ENTERPRISE ENGINES, INC.
STOCK PURCHASE AGREEMENT
dated as of December 15, 1999
by and among
QAD INC.
("Purchaser")
and
XXXXX X. XXXXXX
("Seller")
and
ENTERPRISE ENGINES, INC.
("Company")
with respect to
One Hundred Percent of the Outstanding Common Stock of
ENTERPRISE ENGINES, INC.
TABLE OF CONTENTS
(Continued)
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
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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
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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
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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
XXXXX X. XXXXXX ("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 Xxxxxxx 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, 0000
Xxx Xxxx, Xxxxxxxxxxx, Xxxxxxxxxx, X.X.X. 00000, 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 Xxxxxx Xxxxxxxx the Company's Enterprise Engine Source Code which
will be delivered by Xxxxxx Xxxxxxxx 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
4
maintained its Books and 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,
7
would constitute a default) 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
8
Disclosure Schedule, and each such employee has already 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 not been sued or, to Company's and
9
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 xxxx,
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 effect and the Company is in compliance in
11
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.
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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 jointly with others, that relate to any subject
13
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 exemptions therefrom the nonpublic offerings.
14
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, including any such
15
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,
16
provide copies of any such communications that 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.
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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 thereto shall be reasonably satisfactory in form and
21
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 Xxxxxx Xxxxxxxx.
(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.
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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 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
25
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
26
Notice or fails to notify the Indemnified 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 financial statements, Tax
28
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
29
"claim") by any other Person 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
30
services (other than trade payables or accruals incurred in the
ordinary course of business), (iv) 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 xxxx 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, Xxxx
Xxxxxxxx and/or Xxxxxx X. Xxxxx 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.
0000 Xxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxxx XXX 00000
Facsimile No.: (000) 000-0000
Attn.: General Counsel
with a copy to:
Nida & Xxxxxxx, LLP
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn.: Xxxxxx X. Xxxx, Esq.
If to Seller, to:
Xxxxx X. Xxxxxx
0000 Xxxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile No.: none
with a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxx X. X'Xxxx
Facsimile No.: (000) 000-0000
34
If to the Company, to:
Enterprise Engines, Inc.
000 Xxxxx Xxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
Facsimile No.: (000) 000-0000
with a copy to:
Heller, Ehrman, White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxx X. X'Xxxx
Facsimile No.: (000) 000-0000
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 the opinion of legal counsel to such
35
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 such a court and any claim that any
37
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: /s/ X.X. Xxxxx
------------------------------
Xxxxxx X. Xxxxx,
Chief Financial Officer
SELLER:
/s/ Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx
COMPANY:
ENTERPRISE ENGINES, INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx,
President
CONSENT OF SPOUSE
I consent to and join in the foregoing.
Date: December 15, 1999 /s/ Xxxx X. Xxxxxxx
----------------------------
XXX. XXXX X. XXXXXXX
39
[EXHIBITS OMITTED]
