PURCHASE AGREEMENT
DATED AS OF JUNE 11, 2001
BY AND BETWEEN
MERANT PLC
AND
MICRO FOCUS INTERNATIONAL LIMITED
TABLE OF CONTENTS
Page
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ARTICLE 1 PURCHASE AND SALE OF ASSETS........................................................................2
1.1 Purchase of Assets......................................................................2
1.2 Limited Assumption of Liabilities.......................................................4
1.3 Purchase Price..........................................................................5
1.4 Purchase Price Adjustment...............................................................5
1.5 Allocation of Purchase Price............................................................7
1.6 Subsidiary Agreements...................................................................8
1.7 Maintenance Contracts...................................................................9
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLER...........................................................9
2.1 Organization............................................................................9
2.2 Authorization...........................................................................9
2.3 No Conflict............................................................................10
2.4 Completeness of Assets.................................................................10
2.5 Financial Statements...................................................................10
2.6 Absence of Undisclosed Liabilities.....................................................11
2.7 Absence of Certain Facts or Events.....................................................11
2.8 Property, Leases and Encumbrances......................................................12
2.9 Acquired Stock.........................................................................13
2.10 Contracts and Commitments..............................................................13
2.11 Permits and Authorizations.............................................................14
2.12 No Violations..........................................................................15
2.13 No Consents............................................................................15
2.14 Proceedings............................................................................15
2.15 Insurance..............................................................................16
2.16 Proprietary Information and Rights.....................................................16
2.17 Employee Benefits......................................................................17
2.18 Employment Matters.....................................................................18
2.19 Environmental Laws.....................................................................18
2.20 Taxes..................................................................................19
2.21 Accounts Receivable; Customers.........................................................20
2.22 Warranties.............................................................................20
2.23 No Finders or Brokers..................................................................20
2.24 No Unlawful Contributions..............................................................21
2.25 Delivery of Documents..................................................................21
2.26 Board Recommendation...................................................................21
2.27 Required Stockholder Vote..............................................................21
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................................................21
3.1 Organization...........................................................................21
3.2 Authorization..........................................................................21
3.3 No Conflict............................................................................22
3.4 No Finders or Brokers..................................................................22
3.5 Investment Representations.............................................................22
3.6 Litigation.............................................................................23
3.7 Financing..............................................................................23
ARTICLE 4 COVENANTS OF SELLER...............................................................................23
4.1 Access.................................................................................23
4.2 Conduct of Business....................................................................23
4.3 No Solicitation........................................................................24
4.4 Intercompany Accounts..................................................................26
4.5 Third Party Standstill Agreements......................................................26
4.6 Solicitation of Shareholder Approval...................................................26
ARTICLE 5 MUTUAL COVENANTS OF PURCHASER AND SELLER..........................................................28
5.1 Post Closing Cooperation...............................................................28
5.2 Payments With Respect to Accounts Receivable...........................................28
5.3 Fulfillment of Conditions..............................................................29
5.4 Further Assurances.....................................................................29
5.5 Confidentiality........................................................................29
5.6 Personnel Matters......................................................................30
5.7 Third Party Consents...................................................................32
5.8 Public Announcements...................................................................33
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5.9 Certain Notifications..................................................................33
5.10 Tax Matters............................................................................33
5.11 Use of Division Names..................................................................35
5.12 MERANT Name............................................................................35
5.13 Cooperation Regarding Minimization of Costs............................................36
ARTICLE 6 CONDITIONS OF CLOSING.............................................................................36
6.1 Conditions of Obligations of Purchaser.................................................36
6.2 Conditions of Obligations of Seller....................................................39
ARTICLE 7 CLOSING...........................................................................................40
7.1 Closing Date...........................................................................40
7.2 Termination of Agreement...............................................................40
7.3 Effect of Termination..................................................................42
ARTICLE 8 POST-CLOSING......................................................................................42
8.1 Survival of Representations and Warranties.............................................43
8.2 Indemnification of Purchaser by Seller.................................................43
8.3 Indemnification of Seller by Purchaser.................................................44
8.4 Procedure for Indemnification..........................................................45
ARTICLE 9 MISCELLANEOUS.....................................................................................46
9.1 Further Actions........................................................................46
9.2 Expenses...............................................................................46
9.3 Entire Agreement.......................................................................47
9.4 Descriptive Headings; Interpretation...................................................47
9.5 Notices................................................................................47
9.6 Governing Law..........................................................................48
9.7 Assignability..........................................................................48
9.8 Waivers and Amendments.................................................................49
9.9 Third Party Rights.....................................................................49
9.10 Severability...........................................................................49
9.11 Arbitration............................................................................49
9.12 Specific Performance...................................................................50
9.13 Counterparts...........................................................................50
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SCHEDULES
EXHIBIT A Acquired Subsidiaries
EXHIBIT B-1 Form of Subsidiary Agreement - Asset
EXHIBIT B-2 Form of Subsidiary Agreement - Stock
EXHIBIT C Form of Transition Services Agreement
EXHIBIT D Form of Proprietary Rights Agreement
EXHIBIT E Form of Non-competition Agreement
EXHIBIT F Form of Assignment and Assumption and ▇▇▇▇ of Sale
EXHIBIT G-1 Form of Trademark Assignment
EXHIBIT G-2 Form of Copyright Assignment
EXHIBIT G-3 Form of Patent Assignment
EXHIBIT H Form of Opinion of Counsel to Seller
EXHIBIT I Form of Opinion of Counsel to Purchaser
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is dated as of June
11, 2001, by and between Micro Focus International Limited, a company organized
under the laws of The British Virgin Islands ("Purchaser") and MERANT plc, a
company incorporated in England and Wales (registered no. 1709998, whose
registered office is at The Lawn, ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇) ("Seller"). Capitalized terms not otherwise defined in this
Agreement are used as defined in Appendix A hereto. Unless otherwise stated, all
monetary references shall be in the currency of the United States. Any reference
in this Agreement to any United States federal or state legal term or concept
(including, without limitation, any action, remedy, method of judicial
proceeding, document, statute, court official, governmental authority or agency)
shall in respect of any jurisdiction other than the United States be construed
as references to the term or concept which most nearly corresponds to it in that
jurisdiction.
W I T N E S S E T H :
WHEREAS, Seller and its Affiliates are in the business of, among
other things, developing, supporting and marketing, licensing and selling (a)
legacy transformation and integration products and services for the purpose of
providing an enterprise solution to integrate and extend a company's existing
business rules, data and processes to the new platforms of e-business and (b)
traditional enterprise application development products and services, which
business Seller and its Affiliates carry on through their Application Creation
and Transformation division (the "Division").
WHEREAS, Seller and certain of its Affiliates desire to sell,
and Purchaser and certain of its Affiliates desire to purchase, all of the
assets of the Division hereinafter specified. The purchase and sale of the
Division Assets (as defined in Section 1.1(a))will be accomplished by (i) direct
purchase, sale and conveyance of certain specified assets and (ii) purchase and
sale of all of the issued and outstanding shares of capital stock (the "Acquired
Stock") of the direct or indirect subsidiaries of Seller set forth on Exhibit A
attached hereto (referred to herein individually as an "Acquired Subsidiary" and
collectively as the "Acquired Subsidiaries"), in each case upon the terms and
conditions set forth below.
WHEREAS, the board of directors of Seller, subject to the terms
and conditions set forth herein, has (i) determined that this Agreement and the
transactions contemplated hereby are fair to and in the best interest of the
stockholders of Seller, (ii) determined that the consideration to be paid in
connection with the transactions contemplated hereby is fair to and in the best
interests of the stockholders of Seller, (iii) declared the advisability of this
Agreement and the transactions contemplated hereby and approved this Agreement
and the transactions contemplated hereby and (iv) resolved to recommend approval
and adoption of this Agreement and the transactions contemplated hereby by such
stockholders.
WHEREAS, Seller and Purchaser each expect to benefit from the
consummation of the transactions contemplated hereby and, to induce each other
to enter into this Agreement, agree to be bound by the terms and provisions in
this Agreement.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived and the representations and warranties, conditions and promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Purchase of Assets.
(a) On the terms and subject to the conditions contained
in this Agreement, on the Closing Date, Purchaser or one or more of its
Affiliates shall purchase, and Seller or one or more of its Affiliates shall
sell, convey, assign, transfer and deliver, free and clear of all Indebtedness
and Encumbrances (except for any Permitted Encumbrances) by appropriate
instruments of conveyance reasonably satisfactory to Purchaser, all assets,
properties, rights, titles and interests of every kind or nature owned, leased,
licensed or otherwise held by Seller or its Affiliates (including indirect and
other forms of beneficial ownership) as of the Closing Date, whether tangible,
intangible, real or personal and wherever located, which are exclusively used
by, or exclusively for the benefit of, the Division in operating the Business or
are exclusively related to the Business, including all of the following assets
which are exclusively used by, or exclusively for the benefit of, the Division
in operating the Business or are exclusively related to the Business, but
excluding all Excluded Assets (nothing herein shall be deemed to require
conveyance of any assets that are used by or in any other business of Seller,
which assets may be subject to the Transition Services Agreement or one or more
other shared facility agreements) (all such assets, whether to be conveyed
directly by asset transfer or indirectly by transfer of capital stock of an
Acquired Subsidiary, hereinafter referred to as the "Division Assets"):
(i) all accounts receivable and all
correspondence with respect thereto, including without limitation, all trade
accounts receivable, notes receivable from customers, vendor credits and
accounts receivable from employees and all other obligations from customers with
respect to sales of goods or services, whether or not evidenced by a note;
(ii) all prepayments, prepaid expenses and
other assets (it being agreed that between the date of this Agreement and the
Closing Date, the parties will prepare and mutually agree upon a specifically
identifiable list of such assets and attach such list hereto as Schedule
1.1(a)(ii));
(iii) all Acquired Stock;
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(iv) all interests in leased or subleased
real estate set forth on Schedule 1.1(a)(iv);
(v) all inventories, work in progress and
supplies (it being agreed that between the date of this Agreement and the
Closing Date, the parties will prepare and mutually agree upon a specifically
identifiable list of such assets and attach such list hereto as Schedule
1.1(a)(v));
(vi) all machinery, equipment, furniture,
automobiles and other vehicles, spare parts and supplies, computers and all
related equipment, telephones and all related equipment and all other tangible
personal property (it being agreed that between the date of this Agreement and
the Closing Date, the parties will prepare and mutually agree upon a
specifically identifiable list of such assets and attach such list as Schedule
1.1(a)(vi));
(vii) all rights existing under all contracts,
agreements and arrangements to which Seller or any of its Affiliates is a party
(it being agreed, for avoidance of doubt, that no maintenance contracts shall be
transferred, but that such maintenance contracts shall be subcontracted pursuant
to Section 1.7) ("Contracts");
(viii) all rights to the employment of the
employees of the Business addressed in a separate letter agreement dated on or
about the date hereof between Purchaser and Seller (the "Letter Agreement");
(ix) all lists and records pertaining to
customer accounts (whether past or current), suppliers, distributors, personnel
and agents;
(x) all claims, deposits, prepayments,
warranties, guarantees, refunds, causes of action, rights of recovery, rights of
set-off and rights of recoupment of every kind and nature;
(xi) all Division Proprietary Rights,
including, without limitation, an undivided, one-half joint ownership interest
in U.S. Patent No. 5745908;
(xii) all Authorizations, but excluding any
such Authorizations that are not transferable;
(xiii) all insurance, warranty and condemnation
net proceeds received after the Closing Date with respect to damage,
non-conformance of or loss to the Division Assets, but only to the extent
Purchaser has assumed the related liabilities with respect thereto pursuant to
Section 1.2(a);
(xiv) except as provided in Section 1.1(b)(ii)
below, all books, records, ledgers, files, documents, correspondence, lists,
studies and reports and other printed or written materials;
(xv) all Software Products;
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(xvi) all other assets of any kind or nature
which are exclusively used by, or exclusively for the benefit of, the Division
in operating the Business or are exclusively related to the Business.
(b) Excluded Assets. Notwithstanding the foregoing, the
following assets are expressly excluded from the purchase and sale contemplated
hereby (the "Excluded Assets") and, as such, are not included in the assets to
be conveyed hereby:
(i) Seller's or its post-Closing Affiliates'
rights under or pursuant to this Agreement;
(ii) Seller's or its post-Closing Affiliates'
general ledger, accounting records, minute books, statutory books and corporate
seal, provided that Purchaser shall be given copies of the general ledger and
accounting records as such documents exist as of the Closing Date to the extent
such documents relate to the Business;
(iii) any right to receive mail and other
communications addressed to Seller or any of its Affiliates relating to the
Excluded Assets or the Excluded Liabilities;
(iv) all contracts, agreements, arrangements
and other assets listed on Schedule 1.1(b)(iv) attached hereto;
(v) all intercompany receivables,
investments or other intercompany assets of any kind or nature;
(vi) any maintenance contracts, which will be
handled as set forth in Section 1.7;
(vii) cash, other than any cash in any
Acquired Subsidiary;
(viii) except as otherwise provided herein,
U.K. real estate; and
(ix) any other asset not specified in Section
1.1(a).
Nothing herein will prohibit Seller or any of its Affiliates from causing any
Acquired Subsidiary to transfer any asset which is not a Division Asset to
Seller or one or more of its other Affiliates.
1.2 Limited Assumption of Liabilities
(a) From and after the Closing, Purchaser or one or more
of its Affiliates will assume and agree to pay, defend, discharge and perform as
and when due the following specific liabilities and obligations of Seller and
its Affiliates, but only to the extent such liabilities and obligations relate
to the Business (the "Assumed Liabilities").
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(i) all liabilities and obligations of
performance after the Closing under each Contract (other than any performance
obligation arising out of, related to, in the nature of or caused by any
pre-Closing breach of contract or breach of warranty);
(ii) all liabilities and obligations of
performance after the Closing under each real property lease set forth on
Schedule 1.1(a)(iv) hereto (other than any performance obligation arising out
of, related to, in the nature of or caused by any pre-Closing breach of contract
or breach of warranty); and
(iii) those accounts payable and accrued
expenses specifically attributable to the Business which would be required to be
set forth on or accrued on a Closing Date balance sheet of the Division prepared
in accordance with U.S. GAAP, consistently applied in accordance with Seller's
past practices (excluding Seller's past practices of allocating such amounts, it
being agreed that all such accounts payable and accrued expenses will be
specifically identified).
(b) Excluded Liabilities. Notwithstanding anything to
the contrary contained in this Agreement and regardless of whether such
liability is disclosed herein or on any schedule or exhibit hereto, neither
Purchaser nor any of its Affiliates will assume or be liable for any liabilities
or obligations of Seller or any of its Affiliates (i) not described in Section
1.2(a) hereof or (ii) arising out of or related to any (A) Taxes, (B)
indebtedness for borrowed money or deferred purchase price for property, (C)
intercompany payables, loans or other intercompany liabilities of any kind or
nature, (D) any Excluded Asset, (E) resulting from, arising out of, relating to,
in the nature of, or caused by any breach of contract, breach of warranty, tort,
infringement, violation of law or environmental matter (unless specifically
accrued for in the determination of Actual Tangible Net Book Value included in
the Closing Date Balance Sheet, and then only to the extent so accrued) or (F)
any deferred revenue liability, which will be treated as specified in Section
1.7 hereof (in each case, whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated and whether due or to become due) (the
"Excluded Liabilities").
1.3 Purchase Price.
(a) The aggregate purchase price for the Division Assets
(including, without limitation, the Acquired Stock) is (i) $62,500,000 (the
"Cash Portion") and (ii) the assumption of the Assumed Liabilities ((i) and (ii)
collectively referred to as the "Purchase Price"). The Cash Portion will be
subject to adjustment as set forth in Section 1.4. On the Closing Date (as
defined herein), Purchaser shall pay to the account or accounts designated by
Seller, by wire transfer of immediately available funds, an aggregate amount
equal to the Cash Portion, as the same may be adjusted as set forth in Section
1.4.
1.4 Purchase Price Adjustment.
(a) Closing Determination. No later than five (5)
Business Days prior to the Closing, Seller and Purchaser will confer and make a
mutually agreed upon determination of the Division's estimated Tangible Net Book
Value as of the Closing (the "Estimated Tangible
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Net Book Value") as set forth on a mutually agreed upon estimated Closing Date
balance sheet reflecting the assets of the Division being purchased and the
liabilities of the Division being assumed. "Tangible Net Book Value" means,
except as otherwise set forth in this Section 1.4, the aggregate net book value
of the Division Assets, less the sum of (i) the aggregate net book value of all
intangible Division Assets and (ii) the aggregate net book value of all
liabilities of the Division required to be set forth on the face of a closing
date balance sheet, all as determined in accordance with U.S. GAAP applied in a
manner consistent with Seller's past practices; it being agreed that (A) the
calculation of Tangible Net Book Value will not include accounts receivable
related to the delivery of future services, unless a corresponding amount of
deferred revenue liability with respect to such accounts receivable is included
in the calculation of the Division's liabilities, (B) for avoidance of doubt,
the calculation of the assets and liabilities of the Division will include the
assets and liabilities of the Acquired Subsidiaries, (C) the calculation of
Tangible Net Book Value will not include the benefit of, or the burden of, any
asset or liability which inures to the benefit of, or is to be borne by, Seller
or its post-closing Affiliates, (D) notwithstanding the agreement of the parties
to leave all maintenance contracts related to the Business with Seller and its
Affiliates as specified in Section 1.7 hereof and notwithstanding any provision
to the contrary contained herein, the determination of Tangible Net Book Value
will be made as if all maintenance contracts and the related deferred revenue
liabilities with respect thereto are to be transferred to Purchaser and its
Affiliates and (E) notwithstanding any provision to the contrary contained
herein, the determinations of prepaid assets, inventory and property, plant and
equipment, any other fixed assets and any other assets or liabilities to be
included in the determination of Tangible Net Book Value will be made based on
the specifically identified schedules of such assets made pursuant to Sections
1.1(a)(ii), 1.1(a)(v) and 1.1(a)(vi) hereto or other schedules specifically
identifying any such assets and liabilities, in each case as updated to reflect
activity through the Closing Date. If the Estimated Tangible Net Book Value is
less than $10,000,000, the Cash Portion of the Purchase Price otherwise
deliverable to Seller at the Closing will be reduced by an amount equal to such
shortfall. If the Estimated Tangible Net Book Value is greater than $10,000,000,
the Cash Portion of the Purchase Price otherwise deliverable to Seller at the
Closing will be increased by the amount of such excess.
(b) Post-Closing Determination. No later than 120 days
after the Closing Date, Seller will prepare (it being agreed that the
Purchaser's employees and representatives (including PricewaterhouseCoopers)
will be entitled to participate in such preparation together with Seller,
subject to Seller's overall supervision and control of such preparation) and
deliver to Purchaser a Closing Date balance sheet reflecting the assets and
liabilities of the Division transferred to and assumed by Purchaser and its
Affiliates and reflecting the Tangible Net Book Value of the Division (the
"Draft Closing Date Balance Sheet"). If Purchaser disagrees with the calculation
of the Tangible Net Book Value of the Division reflected on the Draft Closing
Date Balance Sheet, Purchaser may, within 30 days after receipt of the Draft
Closing Date Balance Sheet, deliver a notice (an "Objection Notice") to Seller
setting forth any such disagreement. If Purchaser does not deliver an Objection
Notice within such 30 day period, then the Tangible Net Book Value set forth on
the Draft Closing Date Balance Sheet shall be deemed final and conclusive and
binding on each of the parties. Purchaser and Seller will use reasonable best
efforts to resolve any disagreements as to the calculation of the Tangible Net
Book Value of the Division, but if they do not obtain a final resolution no
later than 30 days after Seller's receipt of
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the Objection Notice, Purchaser and Seller will jointly retain an independent
accounting firm of recognized national standing (the "Firm") to resolve any
remaining disagreements. If Purchaser and Seller are unable to agree on the
choice of the Firm, then the Firm will be a "big-five" accounting firm selected
by lot (after excluding one firm designated by Purchaser and one firm designated
by Seller). Purchaser and Seller will direct the Firm to render a determination
within 30 days of its retention and Purchaser, Seller and their respective
agents will cooperate with the Firm during its engagement. The Firm will
consider only those items and amounts with respect to the Draft Closing Date
Balance Sheet set forth in the Objection Notice which Purchaser and Seller are
unable to resolve. Purchaser and Seller shall each make written submissions to
the Firm promptly (and in any event no later than 15 days after the Firm's
engagement), which submissions shall contain such party's computation of the
Tangible Net Book Value and information, arguments, and support for such party's
position. The Firm shall review such submissions and base its determination
solely on such submissions. In resolving any disputed item, the Firm may not
assign a value to any item greater than the greatest value for such item claimed
by either party or less than the smallest value for such item claimed by either
party. The Firm's determination will be based on the definition of the Tangible
Net Book Value included herein. The determination of the Firm will be conclusive
and binding upon Purchaser and Seller. Purchaser and Seller shall each bear the
costs and expenses of the Firm based on the percentage which the portion of the
contested amount not awarded to each party bears to the amount actually
contested by such party (e.g., if Seller makes a claim for $1,000 and Purchaser
only contests $500 of the amount claimed by Seller, and if the Firm resolves the
dispute by awarding Seller $300 of the $500 contested, then the Firm's costs and
expenses will be allocated 60% to Purchaser and 40% to Seller). The Tangible Net
Book Value as finally determined pursuant to this Section 1.4(b) is referred
herein as the "Actual Tangible Net Book Value" and the final balance sheet on
which it is reflected as the "Closing Date Balance Sheet."
(c) Post-Closing Adjustment.
(i) Payment by Seller. If the Actual
Tangible Net Book Value is less than Estimated Tangible Net Book Value, Seller
will, within five (5) business days after the determination thereof, pay to
Purchaser an amount equal to such shortfall, by wire transfer of immediately
available funds.
(ii) Payments by Purchaser. If the Actual
Tangible Net Book Value is greater than Estimated Tangible Net Book Value,
Purchaser will, within five (5) business days after the determination thereof,
pay to Seller an amount equal to such excess, by wire transfer of immediately
available funds.
(iii) Dispute. If, pursuant to this Section
1.4, there is a dispute as to the amount of the Estimated Tangible Net Book
Value or the amount of the Actual Tangible Net Book Value, then subject to the
other terms and conditions of this Section 1.4, Purchaser and Seller shall
promptly pay to the other, as appropriate, such amounts as are not in dispute,
pending final determination of such dispute pursuant to this Section 1.4.
1.5 Allocation of Purchase Price. On or prior to the
Closing, Purchaser and Seller will mutually agree upon an allocation of the
Purchase Price among the Division Assets,
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including the Acquired Stock (the "Allocations"), to be set forth on Schedule
1.5 to be attached hereto, subject to adjustment to reflect the actual amounts
on the Closing Date Balance Sheet. Each party agrees that it will not, in its
tax returns or elsewhere, take a position inconsistent with the Allocations
provided for on Schedule 1.5, except as may be required by a final,
non-appealable order of a competent governmental authority.
1.6 Subsidiary Agreements.
(a) Seller and Purchaser shall pursuant to, and in
accordance with, the terms and conditions of this Agreement enter into, or cause
their respective Affiliates to enter into, as soon as reasonably practicable
following the date hereof (but in any event prior to the Closing Date) separate
agreements (the "Subsidiary Agreements") documenting the purchase and sale of
(i) each portion of the Division Assets (other than the Acquired Stock) and the
Assumed Liabilities to be conveyed separately to Purchaser or one or more of its
Affiliates and (ii) the Acquired Stock of the Acquired Subsidiaries. Such
individual Subsidiary Agreements will be used merely to memorialize the transfer
of particular assets to particular Affiliates of Purchaser, it being agreed that
notwithstanding any provision in this Agreement to the contrary, all intangible
assets of any type or nature (including, without limitation, any Proprietary
Rights and any Contracts, but excluding any goodwill, which will be transferred
directly to MERANT Asia Limited with a nominal sum ascribed thereto) will be
conveyed directly from Seller and its Affiliates (including, without limitation,
any of the Acquired Subsidiaries) directly (by direct asset transfer rather than
indirectly by transfer of capital stock) to Purchaser (rather than its
Affiliates). Except as otherwise set forth herein with respect to intangible
assets, the Division Assets situated in the United Kingdom will be transferred
by Seller or one or more of its Affiliates to MERANT Asia Limited, a private
limited liability subsidiary company incorporated in England and Wales
wholly-owned by Seller (the "UK Acquired Subsidiary") prior to Closing (it being
agreed that between the date the Reorganization is completed and the Closing
Date, all intangible assets situated in the United Kingdom will be made
available to the UK Acquired Subsidiary by means of a license arrangement or
other arrangement which subcontracts the benefits of such assets to the UK
Acquired Subsidiary), which will become one of the Acquired Subsidiaries (the
"Reorganization"). As a result of the Reorganization, except as otherwise set
forth herein with respect to intangible assets, as of the Closing, the UK
Acquired Subsidiary will only hold the Division Assets situated in the United
Kingdom, and will be subject to no liability or obligation other than those
constituting Assumed Liabilities. Seller shall keep Purchaser fully informed in
relation to the form and implementation of the Reorganization and comply with
the reasonable requirements of Purchaser in connection with the Reorganization.
The Reorganization shall be in a form approved by Purchaser, such approval not
to be unreasonably withheld or delayed. Seller shall cause the employment of the
employees set forth in the Letter Agreement to be transferred in compliance with
applicable law to the UK Acquired Subsidiary prior to the Closing. Each separate
Subsidiary Agreement shall reflect an individual allocation of the Purchase
Price consistent with Schedule 1.5.
(b) The Subsidiary Agreements shall be in substantially
the forms attached hereto as Exhibit B-1 and Exhibit B-2, with such
modifications as are necessary and appropriate as a result of differences in
local laws or customs, in order to maintain substantially the same legal meaning
and effect as provided for in this Agreement.
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(c) In the event of any conflict or inconsistency
between the terms and conditions of this Agreement and any Subsidiary Agreement,
the terms and conditions of this Agreement shall prevail.
1.7 Maintenance Contracts. Purchaser and Seller agree that
no maintenance contract related to the Business will be assigned or transferred
from Seller or its Affiliates to Purchaser or its Affiliates and except for
Section 1.4, each of Seller and Purchaser will treat such maintenance contracts
as retained by Seller and its Affiliates for all purposes, including Taxes.
Notwithstanding the foregoing, all benefits of (including the right to all
revenues and cash receipts therefrom), and all burdens of, all such maintenance
contracts, to the extent related to the Business, will inure to, or be borne by,
Purchaser, including Taxes. From and after the Closing, Purchaser and its
Affiliates will have the right to renew any such maintenance contracts in their
own name and for their own account.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser, as of the
date hereof or as otherwise set forth in such representation or the schedules
hereto, as follows:
2.1 Organization. Seller, each of its Affiliates to be party
to any agreement contemplated hereby and each Acquired Subsidiary is a
corporation properly organized, validly existing and in good standing (to the
extent such concept is relevant in any particular jurisdiction) under the laws
of its jurisdiction of incorporation, and has the requisite power and authority
to conduct its business as it is presently being conducted and to own and lease
its properties and assets. Seller, each of its Affiliates to be party to any
agreement contemplated hereby and each Acquired Subsidiary is properly qualified
to do business as a foreign corporation and is in good standing (to the extent
such concept is relevant in any particular jurisdiction) in each jurisdiction in
which such qualification is necessary under the applicable law as a result of
the conduct of the Business, except where the failure to be so qualified would
not have a Material Adverse Effect.
2.2 Authorization. The execution and delivery of this
Agreement by Seller and the performance by Seller and each of its Affiliates of
their respective obligations hereunder have been authorized by all necessary
action on the part of Seller, each of its Affiliates and their respective
shareholders other than the shareholder approval described in Section 4.6
hereof. No other corporate action or approval is necessary for the execution,
delivery or performance of this Agreement by Seller or any of its Affiliates,
other than the shareholder approval described in Section 4.6 hereof. Seller and
each of its Affiliates has full right, power, authority and capacity to execute,
deliver and perform this Agreement and such other agreements and instruments as
are contemplated hereby to which any such Person is a party. This Agreement has
been duly executed and delivered by Seller. This Agreement and each other
agreement and instrument to be executed or delivered by Seller or any of its
Affiliates constitute, or will constitute when executed and delivered, valid and
binding obligations of Seller or such Affiliate, enforceable against them in
accordance with their respective terms, except as such enforceability may be
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limited by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, relating to or limiting creditors'
rights generally and (b) general principles of equity (whether considered in an
action in equity or at law).
2.3 No Conflict. Neither the execution and delivery of this
Agreement or any other agreement or instrument to be executed and delivered in
connection herewith by Seller or any of its Affiliates nor the consummation of
the transactions contemplated hereby or thereby nor the fulfillment by Seller or
any of its Affiliates of any of terms contemplated hereby or thereby will,
except as described on Schedule 2.3:
(a) conflict with or result in a breach by Seller or any
of its Affiliates of, or constitute a default under, or create an event that,
with the giving of notice or the lapse of time, or both, would be a default
under or breach of, or give a right to terminate or cancel under, any of the
terms, conditions or provisions of (i) any Material Contract (as defined in
Section 2.10), (ii) the articles/certificate of incorporation or the bylaws (or
equivalent governing documents) of Seller or any of its Affiliates or (iii) any
judgment, order, writ, injunction, decree or demand of any Governmental Entity
involving Seller or any of its Affiliates;
(b) result in the creation or imposition of any
Encumbrance of any nature whatsoever upon any of the Division Assets that would
materially affect Purchaser's or its Affiliates' ability to conduct the Business
as conducted by Seller and its Affiliates prior to the date of this Agreement;
or
(c) cause a loss or adverse modification of any
Authorization granted by a Governmental Entity to or otherwise held by the
Business which is necessary to operate the Business in any respect that would
materially affect Purchaser's or its Affiliates' ability to conduct the Business
as conducted by Seller and its Affiliates prior to the date of this Agreement.
2.4 Completeness of Assets. The Division Assets (including,
without limitation Software Products and Division Proprietary Rights being
transferred to Purchaser and its Affiliates pursuant to this Agreement), the
services to be made available to Purchaser and its Affiliates pursuant to the
Transition Services Agreement and the other rights being made available to
Purchaser and its Affiliates pursuant to this Agreement or the Proprietary
Rights Agreement constitute all the assets and services used by Seller and its
Affiliates in operating the Business of the Division as it is currently operated
by Seller and its Affiliates (exclusive of those services which Seller has made
available, but Purchaser has elected not to receive, pursuant to the Transition
Services Agreement). The price or cost of each service to be provided to
Purchaser and its Affiliates under the Transition Services Agreement does not
exceed the historical price or cost of such service as reflected in the
Financial Statements (assuming the same levels of activity during the applicable
period).
2.5 Financial Statements.
(a) Seller has delivered to Purchaser and attached
hereto as Schedule 2.5 the consolidated balance sheet (the "2001 Balance Sheet")
and related consolidated statements of operations of the Division as at and for
the year ended April 30, 2001, prepared in accordance
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with U.S. GAAP, consistently applied in accordance with Seller's past practices
(the "Financial Statements"). The Financial Statements (including the notes
thereto, if any) (i) present fairly the financial position and results of
operations of the Division as of the dates and for the periods then ended in
accordance with U.S. GAAP, consistently applied in accordance with Seller's past
practices and (ii) are in agreement with the books and records of Seller and its
Affiliates with respect to the Division.
(b) Except as expressly disclosed in Schedule 2.5, the
Financial Statements do not contain any items of special or nonrecurring income
or any other income not earned or otherwise realized in the ordinary course of
business.
2.6 Absence of Undisclosed Liabilities. The Business does
not have, and as of the Closing, will not have, any obligation or liability (in
any case, whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated or due or to become
due) arising out of or related to facts, events, transactions, occurrences or
actions or inactions arising on or prior to the Closing Date, other than: (i)
liabilities and obligations reflected on the face of the 2001 Balance Sheet,
(ii) liabilities and obligations incurred in the ordinary course of business
(none of which is a liability resulting from, arising out of, relating to, in
the nature of, or caused by any breach of contract, breach of warranty, tort,
infringement, violation of law, environmental matter, claim or lawsuit or
indebtedness for borrowed money), (iii) other liabilities and obligations
expressly disclosed (both by description and amount) on Schedule 2.6 and (iv)
Excluded Liabilities.
2.7 Absence of Certain Facts or Events. Except as listed on
Schedule 2.7, since April 30, 2001, Seller and each of its Affiliates have
conducted the Business in the ordinary course of business consistent with past
custom and practice and there has not been:
(a) a Material Adverse Effect suffered by the Business,
and during the period from April 30, 2001 through and including the Closing
Date, there shall not have been a Material Adverse Effect suffered by the
Business;
(b) any damage, destruction or loss to any Division
Asset, whether tangible or intangible, whether covered by insurance or not,
involving losses cumulatively in excess of $500,000;
(c) any hiring of new key employees of the Business
whose annual compensation exceeds $100,000, any amendment to or entering into of
any employment agreement or any increase in the compensation payable or to
become payable by the Business to any of its employees whose 2000 annual
remuneration exceeded $100,000 or any material increase in the coverage or
benefits under any bonus, insurance, pension or other Benefit Plan (excluding
annual length-of-service and similar adjustments to the benefits of individual
participants) or the transfer of any employee of the Business whose 2000 annual
remuneration exceeded $100,000 to any other business conducted by Seller or its
Affiliates;
(d) any sale, assignment, modification or transfer of
any contractual rights, claims or other assets of the Business valued at more
than $500,000 individually, or $1 million in
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the aggregate, other than (i) changes to sales or purchase orders, licenses or
other customer contracts and changes thereto in the ordinary course of business
consistent with past custom and practice and (ii) Excluded Liabilities;
(e) any Encumbrance placed on any of the Division
Assets, other than any Permitted Encumbrances which would not prevent or
materially limit the sale of any Division Asset;
(f) any waiver or release of any of the Business' rights
of substantial value or any modification or termination of, or claims of any
breach under, any Material Contract except those that constitute Excluded
Assets;
(g) any material transaction entered into or consummated
by Seller or any of its Affiliates with respect to the Business, except in the
ordinary course of business consistent with past custom and practice;
(h) any material addition to or modification of the
Benefit Plans of the Business or other arrangements or practices affecting
personnel of the Business (other than extensions of coverage thereunder to
employees of the Business who became eligible to participate in such Benefit
Plans after April 30, 2001 in accordance with the terms thereof or additions or
modifications to Benefit Plans not being assumed by the Purchaser); or
(i) any obligation or liability incurred by Seller or
any of its Affiliates involving any capitalized expenditures of any kind or
nature of the Business in excess of $200,000.
2.8 Property, Leases and Encumbrances.
(a) Schedule 2.8(a) hereto accurately sets forth as of
April 30, 2001 all material real properties (the "Real Property") used in
connection with the Business that are to be transferred as part of the
transactions contemplated by this Agreement, whether owned or leased, and
contains a list of all material leases, franchises and similar agreements
creating, or materially modifying or altering rights to such Real Property,
including material zoning or use restrictions. Purchaser understands that Seller
will not be transferring the Newbury UK real property as part of the
transactions contemplated by this Agreement, and access to such property will
only be available pursuant to the Transition Services Agreement. Except as noted
on Schedule 2.8(a), Seller or one of its Affiliates has good and marketable
title to such owned Real Property, free and clear of all Encumbrances of any
nature whatsoever other than Permitted Encumbrances and a valid leasehold
interest in Leased Real Property.
(b) As of the Closing Date, Seller or one of its
Affiliates will have good and marketable title to all material items of
machinery, equipment, furniture, and other tangible personal property of the
Business constituting Division Assets, free and clear of all Encumbrances of any
nature whatsoever other than Permitted Encumbrances.
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(c) To Seller's Knowledge, the tangible Division Assets
in all material respects are in good operating condition and repair, ordinary
wear and tear excepted, have been operated, serviced and maintained in
accordance with the recommendations and requirements, if any, of the
manufacturers thereof and are suitable for the purposes for which they are
presently being used, including use in the conduct of the Business.
2.9 Acquired Stock.
(a) Seller or one of its Affiliates is the registered
and beneficial owner of that number of shares of Acquired Stock set forth
opposite the name of each Acquired Subsidiary described on Schedule 2.9, which
constitutes all of the issued and outstanding shares of each class of capital
stock of each Acquired Subsidiary. All of the shares of Acquired Stock are
validly issued, fully paid and non-assessable, and there are no restrictions
with respect to the transfer of the Acquired Stock by Seller or one of its
Affiliates to Purchaser or one of its Affiliates, except those imposed by
applicable securities or local law. The delivery to Purchaser or one of its
Affiliates at Closing of certificates evidencing the Acquired Stock will convey
and transfer to Purchaser or one of its Affiliates good, complete and marketable
title to the Acquired Stock, free and clear of any Encumbrances (other than
restrictions on transfer imposed by applicable securities or local laws and
Permitted Encumbrances). Schedule 2.9 sets forth each Acquired Subsidiary's
name, its place and date of incorporation, the number of shares of Acquired
Stock of such Acquired Subsidiary held by Seller or one of its Affiliates, and
the percentage ownership represented by such shares of Acquired Stock (it being
agreed that such information will be provided with respect to the U.K. Acquired
Subsidiary once it has been formed and is available). Neither Seller nor any of
its Affiliates (including, without limitation, each Acquired Subsidiary) is
subject to any obligation (contingent or otherwise) with respect to the issuance
of any capital stock (or any warrants, options or other rights with respect
thereto) of any Acquired Subsidiary or the redemption or repurchase of any such
capital stock (or any warrants, options or other rights with respect thereto).
(b) The authorized capital stock and the number of
shares issued and outstanding with respect to each Acquired Subsidiary is as set
forth on Schedule 2.9 hereto. All shares of each Acquired Subsidiary's capital
stock are duly authorized, validly issued and outstanding, fully paid and
non-assessable. There are no outstanding options, warrants or other rights to
acquire, or any securities or obligations convertible into or exchangeable for,
any shares of the capital stock of any Acquired Subsidiary which have been
issued or granted by or are binding upon any Acquired Subsidiary or any other
Person, except for Purchaser's rights as contemplated by this Agreement. There
are no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to any Acquired Subsidiary. No Acquired Subsidiary has any
wholly-owned, majority-owned or other subsidiaries or any investment in any
other Person.
2.10 Contracts and Commitments.
(a) Except as set forth on Schedule 2.10, with respect
to the Business, and except for Excluded Assets and Excluded Liabilities,
neither Seller nor any of its Affiliates has any: (i) collective bargaining
agreements or any agreements or policies that contain or include
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any severance pay liabilities or obligations; (ii) employment, consulting or
similar agreement, contract or commitment which is not terminable without
penalty or cost by Seller or one of its Affiliates on notice of thirty (30) days
or less or contains an obligation of Seller or one of its Affiliates to pay more
than $100,000 per year; (iii) lease of real or personal property (as lessor or
lessee) involving rental payments in excess of $250,000 per annum; (iv) note or
other evidence of Indebtedness for borrowed money or the deferred purchase price
of property or services (other than accounts payable and accrued expenses
incurred in the ordinary course of business consistent with past custom and
practice); (v) agreement, contract or commitment relating to capitalized
expenditures of any kind or nature involving unpaid obligations in excess of
$200,000; (vi) agreement, contract or commitment relating to the acquisition of
assets of, or any interest in, any business enterprise involving amounts in
excess of $500,000; (vii) license agreement, or any other contract, arrangement
or commitment, whether written or oral, with any third party relating to
Proprietary Rights (other than (A) license agreements or other contracts for
commercially-available third party off-the-shelf software or (B) contracts,
arrangements or commitments entered into in the ordinary course of business
consistent with past custom and practice); (viii) other contract or agreement
which involves payments of $500,000 or more and is not cancelable without
penalty or cost by the Business on thirty (30) days or less notice, except for
sales orders, licenses with customers, customer contracts or purchase orders
entered into in the ordinary course of business consistent with past custom and
practice or (ix) contracts specifically set forth on Schedule 6.1(e) attached
hereto. Each of the contracts, agreements or commitments required to be
disclosed on Schedule 2.10 (including, for avoidance of doubt, each of the items
in the aforementioned clause (ix)) is referred to herein as a "Material
Contract." Seller has delivered or made available to Purchaser copies of each
Material Contract required to be disclosed on Schedule 2.10. Schedule 2.10 also
identifies the top ten (10) customers of the Business, based upon annualized
sales for the 12 month period ended April 30, 2001.
(b) Except as expressly disclosed on Schedule 2.10: (i)
neither Seller nor any of its Affiliates is in violation of, nor has Seller or
any of its Affiliates received any claim, whether written or oral, that any of
them has breached any of the terms or conditions of any Material Contract; (ii)
each Material Contract is in full force and effect and is valid, binding and
enforceable without any default, breach, waiver or indulgence thereunder by
Seller or any of its Affiliates or, to Seller's Knowledge, by any other party
thereto; and (iii) to Seller's Knowledge, there are no facts or conditions which
have occurred or are, based on facts presently known to exist, anticipated
which, through the passage of time or the giving of notice, or both, would
constitute a default under any Material Contract.
2.11 Permits and Authorizations.
(a) All material consents, licenses, permits, grants or
other authorizations of a Governmental Entity pursuant to which Seller or any of
its Affiliates conduct the Business are collectively referred to herein as
"Authorizations". All Authorizations are in full force and effect and constitute
all Authorizations required to operate the Division Assets and conduct the
Business, except those Authorizations, the lack of which would not materially
impair the ability of Purchaser and its Affiliates to conduct the Business in
the same manner conducted by Seller and its Affiliates prior to the Closing
Date. Except as disclosed on Schedule 2.11(a), to Seller's Knowledge, the
Authorizations may be transferred to Purchaser or one of its Affiliates on the
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Closing Date. The consummation of the transactions contemplated by this
Agreement will not, except as disclosed on Schedule 2.11(a), require any
transfer, renewal or notice with respect to any Authorizations.
(b) Except as set forth on Schedule 2.11(b), Seller has
not been notified of, and is not presently aware of, any factual basis that
would give it any reason to believe any Authorization will not in the ordinary
course of business be renewed upon its expiration when such Authorization is
transferred to Purchaser or one of its Affiliates, or renewed in the name of
Purchaser or one of its Affiliates.
(c) Except as set forth on Schedule 2.11(c), Seller has
not received in writing or, to Seller's Knowledge, otherwise, any claim or
assertion that it has breached any of the terms or conditions of any
Authorization in such manner (i) as would permit any other Person to cancel,
terminate or materially amend any Authorization necessary to permit the
continued operation of the Division as presently conducted or the use of any
material Division Asset or (ii) that is reasonably likely to result in a penalty
or fee of more than $100,000.
2.12 No Violations. Except as disclosed on Schedule 2.12
hereto, Seller and each of its Affiliates is and, during Seller's ownership of
the Business, has been in compliance in all material respects with each
applicable law, statute, order, rule or regulation promulgated or judgment
entered against any of them with respect to the Business, the Division or any
Division Asset.
2.13 No Consents. Except as disclosed on Schedule 2.13
hereto, or in connection with customer contracts or leased properties, no
consent, approval or authorization of, or declaration, filing or registration
with, any Governmental Entity or any other Person is required to be made or
obtained by Seller or any of its Affiliates in connection with the execution,
delivery or performance by any of them of this Agreement.
2.14 Proceedings.
(a) Schedule 2.14 lists all claims, investigations,
suits, actions, arbitrations, mediations and legal or administrative proceedings
and governmental investigations (collectively, "Proceedings") relating to the
Business or the Division or any Division Asset demanding injunctive relief or
involving a claim for damages in excess of $100,000 or any unspecified material
claim, which are pending against Seller or any of its Affiliates, to which any
of them is a party or as to which any of them has received any written claim or
assertion and, to Seller's Knowledge, no such Proceeding has been threatened.
Except as set forth on Schedule 2.14, to Seller's Knowledge, there are no facts
in existence which are reasonably likely to lead to the instigation of any such
Proceeding. Except as set forth on Schedule 2.14, there is no outstanding
unsatisfied judgment, order, decree, award, stipulation or injunction of any
Governmental Entity against or affecting the Business or the Division or any
Division Asset.
(b) Except as set forth on Schedule 2.14, there is no
Proceeding pending, or to Seller's Knowledge, threatened against Seller or any
of its Affiliates seeking to prevent or delay the consummation of the
transactions contemplated by this Agreement.
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2.15 Insurance. Seller has insurance coverage under policies
that, to the Knowledge of Seller, provide adequate insurance coverage for the
Division and the Business until the Closing Date.
2.16 Proprietary Information and Rights.
(a) Schedule 2.16(a) contains a complete and accurate
list of all: (i) software products currently licensed or sold by Seller or any
of its Affiliates exclusively through the Division (the "Software Products");
(ii) patented or registered Division Proprietary Rights and pending patent
applications and other applications for registration of Division Proprietary
Rights owned or filed by or on behalf of Seller or any of its Affiliates; and
(iii) trade names, corporate names and material unregistered trademarks, service
marks and copyrights included among the Division Proprietary Rights.
(b) As of the Closing, Seller or an Affiliate of Seller
will own all right, title and interest in and to, or have a valid and
enforceable license to use, the Division Proprietary Rights, free and clear of
all Encumbrances.
(c) Except as indicated on Schedule 2.16(c): (i) to
Seller's Knowledge, all of the Division Proprietary Rights are valid and
enforceable, (ii) there have been no claims made against, or notices received
by, Seller or any of its Affiliates which are currently outstanding alleging or
asserting (1) the invalidity, misuse or unenforceability of any Division
Proprietary Rights or, with respect to the Business, that Seller or any of its
Affiliates violated, infringed, misappropriated or otherwise conflicted with any
Proprietary Rights of any third party (including any demand or request that
Seller or any of its Affiliates cease using any Division Proprietary Rights or
license any Proprietary Rights from any third party) or (2) that the sale or
licensing of any Software Products violated, infringed, misappropriated or
otherwise conflicted with any Proprietary Rights of any third party (including
any demand or request that Seller or any of its Affiliates cease selling or
licensing any such Software Product); (iii) the conduct of the Business has not
violated the Proprietary Rights of any third party in any material respect and
the continued conduct of the Business as currently conducted will not infringe,
misappropriate or otherwise violate the Proprietary Rights of any third party;
(iv) Seller has not received any notices of, and is not aware of any facts which
indicate a likelihood of, any material infringement, misappropriation or other
violation by any third party with respect to the Division Proprietary Rights;
(v) neither Seller nor any of its Affiliates is in breach or default of any
license or other grant of rights with respect to the Division Proprietary
Rights; (vi) no third party has been granted any perpetual license to use any
Division Proprietary Rights (or the right or option to acquire such a license)
other than contracts, arrangements or commitments entered into in the ordinary
course of business consistent with past custom and practice; and (vii) all
registrations of Division Proprietary Rights with Governmental Entities are
valid and subsisting, and are in good standing, and all required filings in
respect of the Division Proprietary Rights with any relevant Governmental Entity
have been made and all required filing fees have been paid.
(d) Seller and each of its Affiliates has taken all
commercially reasonable and desirable actions customary in the software industry
to maintain and protect the Division
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Proprietary Rights owned by it and no loss or expiration of any such Division
Proprietary Rights is pending, threatened or reasonably foreseeable except for
registered Proprietary Rights expiring at the end of their statutory terms. To
the Seller's Knowledge, the owners of any Division Proprietary Rights licensed
to Seller or any of its Affiliates have taken all reasonably necessary and
desirable actions to maintain the Proprietary Rights that are subject to such
licenses.
(e) The sale and licensing of the Software Products in
the ordinary course of business do not violate or conflict with the terms of the
GNU General Public License or any other "copyleft" restrictions.
2.17 Employee Benefits.
(a) Except as set forth on Schedule 2.17, no employee
benefit plans (including, without limitation, "plans" as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
profit-sharing, deferred compensation, bonus, stock option, stock purchase,
vacation pay, holiday pay, pension, retirement plans, medical and other
compensation or benefit arrangements (collectively, "Benefit Plans") are
maintained or contributed to or required to be contributed to by Seller or any
of its Affiliates for the benefit of the Business' employees (or former
employees) and/or their beneficiaries. Seller has delivered to Purchaser true
and complete copies of all documents pertaining to those items required to be
disclosed on Schedule 2.17. Neither Seller nor any of its Affiliates maintains,
contributes to or has any liability with respect to any Benefit Plans with
respect to the Business' employees other than those disclosed on Schedule 2.17.
(b) Seller and each of its Affiliates have timely made
all contributions required by law to be made to the Benefit Plans, and have
timely filed all reports and other documents required to be filed with respect
thereto.
(c) There is no contract, agreement or benefit
arrangement covering any employee of the Business which, individually or
collectively, could give rise to the payment of any amount which would
constitute an "excess parachute payment" (within the meaning of Section 280G of
the Internal Revenue Code (the "Code")).
(d) All Benefit Plans of the Acquired Subsidiaries and
any Affiliate of Seller which is the sponsor of any Benefit Plan required by
operation of law to be transferred to Purchaser or one of its Affiliates as a
result of the transactions contemplated hereby and the Merant, Inc. 401(k) Plan
(i) have complied in form and operation in all material respects with the
applicable requirements of law; and (ii) with respect to each such Benefit Plan
that is intended to be qualified under Section 401(a) of the Code, such plan has
received a favorable determination letter from the Internal Revenue Service and
no event has occurred and no condition exists which could reasonably be expected
to result in the revocation of any such favorable determination letter. Neither
the Seller nor any of its Affiliates (i) has any obligation or liability to
provide any post-employment welfare benefits to any employee of the Business
(other than as required under Section 4980(B) of the Code) or (ii) contributes
to or has any liability with respect to a multiemployer plan.
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2.18 Employment Matters.
(a) Seller and each of its Affiliates has paid or made
adequate provision to pay all wages and other compensation and all other amounts
due and payable to any employee or former employee of the Business through and
including the Closing Date.
(b) Except for requirements of local law, no collective
bargaining agreement is currently in existence or is being negotiated by Seller
or any of its Affiliates with respect to the Business and, as of the date of
this Agreement, no labor organization has been certified or recognized as the
representative of any employees of Seller or any of its Affiliates with respect
to the Business. Seller and each of its Affiliates operates the Business in all
material respects in accordance with all applicable laws respecting employment
and employment practices, including but not limited to terms and conditions of
employment, wages and hours, and occupational safety, and has not received
written or verbal notice of, and is not engaged in, any unfair labor practice
with respect to the Business. Seller and each of its Affiliates has made all
required payments of social security, unemployment and similar taxes.
2.19 Environmental Laws.
(a) Except as disclosed on Schedule 2.19, (i) the
Division Assets and the Division have been operated by Seller and each of its
Affiliates in compliance in all material respects with all applicable
Environmental Laws including, without limitation, obtaining and complying with
all material Authorizations required for the occupation and use of their
respective properties and facilities, (ii) there has been no production,
generation, storage, treatment, Release, disposal or arrangement for disposal of
any Hazardous Materials in a manner that has given or would give rise to any
material liabilities or obligations (contingent or otherwise) pursuant to
Environmental Laws at, in, on, under, about or from any of the Real Properties
by or on behalf of Seller or any of its Affiliates, (iii) there has been no
production, generation, storage, treatment, Release or disposal of any Hazardous
Materials in a manner that has given or would give rise to any material
liabilities or obligations (contingent or otherwise) pursuant to Environmental
Laws by or on behalf of Seller or any of its Affiliates at any other Division
site, (iv) to Seller's Knowledge, there are no storage tanks or electrical
equipment containing polychlorinated biphenyls on the Real Properties, or any
asbestos-containing materials on the Real Properties and (v) neither Seller nor
any of its Affiliates has received, nor is aware of, any notice, report or other
information regarding any violation of, or any liability (contingent or
otherwise) or investigatory, corrective or remedial obligation under, any
Environmental Laws with respect to their or their predecessors' past or current
operations, properties or facilities to the extent it would result in a Material
Adverse Effect. The Seller and its Affiliates have made available to Purchaser
all environmental audits, reports and other material environmental documents
relating to their or their predecessors' past or current properties, facilities
or operations that constitute part of the Division Assets that are in their
possession or under their reasonable control.
(b) "Environmental Law" shall mean all federal, state,
local and foreign (including, without limitation, United Kingdom and European
Union) laws and directives, including statutes, regulations, rules, ordinances,
orders and similar provisions having the force
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or effect of law, and all common law, which purport to regulate the Release of
Hazardous Materials to the environment, or impose requirements relating to
environmental management, reporting or protection or public or employee health
and safety, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C. Section 9601 et
seq., the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C.
Section 6901 et seq., the Emergency Planning and Community Right-to-Know Act, as
amended, 42 U.S.C. Section 11001 et seq., the Clean Air Act, as amended, 42
U.S.C. Section 7401 et seq., the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251 et seq., the Toxic Substances Control Act, as
amended, 15 U.S.C. Section 2601 et seq., the Safe Drinking Water Act, as
amended, 42 U.S.C. Section 300f et seq., the Federal Insecticide, Fungicide &
Rodenticide Act, as amended, 7 U.S.C. Section 136 et seq., the Federal Food,
Drug and Cosmetic Act, as amended, 21 U.S.C. Section 301 et seq. and the
Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651 et seq.
(c) "Hazardous Material(s)" shall mean any substance
which is defined as a hazardous substance, hazardous material, hazardous waste,
pollutant, contaminant or words of similar import under any Environmental Law.
(d) "Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing into the environment (including the abandonment or discarding of
barrels, containers or other receptacles containing any Hazardous Material).
2.20 Taxes. Except as set forth on Schedule 2.20, Seller and
each of its Affiliates has accurately prepared and has duly filed with the
appropriate Governmental Entities all material Tax Returns and reports required
to be filed on or before the date of this Agreement with respect to the Business
or the Division Assets, and all such returns were and remain true and complete
in all material respects. All Taxes owed, or which may be claimed to be owed,
and which are due and payable to any Governmental Entity with respect to any
period (or portions thereof) ending on or before the Closing Date, and all
interest, penalties, assessments and deficiencies connected therewith, have been
or will be paid in full or adequate reserves have been established therefor.
Neither Seller nor any of its Affiliates is a party to any pending action or
proceeding, nor to Seller's Knowledge, is any such action or proceeding
threatened, by a Governmental Entity for the assessment or collection of Taxes
with respect to the Business and no unresolved deficiency notices or reports
have been received by Seller or any of its Affiliates with respect to the
Business or the Division Assets. There are no claims against Seller or any of
its Affiliates for any Taxes which have resulted in, or may result in, an
Encumbrance against any Division Asset other than a Permitted Encumbrance. None
of the Acquired Subsidiaries is party to any agreement, contract, arrangement or
plan, and none of the Assumed Liabilities is an obligation, that could result in
the payment of any "excess parachute payment" within the meaning of United
States Internal Revenue Code Section 280G (or any corresponding provision of
state, local or non-U.S. income Tax law). No claim is pending by a taxing
authority in a jurisdiction where any of the Acquired Subsidiaries does not file
Tax Returns that such Person is or may be subject to taxation by such
jurisdiction. No Acquired Subsidiary is a party to a tax allocation or tax
sharing agreement except with Seller and its Affiliates and no Acquired
Subsidiary will have any liability or obligation under any such agreement after
the Closing Date.
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Each Acquired Subsidiary is, where appropriate, registered for value added tax
and has complied in all material respects with the requirements and provisions
of any value added tax legislation, subject to any accrual therefor reflected in
the financial statements of the Business. All documents in the enforcement of
which the Acquired Subsidiaries are or may be interested have been duly stamped.
2.21 Accounts Receivable; Customers. Except as set forth on
Schedule 2.21, the accounts receivable reflected on the Financial Statements of
the Business or originated thereafter by Seller or any of its Affiliates with
respect to the Business through the Closing Date are not subject to any dispute
in excess of $100,000, individually or in the aggregate, as of the date hereof.
To Seller's Knowledge, there are no facts existing with respect to any of the
accounts receivable which would give rise to a dispute in excess of $100,000,
individually or in the aggregate, over the same. Schedule 2.21 discloses, as of
the date hereof, all accounts receivable of the Business which have remained
unpaid more than sixty (60) days from the due date of the applicable invoice and
also discloses as of April 30, 2001, (x) the identity of the ten (10) largest
customers (by dollar volume) of the Division for the year ended April 30, 2001,
and (y) the fiscal year-to-date sales for each customer identified on Schedule
2.21 and the amount owing from such customer as of April 30, 2001.
2.22 Warranties. Neither Seller nor any of its Affiliates has
given or made any warranties of any kind or nature to any Person with respect to
any products sold or services performed by or on behalf of the Business, except
in accordance with Seller's standard warranty for products and services of the
Business or any warranties given in the ordinary course of Seller's and its
Affiliate's business, or warranties the obligation for which constitute Excluded
Liabilities.
2.23 No Finders or Brokers. Except for the Seller's
arrangements with ▇▇▇▇▇▇ Brothers and UBS Warburg Ltd. with respect to the sale
of the Business (the cost and expense of which will be borne solely by Seller),
neither Seller nor any of its Affiliates has entered into any agreement,
arrangement or understanding with any Person to pay any finder's fee, brokerage
commission, advisory fee or similar payment in connection with the transactions
contemplated hereby.
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2.24 No Unlawful Contributions. Neither Seller nor any of its
Affiliates nor any of their respective directors or officers, nor, to Seller's
Knowledge, any agent or employee or other Person associated with or acting on
behalf of Seller or any of its Affiliates with respect to the Business: (i) has
made or used any funds to make any unlawful contributions, gifts, entertainment
or other unlawful expenses relating to political activity or any direct or
indirect unlawful payments to officials or employees of any Governmental Entity;
(ii) failed to file any reports required with respect to lawful contributions;
(iii) established or maintained any unlawful or unrecorded fund of any of the
monies or other assets; (iv) made any intentionally false or fictitious entries
on the books or records of Seller or any of its Affiliates; or (v) made or
received any bribe, payoff, influence payment, kickback or other unlawful
payment.
2.25 Delivery of Documents. Seller has delivered or made
available to Purchaser true and correct copies of all documents, and any and all
amendments to any such documents, referred to in Article 2 of this Agreement.
2.26 Board Recommendation. The Seller's board of directors,
at a meeting duly called and held, has (a) declared the advisability of this
Agreement and the transactions contemplated hereby and approved and adopted this
Agreement and the transactions contemplated hereby in accordance with applicable
law, (b) determined that this Agreement and the transactions contemplated hereby
are fair to and in the best interests of the stockholders of Seller, (c)
determined that the consideration to be paid is fair to and in the best
interests of the stockholders of Seller and (iv) subject to the provisions of
Section 4.6 hereof, resolved to recommend that the stockholders of Seller
approve and adopt this Agreement.
2.27 Required Stockholder Vote. The approval of this
Agreement at the Stockholders Meeting (as defined in Section 4.6) by the holders
of a majority of the issued and outstanding ordinary shares entitled to vote at
the Stockholders Meeting (the "Stockholder Approval") is the only vote of the
holders of any class or series of Seller's securities necessary to adopt and
approve this Agreement and the transactions contemplated hereby.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
3.1 Organization. Purchaser and each of its Affiliates is a
properly organized corporation, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has the power and authority to
conduct its business as it is presently being conducted and to own and lease its
properties and assets. As of the Closing, Purchaser and each of its Affiliates
will be qualified to do business as a foreign entity in each jurisdiction as is
necessary in order to conduct the Business following the Closing.
3.2 Authorization. The execution and delivery of this
Agreement by Purchaser and the performance by Purchaser and its Affiliates of
their respective obligations hereunder have been duly authorized by all
necessary action on the part of Purchaser and each of
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its Affiliates, and no other action or approval by Purchaser or any of its
Affiliates is necessary for the execution, delivery or performance of this
Agreement by any of them. This Agreement has been duly executed and delivered by
Purchaser. This Agreement and each other agreement and instrument to be executed
and delivered by Purchaser or any of its Affiliates constitutes, or will
constitute when executed and delivered, valid and binding obligations of
Purchaser or such Affiliate, enforceable against them in accordance with their
respective terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, relating to or limiting creditors' rights generally and (b)
general principles of equity (whether considered in an action in equity or at
law).
3.3 No Conflict. Neither the execution and delivery of this
Agreement or any other agreement or instrument to be executed and delivered in
connection herewith by Purchaser or any of its Affiliates nor the consummation
of the transactions contemplated hereby or thereby nor the fulfillment by
Purchaser or any of its Affiliates of any of the terms contemplated hereby or
thereby will:
(a) conflict with or result in a breach by Purchaser or
any of its Affiliates of, or constitute a default under, or create an event
that, with the giving of notice or the lapse of time, or both, would be a
default under or breach of, any of the terms, conditions or provisions of (i)
any indenture, mortgage, lease, deed of trust, pledge, loan or credit agreement
or any other material contract, arrangement or agreement to which Purchaser or
any of its Affiliates is a party or to which any of the assets of Purchaser or
any of its Affiliates is subject, (ii) the articles/certificate of incorporation
or bylaws (or equivalent governing documents) of Purchaser or any of its
Affiliates or (iii) any judgment, order, writ, injunction, decree or demand of
any Governmental Entity applicable to Purchaser or any of its Affiliates;
(b) result in the creation or imposition of any
Encumbrance which will materially affect the ability of Purchaser or any of its
Affiliates to conduct their business as conducted prior to the date of this
Agreement; or
(c) cause a loss or adverse modification of any permit,
license, or other authorization granted by any Governmental Entity to or
otherwise held by Purchaser or any of its Affiliates which is necessary to
operate their respective businesses prior to the Closing.
3.4 No Finders or Brokers. Neither Purchaser nor any of its
Affiliates has entered into any agreement, arrangement or understanding with any
Person to pay any finder's fee, brokerage commission, advisory fee or similar
payment in connection with this Agreement or the transactions contemplated
hereby.
3.5 Investment Representations.
(a) Purchaser and each of its Affiliates is acquiring
the Acquired Stock for investment purposes only, for its own account and not as
a nominee or agent for any other Person, and not with a view to or for resale in
connection with any distribution thereof within the meaning of the Securities
Act of 1933, as amended (the "Securities Act").
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(b) Neither Purchaser nor any of its Affiliates has any
contract, understanding, agreement or other arrangement or commitment, formal or
informal, with any Person to sell, transfer or pledge the Acquired Stock, or any
portion thereof, and neither Purchaser nor any of its Affiliates has any present
plans to enter into any such contract, understanding, agreement, arrangement or
commitment.
(c) Purchaser and each of its Affiliates is capable of
evaluating the merits and risks of their investment in the Acquired Stock and
has the capacity to protect its own interests in connection with the
transactions contemplated hereby.
3.6 Litigation. There is no Proceeding pending, or to
Purchaser's Knowledge, threatened against or affecting Purchaser or any of its
Affiliates seeking to prevent or delay the consummation of the transactions
contemplated by this Agreement.
3.7 Financing. Purchaser has provided Seller with a copy of
a commitment letter from Foothill Capital relating to senior debt financing to
be provided to Purchaser or its Affiliates, which as of the date hereof is in
full force and effect in accordance with the terms and conditions set forth
therein.
ARTICLE 4
COVENANTS OF SELLER
Seller hereby covenants and agrees that from the date of this
Agreement until the Closing Date, unless another time period is specified:
4.1 Access. Purchaser and its counsel, accountants, other
representatives and lenders have had, and will continue to have, reasonable
access during normal business hours to all properties, books, accounts, records,
contracts, documents, key senior management personnel, independent accountants
and legal counsel of Seller and its Affiliates with respect to the Business.
Seller and its Affiliates shall furnish or cause to be furnished to Purchaser
and its representatives all data and information concerning the Business that
may reasonably be requested by Purchaser.
4.2 Conduct of Business. Except as specifically contemplated
in this Agreement, from the date of this Agreement to the Closing Date, the
Business will be operated only in the ordinary course of business, consistent
with past custom and practice, and Seller shall not and shall not permit any of
its Affiliates to (without the prior written approval of Purchaser, which will
not be unreasonably withheld):
(a) enter into any material contract, commitment or
other transaction relating to the Business, except in the ordinary course of
business consistent with past custom and practice;
(b) materially modify, amend, cancel or terminate any
Material Contract, except in the ordinary course of business consistent with
past custom and practice;
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(c) take any action which, or omit to take any action
the omission of which, would require disclosure under Section 2.7 hereof;
(d) agree to do any of the actions described in the
preceding clauses (a) through (c).
4.3 No Solicitation.
(a) From and after the date hereof until the earlier of
the Closing Date and the termination of this Agreement pursuant to Article 7,
Seller and its Affiliates shall not, and shall cause each of their respective
officers, directors, employees, agents, counsel, accountants, investment
bankers, financial advisors and representatives (collectively, the "Seller
Representatives") not to, directly or indirectly, (i) solicit, initiate or
encourage (including by way of furnishing information or assistance, except for
any information which Seller's independent legal counsel advises Seller it is
obliged to furnish pursuant to the City Code on Takeovers and Mergers), or take
any other action to facilitate, any inquiry in connection with or the making of
any proposal from any Person that constitutes, or may reasonably be expected to
lead to, an Acquisition Proposal (as defined below), (ii) enter into, explore,
maintain, participate in or continue any discussion or negotiation with any
Person (other than Purchaser or any of its representatives) regarding an
Acquisition Proposal, or furnish to any Person (other than Purchaser or any of
its representatives) any information (except for any information which Seller's
independent legal counsel advises Seller it is obliged to furnish pursuant to
the City Code on Takeovers and Mergers) or otherwise cooperate in any way with,
or assist or participate in, facilitate or encourage, any effort or attempt by
any other Person (other than Purchaser or any of its representatives) to make or
effect an Acquisition Proposal, (iii) enter into any agreement, arrangement or
understanding with respect to, or otherwise endorse, any Acquisition Proposal or
(iv) authorize or permit any Seller Representative to take any such action;
provided that nothing contained in this Section 4.3 shall prohibit Seller's
board of directors, prior to approval of this Agreement by the stockholders of
Seller at the Stockholders Meeting, from furnishing information to, or engaging
in discussions or negotiations with, any Person that makes an unsolicited bona
fide written Acquisition Proposal (which did not result from a breach of this
Section 4.3) if (A) Seller's board of directors determines in good faith after
consultation with independent outside legal counsel, that such action is
necessary for Seller's board of directors to comply with its fiduciary duties to
Seller's stockholders under applicable law or in order to comply with their
obligations under the City Code on Takeovers and Mergers (it being agreed the
directors' obligations under the City Code on Takeovers and Mergers shall be
limited to the obligation to furnish obligation, and not to engage in
discussions or negotiations with, any such Person), (B) the Acquisition Proposal
constitutes or would reasonably be expected to lead to a Superior Proposal (as
defined below) and (C) prior to furnishing such information to, or engaging in
discussions or negotiations with, such Person, Seller receives from such Person
an executed confidentiality agreement (which agreement shall be provided to
Purchaser for information purposes) with terms materially no less favorable to
Seller than those contained in the confidentiality agreement between Seller and
Golden Gate Private Equity, Inc.
(b) From and after the date hereof until the earlier of
the Closing Date and the termination of this Agreement pursuant to Article 7, if
Seller's board of directors is entitled to
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furnish information to, or engage in discussions or negotiations with, any
Person on the terms contemplated in Section 4.3(a), Seller's board of directors
may, prior to the approval of this Agreement by the stockholders of Seller at
the Stockholders Meeting, terminate this Agreement in respect of any Acquisition
Proposal pursuant to the termination provisions set forth in Article 7 hereof if
(A) such Acquisition Proposal constitutes a Superior Proposal and (B) Seller's
board of directors shall have determined in good faith after consultation with
independent outside legal counsel, that such action is necessary for Seller's
board of directors to comply with its fiduciary duties to Seller's stockholders
under applicable law.
(c) Seller (i) will promptly (but in any event within
one business day) notify Purchaser orally and in writing of the receipt of any
Acquisition Proposal or any inquiry regarding the making of an Acquisition
Proposal including any request for information, the terms and conditions of such
request, Acquisition Proposal or inquiry and the identity of the Person making
such request, Acquisition Proposal or inquiry and (ii) will keep Purchaser
informed on a timely basis of the status and details (including amendments and
proposed amendments) of any such request, Acquisition Proposal or inquiry. Prior
to furnishing information to, or engaging in discussions or negotiations with,
any Person that makes an unsolicited bona fide written Acquisition Proposal as
permitted in accordance with Section 4.3(a), Seller's board of directors shall
promptly (but in any event within one business day) notify Purchaser orally and
in writing of any action it proposes to take with respect to such Acquisition
Proposal. After taking any such action, Seller's board of directors shall
promptly advise Purchaser orally and in writing of the status of such action as
developments arise or as requested by Purchaser. Notwithstanding any provision
in this Agreement to the contrary, at least five business days (the "Five Day
Period") prior to terminating this Agreement pursuant to Section 4.3(b),
Seller's board of directors shall notify Purchaser of any such action it
proposes to take and, during the Five Day Period, Seller's board of directors
shall negotiate in good faith with Purchaser with respect to any revised
proposal to acquire the Business that Purchaser may make prior to or during the
Five Day Period.
(d) None of Seller or its board of directors shall,
except as permitted by Section 4.3(b), propose to approve or recommend any
Acquisition Proposal. Without limiting the foregoing, it is understood and
agreed that any violation of the restrictions set forth in the preceding
sentence by any Seller Representative, whether or not acting on behalf of Seller
or any of its Affiliates, shall be deemed to be a breach of this Section 4.3 by
Seller.
(e) Seller shall immediately cease and cause its
Affiliates and the Seller Representatives to immediately cease any and all
existing activities, discussions or negotiations with any parties (other than
Purchaser or any of its representatives) conducted heretofore with respect to
any Acquisition Proposal, and shall use its reasonable best efforts to cause any
such parties in possession of confidential information about the Business that
was furnished by or on behalf of Seller to return or destroy all such
information in the possession of any such party.
(f) For purposes of this Agreement, "Acquisition
Proposal" shall mean any offer or proposal for, or any indication of interest
in, (i) any direct or indirect acquisition or purchase of 10% or more of the
total assets of the Business, in a single transaction or series of transactions,
(ii) any direct or indirect acquisition or purchase of 10% or more of any class
of
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equity securities of the Business, in a single transaction or series of
transactions, (iii) any merger, consolidation, share exchange, business
combination, recapitalization, reclassification or other similar transaction
involving the Business or (iv) any public announcement of an agreement,
proposal, plan or intention to do any of the foregoing, other than the
transactions contemplated by this Agreement.
(g) For purposes of this Agreement, "Superior Proposal"
shall mean any bona fide written Acquisition Proposal by a Person that (i)
Seller's board of directors has determined in good faith, after consultation
with an independent financial advisor of recognized reputation, is more
favorable from a financial point of view to Seller's stockholders than the
transactions contemplated hereby (including any adjustment to the terms and
conditions thereof proposed in writing by Purchaser in response to any such
Acquisition Proposal) and (ii) is reasonably capable of being consummated in a
timely manner (taking into account all financial, regulatory, legal and other
aspects of such proposal (including, without limitation, any antitrust or
competition law approvals or non-objections)) and for which financing, to the
extent required, is then committed or reasonably capable (in the good faith
judgment of Seller's board of directors) of being financed by such third party.
4.4 Intercompany Accounts. Effective immediately prior to
the Closing, all intercompany receivables, payables, loans and investments and
any other intercompany accounts of any type or nature then existing between
Seller or any of its Affiliates that is not an Acquired Subsidiary, on the one
hand, and any Acquired Subsidiary, on the other hand, shall be settled, canceled
or otherwise terminated or eliminated. Seller shall indemnify and hold harmless
Purchaser, each of its Affiliates and each Acquired Subsidiary and their
respective directors, shareholders, partners, officers, employees, agents,
consultants, representatives, successors, transferees and assigns, from and
against any and all Taxes incurred or payable, to the extent arising out of, or
related to the consummation of any of the transactions contemplated by this
Section 4.4.
4.5 Third Party Standstill Agreements. During the period
from the date of this Agreement through the Closing Date, without the prior
written consent of Purchaser (not to be unreasonably withheld), Seller shall not
terminate, amend, modify or waive any material provision of any confidentiality
agreement that related to the Business or any standstill agreement to which
Seller is a party (other than any such agreement involving Golden Gate Private
Equity, Inc. or its Affiliates). During such period, Seller agrees to enforce,
to the fullest extent permitted under applicable law, the provisions of any such
agreements, including, but not limited to, seeking injunctions to prevent any
breaches of such agreements to enforce specifically the terms and provisions
thereof.
4.6 Solicitation of Shareholder Approval.
(a) Seller, acting through its board of directors,
shall, in accordance with applicable law and its constitutional documents, duly
call, give notice of, convene and hold an extraordinary general meeting of its
stockholders (the "Stockholders Meeting") as soon as practicable following the
execution of this Agreement for the purpose of considering and voting upon the
approval and adoption of this Agreement, the transactions contemplated hereby
and
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such other matters as may be necessary to effectuate the transactions
contemplated hereby. Seller's board of directors shall (i) recommend to the
stockholders of Seller the approval and adoption of this Agreement and the
transactions contemplated hereby, (ii) include in the Seller Disclosure Document
such favorable recommendation of Seller's board of directors that the
stockholders of Seller vote in favor of the approval and adoption of this
Agreement and the transactions contemplated hereby, (iii) take all permitted
lawful action to solicit approval from Seller's institutional stockholders and
(iv) not withdraw or modify such favorable recommendation, in each case, unless
Seller's board of directors, after consultation with independent outside legal
counsel, determines in good faith that failing to take such action is necessary
for Seller's board of directors to comply with its fiduciary duties to Seller's
stockholders under applicable law. Seller agrees that its obligations set forth
in the first sentence of this Section 4.6(a) shall not be affected by the
withdrawal or modification by Seller's board of directors, in accordance with
the immediately preceding sentence, of its recommendation to Seller's
stockholders that such stockholders approve and adopt this Agreement and the
transactions contemplated hereby.
(b) As soon as practicable following the execution of
this Agreement and in connection with the Stockholders Meeting, Seller shall (i)
promptly prepare and file with the UK Listing Authority (the "UKLA") (but in no
event later than four days after the date hereof), use its best efforts to have
approved by the UKLA and thereafter mail to its stockholders as promptly as
practicable a Class 1 Shareholder Circular (the "Seller Disclosure Document") in
accordance with the listing rules of the Financial Services Authority for the
purposes of Part IV of the Financial Services Act (the "Listing Rules"), (ii)
notify Purchaser of the receipt of any comments of the UKLA with respect to the
Seller Disclosure Document and of any requests by the UKLA for any amendment or
supplement thereto or for additional information and shall promptly provide to
Purchaser copies of all correspondence between Seller or any representative of
Seller and the UKLA, (iii) shall give Purchaser and its counsel the opportunity
to review the Seller Disclosure Document prior to its being filed with the UKLA
and shall give Purchaser and its counsel the opportunity to review all
amendments and supplements to the Seller Disclosure Document and all responses
to requests for additional information and replies to comments prior to their
being filed with, or sent to, the UKLA, (iv) subject to the terms of Section
4.6(a), use its best efforts to obtain the necessary approvals by its
stockholders of this Agreement and the transactions contemplated hereby and (v)
use its best efforts otherwise to comply with all legal requirements applicable
to such meeting.
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ARTICLE 5
MUTUAL COVENANTS OF PURCHASER AND SELLER
5.1 Post Closing Cooperation. After the Closing, each party
shall cooperate with the other to the extent reasonably requested, and make
available to the requesting party all financial, insurance, tax and other
information (including reasonable access to books and records and personnel)
with respect to any fiscal period ending on or prior to the Closing Date to the
extent required by the requesting party in connection with (i) any audit or
other investigation by any taxing authority, (ii) the prosecution or defense of
any tax claims or related litigation that might give rise to indemnification
payments hereunder, (iii) the preparation by the requesting party of tax returns
or any other reports or submissions to any Governmental Entity required to be
made or (iv) in connection with the contesting by either party or defending by
either party against any action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand with respect to any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, failure to act or transaction involving the Business, the Division or
the Division Assets on, prior to or after the Closing Date, including, but not
limited to, the shareholder litigation pending on the date hereof; provided that
in any such case, such cooperation and availability of information may be done
in a manner so as to not unreasonably interfere with the normal business of the
cooperating party and the requesting party shall bear all out-of-pocket costs
incurred by the cooperating party in providing such assistance. Each party shall
preserve all such information, including without limitation, the books and
records of the Division and the Acquired Subsidiaries, for at least six (6)
years after the Closing Date; provided that the books and records related to
Seller's on-going shareholder litigation shall be preserved until such time as
Seller advises Purchaser that such litigation has reached a final,
non-appealable resolution.
5.2 Payments With Respect to Accounts Receivable. Following
the Closing Date, Seller shall continue to remit to Purchaser all monies
received by Seller or any of its Affiliates in payment for any accounts
receivable included in the Division Assets acquired by Purchaser as of the
Closing Date pursuant to this Agreement. Payments remitted to Purchaser pursuant
to this Section 5.2 shall be accompanied by a description of the accounts
receivable to which they relate, including an invoice and/or account number, as
applicable and as available from normal accounting systems of the Seller or its
Affiliates. Seller shall periodically provide Purchaser with such additional
evidence or supporting detail as Purchaser may reasonably request regarding
particular payments or outstanding accounts. With respect to any accounts
receivables constituting Division Assets transferred to Purchaser or its
Affiliates which have been commingled with accounts receivable of any of
Seller's or its Affiliates' other businesses, each party and its Affiliates
shall have the right to collect any such commingled accounts receivable which
are owned by such party or its Affiliates from and after the Closing Date,
following advice from and consultation with the other party so as to preserve
the other party's business relationships with its customers. Each party shall
promptly account for any portion of such commingled accounts receivable which do
not relate to their respective businesses and promptly remit any such amounts to
the other party or its Affiliates. At either party's request, the
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other party or its Affiliates shall use commercially reasonably efforts to
assist the requesting party or its Affiliates in the collection of any such
commingled accounts receivable.
5.3 Fulfillment of Conditions.
(a) Seller will use all reasonable efforts, and will
cause each of its Affiliates to use all reasonable efforts, to perform, comply
with and fulfill all obligations, covenants and conditions required by this
Agreement to be performed, complied with or fulfilled by any of them prior to or
as of the Closing Date. Purchaser will use all reasonable efforts, and will
cause each of its Affiliates to use all reasonable efforts, to perform, comply
with and fulfill all obligations, covenants and conditions required by this
Agreement to be performed, complied with or fulfilled by any of them prior to or
as of the Closing Date. Between the date hereof and the Closing Date, the
parties will mutually agree upon and finalize the schedules to be appended to
the Transition Services Agreement as Exhibit I and Exhibit II thereto (detailing
the transition services to be provided, the price or cost thereof and the term
such services are to be provided).
(b) Seller will use all reasonable efforts, and will
cause each of its Affiliates to use all reasonable efforts, to secure all
necessary consents, waivers, permits, approvals, licenses and authorizations and
will make, and will cause each of its Affiliates to make, all necessary filings
in order to enable the parties to consummate the transactions contemplated
hereby, including but not limited to any filing required pursuant to the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") and any
applicable foreign antitrust laws. Purchaser will use all reasonable efforts,
and will cause each of its Affiliates to use all reasonable efforts, to secure
all necessary consents, waivers, permits, approvals, licenses and authorizations
and will make all necessary filings in order to enable Purchaser to consummate
the transactions contemplated hereby, including but not limited to any required
filings under the HSR Act and any applicable foreign antitrust laws.
5.4 Further Assurances. Each of the parties hereto agrees to
use all reasonable efforts to take, or cause to be taken, all action, and to do,
or cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement, including,
without limitation, any such action in relation to the granting of security by
Purchaser or any of its Affiliates (including any Acquired Subsidiary) in
connection with the financing necessary for the consummation of the transactions
contemplated hereby.
5.5 Confidentiality.
(a) Until the Closing, each party shall treat in
confidence and not disclose to any third Person any confidential information
which such party shall have obtained regarding the other party. In the event the
sale and purchase called for by this Agreement shall not be consummated,
Purchaser, on the one hand, and Seller, on the other hand, shall return or
destroy (verified in writing) all copies of documents and materials constituting
confidential information (whether or not such information is marked or
designated as "confidential") which have been furnished by the other in
connection with this Agreement. However, nothing contained herein shall prohibit
any party from (i) using such documents, materials and other information in
connection with any action or proceeding brought or any claim asserted with
respect to any
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breach of any representation, warranty or covenant made in or pursuant to this
Agreement; (ii) supplying or filing such documents, materials or other
information to or with any Governmental Entity or other Person which either
party deems reasonably necessary in connection with the obtaining of any
consent, waiver, amendment, modification, approval, authorization, permit or
license which may be necessary to effectuate this Agreement and to consummate
the transactions contemplated hereby; (iii) in the case of Seller, disclosing
information to the extent required to comply with Seller's obligations under the
Listing Rules and applicable securities laws; or (iv) supplying such documents,
materials or other information to such party's lenders, counsel, accountants and
other consultants and representatives in connection with the transactions
contemplated hereby.
(b) From and after the Closing Date, Seller and
Purchaser shall each treat, and shall cause each of their respective Affiliates
to treat, in confidence and shall not disclose, and cause their respective
Affiliates to not disclose, all confidential information with respect to the
Business, Seller and/or Purchaser, or their respective Affiliates, which are in
their possession or control, subject to the requirements of applicable
securities laws.
5.6 Personnel Matters.
(a) Transferred Employees. As of the Closing Date, the
parties agree that the employees of the Business shall only include (i) those
United States employees of the Business set forth in the Letter Agreement that
accept an offer of employment from Purchaser or one of its Affiliates (the "US
Transferred Employees") and (ii) (A) with respect to the Acquired Subsidiaries,
only those employees of the Acquired Subsidiaries set forth in the Letter
Agreement (and, in the case of the UK Acquired Subsidiary, prior to the Closing,
Seller shall cause the employment of the U.K. employees set forth in the Letter
Agreement is transferred to the UK Acquired Subsidiary) and (B) with respect to
any portion of the Business conducted outside of the United States other than
through an Acquired Subsidiary, only those foreign employees set forth in the
Letter Agreement who accept the offer of employment (without any rejection
thereof as permitted under applicable law) made by Purchaser or one of its
Affiliates or, in the case of local law which provides for a transfer of
employment, those foreign employees set forth in the Letter Agreement whose
employment is so transferred to Purchaser or one of its Affiliates (the
employees described in clauses (A) and (B) collectively, the "Foreign
Transferred Employees", and together with the US Transferred Employees, the
"Transferred Employees"). In furtherance of the foregoing, (i) the employment of
each US Transferred Employee and the employment of each Foreign Transferred
Employee referred to in clause (B) of the preceding sentence will be terminated
by Seller or its applicable Affiliate immediately prior to the Closing and (ii)
Seller and its Affiliates will cause the employment of each employee of any of
the Acquired Subsidiaries, other than those persons described in clause (A) of
the preceding sentence, to be terminated not later than immediately prior to the
Closing. The employment of each Transferred Employee shall be on substantially
similar terms to those in effect prior to the Closing Date (other than with
respect to equity-based compensation). As of the Closing Date, the parties will
prepare, and update as a supplemental schedule to the Letter Agreement, a list
of Transferred Employees to reflect hiring and termination activity between the
date hereof and the Closing Date.
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(b) Employee Costs. Except for any liabilities or
obligations with respect to the Transferred Employees included in the
determination of Actual Tangible Net Book Value included in the Closing Date
Balance Sheet, (i) neither Purchaser nor any of its Affiliates (including,
without limitation, any Acquired Subsidiary) shall assume or in any way be
liable for any liability or obligation with respect to Seller's or its
Affiliates' employees, former employees or retirees, regardless of when such
liability or obligation arises or is incurred (whether on, prior to or after the
Closing Date), (ii) Seller and its Affiliates shall be solely responsible for
the payment of all wages, salaries and other compensation and employee benefits
(including, without limitation, any severance pay, insurance, supplemental
pension, deferred compensation, "stay" or other similar incentive bonuses,
change-in-control bonuses (or other bonuses related to the execution, delivery
or performance of this Agreement), retirement and any other benefits, premiums
and claims and related costs) to any of Seller's or its Affiliates' employees,
former employees or retirees and (iii) except as required by operation of law,
neither Purchaser nor any of its Affiliates shall assume any liability or
obligation with respect to any employee benefit plan of any kind or nature
maintained by Seller or any of its Affiliates for any of their employees, former
employees or retirees.
(c) Certain Foreign Employee Matters. Neither Purchaser
nor any of its Affiliates shall have any obligation to provide employment to any
non-United States employee of the Business (a "Foreign Employee") who properly
objects to becoming a Foreign Transferred Employee. If a Foreign Employee so
objects, or refuses to assent to the consummation of the transactions
contemplated hereby, Purchaser and its Affiliates shall have no liability or
obligation to such Foreign Employee and Seller shall be fully responsible for
any liability or obligation with respect to such Foreign Employee. Seller shall
indemnify and save harmless Purchaser and its Affiliates (including, without
limitation, any Acquired Subsidiary) from any and all claims, actions,
obligations, liabilities and damages of any kind, in law or in equity, and
including legal fees, arising out of, relating to or based in any way upon the
employment relationship of any Foreign Employee with Seller or its Affiliates
prior to the Closing Date or with Purchaser or its Affiliates on and after the
Closing Date, including reimbursement of all compensation and benefit costs
related to such persons, if (i) such person received a notice of termination on
or prior to the Closing Date, (ii) Seller or its Affiliates terminated or
attempted to terminate such person on or prior to the Closing Date but such
termination or attempted termination is invalid for any reason, (iii) such
person is classified as a Foreign Transferred Employee by operation of law or
otherwise but such person is not listed in the Letter Agreement or (iv) Seller
or its Affiliates have failed to comply with applicable law on or prior to the
Closing Date, whether by failure to properly consult with employees in
connection with the transactions contemplated hereby or otherwise.
(d) Except to the extent otherwise set forth in the
Transition Services Agreement, Transferred Employees shall not accrue benefits
under any employee benefit policy, plan, arrangement, program or agreement of
Seller or its Affiliates after the Closing Date. Notwithstanding the foregoing,
except with respect to any liability or obligation included in the determination
of Actual Tangible Net Book Value included in the Closing Date Balance Sheet,
Seller shall be responsible for all benefits accrued, claims incurred or
obligations arising with respect to the Transferred Employees' service with
Seller or its Affiliates on or prior to the
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Closing Date, and Seller shall satisfy such responsibility by paying to
Purchaser the amount of any such pre-Closing Date obligations which are assumed
by Purchaser or its Affiliates, by operation of law or by express assumption.
(e) Seller is wholly responsible for complying with all
applicable health care continuation coverage requirements under the law commonly
known as COBRA with respect to the employees of the Business as to qualifying
events that occur on or prior to the Closing Date, and Purchaser is wholly
responsible for complying with such coverage requirements with respect to
employees employed by Purchaser and its Affiliates from and after the Closing
Date who have qualifying events that occur after the Closing.
(f) As soon as reasonably practicable after the Closing
Date and to the extent permitted by law (it being agreed that, to the extent
such documents may be amended in accordance with applicable law to permit the
transfer contemplated hereby, such plan documents shall be so amended), Seller
shall cause the Trustees of the Merant, Inc. 401(k) Plan ("Merant Plan") to
transfer (in the form of cash and notes associated with plan loans) the US
Transferred Employees' vested and nonvested account balances (and all related
assets and liabilities) to one or more defined contribution plans established by
Purchaser or its Affiliates ("Purchaser's 401(k) Plan"). Seller agrees not to
place any US Transferred Employees' plan loan into default if such employee's
account balance is to be transferred in accordance with the preceding sentence.
(g) In the event that medical or dental insurance
coverage under Purchaser's welfare plans is not available for the US Transferred
Employees as of the Closing Date, Seller agrees to provide medical continuation
coverage to such employees and their covered dependents for up to three months
following the Closing Date in accordance with Section 4980B of the Code;
provided that the appropriate premiums are paid on a timely basis.
5.7 Third Party Consents. Prior to the Closing Date, Seller
shall, and shall cause each of its Affiliates to, use their respective best
efforts to obtain all necessary third party consents required in connection with
the transfer to Purchaser of the Division Assets, each Scheduled Contract (as
defined in Section 6.1(e)) and the Assumed Liabilities, and shall advise
Purchaser from time to time, or as requested by Purchaser, regarding the status
of such consents. If any contract to be assigned to Purchaser hereunder requires
the consent of a third party which has not been obtained as of the Closing Date,
this Agreement shall not be deemed to effect an assignment of such contract. In
such a case, with respect to any such Scheduled Contracts only, Seller agrees
that it shall, and shall continue to cause its Affiliates to, use their
respective best efforts to obtain the required consent to the assignment of such
Scheduled Contracts, and Seller shall bear the risk of loss of any such
Scheduled Contract which is not properly transferred to Purchaser in accordance
with the terms thereof as in effect as of the date hereof, and Seller shall
indemnify and hold Purchaser harmless from any Loss incurred by Purchaser or any
of its Affiliates with respect to, in connection with or arising from the
failure to obtain any such required consent with respect to any such Scheduled
Contract, including any loss of any future benefit or revenue under any such
Scheduled Contract, including, without limitation, any minimum guaranteed
payments. Unless and until such consent is obtained, Purchaser will perform and
fulfill, on a subcontractor basis, the obligations of Seller or its Affiliates
to be performed under such Scheduled Contracts after the Closing Date in
accordance with the terms
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thereof as in effect as of the date hereof, and Seller will, and will cause its
Affiliates to, remit to Purchaser all payments received in connection with such
Scheduled Contracts.
5.8 Public Announcements. From and after the date hereof
through and including the Closing Date, except as required by law or regulation,
no press releases or other public announcements relating to the transactions
contemplated hereby will be issued or otherwise released by any party without
the prior written consent of the other party. If Seller or Purchaser or any of
their respective Affiliates is required by law or regulation to make any public
announcements relating to the transactions contemplated hereby from and after
the date hereof through and including the Closing Date, such party will submit
its proposed announcement in advance to the other party and will give it a
reasonable opportunity in the circumstances to comment thereon in advance of
release. This Section 5.8 shall not apply to publication of the Seller
Disclosure Document to which Section 4.6 will apply.
5.9 Certain Notifications. At all times from the date hereof
and prior to the Closing Date, each party shall promptly notify the other party
in writing of the occurrence of any event known to such party which will or is
likely to result in the failure to satisfy any of the conditions specified in
Article 6 hereof.
5.10 Tax Matters.
(a) Taxable Periods Ending on or Before the Closing
Date. Seller shall prepare, or cause to be prepared and file or cause to be
filed, all Tax Returns for the Acquired Subsidiaries for all taxable periods
ending on or prior to the Closing Date which are filed after the Closing Date
(excluding any income and franchise Tax Returns with respect to periods for
which the operations of such Acquired Subsidiaries are included in the
consolidated, unitary or combined income Tax Returns of Seller or its
Affiliates, for which Seller will bear sole responsibility for the preparation,
filing and payment of all Taxes with respect thereto). Seller shall permit
Purchaser to review and comment on each such Tax Return described in the
preceding sentence prior to filing. Seller shall pay for Taxes of the Acquired
Subsidiaries with respect to such periods when such Taxes are due and payable.
Seller shall be entitled to all tax refunds for the Acquired Subsidiaries for
all taxable periods ending on or prior to the Closing Date (except to the extent
such refunds result from losses arising after the Closing Date), and Purchaser
shall, and shall cause its Affiliates to, at Seller's request and sole cost,
file for such refunds and fully cooperate to obtain the same. Purchaser shall
pay Seller any such refund amounts to which Seller is entitled pursuant to this
Section 5.10(a) within five (5) days of Purchaser's receipt of the same.
(b) Taxable Periods Beginning Before and Ending
After the Closing Date. Purchaser shall prepare, or cause to be prepared and
file or cause to be filed, any Tax Returns for the Acquired Subsidiaries for
taxable periods which begin before the Closing Date and end after the Closing
Date. Seller shall pay Purchaser no later than five (5) days prior to the date
on which Taxes are paid with respect to such periods an amount equal to the
portion of such Taxes which relates to the portion of such taxable period ending
on the Closing Date. For purposes of this Section 5.10, in the case of any Taxes
that are imposed on a periodic basis and are payable for a taxable period that
includes (but does not end on) the Closing Date, the portion
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of such Tax which relates to the portion of such taxable period ending on the
Closing Date shall (x) in the case of any Taxes other than Taxes based upon or
related to income, be deemed to be the amount of such Tax for the entire taxable
period multiplied by a fraction the numerator of which is the number of days
from the beginning of the taxable period and ending on the Closing Date and the
denominator of which is the number of days in the entire taxable period and (y)
in the case of any Tax based upon or related to income be deemed equal to the
amount which would be payable if the relevant taxable period ended on the
Closing Date. Any Tax refunds for taxable periods which begin before the Closing
Date and end after the Closing Date shall be shared by the parties as described
in this Section 5.10(b) and in accordance with Section 5.10(a).
(c) Additional Tax Indemnification. In addition to
the Taxes to be borne by Seller under Section 5.10(a) and Section 5.10(b) above,
Seller shall be liable for, and shall indemnify and hold Purchaser, each of its
Affiliates and each Acquired Subsidiaries harmless against, without duplication,
(i) all liability (whether as a result of Treasury Regulation Section 1.1502-6
or any similar provision of state, local or non-U.S. law, as a transferee, by
contract or otherwise) for Taxes of any Person (other than the Acquired
Subsidiaries) based on an affiliation, contractual relationship or other
relationship existing at any time prior to the Closing, (ii) any liability for
Tax of an Acquired Subsidiary arising as a result of the Acquired Subsidiary
ceasing to be an Affiliate of Seller as of the Closing or (iii) any liability
for Tax arising as a result of the Reorganization.
(d) Cooperation on Tax Matters. Purchaser and each
of its Affiliates, and Seller and each of its Affiliates shall cooperate fully,
as and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Section 5.10, or any amended return,
claim for refund, determining a liability for Taxes or a right to refund of
Taxes, or any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to any such
return, analysis, audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Each of the parties agree (A) to
retain all books and records with respect to Tax matters pertinent to the
Acquired Subsidiaries relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Purchaser or Seller, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority and (B) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests allowing such other
party to take possession of such books and records.
(e) Except as otherwise set forth herein, Purchaser
and Seller shall bear equally (i) the costs of all sales and use Taxes,
transfer, stamp and similar Taxes, if any, applicable to the consummation of the
transactions contemplated hereby and the consummation of the transactions in any
other agreement contemplated hereby (other than value-added or similar Taxes, to
the extent fully refundable to Purchaser) and (ii) the costs and expenses of
obtaining consents and approvals of governmental authorities or third parties
for the
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consummation of the transactions contemplated hereby (including, without
limitation, any consents required to be obtained in connection with the transfer
of any Contracts).
5.11 Use of Division Names. From and after the Closing, as
soon as is reasonably practicable, but no later than ninety (90) days after the
Closing, Seller shall amend the Articles of Incorporation or Certificate of
Incorporation of any of its Affiliates using any of the names of the Division
listed on Schedule 5.11 and shall remove, or shall cause to be removed, from the
exterior of the Seller's or any of its Affiliates' premises any such names
listed on said schedule or any related logo. After Closing, Seller and its
Affiliates shall have quantities of inventory, software, preprinted stationery,
packaging material and other supplies which bear such names and logos. With
respect to (i) such preprinted stationery, packaging material and other
supplies, for a period of up to six (6) months from the Closing Date and (ii)
inventory and software, for such period of time until such inventory or software
is sold or otherwise consumed in the ordinary course of business consistent with
past practice, Purchaser hereby grants to Seller and each of its Affiliates a
worldwide, non-exclusive, non-transferable, royalty-free license to use the
names and logos specified on Schedule 5.11 and any trademarks, service marks,
logos, corporate names, trade names or trade dress associated therewith
("Business Marks") solely in connection with the marketing of Seller's products
as the same exist as of the date hereof (other than the Software Products) and
in the operation of Seller's business; provided that (a) such use is in
accordance with Seller's trademark usage guidelines in effect as of the Closing
Date and (b) such license shall cease immediately upon the expiration of the
periods identified above. Any goodwill arising from such use shall inure to the
benefit of Purchaser. Seller agrees that the nature and quality of all goods and
services rendered by Seller in connection with the Business Marks shall be
advertised, offered and provided in a manner consistent with the quality control
standards previously used by Seller in connection with the Business. Upon any
termination of the licenses set forth above, Seller will no longer make any use
of the Business Marks. Purchaser will have the exclusive right to own, use,
hold, apply for registration for, and register the Business Marks during the
term of, and after the expiration or termination of, this license; Seller will
neither take nor authorize any activity inconsistent with such exclusive right.
Seller and its Affiliates shall not be entitled to use the Business Marks except
as provided in this Section 5.11 or as otherwise permitted in accordance with
the Transition Services Agreement.
5.12 MERANT Name. From and after the Closing, as soon as is
reasonably practicable, but no later than ninety (90) days after the Closing,
Purchaser shall amend the Articles of Incorporation or Certificate of
Incorporation of any Acquired Subsidiary using the name "MERANT" and shall
remove, or shall cause to be removed, from the exterior of the Acquired
Subsidiaries' premises the "MERANT" name and "MERANT" logo. After Closing,
Purchaser and its Affiliates shall have quantities of inventory, software,
preprinted stationery, packaging material and other supplies which bear the
"MERANT" name and logo. With respect to (i) such preprinted stationery,
packaging material and other supplies, for a period of up to six (6) months from
the Closing Date and (ii) inventory and software, for such period of time until
such inventory or software is sold or otherwise consumed in the ordinary course
of business consistent with past practice, Seller hereby grants to Purchaser and
each of its Affiliates a worldwide, non-exclusive, non-transferable,
royalty-free license to use the "MERANT" name and logo and any trademarks,
service marks, logos, corporate names, trade names or trade dress
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associated therewith ("Merant Marks") solely in connection with the marketing of
the Software Products and in the operation of the Business; provided that (a)
such use is in accordance with Seller's trademark usage guidelines in effect as
of the Closing Date and (b) such license shall cease immediately upon the
expiration of the periods identified above. Any goodwill arising from such use
shall inure to the benefit of Seller. Purchaser agrees that the nature and
quality of all goods and services rendered by Purchaser in connection with the
Merant Marks shall be advertised, offered and provided in a manner consistent
with the quality control standards previously used by Seller in connection with
the Business. Upon any termination of the licenses set forth above, Purchaser
will no longer make any use of the Merant Marks. Seller will have the exclusive
right to own, use, hold, apply for registration for, and register the Merant
Marks during the term of, and after the expiration or termination of, this
license; Purchaser will neither take nor authorize any activity inconsistent
with such exclusive right. Purchaser and its Affiliates shall not be entitled to
use the "MERANT" name and/or logo except as provided in this Section 5.12 or as
otherwise permitted in accordance with the Transition Services Agreement.
5.13 Cooperation Regarding Minimization of Costs. Purchaser
and Seller hereby agree to work cooperatively from and after the date hereof
(including during the period following the Closing Date) to minimize any costs
and expenses to be shared by Purchaser and Seller pursuant to the terms of this
Agreement. Furthermore, Purchaser and Seller hereby agree to work cooperatively
from and after the date hereof (including during the period following the
Closing Date) to minimize the costs and expenses that may result from the
separation of the Business from Seller's other business operations in order to
reduce or eliminate any adverse economic exposure to Purchaser; provided that
Seller shall not be required to take any action that would, in any material
respect, adversely affect Seller or its other business operations.
ARTICLE 6
CONDITIONS OF CLOSING
6.1 Conditions of Obligations of Purchaser. The obligation
of Purchaser to consummate the transactions contemplated hereby is subject to
the satisfaction of the following conditions, any of which may be waived by
Purchaser:
(a) Representations and Warranties; Performance of
Obligations. The representations and warranties of Seller set forth in Article 2
hereof, and in all agreements, documents and instruments executed and delivered
pursuant hereto or in connection with the Closing shall be true and correct in
all material respects as of the Closing Date. Seller and each of its Affiliates
shall have performed in all material respects the agreements and obligations
required to be performed by them under this Agreement prior to the Closing Date.
(b) Bring-Down Certificate. Purchaser shall have
received a certificate, dated the Closing Date, signed by an officer of Seller,
certifying that the conditions specified in Section 6.1(a) have been fulfilled.
(c) Certificate of Secretary. Purchaser shall have
received a certificate, dated the Closing Date, signed by the Secretary or any
Assistant Secretary of Seller, attesting to
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the completion of all necessary action by Seller and each of its Affiliates with
respect to the transactions contemplated by this Agreement, and including copies
of the constating documents of Seller and each of its Affiliates (including each
Acquired Subsidiary) and all corporate resolutions required in connection with
this Agreement.
(d) No Injunction. No preliminary or permanent
injunction or order that would prohibit or restrain the consummation of the
transactions contemplated hereunder shall be in effect and no Governmental
Entity or other third Person shall have commenced or threatened to commence an
action or proceeding seeking to enjoin the consummation of such transactions or
to impose liability on the parties hereto in connection therewith; provided that
Purchaser shall use commercially reasonable efforts to have any such order
vacated.
(e) Consents and Approvals. All necessary governmental
consents or approvals to the consummation of the transactions contemplated
hereby by Seller or any of its Affiliates shall have been obtained by Seller and
delivered to Purchaser, including any consents or approvals required under the
HSR Act and any applicable foreign antitrust laws or regulations. All consents
or approvals of each third party which are required in order to effect the
transfer of Contracts set forth on Schedule 6.1(e) (the "Scheduled Contracts")
representing not less than a majority of the expected minimum cash payments from
all such Scheduled Contracts during the two year period following the date
hereof will have been obtained (or such portion of such Contracts, if any, which
may be properly transferred without third party consent shall have been so
transferred) on terms and conditions no less favorable than in effect as of the
date hereof.
(f) Transition Services Agreement and Proprietary Rights
Agreement. Seller, on behalf of itself and its Affiliates, shall have executed
and delivered (i) a Transition Services Agreement in form and substance as set
forth on Exhibit C attached hereto together with Exhibit I and Exhibit II
thereto as contemplated in Section 5.3 above (the "Transition Services
Agreement") and the Transition Services Agreement shall be in full force and
effect as of the Closing and (ii) a Proprietary Rights Agreement in form and
substance as set forth on Exhibit D attached hereto, together with definitive
agreements incorporating the terms set forth in Schedule 5(b) thereto
(collectively, the "Proprietary Rights Agreement") and the Proprietary Rights
Agreement shall be in full force and effect as of the Closing.
(g) Noncompetition and Nonsolicitation Agreement.
Seller, on behalf of itself and each of its Affiliates, shall have executed and
delivered the Noncompetition and Nonsolicitation Agreement in the form and
substance attached hereto as Exhibit E, and such agreement shall be in full
force and effect as of the Closing.
(h) Deliveries of Seller. Seller shall have delivered or
cause to be delivered to Purchaser the following:
(i) possession of all of the Division Assets
(excluding, for avoidance of doubt, any Excluded Assets);
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(ii) one or more Assignments and Assumptions
and Bills of Sale, executed by Seller and/or its Affiliates transferring the
Division Assets and Assumed Liabilities, in the form attached hereto as
Exhibit F;
(iii) one or more Trademark Assignments,
executed by Seller and/or its Affiliates conveying any trademarks and service
marks included within the Division Assets, in the form attached hereto as
Exhibit G-1, one or more Copyright Assignments, executed by Seller and/or its
Affiliates conveying any copyrights included within the Division Assets, in the
form attached hereto as Exhibit G-2 and one or more Patent Assignments, executed
by Seller and/or its Affiliates, conveying any patents included within the
Division Assets, in the form attached hereto as Exhibit G-3;
(iv) one or more domain name transfer
documents conveying any domain names included among the Division Assets to
Purchaser;
(v) the opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.,
U.S. counsel to the Seller, and Macfarlanes, U.K. counsel to the Seller, dated
the Closing Date, which opinions will collectively address the items set forth
in Exhibit H attached hereto;
(vi) stock certificates representing the
Acquired Stock, with duly executed assignments or stock transfer forms separate
from certificate; and
(vii) other documents reasonably required to
be delivered by Seller or its Affiliates in order to effect the transactions
contemplated hereby, in form and substance reasonably satisfactory to Purchaser
and its counsel.
(i) Financing. Purchaser or its Affiliates shall have
obtained the proceeds of the financing described in the Foothill Capital
commitment letter referred to in Section 3.7 above on the terms and conditions,
and in the amounts, described therein.
(j) Indebtedness. Purchaser will have received payoff
letters with respect to all of the Acquired Subsidiaries' Indebtedness, if any,
(including any accrued interest related thereto and all prepayment premiums and
penalties incurred in connection with any prepayment thereof in connection with
the transactions contemplated by this Agreement), all of which is to be repaid
prior to Closing.
(k) Shareholder Approval. The transactions contemplated
by this Agreement shall have been approved and adopted at a meeting by the
requisite vote of the holders of the issued and outstanding shares of stock in
Seller entitled to vote thereon as required under Seller's organizational
documents, applicable law and the Listing Rules.
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6.2 Conditions of Obligations of Seller. The obligation of
Seller to consummate the transactions contemplated hereby is subject to the
satisfaction of the following conditions, any of which may be waived by Seller:
(a) Representations and Warranties; Performance of
Obligations. The representations and warranties of Purchaser set forth in
Article 3 hereof, and in all agreements, documents and instruments executed and
delivered pursuant hereto or in connection with the Closing shall be true and
correct in all material respects as of the Closing Date. Purchaser and each of
its Affiliates shall have performed in all material respects the agreements and
obligations required to be performed by them under this Agreement prior to the
Closing Date.
(b) Bring-Down Certificate. Seller shall have received a
certificate, dated the Closing Date, signed by an officer of Purchaser,
certifying that the conditions specified in Section 6.2(a) have been fulfilled.
(c) Certificate of Secretary. Seller shall have received
a certificate, dated the Closing Date, signed by the Secretary or any Assistant
Secretary of Purchaser, attesting to the completion of all necessary action by
Purchaser and each of its Affiliates with respect to the transactions
contemplated by this Agreement, and including copies of the constating documents
of Purchaser and each of its Affiliates and all corporate resolutions required
in connection with this Agreement.
(d) No Injunction. No preliminary or permanent
injunction or order that would prohibit or restrain the consummation of the
transactions contemplated hereunder shall be in effect and no Governmental
Entity or other third Person shall have commenced or threatened to commence an
action or proceeding seeking to enjoin the consummation of such transactions or
to impose liability on the parties hereto in connection therewith; provided that
Seller shall use commercially reasonable efforts to have any such order vacated
(e) Consents and Approvals. All necessary governmental
consents or approvals to the consummation of the transactions contemplated
hereby by Purchaser or any of its Affiliates shall have been obtained by
Purchaser and delivered to Seller, including any consents or approvals required
under the HSR Act and any applicable foreign antitrust laws or regulations.
(f) Transition Services Agreement and Proprietary Rights
Agreement. Purchaser, on behalf of itself and its Affiliates, shall have
executed and delivered (i) the Transition Services Agreement in form and
substance as set forth on Exhibit C attached hereto together with Exhibit I and
Exhibit II thereto as contemplated in Section 5.3 above and the Transition
Services Agreement shall be in full force and effect as of the Closing and (ii)
the Proprietary Rights Agreement in form and substance as set forth on Exhibit D
attached hereto and the Proprietary Rights Agreement shall be in full force an
effect as of the Closing.
(g) Shareholder Approval. The transactions contemplated
by this Agreement shall have been approved and adopted at a meeting by the
requisite vote of the
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holders of the issued and outstanding shares of stock in Seller entitled to vote
thereon as required under Seller's organizational documents, applicable law and
the Listing Rules.
(h) Deliveries of Purchaser. Purchaser shall have
delivered or cause to be delivered to Seller the following:
(i) the Cash Portion of the Purchase Price,
as adjusted pursuant to Section 1.4 as of the Closing;
(ii) one or more Assignments and Assumptions
and Bills of Sale, executed by Purchaser and/or its Affiliates accepting the
transfer of the Division Assets and Assumed Liabilities, in the form attached
hereto as Exhibit F;
(iii) one or more Trademark Assignments,
executed by Purchaser and/or its Affiliates accepting the transfer of any
trademarks and service marks included within the Division Assets, in the form
attached hereto as Exhibit G-1, one or more Copyright Assignments, executed by
Purchaser and/or its Affiliates accepting the transfer of the copyrights
included within the Division Assets, in the form attached hereto as Exhibit G-2
and one or more Patent Assignments executed by Purchaser and/or its Affiliates,
accepting the transfer of any patents included within the Division Assets, in
the form attached hereto as Exhibit G-3;
(iv) one or more domain name transfer
documents conveying any domain names included in the Division Assets to
Purchaser;
(v) the opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, U.S.
counsel to the Purchaser, and ▇▇▇▇▇▇, Westwood & Riegels, British Virgin Islands
counsel to the Purchaser, dated the Closing Date, which opinions will
collectively address the items set forth in Exhibit I attached hereto; and
(vi) other documents reasonably required to
be delivered by Purchaser or its Affiliates in order to effect the transactions
contemplated hereby, in form and substance reasonably satisfactory to Seller and
its counsel.
ARTICLE 7
CLOSING
7.1 Closing Date. The closing for the consummation of the
transactions contemplated by this Agreement (the "Closing") shall, unless
another date or place is agreed to in writing by Seller and Purchaser, take
place no later than two (2) Business Days following the satisfaction or waiver
of each of the conditions specified in Article 6 hereof (the "Closing Date") at
a place to be determined by the parties.
7.2 Termination of Agreement. This Agreement may be
terminated and abandoned at any time prior to the Closing Date:
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(a) By mutual consent of the parties hereto; or
(b) By Purchaser or Seller, if any governmental
authority shall have issued an order (which has not been vacated, withdrawn or
overturned) permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated hereby and such order shall have become final and
nonappealable; provided that the right to terminate this Agreement pursuant to
this Section 7.2(b) shall not be available to any party that has failed to
perform its obligations under Section 5.3 or the proviso contained in Sections
6.1(d) or 6.2(d); or
(c) By Purchaser or Seller, if the transactions
contemplated hereby shall not have been consummated on or before November 30,
2001 (the "Expiration Date") or if events have occurred which have made it
impossible to satisfy on or before the Expiration Date a condition precedent to
the terminating party's obligations to consummate the transactions contemplated
hereby; provided that the right to terminate this Agreement under this Section
7.2(c) shall not be available to any party whose failure to perform any covenant
or obligation under this Agreement has been the cause of or resulted in the
failure of the transactions contemplated hereby to occur on or before the
Expiration Date; or
(d) By Purchaser or Seller, if there shall be any law,
statute, rule or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited; or
(e) By Purchaser or Seller, if the Stockholder Approval
shall not have been obtained by reason of the failure to obtain the required
vote at the Stockholder Meeting (provided that Seller shall have made all
payments to Purchaser required by Section 7.3); or
(f) By Purchaser if there has been a material breach by
Seller of any of its representations, warranties or covenants contained in this
Agreement, which breach is not cured within five days after notice thereof is
received by Seller (provided that Seller shall not be entitled to any cure
period for any breach of Section 4.3); or
(g) By Purchaser, if (i) Seller's board of directors
withdraws, modifies or changes in a manner adverse to Purchaser its approval and
favorable recommendation of this Agreement and the transactions contemplated
hereby, (ii) Seller's board of directors fails to reconfirm such approval and
favorable recommendation within three business days after a written request by
Purchaser to do so, (iii) Seller's board of directors shall have approved or
recommended to the stockholders of Seller, taken no position with respect to, or
failed to recommend against acceptance of, any Acquisition Proposal, (iv) Seller
fails to call the Stockholders Meeting or fails to mail the Seller Disclosure
Document within five days after being cleared by the UKLA or fails to include in
such document the favorable recommendation referred to above or (v) Seller or
its board of directors resolves to do any of the foregoing (provided that Seller
shall have made all payments to Purchaser required by Section 7.3); or
(h) By Seller if there has been a material breach by
Purchaser of any of its representations, warranties or covenants contained in
this Agreement, which breach is not cured within five days after notice thereof
is received by Purchaser; or
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(i) By Seller, at any time prior to the adoption of this
Agreement by the Seller's stockholders at the Stockholders Meeting, pursuant to
and in accordance with Section 4.3(b) (provided that Seller shall have complied
with the provisions of Section 4.3, including, without limitation, the notice
provisions therein, and made all payments to Purchaser required by Section 7.3).
7.3 Effect of Termination.
(a) In the event of termination of this Agreement as
provided in Section 7.2, notice thereof shall be promptly given by the
terminating party to the other party and thereafter this Agreement shall
forthwith become void, and there shall be no liability or obligation on the part
of Purchaser or Seller or any of their respective Affiliates except that (a)
Section 5.5, regarding confidentiality, and this Section 7.3 shall remain in
full force and effect and (b) nothing herein will relieve any party from
liability for any breach of any representation, agreement or covenant herein.
(b) If (i) this Agreement is terminated by Seller
pursuant to Section 7.2(i) or by Purchaser pursuant to Section 7.2(g), then
Seller shall pay to Purchaser an amount equal to $625,000 plus Purchaser's and
its Affiliates' Expenses prior to any such termination of this Agreement or (ii)
this Agreement is terminated by Seller or Purchaser pursuant to Section 7.2(e),
then Seller shall pay to Purchaser an amount equal to Purchaser's and its
Affiliates' Expenses prior to any such termination and, concurrently with the
earlier of execution by the Seller of any agreement concerning, or consummation
of, any Acquisition Proposal within twelve months of such termination of this
Agreement pursuant to Section 7.2(e), an additional $625,000. "Expenses" as used
in this Agreement shall not exceed $875,000 and, subject to such limitation,
shall include all reasonable out-of-pocket expenses (including, without
limitation, all fees and expenses of outside counsel, investment bankers, banks,
other financial institutions, accountants, financial printers, experts and
consultants to a party hereto) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and the transactions contemplated
hereby (including any contemplated financing) and all other matters contemplated
by this Agreement and the closing thereof, including, without limitation, fees
and reasonable expenses of, or incurred in connection with, any litigation or
proceedings to collect the amounts payable pursuant to this Section 7.3(b) or
any of the fees, costs and expenses described in this sentence.
(c) All amounts payable by Seller to Purchaser pursuant
to this Section 7.3 shall be paid in cash and in immediately available funds to
such account as Purchaser may designate in writing to Seller.
(d) The parties agree that the agreements contained in
this Section 7.3 are an integral part of the transactions contemplated hereby
and constitute liquidated damages and not a penalty.
ARTICLE 8
POST-CLOSING
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8.1 Survival of Representations and Warranties. Regardless
of any investigation at any time made by or on behalf of any party hereto, or of
any information any party may have in respect thereof, all representations and
warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall, except as otherwise set forth in (ii)
through (iii) or elsewhere in this Section 8.1, survive the Closing for a period
of or until (i) the eighteen month anniversary of the Closing Date, (ii) the
second anniversary of the Closing Date, in the case of any breach of any
representation or warranty contained in Section 2.16 (Proprietary Information
and Rights) and (iii) 30 days after the expiration of the relevant statute of
limitations, in the case of any breach of any representation or warranty
contained in Section 2.9 (Acquired Stock) (but in the case of Section 2.9,
solely with respect to title to the Acquired Stock) or Section 2.20 (Taxes)
(each of the foregoing clauses (i), (ii) and (iii) collectively referred to as
the "Indemnification Deadline"); provided that so long as such written notice of
a Loss (as hereinafter defined) is given on or prior to the Indemnification
Deadline, such representations and warranties shall continue to survive until
such matter is resolved. Notwithstanding the foregoing, any breaches of any of
the covenants or agreements of any party hereto will not be subject to any time
limitations.
8.2 Indemnification of Purchaser by Seller. From and after
the Closing Date, Seller (for purposes of this Section 8.2 only, "Indemnifying
Party") shall indemnify, defend, and hold harmless Purchaser, each of its
Affiliates, each of the Acquired Subsidiaries, and their respective officers,
directors, shareholders, successors and assigns, from and against any and all
costs, expenses, losses, damages, fines, penalties or liabilities (including,
without limitation, interest which may be imposed in connection therewith, court
costs, litigation expenses, reasonable attorneys' fees and accounting fees)
("Losses") incurred by any such Person with respect to, in connection with,
arising from, or alleged to result from, arise out of, or be in connection with:
(a) A breach by the Indemnifying Party of any
representation or warranty made by the Indemnifying Party and contained in this
Agreement or in any certificate or other document delivered by said party to
Purchaser or its Affiliates hereunder or thereunder;
(b) A breach by the Indemnifying Party of any covenant,
restriction or agreement made by or applicable to the Indemnifying Party and
contained in this Agreement or in any certificate or other document delivered by
said party to Purchaser or its Affiliates hereunder or thereunder;
(c) Except for any Assumed Liabilities (or any liability
or obligation of an Acquired Subsidiary which, if such liability or obligation
had been directly assumed pursuant to Section 1.2(a) (rather than by the
transfer of the capital stock of such Acquired Subsidiary), would have been an
Assumed Liability), any liability or obligation of Seller or any of its
Affiliates (including any of the Acquired Subsidiaries) of any nature or kind
whatsoever (in any case, whether known or unknown, asserted or unasserted,
absolute or contingent, accrued or unaccrued, liquidated or unliquidated, due or
to become due or otherwise) arising out of or related to facts, events,
transactions, occurrences or actions or inactions arising on or prior to the
Closing Date (including, without limitation, whether or not disclosed on any
schedule or exhibit hereto, any such liability or obligation resulting from,
arising out of, relating to, in the nature of,
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or caused by any breach of contract, breach of warranty, tort, infringement,
violation of law or environmental matter or related to the deferred purchase
price or other contingent consideration related to any acquisition of the
business of any Person, including, without limitation, any such matter disclosed
on Schedule 2.14 hereto or any such matter related to the deferred purchase
price or other contingent consideration which may be payable to Mezzapesa or any
claim or litigation related thereto); or
(d) All loss, expense or damage suffered as the direct
result of the Indemnifying Party's failure to pay or perform those liabilities
expressly assumed or undertaken under this Agreement.
The Indemnifying Party shall not be required to indemnify Purchaser and its
Affiliates pursuant to Section 8.2(a) unless and until the aggregate of all
Losses pursuant to Section 8.2(a) exceeds $625,000 (the "Basket") and in such
case (i) Purchaser's and its Affiliates' right to recover for Section 8.2(a)
claims shall apply only to the excess of the Basket; (ii) in no event shall the
aggregate amount of indemnification in excess of the Basket under Section 8.2(a)
by the Indemnifying Party exceed $20,000,000 (the "Cap Amount"); provided that
the Basket shall not apply to any Losses relating to Section 2.4 (Completeness
of Assets) and the Cap Amount shall not apply to any Losses relating to Section
2.4 (Completeness of Assets), Section 2.5 (Financial Statements) or Section 2.20
(Taxes). If any Loss indemnifiable pursuant to Section 8.2(a) above would also
be indemnifiable pursuant to Section 8.2(b), Section 8.2(c) or Section 8.2(d)
above, such Loss will be deemed to be the subject matter of the indemnity set
forth in Section 8.2(b), Section 8.2(c) or Section 8.2(d), and thus, not subject
to the limitations set forth in Section 8.1 or this Section 8.2 (including,
without limitation, the Basket, the Cap Amount or the Indemnification Deadline).
8.3 Indemnification of Seller by Purchaser. From and after
the Closing Date, Purchaser (for purposes of this Section 8.3 only,
"Indemnifying Party") shall indemnify, defend, and hold harmless Seller and its
Affiliates and their respective officers, directors, shareholders, successors
and assigns, from and against any and all costs, expenses, losses, damages,
fines, penalties or liabilities (including, without limitation, interest that
may be imposed in connection therewith, court costs, litigation expenses,
reasonable attorneys' fees and accounting fees) ("Losses") incurred by any such
Person with respect to, in connection with, arising from, or alleged to result
from, arise out of, or be in connection with:
(a) A breach by the Indemnifying Party of any
representation or warranty made by the Indemnifying Party and contained in this
Agreement or in any certificate or other document delivered by said party to
Seller or its Affiliates hereunder or thereunder;
(b) A breach by the Indemnifying Party of any covenant,
restriction or agreement made by or applicable to the Indemnifying Party and
contained in this Agreement or in any certificate or other document delivered by
said party to Seller or its Affiliates hereunder or thereunder; or
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(c) All loss, expense or damage suffered as the direct
result of the Indemnifying Party's failure to pay or perform those liabilities
expressly assumed or undertaken under this Agreement, including, without
limitation, any Assumed Liability.
The Indemnifying Party shall not be required to indemnify Seller and its
Affiliates pursuant to Section 8.3(a) unless and until the aggregate of all
Losses pursuant to Section 8.3(a) exceeds $625,000 (the "Basket") and in such
case (i) Seller's and its Affiliates' right to recover for Section 8.3(a) claims
shall apply only to the excess of the Basket; and (ii) in no event shall the
aggregate amount of indemnification in excess of the Basket under Section 8.3(a)
by the Indemnifying Party exceed $20,000,000 (the "Cap Amount"). If any Loss
indemnifiable pursuant to Section 8.3(a) above would also be indemnifiable
pursuant to Section 8.3(b) or Section 8.3(c) above, such Loss will be deemed to
be the subject matter of the indemnity set forth in Section 8.3(b) or Section
8.3(c), and thus, not subject to the limitations set forth in Section 8.1 or
this Section 8.3 (including, without limitation, the Basket, the Cap Amount or
the Indemnification Deadline).
8.4 Procedure for Indemnification.
(a) The party which is entitled to be indemnified
hereunder (the "Indemnified Party") shall promptly give written notice hereunder
to the party required to indemnify (the "Indemnifying Party") after obtaining
notice of any claim as to which recovery may be sought against the Indemnifying
Party because of the indemnity in Section 8.2 or Section 8.3 hereof and, if such
indemnity shall arise from the claim of a third party, shall permit the
Indemnifying Party to assume the defense of any such claim and any litigation
resulting from such claim. Notwithstanding the foregoing, the right to
indemnification hereunder shall not be affected by any failure of an Indemnified
Party to give such notice, or delay by an Indemnified Party in giving such
notice unless, and then only to the extent that, the rights and remedies of the
Indemnifying Party shall have been materially prejudiced as a result of the
failure to give, or delay in giving, such notice. Failure by an Indemnifying
Party to notify an Indemnified Party of its election to defend any such claim or
action by a third party within thirty (30) days after notice thereof shall have
been given to the Indemnifying Party shall be deemed a waiver by the
Indemnifying Party of its right to defend such claim or action.
(b) Subject to Section 8.2 or Section 8.3, as
applicable, if the Indemnifying Party assumes the defense of such claim or
litigation resulting therefrom, the obligations of the Indemnifying Party
hereunder as to such claim shall include taking all steps necessary in the
defense or settlement of such claim or litigation and holding the Indemnified
Party harmless from and against any and all damages caused by or arising out of
any settlement approved by the Indemnifying Party or any judgment in connection
with such claim or litigation. The Indemnifying Party shall not, in the defense
of such claim or any litigation resulting therefrom, consent to entry of any
judgment (other than a judgment of dismissal on the merits without costs) except
with the written consent of the Indemnified Party, or enter into any settlement
(except with the written consent of the Indemnified Party) which does not
include as an unconditional term thereof the giving by claimant or plaintiff to
the Indemnified Party of a
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release from all liability in respect of such claim or litigation. Anything in
this Section 8.4 to the contrary notwithstanding, the Indemnified Party may,
with counsel of its choice and at its expense, participate in the defense of any
such claim or litigation. In all cases, the Indemnified Party shall cooperate
with the Indemnifying Party in the defense of claims or litigation, including by
making employees, information, and documentation reasonably available.
(c) If the Indemnifying Party shall not assume the
defense of any such claim by a third party or litigation resulting therefrom
after receipt of notice from such Indemnified Party, the Indemnified Party may
defend against such claim or litigation in such manner as it deems appropriate,
and unless the Indemnifying Party shall deposit with the Indemnified Party a sum
equivalent to the total amount demanded in such claim or litigation plus the
Indemnified Party's estimate of the costs of defending the same, the Indemnified
Party may settle such claim or litigation on such terms as it may deem
appropriate and, subject to Section 8.2 or Section 8.3, as applicable, the
Indemnifying Party shall promptly reimburse the Indemnified Party for the amount
of such settlement and for all damages incurred by the Indemnified Party in
connection with the defense against or settlement of such claim or litigation.
(d) Subject to Section 8.2 or Section 8.3, as
applicable, the Indemnifying Party shall promptly reimburse the Indemnified
Party for the amount of any judgment rendered with respect to any claim by a
third party in such litigation and for all damage incurred by the Indemnified
Party in connection with the defense against such claim or litigation, whether
or not resulting from, arising out of, or incurred with respect to, the act of a
third party.
ARTICLE 9
MISCELLANEOUS
9.1 Further Actions. From time to time, as and when
requested by the other party, Seller and Purchaser shall execute and deliver, or
cause to be executed and delivered, such documents and instruments and shall
take, or cause to be taken, such further or other actions as the requesting
party may reasonably deem necessary or desirable to carry out the intent and
purposes of this Agreement, and to consummate and give effect to the other
transactions, covenants and agreements contemplated hereby.
9.2 Expenses. Except as otherwise expressly provided herein,
each of Seller, on the one hand, and Purchaser, on the other hand, shall bear
its own expenses incident to its obligations under this Agreement and each of
the other agreements contemplated hereby and the transactions contemplated
hereby and thereby, including, without limitation, all fees and expenses of its
bankers, investment bankers, legal counsel, brokers, accountants or other
representatives or consultants.
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9.3 Entire Agreement. This Agreement, which includes the
Appendix, the Schedules and the Exhibits hereto and the other documents,
agreements and instruments executed and delivered pursuant to this Agreement,
contains the entire agreement between the parties hereto with respect to the
transactions contemplated by this Agreement and supersedes all prior
arrangements, agreements or understandings with respect thereto, whether written
or oral.
9.4 Descriptive Headings; Interpretation. The descriptive
headings of this Agreement are for convenience only and shall not control or
affect the meaning or construction of any provision of this Agreement. Whenever
required by the context, any pronoun used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns, pronouns and verbs shall include the plural and vice versa.
9.5 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if (a)
delivered personally, (b) sent by registered or certified mail, postage prepaid,
(c) sent by overnight courier with a nationally recognized courier or (d) via
facsimile confirmed in writing in any of the foregoing manners, as follows:
If to Seller: MERANT plc
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Silver
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Purchaser: Micro Focus International Limited
c/o Golden Gate Private Equity, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If sent by mail, notice shall be considered delivered five (5) Business Days
after the date of mailing, and if sent by any other means set forth above,
notice shall be considered delivered upon delivery thereof. Any party may by
notice to the other parties change the address to which notice or other
communications to it are to be delivered or mailed.
9.6 Governing Law This Agreement shall be governed by and
construed in accordance with the laws of the State of New York (other than the
choice of law principles thereof). Any action, suit or other proceeding
initiated by either party against the other under or in connection with this
Agreement may be brought in any Federal or state court in the State of New York,
as the party bringing such action, suit or proceeding shall elect, having
jurisdiction over the subject matter thereof. Each of Seller and Purchaser
hereby submit themselves to the jurisdiction of any such court for the purposes
of this Section 9.6 only. Except to the extent specifically awarded by the
court, each party shall bear its own expenses in connection with any claims
brought pursuant to this Section 9.6 and agree that service of process on them
in any such action, suit or proceeding may be effected by the means by which
notices are to be given to it under this Agreement.
9.7 Assignability. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns. Notwithstanding the foregoing, this Agreement shall not be
assignable by any party without the written consent of the other party and any
such purported assignment by any party without such consent shall be void,
except that:
(a) any or all rights of either Seller or Purchaser to
receive the performance of the obligations of the other party hereunder, any or
all rights to assert claims against the other party in respect of any inaccuracy
in or breach of any representations, warranties or covenants of such party
hereunder and any or all of either party's obligations to the other party
hereunder, may be assigned by either Seller or Purchaser to any of their
respective Affiliates (it being agreed that no such assignment shall relieve
either Seller or Purchaser from any liability to the other party with respect to
any such assignment of such party's obligations); and
(b) Purchaser may assign to any financial institution
providing financing to Purchaser or any of its Affiliates any or all of its
rights to assert claims against Seller in respect of any inaccuracy in or breach
of representations, warranties or covenants under this Agreement, but Purchaser
shall require any assignee of such rights under clause (a) or (b) to take such
rights subject to any defenses, counterclaims and rights to which Seller might
be entitled under this Agreement.
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9.8 Waivers and Amendments. Any waiver of any term or
condition of this Agreement, or any amendment or supplementation of this
Agreement, shall be effective only if in writing and signed by the parties
hereto. A waiver of any breach or failure to enforce any of the terms or
conditions of this Agreement shall not in any way affect, limit or waive a
party's rights hereunder at any time to enforce strict compliance thereafter
with every term or condition of this Agreement.
9.9 Third Party Rights. Notwithstanding any other provision
of this Agreement, and except as expressly provided in Section 4.7, Article 8
hereof or as permitted pursuant to Section 9.7 hereof, this Agreement shall not
create benefits on behalf of any shareholder or employee of any Person
(including, without limitation, any broker or finder), except for Seller or
Purchaser themselves and this Agreement shall be effective only as between the
parties hereto, their successors and permitted assigns.
9.10 Severability. If any term or provision of this Agreement
shall, in any jurisdiction, be invalid or unenforceable, such term or provision
shall be ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable such term or
provision in any other jurisdiction, or affecting any other provision of this
Agreement.
9.11 Arbitration. With the exception of any matter involving
a request for injunctive relief or the retention of the Firm to resolve any
dispute with respect to the determination of Tangible Net Book Value, from and
after the Closing, any dispute regarding the validity, the terms or any aspect
of this Agreement, or any act which allegedly has or would violate any provision
of this Agreement, will be submitted to binding arbitration and shall be
administered by the JAMS/Endispute, Inc. ("JAMS") or the American Arbitration
Association ("AAA"), which shall be the exclusive remedy for such claim or
dispute. The selection of JAMS or AAA will be at the option of the claimant, and
the matter shall be conducted in accordance with the rules for commercial
arbitration then in effect for the tribunal selected. The arbitrator shall be a
retired judge or attorney licensed to practice law in New York having more than
five years of substantial experience in litigation of similar disputes. Unless
the parties otherwise agree, or except where the law of another jurisdiction
(such as English law in the case of fiduciary requirements of Seller's board of
directors) shall be applicable, the arbitrator shall apply the substantive New
York and federal law applicable to the claim asserted, as though the matter were
heard in the courts of those jurisdictions located in the State of New York. The
arbitrator shall not have the power to commit errors of law or legal reasoning,
or to award punitive damages, and the award may be vacated for any such error.
The arbitration shall be conducted in New York, New York, at a location to be
determined by the arbitrator. Unless specifically awarded by the arbitrator,
each party shall bear the cost of its own attorneys' fees and expenses.
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9.12 Specific Performance.The parties recognize that if
either party refuses to perform its obligation to consummate the transactions
contemplated hereby, monetary damages alone will be inadequate to compensate the
other party for its injury. Accordingly, either party shall, so far as it is
able under the applicable law of any relevant jurisdiction, be entitled to
obtain specific performance (without the requirement of posting any bond or
other security) of the terms of this Agreement with respect to the consummation
of the transactions contemplated hereby in addition to any other remedies to
which such party may be entitled to, at law or in equity, including, but not
limited to, monetary damages.
9.13 Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts together shall constitute but
one agreement. Facsimile signatures shall be treated as if they were originals.
[SIGNATURES ON FOLLOWING PAGE]
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[SIGNATURE PAGE TO PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have executed and delivered
this Purchase Agreement as of the date first above written.
"Purchaser"
MICRO FOCUS INTERNATIONAL LIMITED
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Its: President
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"Seller"
MERANT PLC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
---------------------------
Its: Chief Executive Officer
--------------------------
APPENDIX A
Definitions
Capitalized terms in this Agreement shall have the meanings
ascribed to them in this Appendix A unless such terms are defined elsewhere in
this Agreement:
Affiliate: With respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" means the power to direct the management and policies of
another Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Business: Means the Division's business of developing,
supporting and marketing, licensing and selling (A) legacy transformation and
integration products and services for the purpose of providing an enterprise
solution to integrate and extend a company's existing business rules, data and
processes to the new platforms of e-business and (B) traditional enterprise
application development products and services. Notwithstanding the foregoing,
the "Business" shall not include (i) Seller's Application Development Management
business as currently conducted, which encompasses the MERANT PVCS solution
series or (ii) Seller's Enterprise Data Connectivity business as currently
conducted, which encompasses the MERANT DataDirect series.
Business Day: Any day that is not a Saturday, Sunday or a day on
which commercial banks in the State of New York are required or permitted by law
to be closed.
Division Proprietary Rights: Means all Proprietary Rights owned
or used by Seller or any of its Affiliates which are exclusively used in or
exclusively applicable to the Business and all Proprietary Rights owned or used
by any of the Acquired Subsidiaries, including, without limitation, all Software
Products, in each case together with all income, royalties, damages and payments
due or payable at the Closing or thereafter (including, without limitation,
damages and payments for past or future infringements or misappropriations
thereof), the right to ▇▇▇ and recover for past infringements or
misappropriations thereof and any and all corresponding rights that now or
hereafter may be secured throughout the world.
Encumbrance: Any lien, mortgage, pledge, security interest,
charge or encumbrance of any kind, whether voluntary or involuntary (including
any conditional sale or other title retention agreement, any lease in the nature
thereof and any agreement to give any security interest) and, with respect to
capital stock, any option or other right to purchase or any restriction on
voting or other rights.
Governmental Entity: Any nation or any state, commonwealth,
territory, possession or tribe and any political subdivision, courts,
departments, commissions, boards, bureaus, agencies or other instrumentalities
of any of the foregoing.
Indebtedness: With respect to any Person (a) all indebtedness
for borrowed money; (b) that portion of obligations with respect to capital
leases that is properly classified as a
-i-
liability on a balance sheet in conformity with U.S. GAAP; (c) notes payable and
drafts accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; and (e) all indebtedness secured by any
Encumbrance on any property or asset owned or held by that Person regardless of
whether the indebtedness secured thereby shall have been assumed by that Person
or is nonrecourse to the credit of that Person.
Knowledge: Means (i) in the case of an individual, to the best
of such Person's knowledge and (ii) in the case of a Person other than a human
being, to the best of such Person's knowledge after due inquiry of the executive
officers of such Person.
Material Adverse Effect: A material adverse effect on the
business, operations or condition (financial or otherwise) of the Division,
taken as a whole (it being agreed that a revenue decline experienced by the
Division consistent with the revenue decline of the Division disclosed in the
Division forecasts furnished by Seller to Purchaser on or prior to the date
hereof shall not, in and of itself, be deemed to be a "Material Adverse
Effect").
Permitted Encumbrances: Means (i) Encumbrances for Taxes or
other governmental charges, assessments or levies which are (A) not delinquent
or (B) the validity of which is being contested in good faith by appropriate
proceedings and as to which adequate reserves have been established on the
Business' financial statements, (ii) landlord's, mechanic's, carrier's,
workmen's, repairmen's or other similar Encumbrances arising or incurred in the
ordinary course of business, (iii) other Encumbrances the existence of which do
not materially impair the operations of the Business in the ordinary course or
the value of the Division Assets taken as a whole and (iv) minor imperfections
of title, conditions, easements and reservations of rights, including easements
and reservations of, or rights of others for, rights of way, sewers, electric
lines, telegraph and telephone lines and other similar purposes, encroachments,
covenants and restrictions. Notwithstanding the foregoing, any Encumbrance for
Indebtedness as of the Closing will not be a Permitted Encumbrance.
Person: An individual, corporation, partnership, joint venture,
trust or unincorporated organization or association or other form of business
enterprise or a Governmental Entity.
Proprietary Rights: Means all (i) patents, patent applications
and patent disclosures; (ii) trademarks, service marks, trade dress, trade
names, logos, corporate names, trade names and domain names, and any
registrations or applications for registration of any of the foregoing, together
with all good will associated therewith; (iii) copyrights and copyrightable
works and registrations and applications for registration thereof; (iv) mask
works and registrations and applications for registration thereof; (v) computer
software (including source code and object code), data, databases and
documentation thereof; (vi) trade secrets, know how and other confidential or
proprietary information (including, without limitation, inventions,
specifications, flow charts, designs, proposals, financial and marketing plans
and customer and supplier lists and information); and (vii) copies and tangible
embodiments of the foregoing (in whatever form or medium).
-ii-
Tax: Any and all license and registration fees, taxes
(including, without limitation, income, minimum or alternative minimum tax,
gross receipts, ad valorem, value added, environmental tax, turnover, sales,
use, personal property (tangible and intangible), stamp, leasing, lease, user,
leasing use, excise, payroll, franchise, transfer, fuel, excess profits,
occupational, interest equalization and other taxes), levies, imposts, duties or
withholdings of any nature whatsoever imposed by any Governmental Entity,
together with any and all penalties, fines, additions to tax and interest
thereon, whether or not such Tax shall be existing or hereafter adopted.
Tax Return: Shall mean any return, report, information return,
declaration, claim for refund or other document (including any related or
supporting information) filed or required to be filed with any taxing authority
with respect to Taxes.
U.S. GAAP: Generally accepted accounting principles,
consistently applied, in the United States as promulgated by the Financial
Accounting Standards Board, the Accounting Principles Board and other recognized
sources for the promulgation of such generally accepted accounting principles.
Other Definitions: The following terms have the meanings
ascribed to them in the Sections noted:
Section
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2001 Balance Sheet 2.5(a)
AAA 9.11
Acquired Stock Recitals
Acquired Subsidiary Recitals
Acquired Subsidiaries Recitals
Acquisition Proposal 4.3(f)
Actual Tangible Net Book Value 1.4(b)
Agreement Recitals
Allocations 1.5
Assumed Liabilities 1.2(a)
Authorizations 2.11(a)
Basket 8.2 / 8.3
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Benefit Plans 2.17(a)
Business Marks 5.11
Cap Amount 8.2 / 8.3
Cash Portion 1.3(a)
Closing 7.1
Closing Date 7.1
Closing Date Balance Sheet 1.4(b)
Code 2.17(c)
Contracts 1.1(a)(vii)
Division Recitals
Division Assets 1.1(a)
Draft Closing Date Balance Sheet 1.4(b)
Environmental Law 2.19(b)
Equipment 2.8(b)
ERISA 2.17(a)
Estimated Tangible Net Book Value 1.4(a)
Excluded Assets 1.1(b)
Excluded Liabilities 1.2(b)
Expenses 7.3(b)
Expiration Date 7.2(c)
Financial Statements 2.5(a)
Firm 1.4(b)
Five Day Period 4.3(c)
Foreign Employee 5.6(c)
Foreign Transferred Employees 5.6(a)
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Hazardous Material(s) 2.19(c)
HSR Act 5.3(b)
Indemnification Deadline 8.1
Indemnified Party 8.4(a)
Indemnifying Party 8.2 / 8.3 / 8.4(a)
JAMS 9.11
Letter Agreement 1.1(a)(viii)
Listing Rules 4.6(b)
Losses 8.2 / 8.3
Material Contract 2.10(a)
Merant Marks 5.12
Merant Plan 5.6(f)
Objection Notice 1.4(b)
Proceedings 2.14(a)
Proprietary Rights Agreement 6.1(f)
Purchase Price 1.3(a)
Purchaser Recitals
Purchaser's 401(k) Plan 5.6(f)
Real Property 2.8(a)
Release 2.19(d)
Reorganization 1.6(a)
Scheduled Contract 6.1(e)
Securities Act 3.5(a)
Seller Recitals
Seller Disclosure Document 4.6(b)
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Seller Representatives 4.3(a)
Software Products 2.16(a)
Stockholder Approval 2.27
Stockholders Meeting 4.6(a)
Subsidiary Agreements 1.6(a)
Superior Proposal 4.3(g)
Tangible Net Book Value 1.4(a)
Transferred Employees 5.6(a)
Transition Services Agreement 6.1(f)
UK Acquired Subsidiary 1.6(a)
UKLA 4.6(b)
US Transferred Employees 5.6(a)
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