apply with respect to the assertion
of claims and the indemnification provisions of Article 9 of the Share Agreement
and this Exhibit B of the Sellers against Buyer or Buyer against the Sellers:
(a) If a claim is asserted by the Buyer against the Sellers
the Buyer shall continue to hold in reserve the Holdback Shares until the rights
of the Sellers and Buyer with respect thereto have been agreed upon between the
Sellers and Buyer or until such matters are settled by arbitration.
(b) The Sellers and Buyer shall attempt promptly and in good
faith to agree upon the rights of the parties with respect to each of such
claims. If the Sellers and Buyer should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties and the Holdback
Shares shall be distributed or forfeited in accordance with the terms thereof.
(c) If no such agreement can be reached after good faith
negotiation, either Buyer or the Sellers may demand arbitration of the matter
unless the amount of the damage or loss is at issue in pending litigation with a
third party, in which event arbitration shall not be commenced until such amount
is ascertained or both parties agree to arbitration.
1.11 In no event shall the aggregate liability of the Sellers for
indemnification hereunder and under the Share Agreement or otherwise arising out
of or relating to this Agreement and the Share Agreement exceed the Share
Consideration. In no event shall the aggregate liability of Buyer for
indemnification hereunder and under the Share Agreement or otherwise arising out
of or relating to this Agreement and the Share Agreement exceed the Share
Consideration. The foregoing shall not limit any indemnification to which a
Seller would be entitled as an officer or director of Buyer or a Group Company,
unless any proceeding directly involves a matter for which indemnification is
being specifically sought by Buyer against the Sellers pursuant to the terms of
the Share Agreement and this Exhibit B and in such event only to the extent that
Buyer is entitled to indemnification under Article 9 of the Share Agreement and
this Exhibit B (except that expenses will not be advanced to the Sellers in any
such matter for which Buyer is seeking indemnification until a final
determination that the Sellers are not obligated to indemnify Buyer hereunder).
Buyer shall have the right to recover the
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proceeds of any such Shares that are sold by Sellers to settle claims of
indemnification. The limitation set forth in Article 9 of the Share Agreement
and this Exhibit B shall not apply in the event that the Sellers' or Buyer's
liability for indemnification, as the case may be, is based upon intentional
misrepresentations or other fraudulent conduct.
1.12 Any controversy or claim arising out of or relating to this
Agreement, the breach hereof or the rights or liabilities of either party
hereunder shall be referred to and finally settled by arbitration. The arbitral
proceedings shall be held in Stockholm, Sweden, in accordance with Swedish law
on arbitration as amended at the date of instigation of arbitral proceedings.
The arbitration shall be conducted in the Swedish language but oral or written
evidence may be presented in English. Sellers may only appear as one party and
neither Seller may be represented other than jointly with the other Sellers.
Sellers may elect only one single arbitrator to represent all Sellers jointly.
Judgment upon the award rendered may be entered in any court having jurisdiction
or application may be made to such court for judicial acceptance of the award
and an order of enforcement, as the case may be. The arbitrators' ruling
regarding legal fees shall be consistent with the rules and regulations of the
Swedish Procedural Code.
-22-
EXHIBIT C
---------
Legends
-------
FOR ESCROW SHARES ONLY:
-----------------------
"The securities evidenced by this certificate have been
pledged to Astea International Inc. and are subject to
restrictions on transfer pursuant to the terms of a certain
Escrow Agreement dated as of June 28, 1996 by and among the
holder of this certificate, Astea International Inc., and
certain other parties thereto."
FOR ALL SHARES, INCLUDING ESCROW SHARES:
----------------------------------------
"The shares represented by this certificate have been issued
pursuant to Regulation S promulgated under the Securities Act
of 1933, as amended (the "Act"), and have not been registered
under the Act. These shares may not be offered or sold within
the United States or to, or for the account of a "U.S. Person"
(as that term is defined in Regulation S) until after August
8, 1996. After such date, this legend shall have no further
effect."
Exhibit 7.03
------------
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made and
entered into as of June 28, 1996 by and among Astea International Inc., a
Delaware corporation ("ASTEA" or the "COMPANY"), and the former shareholders of
Abalon AB, a corporation organized under the laws of Sweden, including its
affiliated corporations or subsidiaries ("ABALON"), Per Edtsrom, Orjan Grinndal
and Henrik Lindberg (collectively the "SHAREHOLDERS" and individually a
"SHAREHOLDER").
RECITALS
A. The Company, Abalon and the Shareholders are parties to a certain
Share Purchase Agreement dated as of June 20, 1996 (the "SHARE AGREEMENT")
pursuant to which Astea will acquire Abalon and its affiliated corporations
through an acquisition from the Shareholders of all of the outstanding stock of
Abalon and/or its affiliated entities in exchange for cash consideration of
US$8,550,000 and the issuance of 233,236 shares of Astea's Common Stock, $.01
par value per share (the "ASTEA COMMON STOCK"), as set forth in the Share
Agreement.
B. The execution and delivery of this Agreement by the parties hereto
is a condition precedent to the obligations of the parties to consummate the
transactions under the Share Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties hereto agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the
meanings indicted below:
1933 ACT. The Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as in effect from time to time
1934 ACT. The Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder, as in effect from time to
time.
BUSINESS DAY. Each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in New York are
authorized or obligated by law or executive order to close.
-2-
COMMISSION. The United States Securities and Exchange
Commission.
CHANGE IN CONTROL. A change in control of Astea shall mean the
sale of all or substantially all of the capital stock or assets of Astea, or any
reorganization, merger, tender offer, consolidation or other form of business
combination involving Astea where Astea is not the surviving entity, or effect a
change in the composition of a majority of the Board of Directors due to any
proxy solicitation of shareholders desiring a change in the composition of the
Board of Directors with the intent of changing or influencing control of Astea.
HOLDER. Any person owning Registrable Securities who is a
party to this Agreement, and any transferee thereof in accordance with Section 7
or 11 of this Agreement.
PROSPECTUS. The prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement (including,
without limitation, any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement), and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
REGISTER, REGISTRATION AND REGISTERED. A registration effected
by preparing and filing a registration statement or similar document with the
Commission in compliance with the 1933 Act, and the declaration or ordering of
effectiveness of such registration statement or document.
REGISTRABLE SECURITIES. The shares of Astea Common Stock
issued to and received by the Shareholders pursuant to the Share Agreement and
any securities that may be issued by the Company or any successor to the Company
from time to time with respect to, in exchange for, or in replacement of such
shares of Astea Common Stock, including, without limitation, securities issued
as a stock dividend on or pursuant to a stock split or similar recapitalization
of such shares of Astea Common Stock; provided, however, that those shares as to
which the following apply shall cease to be Registrable Securities: (a) a
Registration Statement with respect to the sale of such Registrable Securities
shall have become effective under the 1933 Act and such Registrable Securities
shall have been disposed of under such Registration Statement; (b) such
Registrable Securities shall have become transferable, or have become eligible
for transfer (whether or not so transferred), in accordance with the resale
provisions of
-3-
Regulation S or any successor rule or provision, under the 1933 Act; (c) such
Registrable Securities shall have been transferred in a transaction in which the
Shareholder's rights and obligations under this Agreement were not properly
assigned in accordance with this Agreement; (d) such Registrable Securities
shall have ceased to be outstanding; or (e) the shares of Astea Common Stock
have previously been sold, transferred or assigned by a Shareholder in
accordance with this Agreement and permitted by Section 4 hereof.
REGISTRATION EXPENSES. All expenses incident to the Company's
performance of or compliance with Sections 2 and 4 hereof, including, without
limitation, all registration and filing fees (including filing fees with respect
to the Commission and to the National Association of Securities Dealers, Inc.
and listing fees of the Nasdaq National Market System), all fees and expenses of
complying with state securities or "blue sky" laws (including fees and
disbursements of underwriters' counsel in connection with any "blue sky"
memorandum or survey, but excluding any fees and expenses for foreign
qualification in such jurisdictions), all printing expenses, all registrars' and
transfer agents' fees and all fees and disbursements of the Company's counsel
and independent public accountants; provided, however, that Registration
Expenses shall not include the fees and expenses of counsel to the holders of
Registrable Securities, or underwriters' discounts or commissions associated
with the sale of the Registrable Securities.
REGISTRATION STATEMENT. A registration statement prepared and
filed with the Commission in compliance with the 1933 Act.
REGULATION S. Regulation S promulgated under the 1933 Act and
the rules, regulations and interpretations thereof issued by the Commission as
may be in effect from time to time.
SELLER. Any person, including any Holder, participating in an
offering of any Registrable Securities of the Company pursuant to this
Agreement.
SELLING EXPENSES. All applicable transfer taxes and any fees
and disbursements of any counsel, accountants or other advisors for any Seller
of the Registrable Securities being registered.
SHELF REGISTRATION. A registration effected pursuant to a
shelf Registration Statement of the Company, on an appropriate form under Rule
415 under the 1933 Act, or any similar rule that may be adopted by the
Commission, all amendments and
-4-
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein. A Registration Statement
relating to a Shelf Registration shall be referred to herein as the "SHELF
REGISTRATION STATEMENT." The Shelf Registration Statement shall be effected on
Form S-3 or any successor form prescribed by the Commission.
U.S. PERSON shall mean those individuals or entities described
in Rule 902(o) and (p) of Regulation S of the 1933 Act and as further set forth
on Appendix A to this Agreement..
2. "PIGGY-BACK" REGISTRATION RIGHTS
Subject in all instances to the resale restrictions set forth in
Section 4, commencing on and after January 1,, 1997, if at any time thereafter
Astea shall determine to register in a public offering under the 1933 Act any of
its Common Stock for its own account, or the account of other shareholders of
the Company, it shall send to the Shareholders written notice of such
determination and, if within 15 calendar days after receipt of such notice, any
Shareholder shall so request in writing, Astea shall include in such
registration statement all or any part of the Registrable Securities the
Shareholder requests to be registered (subject to the resale restrictions set
forth in Section 4 as to number of Registrable Securities which may be resold
under this agreement at any time). This right shall not apply to a registration
of shares of Astea Common Stock on Form S-8 or Form S-4 (or their then
equivalents or successor forms) relating to shares of Astea Common Stock to be
issued by Astea in connection with any acquisition of any entity or business, or
shares of Astea Common Stock issuable in connection with any stock option, stock
purchase plan or other employee benefit plan.
If, in connection with any offering involving an underwriting of Astea
Common Stock to be issued for the account of the Company or selling
securityholders, the managing underwriter shall impose a limitation on the
number of shares of such Astea Common Stock which may be included in any such
registration statement because, in its judgment, such limitation is necessary to
effect an orderly public distribution of the Astea Common Stock and to maintain
a stable market for the securities of the Company, then the Company shall be
obligated to include in such registration statement only such limited portion of
the stock with respect to which the Shareholder has requested inclusion
hereunder, on a pro rata basis based on the number of shares of Common Stock
originally requested for inclusion therein by the Company, the Shareholders, and
all other selling securityholders possessing contractual registration rights.
-5-
The provisions of this Section 2 shall expire with respect to any
Shareholder at such time as any such Shareholder shall be eligible to resell the
Registrable Securities in the United States or to a U.S. Person (as defined in
Appendix A) pursuant to the resale provisions of Regulation S.
3. SHELF REGISTRATION
3.1 DEMAND REGISTRATION RIGHT
Subject to the limitations set forth elsewhere in this Section 3,
commencing on or after January 1, 1997, and subject to the resale restrictions
and limitations set forth in Section 4 hereof, Astea will, upon the written
request of the Shareholders holding a majority of the Registrable Securities,
use its reasonable efforts to promptly effect qualification and registration of
the Registrable Securities under the Securities Act on a Form S-3 registration
statement (or any other registration statement form for which it is then
eligible, other than Form S-1) as a Shelf Registration. Astea shall not be
required to effect more than two registrations on Form S-3 pursuant to the
provisions of this Section 3. The rights to demand registration of the
Registrable Securities set forth in this Section 3 shall expire on December 31,
1998, except that this date shall be extended by the number of days beginning on
January 1, 1997 through December 31, 1998 during which a registration statement
by the Company is not available for sales of the Registrable Securities because
of (i) the operation of this Section 3; or (ii) the failure of the Company to
qualify for the use of Form S-3 because of its failure to file on a timely basis
all reports required to be filed under the 1934 Act; or (iii) the nonfiling by
the Company of a current report on Form 8-K (and any amendments thereto)
containing pro forma combined financial statements and results of operations of
Astea and Abalon. Astea and the Shareholders shall use reasonable efforts to
coordinate sales of the Registrable Securities pursuant to a Form S-3
registration statement with Astea's market makers in a manner to ensure
stability in the trading price of Astea Common Stock.
3.2 LIMITATION ON SHELF REGISTRATION OBLIGATION
Notwithstanding the provisions of Section 3.1, and subject to the
limitations described below in this Section 3 and Section 4, if, prior to the
filing or effective date of the Shelf Registration Statement referred to in
Section 3.1 above, the Company shall furnish to such Holders a certificate
issued by the Board of Directors upon the advice of counsel and signed by the
President of the Company stating that, in their good faith judgment:
-6-
(a) the filing of the Shelf Registration Statement or the
offering of securities pursuant thereto would materially and adversely affect
(i) a pending or scheduled public offering of Astea's securities, (ii) a pending
or proposed acquisition, merger, consolidation, reorganization, strategic
alliance, corporate partnership, restructuring or similar transaction of or by
Astea, which in each case is material to the business of Astea, (iii) bona fide
negotiations, discussions or proposals with respect to any of the foregoing
types of transactions, or (iv) the financial condition, position, prospects,
stock price or strategy of Astea in connection with the proposed disclosure of
any pending or threatened litigation, claim, assessment or government
investigation which may be required thereby; and
(b) in the event the Shelf Registration Statement were then
effective and sales of Registrable Securities were being made or offered
thereunder, and disclosure of all material information with respect to the
foregoing transactions had not been made, such circumstances would cause a
violation of the 1933 Act or the 1934 Act and result in potential liability to
Astea and/or the Shareholders; then the Company shall have the right, subject to
the limitations set forth in Section 3.3(d) hereof, to defer the filing or
effectiveness, as the case may be, of such Shelf Registration Statement for such
period of time as such the above circumstances shall continue, such period not
to exceed 75 days following the date of suspension, provided that the Company
may not exercise such right to defer the filing or effectiveness more than once
in any six-month period.
3.3 SELLING PROCEDURES; SUSPENSION
Each Holder of Registrable Securities agrees to give written notice to
the General Counsel and the Chief Accounting Officer of the Company at least
five (5) Business Days prior to any intended sale or distribution of Registrable
Securities under the Shelf Registration Statement referred to in Section 3.1,
which notice shall specify the date on which such Holder intends to begin such
sale or distribution. As soon as practicable after the date such notice is
received by the Company, and in any event within three (3) Business Days after
such date, the Company shall comply with either paragraph (a) or (b) below.
(a) Except in the event that paragraph (b) below applies, the
Company shall (i) if deemed necessary by the Company, prepare and file with the
Commission a post-effective amendment to the Shelf Registration Statement or a
supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein
-7-
by reference or file any other required document so that such Registration
Statement will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and so that, as thereafter delivered to
purchasers of the Registrable Securities being sold thereunder, such Prospectus
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; (ii) provide the Holders of the Registrable Securities who gave such
notice copies of any documents filed pursuant to Section 3.3(a)(i); and (iii)
inform each such Holder that the Company has complied with its obligations in
Section 3.3(a)(i) (or that, if the Company has filed a post-effective amendment
to the Shelf Registration Statement which has not yet been declared effective,
the Company will notify each such Holder to that effect, will use its best
efforts to secure the effectiveness of such post-effective amendment and will
immediately notify each such Holder pursuant to Section 3.3(a)(i) hereof when
the amendment has become effective). Each Holder who has given notice of
intention to distribute such Holder's Registrable Securities in accordance with
Section 3.3 hereof (a "NOTICE HOLDER") shall sell all or any of such Registrable
Securities pursuant to the Shelf Registration Statement and related Prospectus
only during the 90-day period commencing with the date on which the Company
gives notice, pursuant to Section 3.3(a)(i), that the Registration Statement and
Prospectus may be used for such purpose (such 90-day period is referred to as a
"SELLING PERIOD"). The Notice holders will not sell any Registrable Securities
pursuant to such Registration Statement or Prospectus after such Selling Period
without giving a new notice of intention to sell pursuant to Section 3.3 hereof
and receiving a further notice from the Company pursuant to Section 3.3(a)(i)
hereof or paragraph (b) below.
(b) In the event of (i) any request by the Commission or any
other federal or state governmental authority during the period of effectiveness
of the Shelf Registration Statement for amendments or supplements to a Shelf
Registration Statement or related Prospectus or for additional information; (ii)
the issuance by the Commission or any other federal or state governmental
authority of any stop order suspending the effectiveness of a Shelf Registration
Statement or the initiation of any proceedings for that purpose; (iii) the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) any event or circumstance which necessitates
the making of any changes in the Shelf Registration Statement or Prospectus, or
any document incorporated or deemed to be incorporated therein by reference, so
that, in the
-8-
case of the Shelf Registration Statement, it will not contain any untrue
statement of a material fact or any omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and that in the case of the Prospectus, it will not contain any untrue statement
of a material fact or any omission to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; (v) that, in the good
faith judgment of the Company's Board of Directors, upon the advice of counsel,
in accordance with the provision of Section 3.2, , it is advisable to suspend
use of the Prospectus for a discrete period of time due to pending corporate
developments, public filings with the Commission or similar events; then,
subject to paragraph (d) below, the Company shall deliver a certificate in
writing to the Notice Holders (the "SUSPENSION NOTICE") to the effect of the
foregoing and, upon receipt of such Suspension Notice, each such Notice Holder's
Selling Period will not commence (a "SUSPENSION") until such Notice Holder's
receipt of copies of the supplemented or amended Prospectus provided for in
Section 3.3(a)(i) hereof, or until it is advised in writing by the Company that
the Prospectus may be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such Prospectus.
(c) In the event any of the events or circumstances listed in
the foregoing paragraph (b) occur or exist after a Selling Period has commenced,
subject to paragraph (d) below, the Company shall have the same right to suspend
such Selling Period by delivery of a Suspension Notice as the Company would have
had if the Selling Period had not yet commenced, and any such suspension of a
Selling Period shall be deemed included within the meaning of the term
"Suspension" for all purposes under this Agreement.
(d) In the event of any Suspension, or any delay in effecting
the Shelf Registration under Section 3.2 above, the Company will use its best
efforts to ensure that the use of the Prospectus so suspended or delayed may be
commenced or resumed, as the case may be, and that any Selling Period so
suspended will commence or resume, as the case may be, as soon as practicable
and, in the case of a pending development, filing or event referred to in
Section 3.3(b)(iv) or (v) hereof, as soon, in the judgment of the Company's
Board of Directors (in accordance with the provisions of Section 3.2), as
disclosure of the material relating to such pending development, filing or event
would not have an adverse effect on the Company's ability to consummate the
transaction, if any, to which such development, filing or event relates.
Notwithstanding any other provision of this Agreement, the Company shall have
the right to cause a maximum of two (2) Suspensions, neither of which may be
within 30 days of the other, as provided
-9-
above (including for this purpose a delay in effecting the Shelf Registration
pursuant to Section 3.2 above) during any 12-month period after the initial
effective date of the Shelf Registration Statement, and the total number of days
in any 12-month period during which a Suspension or Suspensions (including for
this purpose a delay in effecting the Shelf Registration Statement pursuant to
Section 3.2 above) may be in effect shall not exceed 90 days.
(e) Subject to the provisions of Section 3.2, the Company will
use its best efforts to maintain the effectiveness for (i) up to 180 days, (or
such shorter period of time as the underwriters need to complete the
distribution of the registered offering in any Company-primary or secondary
offering), in the case of a registration pursuant to Section 2, or (ii) or
twenty-four (24) months in the case of a Shelf Registration statement on Form
S-3 pursuant to Section 3.1, of any registration statement pursuant to which any
of the Registrable Securities are being offered. The Company from time to time
will amend or supplement such registration statement and the prospectus
contained therein to the extent necessary to comply with the 1933 Act and any
applicable state securities statue or regulation. The Company will also provide
each holder of Registrable Securities with as many copies of the prospectus
contained in any such registration statement as it may reasonably request.
3.4 UNDERWRITING AGREEMENT
If in connection with any proposed distribution by the Shareholders
under the "piggy back" registration referred to in Section 2, the Company in its
discretion shall determine that it is in the best interests of the Company to
effect distribution by means of an underwriting, the Company shall promptly
notify the Shareholders of such determination. In such event, the right of any
Shareholder to participate in such distribution shall be conditioned upon such
Shareholder's participation in the underwriting arrangements required by this
Section 3.4, including without limitation, the requirement that the Shareholder
enter into an underwriting agreement in customary form with the managing
underwriter selected for the underwriting by the Company.
4. RESTRICTIONS ON TRANSFER OF SHARES
Notwithstanding any other provision in this Agreement, each Shareholder
agrees not to sell, assign, transfer, grant an option for, engage in any
derivative security transaction with respect to, or otherwise dispose of in any
manner any of the Registrable Securities, whether to the public or in
privately-negotiated transactions, except with respect to those shares for which
the restrictions on transfer set forth in this Section shall
-10-
lapse in the following increments and on the dates set forth below. The amount
of Registrable Securities held by each Shareholder listed on Exhibit A shall
then become eligible for the registration rights and be released from the
restrictions on transfer set forth in this Agreement in the following increments
on the following dates set forth below:
On and after January 1, 1997: 15% of the Registrable Shares
On and after April 30, 1997: 19% of the Registrable Shares
On and after September 30, 1997: 19% of the Registrable Shares
On and after December 31, 1997: 15% of the Registrable Shares
On and after June 30, 1998: 16% of the Registrable Shares
On and after December 31, 1998: 16% of the Registrable Shares
In the event of any attempted transfer of the Registrable Shares in
violation of the foregoing restrictions, the registration rights set forth in
this Agreement shall automatically expire with respect to each Shareholder who
transfers such Registrable Shares in violation of the foregoing restrictions. In
the event of any violation of these restrictions, the Company shall have to
right to issue stop transfer instructions to its transfer agent to prevent any
threatened or continuing violation of these transfer restrictions and to seek a
decree for specific performance of the provisions of this Agreement.
Notwithstanding the foregoing, a Shareholder may (i) transfer up to 30%
of his Registrable Securities by way of gift for estate planning purposes to any
member of his immediate family or to any trust for the benefit of any such
family member, provided that any transferee shall agree in writing with the
Company, as a condition precedent to such transfer, to be bound by all of the
provisions of this Agreement to the same extent as if such transferee were the
original shareholder hereunder, or (ii) transfer any of his Registrable
Securities by will or the laws of descent and distribution to the heirs of the
Shareholder, or in the event of the disability of the Shareholder, to the legal
representatives of the Shareholder, in which event each such transferee shall
also be bound (and shall agree in writing to be bound) by all of the provisions
of this Agreement to the same extent as if such transferee were the original
Shareholder hereunder.
-11-
THE PROVISIONS OF THIS SECTION 4 SHALL EXPIRE AND TERMINATE
WITH RESPECT TO ANY SHAREHOLDER UPON (i) A CHANGE IN CONTROL
OF ASTEA; (ii) THE DEATH OR DISABILITY OF A SHAREHOLDER; (iii)
A TERMINATION, WITHOUT CAUSE, OF THE SHAREHOLDER UNDER THE
EMPLOYMENT AGREEMENT BETWEEN THE SHAREHOLDER AND ABALON; OR
(iv) A MATERIAL BREACH BY ASTEA OF ANY OF THE MATERIAL
PROVISIONS OF THIS AGREEMENT, THE SHARE AGREEMENT, THE
EMPLOYMENT AGREEMENT BETWEEN A SHAREHOLDER AND ABALON, OR THE
ESCROW AGREEMENT. THE PROVISIONS OF THIS SECTION 4 SHALL NOT
APPLY TO A PLEDGE, MORTGAGE OR OTHER ENCUMBRANCE OF THE
REGISTRABLE SECURITIES PURSUANT TO A BONA FIDE LOAN
TRANSACTION IN WHICH THE REGISTRABLE SECURITIES ARE GIVEN AS
ADDITIONAL COLLATERAL TO SECURE THE LOAN AND THE LOAN
OBLIGATION IS A FULL RECOURSE OBLIGATION WITH RESPECT TO
COLLATERAL OTHER THAN THE REGISTRABLE SECURITIES.
5. EXPENSES
The Company will pay all Registration Expenses in connection with the
registration of Registrable Securities effected by the Company pursuant to
Sections 2 and 3. Holders of Registrable Securities registered pursuant to this
Agreement shall pay all Selling Expenses associated with such registration, with
each Holder bearing a pro rata portion of the Selling Expenses based upon the
number of Registrable Securities registered by each Holder.
6. EXPIRATION OF REGISTRATION RIGHTS
The obligations of the Company under Section 2 and 3 of this Agreement
to register the Registrable Securities shall expire and terminate at such time
as the Shareholder shall be entitled or eligible to sell all such securities in
the United States or to a U.S. Person without restriction and without a need for
the filing of a registration statement under the Securities Act, including
without limitation, for any resales of restricted securities made pursuant to
Regulation S as promulgated by the Commission. The determination as to whether
the Shareholder is entitled or eligible to sell all Registrable Securities
without the need for registration under the Securities Act shall be based on a
written opinion of counsel that registration of the Registrable Securities is
not required under the Securities Act, sufficient to permit the transfer agent
to transfer such securities upon a sale by the Shareholder. The obligations of
the Company under Section 3 of this Agreement shall expire on December 31, 1998
(provided no stop
-12-
transfer orders are in place with the transfer agent), except that this date
shall be extended by the number of days beginning on January 1, 1997 through
December 31, 1998 during which a registration statement by the Company is not
available for sales of the Registrable Securities because of (i) the operation
of Section 3.2 and 3.3; or (ii) the failure of the Company to qualify for the
use of Form S-3 because of its failure to file on a timely basis all reports
required to be filed under the 1934 Act; or (iii) the nonfiling by the Company
of a current report on Form 8-K (and any amendments thereto) containing pro
forma combined financial statements and results of operations of Astea and
Abalon.
7. REGISTRATION PROCEDURES
In connection with the registration of Registrable Securities under
this Agreement, and subject to the other provisions of this Agreement, the
Company shall:
(a) use its best efforts to cause the Registration Statement
filed in accordance with Section 2 or Section 3 to become effective as soon as
practicable after the date of filing thereof;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep such Registration Statement continuously
effective for the shorter of (i) the duration of its registration obligations,
or (ii) until there are no Registrable Securities outstanding, and to comply
with the provisions of the 1933 Act with respect to the disposition of the
Registrable Securities;
(c) furnish to each Seller of such Registrable Securities such
number of copies of the Prospectus included in such Registration Statement as
such Seller may reasonably request in order to facilitate the sale or
disposition of such Registrable Securities;
(d) use its best efforts to register or qualify all securities
covered by such Registration Statement under such other securities or "blue sky"
laws of such jurisdictions as each Seller shall reasonably request, and do any
and all other acts and things that may be necessary to enable such Seller to
consummate the disposition in such jurisdictions of its Registrable Securities
covered by such Registration Statement, except that the Company shall not for
any such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, or to subject
itself to taxation in respect of doing business in any such jurisdiction, or to
consent to general service of process in any such jurisdiction;
-13-
(e) notify each Seller of Registrable Securities covered by
such Registration Statement, at any time when a Prospectus relating thereto is
required to be delivered under the 1933 Act, of the happening of any event as a
result of which the Prospectus included in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing or if it is
necessary to amend or supplement such Prospectus to comply with the law, and at
the request of any such Seller, prepare and furnish to such Seller a reasonable
number of copies of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities or securities, such Prospectus, as amended or supplemented, will
comply with the law;
(f) timely file with the Commission such information as the
Commission may prescribe under Section 13 or 15(d) of the 1934 Act and otherwise
use its best efforts to ensure that the public information requirements of Rule
144 under the 1933 Act are satisfied with respect to the Company. The Company
shall furnish to any Holder of Registrable Securities, upon request, copies of
the Company's most recent annual and quarterly reports and other publicly
available documents filed with the Commission as a Holder may reasonably request
in availing itself of any rule or regulation of the Commission allowing such
Holder to sell Registrable Securities without registration.
(g) use its best efforts to qualify such securities for
inclusion in the Nasdaq National Market, and provide a transfer agent and
registrar for such Registrable Securities not later than the effective date of
such Registration Statement; and
(h) issue to any person to which any Holder of Registrable
Securities may sell such Registrable Securities in connection with such
registration certificates evidencing such Registrable Securities without any
legend restricting the transferability of the Registrable Securities.
From time to time, the Company will amend or supplement such
registration statement and the prospectus contained therein to the extent
necessary to comply with the 1933 Act and any applicable state securities
statute or regulation. The Company will also provide the holder of Registrable
Securities with as many copies of the prospectus contained in any such
registration statement as it may reasonably request.
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8. 1934 ACT REGISTRATION
The Company shall timely file with the Commission such information as
the Commission may require under Section 13 or 15(d) of the 1934 Act; and in
such event, the Company shall use its best efforts to take all action pursuant
to Rule 144(c) as may be required as a condition to the availability of Rule 144
under the 1933 Act (or any successor exemptive rule hereinafter in effect) with
respect to such Common Stock. The Company shall furnish to any holder of
Registrable Securities forthwith upon request (i) a written statement by the
Company as to its compliance with the reporting requirements of Rule 144(c),
(ii) a copy of the most recent annual or quarterly report of the Company as
filed with the Commission, and (iii) such other publicly-filed reports and
documents as a holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a holder to sell any such Registrable
Securities without registration.
9. SHAREHOLDER INFORMATION
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement that all Shareholders of Registrable
Securities shall furnish to the Company such information regarding themselves,
the Registrable Securities held by them and the intended method of disposition
of such Registrable Securities as shall be reasonably required to effect the
registration of their Registrable Securities and to execute such documents in
connection with such registration as the Company may reasonably request.
10. INDEMNIFICATION AND CONTRIBUTION
In the event any Registrable Securities are included in a registration
statement under this Agreement:
(a) The Company will indemnify and hold harmless each Seller,
the officers, directors, partners, agents and employees of each Seller, any
underwriter (as defined in the 1933 Act) for such Seller and each person, if
any, who controls such Seller or underwriter within the meaning of the 1933 Act
or the 1934 Act, against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively, a
"VIOLATION"): (i) any untrue statement or alleged untrue statement of a material
fact
-15-
contained in such Registration Statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto;
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; or (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the 1933 Act,
the 1934 Act or any state securities law; and the Company will reimburse each
such Seller, officer, director, partner, agent, employee, underwriter or
controlling person for any reasonable legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 6(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld or delayed), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by any such Seller, underwriter or controlling
person.
(b) Each Seller will indemnify and hold harmless the Company,
each of its officers, directors, partners, agents or employees, each person, if
any, who controls the Company within the meaning of the 1933 Act, any
underwriter and any other Seller or any of its directors, officers, partners,
agents or employees or any person who controls such Seller, against any losses,
claims, damages or liabilities (joint or several) to which the Company or any
such director, officer, partner, agent, employee, controlling person or
underwriter, or other such Seller or director, officer, partner, agent, employee
or controlling person may become subject, under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Seller expressly for use in connection with such registration;
and each such Seller will reimburse any reasonable legal or other expenses
reasonably incurred by the Company or any such director, officer, partner,
agent, employee, controlling person or underwriter, other Seller, officer,
director, partner, agent, employee or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action.
Notwithstanding anything contained in this Agreement to the contrary, the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any such loss, claim,
-16-
damage, liability or action if such settlement is effected without the consent
of the Seller, which consent shall not be unreasonably withheld or delayed;
provided further, that the aggregate liability of each Seller in connection with
any sale of Registrable Securities pursuant to a Registration Statement in which
a Violation occurred shall be limited to the net proceeds from such sale.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing or conflicting interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, to the extent prejudicial to its ability to
defend such action, shall relieve such indemnifying party of liability to the
indemnified party under this Section 6 to the extent of such prejudice, but the
omission so to deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to any indemnified party otherwise than
under this Section 10.
(d) If recovery is not available under the foregoing
indemnification provisions of this Section 10, for any reason other than as
specified therein, the parties entitled to indemnification by the terms thereof
shall be entitled to contribution to liabilities and expenses in such proportion
as is appropriate to reflect the relative fault of the indemnifying parties and
the indemnified parties, except to the extent that contribution is not permitted
under Section 11(f) of the 1933 Act. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, the parties' relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity to correct
and prevent any statement or omission and any other equitable considerations
appropriate under the circumstances, including, without limitation, whether any
untrue statement or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company, on the one hand,
-17-
or by the Holder of Registrable Securities, on the other hand. The Company and
the Shareholders of the Registrable Securities covered by such Registration
Statement agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation. No seller of
Registrable Securities covered by such Registration Statement or person
controlling such Seller shall be obligated to make any contribution hereunder
which in the aggregate exceeds the net proceeds of the securities sold by such
seller, less the aggregate amount of any damages which such seller and its
controlling persons have otherwise been required to pay in respect of the same
claim or any substantially similar claim. The obligations of such Shareholders
to contribute are several in proportion to their respective ownership of the
Registrable Securities covered by such Registration Statement and not joint.
11. TRANSFERABILITY
The registration rights set forth in this Agreement are not
transferable except to the persons permitted in Section 4. All transferees shall
agree in writing to be bound by all of the provisions of this Agreement. The
Company may issue stop transfer instructions to its transfer agent to inform the
transfer agent of the resale restrictions imposed by the provisions of Section 4
hereof.
12. LEGENDS
Each Holder understands and agrees that the certificates evidencing the
Registrable Securities will bear a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
PURSUANT TO REGULATION S PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND HAVE NOT BEEN REGISTERED
UNDER THE ACT. THESE SHARES MAY NOT BE OFFERED OR SOLD WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OF A "U.S. PERSON"
(AS THAT TERM IS DEFINED IN REGULATION S) UNTIL AFTER AUGUST
8, 1996. AFTER SUCH DATE, THIS LEGEND SHALL HAVE NO FURTHER
EFFECT."
13. REGULATION S REPRESENTATIONS
13.1 SHAREHOLDER'S REPRESENTATIONS. (a) In order to induce the Company
to issue the Registrable Securities to the Shareholders pursuant to the Share
Agreement and this Agreement, each Shareholder severally represents and warrants
to, and covenants
-18-
with, the Company as follows: (i) the Shareholder is not a U.S. person1* as that
term is defined under Regulation S; (ii) at the time of the issuance of the
Registrable Securities, the Shareholder was located outside the United States
and will be outside of the United States as of the date of the execution and
delivery of this Agreement or any permitted resales of the Registrable
Securities pursuant to regulation S; (iii) the Shareholder is acquiring the
Registrable Securities for his own account and not on behalf of any U.S. person
or any other person, and the issuance of the Registrable Securities has not been
pre-arranged with a purchaser in the United States and Shareholder is acquiring
the Registrable Securities for investment purposes and not with a current view
towards distribution to the public and has no present arrangement or intention
to sell the Registrable Securities; (iv) the Shareholder represents and warrants
and hereby agrees that all sales of the Registrable Securities (permitted under
Section 4) prior to the expiration of a period commencing on the date of
issuance of the Registrable Securities to the Shareholders and ending 40 days
thereafter (the "RESTRICTED PERIOD") shall only be made in compliance with the
safe harbor provisions contained in Regulation S, or pursuant to the
registration of such securities under the 1933 Act or pursuant to an exemption
from registration under the 1933 Act, and the Shareholder shall not take a short
position directly or indirectly with respect to the Company's common stock
during the Restricted Period, and that all offers and sales after the expiration
of the Restricted Period in the United States or to U.S. person shall be made
only pursuant to such a registration or to such exemption from registration; (v)
the Shareholder acknowledges and agrees that the Registrable Securities have not
been registered under the 1933 Act and may not be offered or sold in the United
States or to U.S. Persons unless the Registrable Securities are registered under
the 1933 Act or an exemption from the registration requirements of the 1933 Act
is available; (vi) the Shareholder has received and carefully reviewed the
Company's 1995 Annual Report to shareholders and its most recent Annual Report
on Form 10-K, as amended and its subsequent quarterly reports on Form 10-Q
(collectively, the "SEC REPORTS"); (vii) the Shareholder has had a reasonable
opportunity to ask questions of and receive answers from the Company concerning
the Company; (viii) the Shareholder has such knowledge and expertise in
financial and business matters that the Shareholder is capable of evaluating the
merits and risks involved in an acquisition in the Registrable Securities; (ix)
except as set forth in this Agreement and the Share Agreement, no
representations or warranties have been made to the Shareholder by the Company
or any agent, employee or affiliate of the
______________________________________
*See Appendix A attached hereto for definitions of "U.S. person" and
"United States" under Regulation S.
-19-
Company and in entering into this Agreement the Shareholder is not relying upon
any information, other than that contained in this Agreement, the SEC Reports
and the results of independent investigation made by the Shareholder or his
representatives.
(b) The Shareholder understands that the Registrable
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of the United States Federal securities laws
and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
the Shareholder set forth herein in order to determine the applicability of such
exemptions and the suitability of the Shareholder to acquire the Registrable
Securities and the Shareholder acknowledges that it is Shareholder's
responsibility to satisfy itself as to the full observance by this issuance of
the Registrable Securities to Shareholder of the laws of any jurisdiction
outside the United States.
(c) Each Shareholder understands that in the view of the
Commission, the statutory basis for the exemption claimed for the transaction
would not be present if the sale, although in technical compliance with
Regulation S, is part of a plan or scheme to evade the registration provisions
of the 1933 Act and Shareholder confirms that its acquisition of the Registrable
Securities is not part of any such plan or scheme. The Shareholder is acquiring
the Registrable Securities for investment purposes and has not present intention
to sell the Registrable Securities in the United States or to a U.S. Person or
for the account or benefit of a U.S. Person either now or promptly now or
promptly after the expiration of the Restricted Period.
(d) Shareholder acknowledges that the Company may have its
counsel prepare a legal opinion to authorize the Company's transfer agent to
issue the Registrable Securities with a restrictive legend.
13.2 COMPANY'S REPRESENTATIONS. At the time the Registrable Securities
were committed to be issued, the Company reasonably believed that each
Shareholder was outside of the United States and was not a U.S. Persons; and the
Company reasonably believes that the issuance of the Registrable Securities has
not been pre-arranged with a purchaser in the United States. The Company is a
"Reporting Company" as defined by Rule 902 of Regulation S. The Company is in
full compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12(g) or 15(d) of 1934 Act. The Company has registered its
Common Stock pursuant to Section 12 of the 1934 Act and the Common Stock trades
on NASDAQ.
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14. MISCELLANEOUS
14.1 AMENDMENTS AND WAIVERS
Any provision of this Agreement may be amended and the observance
thereof may only be waived (either generally or in a particular instance and
either retroactively or prospectively), with the written consent of the Company
and the Holders of a majority of the Registrable Securities then outstanding.
Any amendment or waiver effected in accordance with this Section 9.1 shall be
binding upon each Holder of Registrable Securities at the time outstanding, each
future Holder of Registrable Securities, and the Company.
14.2 NOTICES
Any notice required or permitted to be given hereunder shall be in
writing and shall be deemed given at the opening of business on the first
Business Day following the time (a) delivery is made, if by hand delivery, (b)
the facsimile is successfully transmitted, if by telecopier or facsimile
machine, or (c) the Business Day after such notice is deposited with a reputable
overnight courier service, postage prepaid, for next-day delivery, addressed as
respectively set forth below or to such other address as any party shall have
previously designated by such a notice.
14.3 GOVERNING LAW
This Agreement shall for all purposes be governed by and construed in
accordance with the internal laws of the State of Delaware with respect to the
enforceability of contracts and in accordance with the United States securities
laws with respect to matters involving securities laws regarding the
registration of the Registrable Shares, both without regard to conflicts-of-laws
principles. The parties hereto agree to submit to the jurisdiction of the
federal and state courts of the State of Delaware with respect to the breach or
interpretation of this Agreement or the enforcement of any and all rights,
duties, liabilities, obligations, powers and other relations between parties
arising under this Agreement.
14.4 SEVERABILITY
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excised from this
Agreement, and the remainder of this Agreement shall be interpreted as if such
provision were so excised and shall be enforceable in accordance with its
remaining terms.
-21-
14.5 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
ASTEA INTERNATIONAL INC.
BY: /s/ Caesar J. Belbel
___________________________
TITLE: Vice President and
General Counsel
_____________________
SHAREHOLDERS:
/s/ Per Edstrom
--------------------------------
PER EDSTROM
/s/ Orjann Grinndal
--------------------------------
ORJANN GRINNDAL
/s/ Henrik Lindberg
--------------------------------
HENRIK LINDBERG
-23-
SCHEDULE A
HOLDERS REGISTRABLE
- ------- SECURITIES
----------
Per Edstrom 77,746
Orjann Grinndal 77,745
Henrik Lindberg 77,745
-24-
APPENDIX A
Pursuant to Rule 902(o) and (p) of Regulation S, the terms
"U.S. Person" and "United States" are defined as follows:
(o) U.S. Person. (1) "U.S. Person" means:
(i) Any natural person resident in the United States;
(ii) Any partnership or corporation organized or incorporated
under the laws of the United States;
(iii) Any estate of which any executor or administrator is a
U.S. person;
(iv) Any trust of which any trustee is a U.S. person;
(v) Any agency or branch of a foreign entity located in the
United States;
(vi) Any non-discretionary account or similar account (other
than an estate or trust (held by a dealer or other fiduciary organized,
incorporated or (if an individual) resident in the United States; and
(vii) Any partnership or corporation if: (A) organized or
incorporated under the laws of any foreign jurisdiction; and (B) formed by a
U.S. person principally for the purpose of investing in securities not
registered under the Securities Act of 1933, unless it is organized or
incorporated and owned, by accredited investors (as defined in Rule 501(a)) who
are not natural persons, estates or trusts.
(1) Notwithstanding paragraph (o)(1) of this rule, any
discretionary account or similar account (other than an estate or trust) held
for the benefit or account of a non-U.S. person by a dealer or other
professional fiduciary organized, incorporated, or (if an individual) resident
in the United States shall not be deemed a "U.S. person."
(2) Notwithstanding paragraph (o)(1), any estate of which any
professional fiduciary acting as executor or administrator is a U.S. person
shall not be deemed a U.S. person if:
(i) An executor or administrator of the estate who is
not a U.S. person has sole or shared investment discretion with respect to the
corpus of the estate; and
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(ii) The estate is governed by foreign law.
(3) Notwithstanding paragraph (o)(1), any trust of which any
professional fiduciary acting as trustee is a U.S. person shall not be deemed a
U.S. person if a trustee who is not a U.S. person has sole or shared investment
discretion with respect to the trust assets, and no beneficiary of the trust
(and no settlor if the trust is revocable) is a U.S. person.
(4) Notwithstanding paragraph (o)(1), an employee benefit plan
established and administered in accordance with the law of a country other than
the United States and customary practices and documentation of such country
shall not be deemed a U.S. person.
(5) Notwithstanding paragraph (o)(1), any agency or branch of
a U.S. person located outside the United States shall not be deemed a "U.S.
person" if:
(i) The agency or branch operates for valid business
reasons; and
(ii) The agency or branch is engaged in the business
of insurance or banking and is subject to substantive insurance or banking
regulation, respectively, in the jurisdiction where located.
(6) The International Monetary Fund, the International Bank
for Reconstruction and Development, the Inter-American Development Bank, the
Asian Development Bank, the African Development Bank, the United Nations, and
their agencies, affiliates and pension plans, any other similar international
organizations, their agencies, affiliates and pension plans shall not be deemed
"U.S. persons."
(p) United States. "United States" means the United States of America,
its territories and possessions, any State of the United States, and the
District of Columbia.
