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Exhibit 2.1
Stock Purchase Agreement by and among the registrant, Network Software
Associates, Inc., a California corporation ("NSA"), Netsoft, a California
corporation ("NetSoft"), holders of securities of NSA and holders of securities
of NetSoft (the "Stock Purchase Agreement"), dated as of July 8, 1997
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================================================================================
STOCK PURCHASE AGREEMENT
By and Among:
NetManage, Inc.
a Delaware corporation;
NetSoft,
a California corporation;
Network Software Associates, Inc.,
a California corporation;
the Securityholders of NetSoft;
and
the Securityholders of Network Software Associates, Inc.
Dated as of July 8, 1997
================================================================================
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into this 8th
day of July 1997, by and among NETMANAGE, INC., a Delaware corporation
("NetManage"), NETWORK SOFTWARE ASSOCIATES, INC., a California corporation
("NSA"), NETSOFT, a California corporation ("NetSoft"), the undersigned holders
of securities of NSA (each a "NSA Shareholder," and collectively, the "NSA
Shareholders") and the undersigned holders of securities of NetSoft (each a
"NetSoft Shareholder," and collectively, the "NetSoft Shareholders"). Certain
other capitalized terms used in this Agreement are defined in Exhibit A attached
hereto.
RECITALS
WHEREAS, the NSA Shareholders own of record or beneficially, or will so own
as of the Closing Date (as defined below), one hundred percent (100%) of the
issued and outstanding shares of the capital stock of NSA. Such outstanding
shares of NSA capital stock and such shares of NSA capital stock issued upon
exercise of any NSA options (the "NSA Options") between the date hereof and the
Closing Date (as defined below) shall collectively be referred to in this
Agreement as the "NSA Shares."
WHEREAS, the NetSoft Shareholders own of record or beneficially, or will so
own as of the Closing Date (as defined below), one hundred percent (100%) of the
issued and outstanding shares of the capital stock of NetSoft. Such outstanding
shares of NetSoft capital stock and such shares of NetSoft capital stock issued
upon exercise of any NetSoft options (the "NetSoft Options") between the date
hereof and the Closing Date (as defined below) shall collectively be referred to
in this Agreement as the "NetSoft Shares."
WHEREAS, NetSoft is a majority-owned subsidiary of NSA.
WHEREAS, NSA has, prior to the date hereof, spun off NSA's Federal Systems
Division (the "Federal Systems Division Spin Off") pursuant to that certain
Purchase Agreement dated as of February 24, 1994 by and between NSA and ▇▇▇▇▇
Kong, an individual and that certain ▇▇▇▇ of Sale dated July 1, 1997.
WHEREAS, on or prior to the Closing Date, NSA or NetSoft intends to acquire
the NetSoft Shares not presently held by NSA.
WHEREAS, NetManage wishes to acquire NSA (the "Acquisition") by acquiring
all of the NSA Shares from the NSA Shareholders in exchange for cash, and the
NSA Shareholders wish to sell all of their NSA Shares to NetManage in exchange
for cash, all according to the terms and subject to the conditions set forth in
this Agreement.
WHEREAS, following the consummation of the Acquisition, NSA will be a
wholly-owned subsidiary of NetManage.
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
consummation of the Acquisition.
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AGREEMENT
NOW, THEREFORE, in reliance on the foregoing recitals and in and for the
consideration and mutual covenants set forth herein and other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. PURCHASE AND SALE OF THE NSA SHARES.
1.1 DEFINITIONS. The definitions set forth in Exhibit A attached hereto
shall apply throughout this Agreement.
1.2 PURCHASE AND SALE OF THE NSA SHARES. Upon the terms and subject to
the conditions set forth herein, at the Closing (as defined below), each NSA
Shareholder shall sell, transfer and deliver to NetManage, and NetManage shall
purchase and acquire from each NSA Shareholder, that number of NSA Shares set
forth opposite such NSA Shareholder's name on Exhibit B attached hereto (the
"NSA Shareholder Schedule"), which, collectively, constitute one hundred percent
(100%) of the issued and outstanding NSA Shares, against delivery by NetManage
of the consideration described in Section 1.3 below.
1.3 CONSIDERATION FOR THE NSA SHARES. Upon the terms and subject to the
conditions set forth herein, at the Closing (as defined below), NetManage shall,
against delivery of the NSA Shares as set forth in Section 1.2 above, deliver to
each NSA Shareholder the respective amounts set forth opposite each NSA
Shareholder's name on Exhibit B attached hereto. The aggregate amount of
consideration exchanged for all of the NSA Shares shall be Twenty-Six Million
Dollars ($26,000,000) in cash less the amount of the Option Payments as defined
in Section 1.4 (such net amount being the "Consideration" and the amount payable
per share being the "Per Share Amount").
1.4 NSA OPTIONS AND NETSOFT OPTIONS. NSA and NetSoft shall cause all
NetSoft Options to be exercised or canceled prior to the Closing Date as
follows: (a) all outstanding NetSoft Options which are fully vested as of the
Closing Date will be exercised as of the Closing Date and all outstanding
NetSoft Options which are not fully vested as of the Closing Date will be
canceled on or before the Closing Date and (b) all such NetSoft Options which
are exercised as provided above shall be "net exercised" as of the Closing Date,
i.e., the optionee shall exercise such option in full and receive, instead of
shares of NSA or NetSoft, a cash payment equal to (x) the difference between the
exercise price per share of such option and the NetSoft Calculated Share Price,
multiplied by (y) the number of vested shares subject to such NetSoft Option.
All holders of unvested NetSoft Options having two (2) or more years of service
to either NSA or NetSoft as of July 31, 1997 shall at the Closing receive a cash
bonus equal to the number of shares of NetSoft issuable upon exercise of such
holder's unvested NetSoft Options held at such time multiplied by the difference
between the exercise price per share of such option and the NetSoft Calculated
Share Price. The aggregate of all such payments to holders of NetSoft Options is
referred to herein as the "Option Payments." The Option Payments shall be paid
at Closing either by NetManage or NetSoft, as determined by NetManage and
NetSoft.
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1.5 ESCROW AGREEMENT. On the Closing Date, NetManage will withhold from
the Consideration described in Section 1.3 above and deposit into escrow for and
on behalf of the NSA Shareholders the aggregate amount of Three Million Dollars
($3,000,000) in cash. Such amount (the "Escrow Fund") shall be held as
collateral for the indemnification obligations under Section 11 and pursuant to
the provisions of an escrow agreement (the "Escrow Agreement") in the form
attached hereto as Exhibit C to be executed and delivered at the Closing.
1.6 THE CLOSING. Subject to termination of this Agreement as provided in
Section 10 below, the closing of the transactions contemplated in this Agreement
(the "Closing") shall take place at the office of Stradling, Yocca, ▇▇▇▇▇▇▇ &
▇▇▇▇▇, a Professional Corporation, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, as soon as possible upon the satisfaction or
waiver of all conditions set forth in Section 8 and Section 9 hereof (the
"Closing Date"), or such other time and place as is mutually agreeable to the
parties; provided, however, that in no event shall the Closing take place after
August 31, 1997.
2. REPRESENTATIONS AND WARRANTIES OF NETSOFT AND NSA. In order to induce
NetManage to enter into this Agreement, NSA and NetSoft, jointly and severally,
hereby make the following representations and warranties to NetManage (the "NSA
and NetSoft Representations and Warranties"). Unless otherwise expressly
provided in this Agreement, the NSA and NetSoft Representations and Warranties
shall be true and correct in all respects as of the date hereof subject to the
provisions in this Agreement regarding the expiration thereof and changes
expressly contemplated in this Agreement.
The NSA and NetSoft Representations and Warranties are qualified, whether or
not reference is made in any such NSA and NetSoft Representation and Warranty to
a disclosure schedule, by information disclosed in the "NSA and NetSoft
Disclosure Schedule" prepared by NSA and NetSoft and delivered to NetManage
prior to or concurrently with the execution and delivery of this Agreement (the
"NSA and NetSoft Disclosure Schedule"). Each NSA and NetSoft Disclosure Schedule
section sets forth or incorporates by reference in reasonable detail any and all
exceptions to the NSA and NetSoft Representations and Warranties contained in
the corresponding subparagraph of this Article II. An exception set forth in one
section of the NSA and NetSoft Disclosure Schedule shall be deemed to be an
exception for all other subsections of that section and the corresponding
section in this Article II. Unless otherwise set forth in this Agreement or in
the NSA and NetSoft Disclosure Schedule, a copy of each agreement set forth in
the NSA and NetSoft Disclosure Schedule has been delivered to NetManage or its
Representatives.
Each of NSA and NetSoft may update the NSA and NetSoft Disclosure Schedule
at any time and from time to time on or prior to the Closing Date, and the NSA
and NetSoft Representations and Warranties set forth in this Article II shall be
qualified, as appropriate, by the corresponding NSA and NetSoft Disclosure
Schedule section as so amended as if such amended NSA and NetSoft Disclosure
Schedule section were part of the original NSA and NetSoft Disclosure Schedule;
provided, however, that NetManage may request the removal of any updated
disclosure item or items from the NSA and NetSoft Disclosure Schedule to the
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extent that any such updated disclosure item or items result or have resulted in
Damages in excess of an aggregate of Two Hundred Thousand Dollars ($200,000);
and provided further, however, that if any updated disclosure item or items
constitute(s) a Material Adverse Change to NSA's and NetSoft's business and
properties, taken as a whole, then NetManage may, at NetManage's option, refuse
to consummate the transactions contemplated in this Agreement, and this
Agreement shall terminate without further obligations or liability upon any
party in favor of any other party hereto.
2.1 ORGANIZATION. Each of NSA and NetSoft is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has all requisite corporate power and authority to carry on its
business as it is now being conducted and as it is proposed to be conducted.
Each subsidiary of NetSoft is a corporation duly organized, validly existing and
in good standing in each jurisdiction where the failure to be so duly organized,
validly existing and in good standing would have a Material Adverse Effect on
NSA's and NetSoft's respective businesses and properties, and each of NetSoft's
subsidiaries has all requisite corporate power and authority to carry on its
business as it is now being conducted and as it is proposed to be conducted.
Each of NSA and NetSoft and each subsidiary of NetSoft is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or properties makes such qualification or licensing
necessary except where the failure to so qualify shall not have a Material
Adverse Effect on NSA's and NetSoft's respective business and properties. The
NSA and NetSoft Disclosure Schedule contains a true and complete listing of the
locations of all sales offices, manufacturing facilities, and any other offices
or facilities of NSA and NetSoft and each Subsidiary of NetSoft and a true and
complete list of all states and countries in which either NSA or NetSoft
maintains any employees. The NSA and NetSoft Disclosure Schedule contains a true
and complete list of all states in which either NSA or NetSoft is duly qualified
to transact business as a foreign corporation. True and complete copies of NSA's
and NetSoft's respective articles of incorporation and bylaws, as well as
charter documents for each subsidiary of NetSoft, all as in effect on the date
hereof and as to be in effect immediately prior to the Closing, have been
provided to NetManage or its Representatives.
2.2 CAPITALIZATION.
(a) The authorized capital stock of NSA as of the date of this
Agreement consists of: (i) three million (3,000,000) shares of common stock and
(ii) no shares of preferred stock, and as of the date of this Agreement one
million eight hundred seventy-six thousand (1,876,000) shares of NSA common
stock and no shares of NSA preferred stock are issued and outstanding and held
of record by NSA's shareholders as set forth and identified in the shareholder
list provided to NetManage or its Representatives.
(b) The authorized capital stock of NetSoft as of the date of this
Agreement consists of: (i) ten million (10,000,000) shares of common stock and
(ii) no shares of preferred stock, and as of the date of this Agreement six
million ten thousand seventy (6,010,070) shares of NetSoft common stock and no
shares of NetSoft preferred stock are issued
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and outstanding and held of record by NetSoft's shareholders as set forth and
identified in the shareholder list provided to NetManage or its Representatives.
(c) NSA has no option plan in effect and no options to purchase its
common stock which are presently outstanding, and no shares of NetSoft common
stock are reserved for issuance and subject to outstanding NSA warrants. NSA has
no outstanding warrants to purchase any shares of its capital stock.
(d) On the date of this Agreement two million five hundred fifty
thousand (2,550,000) shares of NetSoft common stock are available or reserved
for issuance under the NetSoft Stock Option Plan and the NetSoft Chief Executive
Officer Stock Option Plan (collectively, the "NetSoft Plan"), and as of the date
of this Agreement one million seven hundred fifty-two thousand three hundred
sixty-two (1,752,362) shares are subject to outstanding options and held of
record by NetSoft's option holders as set forth and identified in the NetSoft
optionholder list provided to NetManage or its Representatives, and no shares of
NetSoft common stock are reserved for issuance and subject to outstanding
NetSoft warrants. NetSoft has no outstanding warrants to purchase any shares of
its capital stock.
(e) All of the outstanding NSA securities and NetSoft securities
have been duly authorized and are validly issued, fully paid and nonassessable.
All outstanding NSA securities and NetSoft securities were issued in compliance
with applicable securities laws. Except as otherwise set forth in the NSA and
NetSoft Disclosure Schedule, none of the outstanding NSA securities or NetSoft
securities were issued in consideration in whole or in part for any
contribution, transfer or assignment of any NSA Products, NetSoft Products, NSA
Proprietary Assets, NetSoft Proprietary Assets or any proprietary rights
incorporated therein or otherwise related thereto. Except as otherwise set forth
in the NSA and NetSoft Disclosure Schedule or set forth in this Section 2.2,
neither NSA nor NetSoft has any other shares of its capital stock issued or
outstanding and does not have any other outstanding subscriptions, options,
warrants, rights or other agreements or commitments obligating either NSA or
NetSoft to issue shares of its respective capital stock or other securities.
2.3 POWER, AUTHORITY AND VALIDITY.
(a) Each of NSA and NetSoft has the corporate power and authority to
enter into this Agreement and the other Transaction Documents to which it is a
party and to carry out its obligations hereunder and thereunder. The execution
and delivery of this Agreement and the Transaction Documents to which each of
NSA and NetSoft is a party and the consummation of the transactions contemplated
herein and therein have been duly authorized by the respective boards of
directors of NSA and NetSoft (and each subsidiary of NetSoft, if required), and
no other corporate proceedings are necessary to authorize NSA's and NetSoft's
execution, delivery and performance of their respective obligations under this
Agreement and the other Transaction Documents. Except as otherwise set forth on
the NSA and NetSoft Disclosure Schedule, neither NSA nor NetSoft nor any
subsidiary of NetSoft is subject to or obligated under any charter, bylaw or
contract provision or any license, franchise or permit, or subject to any order
or decree, which would be breached or violated in a material manner by or in
material conflict with its
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execution, delivery and performance of this Agreement. Except for (i)
termination of the HSR Waiting Period, (ii) such other consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under the laws of any foreign country in which NSA or NetSoft or any of
NSA's or NetSoft's subsidiaries conducts any business or owns any property or
assets and (iii) except as otherwise set forth on the NSA and NetSoft Disclosure
Schedule, no consent of any person who is a party to a contract which is
material to NSA's or NetSoft's business, nor any consent of any Governmental
Body which is material to NSA's or NetSoft's business, is required to be
obtained on the part of NSA or NetSoft to permit the execution, delivery and
performance of this Agreement and to continue the business activities of NSA and
NetSoft substantially as previously conducted by NSA and NetSoft. This Agreement
is, and the other Transaction Documents to which NetSoft is a party when
executed and delivered by NSA and NetSoft shall be, the valid and binding
obligations of NSA and NetSoft, respectively, enforceable in accordance with
their respective terms, subject to (i) laws of general application relating to
bankruptcy, insolvency, or the relief of debtors, and (ii) rules of law or
equity governing specific performance, injunctive relief and other equitable
remedies.
(b) All NetSoft Options have been issued, exercised and canceled, as
applicable, on or prior to the date hereof, and all NetSoft Options will have
been issued, exercised and canceled, as applicable, on or prior to the Closing
Date in accordance with the terms of the NetSoft Plan, and pursuant to the
standard forms of option agreement previously provided to NetManage's
Representatives. Except as set forth in this Agreement or on the NSA and NetSoft
Disclosure Schedule, no NetSoft Option will by its terms require an adjustment
in connection with the Acquisition not contemplated in Section 1.4 above.
2.4 FINANCIAL STATEMENTS.
(a) Each of NSA and NetSoft has delivered to NetManage copies of the
unaudited balance sheets and statements of operations as of May 31, 1997 of the
Federal Systems Division and of NetSoft, respectively, and prior to the Closing
will have delivered a balance sheet dated as of June 30, 1997 that reflects (on
a pro forma basis) the Federal Systems Division Spin Off, Shareholders' equity
and cash flow for the period ended June 30, 1997 (taken as a whole, the "NSA and
NetSoft Unaudited Financials") and the respective audited balance sheets as of
March 31, 1997 and the respective statements of operations, shareholders' equity
and cash flow for the period then-ended (the "NSA and NetSoft Audited
Financials," and together with the NSA and NetSoft Unaudited Financials, the
"NSA and NetSoft Financial Statements").
(b) The NSA and NetSoft Financial Statements are complete and in
accordance with the respective books and records of NSA and NetSoft and present
fairly in all material respects the respective financial positions of NSA and
NetSoft as of their respective historical dates. The NSA and NetSoft Financial
Statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") (except as to the NSA and NetSoft Unaudited Financials, for
the absence of footnotes and for normal and recurring year-end audit
adjustments, which will not individually or in the aggregate be material in
magnitude) applied on a basis consistent with prior periods. Except and to the
extent reflected or reserved against in such balance sheets (including the notes
thereto), neither NSA nor NetSoft has, as of the dates of
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such balance sheets, any liabilities or obligations (absolute or contingent) of
a nature required or customarily reflected in a balance sheet (or the notes
thereto) prepared in accordance with GAAP. The aggregate reserves, if any,
reflected on the NSA and NetSoft Financial Statements are adequate in light of
the contingencies with respect to which such aggregate reserves are made. The
statements of operations, shareholders' equity and cash flow, taken as a whole,
are complete and in accordance with the respective books and records of NSA and
NetSoft and present fairly the results of operations, equity transactions and
changes of NSA and NetSoft for the periods indicated.
(c) To the best of the respective knowledge of each of NSA and
NetSoft, neither NSA nor NetSoft has any debt, liability, or obligation of any
nature, whether accrued, absolute, contingent, or otherwise, and whether due or
to become due, that is not reflected or reserved against in the NSA and NetSoft
Unaudited Financials, except for those (i) that may have been incurred after the
date of the NSA and NetSoft Unaudited Financials or (ii) that are not required
by GAAP to be included in a balance sheet or the notes thereto, except that
neither NSA nor NetSoft has established any reserves with respect to the costs
and fees associated with this Agreement and the transactions contemplated
herein. All debts, liabilities, and obligations incurred after May 31, 1997 were
incurred in the ordinary course of business, and are usual and normal in amount
both individually and in the aggregate.
2.5 TAX MATTERS.
(a) Each of NSA and NetSoft has fully and timely, properly and
accurately filed all tax returns and reports required to be filed by it,
including all federal, foreign, state and local tax returns and estimates for
all years and periods (and portions thereof) for which any such returns, reports
or estimates were due. All such returns, reports and estimates were prepared in
the manner required by applicable law. All income, sales, use, occupation,
property, payroll or other taxes or assessments due from either NSA or NetSoft
have been paid. There are no pending assessments, asserted deficiencies or
claims for additional taxes that have not been paid by either NSA or NetSoft.
The reserves for taxes, if any, reflected on the NSA and NetSoft Financial
Statements are adequate, and there are no tax liens on any property or assets of
either NSA or NetSoft. There have been no audits or examinations of any tax
returns or reports filed by either NSA or NetSoft by any applicable Governmental
Body. No state of facts exists or has existed which would constitute grounds for
the assessment of any penalty or of any further tax liability beyond that shown
on NSA's and NetSoft's respective tax reports, returns or estimates or reserves
for taxes on the NSA and NetSoft Financial Statements and except for liability
for taxes not yet due. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any federal, state or local
income tax return or report filed by either NSA or NetSoft for any period.
(b) All taxes which either NSA or NetSoft has been required to
collect or withhold have been duly withheld or collected and, to the extent
required, have been paid to the proper taxing authority.
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(c) Neither NSA nor NetSoft is a party to any tax-sharing agreement
or similar arrangement with any other party except as contemplated in the
Federal Systems Division Spin Off.
(d) At no time has either NSA or NetSoft been included in the
federal consolidated income tax return of any affiliated group of corporations
other than of NSA as the common parent.
(e) No payment which either NSA or NetSoft is obliged to pay to any
director, officer, employee or independent contractor pursuant to the terms of
an employment agreement, severance agreement or otherwise will constitute an
excess parachute payment as defined in Section 280G of the Code.
(f) Neither NSA nor NetSoft will be required to include any
adjustment in taxable income for any tax period (or portion thereof) ending
after the Closing Date pursuant to Section 481(c) of the Code or any provision
of the tax laws of any jurisdiction requiring tax adjustments as a result of a
change in method of accounting implemented by either NSA or NetSoft prior to the
Closing Date for any tax period (or portion thereof) ending on or before the
Closing Date or pursuant to the provisions of any agreement entered into by
either NSA or NetSoft prior to the Closing Date with any taxing authority with
regard to the tax liability of either NSA or NetSoft for any tax period (or
portion thereof) ending on or before the Closing Date.
(g) Except for any obligation in the Federal Systems Division Spin
Off and as set forth in the NSA and NetSoft Disclosure Schedule, neither NSA nor
NetSoft is currently under any contractual obligation to pay to any Governmental
Body any tax obligations of, or with respect to any transaction relating to, any
other Person or to indemnify any other Person with respect to any tax.
2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as otherwise set forth
in Section 2.6 of the NSA and NetSoft Disclosure Schedule or elsewhere in this
Agreement, since March 31, 1997, neither NSA nor NetSoft has:
(a) suffered any Material Adverse Change in its financial condition
or in the operations of its business, nor any Material Adverse Change in its
balance sheet (with the NSA and NetSoft Unaudited Financials and any subsequent
financial statements analyzed as if each had been prepared according to GAAP),
and including but not limited to cash distributions or material decreases in the
net assets of either NSA or NetSoft;
(b) suffered any damage, destruction or loss, whether or not covered
by insurance in an amount in excess of Twenty Thousand Dollars ($20,000);
(c) granted or agreed to make any increase in the compensation
payable or to become payable by either NSA or NetSoft to its respective officers
or employees, except those occurring in the ordinary course of business;
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(d) declared, set aside or paid any dividend or made any other
distribution on or in respect of the shares of the capital stock of either NSA
or NetSoft or declared any direct or indirect redemption, retirement, purchase
or other acquisition by either NSA or NetSoft of such shares;
(e) issued any shares of capital stock of either NSA or NetSoft or
any warrants, rights, options or entered into any commitment relating to the
shares of either NSA or NetSoft except for the issuance of NSA Shares and
NetSoft Shares pursuant to the exercise of outstanding NSA Options and NetSoft
Options, respectively;
(f) made any change in the accounting methods or practices it
follows, whether for general financial or tax purposes, or any change in
depreciation or amortization policies or rates adopted therein;
(g) sold, leased, abandoned or otherwise disposed of any real
property or any machinery, equipment or other operating property other than in
the ordinary course of business;
(h) sold, assigned, transferred, licensed or otherwise disposed of
any patent, trademark, trade name, brand name, copyright (or pending application
for any patent, trademark or copyright), invention, work of authorship, process,
know-how, formula or trade secret or interest thereunder or other intangible
asset except in the ordinary course of its business;
(i) suffered any dispute involving any employee that would have a
Material Adverse Effect;
(j) engaged in any activity or entered into any material commitment
or transaction (including without limitation any borrowing or capital
expenditure), in either case, other than in the ordinary course of business;
(k) incurred any liabilities, contingent or otherwise, either
matured or unmatured (whether or not required to be reflected in financial
statements in accordance with GAAP, and whether due or to become due), except
for (i) liabilities identified as such in the "liabilities" column of the NSA
and NetSoft Unaudited Financials, (ii) accounts payable or accrued salaries that
have been incurred by either NSA or NetSoft since May 31, 1997 in the ordinary
course of business and consistent with NSA's and NetSoft's respective past
practices and (iii) liabilities in Section 2.6(k) of the NSA and NetSoft
Disclosure Schedule;
(l) permitted or allowed any of its material property or assets to
be subjected to any mortgage, deed of trust, pledge, lien, security interest or
other encumbrance of any kind, except those permitted under Section 2.7 hereof,
other than any purchase money security interests incurred in the ordinary course
of business;
(m) made any capital expenditure or commitment for additions to
property, plant or equipment individually in excess of Ten Thousand ($10,000),
or in the aggregate, in excess of Twenty Thousand ($20,000);
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(n) paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets to, or entered into any agreement or arrangement
with any of its Affiliates, officers, directors or shareholders or any Affiliate
or associate of any of the foregoing;
(o) made any amendment to or terminated any agreement which, if not
so amended or terminated, would be required to be disclosed on the NSA and
NetSoft Disclosure Schedule; or
(p) agreed to take any action described in this Section 2.6 or which
constitutes a breach of any of the representations contained in this Agreement.
2.7 TITLE AND RELATED MATTERS. Except as otherwise set forth in the NSA
and NetSoft Disclosure Schedule, each of NSA and NetSoft has good and marketable
title to all the properties, interests in properties and assets, real and
personal, reflected in the NSA and NetSoft Financial Statements or acquired
after the date of the NetSoft Financial Statements (except properties, interests
in properties and assets sold or otherwise disposed of since the date of the NSA
and NetSoft Financial Statements in the ordinary course of business), free and
clear of all deeds of trust, mortgages, liens, pledges, charges or encumbrances
of any kind or character, except the lien of current taxes not yet due and
payable and except for liens which in the aggregate do not secure more than
Twenty Thousand Dollars ($20,000) in liabilities. Except as reflected in the NSA
and NetSoft Financial Statements or the NSA and the NetSoft Disclosure Schedule,
the equipment of NSA and NetSoft used in the respective operations of its
business is in good operating condition and repair, normal wear and tear
excepted. All real or personal property leases to which either NSA or NetSoft is
a party are valid, binding, enforceable and effective in accordance with their
respective terms, subject to (a) laws of general application relating to
bankruptcy, insolvency, or the relief of debtors, (b) rules of law or equity
governing specific performance, injunctive relief and other equitable remedies
and (c) any third-party consents which may be required as a result of the
transactions contemplated in this Agreement. There is not under any of such
leases any existing material default by either NSA or NetSoft or event of
default or event which, with notice or lapse of time or both, would constitute a
material default. The NSA and NetSoft Disclosure Schedule contains a description
of all real and personal property leased or owned by either NSA or NetSoft,
describing its interest in said property and with respect to real property a
description of each parcel and a summary description of the buildings,
structures and improvements thereon. True and correct copies of NSA's and
NetSoft's leases have been provided to NetManage or its Representatives.
2.8 PROPRIETARY RIGHTS AND WARRANTY CLAIMS.
(a) Part 2.8 of the NSA and NetSoft Disclosure Schedule sets forth,
with respect to each NSA Proprietary Asset and NetSoft Proprietary Asset
registered with any Governmental Body or for which an application has been filed
with any Governmental Body, (i) a brief description of such NSA Proprietary
Asset or NetSoft Proprietary Asset and (ii) the names of the jurisdictions
covered by the applicable registration or application. Part 2.8 of the NSA and
NetSoft Disclosure Schedule identifies and provides a brief description of all
other NSA Proprietary Assets and NetSoft Proprietary Assets owned by either NSA
or NetSoft.
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Part 2.8 of the NSA and NetSoft Disclosure Schedule identifies and provides a
brief description of each NSA Proprietary Asset and NetSoft Proprietary Asset
licensed to either NSA or NetSoft, respectively, by any Person (except for any
NSA Proprietary Asset or NetSoft Proprietary Asset that is licensed to either
NSA or NetSoft under any third party software license generally available to the
public at a cost of less than One Thousand Dollars ($1,000)), and identifies the
license agreement under which such NSA Proprietary Asset or NetSoft Proprietary
Asset is being licensed to either NSA or NetSoft. Except as set forth in Part
2.8 of the NSA and NetSoft Disclosure Schedule, each of NSA and NetSoft has
good, valid and marketable title to all NSA Proprietary Assets and NetSoft
Proprietary Assets identified in Part 2.8 of the NSA and NetSoft Disclosure
Schedule, free and clear of all liens and other Encumbrances, and has a valid
right to use all NSA Proprietary Assets and NetSoft Proprietary Assets
identified in Part 2.8 of the NSA and NetSoft Disclosure Schedule. Except as set
forth in Part 2.8 of the NSA and NetSoft Disclosure Schedule, neither NSA nor
NetSoft is obligated to make any payment to any Person for the use of any NSA
Proprietary Asset or NetSoft Proprietary Asset. Except as set forth in Part 2.8
of the NSA and NetSoft Disclosure Schedule neither NSA nor NetSoft has developed
jointly with any other Person any NSA Proprietary Asset or NetSoft Proprietary
Asset with respect to which such other Person has any rights.
(b) Except as set forth in Part 2.8 of the NSA and NetSoft
Disclosure Schedule, each of NSA and NetSoft has taken all reasonable and
customary measures and precautions necessary to protect and maintain the
confidentiality and secrecy of all NSA Proprietary Assets and NetSoft
Proprietary Assets (except NSA Proprietary Assets and NetSoft Proprietary Assets
whose value would be unimpaired by public disclosure) and otherwise to maintain
and protect the value of all NSA Proprietary Assets and NetSoft Proprietary
Assets. Except as set forth in Part 2.8 of the NSA Disclosure Schedule, neither
NSA nor NetSoft has (other than pursuant to license agreements identified in
Part 2.11 of the NSA and NetSoft Disclosure Schedule) disclosed or delivered to
any Person, or permitted the disclosure or delivery to any Person of, (i) the
source code, or any portion or aspect of the source code, of any NSA Proprietary
Asset or NetSoft Proprietary Asset or (ii) the object code, or any portion or
aspect of the object code, of any NSA Proprietary Asset or NetSoft Proprietary
Asset.
(c) Except as set forth in Part 2.8(c) of the NSA and NetSoft
Disclosure Schedule, neither NSA nor NetSoft is infringing, misappropriating or
making any unlawful use of, and neither NSA nor NetSoft has at any time
infringed, misappropriated or made any unlawful use of, or received any notice
or other communication (in writing or otherwise) of any actual, alleged,
possible or potential infringement, misappropriation or unlawful use of, any NSA
Proprietary Asset or NetSoft Proprietary Asset owned or used by any other
Person. To the best of NSA's and NetSoft's respective knowledge, no other Person
is infringing, misappropriating or making any unlawful use of, and no NSA
Proprietary Asset or NetSoft Proprietary Asset owned or used by any other Person
infringes or conflicts with, any NSA Proprietary Asset or NetSoft Proprietary
Asset.
(d) Except as set forth in Part 2.8 of the NSA and NetSoft
Disclosure Schedule: (i) each NSA Proprietary Asset and NetSoft Proprietary
Asset conforms in all material respects with any specification, documentation,
performance standard, representation or
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statement made or provided with respect thereto by or on behalf of NSA or
NetSoft and (ii) there has not been any claim made against either NSA or NetSoft
by any customer or other Person alleging that any NSA Proprietary Asset or
NetSoft Proprietary Asset (including each version thereof that has ever been
licensed or otherwise made available by either NSA or NetSoft to any Person)
does not conform in all material respects with any specification, documentation,
performance standard, representation or statement made or provided by or on
behalf of either NSA or NetSoft, and there is no basis for any such claim.
(e) The NSA Proprietary Assets and the NetSoft Proprietary Assets
constitute all the Proprietary Assets necessary to enable each of NSA and
NetSoft to conduct its business in the manner in which such business has been
and is being conducted. Except as set forth in Part 2.8 of the NSA and NetSoft
Disclosure Schedule, (i) neither NSA nor NetSoft has licensed any of the NSA
Proprietary Assets or NetSoft Proprietary Assets to any Person on an exclusive
basis and (ii) neither NSA nor NetSoft has entered into any covenant not to
compete or contract limiting its ability to exploit fully any of the NSA
Proprietary Assets or NetSoft Proprietary Assets or to transact business in any
market or geographical area or with any Person.
(f) Except as set forth in Part 2.8 of the NSA and NetSoft
Disclosure Schedule, (i) all current and former employees of either NSA or
NetSoft have executed and delivered to NSA or NetSoft, as applicable, an
agreement (containing no exceptions to or exclusions from the scope of its
coverage other than listing Proprietary Rights developed by such person prior to
such person's employment with or engagement by NSA or NetSoft, as applicable)
that is substantially identical to the forms of Confidential Information and
Invention Assignment Agreements previously delivered to NetManage or its
Representatives and (ii) all current and former contractors to either NSA or
NetSoft have executed and delivered to NSA or NetSoft, as applicable, an
agreement (containing no exceptions to or exclusions from the scope of its
coverage other than listing Proprietary Rights developed by such person prior to
such person's employment or engagement by NSA or NetSoft, as applicable) that
otherwise is substantially identical to the form of Consultant Confidential
Information and Invention Assignment Agreement previously delivered to NetManage
or its Representatives.
(g) Except as set forth on the NSA and NetSoft Disclosure Schedule,
no product liability or warranty claims which individually or in the aggregate
could exceed the reserves therefor on the NSA and NetSoft Financial Statements
have been communicated in writing to or threatened against NSA or NetSoft
(including each of NetSoft's subsidiaries).
2.9 EMPLOYEE BENEFIT PLANS. Except as set forth on the NSA and NetSoft
Disclosure Schedule, neither NSA nor NetSoft maintains, and is obligated to
contribute to, any defined benefit pension plan or any employee benefit plan
that is subject to either Title IV of the Employee Retirement Income Security
Act of 1974 ("ERISA") or the minimum funding standards of ERISA or the Internal
Revenue Code. Each bonus, deferred compensation, pension, profit-sharing,
retirement, stock purchase, stock option, and other employee benefit or fringe
benefit plans, whether formal or informal, maintained by either NSA or NetSoft
conforms in all material respects, to all applicable requirements, if any, of
ERISA. The NSA and NetSoft Disclosure Schedule lists and describes all
profit-sharing, bonus, incentive, deferred
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compensation, vacation, severance pay, retirement, stock option, group insurance
or other plans (whether written or not) providing employee benefits.
2.10 BANK ACCOUNTS AND RECEIVABLES. The NSA and NetSoft Disclosure
Schedule sets forth the names and locations of all banks, trusts, companies,
savings and loan associations, and other financial institutions at which either
NSA or NetSoft maintains accounts of any nature and the names of all persons
authorized to draw thereon or make withdrawals therefrom. The NSA and NetSoft
Disclosure Schedule sets forth an accurate and complete breakdown and aging of
all accounts receivable, notes receivable, and other receivables of NetSoft as
of May 31, 1997. Except as set forth on the NSA and NetSoft Disclosure Schedule,
all existing accounts receivable of NetSoft (including those accounts receivable
reflected on the NSA and NetSoft Unaudited Financials that have not yet been
collected and those accounts receivable that have arisen since May 31, 1997 and
have not yet been collected) (a) represent valid obligations of customers of
NetSoft arising from bona fide transactions entered into in the ordinary course
of business and (b) are current and will be collected in full when due, without
any counterclaim or setoff (net of an allowance for doubtful accounts not to
exceed Three Hundred Fifty Thousand Dollars ($350,000) in the aggregate and net
of returns not to exceed Two Hundred Thousand Dollars ($200,000)). As of the
date hereof NSA has no, and as of the Closing Date NSA will not have any,
accounts receivable.
2.11 CONTRACTS.
(a) The NSA and NetSoft Disclosure Schedule identifies each
presently existing document or instrument relating to the acquisition, transfer,
current or future use, development, current or future sharing or licensing of
any technology or NSA Proprietary Asset or NetSoft Proprietary Asset.
(b) Except as set forth in Section 2.11 of the NSA and NetSoft
Disclosure Schedule,
(i) Neither NSA nor NetSoft has any agreement, contract or
commitment that call for fixed and/or contingent payments or expenditures by or
to either NSA or NetSoft of more than Ten Thousand Dollars ($10,000).
(ii) Neither NSA nor NetSoft has any purchase agreement,
contract or commitment that calls for fixed and/or contingent payments by either
NSA or NetSoft that are in excess of the normal, ordinary and usual requirements
of NSA's and NetSoft's respective businesses.
(iii) There is no outstanding sales contract, commitment or
proposal (including, without limitation, development projects) of either NSA or
NetSoft that either NSA or NetSoft currently expects to result in any loss to
either NSA or NetSoft upon completion or performance thereof.
(iv) Neither NSA nor NetSoft has any outstanding agreement,
contract or commitment with officers, employees, agents, consultants, advisors,
salesmen, sales
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representatives, distributors or dealers that are not cancelable by it on notice
of not longer than one hundred eighty (180) days and without liability, penalty
or premium.
(v) Neither NSA nor NetSoft has entered into any employment,
independent contractor or similar agreement, contract or commitment that is not
terminable on not more than one hundred eighty (180) days' notice without
penalty or liability of any type, including without limitation severance or
termination pay.
(vi) Neither NSA nor NetSoft has any currently effective
collective bargaining or union agreements, contracts or commitments.
(vii) Neither NSA nor NetSoft is restricted by agreement from
competing with any person or from carrying on its business anywhere in the
world.
(viii) Neither NSA nor NetSoft is under any liability or
obligation, and no such outstanding claim has been made, with respect to the
likely or expected return to either NSA or NetSoft of inventory or merchandise
in the possession of wholesalers, distributors, retailers, or other customers,
except such liabilities, obligations and claims as, in the aggregate, do not
exceed the reserves therefor set forth in the NSA and NetSoft Financial
Statements.
(ix) Neither NSA nor NetSoft has presently in effect any
guarantees of any obligations of other Persons or made any agreements to acquire
or guarantee any obligations of other Persons.
(x) Neither NSA nor NetSoft has any outstanding loan or advance
to any Person; nor is it party to any line of credit, standby financing,
revolving credit or other similar financing arrangement of any sort which would
permit the borrowing by either NSA or NetSoft of any sum not reflected in the
NSA and NetSoft Financial Statements.
(xi) All material contracts, agreements and instruments to which
either NSA or NetSoft is a party are valid, binding, in full force and effect,
and enforceable by either NSA or NetSoft, as applicable, in accordance with
their respective terms, subject to (A) laws of general application relating to
bankruptcy, insolvency and the relief of debtors and (B) rules of law governing
specific performance, injunctive relief and other equitable remedies. No such
material contract, agreement or instrument contains any material
liquidated-damages, penalty or similar provision. To the best of NSA's and
NetSoft's respective knowledge, no party to any such material contract,
agreement or instrument intends to cancel, withdraw, modify or amend such
contract, agreement or arrangement.
(c) The NSA and NetSoft Disclosure Schedule lists all unperformed
agreements pursuant to which either NSA or NetSoft has agreed to manufacture for
or supply to any third party any NSA Products or NetSoft Products or components
thereto requiring, or expected to require, payments of Twenty Thousand Dollars
($20,000) or more over the life of any such agreement which continues beyond the
date hereof. The NSA and NetSoft Disclosure Schedule also lists each vendor who
manufactures for or supplies to NSA or NetSoft any product
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or component included in the NSA Products or the NetSoft Products or is the sole
source for any product or component included in the NSA Products or the NetSoft
Products.
(d) Each of NSA and NetSoft has delivered to NetManage accurate and
complete copies of all written contracts identified in Part 2.11 of the NSA and
NetSoft Disclosure Schedule, including all amendments thereto. Neither NSA nor
NetSoft has entered into any material oral contracts, except for telephone
orders and renewals or extensions of written agreements or arrangements in the
ordinary course of business. Each contract identified in Part 2.11 of the NSA
and NetSoft Disclosure Schedule is valid and in full force and effect, and, to
the best of NSA's and NetSoft's respective knowledge, is enforceable by NSA or
NetSoft, as applicable, in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency or the relief of debtors,
and (ii) rules of law or equity governing specific performance, injunctive
relief and other equitable remedies.
(e) Except as set forth in Part 2.11 of the NSA and NetSoft
Disclosure Schedule:
(i) Neither NSA nor NetSoft has violated or breached, or
committed any default under, any material NSA or NetSoft contract, and, to the
best of NSA's and NetSoft's respective knowledge, no other Person has violated
or breached, or committed any default under, any material NSA or NetSoft
contract.
(ii) No event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could reasonably
be expected to, (A) result in a violation or breach of any of the provisions of
any material NSA or NetSoft contract, (B) give any Person the right to declare
default or exercise any remedy under any material NSA or NetSoft contract, (C)
give any Person the right to accelerate the maturity or performance of any
material NSA or NetSoft contract; or (D) give any Person the right to cancel,
terminate or modify any material NSA or NetSoft contract.
(f) None of the agreements, contracts and commitments listed or
described in Sections 2.3, 2.5, 2.7, 2.8, 2.11, 2.15, 2.16 and 2.17 of the NSA
and NetSoft Disclosure Schedule (collectively, the "Material Contracts")
pursuant to this Section 2.11 contains any provision which would require the
consent of third parties to the Acquisition or which would be altered as a
result of the Acquisition. If any Material Contract contains any such provision,
then each of NSA and NetSoft has described in the NSA and NetSoft Disclosure
Schedule such actions as are necessary with respect to each such Material
Contract to avoid any material adverse consequence as a result of the
Acquisition and shall, prior to the Closing Date, have obtained all necessary
consents (collectively, the "Material Consents") and taken such other action
with respect to each such Material Contract.
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2.12 ORDERS, COMMITMENTS AND RETURNS. All accepted and unfilled orders
entered into by either NSA or NetSoft for the sale, license, or lease or other
disposition by either NSA or NetSoft of its products, and all agreements,
contracts, or commitments for the purchase of supplies by either NSA or NetSoft,
were made in the ordinary course of business. No outstanding purchase or
outstanding lease commitment of either NSA or NetSoft is in excess of the
normal, ordinary and usual requirements of its business or was made at a price
(on both a per unit and aggregate basis) materially in excess of the current
market price at the time made, or to the best knowledge of NSA and NetSoft,
respectively, contains terms and conditions materially more onerous to either
NSA or NetSoft than those usual and customary in the industry.
2.13 COMPLIANCE WITH LAW. Each of NSA and NetSoft is in compliance in
all material respects with all applicable laws and regulations. Neither NSA or
NetSoft nor, to the best of NSA's and NetSoft's respective knowledge, any of its
employees, has directly or indirectly paid or delivered any fee, commission or
other sum of money or item of property, however characterized, to any finder,
agent, government official or other party in the United States or any other
country, that was or is in material violation of any federal, state, or local
statute or law or of any statute or law of any other country having
jurisdiction. Neither NSA nor NetSoft has participated directly or indirectly in
any boycotts or other similar practices affecting any of its customers. To the
best of its knowledge each of NSA and NetSoft has complied in all material
respects at all times with any and all applicable federal, state and foreign
laws, rules, regulations, proclamations and orders relating to the importation
or exportation of its products. All licenses, franchises, permits and other
governmental authorizations held by either NSA or NetSoft and which are material
to its business are valid and sufficient in all respects for the respective
businesses presently carried on by NSA and NetSoft.
2.14 LABOR DIFFICULTIES; NO DISCRIMINATION.
(a) Neither NSA nor NetSoft is engaged in any unfair labor practice
and is not in violation of any applicable laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours.
(b) There is no unfair labor practice complaint against either NSA
or NetSoft actually pending or threatened before the National Labor Relations
Board.
(c) There is no strike, labor dispute, slowdown, or stoppage
actually pending or threatened against either NSA or NetSoft.
(d) No union representation question exists respecting the employees
of either NSA or NetSoft and to the best of NSA's and NetSoft's respective
knowledge, no union organizing activities are taking place.
(e) No grievance or arbitration proceeding arising out of or under
any collective bargaining agreement is pending and no claims therefor exist.
(f) No collective bargaining agreement that is binding on either NSA
or NetSoft restricts it from relocating or closing any of its operations.
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(g) Neither NSA nor NetSoft has experienced any work stoppage or
other labor difficulty having a Material Adverse Effect on either NSA's or
NetSoft's business.
(h) There is and has not been any claim against either NSA or
NetSoft based on actual or alleged wrongful termination or on actual or alleged
race, age, sex, disability or other harassment or discrimination, or similar
tortious conduct, nor is there any basis for any such claim.
(i) Neither NSA nor NetSoft is aware of any NSA or NetSoft employee
who intends to terminate his or her employment with either NSA or NetSoft, as
applicable.
2.15 TRADE REGULATION. Except as otherwise set forth on the NSA and
NetSoft Disclosure Schedule, neither NSA nor NetSoft has terminated its
relationship with or refused to ship NSA Products or NetSoft Products to any
dealer, distributor, OEM, third party marketing entity or customer which had
theretofore paid or been obligated to pay either NSA or NetSoft in excess of
Twenty Thousand Dollars ($20,000) over any consecutive twelve (12) month period.
To the best knowledge of NSA and NetSoft, respectively, all of the prices
charged by either NSA or NetSoft in connection with the marketing or sale of any
products or services have been in compliance in all material respects with all
applicable laws and regulations. No claims against either NSA or NetSoft have
been communicated or threatened in writing to either NSA or NetSoft with respect
to wrongful termination of any dealer, distributor or any other marketing
entity, discriminatory pricing, price fixing, unfair competition, false
advertising, or any other violation of any laws or regulations relating to
anti-competitive practices or unfair trade practices of any kind, and to the
best knowledge of NSA and NetSoft respectively, no specific situation, set of
facts, or occurrence exists which provides any basis for any such claim.
2.16 INSIDER TRANSACTIONS. Except as otherwise set forth on the NSA and
NetSoft Disclosure Schedule, no Affiliate of either NSA or NetSoft has any
interest in (a) any equipment or other material property, real or personal,
tangible or intangible, including, without limitation, any proprietary asset,
used in connection with or pertaining to the business of either NSA or NetSoft
or (b) any creditor, supplier, customer, manufacturer, agent, representative, or
distributor of products of either NSA or NetSoft; provided, however, that no
such Affiliate or other person shall be deemed to have such an interest solely
by virtue of the ownership of less than one percent (1%) of the outstanding
stock or debt securities of any publicly-held company whose stock or debt
securities are traded on a recognized stock exchange or quoted on the National
Association of Securities Dealers Automated Quotation System.
2.17 EMPLOYEES, INDEPENDENT CONTRACTORS AND CONSULTANTS. The NSA and
NetSoft Disclosure Schedule lists and describes all currently effective and
material written or oral consulting, independent contractor and/or employment
agreements and other material agreements with individual employees, independent
contractors or consultants to which either NSA or NetSoft is a party. True and
correct copies of all such written agreements have been provided to NetManage or
its Representatives. All salaries and wages paid by either NSA or NetSoft are in
compliance with applicable federal, state and local laws. The NSA and NetSoft
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Disclosure Schedule lists the names of all persons currently employed by NSA and
NetSoft and the salaries and other compensation arrangements (bonus, deferred
compensation, etc.) for each such person. NSA's and NetSoft's aggregate accrued
vacation as of May 31, 1997 was approximately Four Hundred Forty-Two Thousand
Dollars ($442,000), and accrued severance pay as of June 6, 1997 was
approximately Two Hundred Eighteen Thousand Dollars ($218,000).
2.18 INSURANCE. The NSA and NetSoft Disclosure Schedule contains a list
of the principal policies of fire, liability and other forms of insurance held
by NSA and NetSoft. Neither NSA nor NetSoft has done anything, either by way of
action or inaction, that might invalidate such policies in whole or in part.
2.19 LITIGATION. Except as otherwise set forth on the NSA and NetSoft
Disclosure Schedule, there is no suit, action or proceeding (a) pending against
either NSA or NetSoft, (b) which has been threatened against or materially
affects either NSA or NetSoft or (c) which questions or challenges the validity
of this Agreement or the Transaction Documents. There is no judgment, decree,
injunction or order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding naming either NSA or NetSoft.
2.20 SECTION 341(f)(2). Neither NSA nor NetSoft has, with regard to any
property or assets held, acquired or to be acquired by it, at any time, filed a
consent to the application of Section 341(f)(2) of the Code nor will any such
consent be filed before the Closing.
2.21 SUBSIDIARIES. Other than NetSoft, NSA has no subsidiaries. Except
as listed in the NSA and NetSoft Disclosure Schedule, NetSoft has no
subsidiaries. The capitalization of each of the subsidiaries of NetSoft is as
set forth in Section 2.21 of the NSA and NetSoft Disclosure Schedule. Except as
otherwise set forth on the NSA and NetSoft Disclosure Schedule, neither NSA nor
NetSoft owns or controls (directly or indirectly) any capital stock, bonds or
other securities of, and does not have any proprietary interest in, any other
corporation, general or limited partnership, firm, association or business
organization, entity or enterprise, and nether NSA nor NetSoft controls
(directly or indirectly) the management or policies of any other corporation,
partnership, firm, association or business organization, entity or enterprise.
For purposes of Sections 2.4 through 2.25 of this Article II, the term "NetSoft"
shall be deemed to include all of NetSoft's subsidiaries.
2.22 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS. Each of NSA and NetSoft
has obtained all material permits, licenses and other authorizations which are
required under federal, state and local laws applicable to NSA or NetSoft and
relating to pollution or protection of the environment, including laws or
provisions relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials, substances, or wastes
into air, surface water, groundwater, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials, substances, or wastes. Except as set forth in the NSA and NetSoft
Disclosure Schedule, each of NSA and NetSoft is in material compliance with all
terms and conditions of the required permits, licenses and authorizations.
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Except as set forth in the NSA and NetSoft Disclosure Schedule, neither NSA nor
NetSoft is aware of, or has received written notice of, any conditions,
circumstances, activities, practices, incidents, or actions which may form the
basis of any claim, action, suit, proceeding, hearing, or investigation of, by,
against or relating to either NSA or NetSoft, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, or hazardous or
toxic substance, material or waste.
2.23 CORPORATE DOCUMENTS. Each of NSA and NetSoft has made available to
NetManage for its examination: (a) copies of its articles of incorporation and
bylaws, (b) its minute book containing all records of all proceedings, consents,
actions, and meetings of the shareholders, the board of directors and any
committees thereof, (c) all material permits, orders, and consents issued by any
regulatory agency with respect to it, or any of its securities, and all
applications for such permits, orders, and consents and (d) its stock transfer
books setting forth all transfers of any of its capital stock. The corporate
minute books, stock certificate books, stock registers and other corporate
records of NSA and NetSoft are complete and accurate in all material respects,
and the signatures appearing on all documents contained therein are the true
signatures of the persons purporting to have signed the same. All actions
reflected in such books and records were duly and validly taken in compliance in
all material respects with the laws of the applicable jurisdiction.
2.24 BROKERS. Except as set forth in the NSA and NetSoft Disclosure
Schedule, neither NetSoft, NSA nor, to the best of NSA's and NetSoft's
respective knowledge, any NSA Shareholder or NetSoft Shareholder, is obligated
for the payment of fees or expenses of any broker or finder in connection with
the origin, negotiation or execution of this Agreement or any of the Transaction
Documents in connection with any transaction contemplated herein or therein.
2.25 DISCLOSURE. No statement by either NSA or NetSoft contained in this
Agreement, its exhibits and schedules, nor any of the certificates or documents
required to be delivered by either NSA or NetSoft to NetManage under this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
3. REPRESENTATIONS AND WARRANTIES OF THE NSA SHAREHOLDERS AND THE NETSOFT
SHAREHOLDERS.
In order to induce NetManage to enter into this Agreement, each NSA
Shareholder and NetSoft Shareholder makes, severally (for himself or itself, as
the case may be) and not jointly, the following representations and warranties
which are applicable to such shareholder to NetManage (collectively, the
"Shareholder Representations and Warranties"). The Shareholder Representations
and
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Warranties shall be true and correct in all respects as of the date hereof and
at all times hereafter subject to the provisions in this Agreement regarding the
expiration thereof and changes expressly contemplated in this Agreement. The
Shareholder Representations and Warranties are qualified, as indicated, by
information disclosed in the "Shareholder Disclosure Schedule" prepared by the
NSA Shareholders and the NetSoft Shareholders and delivered to NetManage prior
to or concurrently with the execution and delivery of this Agreement (the
"Shareholder Disclosure Schedule"). Each Shareholder Disclosure Schedule section
sets forth in reasonable detail any and all exceptions to the Shareholder
Representations contained in the corresponding subparagraph of this Article III.
The NSA Shareholders and the NetSoft Shareholders may update the Shareholder
Disclosure Schedule at any time and from time to time on or prior to the Closing
Date, and the Shareholder Representations set forth in this Article III shall be
qualified, as appropriate, by the corresponding Shareholder Disclosure Schedule
section as so amended as if such amended Shareholder Disclosure Schedule section
were part of the original Shareholder Disclosure Schedule; provided, however,
that NetManage may request the removal of any updated disclosure item or items
from the Shareholder Disclosure Schedule; and provided further, however, that if
any updated disclosure item or items constitute(s) a Material Adverse Change to
NSA's and NetSoft's business and properties, taken as a whole, then NetManage
may, at NetManage's option, refuse to consummate the transactions contemplated
in this Agreement, and this Agreement shall terminate without further
obligations or liability upon any party in favor of any other party hereto.
3.1 REPRESENTATIONS AND WARRANTIES OF THE NSA SHAREHOLDERS.
(a) POWER, AUTHORITY, AND VALIDITY. Each NSA Shareholder has all
requisite power and authority to enter into this Agreement and the other
Transaction Documents to which it is a party and to carry out its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the
Transaction Documents to which such NSA Shareholder is a party and the
consummation of the transactions contemplated in this Agreement and in the
Transaction Documents have been, or will prior to Closing have been, duly
authorized by all necessary action on the part of such NSA Shareholder. This
Agreement has been, and each of the Transaction Documents to which such NSA
Shareholder is a party has been or will be as of the Closing Date, duly executed
and delivered by such NSA Shareholder. To such NSA Shareholder's knowledge,
except for any governmental and regulatory consents contemplated in this
Agreement, no consent of any person who is a party to any contract with such NSA
Shareholder, nor consent of any Governmental Body is required to be obtained by
such NSA Shareholder to permit the consummation of the transactions contemplated
in this Agreement and in the Transaction Documents, other than those that will
be obtained prior to the Closing Date. Such NSA Shareholder is not subject to or
obligated under any provision of any certificate or articles of incorporation,
bylaw or contract or any license, franchise or permit, or subject to any order
or decree, which would be breached or violated in any manner by or in conflict
with its executing and carrying out this Agreement and the transactions
contemplated in this Agreement and in the Transaction Documents, other than
those which will be cured prior to the Closing Date. This Agreement is, and the
other Transaction Documents to which such NSA Shareholder is a party when
executed and delivered by such NSA Shareholder shall be, the valid and binding
obligations of such NSA Shareholder enforceable in accordance with its terms,
subject to (i) laws
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of general application relating to bankruptcy, insolvency or the relief of
debtors and (ii) rules of law or equity governing specific performance,
injunctive relief, and other equitable remedies.
(b) OWNERSHIP OF NSA SHARES. Such NSA Shareholder is, or will by the
Closing Date be, the sole record and beneficial owner of , and has good and
marketable title to, all of the NSA shares set forth opposite such NSA
Shareholder's name on Exhibit B attached hereto. Such NSA Shares are duly
authorized, fully paid and nonassessable, and such NSA Shareholder owns, or will
own by the Closing Date, such NSA Shares free and clear of all liabilities
(absolute or contingent), liens, encumbrances, mortgages, deeds of trusts,
pledges, options, claims, proxies and other security interests or rights of
others, other than those that will be removed prior to the Closing Date. Such
NSA Shareholder has not entered into any agreement with respect to such NSA
Shareholder's NSA Shares which in any way limits or otherwise affects such NSA
Shareholder's ability to execute and deliver this Agreement and the Transaction
Documents and to consummate the transactions contemplated herein and therein
other than those which will be terminated prior to or on the Closing Date. There
are no existing charter documents, contracts, judgments, orders, laws,
regulations, rules or other promulgations by any Governmental Body, the
provisions of which will not be complied with prior to the Closing Date so as to
permit each such NSA Shareholder to execute and deliver this Agreement and the
Transaction Documents and to consummate the transactions contemplated herein and
therein.
(c) TRANSACTIONS WITH THE COMPANY. Neither such NSA Shareholder, nor
such NSA Shareholder's, spouse, children or other person living in their
household:
(i) owns directly or indirectly any interest in, or serves as an
officer or director of, any customer, competitor or supplier of either NSA or
NetSoft or any organization which has a contract or arrangement with either NSA
or NetSoft , other than interests owned by a NSA Shareholder which is in the
business of investing in other entities;
(ii) is owed any money or property by either NSA or NetSoft,
other than wages or salary earned, normal and customary employee benefits and
reasonable expense reimbursements incurred in the ordinary course of business;
(iii) is indebted to either NSA or NetSoft;
(iv) has any claim, other than for reimbursements accrued in the
ordinary course of business, (A) (regardless of the source thereof) against
either NSA or NetSoft or (B) against either NSA's or NetSoft's shareholders,
directors, officers, employees, agents, Affiliates or representatives in each
case arising out of conduct engaged in within the same such person's employment
or relationship with either NSA or NetSoft; or
(v) owns any property, real or personal, tangible or intangible,
or has rights required for or used in the business of either NSA or ▇▇▇▇▇▇▇.
▇▇
▇▇
(▇) ▇▇▇ PROPRIETARY ASSETS AND NETSOFT PROPRIETARY ASSETS. Such NSA
Shareholder does not have or claim any right, title or interest of any kind in
any of the NSA Proprietary Assets or NetSoft Proprietary Assets and is not
entitled to any payment from either NSA or NetSoft for use of any NSA
Proprietary Asset or NetSoft Proprietary Assets. The foregoing is not intended
to limit or alter any NSA Shareholder's rights as a shareholder or right to
receive salary or other benefits as an employee.
(e) DISCLOSURE. No representation or warranty made by such NSA
Shareholder in this Agreement, the Transaction Documents, or in any schedule,
certificate or exhibit prepared and furnished or to be prepared and furnished by
such NSA Shareholder or its representatives in its capacity as a NSA Shareholder
pursuant hereto or thereto, or in connection herewith or therewith, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements or facts contained herein
or therein not misleading in light of the circumstances under which they were
furnished.
3.2 REPRESENTATIONS AND WARRANTIES OF THE NETSOFT SHAREHOLDERS.
(a) POWER, AUTHORITY, AND VALIDITY. Each NetSoft Shareholder has all
requisite power and authority to enter into this Agreement and the other
Transaction Documents to which it is a party and to carry out its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the
Transaction Documents to which such NetSoft Shareholder is a party and the
consummation of the transactions contemplated in this Agreement and in the
Transaction Documents have been, or will prior to Closing have been, duly
authorized by all necessary action on the part of such NetSoft Shareholder. This
Agreement has been, and each of the Transaction Documents to which such NetSoft
Shareholder is a party has been or will be as of the Closing Date, duly executed
and delivered by such NetSoft Shareholder. To such NetSoft Shareholder's
knowledge, except for any governmental and regulatory consents contemplated in
this Agreement, no consent of any person who is a party to any contract with
such NetSoft Shareholder, nor consent of any Governmental Body is required to be
obtained by such NetSoft Shareholder to permit the consummation of the
transactions contemplated in this Agreement and in the Transaction Documents,
other than those that will be obtained prior to the Closing Date. No NetSoft
Shareholder is subject to or obligated under any provision of any certificate or
articles of incorporation, bylaw or contract or any license, franchise or
permit, or subject to any order or decree, which would be breached or violated
in any manner by or in conflict with its executing and carrying out this
Agreement and the transactions contemplated in this Agreement and in the
Transaction Documents, other than those which will be cured prior to the Closing
Date. This Agreement is, and the other Transaction Documents to which such
NetSoft Shareholder is a party when executed and delivered by such NetSoft
Shareholder shall be, the valid and binding obligations of such NetSoft
Shareholder enforceable in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency or the relief of debtors
and (ii) rules of law or equity governing specific performance, injunctive
relief, and other equitable remedies.
(b) OWNERSHIP OF NETSOFT SHARES. Such NetSoft Shareholder is, or
will by the Closing Date be, the sole record and beneficial owner of , and has
good and
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marketable title to, all of the NetSoft shares set forth opposite such NetSoft
Shareholder's name on Exhibit B attached hereto. Such NetSoft Shares are duly
authorized, fully paid and nonassessable, and such NetSoft Shareholder owns, or
will own by the Closing Date, such NetSoft Shares free and clear of all
liabilities (absolute or contingent), liens, encumbrances, mortgages, deeds of
trusts, pledges, options, claims, proxies and other security interests or rights
of others, other than those that will be removed prior to the Closing Date. Such
NetSoft Shareholder has not entered into any agreement with respect to such
NetSoft Shareholder's NetSoft Shares which in any way limits or otherwise
affects such NetSoft Shareholder's ability to execute and deliver this Agreement
and the Transaction Documents and to consummate the transactions contemplated
herein and therein other than those which will be terminated prior to or on the
Closing Date. There are no existing charter documents, contracts, judgments,
orders, laws, regulations, rules or other promulgations by any Governmental
Body, the provisions of which will not be complied with prior to the Closing
Date so as to permit each such NetSoft Shareholder to execute and deliver this
Agreement and the Transaction Documents and to consummate the transactions
contemplated herein and therein.
(c) TRANSACTIONS WITH THE COMPANY. Neither such NetSoft Shareholder,
nor such NetSoft Shareholder's, spouse, children or other person living in their
household:
(i) owns directly or indirectly any interest in, or serves as an
officer or director of, any customer, competitor or supplier of either NSA or
NetSoft or any organization which has a contract or arrangement with either NSA
or NetSoft , other than interests owned by a NetSoft Shareholder which is in the
business of investing in other entities;
(ii) is owed any money or property by either NSA or NetSoft,
other than wages or salary earned, normal and customary employee benefits and
reasonable expense reimbursements incurred, in the ordinary course of business;
(iii) is indebted to either NSA or NetSoft;
(iv) has any claim, other than for reimbursements accrued in the
ordinary course of business, (A) (regardless of the source thereof) against
either NSA or NetSoft or (B) against either NSA's or NetSoft's shareholders,
directors, officers, employees, agents, Affiliates or representatives in each
case arising out of conduct engaged in within the same such person's employment
or relationship with either NSA or NetSoft; or
(v) owns any property, real or personal, tangible or intangible,
or has rights required for or used in the business of either NSA or NetSoft.
(d) NSA PROPRIETARY ASSETS AND NETSOFT PROPRIETARY ASSETS. Such
NetSoft Shareholder does not have or claim any right, title or interest of any
kind in any of the NSA Proprietary Assets or NetSoft Proprietary Assets and is
not entitled to any payment from either NSA or NetSoft for use of any NSA
Proprietary Asset or NetSoft Proprietary Assets. The foregoing is not intended
to limit or alter any NetSoft Shareholder's rights as a shareholder or right to
receive salary or other benefits as an employee.
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(e) DISCLOSURE. No representation or warranty made by such NetSoft
Shareholder in this Agreement, the Transaction Documents, or in any schedule,
certificate or exhibit prepared and furnished or to be prepared and furnished by
such NetSoft Shareholder or its representative in its capacity as a NetSoft
Shareholder pursuant hereto or thereto, or in connection herewith or therewith,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained herein or therein not misleading in light of the circumstances under
which they were furnished.
4. REPRESENTATIONS AND WARRANTIES OF NETMANAGE. Except as set forth in the
NetManage Disclosure Schedule provided to NetSoft on the date hereof, NetManage
represents and warrants to NSA and NetSoft that:
4.1 ORGANIZATION AND GOOD STANDING. NetManage is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full power and authority to carry on its business as now
conducted. True and correct copies of NetManage's certificate of incorporation
and by-laws as in effect as of the date hereof have been previously delivered to
NSA and NetSoft.
4.2 POWER, AUTHORIZATION AND VALIDITY. NetManage has the right, power,
legal capacity and authority to enter into and perform its obligations under
this Agreement and the other Transaction Documents to which it is a party. The
execution and delivery of this Agreement and the other Transaction Documents to
which NetManage is a party have been duly and validly approved and authorized by
the board of directors of NetManage. No authorization or approval, governmental
or otherwise, is necessary in order to enable NetManage to enter into and to
perform the terms of this Agreement or the other Transaction Documents on its
part to be performed, except for (a) termination of the HSR Waiting Period and
(b) such other consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the laws of any foreign
country in which NetManage or any of the NetManage's subsidiaries conducts any
business or owns any property or assets. This Agreement is, and the other
Transaction Documents when executed and delivered by NetManage shall be, the
valid and binding obligations of NetManage enforceable in accordance with their
respective terms subject to (c) laws of general application relating to
bankruptcy, insolvency, or the relief of debtors and (d) rules of law or equity
governing specific performance, injunctive relief and other equitable remedies.
4.3 NO VIOLATION OF EXISTING AGREEMENTS. Neither the execution and
delivery of this Agreement or any other Transactions Documents to which
NetManage is a party nor the consummation of the transactions contemplated
herein or therein will conflict with, or result in a material breach or
violation of, any provision of NetManage's certificate of incorporation or its
bylaws, as currently in effect, any instrument or contract to which NetManage is
a party or by which any such party is bound, or any federal, state or local
judgment, writ, decree, order, statute, rule or regulation applicable to any
such person. Neither the execution and delivery of this Agreement nor any of the
Transaction Documents to which NetManage is a party nor the consummation of the
transactions contemplated herein or therein
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will have a Material Adverse Effect on the operations, assets, or financial
condition of NetManage.
4.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. NetManage is not in
violation of any provisions of its certificate of incorporation or bylaws as
currently in effect, or any federal, state or local judgment, writ, decree, or
order applicable to NetManage.
4.5 LITIGATION. There is no suit, action, proceeding, claim or
investigation pending or, to the best of NetManage's knowledge, threatened,
against NetManage before any or which questions or challenges the validity of
this Agreement.
4.6 ADEQUACY OF FUNDS. NetManage has and will continue to have funds
adequate to consummate the transactions contemplated in this Agreement and to
fulfill its obligations under this Agreement.
4.7 DISCLOSURE. No representation or warranty made by NetManage in this
Agreement, the Transaction Documents or in any schedule, certificate or exhibit
prepared and furnished or to be prepared and furnished by NetManage pursuant
hereto or thereto, or in connection herewith or therewith, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished.
5. PRECLOSING COVENANTS OF NSA AND NETSOFT.
5.1 MATERIAL CONSENTS. Each of NSA and NetSoft shall use its respective
Best Efforts to obtain any and all consents necessary for the assumption by
NetManage of those Material Contracts listed on Schedule 5.1 of the NetSoft
Disclosure Schedule concurrent with the Closing.
5.2 ADVICE OF CHANGES. Each of NSA and NetSoft will promptly advise
NetManage in writing (a) of any event occurring subsequent to the date of this
Agreement which would render any NSA and NetSoft Representation and Warranty, if
made on or as of the date of such event or the Closing Date, untrue or
inaccurate in any material respect and (b) of any Material Adverse Change in
either NSA's or NetSoft's business or financial condition.
5.3 CONDUCT OF BUSINESS. From the date hereof through the Closing Date,
each of NSA and NetSoft will continue to conduct its business and maintain its
business relationships in the ordinary and usual course and will not, except as
set forth in the NSA and NetSoft Disclosure Schedule or with the prior written
consent of NetManage, which will not be unreasonably withheld,
(a) borrow any money which borrowings exceed in the aggregate
Twenty-Five Thousand Dollars ($25,000);
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(b) incur or commit to incur any capital expenditure or commitment
for additions to property, plant and equipment individually in excess of Ten
Thousand Dollars ($10,000), or in the aggregate, in excess of Twenty Thousand
Dollars ($20,000).
(c) lease, license, sell, transfer or encumber or permit to be
encumbered any asset, intellectual property right or other property associated
with the business of NetManage (including sales or transfers to Affiliates of
either NSA or NetSoft), except for licenses granted in the usual and ordinary
course of business and except for cash applied in payment of NSA's and NetSoft's
respective liabilities in the usual and ordinary course of its business;
(d) dispose of any of its assets, except inventory in the regular
and ordinary course of business;
(e) enter into any lease or contract for the purchase or sale of any
property, real or personal, except in the ordinary course of business;
(f) fail to maintain its equipment and other assets in good working
condition and repair according to the standards it has maintained up to the date
of this Agreement, subject only to ordinary wear and tear;
(g) pay any bonus, increased salary, or special remuneration to any
officer or employee, including any amounts for accrued but unpaid bonuses;
(h) change its accounting methods;
(i) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital, or redeem or otherwise acquire any of its
capital stock;
(j) amend or terminate any material contract, agreement or license
to which it is a party except in the ordinary course of business;
(k) loan any amount to any person or entity, or guaranty or act as a
surety for any obligation;
(l) waive or release any right or claim, except in the ordinary
course of business;
(m) issue or sell any shares of its capital stock of any class or
any other of its securities, or issue or create any warrants, obligations,
subscriptions, options, convertible securities, or other commitments to issue
shares of capital stock, except in connection with the exercise of rights
existing prior to the date hereof;
(n) split or combine the outstanding shares of its capital stock of
any class or enter into any recapitalization affecting the number of outstanding
shares of its capital stock of any class or affecting any other of its
securities;
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(o) merge, consolidate or reorganize with any entity;
(p) amend its articles of incorporation or bylaws;
(q) make or change any election, change any annual accounting
period, adopt or change any accounting method, file any amended tax return,
enter into any closing agreement, settle any tax claim or assessment relating to
either NSA or NetSoft, surrender any right to claim refund of taxes, consent to
any extension or waiver of the limitation period applicable to any tax claim or
assessment relating to either NSA or NetSoft, or take any other action or omit
to take any action, if any such election, adoption, change, amendment,
agreement, settlement, surrender, consent or other action or omission would have
the effect of increasing the tax liability of either NSA or NetSoft or
NetManage;
(r) do anything that is not contemplated in this Agreement or would
cause there to be a Material Adverse Change in the NetSoft Financial Statements
(with such NSA and NetSoft Financial Statements analyzed as if they had been
prepared according to GAAP, and including but not limited to cash distributions
or material decreases in the net assets of NSA and NetSoft), except as would
occur in the ordinary course of NSA's and NetSoft's respective business, between
the date of the NSA and NetSoft Financial Statements and the Closing Date; or
(s) agree to do any of the things described in the preceding clauses
Section 5.3 through (r).
5.4 RISK OF LOSS. Except as otherwise provided in this Agreement, until
the Closing, all risk of loss, damage or destruction to NSA's and NetSoft's
respective assets shall be borne by NSA and NetSoft.
5.5 ACCESS TO INFORMATION. Until the Closing and subject to Section 7.1
hereof, each of NSA and NetSoft shall allow NetManage and its agents free access
upon reasonable notice and during normal working hours to its files, books,
records, and offices, including, without limitation, any and all information
relating to taxes, commitments, contracts, leases, licenses, and personal
property and financial condition. Until the Closing, each of NSA and NetSoft
shall cause its accountants to cooperate with NetManage and its agents in making
available all financial information requested, including without limitation the
right to examine all working papers pertaining to all financial statements
prepared or audited by such accountants.
5.6 SATISFACTION OF CONDITIONS PRECEDENT. Each of NSA and NetSoft will
use its Best Efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 9, and each of NSA and NetSoft will use
its Best Efforts to cause the transactions contemplated in this Agreement to be
consummated, and, without limiting the generality of the foregoing, to obtain
all Material Consents and other consents and authorizations of third parties and
to make all filings with, and give all notices to, third parties which may be
necessary or reasonably required on its part in order to effect the transactions
contemplated herein.
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5.7 OTHER NEGOTIATIONS. Between the date hereof and August 31, 1997,
(subject to extension upon mutual agreement), or such earlier date as NetManage
and each of NSA and NetSoft mutually agree to discontinue discussions of the
Acquisition (the "Expiration Date"), neither NSA nor NetSoft will (and it will
use its Best Efforts to assure that its officers, directors, employees, agents
and Affiliates do not on its behalf) take any action to solicit, initiate, seek,
encourage or support any inquiry, proposal or offer from, furnish any
information to, or participate in any negotiations with, any corporation,
partnership, person or other entity or group (other than discussions with
NetManage) regarding any acquisition of either NSA or NetSoft, any merger or
consolidation with or involving either NSA or NetSoft, or any acquisition of any
material portion of the stock or assets of either NSA or NetSoft. Each of NSA
and NetSoft agree that any such negotiations in progress as of the date hereof
will be terminated or suspended during such period. In no event will either NSA
or NetSoft solicit or enter into an agreement concerning any such third party
transaction. Each of NSA and NetSoft represent and warrant that it has the legal
right to terminate or suspend any such pending negotiations. If between the date
of this Agreement and the termination of this Agreement, either NSA or NetSoft
receives from a third party any offer or indication of interest regarding any of
the transactions referred to above, or any request for information regarding any
of such transactions, each of NSA and NetSoft shall (a) notify NetManage
immediately of such offer, indication of interest or request, including the full
terms of any proposal therein, (b) notify such third party of NetSoft's
obligations under this Agreement and (c) reject any offer so received.
5.8 FEDERAL SYSTEMS DIVISION SPIN OFF. Each of NSA and NetSoft shall (a)
cause the Federal Systems Division Spin Off to be effected on or prior to the
Closing Date, (b) use its Best Efforts to mitigate the adverse tax consequences
net of tax benefits of the Federal Systems Division Spin Off to NSA, NetSoft and
NetManage and (c) will advise NetManage and NetManage's Representatives in
advance of all transactions undertaken in connection with the Federal Systems
Division Spin Off, including but not limited to the expected tax consequences of
such transactions.
5.9 NSA OPTIONS AND NETSOFT OPTIONS. Prior to the Closing Date, (a) NSA
will cause all outstanding NSA Options which are fully vested as of the Closing
Date, if any, to be exercised and will cause all outstanding NSA Options, if
any, which are not fully vested as of the Closing Date to be canceled on or
before the Closing Date and (b) NetSoft will cause all outstanding NetSoft
Options which are fully vested as of the Closing Date to be exercised or
surrendered to NetSoft against payment of the net value thereof and will cause
all outstanding NetSoft Options which are not fully vested as of the Closing
Date to be canceled on or before the Closing Date.
6. PRECLOSING AND OTHER COVENANTS OF NETMANAGE.
6.1 ADVICE OF CHANGES. NetManage will promptly advise each of NSA and
NetSoft in writing of any event occurring subsequent to the date of this
Agreement which would render any representation or warranty of NetManage
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect.
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6.2 SATISFACTION OF CONDITIONS PRECEDENT. NetManage will use its Best
Efforts to satisfy or cause to be satisfied all the conditions precedent which
are set forth in Section 8, and NetManage will use its Best Efforts to cause the
transactions contemplated in this Agreement to be consummated, and, without
limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give all
notices to, third parties which may be necessary or reasonably required on its
part in order to effect the transactions contemplated herein.
6.3 EMPLOYEES. For all NetSoft employees that become NetManage employees
after consummation of the Acquisition, NetManage will adjust the base salaries
of all such employees to reflect the equivalent salary for their job function at
NetManage (only if the equivalent salary provided by NetManage exceeds that
formerly offered by NetSoft) and will be entitled to NetManage's or NetSoft's,
as applicable, customary employee benefits as appropriate for such employee's
position, including, as appropriate, employee stock options, health insurance,
401K and other benefit plans.
7. MUTUAL COVENANTS.
7.1 CONFIDENTIALITY. Each party acknowledges that in the course of the
performance of this Agreement it may obtain the Confidential Information of the
other party. The Receiving Party shall, at all times, both during the term of
this Agreement and thereafter, keep in confidence and trust all of the
Disclosing Party's Confidential Information received by it. The Receiving Party
shall not use the Confidential Information of the Disclosing Party other than as
expressly permitted under the terms of this Agreement or by a separate written
agreement. The Receiving Party shall take all reasonable steps to prevent
unauthorized disclosure or use of the Disclosing Party's Confidential
Information and to prevent it from falling into the public domain or into the
possession of unauthorized persons. The Receiving Party shall not disclose
Confidential Information of the Disclosing Party to any person or entity other
than its officers or employees (or outside legal, financial or accounting
advisors) who need access to such Confidential Information in order to effect
the intent of this Agreement and who have entered into confidentiality
agreements with such person's employer or who are subject to ethical
restrictions on disclosure which protects the Confidential Information of the
Disclosing Party. The Receiving Party shall immediately give notice to the
Disclosing Party of any unauthorized use or disclosure of Disclosing Party's
Confidential Information. The Receiving Party agrees to assist the Disclosing
Party to remedy such unauthorized use or disclosure of its Confidential
Information. These obligations shall not apply to the extent that Confidential
Information includes information which:
(a) is already known to the Receiving Party at the time of
disclosure, which knowledge the Receiving Party shall have the burden of
proving;
(b) is, or through no act or failure to act of the Receiving Party
becomes, publicly known;
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(c) is received by the Receiving Party from a third party without
restriction on disclosure (although this exception shall not apply if such third
party is itself violating a confidentiality obligation by making such
disclosure);
(d) is independently developed by the Receiving Party without
reference to the Confidential Information of the Disclosing Party, which
independent development the Receiving Party will have the burden of proving;
(e) is approved for release by written authorization of the
Disclosing Party; or
(f) is required to be disclosed by a Government Body to further the
objectives of this Agreement or by a proper order of a court of competent
jurisdiction; provided, however that the Receiving Party will use its best
efforts to minimize such disclosure and will consult with and assist the
Disclosing Party in obtaining a protective order prior to such disclosure.
7.2 NO PUBLIC ANNOUNCEMENT. Other than in connection with effecting the
HSR Filings, the parties shall make no public announcement concerning this
Agreement, their discussions or any other memos, letters or agreements between
the parties relating to the Acquisition until such time as they agree to the
contents of a mutually satisfactory press release which they intend to publicly
release on or before the close of business on the day following (a) the date
hereof and (b) the closing of this Agreement. Either of the parties, but only
after reasonable consultation with the other, may make disclosure if required
under applicable law.
7.3 REGULATORY FILINGS; CONSENTS; REASONABLE EFFORTS. Subject to the
terms and conditions of this Agreement, each of NSA, NetSoft and NetManage shall
use its respective Best Efforts to (a) make all necessary filings with respect
to the Acquisition and this Agreement under the Securities Act, the Exchange Act
and applicable blue sky or similar securities laws and obtain required approvals
and clearances with respect thereto and supply all additional information
requested in connection therewith, (b) make premerger notification or other
appropriate filings with federal, state or local governmental bodies or
applicable foreign governmental agencies and obtain required approvals and
clearances with respect thereto and supply all additional information requested
in connection therewith, (c) obtain all consents, waivers, approvals,
authorizations and orders required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the Acquisition
and (d) take, or cause to be taken, all appropriate action, and do, or cause to
be done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated in this Agreement as promptly as
practicable, but no later than August 31, 1997.
7.4 HSR FILINGS. Within three (3) business days after the execution of
this Agreement, each of NetManage, NetSoft and NSA shall make or cause to be
made any and all required governmental filings ("HSR Filings") required under
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), with respect to the transactions contemplated in this Agreement and the
Transaction Documents, and shall use its Best Efforts to respond promptly to all
inquiries or requests for additional information or documentation from
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the Department of Justice ("DOJ") or the Federal Trade Commission ("FTC"), as
applicable. Each of NetManage, NetSoft and NSA, as applicable, will notify the
other of all correspondence, filings or communications between such party and
its Representatives, on the one hand, and DOJ and/or FTC, on the other hand,
with respect to this Agreement, the Transaction Documents and the transactions
contemplated herein and therein. Each of NetManage, NetSoft and NSA, as
applicable, will furnish the other with such necessary information and
reasonable assistance as such other parties may request in connection with the
preparation of the HSR Filings.
7.5 FURTHER ASSURANCES. Prior to and following the Closing, each party
agrees to cooperate fully with the other parties and to execute such further
instruments, documents and agreements, and to give such further written
assurances, as may be reasonably requested by any other party to better evidence
and reflect the transactions described herein and the Transaction Documents and
contemplated herein and therein and to carry into effect the intents and
purposes of this Agreement.
8. CONDITIONS TO NSA'S AND NETSOFT'S OBLIGATIONS. The obligations of NSA,
NetSoft and the NSA Shareholders and NetSoft Shareholders to close the
transactions contemplated in this Agreement are subject to the fulfillment or
satisfaction on and as of the Closing of each of the following conditions (any
one or more of which may be waived by NSA, NetSoft, the NSA Shareholders and the
NetSoft Shareholders, but only in a writing signed by NSA, NetSoft, the NSA
Shareholders and the NetSoft Shareholders):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of NetManage set forth in Section 4 shall be true and correct when
made and on and as of the Closing with the same force and effect as if they had
been made at the Closing, and NSA and NetSoft shall receive a certificate to
such effect signed by the President or Chief Financial Officer of NetManage.
8.2 COVENANTS. NetManage shall have performed and complied with all of
its covenants required to be performed or complied with prior to the Closing
contained in Sections 6 and 7 on or before the Closing, and NSA and NetSoft
shall receive a certificate from NetManage to such effect signed by the
President or Chief Financial Officer of NetManage.
8.3 AUTHORIZATIONS. NSA and NetSoft shall have received from NetManage
written evidence that the execution, delivery and performance of NetManage's
obligations under this Agreement have been duly and validly approved and
authorized prior to the date hereof by the board of directors of NetManage.
8.4 OPINION OF NETMANAGE'S COUNSEL. NSA and NetSoft shall have received
from counsel to NetManage an opinion in substantially the form attached hereto
as Exhibit D ("Opinion of Counsel to NetManage").
8.5 GOVERNMENT CONSENTS. There shall have been obtained at or prior to
the date of Closing such permits or authorizations, and there shall have been
taken such other action, as may be required by any regulatory authority having
jurisdiction over the parties and the subject matter and the actions herein
proposed to be taken.
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8.6 TERMINATION OF HSR WAITING PERIOD. The parties shall have received
confirmation that the HSR Waiting Period has been terminated.
8.7 NO LITIGATION. On and as of the Closing Date, no litigation or
proceeding shall be threatened or pending against NetManage for the purpose or
with the probable effect (in the reasonable opinion of NetManage's counsel) of
enjoining or preventing the consummation of any of the transactions contemplated
in this Agreement.
8.8 ESCROW AGREEMENT. Each of NetManage, NetSoft, NSA, the NSA
Shareholders and the Escrow Agent shall have executed and delivered an Escrow
Agreement in the form attached hereto as Exhibit C.
8.9 RECEIPT OF CERTIFICATES. Each of NSA and NetSoft shall have received
at Closing a certificate signed by the Chief Financial Officer of NetManage
certifying the accuracy of the matters set forth in Sections 8.1, 8.2 and 8.3.
9. CONDITIONS TO NETMANAGE'S OBLIGATIONS. The obligations of NetManage are
subject to the fulfillment or satisfaction on and as of the Closing of each of
the following conditions (any one or more of which may be waived by NetManage,
but only in a writing signed by NetManage):
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The NSA and NetSoft
Representations and Warranties made in Section 2 and the Shareholder
Representations and Warranties made in Section 3 (in each case as updated
through the Closing Date) and in any certificate delivered by NetSoft, NSA or
the NSA Shareholders or NetSoft Shareholder in connection with this Agreement
shall be true and correct when made (subject to the ability to update) and on
and as of the Closing with the same force and effect as if they had been made at
the Closing.
9.2 COVENANTS. Each of NetSoft, NSA and the NSA Shareholders or NetSoft
Shareholders shall have performed and complied with all of its or their
respective covenants and obligations required to be performed or complied with
on or before the Closing contained in this Agreement on or before the Closing.
9.3 NO LITIGATION. On and as of the Closing, no litigation or proceeding
shall be threatened or pending against either NSA or NetSoft for the purpose or
with the probable effect (in the reasonable opinion of NSA's and NetSoft's
counsel) of enjoining or preventing the consummation of any of the transactions
contemplated in this Agreement, or which would have a Material Adverse Effect on
the business, liabilities, income, property, or operations of either NSA or
NetSoft subsequent to the Closing, and no material judgment, decree, injunction
or order of any court, governmental department, commission, agency,
instrumentality or arbitrator shall be outstanding against either NSA or
NetSoft.
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9.4 AUTHORIZATIONS. NetManage shall have received from NSA and NetSoft
written evidence that the execution, delivery and performance of this Agreement
have been duly and validly approved and authorized by their respective boards of
directors and by the NSA Shareholders and the NetSoft Shareholders.
9.5 REQUIRED CONSENTS. NetManage shall have received all written
consents, assignments, waivers, authorizations or other certificates (including
Material Consents) reasonably deemed necessary by NetManage's legal counsel to
provide for the continuation in full force and effect or assignment or
termination of any and all contracts and leases of NSA and NetSoft.
9.6 OPINION OF NETSOFT'S COUNSEL. NetManage shall have received from
counsel to NSA and NetSoft, opinions in substantially the form attached hereto
as Exhibit E ("Opinions of Counsel to NetSoft").
9.7 EMPLOYMENT AND NON-COMPETITION AGREEMENTS. Each of ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇ ▇▇▇▇▇, (collectively, the "Key Employees") shall
have executed and delivered employment, non-competition and non-solicitation
agreement, in the form attached hereto as Exhibit F (the "Employment
Agreements").
9.8 GOVERNMENT CONSENTS. There shall have been obtained at or prior to
the date of Closing such permits or authorizations, and there shall have been
taken such other actions, as may be required by any regulatory authority having
jurisdiction over the parties and the subject matter and the transactions
contemplated herein.
9.9 CONFIDENTIALITY AND PROPRIETARY INFORMATION AGREEMENTS.
Confidentiality and Proprietary Information Agreements, reasonably satisfactory
in form and content to NetManage, shall have been executed by all employees of
NSA and NetSoft and by all consultants to and independent contractors of NSA and
NetSoft who have not already signed such agreements.
9.10 ESCROW AGREEMENT. Each of NetManage, NetSoft, NSA, the NSA
Shareholders, the NetSoft Shareholders and the Escrow Agent shall have executed
and delivered an escrow agreement in the form attached as Exhibit C.
9.11 RESIGNATIONS OF NSA AND NETSOFT DIRECTORS. All of the respective
directors of NSA and NetSoft shall have executed and delivered to NetManage
written resignations, effective as of the Closing Date.
9.12 RECEIPT OF CERTIFICATES. NetManage shall have received at Closing
certificates signed by (a) the respective Presidents and Chief Financial
Officers of NSA and NetSoft and (b) the Shareholder Representative certifying
the accuracy of the matters set forth in Sections 9.1, 9.2, 9.3, and 9.4 (as
such matters relate to NSA, NetSoft, the NSA Shareholders and the NetSoft
Shareholders, as applicable).
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9.13 NO ADVERSE DEVELOPMENT. There shall not have been any Material
Adverse Change in the financial condition, results of operations, assets,
liabilities or business of either NSA or NetSoft since March 31, 1997.
9.14 SATISFACTORY COMPLETION OF NETMANAGE'S DUE DILIGENCE REVIEW.
NetManage shall have completed its due diligence investigation of NSA and
NetSoft to its reasonable satisfaction, following reasonably diligent efforts by
NetManage to complete its due diligence review.
9.15 TERMINATION OF HSR WAITING PERIOD. The parties shall have received
confirmation that the HSR Waiting Period has been terminated.
9.16 ACCOUNTING TREATMENT. NetManage shall have received confirmation by
its auditors that the Acquisition will receive NetManage's desired in process
research and development purchase accounting treatment.
9.17 NSA OPTIONS AND NETSOFT OPTIONS All NetSoft Options which are
vested as of the Closing Date shall have been exercised, canceled or surrendered
against payment of the net value thereof, all NetSoft Options which are not
vested as of the Closing Date shall have been canceled in exchange for a cash
bonus as set forth in Section 1.4 hereof, no NSA Options shall have been granted
since the date of this Agreement and no NSA Option shall be outstanding as of
the Closing Date and each of NSA and NetSoft shall deliver evidence of such
exercise payments and cancellations as reasonably requested by counsel to
NetManage.
9.18 FEDERAL SYSTEMS DIVISION SPIN OFF. The Federal Systems Division
Spin Off shall have been effected to the reasonable satisfaction of NetManage
and its Representatives according to the terms and provisions contained in the
documents previously delivered to NetManage.
9.19 NON-COMPETITION AGREEMENTS. ▇▇▇▇▇ Kong shall have executed and
delivered to NetManage non-competition and non-solicitation agreements in the
form attached hereto as Exhibit G (the "Non-Competition Agreements").
10. TERMINATION OF AGREEMENT.
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing by the mutual written consent of each of the parties hereto. This
Agreement may also be terminated and abandoned by either NetManage and NSA or
NetSoft for any reason if the Closing has not occurred by August 31, 1997, or
such later date as the parties may agree in writing; provided, however, that a
party cannot terminate under this provision if the failure to occur of the
Closing is the result of the failure on the part of such party to perform any of
its obligations hereunder (except the failure on the part of such party to
satisfy a closing condition over which such party has no control).
Any termination of this Agreement under this Section 10.1 shall be effective
by the delivery of written notice of the terminating party to the other parties
hereto.
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10.2 EFFECT OF TERMINATION. Any termination of this Agreement pursuant
to this Section 10 shall be without further obligation or liability upon any
party in favor of any other party hereto; provided, however, that, subject to
the terms of Article II above, if such termination by one party shall result
from the willful failure of the other party to carry out its obligations under
this Agreement, then such party shall be liable for Damages incurred by the
other party, and such termination shall not be deemed or construed as limiting
or denying any legal or equitable right or remedy of said party, and said party
shall be entitled to recover its costs and expenses which are incurred in
pursuing its rights and remedies (including reasonable attorneys' fees).
10.3 CERTAIN EFFECTS OF TERMINATION. In the event of the termination of
this Agreement by either NSA or NetSoft, on the one hand, or NetManage on the
other hand as provided in Section 10.1 hereof:
(a) each party, if so requested by the other party, will (i) return
promptly every document (other than documents publicly available) furnished to
it by the other party (or any subsidiary, division, associate or affiliate of
such other party) in connection with the transactions contemplated hereby,
whether so obtained before or after the execution of this Agreement, and any
copies thereof which may have been made, and will cause its representatives and
any representatives of financial institutions and investors and others to whom
such documents were furnished promptly to return such documents and any copies
thereof any of them may have made or (ii) destroy such documents and cause its
representatives and such other representatives to destroy such documents, and
such party shall deliver a certificate executed by its president or vice
president stating to such effect; and
(b) NetSoft and NetManage shall continue to abide by the provisions
of the Mutual Nondisclosure Agreement between NetManage and NetSoft. This
Section 10.3 shall survive any termination of this Agreement.
11. INDEMNIFICATION AND ESCROW.
11.1 SURVIVAL OF REPRESENTATIONS.
(a) The NSA and NetSoft Representations and Warranties (including
the representations and warranties set forth in Section 2 hereof and the
representations and warranties set forth in any certificate delivered by NSA and
NetSoft in connection with this Agreement, as qualified by the NSA and NetSoft
Disclosure Schedules as amended as of or prior to the Closing Date) shall
survive the Closing and shall remain in full force and effect and shall survive
until the end of the Indemnification Period and shall survive thereafter only
with respect to any claims properly noticed and made prior to the end of the
Indemnification Period; provided, however, that the NSA and NetSoft
Representations and Warranties made pursuant to Section 2.5 shall survive until
the applicable statutes of limitations expire; and provided further, however,
that the termination hereunder of the NSA and NetSoft Representations and
Warranties shall not terminate or limit in any manner whatsoever any rights
NetManage has or may have pursuant to this Article 11 for Damages arising out of
or resulting from (i) knowing, intentional and
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fraudulent misrepresentation relating to the NSA and NetSoft Representations and
Warranties and/or the Shareholder Representations and Warranties, (ii) breaches
of the NSA and NetSoft Representations and Warranties set forth in Section 2.5
or (iii) any Damages arising out of or resulting from the Federal Systems
Division Spin Off (provided that no claims may be made by NetManage pursuant to
any of the foregoing clauses (i)-(iii) of this Section 11.1(a) after the
expiration of the applicable statutes of limitations). The representations and
warranties made by NetManage set forth in Section 4 of this Agreement shall
survive the Closing and shall remain in full force and effect and shall survive
until the end of the Indemnification Period; provided, however, that the
termination hereunder of the representations and warranties made by NetManage
shall not terminate or limit in any manner whatsoever any rights which the NSA
Shareholders or the NetSoft Shareholders have or may have for fraud or
misrepresentation.
(b) The NSA and NetSoft Representations and Warranties as qualified
pursuant to the NSA and NetSoft Disclosure Schedule, as updated, and the
covenants and obligations of NSA and NetSoft, and the rights and remedies that
may be exercised by the Indemnitees, shall not be limited or otherwise affected
by or as a result of any information furnished to, or any investigation made by
or knowledge of, any of the Indemnitees or any of their Representatives.
NetManage shall make claims resulting from or relating to this Agreement solely
in accordance with Article 11.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the NSA and NetSoft Disclosure Schedule or in any
update to the NSA and NetSoft Disclosure Schedule shall be deemed to be a
modification of the corresponding NSA and NetSoft Representation and Warranty
(including the representations and warranties set forth in Section 2 hereof and
the representations and warranties set forth in any certificate delivered by NSA
and NetSoft in connection with this Agreement).
(d) The Shareholder Representations and Warranties shall as set
forth in Sections 3.1(a), (b) and (d) and 3.2(a), (b) and (d) survive the
Closing; provided, however, that no claims may be made by NetManage pursuant to
such Sections 3.1(a), (b) and (d) and 3.2(a), (b) and (d) after the expiration
of the applicable statutes of limitations. The Shareholder Representation and
Warranties set forth in Section 3.1(c) and (e) and 3.2(c) and (e) shall survive
until the end of the Indemnification Period.
11.2 INDEMNIFICATION BY THE NSA AND THE NETSOFT SHAREHOLDERS.
(a) From and after the Closing Date (but subject to Section 11.1(a)
and Section 11.3), the NSA Shareholders and the NetSoft Shareholders, severally
(in proportion to each such NSA Shareholder's or NetSoft Shareholder's, as
applicable, pro rata ownership of NSA Shares or NetSoft Shares, as applicable,
set forth on Exhibit B attached hereto) and not jointly, shall hold harmless and
indemnify each of the Indemnitees from and against, and shall compensate and
reimburse each of the Indemnitees for, any Damages which are suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees may
otherwise become subject (regardless of whether or not such Damages relate to
any third-party claim) and which arise from or as a result of: (i) any breach of
any NSA or NetSoft Representation or Warranty set
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forth (or in any certificate delivered by either by NSA or NetSoft in connection
with this Agreement), (ii) any breach of any covenant or obligation of either
NSA or NetSoft hereunder, (iii) any Damages which arise out of or result from
the Federal Systems Division Spin Off or (iv) any Legal Proceeding relating to
any breach or expense of the type referred to in clause "(i)," "(ii)" or "(iii)"
above (including any Legal Proceeding commenced by any Indemnitee for the
purpose of enforcing any of its rights under this Section 11 if such Indemnitee
is the prevailing party in any such Legal Proceeding).
(b) If NSA or NetSoft suffers, incurs or otherwise becomes subject
to any Damages as a result of or in connection with any breach of any
representation, warranty, covenant or obligation, then (without limiting any of
the rights of the either NSA or NetSoft as an Indemnitee) NetManage shall also
be deemed, by virtue of its ownership of the stock of either NSA or NetSoft, to
have incurred Damages as a result of and in connection with such breach.
11.3 THRESHOLD; CEILING; EXCLUSIVITY.
(a) Neither the NSA Shareholders nor the NetSoft Shareholders shall
be required to make any indemnification payment pursuant to Section 11.2(a) for
any breach of any of the NSA and NetSoft Representations and Warranties or any
of the Shareholder Representations and Warranties (or in any certificate
delivered by either NSA or NetSoft in connection with this Agreement) until such
time as and to the extent that the total amount of all Damages (including the
Damages arising from any such breach and all other Damages arising from any
other breaches of any representations or warranties) that have been suffered or
incurred by any one or more of the Indemnitees, or to which any one or more of
the Indemnitees has or have otherwise become subject, exceeds Two Hundred Fifty
Thousand Dollars ($250,000) (the "Deductible") in the aggregate.
(b) Except with respect to indemnification claims based on (i)
knowing, intentional and fraudulent misrepresentations of NSA and NetSoft
Representations and Warranties, (ii) the breach of NSA and NetSoft
Representations and Warranties set forth in Section 2.5, (iii) any breach of any
Shareholder Representations and Warranties set forth in Sections 3.1(a), (b) and
(d) and 3.2(a), (b) and (d) and (iv) Damages arising out of or resulting from
the Federal Systems Division Spin Off, NetManage agrees on behalf of the
Indemnitees that, after the Closing, the sole recourse of the Indemnitees with
respect to Damages shall be against the Escrow Fund during the Escrow Period
except for claims properly noticed before the expiration of the Escrow Period
which are not resolved as of the expiration of the Escrow Period.
(c) Notwithstanding any provision in this Agreement to the contrary,
the aggregate liability of the NSA Shareholders and the NetSoft Shareholders for
indemnification claims under this Section 11 shall in no event exceed Thirteen
Million Dollars ($13,000,000) including the Escrow Fund.
11.4 SATISFACTION OF INDEMNIFICATION CLAIM. In the event the NSA
Shareholders and the NetSoft Shareholders shall have any liability for
indemnification claims pursuant to any of clauses (i) through (iv) of Section
11.3(b) or otherwise to any Indemnitee under this Section 11, satisfaction of
such liability shall occur first from the Escrow Fund prior to
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satisfaction of any other claim hereunder and with the Deductible applying to
such liability (provided that the Deductible shall not apply to any liability
for indemnification claims arising out of 11.3(b)(iv), and if any liability
remains after such Deductible and Escrow Fund have been exhausted, the NSA
Shareholders and the NetSoft Shareholders may satisfy such liability by
delivering to such Indemnitee cash.
11.5 NO CONTRIBUTION. Subject to all rights of NSA Shareholders under
this Agreement or any contract disclosed in the Shareholder Disclosure Schedule
and except as provided in Section 11.4, the NSA Shareholders and the NetSoft
Shareholders, as such, acknowledge and agree that they shall not have and shall
not exercise or assert (or attempt to exercise or assert), any right of
contribution, right of indemnity or other right or remedy against NSA, NetSoft
or NetManage in connection with any indemnification obligation or any other
liability to which it may become subject under or in connection with this
Agreement or any certificate delivered by NSA, NetSoft or NetManage in
connection with this Agreement. Nothing in this Section 11.5 shall limit the
right of such Shareholder to seek subrogation or make claims pursuant to other
terms of this Agreement.
11.6 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against
NSA, NetSoft, NetManage or against any other Person) with respect to which NSA,
NetSoft, the NSA Shareholders or the NetSoft Shareholders may become obligated
to hold harmless, indemnify, compensate or reimburse any Indemnitee pursuant to
this Section 11, the procedure set forth below shall be followed.
(a) NOTICE. NetManage shall give prompt written notice to the Escrow
Agent and the NSA Shareholders and NetSoft Shareholders of the commencement of
any such Legal Proceeding against NSA, NetSoft, or NetManage for which indemnity
may be sought under Section 11; provided, however, that any failure on the part
of NetManage to so notify the Escrow Agent and the NSA Shareholders and NetSoft
Shareholders shall not limit any of the obligations of NSA Shareholders or
NetSoft Shareholders under this Section 11 (except to the extent such failure
materially prejudices the defense of such Legal Proceeding) so long as notice of
such claim is given within the Indemnification Period. The Indemnification
Period shall be tolled solely with respect to a particular claim for the period
beginning on the date the Indemnifying Party receives written notice of that
claim until the final resolution of such claim so long as such claim is made
within the Indemnification Period. Notice shall be deemed properly given if
given in accordance with Section 12.11 hereof to the addresses, telephone
numbers and facsimile numbers, as appropriate, set forth in Section 12.11,
regardless of whether or not the NSA Shareholders or NetSoft Shareholders
actually receive such notice.
(b) DEFENSE OF CLAIM. The Indemnitee shall have the right to be
represented by counsel of its choice and to defend or otherwise control the
handling of any claim or Legal Proceeding for which indemnity is sought.
Notwithstanding the foregoing, either the NSA Shareholders or the NetSoft
Shareholders may elect (by written notice by the holders of a majority of the
shares of NSA as of immediately prior to the Closing Date to NetManage within
sixty (60) days after receipt of written notice under Section 11.6(a)) to assume
the defense of or
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otherwise control the handling of any such claim or Legal Proceeding (other than
for matters relating to the intellectual property rights of NetManage (including
NSA and NetSoft), or claims by customers of NetManage) for which indemnity is
sought, subject to the limitations provided herein.
If the NSA Shareholders and the NetSoft Shareholders so elect to assume the
defense of any such claim or Legal Proceeding:
(i) the NSA Shareholders and the NetSoft Shareholders shall proceed
to defend such claim or Legal Proceeding in a diligent manner with counsel
reasonably satisfactory to the Indemnitee;
(ii) the Indemnitee shall make available to the NSA Shareholders and
the NetSoft Shareholders any documents and materials in the possession of the
Indemnitee that may be necessary to the defense of such claim or Legal
Proceeding;
(iii) the NSA Shareholders and the NetSoft Shareholders shall keep
the Indemnitee informed of all material developments and events relating to such
claim or Legal Proceeding;
(iv) the Indemnitee shall have the right to participate in the
defense of such claim or Legal Proceeding at the Indemnitee's expense; and
(v) the holders of a majority of NSA shares as of immediately prior
to Closing shall have the right to settle, adjust or compromise such claim or
Legal Proceeding with the consent of NetManage; provided, however, that
NetManage shall not unreasonably withhold such consent.
If the NSA Shareholders and the NetSoft Shareholders do not (or cannot) elect to
assume the defense of any such claim or Legal Proceeding, the Indemnitee may
proceed with the defense of such claim or Legal Proceeding on its own. If the
Indemnitee so proceeds with the defense of any such claim or Legal Proceeding on
its own:
(vi) all expenses (including reasonable attorneys' fees) relating to
the defense of such claim or Legal Proceeding (whether or not incurred by the
Indemnitee) shall be borne and paid exclusively by the NSA Shareholders and the
NetSoft Shareholders out of the Escrow Fund;
(vii) the NSA Shareholders and the NetSoft Shareholders shall make
available to the Indemnitee any documents and materials in the possession or
control of the NSA Shareholders and the NetSoft Shareholders that may be
necessary to the defense of such claim or Legal Proceeding except for documents
or materials which are sealed by a court order or are subject to a nondisclosure
agreement prohibiting disclosure by the Shareholders;
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(viii) the Indemnitee shall keep the NSA Shareholders and the
NetSoft Shareholders informed of all material developments and events relating
to such claim or Legal Proceeding; and
(ix) the Indemnitee shall have the right to settle, adjust or
compromise such claim or Legal Proceeding with the consent of the holders of a
majority of NSA shares as of immediately prior to Closing; provided, however,
that such holders of a majority of NSA shares as of immediately prior to Closing
shall not unreasonably withhold such consent.
11.7 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN NETMANAGE. No
Indemnitee (other than NetManage or any successor thereto or assignee thereof)
shall be permitted to assert any indemnification claim or exercise any other
remedy under this Agreement unless NetManage (or any successor thereto or assign
thereof) shall have consented to the assertion of such indemnification claim or
the exercise of such other remedy.
11.8 ESCROW FUND. As soon as practicable after the Closing Date, the
Escrow Fund shall be deposited by NetManage with National Bank of Southern
California agent as escrow agent (the "Escrow Agent"), such deposit to
constitute the Escrow Fund and to be governed by the terms set forth herein and
in the Escrow Agreement attached hereto as Exhibit C.
11.9 ESCROW PERIOD. The Escrow Period and the Indemnification Period
shall terminate on the first anniversary of the Closing Date.
11.10 NETMANAGE INDEMNIFICATION. NetManage shall indemnify NetSoft, the
NSA Shareholders and the NetSoft Shareholders against, and hold them harmless
from, any violation or breach of any representations or warranties or covenants
of NetManage set forth in this Agreement.
12. MISCELLANEOUS.
12.1 GOVERNING LAWS. It is the intention of the parties hereto that the
internal laws of the State of California (irrespective of its choice of law
principles) shall govern the validity of this Agreement, the construction of its
terms, and the interpretation and enforcement of the rights and duties of the
parties hereto.
12.2 BINDING UPON SUCCESSORS AND ASSIGNS. Subject to, and unless
otherwise provided in, this Agreement, each and all of the covenants, terms,
provisions, and agreements contained herein shall be binding upon, and inure to
the benefit of, the permitted successors, executors, heirs, representatives,
administrators and assigns of the parties hereto provided that no party hereto
shall assign this Agreement to any such entity without the prior written consent
of the other party, which consent shall not be unreasonably withheld.
12.3 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this
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Agreement and application of such provision to other persons or circumstances
shall be interpreted so as best to reasonably effect the intent of the parties
hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision which will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision.
12.4 ENTIRE AGREEMENT. This Agreement, the exhibits hereto, the
documents referenced herein, and the exhibits thereto, constitute the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and thereof and supersede all prior and contemporaneous agreements
or understandings, inducements or conditions, express or implied, written or
oral, between the parties with respect hereto and thereto.
12.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of which together shall constitute one and the
same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as signatories.
12.6 EXPENSES. Each party shall pay all of its own costs and expenses
incurred with respect to the negotiation, execution and delivery of this
Agreement and the exhibits hereto. In the event the Acquisition is consummated,
all legal, accounting, investment banking, broker's and finder's fees incurred
by NSA, NetSoft, the NSA Shareholders or the NetSoft Shareholders in connection
with the Acquisition shall be deemed to be expenses of the NSA Shareholders and
the NetSoft Shareholders; provided, however , that fees and expenses not to
exceed in aggregate Eighty-Five Thousand Three Hundred Dollars ($85,300)
incurred in connection with the Federal System Division Spin Off, or otherwise,
shall be deemed to be expenses of NSA or NetSoft, as applicable.
12.7 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed to constitute
a waiver of any other default or any succeeding breach or default.
12.8 SURVIVAL OF AGREEMENTS. All covenants, agreements, representations
and warranties made herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
notwithstanding any investigation of the parties hereto and shall terminate on
the date one year after the Closing Date.
12.9 NO WAIVER. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
12.10 ATTORNEYS' FEES. Subject to the limitations or claims set forth in
Section 11 and elsewhere in this Agreement, should suit be brought to enforce or
interpret any
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part of this Agreement, the prevailing party shall be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including, without limitation, costs, expenses and fees
on any appeal), all of which, to the extent applicable against the NSA
Shareholders or the NetSoft Shareholders, shall be recovered from the Escrow
Fund. The prevailing party shall be the party entitled to recover its costs of
suit (from the Escrow Fund if against the NSA Shareholders or the NetSoft
Shareholders), regardless of whether such suit proceeds to final judgment. A
party not entitled to recover its costs shall not be entitled to recover
attorneys' fees. No sum for attorneys' fees shall be counted in calculating the
amount of a judgment for purposes of determining if a party is entitled to
recover costs or attorneys' fees.
12.11 NOTICES. Any notice provided for or permitted under this Agreement
will be treated as having been given when (a) delivered personally, (b) sent by
confirmed telex or telecopy, (c) sent by commercial overnight courier with
written verification of receipt, or (d) mailed postage prepaid by certified or
registered mail, return receipt requested, to the party to be notified, at the
address set forth below, or at such other place of which the other party has
been notified in accordance with the provisions of this Section 12.11.
NSA or NetSoft: NetSoft
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇, President and Chief
Executive Officer
With copy to: Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
NetManage: NetManage, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial
Officer
With copy to: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: J. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
42
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NSA and NetSoft To the NSA Shareholders and the NetSoft
Shareholders: Shareholders at the addresses, telephone numbers
and facsimile numbers, as applicable, as set forth
in Exhibit H attached hereto.
Such notice will be treated as having been received upon actual receipt.
12.12 CONSTRUCTION OF AGREEMENT. This Agreement has been negotiated by
the respective parties hereto and their attorneys and the language hereof shall
not be construed for or against any party. The titles and headings herein are
for reference purposes only and shall not in any manner limit the construction
of this Agreement which shall be considered as a whole.
12.13 NO JOINT VENTURE. Nothing contained in this Agreement shall be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party shall have
the power to control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent contractors with
respect to each other. No party shall have any power or authority to bind or
commit any other. No party shall hold itself out as having any authority or
relationship in contravention of this Section 12.13.
12.14 PRONOUNS. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
12.15 FURTHER ASSURANCES. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances, as may be reasonably requested by
any other party to better evidence and reflect the transactions described herein
and contemplated hereby and to carry into effect the intents and purposes of
this Agreement.
12.16 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions of this
Agreement are intended, nor shall be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, partner of any party hereto or any other
person or entity unless specifically provided otherwise herein, and, except as
so provided, all provisions hereof shall be personal solely between the parties
to this Agreement.
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46
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
NETMANAGE, INC., NETSOFT,
a Delaware Corporation a California corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------- -------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Its: President and Chief Executive
Vice President, Finance, Chief Officer
Financial Officer and -------------------------------
Secretary
NETWORK SOFTWARE ASSOCIATES, INC.,
a California corporation
By: /s/ ▇▇▇▇▇ KONG
-------------------------------
Its: President
-------------------------------
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47
NSA SHAREHOLDER'S COUNTERPART SIGNATURE PAGE
STOCK PURCHASE AGREEMENT
"SHAREHOLDER" "SHAREHOLDER"
If Shareholder is a corporation: If Shareholder is a corporation:
By: By:
-------------------------------- -------------------------------
Title: Title:
----------------------------- ----------------------------
Signature: Signature:
------------------------- -------------------------
If Shareholder is an individual: If Shareholder is an individual:
/s/ ▇▇▇▇▇ KONG /s/ VIOLET KONG
----------------------------------- -----------------------------------
▇▇▇▇▇ Kong Violet Kong
"SHAREHOLDER" "SHAREHOLDER"
If Shareholder is a corporation: If Shareholder is a corporation:
By: By:
-------------------------------- -------------------------------
Title: Title:
----------------------------- ----------------------------
Signature: Signature:
------------------------- -------------------------
If Shareholder is an individual: If Shareholder is an individual:
/s/ ▇▇▇▇▇▇ KONG /s/ ▇▇▇▇▇▇ KONG
----------------------------------- -----------------------------------
▇▇▇▇▇ Kong, Special Trustee of the ▇▇▇▇▇▇ Kong
▇▇▇▇▇ Kong Irrevocable Trust dated,
November 17, 1993
45
48
NSA SHAREHOLDER'S COUNTERPART SIGNATURE PAGE, CONT.
STOCK PURCHASE AGREEMENT
"SHAREHOLDER" "SHAREHOLDER"
If Shareholder is a corporation: If Shareholder is a corporation:
By: By:
-------------------------------- -------------------------------
Title: Title:
----------------------------- ----------------------------
Signature: Signature:
------------------------- -------------------------
If Shareholder is an individual: If Shareholder is an individual:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
----------------------------------- -----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
"SHAREHOLDER" "SHAREHOLDER"
If Shareholder is a corporation: If Shareholder is a corporation:
By: By:
-------------------------------- -------------------------------
Title: Title:
----------------------------- ----------------------------
Signature: Signature:
------------------------- -------------------------
If Shareholder is an individual: If Shareholder is an individual:
/s/ ▇▇▇▇▇ ▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇
----------------------------------- -----------------------------------
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
46
49
NSA SHAREHOLDER'S COUNTERPART SIGNATURE PAGE, CONT.
STOCK PURCHASE AGREEMENT
"SHAREHOLDER" "SHAREHOLDER"
If Shareholder is a corporation: If Shareholder is a corporation:
By: By:
-------------------------------- -------------------------------
Title: Title:
----------------------------- ----------------------------
Signature: Signature:
------------------------- -------------------------
If Shareholder is an individual: If Shareholder is an individual:
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
----------------------------------- -----------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
"SHAREHOLDER" "SHAREHOLDER"
If Shareholder is a corporation: If Shareholder is a corporation:
By: By:
-------------------------------- -------------------------------
Title: Title:
----------------------------- ----------------------------
Signature: Signature:
------------------------- -------------------------
If Shareholder is an individual: If Shareholder is an individual:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------- -----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, Executor of Estate
of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
47
50
NETSOFT SHAREHOLDER'S COUNTERPART SIGNATURE PAGE
STOCK PURCHASE AGREEMENT
"SHAREHOLDER"
If Shareholder is a corporation:
By:
--------------------------------
Title:
-----------------------------
Signature:
-------------------------
If Shareholder is an individual:
/s/ ▇▇▇▇▇ KONG
-----------------------------------
▇▇▇▇▇ Kong
48
51
LIST OF EXHIBITS:
EXHIBIT A: CERTAIN DEFINITIONS
EXHIBIT B: NSA AND NETSOFT SHAREHOLDER SCHEDULE
EXHIBIT C: FORM OF ESCROW AGREEMENT
EXHIBIT D: FORM OF OPINION OF COUNSEL TO NETMANAGE
EXHIBIT E: FORM OF OPINIONS OF COUNSEL TO NSA AND NETSOFT
EXHIBIT F: FORM OF EMPLOYMENT AND NON-COMPETITION AGREEMENT
EXHIBIT G: FORM OF NON-COMPETITION AGREEMENT
EXHIBIT H: NSA SHAREHOLDERS' AND NETSOFT SHAREHOLDERS' ADDRESSES,
TELEPHONE NUMBERS AND FACSIMILE NUMBERS
49
52
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
AFFILIATE. "Affiliate" shall have the meaning set forth in the rules and
regulations promulgated by the Commission pursuant to the Securities Act.
BEST EFFORTS. "Best Efforts" shall mean the efforts that a prudent person
desirous of achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible; provided, however, that an
obligation to use Best Efforts under this Agreement does not require the person
subject to that obligation to take actions that would result in a Material
Adverse Change in the benefits to such person of this Agreement and the
transactions contemplated hereby.
CLOSING AND CLOSING DATE. "Closing" and "Closing Date" shall have the
meanings set forth in Section 1.6.
CODE. "Code" shall mean the Internal Revenue Code of 1986, as amended.
COMMISSION. "Commission" shall mean the United States Securities and
Exchange Commission.
CONFIDENTIAL INFORMATION. "Confidential Information" shall mean confidential
information of a party ("Disclosing Party") which is disclosed to another party
("Receiving Party"). Confidential Information shall include, but not be limited
to, trade secrets, know-how, inventions, techniques, processes, algorithms,
software programs, schematics, designs, contracts, customer lists, financial
information, sales and marketing plans and business information.
DAMAGES. "Damages" shall include any loss, damage, injury, liability, claim,
settlement, judgment, award, fine, penalty, tax, fee (including reasonable
attorneys' fees), charge, reasonable out-of-pocket expenses (including
reasonable costs of investigation) arising out of or incurred in connection with
a claim for indemnification under Article XI of this Agreement; provided,
however, that Damages shall not include any loss to the extent that an
Indemnitee has received payment by an insurance carrier.
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
ESCROW FUND. "Escrow Fund" shall have the meaning set forth in Section 1.5.
50
53
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any substituted federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
FEDERAL SYSTEMS DIVISION SPIN OFF. "Federal Systems Division Spin Off" shall
have the meaning set forth in the recitals.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality and any court or other tribunal).
HSR ACT. "HSR Act" shall have the meaning set forth in Section 7.4.
HSR FILINGS. "HSR Filings" shall have the meaning set forth in Section 7.4.
HSR WAITING PERIOD. "HSR Waiting Period" shall mean the waiting period as
defined under the HSR Act.
INDEMNIFICATION PERIOD. "Indemnification Period" shall mean the period
commencing on the Closing Date and ending at the close of business on the first
anniversary of the Closing Date.
INDEMNITEES. "Indemnitees" shall mean the following Persons: (a) NetManage,
(b) NetManage's current and future subsidiaries, and (c) the respective
successors and assigns of the Persons referred to in clauses "(a)" and "(b)"
above; provided, however, that any Person receiving cash in exchange for NSA
Shares or NetSoft Shares or NetSoft Options pursuant to this Agreement shall not
be deemed to be an "Indemnitee."
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving any court or other Governmental Body or any
arbitrator or arbitration panel.
MATERIAL ADVERSE CHANGE. "Material Adverse Change" shall mean a change which
results in Damages to NSA, NetSoft or NetManage, as applicable, in excess of
Five Hundred Thousand Dollars ($500,000) or if any one of the Key Employees dies
prior to the Closing Date.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to have
a "Material Adverse Effect" on NSA, NetSoft or NetManage, as applicable, if such
violation or other matter would have a material adverse effect on NSA's,
NetSoft's or NetManage's, as applicable, business, intellectual property rights,
condition, assets, liabilities, operations, or financial performance.
51
54
NSA AND NETSOFT FINANCIAL STATEMENTS. "NSA and NetSoft Financial Statements"
shall have the meaning set forth in Section 2.4(a).
NETSOFT CALCULATED SHARE PRICE. "NetSoft Calculated Share Price" shall mean
the amount ("Y") determined by solving the following formula:
$26,000,000 = (6,010,070 * Y) + (A * (Y-$3.20)) + (B * (Y - $2.25))
A = the number of NetSoft Options exercisable at $3.20
B = the number of NetSoft Options exercisable at $2.25
NETSOFT OPTIONS. "NetSoft Options" shall have the meaning set forth in the
Recitals.
NSA OPTIONS. "NSA Options" shall have the meaning set forth in the Recitals.
NETSOFT PRODUCTS. "NetSoft Products" shall mean all versions and
implementations of any product which is being marketed by NetSoft or currently
is under development, and all patents, patent applications, trade secrets,
copyrights, trademarks, trade names and other proprietary rights related
thereto.
NSA PRODUCTS. "NSA Products" shall mean all versions and implementations of
any product which has been or is being marketed by NSA or currently is under
development, and all patents, patent applications, trade secrets, copyrights,
trademarks, trade names and other proprietary rights related thereto remaining
with NSA following the Federal Systems Division Spin Off.
NETSOFT PROPRIETARY ASSETS. "NetSoft Proprietary Assets" shall mean all
Proprietary Assets owned by NetSoft. following the consummation of the Federal
Systems Division Spin Off.
NSA PROPRIETARY ASSETS. "NSA Proprietary Assets" shall mean all Proprietary
Assets owned by NSA.
NETSOFT SHARES. "NetSoft Shares" shall have the meaning set forth in the
Recitals.
NSA SHARES. "NSA Shares" shall have the meaning set forth in the Recitals.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean: (a) any patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service ▇▇▇▇ (whether
registered or unregistered), service ▇▇▇▇ application, copyright (whether
registered or unregistered), copyright application, maskwork,
52
55
maskwork application, trade secret, know-how, customer list, franchise, system,
computer software, computer program, invention, design, blueprint, engineering
drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset; and (b) any right to use or
exploit any of the foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended, or any substituted federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
TRANSACTION DOCUMENTS. "Transaction Documents" shall mean all documents or
agreements required to be delivered by any party hereunder on or prior to the
Closing including the Escrow Agreement.
53
56
EXHIBIT B
NSA SHAREHOLDER SCHEDULE
NSA SHARES
----------
▇▇▇▇▇ Kong & Violet Kong 76,000
Husband & Wife, Community Property
▇▇▇▇▇▇ Kong, Special Trustee of the 225,000
▇▇▇▇▇ Kong Irrevocable Trust dated,
November 17, 1993
▇▇▇▇▇▇ Kong 225,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Married 270,000
Man as sole and separate property
▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇ 270,000
Husband & Wife, Community Property
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ 270,000
Husband & Wife, Community Property
Willi & ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ 270,000
Husband & Wife Community Property
Estate of B. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 270,000
54
57
EXHIBIT C
ESCROW AGREEMENT
55
58
EXHIBIT D
FORM OF OPINION OF COUNSEL TO NETMANAGE
56
59
EXHIBIT E
FORM OF OPINIONS OF COUNSEL TO NSA AND NETSOFT
57
60
EXHIBIT F
FORM OF EMPLOYMENT AND NON-COMPETITION AGREEMENT
58
61
EXHIBIT G
FORM OF NON-COMPETITION AGREEMENT
59