MERGER AGREEMENT &
PLAN OF REORGANIZATION
DATED AS OF MAY 31, 1996
BETWEEN ZYCAD CORPORATION
AND
ATTEST SOFTWARE, INC.
AND
THE SHAREHOLDERS OF
ATTEST SOFTWARE, INC.
AND
ZYCAD INTERNATIONAL, INC.
MERGER AGREEMENT AND PLAN OF REORGANIZATION
TABLE OF CONTENTS
Recitals.......................................................... 5
ARTICLE ONE -The Merger and Reorganization........................ 6
ARTICLE TWO - Conversion of Shares................................ 6
ARTICLE THREE - Governance of Surviving Corporation............... 9
Articles of Incorporation.................................... 9
Bylaws....................................................... 9
Directors and Officers....................................... 9
ARTICLE FOUR - Representations and Warranties of Attest and
Shareholders................................................. 9
Organization and Standing of Attest.......................... 10
Subsidiaries................................................. 10
Capitalization............................................... 10
Share Ownership.............................................. 10
Options, Warrants and Convertible Securities................. 10
Financial Information........................................ 11
Absence of Undisclosed Liabilities........................... 11
Absence of Certain Changes................................... 12
Taxes........................................................ 13
Title to Properties; Liens and Encumbrances; Leasehold
Interests.................................................. 14
Patents, Trademarks, Etc..................................... 14
Material Contracts........................................... 15
Insurance.................................................... 16
Customers and Supplies....................................... 16
Compliance................................................... 17
Employee Matters............................................. 17
Employee Benefit Plans....................................... 18
Warranties; Returned Products................................ 18
Directors, Officers and Employees; Compensation; Bank
Accounts; Certain Transactions............................. 18
Litigation................................................... 18
Authority of Shareholders.................................... 19
Brokers...................................................... 19
Disclosure................................................... 20
Representations and Warranties............................... 20
Disclosures Applicable to All Provisions..................... 20
ARTICLE FIVE - Representations and Warranties of Zycad............ 20
Organization and Standing of Zycad and Subsidiary............ 20
Authority of Zycad and Subsidiary............................ 20
Access to Information........................................ 21
Brokers...................................................... 21
2
No Restriction on Sharheolders' Disposition of Zycad Stock... 21
Disclosure................................................... 22
Representations and Warranties............................... 22
Valid Issuance of Zycad Stock................................ 22
ARTICLE SIX - Covenants of Shareholders and Attest................ 22
Operations of Attest......................................... 22
No Further Negotiations...................................... 23
Access....................................................... 23
Public Disclosure............................................ 23
Updating of Schedules........................................ 23
ARTICLE SEVEN - Closing........................................... 23
ARTICLE EIGHT - Conditions to Zycad's Obligation to Close......... 24
ARTICLE NINE - Conditions to Shareholder's Obligation to Close.... 25
ARTICLE TEN - Post Closing Obligations............................ 26
ARTICLE ELEVEN - Termination...................................... 27
Termination by Mutual Consent................................ 27
Termination at Zycad's Option................................ 27
Termination at Shareholder's Option.......................... 27
Additional Rights of Termination............................. 27
Expenses on Termination...................................... 28
ARTICLE TWELVE - Indemnification.................................. 28
Indemnification by Shareholders.............................. 28
Indemnification by Zycad..................................... 28
Notice and Opportunity to Defend............................. 29
Limitation................................................... 29
ARTICLE THIRTEEN - Miscellaneous.................................. 31
Survival of Representations and Warranties................... 31
Definition of Knowledge...................................... 31
Amendment.................................................... 31
Headings..................................................... 31
Entire Agreement............................................. 31
Counterparts................................................. 31
Notices...................................................... 32
Governing Law................................................ 33
Waiver....................................................... 33
Signatures........................................................ 33
3
SCHEDULES
Schedule 4.1 Exceptions to Qualification as a Foreign Corporation
Schedule 4.3 Attest Capital Stock Table
Schedule 4.5 Incentive Stock Option Table
Schedule 4.6(a) List of Tangible Assets
Schedule 4.6(b) Balance Sheet
Schedule 4.7 Certain Material Liabilities of Attest
Schedule 4.8 Statement of Material Adverse Changes in Attest
Schedule 4.9 Statement of Tax Liabilities of Attest
Schedule 4.10 Exceptions to Title Properties and Statement of Default
of Attest
Schedule 4.11 Intellectual Property Rights of Attest
Schedule 4.12 Material Contracts of Attest
Schedule 4.13 Insurance Policies and Bonds of Attest
Schedule 4.14 Customers and Suppliers of Attest
Schedule 4.15 Compliance Exceptions
Schedule 4.16 Accrued Vacation Pay and Sick Leave of Attest Employees
Schedule 4.17 Attest Employee Benefits Plan
Schedule 4.18 Attest Warranties, Returned Products
Schedule 4.19(a) Attest Directors, Officers and Employees
Schedule 4.19(b) Attest's Bank Accounts
Schedule 4.19(c) Interests of Attest Directors and Officers
Schedule 4.20 Attest Litigation
Schedule 4.22 Brokers
Schedule 4.23 Accounts Receivable
EXHIBITS
Exhibit 7.1 Escrow Agreement
Exhibit 7.2 Employment Offers to Shareholders
Exhibit 8.1(b) Opinion of Counsel for Attest
Exhibit 9.1(b) Opinion of Counsel for Zycad
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MERGER AGREEMENT AND PLAN OF REORGANIZATION
THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made
and entered into as of the 31st day of May, 1996, by and between Attest
Software, Incorporated, a company organized under the laws of California
with principal offices at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, California ("Attest"); the holders of the
issued and outstanding shares of the capital stock of Attest and holders
of options therefor (the "Shareholders"); Zycad Corporation, a Delaware
Corporation with principal offices at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Zycad"), and Zycad International, Inc., a California
corporation and a wholly owned subsidiary of Zycad ("Subsidiary").
RECITALS
WHEREAS, Shareholders are the owners and holders of all of the issued
and outstanding shares of the capital stock of Attest and all of the
options therefor; and
WHEREAS, Attest is a corporation duly organized and existing under the
laws of California with authorized capital stock consisting of
10,000,000 shares of common stock, par value of which 2,000,000 shares
are issued and outstanding on the date of this Agreement with options
for an additional 678,571 shares to be exercised on or before the
Closing Date; and
WHEREAS, Zycad is a corporation duly organized and existing under the
laws of the State of Delaware; and
WHEREAS, Subsidiary is a corporation duly organized and existing under
the laws of the State of California and is a wholly owned subsidiary of
Zycad; and
WHEREAS, the Shareholders and the respective Boards of Directors of
Attest, Subsidiary and Zycad have determined that it is advisable that
Subsidiary shall be merged with and into Attest on the terms and
conditions set forth herein and each such Board has, by resolution, duly
adopted, approved and authorized the execution and delivery of this
Agreement; and
WHEREAS, Shareholders, Attest, Subsidiary and Zycad deem it advisable to
set forth in this Agreement the representations and warranties of each
party and certain other undertakings and understandings in connection
with the stock purchase and to provide for certain matters in respect of
the conduct of the business of Attest prior to the Closing Date (as
hereinafter defined).
AGREEMENT
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, the parties hereto agree as follows:
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ARTICLE ONE
MERGER AND REORGANIZATION
1.1 On the Closing Date, as defined in this Agreement, a merger shall
take place ("the Merger") whereby Subsidiary shall be merged with
and into Attest, and Attest shall be the Surviving Corporation.
(The term "Surviving Corporation" appearing in this Agreement
denotes Attest after consummation of the Merger.) Attest's
corporate name, existence, and all its purposes, powers, and
objectives shall continue unaffected and unimpaired by the Merger,
and as the Surviving Corporation it shall be governed by the laws
of the State of California and succeed to all of Subsidiary's
rights, assets, liabilities, and obligations in accordance with the
California General Corporation Law.
1.2 For Federal income tax purposes, the Merger shall constitute a tax
free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended.
ARTICLE TWO
CONVERSION OF SHARES
2.1 On the Closing Date:
(a) Each share of Subsidiary's common stock issued and outstanding
immediately before the Closing Date shall be converted into one
share of common stock of the Surviving Corporation; and
(b) All of the shares of Attest's common stock issued and
outstanding on the Closing Date consisting of 2,679,106 shares (the
"Attest Common Stock"), shall by virtue of the Merger and without
action on the part of the Shareholder be converted into an
aggregate of 387,098 shares of Zycad Common Stock ("Zycad Stock")
at an exchange ratio of .1444877 share of Zycad Stock for each
share of Attest Common Stock. Any fraction of a share of Zycad
Stock shall be eliminated by rounding down to the nearest full
share.
2.2 The number of shares of Zycad Stock to be exchanged for the Attest
Common Stock as specified in Section 2.1(b) is based on a Closing
Price of Zycad Common Stock of $6.20 per share (Closing Price is
defined as the average daily closing price [last trade] of Zycad
Common Stock as reported on NASDAQ for the 15 days preceding the
date hereof. Adjustments to the number of shares of Zycad Stock
shall be made, subject to the limitations of Section 12.4, if the
following formula results in a sum that is less than $130,000:
(Cash as of the hereof date + proceeds from the exercise of stock
options + prepaid expenses + accounts receivable as of the hereof
date + sales made by Attest but not invoiced prior to the Closing
Date) less (total liabilities including all accruals for expenses
related to Attest's business through the hereof date). Amounts
representing accounts receivable and sales made but not invoiced
shall be limited to those are, to Attest's knowledge, collectible.
All liabilities that should be accrued as of the hereof date under
generally accepted accounting principles shall be included in the
foregoing formula, whether or not they were accrued as liabilities
on the May 31, 1996 Balance Sheet.
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No adjustment in the number of shares shall be made if the above
computation results in an amount greater than $130,000.
2.3 One-half of the Zycad Stock shall be delivered to the Shareholders
on the Closing Date on a prorata basis based on their respective
ownership interest of the Attest Shares.
2.4 The balance of the Zycad Stock exchanged for the Attest Shares
shall be held in escrow (the "Escrowed Stock") in a separate escrow
account for each Shareholder on a prorata basis based on their
respective ownership interest and shall be released on the same
prorata basis in accordance with the following schedule:
a. One half of the Escrowed Stock shall be released upon the public
announcement of Zycad's fiscal First Quarter 1997 financial results,
provided there is a minimum of $1,200,000 in revenue generated from
the sale and support of Attest Software Products during the period
April 1, 1996 through March 31, 1997, (including revenue from sales
made by Attest but not invoiced prior to Closing) which includes
current Attest Products, as well as new versions or updates created
by Zycad from the Attest Software source code ("Attest Software
Revenue").
In the event that there is less than $1,200,000 in Attest Software
Revenue as stated above, but at least $800,000 in such revenue, the
one half of the Escrowed Stock shall be released on a prorata basis,
e.g., if the Attest Software Revenue equals $800,000, 66.67% of the
one half of the Escrow Stock shall be released.
b. A total of one-eighth of the Escrowed Stock shall be released upon
the public announcement of Zycad's Second Quarter 1997 financial
results provided there is a minimum of $300,000 in Attest Software
revenue in Second Quarter 1997.
A total of one-eighth of the Escrowed Stock shall be released upon
the public announcement of Zycad's Third Quarter 1997 financial
results provided there is a minimum of $300,000 in Attest Software
revenue in Third Quarter 1997.
A total of one-eighth of the Escrowed Stock shall be released upon
the public announcement of Zycad's Fourth Quarter 1997 financial
results provided there is a minimum of $300,000 in Attest Software
revenue in Fourth Quarter 1997.
A total of one-eighth of the Escrowed Stock shall be released upon
the public announcement of Zycad's First Quarter 1998 financial
results provided there is a minimum of $400,000 in Attest Software
revenue in First Quarter 1998.
In the event there is less than $1,300,000 in Attest Software
Revenue for the period April 1, 1997 through March 31, 1998, but at
least $900,000 in such Revenue, the balance of the one half of the
Escrowed Stock scheduled to be released during this period which
remain unreleased and held in escrow shall be released on a prorata
basis, e.g., if the Attest Software Revenue equals $900,000, 69.23%
of such unreleased shares of the one half of the Escrow Stock
scheduled to be released shall be released.
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c. Notwithstanding the above, in the event that the cumulative Attest
Software Revenue for the period April 1, 1996 through March 31,
1998 is a minimum of $2,500,000, all of the Escrowed Stock shall be
released.
d. In the event that not all of the Escrowed Stock is released under
the provisions of subsections a, b, or c above, the balance of the
Escrowed Stock shall be released upon the public announcement of
Zycad's Second Quarter 1998 financial results, provided that there
is a minimum of $500,000 in Attest Software Revenue for the period
January 1, 1998 to June 30, 1998.
e. In the event not all of the Escrowed Stock is released under the
provisions of subsections a, b, c or d above, the balance of the
Escrowed Stock shall be released to each Shareholder provided such
Shareholder is still a Zycad employee on June 30, 1998.
f. Notwithstanding anything to the contrary in this Section 2.4, if any
of the following occurs, the balance of the Escrowed Stock that is,
at the time such event occurs, still subject to the release
provisions of subsections a through e above, shall be released to
each such Shareholder as follows:
(1) In the event of a Shareholder's death or disability, the
balance of the Escrowed Stock shall be released to that Shareholder
upon the later of (i) his death or disability, or (ii) one (1) year
after the Closing Date, (subject, however, to Article Twelve below).
(2) In the event Zycad terminates a Shareholder's employment
without cause, the balance of the Escrowed Stock shall be released
to that Shareholder upon the later of (i) said termination of
employment, or (ii) one (1) year after the Closing Date, (subject,
however, to Article Twelve below).
g. Any Escrowed Stock remaining in escrow after the conditions
specified in subsection e above shall be canceled and forfeited.
h. Attest Software Revenue is further defined in Schedule 2.4.
2.5 This Escrowed Stock will also be used to offset any breaches of
Attest and Shareholder's representations, warranties, and
indemnification provisions as contained in this Agreement.
2.6 All Escrowed Stock shall be issued and outstanding on Zycad's
balance sheet and legally outstanding under Delaware law.
2.7 All cash dividends and distributions, if any, shall be paid to the
Shareholders currently and shall not be deposited in Escrow.
2.8 All voting rights on the Escrowed Stock shall be exercisable by or
on behalf of the Shareholders or their authorized agent.
2.9 The Escrowed Stock shall not be subject to claims for additional
tax paid, if any, as a result of an audit by the Internal Revenue
Service of the Shareholders or Zycad with respect to the herein
reorganization.
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2.10 Claims against the Escrowed Stock shall be satisfied by
transferring to Zycad the number of shares determined by dividing
the amount of each Shareholders' share of a claim (less his pro
rata share of the aggregate deductible amount stated in Section
11.4(a)) by the greater of $6.20 or the average daily closing price
(last trade) of Zycad common stock as reported on NASDAQ for the 15
days preceding the date on which such claim is deemed to be
matured. Alternatively, Shareholders may pay the amount of the
claim in cash within fifteen (15) days of notice to Shareholders,
in which case the number of shares that would otherwise be
transferred to Zycad shall thereafter, be subject only to the
restrictions of Section 2.4 above and future claims, if any, under
Article Twelve.
ARTICLE THREE
GOVERNANCE OF SURVIVING CORPORATION
3.1 Articles of Incorporation
The articles of incorporation of Attest in effect on the Closing
Date of the Merger shall become the articles of incorporation of
the Surviving Corporation. From and after the Closing Date of the
Merger, said articles of incorporation, as they may be amended from
time to time as provided by law, shall be, and may be separately
certified as, the articles of incorporation of the Surviving
Corporation.
3.2 Bylaws
The bylaws of Attest in effect on the Closing Date of the Merger
shall be the bylaws of the Surviving Corporation until they are
thereafter duly altered, amended or repealed.
3.3 Directors and Officers
The directors of Zycad Subsidiary on the Closing Date of the Merger
shall be the directors of the Surviving Corporation. They shall
hold office until their successors have been elected and qualified.
The officers of Zycad Subsidiary on the Closing Date of the Merger
shall be the officers of Surviving Corporation. Each shall hold
office subject to the bylaws and the pleasure of the directors of
Surviving Corporation.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF ATTEST AND SHAREHOLDERS
As inducement to the execution of this Agreement by the parties hereto,
Attest and the Shareholders represent and warrant that the following
statements are true and correct on the date hereof:
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4.1 Organization and Standing of Attest
Attest is a corporation duly incorporated, validly existing and in
good standing under the laws of California. Attest's Articles of
Incorporation, and all amendments thereto, and its By-laws, as
amended, copies of which have been delivered to Zycad, are
complete, correct and in full force and effect at the date of this
Agreement and Attest is not in violation of any provision of such
Article and By-laws. Attest has the corporate power and authority
to own, operate and dispose of its properties and to conduct its
business as now being conducted.
4.2 Subsidiaries
Attest has no subsidiaries and does not control, directly or
indirectly, any other corporation, partnership, association or
business organization.
4.3 Capitalization
As of the date of this Agreement and except as set forth in
Schedule 4.3, Attest's authorized capital stock consists of
10,000,000 shares of Attest Common Stock, of which 2,000,000 shares
are issued and outstanding. On or before the Closing Date options
for an additional 679,106 shares of Attest Common Stock will be
exercised and will be issued and outstanding. No Attest Stock is
held in the treasury of Attest. All outstanding shares of Attest
Stock are duly and validly authorized and issued, fully paid and
non-assessable, and the issuance and sale of all such Attest
securities has been in compliance with all applicable securities
laws. Attached hereto as Schedule 4.3 is a summary stock table for
Attest stock.
4.4 Share Ownership
The Shareholders are or will be the beneficial and record owners
and holders of all of said 2,679,106 shares of the capital stock
of Attest, which shares will be transferred to Zycad free and clear
of any claims, liens, charges, equities and encumbrances or other
restrictions which would in any way impair Shareholders right to
effectively sell or transfer such shares to Zycad.
4.5 Options, Warrants Equity Commitments and Convertible Securities
As of the date of this Agreement and except as set forth in
Schedule 4.5, Attest has outstanding options to purchase 1,869,000
shares under its Incentive Stock Option Plan. On or before the
Closing Date options for 679,106 shares of Attest Common Stock
will be exercised and said shares will be issued and outstanding.
The balance of options for 1,189,894 shares will be canceled on
the Closing Date. There are no warrants or other commitment or
agreement to issue, sell or transfer any shares of Attest capital
stock, or any securities or obligations convertible into or
exchangeable for shares of its capital stock to any third party.
Attached hereto as Schedule 4.5 is a summary stock option table for
the outstanding stock options.
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4.6 Financial Information
Attest has delivered to Zycad copies of the following financial
statements (collectively the "Financial Statements"): (i) the
unaudited results of operations (Statement of Profit and Loss) of
Attest for the three-month periods ended June 30, 1995, September
30, 1995, December 30, 1995, March 31, 1996, and for the one-month
period ended April 30, 1996 and (ii) the unaudited balance sheet of
Attest as of June 30, 1995, September 30, 1995, December 30, 1995,
March 31, 1996, April 30, 1996, and May 31, 1996 (the "Balance
Sheet"). Attest shall deliver to Zycad as soon as practicable
prior to the Closing Date Proforma financial statements as of the
Closing Date.
The Financial Statements, (including the notes thereto, if any)
were prepared by Attest management in accordance with the books and
records of Attest. Except as described on Schedule 4.6
Shareholders believe and represent that the Financial Statements
fairly and accurately present the business operations for the
periods covered by said statements in all material respects. None
of Attest's books and records, has been compiled or audited by a
Certified Public Accountant; and there can be no assurance that any
of the foregoing is in conformity with generally accepted
accounting principles.
The tangible assets reflected in the Balance Sheet are shown
thereon at actual cost, less depreciation and amortization, and in
the case of plant and equipment are, to the best of Attest's
knowledge, in good operating condition and state of repair. A true
and complete list of all tangible assets of Attest as of May 31,
1996 is attached hereto as Schedule 4.6(a).
Except as set forth in Schedule 4.6(b) attached hereto, all
accounts receivable reflected in the Balance Sheet at the date
thereof were bona fide accounts receivable resulting from the sale
of goods and services in the ordinary course of business, and,
shareholders have no reason to believe, such accounts receivable
are not collectible in full in the ordinary course of business or
are subject to conditions to payment, offsets, counterclaims,
defenses of any kind, returns, allowances or credits. There is no
allowance for warranty reserve reflected in the Financial
Statements. Zycad shall have the right to indemnification pursuant
to Section 12.1 of this Agreement for any accounts receivable
arising from Attest product shipment prior to Closing which is not
collected in full within ninety (90) days after Closing with
commercially reasonable collection efforts by Zycad. The amount to
be indemnified shall be the unpaid balance on said 90th day.
Shareholders will receive credit for any monies collected by Zycad
within 120 days after Closing.
4.7 Absence of Undisclosed Liabilities
Except as set forth in Schedule 4.7 attached hereto, at the date of
each such balance sheet Attest had no material liabilities (fixed
or contingent, including without limitation any tax liabilities due
or to become due) which were not fully disclosed, reflected or
provided for in each such balance sheet. The officers of Attest
and the Shareholders have no knowledge of any facts which would
form the basis for the assertion of any material claim or liability
which is not disclosed, reflected or provided for in each such
Balance Sheet or described in Schedule 4.7 hereto.
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4.8 Absence of Certain Changes
Except as set forth in Schedule 4.8 attached hereto, since the date
of the Balance Sheet there has not been:
a. any material adverse change in the condition (financial or
otherwise), assets, liabilities or business of Attest from that
reflected in the Financial Statements or, to the knowledge of the
officers of Attest or the Shareholders, any occurrence, circumstance
or combination thereof which reasonably could be expected to result
in any material adverse change in the condition (financial or
otherwise), assets, liabilities or business of Attest.
b. any damage, destruction or loss of any of the properties or assets
of Attest (whether or not covered by insurance) materially adversely
affecting the condition (financial or otherwise), assets,
liabilities or business of Attest;
c. any declaration, setting aside, payment or other distribution in
respect of any of Attest's capital stock, or any direct or indirect
redemption, purchase or other merger of any of such stock by Attest.
d. any change in the capitalization of Attest from that reflected in
the Financial Statements or in this Agreement, or any grant or
issuance of (i) any shares of capital stock of Attest; (ii) any
securities convertible into capital stock of Attest; or (iii) any
option, warrant or other right to subscribe for or acquire shares of
capital stock or securities convertible into capital stock of Attest;
e. any event, other than changes in general economic conditions which
affect the business of Attest, including without limitation, fire,
explosion, accident, requisition or taking of property by any
governmental agency, flood, drought, earthquake or other natural
event, riot, act of God or the public enemy or damage, destruction
or other casualty, whether or not covered by insurance, which has
materially adversely affected the condition (financial or
otherwise), assets, liabilities or business of Attest, or any such
event known to the officers of Attest or the Shareholders which
reasonably could be expected to materially adversely affect the
condition (financial or otherwise), assets, liabilities or business
of Attest;
f. any increase in compensation payable to or for the benefit of, or
committed to be paid to or for the benefit of, any director,
shareholder, officer or employee of Attest, or in any benefits
granted under any bonus, stock option, profit sharing, pension,
retirement, deferred compensation, or other direct or indirect
benefit plan, payment or arrangement made to, for the benefit of, or
with any such director, shareholder, officer or employee;
g. any borrowing or agreement to borrow funds or any incurring of any
other material indebtedness or liability; or any endorsement,
assumption or guarantee of payment or performance of any loan or
obligation of any other individual, firm, corporation or other
entity by Attest;
h. any change made by Attest in its methods of doing business or of
accounting;
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i. any material mortgage, pledge, lien, security interest,
hypothecation, charge or other encumbrance imposed or agreed to be
imposed on or with respect to any properties or assets, tangible or
intangible, of Attest;
j. any technology licenses or sale or transfer of any technology rights
except software object code licenses granted in the normal course of
business.
k. any sale, lease or disposition of, or any agreement to sell, lease
or dispose of, any properties or assets held for use or used in the
business of Attest, other than sales, leases or dispositions for
fair equivalent value to persons other than directors, or officers
of Attest in the ordinary course of the business of Attest;
l. any modification, waiver, change, amendment, release, rescission,
accord and satisfaction nor termination of, or with respect to, any
material term, condition or provision of any material contract,
agreement, license or other instrument to which Attest is a party,
other than any satisfaction or performance in accordance with the
terms thereof and other than in the ordinary course of the business
of Attest;
m. any labor or employee disputes or disturbances materially adversely
affecting the condition (financial or otherwise), assets,
liabilities or business of Attest, including the filing of any
petition or charge of unfair labor practices with the National Labor
Relations Board or any action, claim or proceeding relating to equal
employment practices;
n. any loan or advance made by Attest to any individual, firm,
corporation or entity except for advances not material in amount
made to employees of Attest in the ordinary course of the business
of Attest;
o. any other event, development, or condition of any character known to
the officers of Attest or the Shareholders which materially
adversely affects, or may reasonably be expected to so affect, the
condition (financial or otherwise), assets, liabilities or business
of Attest.
4.9 Taxes
Except as set forth in Schedule 4.9, for all periods ended on or
prior to the Closing Date, Attest has filed or will file within the
time prescribed by law (including extensions of time approved by
the appropriate taxing authorities) all tax returns and reports for
Attest required to be filed with the Internal Revenue Service, the
appropriate California agencies and with all other jurisdictions,
including state, county, local and foreign government agencies or
instrumentalities where such filing is required by law. Except as
set forth in Schedule 4.9, Attest has paid, or has made adequate
provision in the Financial Statements for the payment of, all
taxes, interest, penalties, assessments or deficiencies due or
claimed to be due through the date of the Financial Statements and
through the Closing Date in the Proforma Closing Financial
Statements on or in respect of such tax returns and reports.
Except as set forth in Schedule 4.9, there are for such periods (i)
no other taxes which are due and payable by Attest which have not
been paid or otherwise reserved for in the Financial Statements,
including collection and remittance of sales tax; (ii) no other tax
returns or reports which are
13
required to be filed which have not been filed; (iii) no unpaid
assessment for additional taxes other than reserved for in the
Financial Statements for any fiscal period or, to the knowledge of
the officers of Attest, any facts which would form the basis for
any material assessment for additional taxes; (iv) no pending or,
to the knowledge of the officers of Attest, threatened federal,
state or local tax audit of Attest; and (v) no agreement with any
federal state of local taxing authority that may affect the
subsequent tax liabilities of Attest.
Sales and payroll tax returns and reports have been prepared by
management without review by a Certified Public Accountant. Income
tax returns have been prepared by an accountant without review by a
Certified Public Accountant.
Attest has not accrued or reserved any amount for federal or state
income tax liabilities.
4.10 Title to Properties; Liens and Encumbrances; Leasehold Interests
Except as set forth in Schedule 4.10 or in the notes to the Balance
Sheet, Attest has good title to all properties and assets owned by
it, including those reflected in the Financial Statements (except
for properties and assets sold or otherwise disposed of in the
ordinary course of business since that date), subject to no
mortgage, pledge, lien, security interest, conditional sale
agreement, encumbrance or charge. Except as set forth in Schedule
4.10, Attest is not in default under the terms of any material
lease or sublease of any properties leased or subleased by it, and
such leases or subleases are valid and enforceable leases or
subleases for such properties. Except as set forth in Schedule
4.10, the property shown on the Balance Sheet constitutes all of
the tangible personal property utilized by Attest in the conduct of
its business as presently conducted.
4.11 Patents, Trademarks, Etc.
Attached hereto as Schedule 4.11 is a true and complete list and
summary description of all patents, patent applications, shop
rights, know-how, inventions (whether or not patentable),
trademarks and service marks and registrations thereof, trade
names, trade secrets, confidentiality rights and agreements,
copyrights, copyright registrations, proprietary ideas, licenses
and interests therein (individually and collectively referred to as
the "Intellectual Property Right(s)") presently owned or held by
Attest. Where an Intellectual Property Right is held by Attest as
a licensee under a license or sublicense or otherwise in any form
or manner other than as owner of clear title, this is so designated
in Schedule 4.11. Such Intellectual Property Right(s) are all such
rights that are required to enable Attest to conduct its business
as now conducted and as proposed to be conducted. Except as set
forth in Schedule 4.11, the business currently and proposed to be
conducted by Attest does not infringe and has not infringed the
rights of others, including without limitation any rights under
patents, patent applications, shop rights, know-how, inventions,
trademarks, service marks, trade names, trade secrets, copyrights,
contracts (whether express or implied in fact or in law),
proprietary ideas, licenses, privacy rights or interests therein.
To the best knowledge of Attest and the Shareholders, no
third-party is violating or has violated any of the Intellectual
Property Rights of Attest. Except as set forth in Schedule 4.11,
Attest is the sole and absolute owner of the Intellectual Property
Rights and has full right and authority to utilize the Intellectual
Property Right(s) and other processes, systems and techniques
presently employed, or proposed to be employed, by it in the
research, design, scale-up, manufacture, and marketing of its
products or projected products, and all rights to such Intellectual
Property Right(s) and other
14
processes, systems and techniques developed by any employee of Attest
or developed for Attest by any consultant or third party have been duly
and validly assigned to Attest without any restriction or unpaid or
continuing royalty or other obligation. Except as set forth in
Schedule 4.11, no third party and no affiliate, officer, director, or
employee of Attest, nor any associates of any such person, owns or
holds, directly or indirectly, any interest in any Intellectual Property
Right(s) used or planned to be used by Attest. Except as limited by
the Export Control Act, Attest has the unrestricted right to license,
sublicense, or otherwise authorize any party whatsoever, anywhere
in the world, to use and exercise any or all of the Intellectual
Property Right(s), and, except as stated in Schedule 4.11, Attest
has not granted any such license, sublicense, or authority. The
closing and consummation of the transactions contemplated under
this Agreement shall create no restriction under, nor have any
other effect upon, Attest's right in, to, and under any of the
Intellectual property Right(s). Except as expressly set forth in
Schedule 4.11, Attest has not agreed to indemnify any person or
entity for patent, service ▇▇▇▇, trade secret, trademark, or
copyright infringement as to any equipment, materials, products,
services, or supplies which Attest produces, uses, provides,
license, leases, sells or distributes. Attest has taken reasonable
security measures to protect the secrecy, confidentiality and value
of its trade secrets.
4.12 Material Contracts
Schedule 4.12 attached hereto identifies all currently existing
contracts, obligations or commitments, whether written or oral (i)
involving payment by Attest of more than $10,000 during the past 12
months, (ii) extending beyond the Closing Date and involving annual
payments by Attest of more than $10,000 during the next 12 months;
or (iii) which are material to the business of Attest, including
without limitation the following:
a. employment, bonus or consulting agreements; pension, profit sharing,
deferred compensation, stock bonus, retirement, stock option, stock
purchase, phantom stock or similar plans, including agreements
evidencing rights to purchase securities of Attest;
b. agreements with employees or others as to non-disclosure of
proprietary information and assignment of inventions and
developments;
c. agreements relating to the purchase, sale or license of patents,
copyrights, trade secrets, trade names or other rights to technology
or other intellectual property;
d. loan or other agreements, notes, indentures, or instruments relating
to or evidencing indebtedness for borrowed money, or mortgaging,
pledging, or granting or creating a lien or security interest or
other encumbrance on, any property of Attest; any agreement or
instrument evidencing any guaranty by Attest of payment or
performance by any other person;
e. agreements with dealers, sales representatives, brokers, and other
distributors, jobbers, advertisers or sales agencies;
f. agreements with any labor union or collective bargaining
organization or other labor agreements;
15
g. any lease of machinery, equipment, other personal property,
including motor vehicles, and any lease or sublease of real estate
to which Attest is a party;
h. any joint venture contract or arrangement or other agreement
involving a sharing of profits or expenses to which Attest is a
party;
i. agreements limiting the freedom of Attest to compete in any line of
business or in any geographic area or with any person;
j. agreements providing for disposition of the business and assets, or
shares, of Attest; agreements of merger or consolidation to which
Attest is a party other than this Agreement; letters of intent with
respect to the foregoing;
k. agreements involving or letters of intent with respect to the merger
of assets or shares of any other business;
▇. ▇▇▇▇▇▇ of attorney granted by Attest; and
m. any other contract, agreement or legal obligation to or with any
director, officer or shareholder.
True and complete copies of the written contracts and commitments
(with all amendments thereto) listed on Schedule 4.12 have been
delivered or made available to Zycad. Except as set forth in
Schedule 4.12, Attest has complied with all material provisions of
the contracts and commitments set forth in Schedule 4.12 hereto and
of all other material contracts and commitments to which it is a
party, and Attest is not in default under any thereof nor has any
party asserted that Attest is in default under any thereof nor, to
the knowledge of the officers of Attest and the Shareholders, does
any condition exist which with the passage of time or the giving of
notice would constitute a default under any thereof.
4.13 Insurance
Attached hereto as Schedule 4.13 is a true, correct and complete
list of all insurance policies and bonds in force in which Attest
is named as an insured party, or for which Attest is named as an
insured party, or for which Attest has paid any premiums, and said
Schedule correctly states the name of the insurer, the name of each
insured party, the type and amount of coverage, the deductible
amounts, if any, the expiration date and the premium of each such
policy or bond. Except as disclosed on said Schedule, all such
policies or bonds are currently in full force and effect. Attest
will continue all of such insurance in full force and effect up to
and including the Closing Date. All premiums due and payable on
such policies have been paid. Attest believes that such insurance
is adequate for the conduct of its business.
4.14 Customers and Suppliers
Attached hereto as Schedule 4.14 is a true, correct and complete
list of the names of all customers and suppliers of Attest who,
have purchased from or sold to Attest or who have entered into
contracts with respect to the purchase from or sale to Attest, of
products or services with an invoice price, before application of
any discounts, offsets or the like, of at
16
least $10,000. No customer or supplier of Attest has given Attest
written notice of termination of its relationship with Attest, or
has indicated in writing an intention to terminate its relationship
with Attest, and to the knowledge of the officers of Attest and the
Shareholders, there are no unresolved written complaints or material
disputes existing with any such customer or supplier.
4.15 Compliance
Except as set forth in Schedule 4.15, to the knowledge of the
officers of Attest and the Shareholders, Attest has conducted its
business so as to comply with applicable laws, regulations,
ordinances and codes, including without limitation United States
Department of Commerce export licensing regulations, except where
the failure to so comply would not have a material adverse effect
on the condition (financial or otherwise), assets, liabilities or
business of Attest.
4.16 Employee Matters
a. Schedule 4.16 contains a complete listing of all Attest employee
benefit plans including, but not limited to, all pension,
retirement, employee savings, bonus, profit sharing, stock option,
worker's compensation insurance, group insurance or other employee
welfare or benefit plan (hereinafter "Benefit Plan") in which Attest
either participates or has responsibility. Current copies of those
Benefit Plans have been supplied to Zycad.
b. Attest is in material compliance with, and has filed, published and
disseminated, all reports, documents, statements and communications
required to be filed, published or disseminated by it under the
Employee Retirement Income Security Act of 1974, as amended
(hereinafter referred to as "ERISA"), and the rules and regulations
promulgated under said Act, and each Benefit Plan to which said Act,
rules and regulations are applicable is in substantial compliance
therewith.
c. to the knowledge of Attest, no Benefit Plan listed in Schedule 4.16
or any trustee or administrator thereof, has engaged in any
transaction that is likely to subject any Benefit Plan or the Attest
to tax or penalty or prohibited transactions imposed by Section 4975
of the Code or to a civil penalty imposed by any section of ERISA.
d. no Benefit Plan that is subject to ERISA and whose termination could
create a material liability for Attest has been completely or
partially terminated.
e. to the extent required by their terms or by law, all of the Benefit
Plans have been fully funded and no benefit Plan has incurred any
"accumulated funding deficiency", as such term is defined in Section
412 of the Code, whether or not such deficiency has been waived.
f. except as disclosed in Schedule 4.16, Attest has no obligations for
retiree health and life benefits under any plan.
g. Attest's Stock Option Plan complies with the requirements for
incentive stock option plans under Section 422 of the Code.
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4.17 Employee Benefit Plans
Schedule 4.17 attached hereto is a true, correct and complete list
and summary description of all employee benefit plans maintained by
Attest or Shareholders which cover employees of Attest. There are
no pending or, to the knowledge of the officers of Attest,
threatened claims by or on behalf of any trustee, beneficiary or
other party with rights under any such benefit plans which allege a
breach of fiduciary duties or violations of applicable state or
federal laws which could materially adversely affect the condition
(financial or otherwise), assets, liabilities or business of
Attest, nor, to the knowledge of the officers of Attest any facts
exist which would be the basis for any such claim.
4.18 Warranties; Returned Products
No customer of Attest has the right to return any products
manufactured or supplied by Attest for refund of purchase price or
credit pursuant to any agreement, understanding or practice of
Attest, other than those rights granted to a purchaser under the
terms and conditions of Attest's standard warranty described in
Schedule 4.18 attached hereto, or as set forth and described on
Schedule 4.18. Except as set forth on Schedule 4.18, there are no
existing claims by purchasers requesting or asserting the right to
return any Attest products for refund of purchase price or credit,
or demands for damages of any nature arising out of alleged
defective performance of such products. Attest is not aware of any
warranty, product repair or replacement claims or liabilities
relating to products manufactured or sold by Attest. There is no
reserve for warranty expense on the Balance Sheet.
4.19 Directors, Officers and Employees; Compensation; Bank Accounts;
Certain Transactions
Attached hereto as Schedule 4.19(a) is a true, correct and complete
list of all directors, officers and employees of Attest and the
annual total salary and bonus each is currently being or is
expected to be paid by Attest for the year ended December 31, 1996.
Except as disclosed in Schedule 4.19(a) there are no other forms of
compensation, deferred or otherwise, paid to or accrued for the
account of any such director, officer or employees of Attest. To
the knowledge of the officers of Attest, no officer or key employee
of Attest has expressed an intention (except as specified in
Schedule 4.19(a)) to terminate his or her employment with Attest.
Attached hereto as Schedule 4.19(b) is a true, correct and complete
list of each bank in which Attest has an account or safe deposit
box and the names of all persons authorized to draw funds thereon,
or have access thereto.
Except as set forth in Schedule 4.19(c) attached hereto, to the
knowledge of the officers of Attest, none of Attest's officers or
directors, or their respective spouses, owns directly or
indirectly, individually or collectively, a material interest in
any entity which (i) is a competitor, customer or supplier of
Attest or (ii) has an existing contractual relationship with Attest.
4.20 Litigation
Except as set forth in Schedule 4.20, there is no litigation or
proceeding pending or, to the knowledge of the officers of Attest
or the Shareholders, threatened against Attest, its
18
properties or business, or the Shareholders relating to the operations
of Attest, nor is there any pending or, to the knowledge of the officers
of Attest or the Shareholders, threatened governmental investigation
relative to employee safety, discrimination matters, product
safety, wage or price regulations or environmental matters, nor are
there any actions or proceedings pending or proposed in which
Attest or the Shareholders are the plaintiff or petitioner except
as set forth in Schedule 4.20. To the knowledge of the officers of
Attest or the Shareholders, there is no judgment, decree,
injunction, rule or order of any court, arbitrator or governmental
agency against Attest.
4.21 Authority of Shareholders
Each Shareholder and Attest has the legal power and authority to
enter into and perform this Agreement and the transactions
contemplated herein. The execution, delivery and performance of
this Agreement and the other agreements contemplated herein by
Shareholders have been duly authorized by Attest's Board of
Directors. The Shareholders and Attest have the corporate power and
authority to consummate the sale of the Attest Stock pursuant to
this Agreement. This Agreement has been duly and validly
authorized by all necessary corporate action of Attest and will
constitute the legal, valid and binding obligation of Shareholders
and Attest, enforceable in accordance with its terms. Neither the
execution and delivery of this Agreement, nor the consummation of
the transactions contemplated herein, will violate any statute,
regulation or ordinance of any governmental authority, or conflict
with or result in the breach of any term, condition or provision of
the Articles of Incorporation or By-Laws of Attest, or of any
agreement, deed, contract, mortgage, indenture, writ, order,
decree, legal obligation or instrument to which Attest or
Shareholders is a party or by which Attest or any of its assets or
properties are or may be bound, or constitute a default (or an
event which, with the lapse of time or the giving of notice, or
both, would constitute a default) thereunder, or result in the
creation or imposition of any lien, charge or encumbrance, or
restriction of any nature whatsoever with respect to any properties
or assets of Attest, or give to others any interest or rights,
including rights of termination, acceleration or cancellation in or
with respect to any of the properties, assets, contracts or
business of Attest, except for such violations, conflicts,
breaches, defaults, liens, restrictions, interests and rights that
would not, in the aggregate, have a material effect of the
condition (financial or otherwise), assets, liabilities or business
of Attest, or that are cured, waived or terminated prior to the
Closing Date. No consent, approval, authorization, order,
registration or qualification of or with any court or any
regulatory authority or any other governmental body is required for
the consummation by Attest of the transactions contemplated by this
Agreement except those contemplated by this Agreement.
4.22 Brokers
Except as set forth in Schedule 4.22 hereto, neither Zycad nor
Attest nor anyone acting on their behalf has or will have, as a
result of any act or omission of either Shareholders or Attest, any
liability to any broker, finder, agent or other person (other than
legal and accounting advisors) in connection with the transactions
contemplated hereby, nor has Attest or anyone acting on its behalf,
agreed to pay any brokerage, finder's, consulting or investment
banking fee or commission, whether payable in cash, securities or
in any other form with any person, firm or entity with respect to
the transactions contemplated hereby.
19
4.23 Disclosure
No representation or warranty by the Shareholders in this
Agreement, nor any statement or certificate furnished or to be
furnished to Zycad pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any
untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements contained herein
or therein not misleading.
4.24 Disclosures Applicable to All Provisions
Disclosure of any matter in a particular schedule or provision of
Article Four shall constitute disclosure of such matter in each
schedule and section of Article Four to which the item is relevant.
4.25 Representations and Warranties
Shareholders representations and warranties contained in this
Agreement shall be true at the time of Closing as though such
representations and warranties were made at Closing.
ARTICLE FIVE
REPRESENTATIONS AND WARRANTIES OF ZYCAD
As inducement to the execution of this Agreement by the parties hereto,
Zycad represents and warrants that the following statements are true and
correct on the date hereof:
5.1 Organization and Standing of Zycad and Subsidiary
Each of Zycad and its subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws
of the jurisdictions of their incorporation, and is duly qualified
to do business as a foreign corporation in each jurisdiction in
which the nature of its business or the character of its properties
makes such qualification necessary, except where the failure to so
qualify would not have a material adverse effect on the condition
(financial or otherwise), assets, liabilities or business of Zycad.
Zycad's Certificate of Incorporation, and all amendments thereto,
and its By-Laws, as amended, copies of which have been delivered to
Shareholders, are complete, correct and in full force and effect at
the date of this Agreement. Zycad has the corporate power and
authority to own, operate and dispose of its properties, to conduct
its business as now being conducted, to enter into, deliver and
perform its obligations and undertakings under this Agreement and
to complete the transactions contemplated herein.
5.2 Authority of Zycad and Subsidiary
Zycad and Subsidiary has the legal power and authority to enter
into and perform this Agreement and the transactions contemplated
herein. The execution, delivery and performance of this Agreement
and the other agreements contemplated herein by Zycad have been
duly authorized by the Board of Directors of Zycad. Zycad has the
corporate power and authority to consummate the purchase of stock
pursuant to this Agreement. This
20
Agreement has been duly and validly authorized by all necessary
corporate action of Zycad and constitutes the legal, valid and
binding obligations of Zycad, enforceable in accordance with its
terms. Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated herein, will
violate any statute, regulation or ordinance of any governmental
authority, or conflict with or result in the breach of any term,
condition or provision of the Articles of Incorporation or By-Laws
of Zycad, or of any agreement, deed, contract, mortgage, indenture,
writ, order, decree, legal obligation or instrument to which Zycad is
a party or by which Zycad or any of its assets or properties are or
may be bound, or constitute a default (or an event which, with the
lapse of time or the giving of notice, or both, would constitute a
default) thereunder, or result in the creation or imposition of any
lien, charge or encumbrance, or restriction of any nature
whatsoever with respect to any properties or assets of Zycad, or
give to others any interest or rights, including rights of
termination, acceleration or cancellation in or with respect to any
of the properties, assets, contracts or business of Zycad, except
for such violations, conflicts, breaches, defaults, liens,
restrictions, interests and rights that would not, in the
aggregate, have a material effect on the condition (financial or
otherwise), assets, liabilities or business of Attest, or that
would not, in the aggregate have a material effect on the condition
(financial or otherwise), assets, liabilities or business of Zycad,
or that are cured, waived or terminated prior to the Closing Date.
No consent, approval, authorization, order, registration or
qualification of or with any court or any regulatory authority or
any other governmental body is required for the consummation by
Zycad of the transactions contemplated by this Agreement except
those contemplated by this Agreement.
5.3 Access to information
Zycad has been provided with all information about Attest requested
by it including without limitation all materials referenced in
Article Four or any schedule thereto; it has been provided the
opportunity to ask questions of and receive answers from Attest and
its management and has been supplied all information and
documentary material deemed necessary by it to verify the accuracy
of such information.
5.4 Brokers
Neither Shareholders or Attest nor anyone acting on their behalf
has or will have as a result of any act or omission by Zycad any
liability to any broker, finder, agent or other person (other than
legal and accounting advisors) in connection with the transactions
contemplated hereby, nor has Zycad or anyone acting on its behalf
agreed to pay any brokerage, finder's, consulting or investment
banking fee or commission, whether payable in cash, securities or
in any other form with any person, firm or entity with respect to
the transaction contemplated hereby.
5.5 No Restriction on Shareholders' Disposition of Zycad Stock
The Zycad Stock will not be registered under the Securities Act of
1933, as amended (the "Securities Act"), in reliance upon the
exemption from registration contained in Section 3(a)(10) thereof.
The Zycad Stock can be publicly traded subject only upon the
issuance of an opinion letter by Zycad to its transfer agent and
compliance with the requirements of Rule 145. Zycad will issue
such instructions to its transfer agent as may be necessary for
21
Shareholders to sell the Zycad Stock. Zycad has complied or shall
comply with NASD rules with respect to the Zycad Stock and such
Stock shall be approved for full listing on NASDAQ.
5.6 Disclosure
No representation or warranty by Zycad in this Agreement, nor any
statement or certificate furnished or to be furnished to Attest or
Shareholders pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any
untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements contained herein
or therein not misleading.
5.7 Representations and Warranties
Zycad's representations and warranties contained in this Agreement
shall be true at the time of Closing as though such representations
and warranties were made at Closing.
5.8 Valid Issuance of Zycad Stock
The Zycad Stock has been duly authorized and, when issued in
accordance with the terms of this Agreement, will be validly
issued, fully paid, nonassessable, and issued in compliance with
all applicable federal and Delaware securities laws.
ARTICLE SIX
COVENANTS OF SHAREHOLDERS AND ATTEST
6.1 Operations of Attest
Attest and the Shareholders agree that they will, at all times
subsequent to the date of this Agreement and prior to the Closing
Date, operate Attest's business in the ordinary course consistent
with Attest's past practice, use their best efforts to preserve
intact Attest's present business organization, keep available the
services of Attest's present officers and employees, and preserve
Attest's relationships with customers, suppliers and others having
business relationships with Attest. Attest and the Shareholders
agree that during the period from the date hereof until the Closing
Date they will not, without the consent of Zycad, amend Attest's
Articles of incorporation or By-Laws, enter into any employment or
consulting contract, pay any dividend on Attest's stock, issue
Attest Stock, change any Stock Option Plan or other Employee
Benefit Plan, make any other distribution of assets to Attest's
shareholder, repurchase or make any reduction in any of Attest's
outstanding securities, issue any securities of any nature or grant
any further rights or options to acquire securities of Attest,
increase any compensation payable or to become payable or benefits
to be paid to any officer, employee or agent of Attest, enter into
any contract or commitment on behalf of Attest extending beyond the
date of this Agreement except sales of products and purchase of raw
materials and supplies in the ordinary course of business.
22
6.2 No Further Negotiations
Until the Closing Date, or the earlier termination of this
Agreement, Attest and Shareholders will not (i) sell, offer to sell
or solicit offers to purchase any of the assets of Attest (other
than sales of the products of Attest in the ordinary course of
business); or (ii) sell, offer to sell or exchange or solicit
offers to purchase or exchange, any capital stock of Attest, from
any other party (other than Zycad), or enter into any merger,
consolidation, liquidation or similar transaction involving Attest
and any other party (other than Zycad), and Attest and the
Shareholders will not provide confidential, technical or other
information to any person (other than Zycad) in connection with any
such proposed purchase or transaction.
6.3 Access
Attest and the Shareholders shall permit Zycad to make such due
diligence investigation of Attest as Zycad deems appropriate, and
Attest and the Shareholders shall make available to Zycad and its
staff, attorneys, accountants, consultants and other
representatives all information about Attest which Zycad may
reasonably request in connection with such investigation. Unless
and until the transaction contemplated by this Agreement has been
completed, Zycad (and its staff, attorneys accountants, consultants
and other representatives) shall hold all such information and
documents received from Attest or any of its affiliates in
strictest confidence, pursuant to the terms and conditions of the
Confidentiality and Nondisclosure Agreement between Attest and
Zycad. All such information in written form and all such documents
shall be returned to Attest in the event the transactions
contemplated by this Agreement are not completed.
6.4 Public Disclosure
Neither party, nor any of its affiliates shall make any public
announcement or issue any press release concerning the proposed
stock sale without the prior consent of the other except as
required by law.
6.5 Updating of Schedules
Shareholders shall provide Zycad with updates to the Schedules set
forth in Article Four current as of the Closing Date.
ARTICLE SEVEN
CLOSING
The closing of the sale (the "Closing") of the capital stock of Attest shall
take place on June 1, 1996 (the "Closing Date") at a mutually agreeable time
and place (or such other time and place as may be mutually agreeable).
7.1 At the Closing, Shareholders shall deliver to Zycad, free and clear
of all encumbrances certificates for all the issued and outstanding
shares of Attest Stock in negotiable form, endorsed in blank with
all transfer stamps required by government authorities attached
hereto. Upon such delivery and delivery of the other documents
referred to in Article Eight,
23
Zycad shall transfer to Shareholders fifty percent (50%) of the
Zycad Stock as adjusted for in Article Two of this Agreement. The
balance of the Zycad Stock shall be delivered into escrow to State
Street Bank and Trust Company as Escrow Agent to be held in escrow
under an Escrow Agreement pursuant to Section 2.4. The Escrow
Agreement shall be in a form reasonably acceptable to the parties
and shall be attached as Exhibit 7.1.
7.2 At Closing, Zycad will offer the Shareholders employment providing
for their continued employment at compensation and benefits at
least equal to what they were receiving at Attest. Attached hereto
as Exhibit 7.2 are copies of each offer letter to the Shareholders.
7.3 In addition, Shareholders shall deliver to Zycad the following
documents at Closing:
a. Minute book, stock transfer book, stock certificate book and
corporate seal of Attest.
b. All original agreements to which Attest is a party.
c. Signed employment agreements with Zycad.
ARTICLE EIGHT
CONDITIONS TO ZYCAD'S OBLIGATION TO CLOSE
The obligation of Zycad to consummate the purchase of Attest Stock is subject
to satisfaction, on or prior to the Closing Date, of the following conditions:
8.1 Attest shall have delivered to Zycad:
a. a certified copy of the resolution or resolutions duly adopted by
the Board of Directors and Shareholders authorizing execution of
this Agreement and the consummation by Attest and the Shareholders
of the transactions contemplated thereby;
b. an opinion in form and substance reasonably satisfactory to counsel
for Zycad, dated the Closing Date, of counsel for Attest. This
legal opinion shall be attached as Exhibit 8.1(b).
c. A Proforma Closing Balance Sheet and Statement of Profit and Loss as
of the Closing Date.
8.2 Shareholders shall have performed in all material respects the
obligations, covenants and undertakings by each herein to be
performed at or prior to the Closing Date including the
cancellation of the Shareholders/Attest inter-company debt if any,
and Zycad shall have received at Closing a certificate, dated the
Closing Date and executed on behalf of Attest by its President and
by each of the Shareholders to that effect.
8.3 The representations and warranties of Attest and the Shareholders
contained in this Agreement, including the schedules thereto, shall
be true in all material respects on and as of
24
the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date, and Zycad shall
have received at the Closing a certificate to such effect, dated the
Closing Date and executed on behalf of Attest by its President and
by each of the Shareholders.
8.4 The transfer of Attest Stock pursuant to this Agreement shall not
violate any order, decree or judgment of any court or government
body having competent jurisdiction, and no law, rule, regulation or
order shall have been adopted, by any such body, prohibiting or
enjoining the transactions contemplated by this Agreement or which
would, in the reasonable judgment of Zycad, render it impossible or
inadvisable for Zycad to consummate the transactions contemplated
hereby or to own, operate or control the assets, properties or
business of Attest.
8.5 Attest and Zycad shall have received by the Closing Date all
authorizations and approvals of federal or state regulatory bodies
and officials as may be required in connection with the sale of the
Attest Stock and the transaction contemplated herein.
8.6 The California Department of Corporations shall have issued an
order declaring this transaction to be fair to the Shareholders.
8.7 All employees of Attest have accepted employment with Zycad and
have signed Zycad's Standard Employment Agreement.
8.8 Zycad shall have entered into an Escrow Agreement with State Street
Bank and Trust Company in substantially the form attached hereto as
Exhibit 7.1.
8.9 Receipt of any required third party contracts.
8.10 No shareholder entitled to exercise dissenters rights.
ARTICLE NINE
CONDITIONS TO SHAREHOLDERS' OBLIGATION TO CLOSE
The obligation of Shareholders to consummate the Stock Purchase is subject to
the satisfaction, on or prior to the Closing Date, of the following
conditions:
9.1 Zycad shall have delivered to Shareholders:
a. a certified copy of the resolution or resolutions duly adopted by
the Board of Directors of Zycad authorizing the execution of this
Agreement and the consummation by Zycad of the transactions
contemplated thereby;
b. an opinion in form and substance reasonably satisfactory to counsel
for Shareholders dated the Closing Date, of Zycad's counsel. This
legal opinion shall be attached as Exhibit 9.1(b).
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9.2 Zycad shall have performed in all material respects the
obligations, covenants and undertakings by it herein to be
performed at or prior to the Closing Date; and Shareholders shall
have received at Closing a certificate dated the Closing Date and
executed on behalf of Zycad by a duly authorized officer to that
effect.
9.3 The representations and warranties of Zycad contained in this
Agreement, including the schedules thereto, shall be true in all
material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made
on and as of such date, and Shareholders shall have received at the
Closing a certificate to such effect, dated the Closing Date and
executed on behalf of Zycad by its Chief Executive Officer or Chief
Financial Officer.
9.4 The transfer of Zycad Stock shall not violate any order, decree or
judgment of any court or governmental body having competent
jurisdiction, and no law, rule, regulation, or order shall have
been adopted, by any such body, prohibiting or enjoining the
transactions contemplated by this Agreement or which would, in the
reasonable judgment of Shareholders, render it impossible or
inadvisable for Shareholders to consummate the transactions
contemplated hereby.
9.5 Shareholders and Zycad shall have received by the Closing Date all
authorizations and approvals of federal or state regulatory bodies
and officials as may be required in connection with the sale of the
Attest Stock, and the issuance of the Zycad Stock and the
transactions contemplated herein.
9.6 The California Department of Corporations shall have issued an
order declaring this transaction to be fair to the Shareholders.
9.7 Zycad shall have entered into an Escrow Agreement with State Street
Bank and Trust Company in substantially the form attached hereto as
Exhibit 7.1.
9.8 The Zycad Stock shall be freely transferable and publicly tradable
subject only to the requirements of Rule 145 and subject to no
other restriction or limitation.
ARTICLE TEN
POST CLOSING OBLIGATIONS
Shareholders shall have the following obligations after the Closing Date:
10.1 Shareholders shall indemnify Zycad pursuant to Article Twelve.
10.2 Shareholders shall cooperate with Zycad in the orderly transfer of
its technology, business operations and its books and records.
Zycad shall have the following obligations after the Closing Date:
10.3 Zycad shall indemnify Shareholders pursuant to Article Twelve.
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10.4 Zycad agrees to reimburse Shareholders for the stock brokerage fees
incurred in selling the first $300,000 worth of Zycad stock in the
aggregate for all Shareholders on the condition that Zycad may
select the stockbroker provided, however, that said stockbroker
shall be a market maker as required by Rule 145.
ARTICLE ELEVEN
TERMINATION
11.1 Termination by Mutual Consent
At any time on or prior to the Closing Date, this Agreement may be
terminated by mutual written consent of the Boards of Directors of
Attest and Zycad, without liability on the part of any party.
11.2 Termination at Zycad's Option
At any time on or prior to the Closing Date, this Agreement may be
terminated by Zycad without liability to any party, by written
notice from the Board of Directors of Zycad to Attest, in any of
the following events:
a. Change in Management
There shall have been any change in the management of Attest, either
by death, disability, termination, resignation or otherwise; or
b. Failure of Conditions
The occurrence of any event which in the reasonable opinion of Zycad
renders one or more of the conditions to Zycad's obligations to
close listed in Article Seven hereof impossible to satisfy.
11.3 Termination at Shareholders' Option
At any time on or prior to the Closing Date, this Agreement may be
terminated by the Shareholders without liability to any party, by
written notice from the Shareholders to Zycad, in any of the
following events:
a. Failure of Conditions
The occurrence of any event which in the opinion of Shareholders
renders one or more of the conditions to Shareholders obligations to
close listed in Article Eight hereof impossible to satisfy.
11.4 Additional Rights of Termination
In addition to the other terms of this Article Eleven, this
Agreement may be terminated by written notice from either the Board
of Directors of Zycad or Shareholders to the other parties hereto,
without liability on the part of either party, if the purchase of
the Attest Stock has not been consummated by June 15, 1996 for any
reason whatsoever.
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11.5 Expenses on Termination
Upon termination for any reason pursuant to this Article Eleven,
each party shall bear all of its out-of-pocket expenses incurred in
connection with the transactions contemplated by this Agreement,
including without limitation all legal, accounting, printing,
travel and other similar fees and expenses.
ARTICLE TWELVE
INDEMNIFICATION
12.1 Indemnification by Shareholders
Subject to the provisions of Section 12.4 and Section 12.1 hereof,
Shareholders agree to indemnify and hold harmless Zycad from and
against any and all loss, liability, damage or deficiency
(including, without limitation, interest, penalties and reasonable
attorneys' fees and disbursements) (collectively "Damages")
actually and reasonably incurred by Zycad (excluding any costs of
internal personnel of Zycad) that:
a. are caused by any breach of any representation, warranty, covenant
or agreement of the Shareholders or Attest contained in this
Agreement; or
b. are based on any undisclosed and valid claims of third parties
related to, based upon or arising out of the operations of Attest
prior to the Closing Date; or
c. represent federal or state taxes attributable to the activities of
Attest prior to the Closing except for state and federal tax
liability arising from the transactions contemplated by this
Agreement; or
d. arise out of an Insurance Claim. As used herein, the term "Insurance
Claim" shall mean any product liability or worker's compensation
claim, or any other claim for general liability of a type covered by
Shareholders comprehensive general liability, product liability or
property insurance, regardless of policy limits or deductible
amounts, which claim arises out of an occurrence prior to the
Closing.
12.2 Indemnification by Zycad
Subject to the provisions of Section 12.4 hereof, Zycad agrees to
indemnify and hold harmless Shareholders from and against any and
all Damages (as defined in Section 12.1 hereof) actually incurred
by Shareholders (excluding any costs of internal personnel of
Shareholders) that:
a. are caused by any breach of any representation, warranty, covenant
or agreement of Zycad contained in this Agreement; or
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b. are based on any claims of third parties related to, based upon or
arising out of the operations of Attest on or after the Closing Date
including but not limited to payments due Attest employees arising
after the Closing Date under any employment agreement or commission
agreement between Attest and employees of Attest; or
c. represent federal or state taxes attributable to the activities of
Attest on or after the Closing Date, except for state and federal
tax liability arising from the transactions contemplated by this
Agreement; or
d. are caused by (i) the release of Escrowed Stock to Shareholders
under Section 2.4 disproportionate to the number of shares of Zycad
Stock the Shareholders received in exchange for their Attest Shares
or (ii) any claim against the Escrowed Stock under Article Twelve
disproportionate to the number of shares of Zycad Stock the
Shareholders received in exchange for their Attest Shares.
12.3 Notice and Opportunity to Defend
Promptly after receipt by Zycad, on the one hand, or the Shareholders,
on the other hand, of notice of any action, proceeding or claim that
could give rise to a right of indemnification pursuant to Section 12.1
or 12.2 hereof, Zycad or Shareholders, as the case may be, shall give
the party who may become obligated to provide indemnification hereunder
(the "Indemnifying Party") written notice describing in reasonable
detail the facts and circumstances surrounding such claim within 10 days
of receiving such notice or otherwise becoming aware of the facts
constituting the claim. The Indemnifying Party shall have the right, at
its option, to compromise or defend, at its own expense and by its own
counsel, any such matter, including but not limited to an asserted
liability against the party seeking such indemnification, provided,
however, that the Indemnifying Party shall not settle a claim against
the Indemnified Party without the Indemnified Party's prior written
consent, which shall not be unreasonably withheld. If any Indemnifying
Party shall undertake to compromise or defend any such asserted
liability, it shall promptly notify the party seeking indemnification
(the "Indemnified Party) of its intention to do so, and the Indemnified
Party shall cooperate fully with the Indemnifying Party and its counsel
in the compromise of, or defense against, any such asserted liability.
In any event, the Indemnified Party shall have the right at its own
expense to participate in the defense of such asserted liability. Under
no circumstances shall the Indemnified Party compromise any such
asserted liability without the written consent of the Indemnifying Party
unless the Indemnifying Party has failed or refused to undertake the
defense or compromise of any such asserted liability after a reasonable
period of time not to exceed thirty (30) days has elapsed since the
Indemnifying Party received notice of a claim for indemnification
pursuant to this Section 12.3 hereof. The parties acknowledge that the
indemnification obligations set forth in this Article 12 were negotiated
between the parties.
12.4 Limitation
a. No indemnity shall be payable to Zycad with respect to any claim
arising under Section 12.1 hereof unless the aggregate amount of
Damages due from Shareholders with respect to all such claims shall
exceed $25,000 in the aggregate, whereupon all amounts then due from
Shareholders with respect to claims aggregating in excess of $25,000
shall be payable on demand, and all such amounts thereafter due from
Shareholders with respect to such claims shall be payable on demand.
This limitation
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shall not apply to claims for indemnification based upon a breach of
the representations and warranties contained in Section 4.5 of this
Agreement.
b. No indemnity shall be payable to Shareholders with respect to any
claim arising under Section 12.2 unless the aggregate amount of
Damages due from Zycad with respect to such claims shall exceed
$25,000 in the aggregate, whereupon all amounts then due from Zycad
with respect to such claims aggregating in excess of $25,000 shall
be payable on demand, and all such amounts thereafter due from Zycad
with respect to such claims shall be payable on demand.
c. The amount of Damages for which the Indemnifying Party may be liable
for indemnification shall be reduced by the amount of any insurance
proceeds received by the Indemnified Party with respect to the claim
that is the subject of indemnification pursuant to this Article
Twelve.
d. All claims for indemnification pursuant to this Article Twelve shall
expire one (1) year from the Closing Date, unless the Indemnifying
Party has received notice of such claim prior to such date.
Notwithstanding the foregoing, all claims for indemnification for
tax liability pursuant to Sections 12.1(c), and 12.2(c) shall not
expire until expiration of the relevant statutes of limitation
applicable to such tax matters.
e. The Escrow shall be the sole and exclusive remedy of Zycad in
connection with any claim, damage, loss, cost, expense, liability,
damage, penalty or obligation arising under or attributable to, or
by reason of or in connection with any rights of Zycad pursuant to
Section 12.1 above under Article Twelve. Zycad shall have the right
to satisfy any indemnity claims first with Escrowed Stock which has
been earned by Shareholders pursuant to Section 2.4. Shareholders
shall not under any circumstances be personally liable for any
indemnification claims by Zycad except to the extent Escrowed Stock
is available.
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ARTICLE THIRTEEN
MISCELLANEOUS
13.1 Survival of Representations and Warranties
All representations and warranties contained here or made in
writing by the parties hereto in connection herewith shall survive
the Closing Date until the first anniversary of the Closing Date,
at which time the representation and warranties shall terminate;
provided, however, that Zycad's representations and warranties in
Sec. 4.5 shall not terminate until the earlier of (i) 30 days after
all Escrowed Stock has been released, or (ii) July 30, 1998.
13.2 Definition of Knowledge
As used herein in connection with a specific representation or
warranty, "knowledge" of the officers of Attest or the Shareholders
or Zycad, as the case may be or "known" to the officers of Attest
or the Shareholders or Zycad means the knowledge of one or more of
such officers following such reasonable inquiry as is appropriate
under the circumstances and in the context of each such
representation or warranty.
13.3 Amendment
This Agreement may be amended, modified or supplemented in whole or
in part at any time by an instrument in writing executed in the
same manner as this Agreement after due authorization by the
respective Board of Directors of the parties hereto.
13.4 Headings
The Article and Section headings in this Agreement and in the Index
are solely for the convenience and reference of the parties hereto,
and are not intended to be descriptive of the entire contents of
any such Articles or Sections and shall not limit or otherwise
affect any of the terms or provisions hereof.
13.5 Entire Agreement
This Agreement and the documents, schedules and exhibits described
herein or attached or delivered pursuant hereto set forth the
entire agreement between the parties hereto with respect to the
transactions contemplated hereby and supersede all prior
agreements, arrangements and understandings relating to the subject
matter hereof. Except as expressly set forth herein, no party is
entitled to rely on any statement not contained herein or any
writing not specifically furnished pursuant hereto.
13.6 Counterparts
This Agreement may be executed in one or more counter parts each of
which shall be deemed to constitute an original and shall become
effective when each of the parties hereto has signed and delivered
to the other parties a copy of this Agreement, whether or not all
parties have signed the same copy.
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13.7 Notices
All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given when received, or when
sent by certified or registered mail, return receipt requested, or
by prepaid telex or telegram, as follows:
a. If to Attest:
Attest Software, Inc.
Attention: President
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
b. If to Zycad:
Zycad Corporation
Attention: Chief Executive Officer
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other address as shall be designated by any of such
parties to the others by such a notice.
(This space left intentionally blank)
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13.8 Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of California. The prevailing party shall be
entitled to reasonable attorneys' fees and costs incurred in
connection with such litigation.
13.9 Waiver
No waiver of any provision of this Agreement or any rights or
obligations of either party hereunder shall be effective, except
pursuant to a written instrument signed by the party or parties
waiving compliance, and any such waiver shall be effective only in
the specific instance and for the specific purpose stated in such
writing.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed in its corporate name by its duly authorized officers all as of the
date first above written.
ZYCAD CORPORATION: ATTEST SOFTWARE INCORPORATED:
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇, III
------------------------------------ -------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇ III
Executive VP and Chief President
Financial Officer
ZYCAD INTERNATIONAL, INC. SHAREHOLDERS
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇, III
------------------------------------ -------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇ III
Executive VP and Chief
Financial Officer /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
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