<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 9, 1999
SMITH MICRO SOFTWARE, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-26536 33-0029027
- ---------------------------- ------------------------ -------------------
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
51 Columbia, Aliso Viejo, California 92656
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (949) 362-5800
Not Applicable
-------------------------------------------------------------
(Former Name or Former Address, if Changed since Last Report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 9, 1999, Smith Micro Software, Inc. (the "Registrant" or
"Smith Micro") acquired all of the outstanding capital stock (the "Acquisition")
of STF Technologies, Inc., a Missouri corporation ("STF"), pursuant to a Stock
Purchase Agreement (the "Stock Purchase Agreement") by and among Smith Micro,
STF, and the Shareholders of STF (the "Former STF Shareholders") in exchange for
One Million Dollars ($1,000,000) in cash and Four Hundred Nine Thousand One
Hundred Sixty Four (409,164) shares of Smith Micro Common Stock (the
"Acquisition Consideration"). Each of individual Former STF Shareholders
received their portion of the Acquisition Consideration in accordance with the
percentage ownership interest held by such shareholder in STF immediately prior
to the Acquisition. The aggregate number of shares delivered as part of the
Acquisition Consideration was determined by dividing $1,000,000 by the average
closing price on the Nasdaq National Market of a share of Smith Micro Common
Stock as reported in the Wall Street Journal for the ten (10) consecutive
trading days ending on the trading day immediately prior to the closing date. In
exchange for the shares of the Smith Micro Common Stock, each of the Former STF
Shareholders transferred their shares to Smith Micro, and as a result of this
Acquisition, STF became a wholly owned subsidiary of Smith Micro. In determining
the aggregate purchase price for STF, Smith Micro took into account the value of
software companies of similar size to STF, comparable transactions and the
market for software companies generally. The cash portion of the Acquisition
consideration was funded with proceeds received in connection with Smith Micro's
initial public offering in September, 1995.
One Hundred Twenty-Two Thousand, Seven Hundred Forty-Eight
(122,748) Smith Micro shares issued to the Former STF Shareholders (the "Escrow
Shares") were deposited into an escrow fund pursuant to the Stock Purchase
Agreement and an Escrow Agreement. Subject to the Stock Purchase Agreement, the
Former STF Shareholders will indemnify Smith Micro for damages incurred by
reason of certain breaches of the Stock Purchase Agreement; provided that such
indemnification obligation is limited to the Escrow Shares. Any Escrow Shares
remaining in the escrow fund one year after the closing of the Acquisition will
be released from escrow and distributed to the Former STF Shareholders.
STF is a developer and publisher of fax and communications
software products for the Apple Macintosh computer. STF is headquartered in
Concordia, Missouri.
The Acquisition was structured as a stock purchase and will be
treated by the Registrant as a "purchase" for accounting purposes.
THE PRECEDING DISCUSSION IS ONLY A SUMMARY AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE STOCK PURCHASE AGREEMENT, A COPY OF WHICH IS INCLUDED AS
EXHIBIT 2 TO THIS CURRENT REPORT OF FORM 8-K AND IS INCORPORATED BY REFERENCE
HEREIN.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Not Applicable.
(b) Not Applicable.
<PAGE> 3
(c) Exhibits
2. Stock Purchase Agreement dated as of April 9, 1999 by and
among Smith Micro Software, Inc. STF Technologies, Inc. and the
Shareholders of STF Technologies, Inc.
99.1 Text of Press Release of the Registrant dated April 13, 1999.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
April 23, 1999
SMITH MICRO SOFTWARE, INC.,
a Delaware corporation
By: /s/ WILLIAM W. SMITH, JR.
----------------------------------
William W. Smith, Jr., President
<PAGE> 5
Index to Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- --------
<S> <C>
2. Stock Purchase Agreement dated as of April 9, 1999 by and among Smith
Micro Software, Inc. STF Technologies, Inc. and the Shareholders of
STF Technologies, Inc.
99.1 Text of Press Release of the Registrant dated April 13, 1999.
</TABLE>
<PAGE> 1
EXHIBIT 2
STOCK PURCHASE AGREEMENT
By and Among
SMITH MICRO SOFTWARE, INC.
STF TECHNOLOGIES, INC.
and the Shareholders of
STF TECHNOLOGIES, INC.
DATED AS OF APRIL 9, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - PURCHASE OF SHARES...............................................................1
1.1. Purchase and Sale of Shares.......................................................1
1.2. Purchase Price....................................................................1
1.3. Escrow Fund.......................................................................2
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS..............................2
2.1. Corporate Organization............................................................2
2.2. Capitalization....................................................................2
2.3. Authority; No Violation...........................................................3
2.4. Consents and Approvals............................................................4
2.5. Financial Statements..............................................................5
2.6. Absence of Undisclosed Liabilities................................................5
2.7. Absence of Certain Changes or Events..............................................5
2.8. Legal Proceedings.................................................................6
2.9. Restrictions on Business Activities...............................................6
2.10. Governmental Authorization........................................................7
2.11. Title and Condition of Personal Property..........................................7
2.12. Real and Leased Property..........................................................7
2.13. Intellectual Property Rights......................................................9
2.14. Taxes............................................................................10
2.15. Environmental Matters............................................................11
2.16. Major Customers and Suppliers; Supplies..........................................12
2.17. List of Accounts.................................................................12
2.18. Employment Agreements............................................................13
2.19. ERISA............................................................................13
2.20. Labor Matters....................................................................15
2.21. Contracts and Commitments........................................................16
2.22. Absence of Breaches or Defaults..................................................18
2.23. Interested Party Transactions....................................................18
2.24. Compliance with Applicable Law...................................................18
2.25. Insurance........................................................................18
2.26. Brokers..........................................................................19
2.27. Minute Books.....................................................................19
2.28. Accounts Receivable and Inventory................................................19
2.29. Employees........................................................................19
2.30. Board and Shareholder Approval...................................................19
2.31. Employee Non-Disclosure Agreement................................................20
2.32. Year 2000 Compliance.............................................................20
2.33. No Misstatements.................................................................20
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF BUYER.......................................20
3.1. Corporate Organization...........................................................20
3.2. Corporate Power and Authority....................................................20
3.3. Capitalization of Buyer..........................................................21
3.4. Conflicts; Consents and Approvals................................................21
3.5. SEC Documents; Buyer Financial Statements........................................22
3.6. Absence of Certain Changes.......................................................22
3.7. Litigation.......................................................................23
3.8. Brokers..........................................................................23
ARTICLE IV - CLOSING........................................................................23
4.1. Closing Time and Place...........................................................23
4.2. Delivery by Shareholders or the Company at the Closing...........................23
4.3. Delivery by Buyer at the Closing.................................................24
ARTICLE V - ADDITIONAL AGREEMENTS...........................................................25
5.1. Company's Auditors...............................................................25
5.2. Press Releases...................................................................25
5.3. Confidentiality..................................................................25
5.4. Termination of Bank Line.........................................................26
5.5. Registration Rights..............................................................26
5.6. Further Assurances...............................................................26
ARTICLE VI - INDEMNIFICATION AND ESCROW FUND................................................26
6.1. Indemnity and Escrow Fund........................................................26
6.2. Claims Upon Escrow Fund..........................................................27
6.3. Objections to Claims.............................................................27
6.4. Attempt to Resolve Conflicts; Arbitration........................................27
6.5. Actions of the Shareholders' Agent...............................................29
6.6. Third-Party Claims...............................................................29
6.7. Limitations......................................................................30
ARTICLE VII - GENERAL PROVISIONS............................................................30
7.1. Survival of Representations, Warranties and Agreements...........................30
7.2. Expenses.........................................................................31
7.3. Notices..........................................................................31
7.4. Governing Law....................................................................32
7.5. Severability.....................................................................32
7.6. Assignment; Binding Effect; Benefit..............................................32
7.7. Headings.........................................................................33
7.8. Entire Agreement.................................................................33
7.9. Counterparts.....................................................................33
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
EXHIBITS
- --------
Exhibit A Form of Escrow Agreement
Exhibit B Form of Company Legal Opinion
Exhibit C Form of Buyer Legal Opinion
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Release
Exhibit F Form of Shareholder Representation Letter
SCHEDULES
- ---------
Schedule A Schedule of Shares and Purchase Price
iii
<PAGE> 5
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), is made and
entered into as of April 9, 1999, by and among SMITH MICRO SOFTWARE, INC., a
Delaware corporation ("Buyer"), and the shareholders of STF Technologies, Inc.
listed on Schedule A (individually, a "Shareholder" and collectively, the
"Shareholders") and STF Technologies, Inc., a Missouri corporation (the
"Company"), with reference to the following facts:
R E C I T A L S
A. The Company is a duly incorporated Missouri corporation; its
authorized capital stock consists of 3,000,000 shares of capital stock, $0.01
par value, all of which shares are designated Common Stock; there are 839,940
shares of Common Stock (the "Shares"), and no more, duly and validly issued and
outstanding, all of which are owned by the Shareholders as set forth on attached
Schedule A; and
B. Shareholders desire to sell and buyer desires to purchase all
of the Shares, on the terms set forth herein;
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
PURCHASE OF SHARES
1.1. Purchase and Sale of Shares. Subject to the terms and
conditions of this Agreement, Shareholders hereby agree to sell, convey,
transfer and deliver, and Buyer hereby agrees to purchase and accept, all right,
title and interest in and to the Shares. On the Closing Date (as defined in
Section 4.1), Shareholders shall deliver to Buyer: (a) duly endorsed stock
certificate(s) representing all the Shares, and (b) such other instruments of
transfer as, in the opinion of Buyer's counsel, shall be reasonably necessary to
or in furtherance of the effective conveyance to Buyer of good and marketable
title to the Shares.
1.2. Purchase Price. In consideration for the transfer of the
Shares, Buyer shall pay and Shareholders shall accept the following as full and
complete consideration for the Shares (collectively, the "Purchase Price"):
(a) At the Closing (as defined in Section 4.1), Buyer shall
pay to the Shareholders the aggregate sum of One Million Dollars ($1,000,000) in
cash, allocated among the Shareholders in accordance with the amounts listed
opposite each Shareholders' name under the heading "Cash Payment For Shares" on
Schedule "A"; such payment to be in the form of cashiers checks or other
certified funds.
(b) At the Closing, Buyer shall deliver to the Shareholders
that number of shares of Buyer Common Stock ("New Stock") equal to the quotient
of (x) $1,000,000 divided by (y) the average closing price of a share of Buyer
Common Stock for the ten (10) consecutive trading days ending on the trading day
immediately prior to the Closing Date on the
1
<PAGE> 6
NASDAQ National Market, as reported in the Wall Street Journal (the "Buyer Stock
Price"), such number of shares to be allocated among the Shareholders according
to the percentage ownership interest of each Shareholder set forth opposite
their respective names on Schedule A; provided that such number of Shares shall
be reduced by the Escrow Shares deposited in the Escrow Fund in accordance with
Section 1.3.
1.3. Escrow Fund. At Closing, Buyer shall cause to be issued in
the name of each Shareholder, a certificate representing thirty percent (30%) of
the number of shares of New Stock to be issued by Buyer under Section 1.2 (the
"Escrow Shares") and shall deposit the Escrow Shares on behalf of the
Shareholders, such deposit to constitute the escrow fund (the "Escrow Fund"),
with an escrow agent selected by Buyer and reasonably acceptable to a majority
in interest of the Shareholders (the "Escrow Agent"), pursuant to the Escrow
Agreement attached hereto as Exhibit A (the "Escrow Agreement"), to be held in
escrow in accordance with the terms and conditions of such Escrow Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Except as disclosed in the disclosure schedule attached hereto
which has been executed by an officer of the Company on behalf of the
Shareholders (the "Disclosure Schedule"), each of the Shareholders jointly and
severally represent and warrant to Buyer as follows:
2.1. Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Missouri. The Company has the corporate power and authority to own or lease its
properties and assets and to carry on its business as it is now being conducted,
and is qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such qualification necessary, except where
the failure to be so licensed or qualified would not (i) individually or in the
aggregate have, or reasonably could be expected to have, a material adverse
effect on the assets, liabilities, business, financial condition, results of
operations or prospects of the Company or the Shares (a "Material Adverse
Effect") or (ii) adversely affect the ability of the Company to consummate the
transactions contemplated hereby. The copies of the Articles of Incorporation
and Bylaws of the Company which have previously been made available to Buyer are
true and correct copies of such documents as in effect as of the date of this
Agreement.
2.2. Capitalization.
(a) The authorized capital stock of the Company consists of
3,000,000 shares of Common Stock, par value $0.01 per share of which 839,940
shares are issued and outstanding. All of the Shares were duly authorized and
validly issued and are fully paid and nonassessable and are free of any liens or
encumbrances created by or resulting from the actions of the Company, and are
not subject to preemptive rights or rights of first refusal created by statute,
the Articles of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which it is bound except as disclosed in Section
2.2(a) of the Disclosure Schedule. All of the Shares were issued in compliance
with all applicable federal and state securities laws. There are no shares of
capital stock of the Company issued or outstanding,
2
<PAGE> 7
other than the Shares; and there are no outstanding options, warrants, rights,
contracts, agreements, commitments, understandings or arrangements by which the
Company or may be bound or obligated to issue any additional shares of its
capital stock or any security convertible thereto or exchangeable therefor or to
repurchase any outstanding Shares. There are no amounts owed to any person by
the Company as a result of any repurchase or redemption by the Company of its
Common Stock.
(b) Shareholders own all the Shares free and clear of all
liens, encumbrances, rights, charges and assessments of every nature and no such
Shares are subject to any restriction on transferability. Shareholders have not
granted any option, warrant or right to purchase or acquire any of the Shares
nor have Shareholders entered into any contract, agreement, commitment,
understanding or arrangement relating to the Shares, or by which Shareholders
are or may be bound or obligated to transfer or dispose of any of the Shares. No
Shareholder has been married since formation of Company except to the persons
signing Spousal Consents to this Agreement.
(c) Shareholders shall transfer to Buyer hereunder good and
marketable legal and beneficial title to the Shares, free and clear of all
liens, encumbrances, rights, charges and assessments of any nature whatsoever.
(d) There are no outstanding proxies, shareholders'
agreements, voting trusts or other agreements of any kind whatsoever
restricting, controlling, directing or otherwise affecting the voting of the
Shares.
(e) Except for STF Technologies Limited, a corporation
formed under the laws of England and Wales ("Subsidiary"), the Company does not
presently own or control, directly or indirectly, and has no stock or other
interest as owner or principal in, any other corporation, partnership, limited
liability company, joint venture, business, trust, association or other business
venture or entity. The Subsidiary is duly organized and existing in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power to own its properties and carry on its business as now
conducted, and except as disclosed in Section 2.2(e) of the Disclosure Schedule,
is not required to be qualified to do business in any other jurisdiction. The
Company directly owns all of the outstanding shares of capital stock of the
Subsidiary, free and clear of all liens, claims and encumbrances and there are
no existing options, warrants, calls or commitments of any kind relating to the
authorized and unissued capital stock of the Subsidiary. The Disclosure Schedule
contains complete and correct copies of each Subsidiary's Charter and Bylaws as
presently in effect. All references to the Company in the representations and
warranties in this Article II shall include the Subsidiary.
2.3. Authority; No Violation.
(a) The Company has full corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder 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 and validly approved by the Board of Directors of the Company. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by
shareholders representing one hundred percent of the outstanding shares of the
Company's
3
<PAGE> 8
capital stock. No other corporate proceedings on the part of the Company are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement and all other agreements and documents to be
entered into in connection herewith have been duly and validly executed and
delivered by the Company and each of the Company Shareholders and (assuming due
authorization, execution and delivery by Buyer) constitute valid and binding
obligations of the Company and each of the Company Shareholders, enforceable
against the Company and each of the Company Shareholders in accordance with
their respective terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(b) Shareholders have the power and authority to enter into
this Agreement and to perform their obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Shareholders and constitutes a legal, valid and binding
obligation of the Shareholders, enforceable against the Shareholders in
accordance with the terms hereof.
(c) Except as set forth in Section 2.3(b) of the Disclosure
Schedule, neither the execution and delivery of this Agreement by the Company
and each of the Shareholders, nor the consummation by the Company and each of
the Shareholders of the transactions contemplated hereby, nor compliance by the
Company and each of the Shareholders with any of the terms or provisions hereof,
will (i) violate any provision of the Articles of Incorporation or Bylaws of the
Company, or (ii) assuming that the consents and approvals referred to in Section
2.4 hereof are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to the
Company or any of the Shareholders or any of their respective properties or
assets, or (y) violate, conflict with, result in a breach of any provision of or
the loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the properties or
assets of the Company or any of the Shareholders under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the Company
or any of the Shareholders is a party, or by which the Company or any of the
Shareholders or any of their respective properties or assets may be bound or
affected.
2.4. Consents and Approvals. No consents or approvals orders or
authorizations of or filings or registrations with any court, administrative
agency or commission or other governmental authority or instrumentality (each a
"Governmental Entity") or with any third party are necessary with respect to the
Company or any of the Company Shareholders in connection with (1) the execution
and delivery of this Agreement and (2) the consummation of the purchase of the
Shares and the other transactions contemplated hereby.
2.5. Financial Statements. Set forth in Section 2.5 of the
Disclosure Schedule are true and correct copies of an audited consolidated
balance sheet ("Balance Sheet") of the Company and Subsidiary at December 31,
1998 (the "Balance Sheet Date"), and the related consolidated statements of
operations, shareholders' equity and cash flows for the fiscal year then ended
(collectively, the "Financial Statements"). Such Financial Statements have been
4
<PAGE> 9
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods indicated and with each
other. The Financial Statements (a) are complete and correct in all material
respects, (b) are in accordance with the Company's books and records, and (c)
fairly present the financial condition and operating results of the Company as
of the dates, and for the periods indicated therein. Except as disclosed in the
Financial Statements, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation. The books and records of
the Company have been, and are being, maintained in accordance with GAAP and any
other applicable legal and accounting requirements.
2.6. Absence of Undisclosed Liabilities. The Company has no
material obligations or liabilities of any nature (matured or unmatured, fixed
or contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet, (ii) those incurred in the ordinary course of business and not
required to be set forth in the Balance Sheet under GAAP, (iii) those incurred
in the ordinary course of business since the Balance Sheet Date and consistent
with past practice, and (iv) those incurred in connection with the execution of
this Agreement. Since January 1, 1999 the Company has operated the business in
the ordinary course of business consistent with past practices and has used the
line of credit with the State Bank of Missouri only to provide working capital
for the business consistent with past practices.
2.7. Absence of Certain Changes or Events. Except as disclosed in
Section 2.7 of the Disclosure Schedule, since the Balance Sheet Date, the
Company has conducted its business in the ordinary course consistent with past
practice, and except as contemplated by this Agreement, there has not occurred
(i) any purchase or other acquisition of, sale, lease, disposition, or other
transfer of, or mortgage, pledge or subjection to any material encumbrance or
lien on, any material asset, tangible or intangible, of the Company, other than
in the ordinary course of business; (ii) any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by the Company or any revaluation by the Company of any of its assets;
(iii) any declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of the Company Common Stock, or any
split-up or other recapitalization in respect of the Company Common Stock, or
any direct or indirect redemption, purchase or other acquisition by the Company
of any shares of Company Common Stock; (iv) any material contract entered into
by the Company, other than in the ordinary course of business and as provided to
Buyer, or any amendment or termination of, or default under, any material
contract to which the Company is a party or by which it is bound; (v) any
amendment or change to the Articles of Incorporation or Bylaws of the Company;
(vi) any increase in or modification of the compensation or benefits payable or
to become payable by the Company to any of its directors or employees; (vii) any
issuance, transfer, sale or pledge by the Company of any shares of Company
Common Stock or other securities or of any commitment, option, right or
privilege under which the Company is or may become obligated to issue any shares
of Company Common Stock or other securities; (viii) any indebtedness for
borrowed money incurred by the Company, except such as may have been incurred or
entered into in the ordinary course of business not exceeding $10,000; (ix) any
loan made or agreed to be made by the Company, nor has the Company become liable
or agreed to become liable as a guarantor with respect to any loan; (x) any
waiver or compromise by the Company of any right or rights or any payment,
direct or indirect, of any material debt, liability or other obligation, other
than in the ordinary course of business; (xi) any sale, assignment, or transfer
of any patents, trademarks, copyrights, trade secrets or other intangible
assets, other than in the ordinary course of business;
5
<PAGE> 10
(xii) any actual or, to the knowledge of the Company, threatened termination or
loss of (a) any material contract, lease, license or other agreement to which
the Company was or is a party; (b) any certificate, license or other
authorization required for the continued operation by the Company of any portion
of any of its business; or (c) any customer or other revenue source, which
termination or loss could reasonably be expected to result in loss of revenues
to the Company in excess of $25,000 per year, and the Company has no knowledge
of any event (including, without limitation, the transactions contemplated
hereby) which could reasonably be expected to result in any such termination or
loss; (xiii) any resignation or termination of employment of any key officer or
key employee of the Company to the knowledge of the Company, any impending
resignation or termination of employment of any such officer or employee; (xiv)
any negotiation or agreement by the Company to do any of the things described in
the preceding clauses (i) through (xiii) (other than negotiations with Buyer and
its representatives regarding the transactions contemplated by this Agreement);
or (xv) any other event or circumstance that will have or could reasonably be
expected to have a Material Adverse Effect on the Company.
2.8. Legal Proceedings. Except as set forth in Section 2.8 of the
Disclosure Schedule, there are no legal actions, suits, arbitrations or other
legal, administrative or governmental proceedings or investigations pending or,
to the knowledge of the Company, threatened against the Company or its
properties, assets or business or the Shares in which an unfavorable outcome,
ruling or finding would have a Material Adverse Effect and neither the Company
nor any of the Shareholders is aware of any facts which might result in or form
the basis for any such action, suit or other proceeding or which would challenge
the validity or propriety of the transactions contemplated by this Agreement.
The Company is not in default with respect to any judgment, order or decree of
any court or any governmental agency or instrumentality which would have a
Material Adverse Effect. The foregoing includes, without limiting the generality
thereof, actions pending, threatened or involving the prior employment of any of
the Company's employees or their use in connection with the Company's business
of any information or techniques allegedly proprietary to a former employee.
2.9. Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon the Company which has or
could reasonably be expected to have the effect of prohibiting or materially
impairing any current or future business practice of the Company, any
acquisition of property by the Company, the ability of the Company to compete
with any other person or the conduct of business by the Company as currently
conducted or as proposed to be conducted by the Company.
2.10. Governmental Authorization. The Company has obtained each
federal, state, county, local or foreign governmental consent, license, permit,
grant, or other authorization of a Governmental Entity (i) pursuant to which the
Company currently operates or holds any interest in any of its properties or
(ii) that is required for the operation of the Company's business or the holding
of any such interest ((i) and (ii) herein collectively called the "Company
Authorizations"), and all of such Company Authorizations are in full force and
effect, except where the failure to obtain or have any such Company
Authorizations could not reasonably be expected to have a Material Adverse
Effect on the Company.
2.11. Title and Condition of Personal Property. The Company has
good and marketable title to all of its personal property reflected in the
Balance Sheet or acquired after the
6
<PAGE> 11
Balance Sheet Date (other than property sold or otherwise disposed of since the
Balance Sheet Date in the ordinary course of business), free and clear of all
mortgages, liens, pledges, charges or encumbrances of any kind or character or
claims thereto, except (i) the lien of current taxes not yet due and payable,
(ii) such imperfections of title, liens and easements as do not and will not
materially detract from or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations
involving such properties and (iii) liens securing debt which is reflected on
the Balance Sheet. The plant, property and equipment of the Company that is used
in the operations of its business are in all material respects in good operating
condition and repair. All properties used in the operations of the Company are
reflected in the Balance Sheet to the extent GAAP require the same to be
reflected.
2.12. Real and Leased Property.
(a) The Company does not own any fee simple interest in
real property. The Company does not lease or sublease any real property other
than as set forth on Section 2.12 of the Disclosure Schedule. Section 2.12 of
the Disclosure Schedule sets forth the street or other identifying address of
each parcel of real property leased or subleased by the Company (the "Leased
Property"). The Company has previously delivered to Buyer a true and complete
copy of all of the lease and sublease agreements, as amended to date (the
"Leases") relating to the Leased Property. The Company enjoys a peaceful and
undisturbed possession of the Leased Property. All improvements located on the
Leased Property are in a state of good maintenance and repair and in a condition
adequate and suitable for the effective conduct therein of the business
conducted and proposed to be conducted by the Company. No person other than the
Company has any right to use or occupy any part of the Leased Property. The
Leases are valid, binding and in full force and effect, all rent and other sums
and charges payable thereunder are current, no notice of default or termination
under any of the Leases is outstanding, no termination event or condition or
uncured default on the part of the Company or, on the part of the landlord or
sublandlord, as the case may be, thereunder, exists under the Leases, and no
event has occurred and no condition exists which, with the giving of notice or
the lapse of time or both, would constitute such a default or termination event
or condition. In the event that any of the Leases is a sublease, the Company, as
sublessee or sublessor, as the case may be, has obtained the required consent of
the prime landlord to such sublease, and such prime lease is in full force and
effect, there arc no outstanding uncured notices of default or termination, and
no right of the Company in any such sublease conflicts with such prime lease.
There are no subleases, licenses or other agreements granting to any person
other than the Company any right to the possession, use, occupancy or enjoyment
of the premises demised by the Leases. All of the premises are used in the
conduct of the Company's business.
(b) The heating, ventilation, air conditioning, plumbing
and electrical systems at the Leased Property are in good working order and
repair on the date hereof and will be in good working order and repair on the
Closing Date. The Company has not experienced any material interruption in the
services provided to any of the Premises within the last six (6) months. To the
best knowledge of the Shareholders, no landlord under the Leases has any plans
to make any material alterations to any of the Leased Property, the construction
of which would interfere with the use of any portion of the Leased Property. To
the best knowledge of the Shareholders, no landlord under the Leases has any
plans to make any material alterations to any of the buildings in which Leased
Property is located, the costs of which alterations would be borne in any part
by a tenant under the applicable Lease.
7
<PAGE> 12
(c) Section 2.12 of the Disclosure Schedule sets forth all
material permits, licenses, franchises, approvals and authorizations
(collectively, the "Real Property Permits") of all Governmental Entities having
jurisdiction over each Leased Property and from all insurance companies and fire
rating and other similar boards and organizations (collectively, the "Insurance
Organizations"). All such Real Property Permits required or appropriate have
been lawfully issued to the Company to enable each Leased Property to be
lawfully occupied and used for all of the purposes for which they are currently
occupied and useful and are, as of the date hereof, in full force and effect.
The Company has not received or been informed by a third party of the receipt by
it of any notice from any Governmental Entity having jurisdiction over any
Leased Property or from any Insurance Organization threatening a suspension,
revocation, modification or cancellation of any Real Property Permit or of any
insurance policies and, to the best knowledge and belief of the Company there is
no basis for the issuance of any such notice or the taking of any such action.
No action is required in order for all Real Property Permits and liability and
casualty insurance policies required under any of the Leases to remain Real
Property Permits and insurance policies of the Company.
(d) The Company has not received any notice nor has it any
knowledge of any pending, threatened or contemplated condemnation proceeding
affecting any Leased Property or any part thereof.
(e) There are no liabilities (other than rent and other
sums and charges regularly payable) associated with any of the Leases including,
without limitation, any liability under any Environmental Law or regulation,
which is or which may become payable by the Company.
2.13. Intellectual Property Rights.
(a) Section 2.13(a) of the Disclosure Schedule sets forth
an accurate and complete description of (i) all foreign and domestic patents,
patent applications, patent rights, trademarks, service marks, trade names,
brands and copyrights of the Company which are registered or issued or for which
registration or issuance is pending with any Governmental Entity specifying as
to each such item, as applicable, the jurisdiction(s) by or in which such
patent, trademark or copyright has been issued or registered or in which an
application for such issuance or registration has been filed or proposed,
including the registration or application number; (ii) all foreign and domestic
franchises, licenses, sublicenses, contracts and agreements pursuant to which
any person other than the Company is authorized to use any foreign and domestic
patents, patent rights, trademarks, trade names, service marks, brands,
copyrights, and any applications therefor, maskworks, net lists, schematics,
technology, know-how, trade secrets, inventory, ideas, algorithms, processes,
computer software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material
("Intellectual Property") owned by the Company; and (iii) all foreign and
domestic franchises, licenses, sublicenses, contracts and agreements, other than
shrink-wrap software licenses, pursuant to which the Company is authorized to
use any such Intellectual Property not owned by the Company ("Third Party
Intellectual Property Rights") including, with respect to (ii) or (iii), the
identity of all parties thereto, a description of the nature and subject matter
thereof, the royalty provided and the term thereof.
8
<PAGE> 13
(b) Except as set forth in Section 2.13(b) of the
Disclosure Schedule, the Company owns or has the right to use, pursuant to
franchise, license, sublicense, contract, agreement, or permission, all of the
Intellectual Property necessary for the conduct of its business as currently
conducted or as proposed to be conducted by the Company. All applicable fees,
royalties and other amounts due and payable by the Company to any person or to
the Company by any person in respect of such Intellectual Property have been
paid. The Company has taken all reasonably necessary and desirable action to
maintain and protect the Intellectual Property that it owns or has the right to
use.
(c) Except for third party licenses listed in Section
2.13(c) of the Disclosure Schedule, the Company is the sole and exclusive owner
of its Intellectual Property including, but not limited to, those listed or
described on the Disclosure Schedule, or has the right to the use thereof for
the material covered thereby in connection with the services or products in
respect to which they have been or are now being used.
(d) Except as set forth in Section 2.13(d) of the
Disclosure Schedule, (i) the Company is not the subject of any pending
litigation or, to the Shareholders' best knowledge, any claim regarding
infringement of or misappropriation or misuse of any Intellectual Property of
the Company or other tangible right of any other person, (ii) none of the
Shareholders after reasonable inquiry has knowledge of any such infringement,
whether or not claimed by any other person, (iii) none of the Shareholders after
reasonable inquiry has knowledge of any infringement by any other person of the
Intellectual Property of the Company, and (iv) none of the Shareholders after
reasonable inquiry has knowledge of any facts or circumstances which would
reasonably be anticipated to result in any such litigation or claim or which
would reasonably lead the Company to conclude that the continued operation and
conduct of any aspect of its business would result in any such litigation or
claim. To the best knowledge of the Shareholders, except as set forth in Section
2.13(d) of the Disclosure Schedule, there is no other person that is operating
under or otherwise using any name confusingly similar with any trade names,
trademarks, service names, service marks or logos included in the Intellectual
Property owned by the Company. To the best knowledge of the Shareholders, no
Intellectual Property licensed by the Company from a third party is subject to
any outstanding order, judgment, decree, stipulation or agreement restricting
the use thereof by the Company. Except as set forth in Section 2.13(d) of the
Disclosure Schedule, no Intellectual Property of the Company is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting the
use thereof by the Company. Except as set forth in Section 2.13(d) of the
Disclosure Schedule, the Company has not entered into any agreement to indemnify
any other person against any charge of infringement of any Intellectual
Property.
(e) Except as set forth in Section 2.13(e) of the
Disclosure Schedule, to the best knowledge of the Shareholders, there has been
no unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property rights of the Company, any trade secret material to the
Company, or any Intellectual Property right of any third party to the extent
licensed by or through the Company, by any third party, including any employee
or former employee of the Company.
(f) The Company is not nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach
9
<PAGE> 14
of any license, sublicense or other agreement relating to the Intellectual
Property or Third Party Intellectual Property Rights.
(g) Except as set forth in Section 2.13(g) of the
Disclosure Schedule, to the best of the Shareholders' knowledge after reasonable
inquiry, no material trade secrets included in the Intellectual Property of the
Company have been disclosed by the Company to any person other than employees,
agents and representatives of the Company or Buyer. The Company has taken such
reasonable measures as is appropriate to protect all of its trade secrets,
including securing valid written assignments from all consultants and employees
who contributed to the creation or development of Intellectual Property of the
rights to such contributions that the Company does not already own by operation
of law.
(h) Except for obligations that arise under the common law
of the appropriate jurisdiction, to the best of the Shareholders' knowledge,
neither the Company nor its employees has, other than confidentiality and other
agreements assigning inventions made prior to their employment with the Company,
any written agreements or arrangements with former employers of such employees
relating to trade secrets of such employers, the assignment of inventions of
such employers, or such employee's engagement in activities competitive with
such employers. Except for obligations that arise under the common law of the
appropriate jurisdiction, to the best of the Shareholders' knowledge, the
activities of such employees on behalf of the Company do not violate any
agreements or arrangements known to the Company which any such employees have
with former employers.
2.14. Taxes.
(a) Except as set forth in Section 2.14(a) of the
Disclosure Schedule, the Company has duly and timely filed (including applicable
extensions granted without penalty) all material Tax Returns (as hereinafter
defined) required to be filed at or prior to the Closing, and such Tax Returns
are true and correct in all material respects, except where failure to do so
would not have a Material Adverse Effect and the Company paid in full or made
adequate provision in the financial statements of the Company (in accordance
with GAAP) for all material Taxes (as hereinafter defined) shown to be due on
such Tax Returns except where failure to do so would not have a Material Adverse
Effect. Except as set forth in Section 2.14(a) of the Disclosure Schedule, as of
the date hereof (i) the Company has not requested any extension of time within
which to file any Tax Returns in respect of any fiscal year which have not since
been filed and no request for waivers of the time to assess any Taxes are
pending or outstanding, (ii) no claim for Taxes has become a lien against the
property of the Company or is being asserted against the Company other than
liens for Taxes not yet due and payable, (iii) no audit of any Tax Return of the
Company is being conducted by a Tax authority, (iv) no extension of the statute
of limitations on the assessment of any Taxes has been granted to the Company
and is currently in effect, and (v) there is no agreement, contract or
arrangement to which the Company is a party that may result in the payment of
any amount that would not be deductible by reason of Sections 280G, 162 or 404
of the Code. The Company has not been nor will it be required to include any
adjustment in taxable income for any Tax period (or portion thereof) pursuant to
Section 481 or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions, events or accounting methods
employed prior to the Closing.
10
<PAGE> 15
(b) For the purposes of this Agreement, "Taxes" shall mean
all taxes, charges, fees, levies, penalties or other assessments imposed by any
United States federal, state, local or foreign taxing authority, including, but
not limited to income, excise, property, sales, use, transfer, franchise,
payroll, withholding, social security or other taxes, including any interest,
penal-ties or additions attributable thereto. For purposes of this Agreement,
"Tax Return" shall mean any return, report, information return or other document
(including any related or supporting information) with respect to Taxes.
2.15. Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any
federal, state or local laws, ordinances, codes, regulations, rules, policies
and orders that are intended to assure the protection of the environment, or
that classify, regulate, call for the remediation of, require reporting with
respect to, or list or define air, water, groundwater, solid waste, hazardous or
toxic substances, materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other persons, including
the public.
(ii) "Hazardous Materials" shall mean any toxic or
hazardous substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including without limitation,
those substances, materials and wastes defined in or regulated under any
Environmental and Safety Laws.
(iii) "Property" shall mean all real property leased or
owned by the Company either currently or in the past.
(iv) "Facilities" shall mean all buildings and
improvements on the Property of the Company.
(b) The Company represents and warrants as follows: (i) to
the Shareholders' best knowledge, no methylene chloride or asbestos is contained
in or has been used at or released from the Facilities; (ii) all Hazardous
Materials and wastes disposed of by the Company have been disposed of in
accordance with all Environmental and Safety Laws; (iii) the Company has
received no notice (oral or written) of any noncompliance of the Facilities or
its past or present operations with Environmental and Safety Laws; (iv) no
notices, administrative actions or suits are pending or, to the Shareholders'
best knowledge, threatened relating to a violation of any Environmental and
Safety Laws; (v) the Company has not been notified that it is a potentially
responsible party under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), or state analog statute, arising out
of events occurring prior to the Closing Date; (vi) to the Shareholders' best
knowledge, there have not been in the past, and are not now, any Hazardous
Materials on, under or migrating to or from the Facilities or Property; (vii) to
the Shareholders' best knowledge, there have not been in the past, and are not
now, any underground tanks or underground improvements at, on or under the
Property including without limitation, treatment or storage tanks, pumps, or
water, gas or oil wells; (viii) to the Shareholders' best knowledge, there are
no polychlorinated biphenyls ("PCBs") deposited, stored, disposed of or located
on the Property or Facilities or any equipment on the Property containing PCBs
at levels in excess of 50 parts per million; (ix) to the
11
<PAGE> 16
Shareholders' best knowledge, there is no formaldehyde on the Property or in the
Facilities, nor any insulating material containing urea formaldehyde in the
Facilities; (x) the Company's uses of and activities within the Facilities have
at all times complied with all Environmental and Safety Laws; and (xi) the
Company has all the permits and licenses required to be issued and are in full
compliance with the terms and conditions of those permits.
2.16. Major Customers and Suppliers; Supplies. Buyer has been
provided with a list of the ten (10) largest customers (measured by dollar
volume) of the Company and all suppliers of significant goods or services to the
Company for the period ended December 31, 1998. Section 2.16 of the Disclosure
Schedule identifies those suppliers of significant goods or services with
respect to which alternative sources of supply are not readily available on
comparable terms and conditions. Except as indicated in Section 2.16 of the
Disclosure Schedule, all supplies and services necessary for the conduct of the
business of the Company as presently conducted, may be obtained from alternate
sources on terms and conditions comparable to those presently available to the
Company, and no facts, circumstances or conditions exist which create a
reasonable basis for believing that the Company will be unable to continue to
procure the supplies and services necessary to conduct its business on
substantially the same terms and conditions as such supplies and services are
currently procured. There has not been, and there will not be, any adverse
change in the relations of the Company or its Subsidiary with its customers,
suppliers, contractors, licenser and lessors, as a result of the announcement or
consummation of the transactions contemplated by this Agreement.
2.17. List of Accounts. Set forth in Section 2.17 of the
Disclosure Schedule is: (a) the name and address of each bank or other
institution in which the Company maintains an account (cash, securities or
other) or safe deposit box; (b) the name and phone number of the contact person
at such bank or institution and (c) the account number of the relevant account
and a description of the type of account.
2.18. Employment Agreements. Except as set forth in Section 2.18
of the Disclosure Schedule, there are no employment, consulting, severance or
indemnification arrangements, agreements or understandings between the Company
and any officer, director, consultant or employee including, without limitation,
any contracts to employ executive officers, any severance, change in control or
similar arrangements with any officers, employees or agents of the Company that
will result in any obligation (absolute or contingent) of the Company to make
any payment to any officer, employee or agent of the Company following either
the consummation of the transactions contemplated hereby, termination of
employment, or both ("Company Employment Agreements").
2.19. ERISA.
(a) Section 2.19(a) of the Disclosure Schedule lists, with
respect to the Company and any trade or business (whether or not incorporated)
which is treated as a single employer with the Company (an "ERISA Affiliate")
within the meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all
material employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), (ii) each loan to
a non-officer employee in excess of $10,000, loans to officers and directors and
any stock option, stock purchase, phantom stock, stock appreciation right,
supplemental retirement, severance, sabbatical, medical, dental, vision care,
disability, employee relocation, cafeteria benefit (Code
12
<PAGE> 17
Section 125) or dependent care (Code Section 129), life insurance or accident
insurance plans, programs or arrangements, (iii) all bonus, pension, profit
sharing, savings, deferred compensation or incentive plans, programs or
arrangements, (iv) other fringe or employee benefit plans, programs or
arrangements that apply to senior management of the Company and that do not
generally apply to all employees, and (v) any current or former employment or
executive compensation or severance agreements, written or otherwise, as to
which unsatisfied obligations of the Company of greater than $10,000 remain for
the benefit of, or relating to, any present or former employee, consultant or
director of the Company (together, the "Company Employee Plans").
(b) The Company has furnished to Buyer a copy of the
Company Employee Plans and related plan documents (including trust documents,
insurance policies or contracts, employee booklets, summary plan descriptions
and other authorizing documents, and, to the extent still in its possession, any
material employee communications relating thereto) and has, with respect to each
Company Employee Plan which is subject to ERISA reporting requirements, provided
copies of the Form 5500 reports filed for the last three plan years. Any Company
Employee Plan intended to be qualified under Section 401(a) of the Code has
either obtained from the Internal Revenue Service a favor-able determination
letter as to its qualified status under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent legislation, or
has applied to the Internal Revenue Service for such a determination letter
prior to the expiration of the requisite period under applicable Treasury
Regulations or Internal Revenue Service pronouncements in which to apply for
such determination letter and to make any amendments necessary to obtain a
favorable determination. The Company has also furnished Buyer with the most
recent Internal Revenue Service determination letter issued with respect to each
such Company Employee Plan, and nothing has occurred since the issuance of each
such letter which could reasonably be expected to cause the loss of the
tax-qualified status of any Company Employee Plan subject to Code Section
401(a).
(c) (i) Except as disclosed in Section 2.19(c) of the
Disclosure Schedule, none of the Company Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person; (ii) there has
been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code, with respect to any Company Employee Plan;
(iii) each Company Employee Plan has been administered substantially in
accordance with its terms and in compliance with the requirements prescribed by
any and all statutes, rules and regulations (including ERISA and the Code), and
the Company and each ERISA Affiliate have performed all obligations required to
be performed by them under, are not in any respect in default under or violation
of, and have no knowledge of any default or violation by any other party to, any
of the Company Employee Plans; (iv) neither the Company nor any ERISA Affiliate
is subject to any liability or penalty under Sections 4976 through 4980 of the
Code or Title I of ERISA with respect to any of the Company Employee Plans,
other than obligations for the payment of benefits in the normal operation of
the Plan; (v) all material contributions required to be made by the Company and
ERISA Affiliate to any Company Employee Plan have been made on or before their
due dates and any accruals required by GAAP for contributions to each Company
Employee Plan for the current plan years are reflected on the financial
statements of the Company; (vi) with respect to each Company Employee Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30)-day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 or
13
<PAGE> 18
ERISA has occurred; and (vii) none of the Company nor any ERISA Affiliate have
incurred or expects to incur any liability under Title IV of ERISA or Section
412 of the Code. With respect to each Company Employee Plan subject to ERISA as
either an employee pension plan within the meaning of Section 3(2) of ERISA or
an employee welfare benefit plan within the meaning of Section 3(1) of ERISA,
the Company has prepared in good faith and timely filed all requisite
governmental reports (which were true and correct as of the date filed) and has
properly and timely filed and distributed or posted all notices and reports to
employees required to be filed, distributed or posted with respect to each such
Company Employee Plan. No suit, administrative proceeding, action or other
litigation has been brought, or to the best knowledge of the Company is
threatened, against or with respect to any such Company Employee Plan, including
any audit or inquiry by the IRS or United States Department of Labor. None of
the Company nor any other ERISA Affiliate are a party to, or have made any
contribution to or otherwise incurred any obligation under, any "multiemployer
plan" as defined in Section 3(37) of ERISA.
(d) With respect to each Company Employee Plan, the Company
has complied with (i) the applicable health care continuation and notice
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and the proposed regulations thereunder and (ii) the applicable
requirements of the Family Leave Act of 1993 and the regulations thereunder.
(e) The consummation of the transactions contemplated by
this Agreement will not entitle any current or former employee or other service
provider of the Company or any other ERISA Affiliate to severance benefits or
any other payment, except as vesting, or increase the amount of compensation due
any such employee or service provider.
(f) Except as disclosed in Section 2.19(f) of the
Disclosure Schedule, there has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or other ERISA Affiliate
relating to, or change in participation or coverage under, any Company Employee
Plan which would increase the expense of maintaining such Plan above the level
of expense incurred with respect to that Plan for the most recent fiscal year
included in the Company's financial statements.
2.20. Labor Matters. Except as set forth in Section 2.20 of the
Disclosure Schedule, (a) the Company is not a party to or otherwise bound by or
threatened by with any collective bargaining agreement or other labor union
contract and currently there are no organizational campaigns, petitions or other
unionization activities seeking recognition of a collective bargaining unit
which could affect the Company; (b) there are no controversies, strikes,
slowdowns, work stoppages or labor disturbances pending or threatened between
the Company and any of its employees, and the Company has not experienced any
such controversy, strike, slowdown, work stoppage or labor disturbances within
the past three years; (c) the Company has not breached or otherwise failed to
comply with the provisions of any collective bargaining or union contract and
there are no grievances outstanding against the Company under any such agreement
or contract; (d) there are no unfair labor practice complaints pending against
the Company before the National Labor Relations Board or any other Governmental
Entity or any current union representation questions involving employees of the
Company; (e) there are no pending claims against the Company under any workers'
compensation plan or policy or for long-term disability; (f) the Company does
not have any obligations under COBRA with respect to any former employees or
qualifying beneficiaries thereunder; (g) the Company is currently in
14
<PAGE> 19
compliance with all applicable Laws relating to the employment of labor,
including those related to wages, hours, collective bargaining and the payment
and withholding of taxes and other sums as required by the appropriate
Governmental Entity and has withheld and paid to the appropriate Governmental
Entity or is holding for payment not yet due to such Governmental Entity all
amounts required to be withheld from employees of the Company and is not liable
for any arrears of wages, taxes, penalties or other sums for failure to comply
with any of the foregoing; (h) the Company has paid in full to all their
respective employees or adequately accrued for in accordance with GAAP all
wages, salaries, commissions, bonuses, benefits and other compensation due to or
on behalf of such employees, including all compensation owing and due for
over-time work; (i) the Company has provided its employees with all relocation
benefits, stock options, bonuses and incentives, and all other compensation that
such employee has earned up through the date of this Agreement or that such
employee was otherwise promised in their employment agreements with the Company;
(j) there is no claim with respect to payment of wages, salary or overtime pay
that has been asserted or is now pending or threatened before any Governmental
Entity with respect to any Persons currently or formerly employed by the
Company; (k) the Company is not a party to, or otherwise bound by, any consent
decree with, or citation by, any Governmental Entity relating to employees or
employment practices; (l) there is no charge or proceeding with respect to a
violation of any occupational safety or health standards that has been asserted
or is now pending or threatened with respect to the Company; (m) there is no
charge of discrimination in employment or employment practices, for any reason,
including, without limitation, age, gender, race, religion or other legally
protected category, which has been asserted or is now pending or threatened
before the United States Equal Employment Opportunity Commission, or any other
Governmental Entity in any jurisdiction in which the Company has employed or
currently employs any Person; (n) the Company is in compliance with the
requirements of the Americans With Disabilities Act; and (o) the Company is in
compliance with the requirements of the Workers Adjustment and Retraining
Notification Act ("WARN") and have no liabilities pursuant to WARN.
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
severance benefits or any other payment (including, without limitation,
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any current or former director, employee or other service
provider of the Company or any other ERISA Affiliate, (ii) increase any benefits
otherwise payable by the Company or (iii) result in the acceleration of the time
of payment or vesting of any such benefits, or increase in the amount of
compensation of benefits due any such person.
2.21. Contracts and Commitments. Section 2.21 of the Disclosure
Schedule contains a complete and accurate list of all contracts and agreements
(including, without limitation, oral and informal arrangements) of the following
categories to which the Company is a party or by which it is bound as of the
date of this Agreement.
(a) labor contracts or collective bargaining agreements;
(b) material manufacturing, distribution, franchise,
license, sales, agency or advertising contracts;
15
<PAGE> 20
(c) contracts which require the payment in excess of
$25,000 per year for (i) the purchase of inventory, material, supplies or
equipment which are not cancelable (without material penalty, cost or other
liability) within one (1) year, (ii) management, consulting, service or other
similar contracts, (iii) advertising or marketing agreements or arrangements,
and (iv) other contracts made in the ordinary course of business involving
annual expenditures or liabilities in excess of $25,000 which are not cancelable
(without material penalty, cost or other liability) within ninety (90) days,
other than purchase orders made in the ordinary course of business consistent
with past practice;
(d) promissory notes, loans, agreements, indentures,
evidences of indebtedness or other instruments proving for the lending of money,
whether as borrower, lender or guarantor, in excess of $25,000;
(e) contracts (other than Leases) containing covenants
limiting the freedom of the Company to engage in any line of business or compete
with any Person or operate at any location;
(f) joint venture or partnership agreements or joint
development or similar agreements;
(g) agreement, contract or other arrangement with (i) the
Company or any affiliate of the Company or (ii) any current or former officer,
director or employee of the Company or any affiliate of the Company;
(h) lease or similar agreement with any person under which
(i) the Company is lessee of, or holds or uses, any machinery, equipment,
vehicle or other tangible property owned by any person or (ii) the Company is a
lessor or sublessor of, or makes available for use by any person, any tangible
personal property owned or leased by the Company, in any such case which has an
aggregate future liability or receivable, as the case may be, in excess of
$25,000 and is not terminable by the Company by notice of not more than sixty
(60) days for a cost of less than $10,000;
(i) material license, option or other agreement relating in
whole or in party to the Intellectual Property described in Section 2.13
(including any license or other agreement under which the Company is license or
licensor of any such Intellectual Property);
(j) contracts or other instrument (including so-called
take-or-pay or keepwell agreements) under which (i) any person has directly or
indirectly guaranteed indebtedness, liabilities or obligations of the Company or
(ii) the Company has directly or indirectly guaranteed indebtedness, liabilities
or obligations of any person (in each case other than endorsements for the
purpose of collection in the ordinary course of business);
(k) contracts or other instruments under which the Company
has, directly or indirectly, made any advance, loan, extension of credit or
capital contribution to, or other investment in, any person involving aggregate
payments in excess of $25,000;
(l) mortgage, pledge, security agreement, deed of trust or
other instrument granting a lien or other encumbrance upon any property of the
Company;
16
<PAGE> 21
(m) agreement or instrument involving aggregate payments in
excess of $25,000 providing for indemnification of any person with respect to
liabilities relating to any current or former business of the Company, or any
predecessor person;
(n) contract for the acquisition, sale or lease of any
assets or capital stock or other ownership interests outside the ordinary course
of the business or involving aggregate payments in excess of $25,000 or to
effect any merger of the Company; and
(o) any exclusive retainer agreement or arrangement with
attorneys, accountants, actuaries, appraisers, investment bankers or other
professional advisors.
(p) any voting agreement, right of first refusal or other
agreement binding, restricting or otherwise relating to the Shares.
True copies of the written contracts identified in Section 2.21
of the Disclosure Schedule have been delivered or made available to Buyer.
2.22. Absence of Breaches or Defaults. The Company is not and, to
the knowledge of the Company, no other party is, in default under, or in breach
or violation of, any contract identified on Section 2.21 of the Disclosure
Schedule and, to the knowledge of the Shareholders, no event has occurred which,
with the giving of notice or passage of time or both would constitute a default
under any contact identified on Section 2.21 of the Disclosure Schedule, except
for defaults, breaches, violations or events which, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. Other than
contracts which have terminated or expired in accordance with their terms, each
of the contracts identified on Section 2.21 of the Disclosure Schedule is valid,
binding and enforceable in accordance with its terms (subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered on a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing) and is in full force and
effect, and assuming all consents required by the terms thereof or applicable
law have been obtained, such contracts will continue to be valid, binding and
enforceable in accordance with their respective terms and in full force and
effect immediately following the consummation of the transactions contemplated
hereby, in each case except where the failure to be valid, binding, enforceable
and in full force and effort would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. No event has occurred which either
entitles, or would, on notice or lapse of time or both, entitle the holder of
any indebtedness for borrowed money affecting the Company (except for the
execution or consummation of this Agreement) to accelerate, or which does
accelerate, the maturity of any indebtedness affecting the Company, except as
set forth in Section 2.22 of the Disclosure Schedule.
2.23. Interested Party Transactions. Except as set forth in
Section 2.23 of the Disclosure Schedule, the Company is not indebted to any
director, officer, employee or agent of the Company (except for amounts due as
normal salaries and bonuses and in reimbursement of ordinary expenses), and no
such person is indebted to the Company.
2.24. Compliance with Applicable Law. The Company holds, and has
at all times held, all licenses, franchises, permits and authorizations which
(a) are necessary for it to
17
<PAGE> 22
engage in the business currently conducted by it and (b) if not possessed by the
Company would have a Material Adverse Effect. The Company has complied with and
is not in default in any respect under any, applicable law, statute, order,
rule, regulation, policy and/or guideline of any Governmental Entity relating to
the Company except where the failure to do so would not have a Material Adverse
Effect and the Company has not received notice of any violations of any of the
above.
2.25. Insurance. Section 2.25 of the Disclosure Schedule sets
forth a true and complete list of all insurance policies providing insurance
coverage of any nature to the Company. Such policies are sufficient for
compliance by the Company with all requirements of law and all material
agreements to which the Company is a party or by which any of their assets are
bound. All of such policies are in full force and effect and are valid and
enforceable in accordance with their terms, and the Company has complied with
all material terms and conditions of such policies, including premium payments.
None of the insurance carriers has indicated to the Company an intention to
cancel any such policy. The Company does not have any claim pending against any
of the insurance carriers under any of such policies and there has been no
actual or alleged occurrence of any kind which may give rise to any such claim.
2.26. Brokers. Neither the Company nor any of its officers or
directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with any of the
transactions contemplated by this Agreement.
2.27. Minute Books. Except as set forth in Section 2.27 of the
Disclosure Schedule, the minute books of the Company made available to Buyer
contain a complete and accurate summary of all meetings of directors and
shareholders or actions by written consent since the time of incorporation of
the Company through the date of this Agreement, and reflect all transactions
referred to in such minutes accurately.
2.28. Accounts Receivable and Inventory. Except as set forth in
Section 2.28 of the Disclosure Schedule, subject to any reserves set forth on
the Balance Sheet, the accounts receivable shown on the Balance Sheet represent
and will represent bona fide claims arising in the ordinary course of business
against debtors for sales and other charges, and are not subject to discount
except for normal cash and immaterial trade discounts. Such accounts receivable
are collectible and will be collectible by the Company in the ordinary course of
business. The amount carried for doubtful accounts and allowances disclosed in
the Reference Balance Sheet is sufficient to provide for any losses which may be
sustained on realization of the receivables. The inventory reflected on the
Balance Sheet in quantity and quality is fully usable and salable in the
ordinary course of business at no less than book value within the next three (3)
years.
2.29. Employees. Section 2.29 of the Disclosure Schedule contains
the names, job descriptions and annual salary rates and other compensation of
all non-corporate officer employees of the Company. A list of all employee
policies, employee manuals or other written statements of rules or policies as
to working conditions, vacation and sick leave, a complete copy of each of which
has been made available to Buyer.
2.30. Board and Shareholder Approval. The Board of Directors of
the Company has unanimously approved this Agreement and the sale of the Shares
and all transactions contemplated hereby, and the holders of one hundred percent
of the outstanding Company
18
<PAGE> 23
Common Stock have unanimously approved this Agreement and all transactions
contemplated hereby.
2.31. Employee Non-Disclosure Agreement. Each employee of the
Company has executed and delivered to the Company the standard Employee
Non-Disclosure Agreement in the form previously delivered to Buyer.
2.32. Year 2000 Compliance. The Company has performed all
reasonable acts necessary to ensure that it will become Year 2000 Compliant in a
timely manner. As used herein, "Year 2000 Compliant" shall mean, that all
software, hardware, firmware equipment, goods or systems material to the
business operation or financial condition of the Company, will properly perform
date sensitive functions before, during and after the year 2000. The Company
shall, immediately upon request, provide to Buyer such certifications or other
evidence of its compliance with the terms hereof as Buyer may from time to time
require.
2.33. No Misstatements. Neither this Agreement, nor any other
document, certificate or written statement prepared by the Company and/or the
Shareholders and furnished to Buyer in connection herewith, contain any untrue
statement of material fact or omits to state a material fact known to any
Shareholder necessary in order to make the statements contained herein and
therein not misleading as of the date thereof or hereof. There is no fact known
to any Shareholder, in Shareholder's individual capacity or in Shareholder's
capacity as an officer and/or director of the Company or the Subsidiary, which
adversely affects the business or financial condition or operations of Company
considered on a consolidated basis, which has not been set forth in this
Agreement or in the Disclosure Schedule.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the disclosure schedule attached hereto
(the "Buyer Disclosure Schedule") Buyer represents and warrants to the Company
as follows:
3.1. Corporate Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws the State of
Delaware. Buyer has the corporate power and authority to own or lease its
properties and assets and to carry on its business as it is now being conducted,
and is duly qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties and
assets owned or leased by it makes such qualification necessary, except where
the failure to be so qualified would not (i) individually or in the aggregate
have, or reasonably could be expected to have, a Material Adverse Effect on
Buyer or (ii) adversely affect the ability of Buyer to consummate the
transactions contemplated hereby.
3.2. Corporate Power and Authority. Buyer has all requisite
corporate power and authority to enter into and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated by this Agreement. 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 Buyer. This
Agreement and all other agreements and documents to be entered into in
connection herewith have been duly executed and delivered by Buyer, and
(assuming due authorization, execution and delivery by the
19
<PAGE> 24
Company and the Shareholders) constitute the legal, valid and binding
obligations of Buyer enforceable against it in accordance with its terms except
as enforcement may be limited to general principles of equity whether applied in
a court of law or a court of equity and by bankruptcy, insolvency and similar
laws affecting creditors' rights and remedies generally.
3.3. Capitalization of Buyer.
(a) As of December 31, 1998, Buyer's authorized capital
stock consisted solely of (i) 20,000,000 shares of Common Stock, of which (a)
14,074,698 shares were issued and outstanding, (b) no shares were issued and
held in treasury (which does not include the shares reserved for issuance set
forth in clause (c) below and no shares were held by Subsidiaries of Buyer and
(c) 1,163,066 shares were reserved for issuance upon the exercise of outstanding
options and no shares were reserved for issuance upon the conversion or exchange
of convertible or exchangeable securities granted or issued by Buyer; and (ii)
5,000,000 shares of Preferred Stock of which no shares were issued and
outstanding. Each outstanding share of Common Stock is, and all shares of New
Stock to be issued in connection with the purchase of the Shares will be, duly
authorized and validly issued, fully paid and nonassessable, and each
outstanding share of Common Stock has not been, and all shares of Common Stock
to be issued in connection with the purchase of the Shares will not be, issued
in violation of any preemptive or similar rights. As of the date hereof, other
than as set forth in Section 3.3 of the Buyer Disclosure Schedule, there are no
outstanding subscriptions, options, warrants, calls, commitments, agreements, or
obligations of any character calling for the purchase, redemption or issuance,
by Buyer of any equity securities of Buyer, nor are there outstanding any
securities which are convertible into or exchangeable for any shares of Common
Stock and neither Buyer nor any subsidiary ("Subsidiary" or "Subsidiaries") has
any obligation of any kind to issue any additional securities or to pay for or
repurchase any securities of Buyer, its Subsidiaries or its or their
predecessors. Except as set forth in Section 3.3 of the Buyer Disclosure
Schedule, Buyer has no agreement, arrangement or understanding to register any
securities of Buyer or any of its Subsidiaries under the Securities Act or under
any state securities law and has not granted registration rights to any person
or entity; copies of all such agreements have previously been provided to the
Company.
3.4. Conflicts; Consents and Approvals. Neither the execution and
delivery of this Agreement by Buyer nor the consummation of the transactions
contemplated hereby will:
(a) conflict with, or result in a breach of any provision of
the Certificate of Incorporation (or Articles of Incorporation, as the case may
be) or Bylaws of Buyer;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with the giving of
notice, the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or otherwise)
to terminate, accelerate, modify or call a default under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Buyer or any of its Subsidiaries under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, contract, undertaking, agreement, lease or otherwise instrument
or obligation to which Buyer or any of its Subsidiaries is a party;
20
<PAGE> 25
(c) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Buyer or any of its Subsidiaries or any of
their respective properties or assets; or
(d) require any action or consent or approval of, or review
by, or registration or filing by Buyer or any of its affiliates with, any third
party or any Governmental Entity, other than (i) registrations or other actions
required under federal and state securities laws as are contemplated by this
Agreement or (ii) consents or approvals of any Governmental Entity set forth in
Section 3.4 to the Buyer Disclosure Schedule; except in the case of (b), (c) and
(d) for any of the foregoing that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Buyer and its
Subsidiaries taken as a whole or a material adverse effect on the ability of the
parties to consummate the transactions contemplated hereby.
3.5. SEC Documents; Buyer Financial Statements. Buyer has
furnished or made available to the Shareholders true and complete copies of all
reports or registration statements filed by it with the U.S. Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") for all periods since January 1, 1998, all in the
form so filed (all of the foregoing being collectively referred to as the "SEC
Documents"). As of their respective filing dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected by a document
subsequently filed with the SEC. The financial statements of Buyer, including
the notes thereto, included in the SEC Documents (the "Buyer Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP consistently
applied (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) and present fairly
the consolidated financial position of Buyer at the dates thereof and the
consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal audit adjustments).
Since January 1, 1998, there has been no change in Buyer accounting policies
except as described in the notes to the Buyer Financial Statements.
3.6. Absence of Certain Changes. Except as set forth in Section
3.6 of the Buyer Disclosure Schedule and except for the transactions expressly
contemplated hereby, since the date of the balance sheet included in Buyer's
most recently filed Annual Report on Form 10-K filed with the SEC, Buyer and its
Subsidiaries have conducted their respective businesses only in the ordinary and
usual course consistent with past practices and there has not been any (i)
change in Buyer's business, operations, condition (financial or otherwise),
results of operations, assets or liabilities, except for changes contemplated
hereby or changes which have not, individually or in the aggregate, had a
Material Adverse Effect on Buyer, or (ii) condition, event or occurrence which,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect on Buyer.
3.7. Litigation. Except as set forth in Section 3.7 to the Buyer
Disclosure Schedule or as disclosed in Buyer's most recently filed Annual Report
on Form 10K for the year
21
<PAGE> 26
ended December 31, 1998, there is no suit, claim, action, proceeding or
investigation (an "Action") pending or, to the knowledge of Buyer, threatened
against Buyer or any of its Subsidiaries which, individually or in the
aggregate, would have a Material Adverse Effect on Buyer and its Subsidiaries
taken as a whole or a material adverse effect on the ability of Buyer to
consummate the transactions contemplated hereby.
3.8. Brokers. Neither Buyer nor any stockholder, director,
officer or employee thereof has incurred or will incur on behalf of Buyer any
brokerage, finder's or similar fee in connection with the transactions
contemplated by this Agreement.
ARTICLE IV
CLOSING
4.1. Closing Time and Place. The closing of the transactions
contemplated hereby (the "Closing") shall be held on April 9, 1999 at the
offices of Brobeck, Phleger & Harrison LLP, 38 Technology Drive, Irvine,
California 92618-5312, or at such other time or such other place as the parties
may agree. The date of such Closing is herein referred to as the "Closing Date."
4.2. Delivery by Shareholders or the Company at the Closing.
(a) Representations and Warranties; Performance. At the
Closing, Shareholders shall deliver to Buyer a certificate dated as of the
Closing Date signed by the President of the Company certifying (i) that each of
the representations and warranties made by the Shareholders herein are true and
correct in all material respects on the Closing Date with the same effect as
though made on such date; (ii) the Company and the Shareholders have performed
and complied with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by the Company and the Shareholders
prior to the Closing Date; and (iii) that there has been no material adverse
change since the Balance Sheet Date in the business, condition (financial or
otherwise) or operations of Company and the Subsidiary or their assets.
(b) Books and Records. At the Closing, the Shareholders
shall deliver to Buyer (i) the stock books, minute books, corporate seals and
other corporate record-keeping documentation of the Company and the Subsidiary;
(ii) certificates representing all outstanding Shares of the Company, free of
any restrictive legends, except for transfer restrictions which may be imposed
by the Securities Act of 1933, as amended, all stock certificates to be duly
endorsed and guaranteed for transfer to Buyer; (iii) such other instruments of
transfer as in the opinion of Buyer's counsel shall be necessary or desirable to
effectively vest in Buyer good and marketable title to the Shares; and (iv) all
other opinions, instruments and documents contemplated by this Agreement.
(c) Release of Claims. At the Closing, each Shareholder
shall sign and deliver to Buyer a certificate of release ("Release") of all
claims or rights of such Shareholder against the Company and the Subsidiary,
except for claims or rights arising pursuant to the agreements and documents
executed and delivered in connection with the transactions contemplated herein,
in the form attached hereto as Exhibit E.
22
<PAGE> 27
(d) Board and Shareholder Approval. At the Closing,
Shareholders shall deliver to Buyer evidence that this Agreement and the
transactions contemplated hereby have been approved by the Company's Board of
Directors and, if such approval is required under applicable law, the Company's
shareholders in form reasonably acceptable to Buyer's counsel.
(e) Legal Opinion. At the Closing, Buyer shall receive a
legal opinion from the Shareholders' and the Company's legal counsel, in
substantially the form attached hereto as Exhibit B .
(f) Resignation of Directors and Officers. At the Closing,
the directors and officers of the Company in office immediately prior to the
Closing shall resign as directors and officers of the Company effective
immediately following the Closing.
(g) Termination of Employment Agreements. Prior to or at the
Closing, the Company shall have terminated the employment agreements and
shareholder agreements with William R. Wyand and Donald MacCormick.
(h) Termination of Bank Line. At the Closing, the State Bank
of Missouri shall have executed a termination agreement terminating the line of
credit and releasing its security interest in the assets of the Company.
(i) Escrow Agreement. At the Closing, the Shareholders shall
execute and deliver the Escrow Agreement in the form attached hereto as Exhibit
A.
(j) Termination of Shareholder Debt. At the Closing, the
Evans (and their affiliated businesses) shall execute and deliver termination
and release documents canceling and terminating any debt obligations owed by the
Company to the Evans or their affiliated companies in form and substance
satisfactory to Buyer's counsel.
(k) Shareholder Representation Letter. At the Closing, each
of the Shareholders shall execute a Shareholder Representation Letter in the
form attached hereto as Exhibit F.
4.3. Delivery by Buyer at the Closing.
(a) Representations and Warranties; Performance. At the
Closing, Buyer shall deliver to Shareholders a certificate dated as of the
Closing Date signed by the President of the Buyer certifying (i) that each of
the representations and warranties made by Buyer herein are true and correct in
all material respects on the Closing Date with the same effect as though made on
such date; and (ii) Buyer that has performed and complied with all agreements,
covenants and conditions required by this Agreements to be performed and
complied with by Buyer prior to the Closing Date.
(b) Purchase Price. At the Closing, Buyer shall pay to the
Shareholders the Purchase Price as set forth in Section 1.2.
(c) Board Approval. At the Closing, Buyer shall deliver to
Shareholders evidence that this Agreement and the transactions contemplated
hereby shall have been approved by the Buyer's Board of Directors.
23
<PAGE> 28
(d) Legal Opinion. At the Closing, the Shareholders shall
have received a legal opinion from Buyer's legal counsel, in substantially the
form attached hereto as Exhibit C.
(e) Termination of Bank Line. At the Closing, Buyer shall
pay to the State Bank of Missouri the outstanding balance of the amount of the
line of credit and the Bank shall have terminated and released the personal
guarantee of the Shareholders who are subject to such guarantees.
(f) Escrow Agreement. At the Closing, Buyer shall execute
and deliver the Escrow Agreement in the form attached hereto as Exhibit A.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. Company's Auditors. The Shareholders and the Company will
use their commercially reasonable efforts to cause the Company's management and
its independent auditors to facilitate on a timely basis (i) the preparation of
financial statements (including pro forma financial statements if required) as
required by Buyer to comply with applicable SEC regulations, and (ii) the review
of the Company's audit work papers for up to the past three years, including the
examination of selected interim financial statements and data.
5.2. Press Releases. The parties will consult with each other
prior to any public announcement relating to the transactions contemplated by
this Agreement and the terms hereof and will mutually and reasonably approve the
timing, content and dissemination of any public announcement of the transactions
contemplated herein.
5.3. Confidentiality. Each party will cause its director,
affiliates, officers, employees or authorized representatives to hold in strict
confidence, and not disclose to any third party, without prior written consent
of the other party, all confidential information received by it in connection
with the transactions contemplated hereby, except as may be required by
applicable law or as otherwise contemplated herein
5.4. Termination of Bank Line. The Shareholders covenant and
agree to cooperate with Buyer and the Company in terminating the line of credit
with the State Bank of Missouri. The outstanding balance of the bank line at the
Closing shall not exceed $138,950.00, and no further borrowing shall be made
after the Closing.
5.5. Registration Rights. Buyer hereby grants to the Shareholders
registration rights to the New Stock pursuant to the Registration Rights
Agreement attached hereto as Exhibit D, which agreement shall be executed and
delivered at the Closing.
5.6. Further Assurances. From time to time after the Closing
Date, the parties will execute, deliver and acknowledge all such further
instruments of transfer and conveyance and will perform all such other acts as
any other party may reasonably request to m ore effectively transfer the Shares
and the business, assets and properties of the Company to Buyer, and to
otherwise carry out the transactions contemplated by this Agreement, including
(without limitation) the preparation, execution and filing with regulatory
authorities of all documents and
24
<PAGE> 29
instruments and the taking of all other actions in connection with the valid and
due conveyance of all right, title and interest in and to the Shares.
ARTICLE VI
INDEMNIFICATION AND ESCROW FUND
6.1. Indemnity and Escrow Fund. The Shareholders shall jointly
and severally indemnify and hold harmless Buyer and the Company in respect of
any and all Damages (as defined below) that Buyer or the Company incur by reason
of any Indemnifiable Items (as defined below). To secure performance of such
indemnification obligations, the Escrow Shares shall be deposited with the
Escrow Agent in accordance with Section 1.3 hereof. The Escrow Fund shall be
available to compensate Buyer and the Company for any loss, expense, liability
or other damage, including, without limitation, reasonable attorneys' fees,
accountants' fees, and all other reasonable costs and expenses of litigation,
investigation, defense or settlement of claims (including costs of all appeals
related thereto) or threats thereof and amounts paid in settlement to the extent
of the amount of such loss, expense, liability or other damage (collectively,
"Damages") that Buyer and the Company incur by reason of (i) the breach by the
Shareholders of any representation, warranty, covenant or agreement of the
Shareholders contained herein; and (ii) any of the matters set forth in Exhibit
6.1 hereto (collectively, (i) and (ii) shall be referred to as "Indemnifiable
Items").
The Escrow Period shall terminate at the expiration of twelve
(12) months following the Closing Date; provided that a portion of the Escrow
Fund, which, in the reasonable judgment of Buyer, subject to the objection of
the Shareholders' Agent and the subsequent resolution or arbitration of the
matter in the manner provided in Section 6.4, is necessary to satisfy any
unsatisfied claims specified in any Officer's Certificate (as defined in Section
6.2(a) below) theretofore delivered to the Escrow Agent prior to termination of
the Escrow Period with respect to facts and circumstances existing prior to
expiration of the Escrow Period, shall remain in the Escrow Fund until such
claims have been resolved.
6.2. Claims Upon Escrow Fund.
(a) Upon receipt by the Escrow Agent on or before the last
day of the Escrow Period of a certificate of Buyer (an "Officer's Certificate")
specifying in reasonable detail the individual items of such Damages included in
the amount so stated, the date each such item was paid, or properly accrued or
arose, the nature of the Indemnifiable Item which such item is related, the
Escrow Agent shall, subject to the provisions of Section 6.4 hereof, deliver to
Buyer out of the Escrow Fund, as promptly as practicable, New Stock or other
assets held in the Escrow Fund having a value equal to such Damages, provided
that at the option of Buyer, the Escrow Agent shall be authorized to either (x)
sell in compliance with applicable federal and state securities laws such number
of shares of the New Stock in the Escrow Fund with a value equal to the amount
of the Damages or (y) deliver to Buyer the number of shares of New Stock in the
Escrow Fund with a value equal to the amount of the Damages.
(b) For the purpose of compensating Buyer for its Damages
from the Escrow Fund, the New Stock in the Escrow Fund shall be valued as
follows: (i) The Escrow Shares sold in a transaction that is not executed
through a broker in the public market shall be valued at the net proceeds of
such sale multiplied by the number of shares of the Escrow Shares
25
<PAGE> 30
so sold; or (ii) the Escrow Shares sold in a transaction that is executed
through a broker in the public market pursuant to Rule 144 or a registered
public offering shall be valued on the gross proceeds less applicable broker
commissions or underwriting discounts, as applicable, of such sale, or (iii) the
Escrow Shares delivered to Buyer without being sold shall be valued at the price
per share of Buyer's Common Stock as determined in Section 1.2.
6.3. Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such Officer's
Certificate shall be delivered to the Shareholders' Agent (defined in Section
6.4 below) and for a period of fifteen (15) days after such delivery, the Escrow
Agent shall make no delivery of New Stock or other property pursuant to Section
6.2 hereof unless the Escrow Agent shall have received written authorization
from the Shareholders' Agent to make such delivery. After the expiration of such
fifteen (15)-day period, the Escrow Agent shall make delivery of the New Stock
or other property in the Escrow Fund in accordance with Section 6.2 hereof;
provided, that no such payment or delivery may be made if the Shareholders'
Agent shall object in a written statement to the claim made in the Officer's
Certificate, and such statement shall have been delivered to the Escrow Agent
and to Buyer prior to the expiration of such fifteen (15)-day period.
6.4. Attempt to Resolve Conflicts; Arbitration.
(a) In case the Shareholders' Agent shall so object in
writing to any claim or claims by Buyer made in any Officer's Certificate or
otherwise, Buyer shall have thirty (30) days to respond in a written statement
to the objection of the Shareholders' Agent. If after such thirty (30)-day
period there remains a dispute as to any claims, the Shareholders' Agent and
Buyer shall attempt in good faith for thirty (30) days to agree upon the rights
of the respective parties with respect to each of such claims. If the
Shareholders' Agent and Buyer should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall, if a claim is
being made against the Escrow Fund, be furnished to the Escrow Agent. The Escrow
Agent shall be entitled to rely on any such memorandum and shall distribute the
New Stock or other property from the Escrow Fund in accordance with the terms
thereof.
(b) If no such agreement can be reached after good faith
negotiation, either Buyer or the Shareholders' Agent may, by written notice to
the other, demand binding arbitration of the matter unless the Damages are at
issue in pending litigation with a third party. If the Damages are at issue in
pending litigation, then the arbitration shall not be commenced until such
amount is ascertained or both parties agree to arbitration; and in either such
event the matter shall be settled by arbitration conducted by three arbitrators.
Within fifteen (15) days after such written notice is sent, Buyer and the
Shareholders' Agent shall each select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator. The decision of the arbitrators as to
the validity and amount of any claim in such Officer's Certificate shall be
binding and conclusive upon the parties to this Agreement, and the Escrow Agent
shall be entitled to act in accordance with such decision and make or withhold
payments out of the Escrow Fund in accordance therewith.
(c) Any such arbitration shall be held in the County of
Orange, California under the commercial rules then in effect of the American
Arbitration Association. The parties hereto agree that any action to compel
arbitration pursuant to this Agreement may be
26
<PAGE> 31
brought in any appropriate court in the County of Orange, California and in
connection with such action to compel the laws of the State of California to
control. Application may also be made to such court for confirmation of any
decision or award of the arbitrator, for an order of the enforcement and for any
other remedies which may be necessary to effectuate such decision or award. The
parties hereto hereby consent to the jurisdiction of the arbitrator and of such
court and waive any objection to the jurisdiction of such arbitrator and court.
(d) If a dispute is submitted for arbitration as provided in
this Section 6.4, the Escrow Agent shall continue to hold Escrow Shares in the
Escrow Fund having a value sufficient to cover the Damages related to such
dispute (the "Contested Damages") (but only to the extent that there are Escrow
Shares remaining in the Escrow Fund) until: (i) delivery of a copy of a
settlement agreement executed by Buyer and the Shareholders' Agent setting forth
instructions to the Escrow Agent as to the release of such Escrow Shares that
shall be made with respect to the Contested Damages; (ii) delivery of a copy of
the final decision of the arbitrators setting forth instructions to the Escrow
Agent as to the release of Escrow Shares that shall be made with respect to the
Contested Damages; or (iii) receipt of a court order or judgment directing the
Escrow Agent to act with respect to the distribution of any Escrow Shares. The
Escrow Agent shall thereupon release the Escrow Shares from the Escrow Fund (to
the extent Escrow Shares are then held in the Escrow Fund) in accordance with
such settlement agreement, arbitrator's instructions, court order or judgment,
as applicable. If any controversy arises involving any party to this Agreement
(other than the Escrow Agent) concerning the subject matter of this Agreement,
including Contested Damages, the Escrow Agent will not be required to resolve
the controversy.
(e) William R. Wyand shall be constituted and appointed as
agent ("Shareholders' Agent") for and on behalf of the shareholders of the
Company to give and receive notices and communications, to authorize delivery to
Buyer of the New Stock or other property from the Escrow Fund in satisfaction of
claims by Buyer, to settle any other claims for indemnification, to object to
such deliveries, to agree to, negotiate, enter into settlements and compromises
of, and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary or
appropriate in the judgment of the Shareholders' Agent for the accomplishment of
the foregoing. Such agency may be changed by the holders of a majority in
interest of the Escrow Fund from time to time upon not less than ten (10) days'
prior written notice to Buyer. No bond shall be required of the Shareholders'
Agent, and the Shareholders' Agent shall receive no compensation for his
services. Notices or communications to or from the Shareholders' Agent shall
constitute notice to or from each of the shareholders of the Company.
(f) The Shareholders' Agent shall not be liable for any act
done or omitted hereunder as Shareholders' Agent while acting in good faith and
in the exercise of reasonable judgment, and any act done or omitted pursuant to
the advice of counsel shall be conclusive evidence of such good faith. The
Shareholders shall severally indemnify the Shareholders' Agent and hold him
harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Shareholders' Agent and arising out
of or in connection with the acceptance or administration of his duties
hereunder.
(g) The Shareholders' Agent shall have reasonable access to
information about the Company and the reasonable assistance of the Company's
officers and
27
<PAGE> 32
employees for purposes of performing its duties and exercising its rights
hereunder; provided, that the Shareholders' Agent shall treat confidentially and
not disclose any nonpublic information from or about Stockholder to anyone
(except on a need to know basis to individuals who agree to treat such
information confidentially).
6.5. Actions of the Shareholders' Agent. A decision, act, consent
or instruction of the Shareholders' Agent shall constitute a decision of all
shareholders of the Company for whom shares of New Stock otherwise issuable to
them are deposited in the Escrow Fund and shall be final, binding and conclusive
upon each such shareholders of the Company, and the Escrow Agent and Buyer may
rely upon any decision, act, consent or instruction of the Shareholders' Agent
as being the decision, act, consent or instruction of each and every such
stockholder of the Company. The Escrow Agent and Buyer are hereby relieved from
any liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Shareholders' Agent.
6.6. Third-Party Claims. In the event that a third party asserts
or threatens a claim which Buyer believes may result in a demand against the
Escrow Fund, Buyer shall notify the Shareholders' Agent of such claim, and the
Shareholders' Agent on behalf of the shareholders of the Company for whom shares
of New Stock otherwise issuable or payable to them are deposited in the Escrow
Fund shall be entitled, at such shareholders' expense, to participate in any
defense of such claim. Unless the Shareholders' Agent elects to assume such
defense (with counsel reasonably acceptable to Buyer, and, provided, that the
Shareholders' Agent has the reasonable means to put on such a defense), Buyer
shall have the right to settle any such claim (with its own counsel); provided,
that Buyer may not effect the settlement of any such claim without the consent
of the Shareholders' Agent, which consent shall not be unreasonably withheld. In
the event that the Shareholders' Agent has consented to any such settlement, the
Shareholders' Agent and the former shareholders of the Company shall have no
power or authority to object under Section 6.4 or any other provision of this
Article VI to the amount of any claim by Buyer against the Escrow Fund for
indemnity with respect to such settlement.
6.7. Limitations.
(a) Notwithstanding anything else set forth herein, Buyer
and the Company shall not be compensated from the Escrow Fund or otherwise in
respect of any Damages that are covered by insurance proceeds from insurance
owned and paid for by the Company prior to the Effective Time to the extent that
Buyer and/or such other persons actually receive such insurance proceeds to
cover such Damages from such insurance (including all costs and expenses
incurred in pursuing and collecting such insurance proceeds).
(b) The parties hereto understand and agree that the
indemnity obligations of the shareholders of the Company and option holders,
including the Company Shareholders, under this Article VI shall terminate twelve
(12) months from the Closing Date, except (i) insofar as a claim for
indemnification under this Article VI has been asserted and such claim has not
been resolved in accordance with the terms of the this Agreement, the Escrow
Agreement or otherwise, or (ii) for any Damages incurred by Buyer or the Company
as a result of a breach of the representations and warranties set forth in
Sections 2.2, 2.5, 2.13 and 2.14, in which case the indemnity obligations shall
terminate four (4) years from the Closing Date.
28
<PAGE> 33
No Shareholder shall be personally liable under this Article VI
for any Damages beyond the Escrow Shares. Notwithstanding the foregoing, nothing
herein shall limit Buyer's right to seek recourse against any person or entity
for claims based on fraud.
ARTICLE VII
GENERAL PROVISIONS
7.1. Survival of Representations, Warranties and Agreements. All
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Closing
shall (except to the extent that survival is necessary to effectuate the intent
of such provisions or as provided in Section 6.7(b)) terminate twelve (12)
months after the Closing Date. Each party agrees that, except for the
representations and warranties contained in this Agreement and the Buyer
Disclosure Schedule and the Disclosure Schedule, no party hereto has made any
other representations and warranties, and each party hereby disclaims any other
representations and warranties made by itself or any of its officers, directors,
employees, agents, financial and legal advisors or other representatives, with
respect to execution and delivery of this Agreement or the transactions
contemplated herein, notwithstanding the delivery or disclosure to any other
party or any party's representatives of any documentation or other information
with respect to any one or more of the foregoing.
7.2. Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses; provided that the Company Shareholders
shall be solely responsible for all of the costs and expenses incurred by the
Company in connection with this transaction, except that Buyer shall pay the
accounting fees directly related to the audit of the Company as referenced in
the engagement letter of House, Park & Dobratz dated February 23, 1999, such
amount not to exceed $32,000 in fees plus reasonable out-of-pocket costs of the
accountants in connection with such audit.
7.3. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation), mailed by registered or certified mail (return
receipt requested) or delivered by an express courier (with confirmation) to
the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Buyer, to:
Smith Micro Software, Inc.
51 Columbia
Aliso Viejo, California 92656
Attention: William W. Smith. Jr.
29
<PAGE> 34
with a copy to:
Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, CA 92618
Attention: Bruce R. Hallett, Esq.
and
(b) if to the Shareholders, to:
_________________________________________
_________________________________________
_________________________________________
_________________________________________
with a copy to
Seigfreid, Bingham, Levy, Selzer & Gee
2800 Commerce Tower, 911 Main Street
Kansas City, Missouri 84105
Attention: Robert C. Levy, Esq.
7.4. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
(WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES OTHER THAN THOSE DIRECTING
CALIFORNIA LAW) EXCEPT TO THE EXTENT MANDATORILY GOVERNED BY THE LAWS OF THE
STATE OF DELAWARE. BUYER AND EACH OF THE SHAREHOLDERS HEREBY IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY CALIFORNIA STATE OR FEDERAL COURT SITTING IN ORANGE
COUNTY, CALIFORNIA, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT, AND BUYER AND THE SHAREHOLDERS EACH HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH CALIFORNIA STATE COURT OR SUCH FEDERAL COURT. BUYER AND THE
SHAREHOLDERS EACH HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT
CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
30
<PAGE> 35
7.5. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the purchase of the Shares is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner to
the fullest extent permitted by applicable law in order that the purchase of the
Shares may be consummated as originally contemplated to the fullest extent
possible.
7.6. Assignment; Binding Effect; Benefit. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties hereto; provided, however, that Buyer
may assign its rights, interests and obligations hereunder to any successor or
Buyer entity of Buyer whose shares are registered under Section 12 of the
Exchange Act. Subject to the preceding sentence, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and permitted assigns any rights or remedies under or by
reason of this Agreement.
7.7. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
7.8. Entire Agreement. This Agreement (including the Exhibits,
the Buyer Disclosure Schedule and the Disclosure Schedule and other Schedules
referenced herein) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
7.9. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
31
<PAGE> 36
STOCK PURCHASE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered by their respective officers thereunto duly authorized, all as of the
date first written above.
COMPANY SHAREHOLDERS BUYER
BRYCE T. EVANS IRREVOCABLE TRUST FOR SMITH MICRO SOFTWARE, INC.
MACMILLAN M. EVANS
By:________________________________ By:_______________________________
Name:
Title:
BRYCE T. EVANS IRREVOCABLE COMPANY
TRUST FOR MORGAN P. EVANS
STF TECHNOLOGIES, INC.
By:________________________________ By:_______________________________
Name:
Title:
BRYCE T. EVANS IRREVOCABLE
TRUST FOR REECE E. EVANS
By:________________________________
BRAD L. EVANS IRREVOCABLE
TRUST FOR HALEY EVANS
By:________________________________
32
<PAGE> 37
STOCK PURCHASE AGREEMENT SIGNATURE PAGE
BRAD L. EVANS IRREVOCABLE
TRUST FOR MOLLY KAY EVANS
By:________________________________
WILLIAM R. WYAND
By:________________________________
DONALD MacCORMICK
By:________________________________
33
<PAGE> 1
EXHIBIT 99.1
INVESTOR CONTACT: PRESS CONTACT:
Mark Trinske Bob Maples
Trinske Communications Maples Communications
303/665-7760 949/253-8737
[email protected] [email protected]
FOR IMMEDIATE RELEASE
SMITH MICRO ACQUIRES STF TECHNOLOGIES, THE #1 MANUFACTURER OF
MACINTOSH COMMUNICATIONS SOFTWARE
ACQUISITION CREATES WORLDWIDE PRESENCE AND "BEST-OF-CLASS" MACINTOSH PRODUCTS
ALISO VIEJO, California--April 13, 1999--Smith Micro Software, Inc. (Nasdaq NMS:
SMSI) today announced that it has acquired STF Technologies, Inc., the leading
manufacturer of communications software for the Macintosh(R). STF Technologies
will now be operated as a wholly owned subsidiary of Smith Micro Software, Inc.
This acquisition establishes Smith Micro as a world leader in the development
and sale of Macintosh communications software and enhances the company's current
position as a leader in overall PC communications software solutions.
Apple bundles STF Technologies' FAXstf(TM) with Apple products and is working
with Smith Micro's STF Technologies Macintosh Division on future product
offerings.
In related news, Smith Micro's STF Technologies Macintosh Division announced it
is developing a Mac(R) "client" software application for Smith Micro's
conexs.com(TM). conexs.com is an Internet service that gives subscribers the
ability to make Internet phone calls, have real-time chat sessions, and even
make video phone calls (if they have a camera), at no additional charge. Smith
Micro's strategic plan for conexs.com is similar in certain ways to that of the
Internet "portals" like Yahoo!(R), Excite(TM), Lycos(R), etc.; that is, develop
an extremely large installed base and then sell upgraded products, on-line
services, and advertising to the conexs.com user base.
"The acquisition of STF Technologies confirms Smith Micro's strong commitment to
focus on the Mac market," said William W. Smith, Jr., President and CEO of Smith
Micro. "We intend to retain the integrity of developing products for the
Macintosh marketplace that historically has been the strength of STF
Technologies. With the addition of Smith Micro's resources, it will allow us to
expand our leadership position in the Mac market such as our commitment to build
a conexs.com Macintosh client. We believe that the synergies created by
combining our two companies will provide certain financial and operational
efficiencies."
"The iMac(TM), PowerBook G3s and new Power Macintosh G3s have inspired
developers to bring out a deluge of new products for Macintosh customers," said
Clent Richardson, Apple's vice president of worldwide developer relations.
"Developers are recognizing that the Macintosh is once again a platform where
companies can innovate and prosper and we believe the combination of Smith Micro
and STF Technologies will result in even more great Mac products, like FAXstf,
moving forward."
-more-
SMITH MICRO ACQUIRES STF TECHNOLOGIES/PAGE 1
<PAGE> 2
"We are pleased to join the Smith Micro team and broaden our efforts to continue
to develop and support Macintosh software communication products," said W. Rick
Wyand, formerly STF Technologies' President and CEO and now the general manager
of Smith Micro's STF Technologies Macintosh Division. "Teaming STF Technologies'
award-winning FAXstf software with the resources and Internet telephony
experience of Smith Micro creates a bright future for the newly combined
company," said Wyand.
The STF Technologies acquisition immediately increases Smith Micro's revenues,
broadens its customer base, compliments its existing Macintosh product line and
positions the company as a leader in the development of solutions for the
Macintosh Internet telephony market. With the acquisition of STF Technologies,
Smith Micro has a very strong Macintosh team as well as the resources to
implement its plan to support the Macintosh fax market and aggressively develop
and market Internet telephony solutions for Mac users.
Under the terms of the agreement, Smith Micro issued 409,164 shares of common
stock and paid $1.0 million in cash as the purchase price for all of the
outstanding shares of STF Technologies. Smith Micro has agreed to file a Form
S-3 registration statement on such shares within 90 days of the closing. The
transaction will be accounted for as a stock purchase. STF Technologies had
revenues of approximately $2.5 million for its year ended December 31, 1998 with
nominal profit for the year.
Smith Micro is a leading developer and marketer of software products that make
person-to-person communications simple. With a focus on the Internet, broadband
and modem-based technologies, the company designs integrated, easy-to-use
software that enables personal computer users to access fax, data, voice and
video communications around the world. Headquartered in Aliso Viejo, California,
Smith Micro's complete line of products are available through direct sales, and
a worldwide network of retail distributors, value-added resellers (VARs) and
OEMs. The company is publicly traded on the Nasdaq National Market System under
the symbol SMSI. For more information, contact Bruce Quigley at Smith Micro at
949/362-5800 or visit www.smithmicro.com.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: THIS RELEASE MAY CONTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. FOR EXAMPLE, THERE ARE RISKS AND UNCERTAINTIES INVOLVED WITH THE
INTEGRATION OF STF TECHNOLOGIES AS A NEWLY ACQUIRED COMPANY INTO SMITH MICRO. IN
ADDITION, AS WITH OTHER SOFTWARE DEVELOPERS AND PUBLISHERS FOR APPLE PRODUCTS,
THE FUTURE PERFORMANCE OF STF TECHNOLOGIES IS DEPENDENT UPON AND SUBJECT TO
RISKS AND CERTAINTIES ASSOCIATED WITH THE COMMERCIAL SUCCESS OF APPLE PRODUCTS
AND ON MAINTAINING A STRONG RELATIONSHIP WITH APPLE COMPUTER AS A SOLE SOURCE
COMPUTER MANUFACTURER OF THE MACINTOSH. AMONG THE OTHER IMPORTANT FACTORS WHICH
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE
FORWARD-LOOKING STATEMENTS ARE ECONOMIC, COMPETITIVE, GOVERNMENTAL AND
TECHNOLOGICAL FACTORS AFFECTING THE COMPANY'S OPERATIONS, MARKETS, PRODUCTS,
SERVICES AND PRICES, AS WELL AS OTHER FACTORS DETAILED IN THE COMPANY'S FILINGS
WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING ITS RECENT FILINGS ON
FORMS 10-K AND 10-Q. SMITH MICRO DISCLAIMS ANY OBLIGATION TO REVISE OR UPDATE
ANY FORWARD-LOOKING STATEMENT THAT MAY BE MADE FROM TIME TO TIME BY IT OR ON ITS
BEHALF.
-more-
SMITH MICRO ACQUIRES STF TECHNOLOGIES/PAGE 2
<PAGE> 3
Smith Micro, conexs.com, FAXstf, and the Smith Micro logo are registered
trademarks or trademarks of Smith Micro Software, Inc. Apple, Macintosh and Mac
are registered trademarks of Apple Computer, Inc. Yahoo! is a registered
trademark of Yahoo! Inc. Excite is a trademark of Excite, Inc. Lycos is a
registered trademark of Carnegie Mellon University. All other trademarks and
product names are the property of their respective companies.
SMITH MICRO ACQUIRES STF TECHNOLOGIES/PAGE 3
