EXHIBIT 10.48
ENTERPRISE ENGINES, INC.
STOCK PURCHASE AGREEMENT
dated as of December 15, 1999
by and among
QAD INC.
("Purchaser")
and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
("SELLER")
and
ENTERPRISE ENGINES, INC.
("COMPANY")
with respect to
One Hundred Percent of the Outstanding Common Stock of
ENTERPRISE ENGINES, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I SALE OF SHARES AND CLOSING.............................................................................1
1.1 Purchase and Sale. ............................................................................1
1.2 Purchase Price. ...............................................................................1
1.3 Closing. ......................................................................................1
1.4 Further Assurances; Post-Closing Cooperation. .................................................2
1.5 Seller's Retention of Certain Rights. .........................................................2
1.6 Company Source Code. ..........................................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER..............................................................2
2.1 Authority. ....................................................................................3
2.2 Organization of the Company. ..................................................................3
2.3 Capital Stock. ................................................................................3
2.4 Subsidiaries. .................................................................................3
2.5 No Conflicts. .................................................................................3
2.6 Governmental Approvals and Filings. ...........................................................4
2.7 Books and Records. ............................................................................4
2.8 Financial Statements; Assets and Liabilities. .................................................4
2.9 Absence of Changes. ...........................................................................5
2.10 No Undisclosed Liabilities. ...................................................................6
2.11 Taxes. ........................................................................................6
2.12 Legal Proceedings...............................................................................7
2.13 Compliance With Laws and Orders. ..............................................................7
2.14 Benefit and Compensation Plans. ...............................................................7
2.15 Real Property...................................................................................7
2.16 Tangible Personal Property; Investment Assets...................................................8
2.17 Intellectual Property...........................................................................8
2.18 Contracts. ...................................................................................10
2.19 Licenses. ....................................................................................10
2.20 Insurance. ...................................................................................11
2.21 Affiliate Transactions. ......................................................................11
2.22 Employees; Labor Relations. ..................................................................11
2.23 Environmental Matters. .......................................................................11
2.24 Bank and Brokerage Accounts; Investment Assets. ..............................................12
2.25 No Powers of Attorney. .......................................................................12
2.26 Accounts Receivable. .........................................................................13
2.27 Brokers. .....................................................................................13
2.28 Disclosure. ..................................................................................13
2.29 Warranties and Indemnities. ..................................................................13
2.30 Confidentiality Agreements. ..................................................................13
2.31 Products. ....................................................................................14
2.32 Product Liability. ...........................................................................14
2.33 Year 2000 Compliance. ........................................................................14
2.34 Seller's Investment Representations. .........................................................14
i
TABLE OF CONTENTS
(continued)
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER.........................................................15
3.1 Organization. ................................................................................15
3.2 Authority. ...................................................................................15
3.3 No Conflicts. ................................................................................15
3.4 Governmental Approvals and Filings. ..........................................................15
3.5 QAD Stock. ...................................................................................15
3.6 Reports; Financial Statements. ...............................................................15
3.7 Absence Of Certain Changes. ..................................................................16
ARTICLE IV COVENANTS OF SELLER, THE COMPANY AND
PURCHASER....................................................................................16
4.1 Regulatory and Other Approvals. ..............................................................16
4.2 Investigation by Purchaser. ..................................................................17
4.3 No Solicitations. ............................................................................17
4.4 Conduct of Business. .........................................................................17
4.5 Financial Statements and Reports; Filings......................................................18
4.6 Certain Restrictions. ........................................................................18
4.7 Affiliate Transactions. ......................................................................19
ARTICLE V COVENANT OF PURCHASER.................................................................................20
5.1 Form S-3. ....................................................................................20
ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER
AND SELLER...................................................................................20
6.1 Conditions to Obligations of Purchaser. ......................................................20
6.2 Conditions to Obligations of Seller. .........................................................22
ARTICLE VII SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS...............................................................................24
7.1 Survival of Representations, Warranties, Covenants and
Agreements. ..................................................................................24
ARTICLE VIII INDEMNIFICATION....................................................................................24
8.1 Indemnification................................................................................24
8.2 Method of Asserting Claims. ..................................................................25
ARTICLE IX TERMINATION..........................................................................................27
9.1 Termination. .................................................................................27
9.2 Effect of Termination. .......................................................................28
ARTICLE X DEFINITIONS...........................................................................................28
10.1 Definitions....................................................................................28
ii
TABLE OF CONTENTS
(continued)
ARTICLE XI MISCELLANEOUS........................................................................................34
11.1 Notices. .....................................................................................34
11.2 Entire Agreement. ............................................................................35
11.3 Expenses. ....................................................................................35
11.4 Public Announcements. ........................................................................35
11.5 Confidentiality. .............................................................................36
11.6 Waiver. ......................................................................................36
11.7 Amendment. ...................................................................................36
11.8 No Third Party Beneficiary. ..................................................................36
11.9 No Assignment; Binding Effect. ...............................................................37
11.10 Headings. ....................................................................................37
11.11 Arbitration. .................................................................................37
11.12 Consent to Jurisdiction and Service of Process. ..............................................37
11.13 Invalid Provisions. ..........................................................................38
11.14 Governing Law. ...............................................................................38
11.15 Post-Closing Operation of Business. ..........................................................38
11.16 Counterparts. ................................................................................38
iii
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT dated as of December 15, 1999 is made and
entered into by and among QAD Inc., a Delaware corporation ("PURCHASER") and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("SELLER") and ENTERPRISE ENGINES, INC. (the "COMPANY").
Capitalized terms not otherwise defined herein have the meanings set forth in
SECTION 9.1.
WHEREAS, Seller owns Two Million One Hundred (2,000,100) shares of
common stock, without par value, of the Company, constituting One Hundred
Percent (100%) of the issued and outstanding shares of common stock of the
Company (such shares being referred to herein as the "SHARES"); and
WHEREAS, Seller desires to sell, and Purchaser desires to purchase, all
of the Shares on the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
1.1 PURCHASE AND SALE. Seller agrees to sell to Purchaser, and
Purchaser agrees to purchase from Seller, all of the right, title and interest
of Seller in and to the Shares at the Closing on the terms and subject to the
conditions set forth in this Agreement.
1.2 PURCHASE PRICE. The consideration for the purchase of the Shares
is: (i) ONE MILLION DOLLARS ($1,000,000), payable FIVE HUNDRED THOUSAND DOLLARS
($500,000) in immediately available funds at the Closing, as hereinafter
defined, in the manner provided in SECTION 1.3, together with a one (1) year
Promissory Note in the form attached hereto as EXHIBIT A (the "PROMISSORY
NOTE"), and (ii) the issuance of up to One Hundred Twenty Thousand (120,000)
shares of the Purchaser's common stock, upon the achievement of the Milestones
as set forth in the Escrow Agreement in the form attached hereto as EXHIBIT B
(the "QAD STOCK") to be deposited in escrow with Santa ▇▇▇▇▇▇▇ Bank & Trust and
to be released as the Milestones are reached or returned to the Purchaser if the
Milestones are not achieved (the cash payment, the Promissory Note and the QAD
Stock are collectively referred to as the "PURCHASE PRICE"). The Seller will be
responsible for all ordinary income taxes and capital gains taxes which may be
due as a result of receipt of the Purchase Price.
1.3 CLOSING. The Closing will take place at the offices of Purchaser,
▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇.▇. ▇▇▇▇▇, or at such other place as
Purchaser and Seller mutually agree, on the Closing Date, as hereinafter
defined. At the Closing, Purchaser will pay the Purchase Price by wire transfer
of immediately available funds to such account as Seller may reasonably direct
by written notice delivered to Purchaser by Seller at least two (2) Business
Days before the Closing Date. Simultaneously, Seller will assign and transfer to
Purchaser all of
Seller's right, title and interest in and to the Shares by delivering to
Purchaser a certificate or certificates representing the Shares, in genuine
and unaltered form, duly endorsed in the name of Purchaser or its designee.
At the Closing, there shall also be delivered to Seller and Purchaser the
opinions, certificates and other documents and instruments to be delivered
under ARTICLE VI.
1.4 FURTHER ASSURANCES; POST-CLOSING COOPERATION. At any time or from
time to time after the Closing, Seller shall execute and deliver to Purchaser
such other documents and instruments, provide such materials and information and
take such other actions as Purchaser may reasonably request more effectively to
vest title to the Shares in Purchaser and, to the full extent permitted by Law,
to put Purchaser in actual possession and operating control of the Company and
its Assets and Properties and Books and Records, and otherwise to cause Seller
to fulfill his obligations under this Agreement to which he is a party. The
obligation of Seller under this SECTION 1.4 shall survive until two (2) years
following the Closing Date.
1.5 SELLER'S RETENTION OF CERTAIN RIGHTS. The Seller wishes to secure
certain Intellectual Property rights from the Company which the Seller was
instrumental in creating, and Purchaser is agreeable to the Company's divestment
of such Intellectual Property rights, as follows. The Company hereby agrees to
assign, effective as of immediately following the Closing without any further
action required on the part of any of Seller, Purchaser or the Company, all its
right, title and interest in and to (collectively, the "Divested IP"): (i) the
trademark "Convergent Engineering" (the "Name"); (ii) the copyright to the book,
"Business Engineering With Object Technology" (the "Book"); and (iii) any
royalty or license agreements associated with the Name and/or the Book. Company
and Purchaser agree to execute any documents reasonably necessary to vest in the
Seller all such right, title and interest in and to the Divested IP. Except for
the Divested IP, Seller has no other rights to the Company or its Assets and
Properties. The Company shall retain, and, together with Seller, hereby grants
to Purchaser, effective as of the Closing, transferable, worldwide,
non-exclusive, royalty-free, licenses to make, use and sell the Divested IP in
the state Divested IP exists at the Closing, whether or not utilized
independently or included in the Purchaser's software products. The license
includes all rights necessary to utilize the Company's and the Purchaser's
software and create derivative works in and to the Divested IP and to create
appropriate documentation, training and marketing materials. The parties hereto
agree and acknowledge that the value of the Divested IP is $5,000.00. Except as
provided herein, the Seller has no other rights to the Company or its Assets and
Properties.
1.6 COMPANY SOURCE CODE. The Seller acknowledges that it has deposited
into Escrow with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ the Company's Enterprise Engine Source Code
which will be delivered by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ to the Purchaser upon the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Except with respect to any contract, arrangement or understanding
between the Company and Purchaser, as to which Seller makes no representation,
warranty or covenant, Seller hereby represents and warrants to Purchaser as
follows:
2
2.1 AUTHORITY. The execution and delivery by Seller of this Agreement
to which he is a party, and the performance by Seller of his obligations
hereunder and thereunder, have been duly and validly authorized by the Seller,
no other action on the part of Seller being necessary. This Agreement has been
duly and validly executed and delivered by Seller and constitutes the legal,
valid and binding obligations of Seller enforceable against Seller in accordance
with its terms.
2.2 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the State of California,
and has full corporate power and authority to conduct its business as and to the
extent now conducted and to own, use and lease its Assets and Properties.
SECTION 2.2 OF THE DISCLOSURE SCHEDULE lists all lines of business in which the
Company is participating or engaged. The Company is duly qualified, licensed or
admitted to do business and is in good standing in the State of California,
which is the only jurisdiction in which the ownership, use or leasing of its
Assets and Properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except for those jurisdictions
in which the adverse effects of all such failures by the Company to be
qualified, licensed or admitted and in good standing can in the aggregate be
eliminated without material cost or expense by the Company, as the case may be,
becoming qualified or admitted and in good standing. The name of each director
and officer of the Company on the date hereof, and the position with the Company
held by each, are listed in SECTION 2.2 OF THE DISCLOSURE SCHEDULE. Seller has
prior to the execution of this Agreement delivered to Purchaser true and
complete copies of the Articles of Incorporation and the Bylaws of the Company
as in effect on the date hereof.
2.3 CAPITAL STOCK. The authorized capital stock of the Company consists
solely of Forty Million (40,000,000) shares of Common Stock, of which only the
Shares have been issued, and of which the Shares represent One Hundred Percent
(100%) of the entire outstanding common stock of the Company, and Twenty Million
(20,000,000) shares of Preferred Stock. Shares of Series A Preferred Stock have
been authorized, of which One Million (1,000,000) is outstanding. The Shares are
duly authorized, validly issued, outstanding, fully paid and nonassessable.
Seller owns the Company Shares, beneficially and of record, free and clear of
all Liens. Except for options or warrants disclosed in SECTION 2.3 of the
Disclosure Schedule, there are no outstanding stock options or warrants or other
securities or debt which is convertible into common stock. The delivery of a
certificate or certificates at the Closing representing the Shares in the manner
provided in SECTION 1.3 will transfer to Purchaser good and valid title to the
Shares, free and clear of all Liens.
2.4 SUBSIDIARIES. The Company does not have, nor has it ever had, any
Subsidiaries.
2.5 NO CONFLICTS. The execution and delivery by Seller of this
Agreement do not conflict with the performance by Seller of his obligations
under this Agreement and the consummation of the transactions contemplated
hereby and thereby will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the articles of incorporation or by-laws
(or other comparable corporate charter documents) of the Company or any
Subsidiary;
3
(b) conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to Seller, the Company or any
Subsidiary or any of their respective Assets and Properties; or
(c) except as disclosed in SECTION 2.5 OF THE DISCLOSURE
SCHEDULE, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require Seller, the Company or any Subsidiary to obtain any consent,
approval or action of, make any filing with or give any notice to any Person as
a result or under the terms of, (iv) result in or give to any Person any right
of termination, cancellation, acceleration or modification in or with respect
to, (v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or (vi) result
in the creation or imposition of any Lien upon the Company or any Subsidiary or
any of their respective Assets and Properties under, any material Contract or
License to which Seller, the Company or any Subsidiary is a party or by which
any of their respective Assets and Properties is bound.
2.6 GOVERNMENTAL APPROVALS AND FILINGS. No consent, approval or action
of, filing with or notice to any Governmental or Regulatory Authority on the
part of Seller, the Company or any Subsidiary is required in connection with the
execution, delivery and performance of this Agreement to which it is a party or
the consummation of the transactions contemplated hereby or thereby.
2.7 BOOKS AND RECORDS. The minute books and other similar records of
the Company as made available to Purchaser prior to the execution of this
Agreement contain a true and complete record, in all material respects, of all
action taken at all meetings and by all written consents in lieu of meetings of
the stockholders, the boards of directors and committees of the boards of
directors of the Company. The stock transfer ledgers, stock option schedules,
and other similar records of the Company as made available to Purchaser prior to
the execution of this Agreement accurately reflect all record transfers prior to
the execution of this Agreement in the capital stock of the Company. The Company
has not recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held any of its Books and Records by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company.
2.8 FINANCIAL STATEMENTS; ASSETS AND LIABILITIES. Prior to the
execution of this Agreement, Seller has delivered to Purchaser a true and
complete copy of the unaudited balance sheet of the Company as of November 30,
1999, a copy of which is attached hereto as EXHIBIT C, and the related unaudited
statements of operations, stockholders' equity and cash flows for the portion of
the fiscal year then ended.
Except as set forth in the notes thereto, all such financial statements
(i) were prepared in accordance with GAAP, (ii) fairly present the consolidated
financial condition and results of operations of the Company as of the
respective dates thereof and for the respective periods covered thereby, and
(iii) were compiled from the Books and Records of the Company regularly
maintained by management and used to prepare the financial statements of the
Company in accordance with the principles stated therein. The Company has
maintained its Books and
4
Records in a manner sufficient to permit the preparation of financial
statements in accordance with GAAP.
2.9 ABSENCE OF CHANGES. Except for the execution and delivery of this
Agreement and the transactions to take place pursuant hereto and thereto on or
prior to the Closing Date, since the Financial Statement Date there has not been
any material adverse change, or any event or development which, individually or
together with other such events, could reasonably be expected to result in a
material adverse change, in the Business or Condition of the Company. Without
limiting the foregoing, there has not occurred between the Financial Statement
Date and the date hereof:
(i) any declaration, setting aside or payment of any dividend
or other distribution in respect of the capital stock of the Company, or any
direct or indirect redemption, purchase or other acquisition by the Company of
any such capital stock of or any Option with respect to the Company;
(ii) any authorization, issuance, sale or other disposition by
the Company of any shares of capital stock of or Option with respect to the
Company, or any modification or amendment of any right of any holder of any
outstanding shares of capital stock of or Option with respect to the Company;
(iii) (A) incurrences by the Company of Indebtedness in an
aggregate principal amount exceeding $25,000 (net of any amounts discharged
during such period), or (B) any voluntary purchase, cancellation, prepayment or
complete or partial discharge in advance of a scheduled payment date with
respect to, or waiver of any right of the Company under, any Indebtedness of or
owing to the Company;
(iv) any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the real or personal
property or equipment of the Company or any Subsidiary in an aggregate amount
exceeding $25,000;
(v) any material change in (x) any pricing, investment,
accounting, financial reporting, inventory, credit, allowance or Tax practice or
policy of the Company, or (y) any method of calculating any bad debt,
contingency or other reserve of the Company for accounting, financial reporting
or Tax purposes, or any change in the fiscal year of the Company;
(vi) any write-off or write-down of or any determination to
write off or write down any of the Assets and Properties of the Company in an
aggregate amount exceeding $25,000;
(vii) any acquisition or disposition of, or incurrence of a
Lien (other than a Permitted Lien) on, any Assets and Properties of the Company,
other than in the ordinary course of business consistent with past practice;
(viii) any (x) amendment of the certificate or acts of
incorporation or by-laws (or other comparable corporate charter documents) of
the Company, (y) recapitalization, reorganization, liquidation or dissolution of
the Company or (z) merger or other business combination involving the Company
and any other Person;
5
(ix) any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any consent with
respect to (A) any Contract which is required (or had it been in effect on the
date hereof would have been required) to be disclosed in the Disclosure Schedule
pursuant to SECTION 2.18(A) or (B) any material License held by the Company;
(x) capital expenditures or commitments for additions to
property, plant or equipment of the Company constituting capital assets in an
aggregate amount exceeding $25,000;
(xi) any commencement or termination by the Company of any
line of business;
(xii) any transaction by the Company with Seller, any officer,
director or Affiliate (other than the Company) of Seller (A) other than on an
arm's-length basis, other than pursuant to any Contract in effect on the
Financial Statement Date and disclosed pursuant to SECTION 2.18(A)(VII) OF THE
DISCLOSURE SCHEDULE;
(xiii) any entering into of a Contract to do or engage in any
of the foregoing after the date hereof;
(xiv) any other transaction involving or development affecting
the Seller outside the ordinary course of business consistent with past
practice; or
(xv) any increase in the annual level of compensation of any
employee whose compensation from the Company in the last preceding fiscal year
exceeded $50,000, or any grant of any unusual or extraordinary bonuses, benefits
or other forms of direct or indirect compensation to any current or former
employee, officer, director or consultant, except in amounts in keeping with
past practices by formulas or otherwise.
2.10 NO UNDISCLOSED LIABILITIES. To the Knowledge of Seller, Except as
reflected or reserved against in the balance sheet included in the Financial
Statements or in the notes thereto or as disclosed in SECTION 2.10 OF THE
DISCLOSURE SCHEDULE, there are no Liabilities against, relating to or affecting
the Company or any of its Assets and Properties, other than Liabilities which,
individually or in the aggregate, are not material to the Business or Condition
of the Company.
2.11 TAXES. The Company has filed all Tax Returns which are required to
have been filed in any jurisdiction, and have paid all Taxes shown to be due and
payable on the Tax Returns and all other Taxes payable by the Company to the
extent the same have become due and payable and before they have become
delinquent. The Seller knows of no proposed material Tax assessment against the
Company and all Tax liabilities are adequately provided for on the Books and
Records of the Company. There are no pending or, to the Knowledge of Seller,
threatened Actions or Proceedings against the Company with respect to any Taxes.
With respect to any Tax audits, the Company has not received any adverse notice
or communication of any kind or nature whatsoever from any Governmental or
Regulatory Authority with respect to any Tax Returns filed by the Company. No
Liens for Taxes (other than with respect to Taxes not yet due and payable)
encumber any of the Assets and Properties of the Company.
6
2.12 LEGAL PROCEEDINGS.
(a) there are no Actions or Proceedings pending or, to the
Knowledge of Seller, threatened against, relating to or affecting Seller, the
Company or any Subsidiary or any of their respective Assets and Properties which
(i) could reasonably be expected to result in the issuance of an Order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or
otherwise result in a material diminution of the benefits contemplated by this
Agreement, or (ii) if determined adversely to the Company, could reasonably be
expected to result in (x) any injunction or other equitable relief against the
Company that would interfere in any material respect with its business or
operations or (y) Losses by the Company or any Subsidiary, individually or in
the aggregate with Losses in respect of other such Actions or Proceedings,
exceeding $5,000;
(b) there are no facts or circumstances Known to Seller that
could reasonably be expected to give rise to any Action or Proceeding that would
be required to be disclosed pursuant to clause (a) above; and
(c) there are no Orders outstanding against the Company.
2.13 COMPLIANCE WITH LAWS AND ORDERS. The Company is not and has not at
any time within the last five (5) years been, or has received any notice that it
is or has at any time within the last five (5) years been, in violation of or in
default under, in any material respect, any Law or Order applicable to the
Company or any of its Assets and Properties.
2.14 BENEFIT AND COMPENSATION PLANS. The Company has a Section 401-K
Employee Benefit Plan, a copy of which has been made available to Purchaser, and
has no other employee benefit or compensation plans except as set forth in
SECTION 2.14 OF THE DISCLOSURE SCHEDULE.
2.15 REAL PROPERTY.
(a) SECTION 2.15(A) OF THE DISCLOSURE SCHEDULE contains a true
and correct list of each parcel of real property leased by the Company. The
Company owns no real property.
(b) The Company has adequate rights of ingress and egress with
respect to the real property listed in SECTION 2.15(A) OF THE DISCLOSURE
SCHEDULE and all buildings, structures, facilities, fixtures and other
improvements thereon. To the Knowledge of Seller, none of such real property,
buildings, structures, facilities, fixtures or other improvements, or the use
thereof, contravenes or violates any building, zoning, administrative,
occupational safety and health or other applicable Law in any material respect
(whether or not permitted on the basis of prior nonconforming use, waiver or
variance).
(c) The Company has a valid and subsisting leasehold estate in
and the right to quiet enjoyment of the real properties leased by it for the
full term of the lease thereof. Each lease referred to in paragraph (a) above is
a legal, valid and binding agreement, enforceable in accordance with its terms,
of the Company and, to the Knowledge of Seller, of each other Person that is a
party thereto, and, there is no, and the Company has not received notice of any,
default (or any condition or event which, after notice or lapse of time or both,
would constitute a default)
7
thereunder. The Company does not owe any brokerage commissions with respect
to any such leased space.
(d) Seller has delivered to Purchaser prior to the execution
of this Agreement true and complete copies of all leases (including any
amendments and renewal letters).
(e) The improvements on the real property identified in
SECTION 2.15(A) OF THE DISCLOSURE SCHEDULE are in good operating condition and
in a state of good maintenance and repair, ordinary wear and tear excepted, are
adequate and suitable for the purposes for which they are presently being used
and, to the Knowledge of Seller, there are no condemnation or appropriation
proceedings pending or threatened against any of such real property or the
improvements thereon.
2.16 TANGIBLE PERSONAL PROPERTY; INVESTMENT ASSETS.
(a) The Company is in possession of and has good title to, or
has valid leasehold interests in or valid rights under Contract to use, all
tangible personal property used in or reasonably necessary for the conduct of
their business, including all tangible personal property reflected on the
balance sheet included in the Financial Statements and tangible personal
property acquired since the Financial Statement Date other than property
disposed of since such date in the ordinary course of business consistent with
past practice. All such tangible personal property is free and clear of all
Liens, other than Permitted Liens, and is in good working order and condition,
ordinary wear and tear excepted, and its use complies in all material respects
with all applicable Laws.
(b) SECTION 2.16(B) OF THE DISCLOSURE SCHEDULE describes each
Investment Asset owned by the Company on the date hereof. Except as disclosed in
SECTION 2.16(B) OF THE DISCLOSURE SCHEDULE, all such Investment Assets are owned
by the Company free and clear of all Liens other than Permitted Liens.
2.17 INTELLECTUAL PROPERTY.
(a) To the Knowledge of Seller, Company owns, or is licensed
or otherwise entitled to exercise pursuant to the terms of a license or other
similar agreement identified in SECTION 2.17(A) OF THE DISCLOSURE SCHEDULE, all
rights to all Intellectual Property used in the Business as currently conducted
or in connection with products to be used in the Business currently under
development without any conflict or infringement of the rights of others. The
source code created by Company and included within the Assets and Properties of
the Company constitutes a trade secret of Company, and as a whole, is not part
of the public knowledge or literature, and Company has taken reasonable action
to protect such source code as a trade secret and has not been disclosed to any
party or retained by any party other than the Company. In addition, Company has
taken reasonable and practicable steps (including, without limitation, entering
into confidentiality and non-disclosure agreements with all officers and
employees of and consultants to Seller) to maintain the secrecy and
confidentiality of and its proprietary rights in, Company's trade secrets.
Furthermore, all of the employees of Company that have participated in the
development or creation of any of the Company's Intellectual Property are listed
in SECTION 2.17(A) OF THE DISCLOSURE SCHEDULE, and each such employee has
already
8
entered, or will prior to the Closing enter, into agreements with Company
whereby each such employee assigns any and all of his or her rights in the
Intellectual Property created pursuant to his or her employment with the
Company.
(b) In addition to the foregoing, SECTION 2.17(B) OF THE
DISCLOSURE SCHEDULE lists (i) all patents and patent applications and all
registered copyrights, trade names, trademarks, service marks and other company,
product or service identifiers included in Company's Intellectual Property, and
specifies the jurisdictions in which each such Company's Intellectual Property
has been registered, including the respective registration numbers; (ii) other
than nonexclusive end user licenses entered into in the ordinary course of
business, all licenses, sublicenses and other agreements as to which Company is
a party and pursuant to which Company or any other person is authorized to use
any of Company's Intellectual Property; and (iii) all licenses relating to the
Business under which Company is or may be obligated to make royalty or other
payments. Copies of all licenses, sublicenses, and other agreements identified
pursuant to clauses (ii) and (iii) above have been delivered by Company to
Purchaser.
(c) To the Knowledge of Seller, Company is not in violation in
any material respect of any license, sublicense or agreement described in
SECTION 2.17 OF THE DISCLOSURE SCHEDULE. As a result of the execution and
delivery of this Agreement or the performance of Company's obligations hereunder
or thereunder, to Company's and Seller's knowledge, Company will not be in
violation in any material respect of any license, sublicense or agreement
described in SECTION 2.17 OF THE DISCLOSURE SCHEDULE, or lose or in any way
impair any rights pursuant thereto.
(d) To the Knowledge of Seller, Company is the owner or a
licensee of, with all necessary right, title and interest in and to (free and
clear of any liens, encumbrances or security interests) all Intellectual
Property being used or proposed to be used in the Business in connection with
products currently under development, and has rights to the use, sale, license
or disposal thereof in connection with the services or products in respect of
which such Intellectual Property are used.
(e) No claims with respect to the Intellectual Property used
in the Business have been asserted to Company, or, to Company's and Seller's
knowledge, are threatened by any person, and Seller knows of no claims (i) to
the effect that Company in the conduct of the Business infringes any copyright,
patent, trade secret, or other intellectual property right of any third party or
violates any license or agreement with any third party, (ii) contesting the
right of Company to use, sell, license or dispose of any Intellectual Property
used in the Business, or (iii) challenging the ownership, validity or
effectiveness of any of the Intellectual Property used in the Business.
(f) To the Knowledge of Seller, all trademarks, service marks,
and other company, product or service identifiers held by Company and used in
the Business are valid and subsisting.
(g) To the Knowledge of Seller, there has not been and there
is not now any unauthorized use, infringement or misappropriation of any of
Company's Intellectual Property by any third party, including, without
limitation, any service provider of Company; Company has
9
not been sued or, to Company's and Seller's knowledge, charged as a defendant
in any claim, suit, action or proceeding that involves a claim of
infringement of any patents, trademarks, service marks, copyrights or other
intellectual property rights. To Company's and Seller's knowledge, Company
does not have any infringement liability due to its conduct of the Business
with respect to any patent, trademark, service ▇▇▇▇, copyright or other
intellectual property right of another.
(h) To the Knowledge of Seller, none of Company's Intellectual
Property is subject to any outstanding order, judgment, decree, stipulation or
agreement restricting in any material manner the licensing thereof by Company.
Company has not entered into any agreement to indemnify any other person against
any charge of infringement of any Intellectual Property, except in the ordinary
course of business. Company has not entered into any agreement granting any
third party the right to bring infringement actions with respect to, or
otherwise to enforce rights with respect to, any of Company's Intellectual
Property. Company has the exclusive right to file, prosecute and maintain all
applications and registrations with respect to Company's Intellectual Property
developed or owned by Company.
(i) No person has a license to use or the right to acquire a
license to use any future version of any Company product used in or sold by the
Business or any such Company product that is under development, and no agreement
to which Company is a party will restrict Purchaser from charging customers for
any such new version. SECTION 2.17(I) OF THE DISCLOSURE SCHEDULE separately
identifies each exclusive arrangement between Company and any third party to
use, license, sublicense, sell or distribute any of Company's Intellectual
Property or any Company products sold or distributed by the Business.
2.18 CONTRACTS. SECTION 2.18 OF THE DISCLOSURE SCHEDULE contains a true
and complete list of each of Contracts or other arrangements (true and complete
copies or reasonably complete and accurate written descriptions of, together
with all amendments and supplements thereto and all waivers of any terms
thereof, have been made available to Purchaser prior to the execution of this
Agreement), to which the Company is a party or by which any of its Assets and
Properties are bound which (i) has a value in excess of $10,000.00 and (ii) is
not listed in any other section of the DISCLOSURE SCHEDULE.
2.19 LICENSES. SECTION 2.19 OF THE DISCLOSURE SCHEDULE contains a true
and complete list of all Licenses used in and material, individually or in the
aggregate, to the business or operations of the Company (and all pending
applications for any such Licenses), setting forth the grantor, the grantee, the
function and the expiration and renewal date of each. Prior to the execution of
this Agreement, Seller has delivered to Purchaser true and complete copies of
all such Licenses. Except as disclosed in SECTION 2.19 OF THE DISCLOSURE
SCHEDULE:
(i) the Company owns or validly holds all Licenses that are
material, individually or in the aggregate, to its business or operations;
(ii) each License listed in SECTION 2.19 OF THE DISCLOSURE
SCHEDULE is valid, binding and in full force and effect; and
10
(iii) neither the Company is, or has received any notice that
it is, in default (or with the giving of notice or lapse of time or both, would
be in default) under any such License.
2.20 INSURANCE. SECTION 2.20 OF THE DISCLOSURE SCHEDULE contains a true
and complete list of all liability, property, workers' compensation, directors'
and officers' liability and other insurance policies currently in effect that
insure the business, operations or employees of the Company or affect or relate
to the ownership, use or operation of any of the Assets and Properties of the
Company and that (i) have been issued to the Company or (ii) have been issued to
any Person (other than the Company) for the benefit of the Company. The
insurance coverage provided by any of the policies described in clause (i) above
will not terminate or lapse by reason of the transactions contemplated by this
Agreement. Each policy listed in SECTION 2.20 OF THE DISCLOSURE SCHEDULE is
valid and binding and in full force and effect, no premiums due thereunder have
not been paid and neither the Company, nor the Person to whom such policy has
been issued has received any notice of cancellation or termination in respect of
any such policy or is in default thereunder. The insurance policies listed in
SECTION 2.20 OF THE DISCLOSURE SCHEDULE are, in light of the respective
business, operations and Assets and Properties of the Company, in amounts and
have coverages that are reasonable and customary for Persons engaged in such
businesses and operations and having such Assets and Properties. Neither the
Company, nor the Person to whom such policy has been issued has received notice
that any insurer under any policy referred to in this Section is denying
liability with respect to a claim thereunder or defending under a reservation of
rights clause.
2.21 AFFILIATE TRANSACTIONS. Except as disclosed in SECTION
2.18(a)(VII) OR SECTION 2.21(a) OF THE DISCLOSURE SCHEDULE, (i) there are no
intercompany Liabilities between the Company, on the one hand, and Seller, any
present or former officer, director or Affiliate (other than the Company) of
Seller, on the other, (ii) neither Seller nor any such present or former
officer, director or Affiliate provides or causes to be provided any assets,
services or facilities to the Company, (iii) the Company does not provide or
cause to be provided any assets, services or facilities to Seller or any such
present or former officer, director or Affiliate and (iv) the Company does not
beneficially own, directly or indirectly, any Investment Assets issued by Seller
or any such present or former officer, director or Affiliate. Except as
disclosed in SECTION 2.21(b) OF THE DISCLOSURE SCHEDULE, each of the Liabilities
and transactions listed in SECTION 2.21(a) OF THE DISCLOSURE SCHEDULE was
incurred or engaged in, as the case may be, on an arm's-length basis. Except as
disclosed in SECTION 2.21(c) OF THE DISCLOSURE SCHEDULE, since the Financial
Statement Date, all settlements of intercompany Liabilities between the Company,
on the one hand, and Seller or any such present or former officer, director or
Affiliate, on the other, have been made, and all allocations of intercompany
expenses have been applied, in the ordinary course of business consistent with
past practice. Since November 30, 1999, the Company has not made any
distributions to Seller other than normal payroll or expense reimbursement.
2.22 EMPLOYEES; LABOR RELATIONS. There are no outstanding claims
pending or, to the Knowledge of Seller, asserted by or against the Company by
any employee, consultant or former employee or former consultant of the Company.
2.23 ENVIRONMENTAL MATTERS. To the Knowledge of Seller, the Company has
obtained all Licenses which are required under applicable Environmental Laws in
connection with the conduct of the business or operations of the Company. Each
of such Licenses is in full force and
11
effect and the Company is in compliance in all material respects with the
terms and conditions of all such Licenses and with any applicable
Environmental Law. In addition, to the Knowledge of Seller:
(a) No Order has been issued, no Environmental Claim has been
filed, no penalty has been assessed and no investigation or review is pending
or, to the Knowledge of Seller, threatened by any Governmental or Regulatory
Authority with respect to any alleged failure by the Company to have any License
required under applicable Environmental Laws in connection with the conduct of
the business or operations of the Company or with respect to any generation,
treatment, storage, recycling, transportation, discharge, disposal or Release of
any Hazardous Material generated by the Company or any Subsidiary, and to the
Knowledge of Seller, there are no facts or circumstances in existence which
could reasonably be expected to form the basis for any such Order, Environmental
Claim, penalty or investigation.
(b) The Company has not transported or arranged for the
transportation of any Hazardous Material to any location that is the subject of
enforcement actions by Governmental or Regulatory Authorities that may lead to
Environmental Claims against the Company.
(c) No Hazardous Material generated by the Company has been
recycled, treated, stored, disposed of or Released by the Company at any
location.
(d) No Liens have arisen under or pursuant to any
Environmental Law on any site or facility owned, operated or leased by the
Company, and no Governmental or Regulatory Authority action has been taken or,
to the Knowledge of Seller, is in process that could subject any such site or
facility to such Liens, and the Company would not be required to place any
notice or restriction relating to the presence of Hazardous Materials at any
site or facility owned by it in any deed to the real property on which such site
or facility is located.
(e) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or that are in the
possession of, the Company in relation to any site or facility now or previously
owned, operated or leased by the Company which have not been delivered to
Purchaser prior to the execution of this Agreement.
2.24 BANK AND BROKERAGE ACCOUNTS; INVESTMENT ASSETS. SECTION 2.24 OF
THE DISCLOSURE SCHEDULE sets forth (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which the Company has an account or safe deposit box or
maintains a banking, custodial, trading or other similar relationship; (b) a
true and complete list and description of each such account, box and
relationship, indicating in each case the account number and the names of the
respective officers, employees, agents or other similar representatives of the
Company having signatory power with respect thereto; and (c) a list of each
Investment Asset, the name of the record and beneficial owner thereof, the
location of the certificates, if any, therefor, the maturity date, if any, and
any stock or bond powers or other authority for transfer granted with respect
thereto.
2.25 NO POWERS OF ATTORNEY. Except as set forth in SECTION 2.25 OF THE
DISCLOSURE SCHEDULE, the Company does not have any powers of attorney or
comparable delegations of authority outstanding.
12
2.26 ACCOUNTS RECEIVABLE. Except as set forth in SECTION 2.26 OF THE
DISCLOSURE SCHEDULE, the accounts and notes receivable of the Company reflected
on the balance sheet included in the Financial Statements, and all accounts and
notes receivable arising subsequent to the Financial Statement Date, (i) arose
from bona fide sales transactions in the ordinary course of business and are
payable on ordinary trade terms, (ii) are legal, valid and binding obligations
of the respective debtors enforceable in accordance with their terms, (iii) are
not subject to any valid set-off or counterclaim, (iv) do not represent
obligations for goods sold on consignment, on approval or on a sale-or-return
basis or subject to any other repurchase or return arrangement, (v) are
collectible in the ordinary course of business consistent with past practice in
the aggregate recorded amounts thereof, net of any applicable reserve reflected
in the balance sheet included in the Financial Statements, and (vi) are not the
subject of any Actions or Proceedings brought by or on behalf of the Company.
SECTION 2.26 OF THE DISCLOSURE SCHEDULE sets forth a description of any security
arrangements and collateral securing the repayment or other satisfaction of
receivables of the Company. All steps necessary to render all such security
arrangements legal, valid, binding and enforceable, and to give and maintain for
the Company, as the case may be, a perfected security interest in the related
collateral, have been taken.
2.27 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Seller directly with
Purchaser without the intervention of any Person on behalf of Seller in such
manner as to give rise to any valid claim by any Person against Purchaser or the
Company for a finder's fee, brokerage commission or similar payment.
2.28 DISCLOSURE. To the Knowledge of Seller, all material facts
relating to the Business or Condition of the Company have been disclosed by the
Seller to the Purchaser in or in connection with this Agreement. No
representation or warranty contained in this Agreement, and no statement
contained in the Disclosure Schedule or in any certificate, list or other
writing furnished to Purchaser pursuant to any provision of this Agreement
(including without limitation the Financial Statements), contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading.
2.29 WARRANTIES AND INDEMNITIES. SECTION 2.29 OF THE DISCLOSURE
SCHEDULE sets forth a summary of all warranties and indemnities, express or
implied, relating to products sold or services rendered by the Company, and no
warranty or indemnity has been given by the Company that is not listed on
SECTION 2.29 OF THE DISCLOSURE SCHEDULE or which differs therefrom in any
respect. The Company is in compliance with all warranties described in SECTION
2.29 OF THE DISCLOSURE SCHEDULE. SECTION 2.29 OF THE DISCLOSURE SCHEDULE also
indicates all warranty and indemnity claims currently pending against the
Company.
2.30 CONFIDENTIALITY AGREEMENTS. All present or former employees,
consultants, officers and directors of the Company that have had access to the
Proprietary Assets of the Company are parties to a written agreement (a
"CONFIDENTIALITY AGREEMENT"), under which each such Person (i) is obligated to
disclose and transfer to the Company, without the receipt by such Person of any
additional value therefor (other than normal salary or fees for consulting
services), all inventions, developments and discoveries which, during the period
of employment with or performance of services for the Company, he or she makes
or conceives of either solely or
13
jointly with others, that relate to any subject matter with which his or her
work for the Company may be concerned, and (ii) is obligated to maintain the
confidentiality of proprietary information of the Company. To the Knowledge
of Seller, none of the Company's present or former employees, consultants,
officers or directors is obligated under any Contract (including licenses,
covenants or commitments of any nature), or subject to any judgment, decree
or Order of any Governmental or Regulatory Authority, that would conflict
with their obligation to promote the interests of the Company with regard to
their business or the proprietary assets. To the Knowledge of Seller, neither
the execution nor the delivery of this Agreement, nor the carrying on of the
Company's business by its present or former employees and consultants, will
conflict with or result in a breach of the terms, conditions or provisions
of, or constitute a default under, any contract, covenant or instrument under
which any of such Persons are now obligated. It is currently not necessary
nor will it be necessary for the Company to utilize any inventions of any of
such Persons (or Persons the Company currently intends to hire) made or owned
prior to their employment by or affiliation with the Company, nor is it or
will it be necessary to utilize any other assets or rights of any such
persons or entities (or Persons the Company currently intends to hire) made
or owned prior to their employment with or engagement by the Company, in
violation of any registered patents, trade names, trademarks or copyrights or
any other limitations or restrictions to which any such persons or entity is
a party or to which any of such assets or rights may be subject. To the
Knowledge of Seller, none of the Company's present or former employees,
consultants, officers, directors or shareholders that has had knowledge or
access to information relating to the proprietary assets has taken, removed
or made use of any Proprietary Assets, or any other tangible item from his or
her previous employer relating to the proprietary assets by such previous
employer which has resulted in the Company's access to or use of such
proprietary items included in the Proprietary Assets, and the Company will
not gain access to or make use of any such proprietary items in their
business.
2.31 PRODUCTS. Each of the products and services produced, sold or
provided by the Company is, and at all times has been, in compliance in all
material respects with all applicable Laws and, to the Knowledge of the Seller,
at all relevant times has been fit for the ordinary purposes for which it is
intended to be used and conforms in all material respects to any promises or
affirmations of fact made in connection with the sale of such product or
service.
2.32 PRODUCT LIABILITY. There are no claims, actions, suits, inquiries,
proceedings or investigations pending by or against the Company, or threatened
by or against relating to the Company's products and containing allegations that
such products are defective or were improperly designed or manufactured or
improperly labeled or otherwise improperly described for use.
2.33 YEAR 2000 COMPLIANCE. Seller represents and warrants that Seller
owned and controlled business systems ("SELLER'S SYSTEMS") that are part of the
Business will not have a material interruption of operations due to a Year 2000
problem provided items not owned and controlled by Seller properly exchange date
data with the Seller's Systems. Such warranty shall remain in place up to and
including one hundred eighty (180) days following January 1, 2000.
2.34 SELLER'S INVESTMENT REPRESENTATIONS. The Seller understands that
the sale of the QAD Stock has not been registered under the Securities Act of
1933, as amended (the "Securities Act") or qualified under the California
Corporations Code (the "Code") in reliance upon
14
exemptions therefrom the nonpublic offerings. The Seller understands that the
QAD Stock must be held indefinitely unless the sale thereof is subsequently
registered or qualified under the Act and the Code and applicable state
securities laws or exemptions from such registration or qualification are
available. The QAD Stock is being purchased solely for the Seller's own
account for investment and not for the account of any other person and not
for distribution, assignment or resale to others or a view to distribution to
others and no other person has a direct or indirect beneficial interest in
the QAD Stock, and the certificates representing the QAD Stock will bear
appropriate restrictive legends.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
3.1 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware. Purchaser
has full corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby.
3.2 AUTHORITY. The execution and delivery by Purchaser of this
Agreement, and the performance by Purchaser of its obligations hereunder, have
been duly and validly authorized by the Board of Directors of Purchaser, no
other corporate action on the part of Purchaser or its stockholders being
necessary. This Agreement has been duly and validly executed and delivered by
Purchaser and constitutes a legal, valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms.
3.3 NO CONFLICTS. The execution and delivery by Purchaser of this
Agreement and the performance by the Purchaser of its obligations under this
Agreement and the consummation of the transactions contemplated hereby will not
conflict with or result in a violation or breach of any of the terms, conditions
or provisions of the certificate of incorporation or by-laws (or other
comparable corporate charter document) of Purchaser.
3.4 GOVERNMENTAL APPROVALS AND FILINGS. Except for routine filings with
the Securities and Exchange Commission (the "SEC") that may be required pursuant
to the Securities Exchange Act of 1934, as amended, no consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of Purchaser is required in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
3.5 QAD STOCK. The QAD Stock will be duly authorized, issued and
outstanding, and fully paid and non-assessable.
3.6 REPORTS; FINANCIAL STATEMENTS. Each registration statement, report,
proxy statement or information statement prepared by Purchaser since January 31,
1999, including Purchaser's Annual Report on Form 10-K for the years ended
January 31, 1999 and Purchaser's Quarterly Reports on Form 10-Q for the quarters
ended April 30, 1999 and July 31, 1999 in the form (including exhibits, annexes
and any amendments thereto) filed with the SEC (collectively,
15
including any such reports filed subsequent to the date of this Agreement,
"Purchaser's Reports") complied as to form with all applicable requirements
under the Securities Act, the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations thereunder and did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not
misleading. Each of the consolidated balance sheets included in or
incorporated by reference into Purchaser's Reports (including the related
notes and schedules) fairly presents the consolidated financial position of
Purchaser and its Subsidiaries as of its date and each of the consolidated
statements of income, shareholders' investment and cash flows included in or
incorporated by reference into Purchaser's Reports (including any related
notes and schedules) fairly presents the consolidated results of operations,
statement of shareholders' investment and cash flows, as the case may be, of
Purchaser and its Subsidiaries for the periods set forth therein (subject, in
the case of unaudited statements, to the absence of notes (to the extent
permitted by the rules applicable to Form 10-Q) and to normal year-end audit
adjustments that will not be material in amount or effect), in each case in
accordance with GAAP consistently applied during the periods involved, except
as may be noted therein.
3.7 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Purchaser's
Reports filed prior to the date of this Agreement or in any press releases made
by Purchaser, since January 31, 1999, there has not been: (i) any material
change in the financial condition, liabilities and assets (taken together),
business or results of operations of Purchaser and its Subsidiaries; (ii) any
material damage, destruction or other casualty loss with respect to any asset or
property owned, leased or otherwise used by Purchaser or any of its
Subsidiaries, whether or not covered by insurance; or (iii) any change by
Purchaser in accounting principles, practices or methods, except as required by
GAAP.
ARTICLE IV
COVENANTS OF SELLER, THE COMPANY AND PURCHASER
The Seller and the Company covenant and agree with the Purchaser that,
at all times from and after the date hereof until the Closing, they will comply
with the following covenants:
4.1 REGULATORY AND OTHER APPROVALS. The Seller and the Company will as
promptly as practicable (a) take all commercially reasonable steps necessary or
desirable to obtain all consents, approvals or actions of, make all filings with
and give all notices to Governmental or Regulatory Authorities or any other
Person required of the Seller, the Company to consummate the transactions
contemplated hereby, including without limitation those described in SECTIONS
2.6 AND 2.7 OF THE DISCLOSURE SCHEDULE, (b) provide such other information and
communications to such Governmental or Regulatory Authorities or other Persons
as the Purchaser or such Governmental or Regulatory Authorities or other Persons
may reasonably request in connection therewith and (c) cooperate with Purchaser
in connection with the performance of its obligations under SECTIONS 6.1(B) AND
(C). The Seller and the Company will provide prompt notification to the
Purchaser when any such consent, approval, action, filing or notice referred to
in clause (a) above is obtained, taken, made or given, as applicable, and will
advise the Purchaser of any communications (and, unless precluded by Law,
provide copies of any such communications that
16
are in writing) with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement.
4.2 INVESTIGATION BY PURCHASER. The Seller and the Company (a) provide
the Purchaser and its officers, directors, employees, agents, counsel,
accountants, financial advisors, consultants and other representatives (together
"REPRESENTATIVES") with full access, upon reasonable prior notice and during
normal business hours, to all officers, employees, agents and accountants of the
Company and its Assets and Properties and Books and Records, and (b) furnish the
Purchaser and such other Persons with all such information and data (including
without limitation copies of Contracts, Benefit Plans and other Books and
Records) concerning the business and operations of the Company as the Purchaser
or any of such other Persons reasonably may request in connection with such
investigation.
4.3 NO SOLICITATIONS. The Seller and the Company will not take, nor
will they permit the Company or any Affiliate of Seller (or authorize or permit
any investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of the Seller, the Company or any such
Affiliate) to take, directly or indirectly, any action to solicit, encourage,
receive, negotiate, assist or otherwise facilitate (including by furnishing
confidential information with respect to the Company or permitting access to the
Assets and Properties and Books and Records of the Company ) any offer or
inquiry from any Person concerning an Acquisition Proposal. If the Seller, the
Company or any such Affiliate (or any such Person acting for or on their behalf)
receives from any Person any offer, inquiry or informational request referred to
above, the Seller and the Company will promptly advise such Person, by written
notice, of the terms of this SECTION 4.3 and will promptly, orally and in
writing, advise the Purchaser of such offer, inquiry or request and deliver a
copy of such notice to the Purchaser.
4.4 CONDUCT OF BUSINESS. The Seller and the Company will cause the
Company to conduct business only in the ordinary course consistent with past
practice. Without limiting the generality of the foregoing, Seller and the
Company will:
(a) cause the Company to use commercially reasonable efforts
to (i) preserve intact the present business organization and reputation of the
Company, (ii) keep available (subject to dismissals and retirements in the
ordinary course of business consistent with past practice) the services of the
present officers, employees and consultants of the Company, (iii) maintain the
Assets and Properties of the Company in good working order and condition,
ordinary wear and tear excepted, (iv) maintain the good will of customers,
suppliers, lenders and other Persons to whom the Company sells goods or provides
services or with whom the Company otherwise has significant business
relationships and (v) continue all current sales, marketing and promotional
activities relating to the business and operations of the Company;
(b) except to the extent required by applicable Law, (i) cause
the Books and Records to be maintained in the usual, regular and ordinary
manner, (ii) not permit any material change in (A) any pricing, investment,
accounting, financial reporting, inventory, credit, allowance or Tax practice or
policy of the Company, or (B) any method of calculating any bad debt,
contingency or other reserve of the Company for accounting, financial reporting
or Tax purposes and (iii) not permit any change in the fiscal year of the
Company;
17
(c) (i) use, and will cause the Company to use, commercially
reasonable efforts to maintain in full force and effect until the Closing
substantially the same levels of coverage as the insurance afforded under the
Contracts listed in SECTION 2.18 OF THE DISCLOSURE SCHEDULE, (ii) to the extent
requested by the Purchaser prior to the Closing Date, use all commercially
reasonable efforts to cause such insurance coverage held by any Person (other
than the Company) for the benefit of the Company to continue to be provided at
the expense of the Company for at least ninety (90) days after the Closing on
substantially the same terms and conditions as provided on the date of this
Agreement and (iii) cause any and all benefits under such Contracts paid or
payable (whether before or after the date of this Agreement) with respect to the
business, operations, employees or Assets and Properties of the Company to be
paid to the Company; and
(d) cause the Company to comply, in all material respects,
with all Laws and Orders applicable to the business and operations of the
Company, and promptly following receipt thereof to give the Purchaser copies of
any notice received from any Governmental or Regulatory Authority or other
Person alleging any violation of any such Law or Order.
4.5 FINANCIAL STATEMENTS AND REPORTS; FILINGS.
(a) As promptly as practicable after the date hereof and
before the Closing Date, the Seller will deliver to the Purchaser true and
complete copies of such financial statements, reports and analyses as may be
prepared or received by Seller or the Company relating to the business or
operations of the Company or as the Purchaser may otherwise reasonably request.
(b) As promptly as practicable, the Seller will deliver copies
of all License applications and other filings made by the Company after the date
hereof and before the Closing Date with any Governmental or Regulatory Authority
(other than routine, recurring filings made in the ordinary course of business
consistent with past practice).
4.6 CERTAIN RESTRICTIONS. Except as contemplated by this Agreement, the
Seller will cause the Company to refrain from:
(a) amending its articles of incorporation or by-laws (or
other comparable corporate charter documents) or taking any action with respect
to any such amendment or any recapitalization, reorganization, liquidation or
dissolution of any such corporation;
(b) authorizing, issuing (except pursuant to the exercise of
outstanding options to purchase Common Stock of the Company), selling or
otherwise disposing of any shares of capital stock of or any Option with respect
to the Company, or modifying or amending any right of any holder of outstanding
shares of capital stock of or Option with respect to the Company;
(c) declaring, setting aside or paying any dividend or other
distribution in respect of the capital stock of the Company, or directly or
indirectly redeeming, purchasing or otherwise acquiring any capital stock of or
any Option with respect to the Company;
(d) acquiring or disposing of, or incurring any Lien (other
than a Permitted Lien) on, any Assets and Properties;
18
(e) (i) entering into, amending, modifying, terminating
(partially or completely), granting any waiver under or giving any consent with
respect to (A) any Contract that would, if in existence on the date of this
Agreement, be required to be disclosed in the Disclosure Schedule pursuant to
SECTION 2.18 or (B) any material License or (ii) granting any irrevocable powers
of attorney;
(f) violating, breaching or defaulting under in any material
respect, or taking or failing to take any action that (with or without notice or
lapse of time or both) would constitute a material violation or breach of, or
default under, any term or provision of any License held or used by the Company
or any Contract to which the Company is a party or by which any of its Assets
and Properties is bound;
(g) (i) incurring Indebtedness in an aggregate principal
amount exceeding $10,000 (net of any amounts of Indebtedness discharged during
such period), or (ii) voluntarily purchasing, canceling, prepaying or otherwise
providing for a complete or partial discharge in advance of a scheduled payment
date with respect to, or waiving any right of the Company under, any
Indebtedness of or owing to the Company;
(h) engaging with any Person in any merger or other business
combination;
(i) making capital expenditures or commitments for additions
to property, plant or equipment constituting capital assets in an aggregate
amount exceeding $10,000;
(j) making any change in the lines of business in which they
participate or are engaged;
(k) writing off or writing down any of their Assets and
Properties;
(l) except as set forth in SECTION 4.6(L) OF THE DISCLOSURE
SCHEDULe, modifying any compensation terms or paying any bonuses to a current or
former employee, director, consultant or Affiliate; or
(m) entering into any Contract to do or engage in any of the
foregoing.
4.7 AFFILIATE TRANSACTIONS. Except as set forth in SECTION 4.7 OF THE
DISCLOSURE SCHEDULE, immediately prior to the Closing, all Indebtedness and
other amounts owing under Contracts between the Seller, the Company, any
officer, director or Affiliate (other than the Company) of Seller, on the one
hand, and the Company, on the other, will be paid in full, and Seller will
terminate and will cause any such officer, director or Affiliate to terminate
each Contract with the Company. Prior to the Closing, the Company will not enter
into any Contract or amend or modify any existing Contract, and will not engage
in any transaction outside the ordinary course of business consistent with past
practice or not on an arm's-length basis (other than pursuant to Contracts
disclosed pursuant to SECTION 2.21 OF THE DISCLOSURE SCHEDULE), with Seller, or
any such officer, director or Affiliate.
19
ARTICLE V
COVENANT OF PURCHASER
5.1 FORM S-3. No later than 30 days after the Closing Date, Purchaser
shall file with the SEC, at Purchaser's expense a Registration Statement on Form
S-3 (the "Registration Statement") or other appropriate form under the
Securities Act to register the QAD Stock. Purchaser shall use commercially
reasonable efforts to cause the Registration Statement to remain continuously
effective, including without limitation by timely making all required filings
with the SEC and supplementing the prospectus related to the QAD Stock as
necessary, until the earlier to occur of the following: (i) Seller has disposed
of all of the shares of QAD Stock; and (ii) all of the shares of QAD Stock are
can be sold within a given 30-day period pursuant to Rule 144 of the Securities
Act.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER AND SELLER
6.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser hereunder to purchase the Shares are subject to the fulfillment, at or
before the Closing, of each of the following conditions (all or any of which may
be waived in whole or in part by Purchaser in its sole discretion):
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by Seller in this Agreement (other than
those made as of a specified date earlier than the Closing Date) shall be true
and correct in all material respects on and as of the Closing Date as though
such representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall have been true and correct in all material respects on and as of such
earlier date.
(b) PERFORMANCE. Seller shall have performed and complied
with, in all material respects, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by Seller at or before the
Closing.
(c) SELLER'S CERTIFICATES. Seller shall have delivered to
Purchaser a certificate, dated the Closing Date and executed in the name and on
behalf of Seller, substantially in the form and to the effect of EXHIBIT D
hereto.
(d) ORDERS AND LAWS. There shall not be in effect on the
Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or which could reasonably be expected to otherwise result in a
material diminution of the benefits of the transactions contemplated by this
Agreement, and there shall not be pending or threatened on the Closing Date any
Action or Proceeding in, before or by any Governmental or Regulatory Authority
which could reasonably be expected to result in the issuance of any such Order
or the enactment, promulgation or deemed applicability to Purchaser, the
Company, or the transactions contemplated by this Agreement of any such Law.
20
(e) REGULATORY CONSENTS AND APPROVALS. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit the Seller to perform his obligations under this
Agreement and to consummate the transactions contemplated hereby and thereby (a)
shall have been duly obtained, made or given, (b) shall be in form and substance
reasonably satisfactory to Purchaser, (c) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived and (d)
shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any Governmental or Regulatory Authority necessary
for the consummation of the transactions contemplated by this Agreement, shall
have occurred.
(f) THIRD PARTY CONSENTS. All consents (or in lieu thereof
waivers) to the performance by Purchaser or Seller of their obligations under
this Agreement or to the consummation of the transactions contemplated hereby
and thereby as are required under any Contract to which Purchaser, Seller or the
Company is a party or by which any of their respective Assets and Properties are
bound (a) shall have been obtained, (b) shall be in form and substance
reasonably satisfactory to Purchaser, (c) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived and (d)
shall be in full force and effect, except where the failure to obtain any such
consent (or in lieu thereof waiver) could not reasonably be expected,
individually or in the aggregate with other such failures, to materially
adversely affect Purchaser or the Business or Condition of the Company or
otherwise result in a material diminution of the benefits of the transactions
contemplated by this Agreement.
(g) DUE DILIGENCE. Purchaser's due diligence investigation of
the Company shall not have disclosed any matter or matters which, individually
or in the aggregate, could reasonably be expected to materially adversely affect
the Company or the Business or Conditions of the Company.
(h) RESIGNATIONS OF DIRECTORS AND OFFICERS. Such members of
the boards of directors and such officers of the Company as are designated in a
written notice delivered prior to the Closing Date by Purchaser to Seller shall
have tendered, effective at the Closing, their resignations as such directors
and officers.
(i) CONSULTING AGREEMENT. Seller will execute a Consulting
Agreement in the form attached hereto as EXHIBIT E (the "CONSULTING AGREEMENT").
(j) RELEASE AGREEMENT. Seller will deliver a Release
Agreement, in the form attached hereto as EXHIBIT F, releasing the Company and
the Purchaser from all claims and liabilities, except for this Agreement, the
Promissory Note, the QAD Stock, the Consulting Agreement and the Noncompetition
Agreement (as defined below).
(k) EMPLOYMENT AGREEMENTS. The employees listed in SECTION
6.1(K) OF THE DISCLOSURE SCHEDULE will have executed employment agreements in a
form satisfactory to the Purchaser, together with the cancellation of any
existing options to purchase shares of the Company.
(l) PROCEEDINGS. All proceedings to be taken on the part of
Seller in connection with the transactions contemplated by this Agreement and
all documents incident
21
thereto shall be reasonably satisfactory in form and substance to Purchaser,
and Purchaser shall have received copies of all such documents and other
evidences as Purchaser may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
(m) SOURCE CODE. The Seller shall have delivered the Source
Code for Enterprise Engines to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
(n) PURCHASER'S LENDER AND BOARD OF DIRECTORS APPROVAL. The
Purchaser's lender and the Purchaser's Board of Directors has consented to or
approved this Agreement.
(o) NONCOMPETITION AGREEMENT. The Seller shall have executed
the Noncompetition Agreement in the form attached hereto as EXHIBIT G (the
"Noncompetition Agreement").
(p) GEMSTONE AGREEMENT. The Value-Added Remarketer Agreement
between the Company and Gemstone Systems, Inc. (the "GEMSTONE AGREEMENT") shall
remain in effect and shall be unaffected by the transactions contemplated herein
such that the Purchaser has determined that the Company may receive the full
benefit of the Gemstone Agreement and that it is valid and in full force and
effect.
6.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller
hereunder to sell the Shares are subject to the fulfillment, at or before the
Closing, of each of the following conditions (all or any of which may be waived
in whole or in part by Seller in its sole discretion):
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by Purchaser in this Agreement (other than
those made as of a specified date earlier than the Closing Date) shall be true
and correct in all material respects on and as of the Closing Date as though
such representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall have been true and correct in all material respects on and as of such
earlier date.
(b) PERFORMANCE. Purchaser shall have performed and complied
with, in all material respects, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by Seller at or before the
Closing.
(c) PURCHASER'S CERTIFICATE. Purchaser shall have delivered to
Seller a certificate, dated the Closing Date and executed in the name and on
behalf of Seller, substantially in the form and to the effect of EXHIBIT H
hereto.
(d) ORDERS AND LAWS. There shall not be in effect on the
Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or which could reasonably be expected to otherwise result in a
material diminution of the benefits of the transactions contemplated by this
Agreement, and there shall not be pending or threatened on the Closing Date any
Action or Proceeding in, before or by any Governmental or Regulatory Authority
which could reasonably be expected to result in the issuance of any such Order
or the enactment,
22
promulgation or deemed applicability to Purchaser, the Company, or the
transactions contemplated by this Agreement of any such Law.
(e) REGULATORY CONSENTS AND APPROVALS. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit the Purchaser to perform its obligations under
this Agreement and to consummate the transactions contemplated hereby and
thereby (a) shall have been duly obtained, made or given, (b) shall be in form
and substance reasonably satisfactory to Seller, (c) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived and (d)
shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any Governmental or Regulatory Authority necessary
for the consummation of the transactions contemplated by this Agreement, shall
have occurred.
(f) THIRD PARTY CONSENTS. All consents (or in lieu thereof
waivers) to the performance by Seller or Purchaser of their obligations under
this Agreement or to the consummation of the transactions contemplated hereby
and thereby as are required under any Contract to which Seller, Purchaser or the
Company is a party or by which any of their respective Assets and Properties are
bound (a) shall have been obtained, (b) shall be in form and substance
reasonably satisfactory to Seller, (c) shall not be subject to the satisfaction
of any condition that has not been satisfied or waived and (d) shall be in full
force and effect, except where the failure to obtain any such consent (or in
lieu thereof waiver) could not reasonably be expected, individually or in the
aggregate with other such failures, to materially adversely affect Seller or the
Business or Condition of the Company or otherwise result in a material
diminution of the benefits of the transactions contemplated by this Agreement.
(g) CONSULTING AGREEMENT. Purchaser shall have executed the
Consulting Agreement.
(h) PROCEEDINGS. All proceedings to be taken on the part of
Purchaser in connection with the transactions contemplated by this Agreement and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Seller, and Seller shall have received copies of all such documents
and other evidences as Seller may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
(i) THE COMPANY'S BOARD OF DIRECTORS APPROVAL. The Company's
Board of Directors shall have consented to or approved this Agreement.
(j) NONCOMPETITION AGREEMENT. Purchaser shall have executed
the Noncompetition Agreement.
(k) TERMINATION OF EMPLOYMENT AGREEMENT. The Company and
Seller shall have terminated the Employment Agreement, dated March 26, 1997,
between the Company and Seller.
23
ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
The representations, warranties, covenants and agreements of Seller and
Purchaser contained in this Agreement will survive the Closing for eighteen (18)
months; PROVIDED that an Indemnified Party shall be entitled to indemnification
in accordance with the terms of this Agreement provided that a Claim Notice or
Indemnity Notice (as applicable) is timely given under ARTICLE VIII on or prior
to May 15, 2001.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION.
(a) Subject to paragraph (c) of this Section and the other
Sections of this ARTICLE VIII, the Seller shall indemnify the Purchaser
Indemnified Parties in respect of, and hold each of them harmless from and
against, any and all Losses suffered, incurred or sustained by any of them or to
which any of them becomes subject, resulting from, arising out of or relating to
any breach of representation or warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of Seller, contained in this
Agreement.
(b) Subject to the other Sections of this ARTICLE VIII,
Purchaser shall indemnify the Seller Indemnified Parties in respect of, and hold
each of them harmless from and against, any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any breach of representation or warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Purchaser contained in this Agreement.
(c) No amounts of indemnity shall be payable in the case of a
claim by an Indemnified Party, as the case may be, under SECTION 8.2(A) unless
and until the Seller or Purchaser Indemnified Parties, as the case may be, have
suffered, incurred, sustained or become subject to Losses referred to in such
Section in excess of $10,000 in the aggregate; in which event the Indemnified
Parties shall be entitled to claim indemnity for the full amount of such Losses;
provided in no event shall the aggregate liability under this Article VIII of
Purchaser or Seller to indemnify, defend or hold harmless all Indemnified
Parties exceed Five Hundred Thousand Dollars ($500,000.00).
(d) The indemnification provisions of this Article VIII shall
constitute the sole and exclusive remedy of each party hereto with respect to
the breach or falsity of any representation or warranty, or the failure to
perform or comply with any covenant or agreement to be performed on or prior to
the Closing Date, made by another party hereto in this Agreement or in any
certificate delivered pursuant to this Agreement.
24
8.2 METHOD OF ASSERTING CLAIMS. All claims for indemnification by any
Indemnified Party under SECTION 8.2 will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which an
Indemnified Party might seek indemnity under SECTION 8.2 is asserted against or
sought to be collected from such Indemnified Party by a Person other than Seller
or any Affiliate of Seller or of Purchaser (a "THIRD PARTY CLAIM"), the
Indemnified Party shall deliver a Claim Notice with reasonable promptness to the
Indemnifying Party. If the Indemnified Party fails to provide the Claim Notice
with reasonable promptness after the Indemnified Party receives notice of such
Third Party Claim, the Indemnifying Party will not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been irreparably prejudiced by such
failure of the Indemnified Party. The Indemnifying Party will notify the
Indemnified Party as soon as practicable within the Dispute Period whether the
Indemnifying Party disputes its liability to the Indemnified Party under SECTION
8.2 and whether the Indemnifying Party desires, at its sole cost and expense, to
defend the Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the
Indemnified Party within the Dispute Period that the Indemnifying Party desires
to defend the Indemnified Party with respect to the Third Party Claim pursuant
to this SECTION 8.2(A), then the Indemnifying Party will have the right to
defend, with counsel reasonably satisfactory to the Indemnified Party, at the
sole cost and expense of the Indemnifying Party, such Third Party Claim by all
appropriate proceedings, which proceedings will be vigorously and diligently
prosecuted by the Indemnifying Party to a final conclusion or will be settled at
the discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party, which consent will not be unreasonably withheld, in the case
of any settlement that provides for any relief other than the payment of
monetary damages as to which the Indemnified Party will be indemnified in full).
The Indemnifying Party will have full control of such defense and proceedings,
including (except as provided in the immediately preceding sentence) any
settlement thereof; PROVIDED, HOWEVER, that the Indemnified Party may, at the
sole cost and expense of the Indemnified Party, at any time prior to the
Indemnifying Party's delivery of the notice referred to in the first sentence of
this clause (i), file any motion, answer or other pleadings or take any other
action that the Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests; and PROVIDED FURTHER, that if requested by
the Indemnifying Party, the Indemnified Party will, at the sole cost and expense
of the Indemnifying Party, provide reasonable cooperation to the Indemnifying
Party in contesting any Third Party Claim that the Indemnifying Party elects to
contest. The Indemnified Party may retain separate counsel to represent it in,
but not control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this clause (i), and the Indemnified Party
will bear its own costs and expenses with respect to such separate counsel,
except as provided in the preceding sentence and except that the Indemnifying
Party will pay the costs and expenses of such separate counsel if (x) in the
Indemnified Party's good faith judgment, it is advisable, based on advice of
counsel, for the Indemnified Party to be represented by separate counsel because
a conflict or potential conflict exists between the Indemnifying Party and the
Indemnified Party which makes representation of both parties inappropriate under
applicable standards of professional conduct or (y) the named parties to such
Third Party Claim include both the Indemnifying Party and the Indemnified Party
and the Indemnified Party determines in good faith, based on advice of counsel,
that defenses are available to it that are unavailable to the
25
Indemnifying Party. Notwithstanding the foregoing, the Indemnified Party may
retain or take over the control of the defense or settlement of any Third
Party Claim the defense of which the Indemnifying Party has elected to
control if the Indemnified Party irrevocably waives its right to indemnity
under SECTION 8.1 with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the Indemnifying Party desires
to defend the Third Party Claim pursuant to SECTION 8.2(A), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, then the Indemnified Party will have
the right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings will be
prosecuted by the Indemnified Party in good faith or will be settled at the
discretion of the Indemnified Party (with the consent of the Indemnifying Party,
which consent will not be unreasonably withheld). The Indemnified Party will
have full control of such defense and proceedings, including (except as provided
in the immediately preceding sentence) any settlement thereof; PROVIDED,
HOWEVER, that if requested by the Indemnified Party, the Indemnifying Party
will, at the sole cost and expense of the Indemnifying Party, provide reasonable
cooperation to the Indemnified Party and its counsel in contesting any Third
Party Claim which the Indemnified Party is contesting. Notwithstanding the
foregoing provisions of this clause (ii), if the Indemnifying Party has notified
the Indemnified Party within the Dispute Period that the Indemnifying Party
disputes its liability hereunder to the Indemnified Party with respect to such
Third Party Claim and if such dispute is resolved in favor of the Indemnifying
Party in the manner provided in clause (iii) below, the Indemnifying Party will
not be required to bear the costs and expenses of the Indemnified Party's
defense pursuant to this clause (ii) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified
Party will reimburse the Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in connection with such litigation.
(iii) If the Indemnifying Party notifies the
Indemnified Party that it does not dispute its liability to the Indemnified
Party with respect to the Third Party Claim under SECTION 8.1 or fails to notify
the Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes its liability to the Indemnified Party with respect to such Third Party
Claim, the Loss arising from such Third Party Claim will be conclusively deemed
a liability of the Indemnifying Party under SECTION 8.1 and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party on demand
following its final determination. If the Indemnifying Party has timely disputed
its liability with respect to such claim, the Indemnifying Party and the
Indemnified Party will proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through negotiations within the Resolution Period,
such dispute shall be resolved by arbitration in accordance with SECTION 11.11.
(b) In the event any Indemnified Party should have a claim
under SECTION 8.1 against any Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that an Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified
26
Party within the Dispute Period whether the Indemnifying Party disputes the
claim described in such Indemnity Notice, the Loss arising from the claim
specified in such Indemnity Notice will be conclusively deemed a liability of
the Indemnifying Party under SECTION 8.1 and the Indemnifying Party shall pay
the amount of such Loss to the Indemnified Party on demand following its
final determination. If the Indemnifying Party has timely disputed its
liability with respect to such claim, the Indemnifying Party and the
Indemnified Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by arbitration in accordance with
SECTION 11.11.
(c) The amount which an Indemnifying Party is required to pay
to, for, or on behalf of any other party pursuant to this Article VIII shall be
reduced (including, without limitation, retroactively) by any insurance proceeds
actually recovered (after making a good faith effort for such recovery) by or on
behalf of such Indemnified Party and other amounts paid by any other person in
reduction of the related indemnifiable loss (the "Indemnifiable Loss"). Amounts
required to be paid, as so reduced, are hereafter sometimes called an "Indemnity
Payment." If an Indemnified Party shall have received or shall have paid on its
behalf an Indemnity Payment in respect of an Indemnifiable Loss and shall
subsequently receive directly or indirectly insurance proceeds or other amounts
in respect of such Indemnifiable Loss, then such Indemnified Party shall
promptly pay to the Indemnifying Party a sum equal to the amount of such
insurance proceeds or other amounts provided the same does not exceed an amount
equal to the payment actually made by the Indemnifying Party.
ARTICLE IX
TERMINATION
9.1 TERMINATION. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written
agreement of Seller and Purchaser;
(b) at any time before the Closing, by Seller or Purchaser, in
the event (i) of a material breach hereof by the non-terminating party if such
non-terminating party fails to cure such breach within five (5) Business Days
following notification thereof by the terminating party or (ii) upon
notification of the non-terminating party by the terminating party that the
satisfaction of any condition to the terminating party's obligations under this
Agreement becomes impossible or impracticable with the use of commercially
reasonable efforts if the failure of such condition to be satisfied is not
caused by a breach hereof by the terminating party; or
(c) at any time after December 15, 1999 by Seller or Purchaser
upon notification of the non-terminating party by the terminating party if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of this Agreement by the terminating party.
27
9.2 EFFECT OF TERMINATION. If this Agreement is validly terminated
pursuant to SECTION 9.1, this Agreement will forthwith become null and void, and
there will be no liability or obligation on the part of Seller, the Company or
Purchaser (or any of their respective officers, directors, employees, agents or
other representatives or Affiliates), except as provided in the next succeeding
sentence and except that the provisions with respect to expenses in SECTION 11.3
and confidentiality in SECTION 11.5 will continue to apply following any such
termination. Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to SECTION 9.1(B) or (C),
Seller will remain liable to Purchaser for any breach of this Agreement by
Seller existing at the time of such termination, and Purchaser will remain
liable to Seller for any breach of this Agreement by Purchaser existing at the
time of such termination, and Seller or Purchaser may seek such remedies,
including damages and fees of attorneys, against the other with respect to any
such breach as are provided in this Agreement or as are otherwise available at
Law or in equity.
ARTICLE X
DEFINITIONS
10.1 DEFINITIONS.
(a) DEFINED TERMS. As used in this Agreement, the following
defined terms have the meanings indicated below:
"ACTIONS OR PROCEEDINGS" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"AFFILIATE" means any Person that directly, or indirectly
through one of more intermediaries, controls or is controlled by or is under
common control with the Person specified. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract or
otherwise and, in any event and without limitation of the previous sentence, any
Person owning ten percent (10%) or more of the voting securities of another
Person shall be deemed to control that Person.
"AGREEMENT" means this Stock Purchase Agreement and the
Exhibits, the Disclosure Schedule and the Schedules hereto and the certificates
delivered in accordance with ARTICLE VI, as the same shall be amended from time
to time.
"ASSETS AND PROPERTIES" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including without
limitation cash, cash equivalents, Investment Assets, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles, real
estate, equipment, inventory, goods and Intellectual Property.
"BOOKS AND RECORDS" means all files, documents, instruments,
papers, books and records relating to the Business or Condition of the Company,
including without limitation
28
financial statements, Tax Returns and related work papers and letters from
accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, Licenses, customer lists, computer files and programs, retrieval
programs, operating data and plans and environmental studies and plans.
"BUSINESS DAY" means a day other than Saturday, Sunday or any
day on which banks located in the State of California are authorized or
obligated to close.
"BUSINESS OR CONDITION OF THE COMPANY" means the business,
condition (financial or otherwise), results of operations, Assets and Properties
of the Company taken as a whole.
"CLAIM NOTICE" means written notification pursuant to SECTION
9.2(A) of a Third Party Claim as to which indemnity under SECTION 9.1 is sought
by an Indemnified Party, enclosing a copy of all papers served, if any, and
specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party's claim against the Indemnifying Party under SECTION 9.1,
together with the amount or, if not then reasonably determinable, the estimated
amount, determined in good faith, of the Loss arising from such Third Party
Claim.
"CLOSING" means the closing of the transactions contemplated
by SECTION 1.3.
"CLOSING DATE" means the earlier of (a) December 15, 1999, (b)
as soon as practicable after the last of the consents, approvals, actions,
filings, notices or waiting periods described in or related to the filings
described in ARTICLE VI has been obtained, made or given or has expired, as
applicable, or (c) such other date as Purchaser and Seller mutually agree upon
in writing.
"COMMON STOCK" means the common stock, no par value per share,
of the Company.
"COMPANY" has the meaning ascribed to it in the forepart of
this Agreement.
"COMPANY SHARES" has the meaning ascribed to it in the
forepart of this Agreement.
"CONTRACT" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral).
"DISCLOSURE SCHEDULE" means the record delivered to Purchaser
by Seller herewith and dated as of the date hereof, containing all lists,
descriptions, exceptions and other information and materials as are required to
be included therein by Seller pursuant to this Agreement.
"DISPUTE PERIOD" means the period ending thirty (30) days (or
such shorter period as required by law) following receipt by an Indemnifying
Party of either a Claim Notice or an Indemnity Notice.
"ENVIRONMENTAL CLAIM" means, with respect to any Person, any
written or oral notice, claim, demand or other communication (collectively, a
"CLAIM") by any other Person
29
alleging or asserting such Person's liability for investigatory costs,
cleanup costs, Governmental or Regulatory Authority response costs, damages
to natural resources or other property, personal injuries, fines or penalties
arising out of, based on or resulting from (a) the presence, or Release into
the environment, of any Hazardous Material at any location, whether or not
owned by such Person, or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law. The term
"Environmental Claim" shall include, without limitation, any claim by any
Governmental or Regulatory Authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and any claim by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive
relief resulting from the presence of Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the environment.
"ENVIRONMENTAL LAW" means any Law or Order relating to the
regulation or protection of human health, safety or the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air, soil, surface
water, ground water, wetlands, land or subsurface strata), or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
"FINANCIAL STATEMENTS" means the financial statements of the
Company delivered to Purchaser pursuant to SECTION 2.8.
"FINANCIAL STATEMENT DATE" means November 30, 1999.
"GAAP" means United States generally accepted accounting
principles, consistently applied throughout the specified period and in the
immediately prior comparable period as determined by the Purchaser's independent
auditors.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States or any domestic or foreign state, county,
city or other political subdivision.
"HAZARDOUS MATERIAL" means (A) any petroleum or petroleum
products, flammable explosives, radioactive materials, asbestos in any form that
is or could become friable, urea formaldehyde foam insulation and transformers
or other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls (PCBs); (B) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import under any Environmental Law; and
(C) any other chemical or other material or substance, exposure to which is now
or hereafter prohibited, limited or regulated by any Governmental or Regulatory
Authority under any Environmental Law.
"INDEBTEDNESS" of any Person means all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇), (▇▇) under capital leases and (v) in the nature
of guarantees of the obligations described in clauses (i) through (iv) above
of any other Person.
"INDEMNIFIED PARTY" means any Person claiming indemnification
under any provision of ARTICLE IX.
"INDEMNIFYING PARTY" means any Person against whom a claim for
indemnification is being asserted under any provision of ARTICLE IX.
"INDEMNITY NOTICE" means written notification pursuant to
SECTION 9.2(B) of a claim for indemnity under ARTICLE IX by an Indemnified
Party, specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably determinable, the estimated amount, determined
in good faith, of the Loss arising from such claim.
"INTELLECTUAL PROPERTY" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service ▇▇▇▇ rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, designs, methodologies, computer programs (including all
source codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.
"INVESTMENT ASSETS" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company
and issued by any Person other than the Company (other than trade receivables
generated in the ordinary course of business of the Company).
"KNOWLEDGE OF SELLER" or "KNOWN TO SELLER" means the knowledge
of the Seller; PROVIDED HOWEVER, that the parties expressly agree that any
intellectual property claims arising from, or related to, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and/or
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall be deemed to be within the knowledge of the Seller.
"LAWS" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"LIABILITIES" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"LICENSES" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
31
"LIENS" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"LOSS" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation interest, court
costs, fees of attorneys, accountants and other experts or other expenses of
litigation or other proceedings or of any claim, default or assessment).
"OPTION" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of such Person or
(ii) receive or exercise any benefits or rights similar to any rights enjoyed by
or accruing to the holder of shares of capital stock of such Person, including
any rights to participate in the equity or income of such Person or to
participate in or direct the election of any directors or officers of such
Person or the manner in which any shares of capital stock of such Person are
voted.
"ORDER" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"PERMITTED LIEN" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of Law
with respect to a Liability that is not yet due or delinquent and (iii) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other such Liens does not materially impair the value of the
property subject to such Lien or the use of such property in the conduct of the
business of the Company.
"PERSON" means any natural person, corporation, general
partnership, limited partnership, proprietorship, other business organization,
trust, union, association or Governmental or Regulatory Authority.
"PLAN" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral.
"PROPRIETARY ASSETS" means any Assets and Properties of the
Company of a proprietary nature, including, without limitation, know-how,
formulas, processes, ideas, inventions (whether or not patentable), schematics
and other technical, business, financial, customer and product development plans
related to the Company's products or services.
"PURCHASE PRICE" has the meaning ascribed to it in SECTION
1.2.
32
"PURCHASER" has the meaning ascribed to it in the forepart of
this Agreement.
"PURCHASER INDEMNIFIED PARTIES" means Purchaser and its
officers, directors, employees, agents and Affiliates.
"RELEASE" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, including, without limitation,
the movement of Hazardous Materials through ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata.
"RESOLUTION PERIOD" means the period ending thirty (30) days
following receipt by an Indemnified Party of a written notice from an
Indemnifying Party stating that it disputes all or any portion of a claim set
forth in a Claim Notice or an Indemnity Notice.
"SELLER" has the meaning ascribed to it in the forepart of
this Agreement.
"SELLER INDEMNIFIED PARTIES" means the Seller.
"SHARES" has the meaning ascribed to it in the forepart of
this Agreement.
"TAX OR TAXES" shall mean any federal, state, local, or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"TAX RETURN" means any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental or Regulatory Authority in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Laws
relating to any Tax.
"THIRD PARTY CLAIM" has the meaning ascribed to it in SECTION
9.2(A).
"YEAR 2000 COMPLIANT" has the meaning ascribed to it in
SECTION 2.33.
(b) CONSTRUCTION OF CERTAIN TERMS AND PHRASES. Unless the context of
this Agreement otherwise requires, (i) words of any gender include each other
gender; (ii) words using the singular or plural number also include the plural
or singular number, respectively; (iii) the terms "hereof," "herein," "hereby"
and derivative or similar words refer to this entire Agreement; (iv) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement; and (v) the phrases "ordinary course of business" and "ordinary
course of business consistent with past practice" refer to the business and
practice of the Company. Whenever this Agreement refers to a number of days,
such number shall refer to calendar days unless Business Days are specified. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP as interpreted by the Purchaser's independent
auditors.
33
ARTICLE XI
MISCELLANEOUS
11.1 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
IF TO PURCHASER, TO:
--------------------
QAD Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: General Counsel
WITH A COPY TO:
---------------
Nida & ▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
IF TO SELLER, TO:
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: none
WITH A COPY TO:
---------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
34
IF TO THE COMPANY, TO:
----------------------
Enterprise Engines, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
---------------
Heller, Ehrman, White & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
11.2 ENTIRE AGREEMENT. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter hereof and
thereof, including without limitation that certain letter of intent; between the
parties dated November 24, 1999, and contains the sole and entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
11.3 EXPENSES. Except as otherwise expressly provided in this Agreement
(including without limitation as provided in SECTION 10.2), whether or not the
transactions contemplated hereby are consummated, the Purchaser will pay its own
costs and expenses, and the Company shall pay the actual documented costs and
expenses, including any broker's, finder's or investment banking fees and
counsel fees not to exceed $100,000, incurred in connection with the negotiation
and closing of this Agreement and the transactions contemplated hereby and
thereby.
11.4 PUBLIC ANNOUNCEMENTS. At all times at or before the Closing,
Seller and Purchaser will not issue or make any reports, statements or releases
to the public or generally to the customers, suppliers or other Persons to whom
the Company sells goods or provides services or with whom the Company otherwise
has significant business relationships with respect to this Agreement or the
transactions contemplated hereby without the consent of the other, which consent
shall not be unreasonably withheld. If either party is unable to obtain the
approval of its public report, statement or release from the other party and
such report, statement or release is, in
35
the opinion of legal counsel to such party, required by Law in order to
discharge such party's disclosure obligations, then such party may make or
issue the legally required report, statement or release and promptly furnish
the other party with a copy thereof. Seller and the Purchaser will also
obtain the other parties prior approval of any press release to be issued
immediately following the Closing announcing the consummation of the
transactions contemplated by this Agreement.
11.5 CONFIDENTIALITY. Each party hereto will hold, and will use its
best efforts to cause its Affiliates, and their respective Representatives to
hold, in strict confidence from any Person (other than any such Affiliate or
Representative), unless (i) compelled to disclose by judicial or administrative
process (including without limitation in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental or Regulatory Authorities) or by other requirements of Law or (ii)
disclosed in an Action or Proceeding brought by a party hereto in pursuit of its
rights or in the exercise of its remedies hereunder, all documents and
information concerning the other party or any of its Affiliates furnished to it
by the other party or such other party's Representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (a) previously known by
the party receiving such documents or information, (b) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party or (c) later acquired by the
receiving party from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to keep such
documents and information confidential; PROVIDED that following the Closing the
foregoing restrictions will not apply to Purchaser's use of documents and
information concerning the Company furnished by Seller hereunder. In the event
the transactions contemplated hereby are not consummated, upon the request of
the other party, each party hereto will, and will cause its Affiliates and their
respective Representatives to, promptly redeliver or cause to be redelivered all
copies of documents and information furnished by the other party in connection
with this Agreement or the transactions contemplated hereby and destroy or cause
to be destroyed all notes, memoranda, summaries, analyses, compilations and
other writings related thereto or based thereon prepared by the party furnished
such documents and information or its Representatives.
11.6 WAIVER. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
11.7 AMENDMENT. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of each party hereto.
11.8 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under ARTICLE IX.
36
11.9 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except (a) for assignments and transfers by operation of Law
and (b) that Purchaser may assign any or all of its rights, interests and
obligations hereunder (including without limitation its rights under ARTICLE IX)
to (i) a wholly-owned subsidiary, provided that any such subsidiary agrees in
writing to be bound by all of the terms, conditions and provisions contained
herein, (ii) any post-Closing purchaser of all of the issued and outstanding
stock of the Company or a substantial part of its assets or (iii) any financial
institution providing purchase money or other financing to Purchaser or the
Company from time to time as collateral security for such financing, but no such
assignment referred to in clause (i) shall relieve Purchaser of its obligations
hereunder. Subject to the preceding sentence, this Agreement is binding upon,
inures to the benefit of and is enforceable by the parties hereto and their
respective successors and assigns.
11.10 HEADINGS. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
11.11 ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by arbitration before
one (1) arbitrator in San Francisco, California, administered by the American
Arbitration Association under its Commercial Arbitration Rules and judgment on
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
11.12 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Seller agrees to
appoint, within ten (10) days of any written request by Purchaser, its lawful
agent and attorney in the State of California to accept and acknowledge service
of any and all process against it in any action, suit or proceeding arising out
of or relating to this Agreement or any of the transactions contemplated hereby
and upon whom such process may be served, with the same effect as if such party
were a resident of the State of California and had been lawfully served with
such process in such jurisdiction, and waives all claims of error by reason of
such service, PROVIDED that in the case of any service upon such agent and
attorney, the party effecting such service shall also deliver a copy thereof to
the other party at the address and in the manner specified in SECTION 11.1.
Seller will enter into such agreements with such agents as may be necessary to
constitute and continue the appointment of such agents hereunder. In the event
that any such agent and attorney resigns or otherwise becomes incapable of
acting as such, such party will appoint a successor agent and attorney in the
State of California, reasonably satisfactory to the other party, with like
powers. Subject to the arbitration provisions set forth in Section 11.11, each
party hereby irrevocably submits to the exclusive jurisdiction of the United
States District Court for the Northern District of California or any court of
the State of California located in the City of San Francisco, California, in any
action, suit or proceeding arising out of or relating to this Agreement or any
of the transactions contemplated hereby, and agrees that any such action, suit
or proceeding shall be brought only in such court, PROVIDED, HOWEVER, that such
consent to jurisdiction is solely for the purpose referred to in this SECTION
11.12 and shall not be deemed to be a general submission to the jurisdiction of
said courts or in the State of California other than for such purpose. Each
party hereby irrevocably waives, to the fullest extent permitted by Law, any
objection that it may now or hereafter have to the laying of the venue of any
such action, suit or proceeding brought in
37
such a court and any claim that any such action, suit or proceeding brought
in such a court has been brought in an inconvenient forum.
11.13 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, and (c)
the remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable provision or
by its severance herefrom.
11.14 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the Laws of the State of California applicable to a Contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof.
11.15 POST-CLOSING OPERATION OF BUSINESS. The parties acknowledge that
following the Closing, the Purchaser, as the sole shareholder, shall be entitled
to operate the Company in the manner it determines.
11.16 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. Signatures may be
exchanged by telecopy, with original signatures to follow. Each of the parties
hereto agrees that it will be bound by its own telecopied signature and that it
accepts the telecopied signatures of the other parties to this Agreement. The
original signature pages shall be forwarded to Purchaser or its counsel and
Purchaser or its counsel will provide all of the parties hereto with a copy of
the entire Agreement.
[Signature Page to Follow]
38
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officer of each party hereto as of the date first above
written.
PURCHASER:
QAD Inc., a Delaware corporation
By:____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Chief Financial Officer
SELLER:
_______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
COMPANY:
ENTERPRISE ENGINES, INC.
By:____________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
President
CONSENT OF SPOUSE
-----------------
I consent to and join in the foregoing.
Date: December 15, 1999 ____________________
▇▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
39
EXHIBIT A TO STOCK PURCHASE AGREEMENT
PROMISSORY NOTE
40
EXHIBIT B TO STOCK PURCHASE AGREEMENT
ESCROW AGREEMENT
41
EXHIBIT C TO STOCK PURCHASE AGREEMENT
FINANCIAL STATEMENTS
42
EXHIBIT D TO STOCK PURCHASE AGREEMENT
SELLER'S CERTIFICATE
43
EXHIBIT E TO STOCK PURCHASE AGREEMENT
CONSULTING AGREEMENT
44
EXHIBIT F TO STOCK PURCHASE AGREEMENT
RELEASE
45
EXHIBIT G TO STOCK PURCHASE AGREEMENT
NONCOMPETITION AGREEMENT
46
EXHIBIT H TO STOCK PURCHASE AGREEMENT
PURCHASER'S CERTIFICATE
47