STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into as of November 2, 1999,
by and among XXXXXXX.XXX, INC., a Delaware corporation (the "Purchaser"), THE
TITAN CORPORATION, a Delaware corporation ("Titan"), JB SYSTEMS, INC., doing
business as X.X. SYSTEMS, INC. D.B.A. MAINSAVER and MAINSAVER CORPORATION, a
California corporation ("MS"), and the following parties (the "Selling
Shareholders"): JKS SEPARATE PROPERTY TRUST, THE XXXX LIVING TRUST, JBS
ACQUISITION COMPANY, LLC, EPICOR SOFTWARE CORPORATION and XXXX XXXXXXX
("Xxxxxxx"). Certain capitalized terms used in this Agreement are defined on
Exhibit A.
RECITALS
A. The Selling Shareholders own 1,173,543 shares of the Class A Common
Stock and 58,677 shares of the Class B Common Stock of MS (the "Shares"), which
constitute all of the outstanding capital stock of MS.
B. The Selling Shareholders wish to sell the Shares to the Purchaser on
the terms set forth in this Agreement.
AGREEMENT
The Purchaser, MS and the Selling Shareholders, intending to be legally
bound, agree as follows:
1. SALE AND PURCHASE OF SHARES; RELATED TRANSACTIONS
1.1 Sale and Purchase of Shares. At the Closing, the Selling
Shareholders shall sell, assign, transfer and deliver the Shares to the
Purchaser, and the Purchaser shall purchase the Shares from the Selling
Shareholders, on the terms and subject to the conditions set forth in this
Agreement.
1.2 Purchase Price.
(a) The aggregate purchase price payable by the Purchaser for the
Shares and for the cash-out of the Options and Warrants pursuant to Section
1.2(d) (the "Purchase Price") shall be $12,900,000, subject to the Working
Capital adjustment. The Purchase Price shall be increased on a dollar for dollar
basis to the extent MS' estimated Working Capital on the Closing Date (the
"Estimated Working Capital") is positive or decreased on a dollar for dollar
basis to the extent that Estimated Working Capital is negative. The Purchase
Price shall be paid by the Purchaser to the Agent in two installments as set
forth in Sections 1.2(b) and 1.2(c) subject to post-closing Purchase Price
adjustments, if any, as set forth in Section 1.3. The Agent shall be responsible
for distributing such payments (net of any fee payable to Xxxxxx Xxxxxxx &
Associates pursuant to Section 7.23) to the Selling Shareholders and to the
holders of the cashed out Options and Warrants pursuant to Section 1.2(d).
Neither the Purchaser nor MS shall be liable to any Selling Shareholder or to
the holders of the cashed out Options or Warrants for any of such Selling
Shareholder's or such holder's share of the Purchase Price lawfully and properly
delivered to the Agent in accordance with the terms of this Agreement.
Notwithstanding anything herein to the contrary, the Agent may allocate the
Purchase Price to Xxxxxxx on a different per share basis and different
installment basis than the other Selling Shareholders and Xxxxxxx shall not be
included as a Selling Shareholder for purposes of the indemnification
obligations in Section 6 and Section 7.1.
(b) At the Closing, the Purchaser shall pay to the Agent in
immediately available funds the Purchase Price (as adjusted for Estimated
Working Capital) less (a) $3,000,000 (the "Second Installment") and less (b) a
$500,000 holdback (the "Holdback Amount").
(c) The Purchaser shall, and Titan shall cause the Purchaser to,
pay the Second Installment of the Purchase Price on the first business day after
the 18th month anniversary of the Closing Date (or on such earlier date as the
Purchaser may elect). The aggregate amount of the Second Installment shall be
$3,000,000 less any setoffs or deductions made pursuant to this Agreement. The
Purchaser shall, and Titan shall also cause the Purchaser, to pay with the
Second Installment, simple interest on the amount of such installment actually
paid at the rate of 7.5% per annum over the period from the Closing Date through
the date on which the Second Installment is paid. The Purchaser's obligation to
make the payment contemplated by this Section 1.2(c) shall be subject to any
right of setoff that the Purchaser may be entitled to exercise (pursuant to
Section 6.7). In addition, if the Purchaser shall have made in good faith any
claim for indemnification against any of the Selling Shareholders pursuant to
this Agreement, including the Damages or Losses in connection with any claim
against Xxxx pursuant to Section 6.11 and such claim shall not have been setoff
in accordance with Section 6.7, then the Purchaser may withhold a good faith
estimate of such claim (and the associated interest) from the Second Installment
and pay the remaining portion of the Second Installment with interest on the
portion paid.
(d) Prior to the Closing, MS shall have obtained agreements from
each of the holders of vested Options set forth in Part 1.2(a) of the Disclosure
Schedule, to terminate the Options in exchange for the right to receive
concurrent with the Closing a cash payment on the terms set forth in the
Agreement To Terminate Options attached as Part 1.2(d) of the Disclosure
Schedule. In addition, prior to the Closing, MS shall have obtained agreements
from each of the holders of the Notes under the Convertible Subordinated Loan
Agreement dated August 13, 1999 (the "Convertible Loan Agreement") to terminate
the right to receive warrants in accordance with Section 4.10 of the Convertible
Loan Agreement (the "Warrants") in exchange for the right to receive concurrent
with the Closing a cash payment on the terms set forth in the Agreement to
Terminate Warrants attached as Part 1.2(d) of the Disclosure Schedule. The
amounts payable to the holders of the cashed out Options and Warrants
(collectively, the "Cash-Out Amount") shall not be subject to reduction for any
offsets made against the Second Installment or any claims for indemnity made
against the Selling Shareholders or Xxxx pursuant to this Agreement..
(e) Attached hereto as Part 1.2 of the Disclosure Schedule is a
schedule allocating the Purchase Price among the Selling Shareholders, including
Xxxxxxx, and among the holders of the cashed out Options and Warrants, assuming
there is no Working Capital adjustment to the Purchase Price pursuant to Section
1.3.
1.3 Post-Closing Purchase Price Adjustment.
(a) The Purchase Price payable pursuant to Section 1.2(a) shall be
subject to post-closing adjustment as follows:
(i) the Purchase Price shall be increased dollar for dollar
for each dollar of Working Capital that exceeds Estimated Working Capital, if
any, provided that the maximum aggregate Purchase Price shall be $14,500,000; or
(ii) the Purchase Price shall be reduced dollar for dollar to
the extent the Working Capital (either positive Working Capital or negative
Working Capital) is less than Estimated Working Capital, if any.
(b) Following completion of the audit in accordance with Section
1.3(c), the Purchase Price shall be adjusted pursuant to Section 1.3(a). If the
Purchase Price is reduced in accordance with Section 1.3(a), such amount shall
be deducted from the Holdback Amount and the remainder of the Holdback Amount,
if any, shall be paid to the Agent including simple interest thereon at the rate
of 7.5% per annum over the period from the Closing Date through the date on
which such amount is paid. If the reduction in the Purchase Price exceeds the
Holdback Amount, any excess reduction shall be deducted from the Second
Installment of the Purchase Price and the interest accrual on such installment
shall also be adjusted so that interest accrues on the reduced Second
Installment amount of the Purchase Price from the Closing Date. To the extent
that the Purchase Price is increased, the Purchaser shall pay to the Agent: (i)
the full Holdback Amount, (ii) any additional amounts owing as a result of an
increase in the Purchase Price pursuant to Section 1.3(a), and (iii) simple
interest on the Holdback Amount and the additional Purchase Price at the rate of
7.5% per annum over the period from the Closing Date through the date on which
such amount is paid. In no event, however, shall the aggregate Purchase Price
paid by the Purchaser exceed $14,500,000.
(c) Within 90 days following the Closing, Xxxxxx Xxxxxxxx LLP
("Xxxxxx Xxxxxxxx") shall audit MS' balance sheet as of October 31, 1999 (the
"Closing Balance Sheet") for conformity to GAAP and issue a draft report
thereon. Purchaser shall provide to Agent a copy of the draft report. Any
adjustment to the Closing Balance Sheet proposed by Xxxxxx Xxxxxxxx, including
adjustments to Working Capital, shall be subject to review by auditors retained
by the Selling Shareholders (the "MS Auditors") which review shall be completed
no later than 30 days after the Agent receives the report from Xxxxxx Xxxxxxxx.
If the opinions of Xxxxxx Xxxxxxxx and the MS Auditors differ as to the
necessity of the adjustment, a third auditing firm mutually agreeable to the
parties shall be selected to review the disputed adjustments. The decision of
the third independent auditing firm regarding any such adjustment shall be
binding on the parties. The final determination of the amounts payable hereunder
shall be based on the final determination of the Working Capital as set forth in
the final audited Closing Balance Sheet (the "Audited Balance Sheet") and each
component in the calculation of such amounts shall be made using the Audited
Balance Sheet. Each party shall be responsible for any fees and expenses
incurred by such party's auditors. Notwithstanding anything in this Agreement to
the contrary, if the services of a third independent auditing firm are required
pursuant to this Section, the Purchaser and the Selling Shareholders shall each
bear and pay 50% of all fees and expenses of such auditing firm.
1.4 Closing.
(a) The closing of the sale of the Shares to the Purchaser (the
"Closing") shall take place at the offices of Xxxxxx Godward LLP, 0000 Xxxxxxxxx
Xxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx 00000 at 10:00 a.m. (California time)
on November 2, 1999 (the "Closing Date").
(b) At the Closing:
(i) the Selling Shareholders shall deliver to the Purchaser
the stock certificates representing the Shares, duly endorsed (or accompanied by
duly executed stock powers) and the Purchaser shall pay the first installment of
the Purchase Price to the Agent as contemplated by Section 1.2;
(ii) Xxxx Xxxxxxx, Xxxxxxx Xxxx and Xxxxxx Xxxxxxx &
Associates shall execute and deliver to the Purchaser and MS a Noncompetition
Agreement in the form of Exhibit B;
(iii) MS and Xxxx Xxxxxxx shall execute and deliver an
Employment Agreement in the form of Exhibit C;
(iv) the Selling Shareholders shall execute and deliver to the Purchaser and MS
a General Release in the form of Exhibit D;
(v) the Purchaser shall have received from the Selling
Shareholders' counsel for MS and JBS Acquisition Company, LLC an opinion of such
counsel in the form of Exhibit E;
(vi) the Selling Shareholders shall execute and deliver to the
Purchaser and MS a certificate (the "Closing Certificate") setting forth the
Estimated Working Capital and each of the conditions set forth in Sections
4.3(b), 4.4 and 4.7 has been satisfied in all respects; and
(vii) the directors and officers of MS shall resign from their
respective positions as directors and officers of MS.
2. REPRESENTATIONS AND WARRANTIES OF MS AND SELLING SHAREHOLDERS
Except as set forth in the disclosure schedules attached hereto (each a
"Schedule," and collectively, the "Disclosure Schedule"), as of the date of this
Agreement and as of the Closing, MS and the Selling Shareholders jointly and
severally represent and warrant, to and for the benefit of the Indemnitees, as
follows:
2.1 Due Organization; No Subsidiaries; Etc.
(a) MS is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and has all necessary
power and authority:
(i) to conduct its business in the manner in which its
business is currently being conducted and in the manner in which its business is
currently proposed to be conducted;
(ii) to own and use its assets in the manner in which its
assets are currently owned and used and in the manner in which its assets are
currently proposed to be owned and used; and
(iii) to perform its obligations under all MS Contracts.
(b) MS has never conducted any business under or otherwise used,
for any purpose or in any jurisdiction, any fictitious name, assumed name, trade
name or other name, other than the names "X.X. Systems, Inc.," "Mainsaver
Corporation" and "Mainsaver."
(c) MS is not, and has never been, required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1 of the
Disclosure Schedule. Except as set forth in Part 2.1 of the Disclosure Schedule,
MS is in good standing as a foreign corporation in each of the jurisdictions
identified in Part 2.1 of the Disclosure Schedule.
(d) Part 2.1 of the Disclosure Schedule accurately sets forth (i)
the names of the members of MS's board of directors, (ii) the names of the
members of each committee of MS's board of directors, and (iii) the names and
titles of MS's officers.
(e) Neither MS nor any of its shareholders has ever approved, or
commenced any proceeding or made any election contemplating, the dissolution or
liquidation of MS or the winding up or cessation of MS's business or affairs.
(f) MS has no subsidiaries, and except as set forth in Part 2.1 of
the Disclosure Schedule MS has never owned, beneficially or otherwise, any
shares or other securities of, or any direct or indirect interest of any nature
in, any Entity. MS has not agreed and is not obligated to make any future
investment in or capital contribution to any other Entity.
2.2 Articles of Incorporation and Bylaws; Records.
(a) MS has delivered to the Purchaser accurate and complete copies
of:
(i) MS's articles of incorporation and bylaws, including all
amendments thereto;
(ii) the stock records of MS; and
(iii) the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the shareholders of MS, the board of directors of MS and all
committees of the board of directors of MS.
Except as set forth in Part 2.2 of the Disclosure Schedule, there
have been no meetings or other proceedings of the shareholders of MS, the board
of directors of MS or any committee of the board of directors of MS that are not
fully reflected in such minutes or other records.
(b) There has not been any violation of any of the provisions of
MS's articles of incorporation or bylaws or of any resolution adopted by MS's
shareholders, MS's board of directors or any committee of MS's board of
directors; and no event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time) constitute or result
directly or indirectly in such a violation.
(c) Except as set forth in Part 2.2 of the Disclosure Schedule, the
books of account, stock records, minute books and other records of MS are
accurate, up-to-date and complete, and have been maintained in accordance with
sound and prudent business practices. All of the records of MS are in the actual
possession and direct control of MS. MS has in place, and has at all times had
in place, an adequate and appropriate system of internal controls which is at
least as comprehensive and effective as the systems of internal controls
customarily maintained by Comparable Entities.
2.3 Capitalization, Etc.
(a) The authorized capital stock of MS consists of:
(i) 2,500,000 shares of Class A Common Stock having no par
value and 250,000 shares of Class B Common Stock having no par value, of which
1,173,543 shares of the Class A Common Stock and 58,677 of the Class B Common
Stock (the aggregate of such shares constituting all of the Shares) have been
issued and are outstanding; and
(ii) The Selling Shareholders have, and the Purchaser will
acquire at the Closing, good and valid title to the Shares free and clear of any
Encumbrances. All of such Shares are owned by the Selling Shareholders in the
amounts indicated on the Schedule of Shareholders and are being sold to the
Purchaser hereunder.
(b) All of the Shares (i) have been duly authorized and validly
issued, (ii) are fully paid and non-assessable, (iii) were issued in compliance
with any applicable preemptive or similar rights and (iv) have been issued in
full compliance with all applicable securities laws and other applicable Legal
Requirements and in compliance with all applicable Contracts. The Selling
Shareholders have delivered to the Purchaser accurate and complete copies of the
stock certificates evidencing the Shares.
(c) Except as set forth in Part 2.3 of the Disclosure Schedule,
there is no:
(i) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of MS;
(ii) outstanding security, instrument or obligation that is or
may become convertible into or exchangeable for any shares of the capital stock
or other securities of MS;
(iii) Contract under which MS is or may become obligated to
sell or otherwise issue any shares of its capital stock or any other securities;
or
(iv) condition or circumstance that may directly or indirectly
give rise to or provide a basis for the assertion of a claim by any Person to
the effect that such Person is entitled to acquire or receive any shares of
capital stock or other securities of MS.
(d) Except as set forth in Part 2.3 of the Disclosure Schedule, MS
has never repurchased, redeemed or otherwise reacquired any shares of capital
stock or other securities. All securities so reacquired by MS were reacquired in
full compliance with the applicable provisions of the California General
Corporation Law and with all other applicable Legal Requirements.
2.4 Financial Statements.
(a) MS has delivered to the Purchaser the following financial
statements and notes (collectively, the "MS Financial Statements"):
(i) the audited balance sheet of MS as of December 31, 1998,
and the related audited statements of operations, changes in shareholders'
equity and cash flows of MS for the year then ended, together with the notes
thereto and the unqualified report and certification of Deloitte and Touche LLP
relating thereto;
(ii) the unaudited balance sheet of MS as of December 31,
1997, and the related unaudited statements of operations, changes in
shareholders' equity and cash flows of MS for the year then ended, together with
the notes thereto;
(iii) the unaudited balance sheet of MS as of August 31, 1999
(the "Unaudited Interim Balance Sheet"), and the related unaudited statements of
operations, changes in shareholders' equity and cash flows of MS for the eight
months then ended, together with the notes thereto; and
(iv) the unaudited balance sheet of MS as of September 30,
1999, and the related unaudited statements of operations, changes in
shareholders' equity and cash flows of MS for the nine months then ended,
together with the notes thereto (collectively, the "September Financial
Statements") .
(b) All of the MS Financial Statements are accurate and complete in
all respects except that the September Financial Statements are accurate and
complete in all material respects. The financial statements and notes referred
to in Section 2.4(a)(i) present fairly the financial position of MS as of
December 31, 1998 and the results of operations, changes in shareholders' equity
and cash flows of MS for the year then ended. The financial statements and notes
referred to in Sections 2.4(a)(ii) and 2.4(a)(iii) present fairly the financial
position of MS as of the respective dates thereof and the results of operations,
changes in shareholders' equity and cash flows of MS for the periods covered
thereby. The MS Financial Statements have been prepared in accordance with GAAP,
applied on a consistent basis throughout the periods covered, subject in the
case of interim financial statements to normal recurring year-end adjustments
and the absence of footnotes.
2.5 Absence of Changes. Except as set forth in Part 2.5 of the
Disclosure Schedule, since December 31, 1998:
(a) there has not been any adverse change in MS's business,
condition, assets, liabilities, operations, financial performance, net income or
prospects (or in any aspect or portion thereof), and no event has occurred that
might have an adverse effect on MS's business, condition, assets, liabilities,
operations, financial performance, net income or prospects (or on any aspect or
portion thereof);
(b) there has not been any loss, damage or destruction to, or any
interruption in the use of, any of MS's assets (whether or not covered by
insurance);
(c) MS has not (i) declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, or (ii) repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) MS has not sold or otherwise issued any shares of capital stock
or any other securities;
(e) MS has not amended its articles of incorporation or bylaws and
has not effected or been a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(f) MS has not purchased or otherwise acquired any asset from any
other Person, except for supplies acquired by MS in the Ordinary Course of
Business;
(g) MS has not leased or licensed any asset from any other Person;
(h) MS has not made any capital expenditure;
(i) MS has not sold or otherwise transferred, and has not leased or
licensed, any asset to any other Person except for products sold by MS from its
inventory in the Ordinary Course of Business;
(j) MS has not written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness;
(k) MS has not pledged or hypothecated any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance;
(l) MS has not made any loan or advance to any other Person;
(m) MS has not (i) established or adopted any Employee Benefit
Plan, or (ii) paid any bonus or made any profit-sharing or similar payment to,
or increased the amount of the wages, salary, commissions, fringe benefits or
other compensation or remuneration payable to, any of its directors, officers or
employees;
(n) MS has not entered into, and neither MS nor any of the assets
owned or used by MS has become bound by, any Contract that is not an Excluded
Contract;
(o) no Contract by which MS or any of the assets owned or used by
MS is or was bound, or under which MS has or had any rights or interest, has
been amended or terminated other than Excluded Contracts;
(p) MS has not incurred, assumed or otherwise become subject to any
Liability, other than accounts payable (of the type required to be reflected as
current liabilities in the "liabilities" column of a balance sheet prepared in
accordance with GAAP) incurred by MS in the Ordinary Course of Business;
(q) MS has not discharged any Encumbrance or discharged or paid any
indebtedness or other Liability, except for accounts payable that (i) are
reflected as current liabilities in the "liabilities" column of the Unaudited
Interim Balance Sheet or have been incurred by MS since December 31, 1998 in the
Ordinary Course of Business, and (ii) have been discharged or paid in the
Ordinary Course of Business;
(r) MS has not forgiven any debt or otherwise released or waived
any right or claim;
(s) MS has not changed any of its methods of accounting or
accounting practices in any respect;
(t) MS has not entered into any transaction or taken any other
action outside the Ordinary Course of Business; and
(u) MS has not agreed, committed or offered (in writing or
otherwise), and has not attempted, to take any of the actions referred to in
clauses "(c)" through "(t)" above.
2.6 Title to Assets.
(a) MS owns, and has good, valid and marketable title to, all
assets purported to be owned by it, including:
(i) all assets reflected on the Unaudited Interim Balance
Sheet (except for inventory sold by MS since August 31, 1999 in the Ordinary
Course of Business);
(ii) all assets acquired by MS since August 31, 1999 (except
for inventory sold by MS since August 31, 1999 in the Ordinary Course of
Business);
(iii) all assets referred to in Parts 2.8, 2.9, 2.10 and 2.12
of the Disclosure Schedule and all of MS's rights under MS Contracts; and
(iv) all other assets reflected in MS's books and records as
being owned by MS.
Except as set forth in Part 2.6 of the Disclosure Schedule, all of
said assets are owned by MS free and clear of any Encumbrances.
(b) Part 2.6 of the Disclosure Schedule identifies all assets that
are being leased or licensed to MS.
2.7 Bank Accounts. Part 2.7 of the Disclosure Schedule accurately sets
forth, with respect to each account maintained by or for the benefit of MS at
any bank or other financial institution:
(a) the name and location of the institution at which such account
is maintained;
(b) the name in which such account is maintained and the account
number of such account;
(c) a description of such account and the purpose for which such
account is used;
(d) the current balance in such account;
(e) the rate of interest being earned on the funds in such account;
and
(f) the names of all individuals authorized to draw on or make
withdrawals from such account.
There are no safe deposit boxes or similar arrangements maintained by
or for the benefit of MS.
2.8 Receivables; Major Customers.
(a) Part 2.8 of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable and
other receivables of MS as of August 31, 1999.
(b) Except as set forth in Part 2.8 of the Disclosure Schedule, all
existing accounts receivable of MS (including those accounts receivable
reflected on the Unaudited Interim Balance Sheet that have not yet been
collected and those accounts receivable that have arisen since August 31, 1999
and have not yet been collected):
(i) represent valid obligations of customers of MS arising
from bona fide transactions entered into in the Ordinary Course of Business; and
(ii) are current and will be collected in full (without any
counterclaim or setoff) on or before October 31, 2000.
(c) Part 2.8 of the Disclosure Schedule accurately identifies, and
provides an accurate and complete breakdown of the revenues received from, each
customer or other Person that accounted for (i) more than $250,000 of the gross
revenues of MS in 1998, or (ii) more than $250,000 of MS's gross revenues in the
first three quarters of 1999. MS has not received any notice or other
communication (in writing or otherwise), and has not received any other
information, indicating that any customer or other Person identified in Part 2.8
of the Disclosure Schedule may cease dealing with MS or may otherwise reduce in
any material respect the volume of support services provided by MS to such
Person below historical levels.
2.9 Inventory. Part 2.9 of the Disclosure Schedule provides an accurate
and complete breakdown of all inventory (including raw materials, work in
process and finished goods) of MS as of August 31, 1999. All of MS's existing
inventory (including all inventory that is reflected on the Unaudited Interim
Balance Sheet and that has not been disposed of by MS since August 31, 1999):
(a) is of such quality and quantity as to be usable and saleable by
MS in the Ordinary Course of Business;
(b) has been priced at the lower of cost or market value using the
"first-in, first-out" method; and (c) is free of any defect or deficiency.
The inventory levels maintained by MS (i) are not excessive in light of
MS's normal operating requirements, and (ii) are adequate for the conduct of
MS's operations in the Ordinary Course of Business.
2.10 Equipment, Etc.
(a) Part 2.10 of the Disclosure Schedule accurately identifies all
equipment, furniture, fixtures, improvements and other tangible assets (other
than inventory) owned by MS with an original cost of $2,000 or more, and
accurately sets forth the date of acquisition, original cost and book value of
each of said assets. Part 2.10 also accurately identifies all tangible assets
leased to MS.
(b) Each asset identified or required to be identified in Part 2.10
of the Disclosure Schedule:
(i) is structurally sound, free of defects and deficiencies
and in good condition and repair (ordinary wear and tear excepted);
(ii) complies in all respects with, and is being operated and
otherwise used in full compliance with, all applicable Legal Requirements; and
(iii) is adequate for the uses to which it is being put.
The assets identified in Part 2.10 of the Disclosure Schedule are
adequate for the conduct of MS's business in the manner in which such business
is currently being conducted and in the manner in which such business is
currently proposed to be conducted.
2.11 Real Property. MS does not own any real property or any interest
in real property, except for the leaseholds created under the real property
leases identified in 2.13 of the Disclosure Schedule. Part 2.11 of the
Disclosure Schedule provides an accurate and complete description of the
premises covered by said leases and the facilities located on such premises. MS
enjoys peaceful and undisturbed possession of such premises.
2.12 Proprietary Assets.
(a) Part 2.12(a) of the Disclosure Schedule sets forth, with
respect to each Company Proprietary Asset registered with any Governmental Body
or for which an application has been filed with any Governmental Body, (i) a
brief description of such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application. Part
2.12(a) of the Disclosure Schedule identifies and provides a brief description
of all other material Company Proprietary Assets owned by MS. Part 2.12(a) of
the Disclosure Schedule identifies and provides a brief description of each
Proprietary Asset licensed to MS by any Person (except for any Proprietary Asset
that is licensed to MS under any third party software license generally
available to the public at a cost of less than $1,000 per copy), and identifies
the license agreement under which such Proprietary Asset is being licensed to
MS. Except as set forth in Part 2.12(a) of the Disclosure Schedule, MS has good,
valid and marketable title to all of the Company Proprietary Assets free and
clear of all liens and other Encumbrances, and has a valid right (contractual or
otherwise) to use all Proprietary Assets identified in Part 2.12(a) of the
Disclosure Schedule. Except as set forth in Part 2.12(a) of the Disclosure
Schedule, MS is not obligated to make any payment to any Person for the use of
any Company Proprietary Asset. Except as set forth in Part 2.12(a) of the
Disclosure Schedule, MS has not developed jointly with any other Person any
Company Proprietary Asset with respect to which such other Person has any
rights.
(b) MS has taken commercially reasonable measures and precautions
to protect and maintain the confidentiality and secrecy of all Company
Proprietary Assets (except Company Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all Company Proprietary Assets. Except as set forth in Part 2.12(b) of the
Disclosure Schedule, MS has not disclosed or delivered to any Person, or
permitted the disclosure or delivery to any Person of, (i) the source code, or
any portion or aspect of the source code, of any Company Proprietary Asset, or
(ii) the object code, or any portion or aspect of the object code, of any
Company Proprietary Asset.
(c) None of the Company Proprietary Assets infringes or conflicts
with any Proprietary Asset owned or used by any other Person. MS is not
infringing, misappropriating or making any unlawful use of, and has not at any
time infringed, misappropriated or made any unlawful use of, or received any
notice or other communication (in writing or otherwise) of any actual, alleged,
possible or potential infringement, misappropriation or unlawful use of, any
Proprietary Asset owned or used by any other Person. To Knowledge of MS, no
other Person is infringing, misappropriating or making any unlawful use of, and
no Proprietary Asset owned or used by any other Person infringes or conflicts
with, any Company Proprietary Asset.
(d) Except as set forth in Part 2.12(d) of the Disclosure Schedule:
(i) each Company Proprietary Asset conforms in all material respects with any
specification, documentation, performance standard, representation or statement
made or provided with respect thereto by or on behalf of MS; and (ii) there has
not been any material claim by any customer or other Person alleging that any
Company Proprietary Asset (including each version thereof that has ever been
licensed or otherwise made available by MS to any Person) does not conform in
all material respects with any specification, documentation, performance
standard, representation or statement made or provided by or on behalf of MS,
and, to the Knowledge of MS, there is no basis for any such claim. To the extent
required by GAAP, MS has established adequate reserves on the Unaudited Interim
Balance Sheet to cover all costs associated with any obligations that MS may
have with respect to the correction or repair of programming errors or other
defects in the Company Proprietary Assets.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable MS to conduct its business in the manner in which
such business has been and is currently being conducted. Except as set forth in
Part 2.12(e) of the Disclosure Schedule, (i) MS has not licensed any of the
Company Proprietary Assets to any Person on an exclusive basis, and (ii) MS has
not entered into any covenant not to compete or Contract limiting its ability to
exploit fully any of its Proprietary Assets or to transact business in any
market or geographical area or with any Person.
(f) Except as set forth in Part 2.12(f) of the Disclosure Schedule:
(i) all current employees of MS and all former employees who were hired on or
after August 11, 1998, have executed and delivered to MS an agreement
(containing no exceptions to or exclusions from the scope of its coverage except
for prior inventions that do not conflict with the operations of MS' businesses
or the use of MS' assets) that is substantially identical to the standard form
of Employee Proprietary Information and Invention Agreement previously delivered
to Purchaser, and (ii) all current consultants and independent contractors of MS
and all former consultants and independent contractors of MS engaged on or after
August 11, 1998 (excluding bankers, accountants, lawyers and other non-technical
consultants and independent contractors) have executed and delivered to MS an
agreement (containing no exceptions to or exclusions from the scope of its
coverage as it relates to the specific project for which the consultant or
independent contractor was hired) that is substantially identical to the form of
consultant confidential information and invention assignment agreement
previously delivered to the Purchaser.
(g) All Company Proprietary Assets do not and will not contain any
viruses, which shall mean any computer code designed to disrupt, disable, harm,
or otherwise impede in any manner, the operation of the computer program, or any
other associated software, firmware, hardware, or network (including local area
or wide-area networks), in a manner not intended by the creator(s) of such
software, firmware, hardware, or network.
2.13 Contracts.
(a) Part 2.13 of the Disclosure Schedule identifies and provides an
accurate and complete description of each MS Contract, except for any Excluded
Contract. MS has made available to the Purchaser accurate and complete copies of
all MS Contracts identified in Part 2.13 of the Disclosure Schedule, including
all amendments thereto.
(b) Each MS Contract is valid and in full force and effect, and is
enforceable by MS in accordance with its terms. No MS Contract contains any term
or provision that is extraordinary or that is otherwise not customarily found in
Contracts entered into by Comparable Entities.
(c) Except as set forth in Part 2.13 of the Disclosure Schedule:
(i) no Person has violated or breached, or declared or
committed any default under, any MS Contract;
(ii) no event has occurred, and no circumstance or condition
exists, that might (with or without notice or lapse of time) (A) result in a
violation or breach of any of the provisions of any MS Contract, (B) give any
Person the right to declare a default or exercise any remedy under any MS
Contract, (C) give any Person the right to accelerate the maturity or
performance of any MS Contract, or (D) give any Person the right to cancel,
terminate or modify any MS Contract;
(iii) MS has not received any notice or other communication
(in writing or otherwise) regarding any actual, alleged, possible or potential
violation or breach of, or default under, any MS Contract; and
(iv) MS has not waived any of its rights under any MS
Contract.
(d) To the best of the Knowledge of MS, each Person against which
MS has or may acquire any rights under any MS Contract is solvent and is able to
satisfy all of such Person's current and future monetary obligations and other
obligations and Liabilities to MS.
(e) Except as set forth in Part 2.13 of the Disclosure Schedule:
(i) MS has never guaranteed or otherwise agreed to cause,
insure or become liable for, and MS has never pledged any of its assets to
secure, the performance or payment of any obligation or other Liability of any
other Person;
(ii) MS has never been a party to or bound by (A) any joint
venture agreement, partnership agreement, profit-sharing agreement, cost-sharing
agreement, loss-sharing agreement or similar Contract, or (B) any Contract that
creates or grants to any Person, or provides for the creation or grant of, any
stock appreciation right, phantom stock right or similar right or interest;
(iii) MS has not had any determination of noncompliance,
entered into any consent order or undertaken any internal investigation relating
directly or indirectly to any Government Contract or Government Bid;
(iv) MS has complied in all material respects with all Legal
Requirements with respect to all Government Contracts and Government Bids;
(v) MS has not, in obtaining or performing any Government
Contract, violated (A) the Truth in Negotiations Act of 1962, as amended, (B)
the Service Contract Act of 1963, as amended, (C) the Contract Disputes Act of
1978, as amended, (D) the Office of Federal Procurement Policy Act, as amended,
(E) the Federal Acquisition Regulations (the "FAR") or any applicable agency
supplement thereto, (F) the Cost Accounting Standards, (G) the Defense
Industrial Security Manual (DOD 5220.22-M), (H) the Defense Industrial Security
Regulation (DOD 5220.22-R) or any related security regulations, or (I) any other
applicable procurement law or regulation or other Legal Requirement;
(vi) all facts set forth in or acknowledged by MS in any
certification, representation or disclosure statement submitted by MS with
respect to any Government Contract or Government Bid were current, accurate and
complete as of the date of submission;
(vii) neither MS nor any of its employees has been debarred or
suspended from doing business with any Governmental Body, and, to the best of
the knowledge of MS, no circumstances exist that would warrant the institution
of debarment or suspension proceedings against MS or any of its employees;
(viii) no negative determinations of responsibility have been
issued against MS in connection with any Government Contract or Government Bid;
(ix) no direct or indirect costs incurred by MS have been
questioned or disallowed as a result of a finding or determination of any kind
by any Governmental Body;
(x) no Governmental Body, and no prime contractor or
higher-tier subcontractor of any Governmental Body, has withheld or set off, or
threatened to withhold or set off, any amount due to MS under any Government
Contract other than routine retentions that are not in dispute;
(xi) there are not and have not been any irregularities,
misstatements or omissions relating to any Government Contract or Government Bid
that have led to or could reasonably be expected to lead to (A) any
administrative, civil, criminal or other investigation, legal proceeding or
indictment involving MS or any of its employees, (B) the questioning or
disallowance of any costs submitted for payment by MS, (C) the recoupment of any
payments previously made to MS, (D) a finding or claim of fraud, defective
pricing or improper payments on the part of MS, or (E) the assessment of any
penalties or damages of any kind against MS;
(xii) there is not and has not been any (A) outstanding claim
against MS by, or dispute involving MS with, any prime contractor,
subcontractor, vendor or other person arising under or relating to the award or
performance of any Government Contract, (B) fact known by MS upon which any such
claim could reasonably be expected to be based or which may give rise to any
such dispute, or (C) final decision of any Governmental Body against MS;
(xiii) MS is not undergoing and has not undergone any audit,
and MS has no knowledge of any basis for any impending audit, arising under or
relating to any Government Contract (other than normal routine audits conducted
in the ordinary course of business);
(xiv) MS has not entered into any financing arrangement or
assignment of proceeds with respect to the performance of any Government
Contract;
(xv) no payment has been made by MS or by any person acting on
its behalf to any person (other than to any bona fide employee or agent (as
defined in subpart 3.4 of the FAR) of MS) which is or was contingent upon the
award of any Government Contract or which would otherwise be in violation of any
applicable procurement law or regulation or any other Legal Requirement;
(xvi) MS's cost accounting system is in compliance with
applicable regulations and other applicable Legal Requirements, and has not been
determined by any Governmental Body not to be in compliance with any Legal
Requirement;
(xvii) MS has complied with all applicable regulations and
other Legal Requirements and with all applicable contractual requirements
relating to the placement of legends or restrictive markings on technical data,
computer software and other proprietary assets;
(xviii) in each case in which MS has delivered or otherwise
provided any technical data, computer software or Company Proprietary Assets to
any Governmental Body in connection with any Government Contract, MS has marked
such technical data, computer software or Company Proprietary Assets with all
markings and legends (including any "restricted rights" legend and any
"government purpose license rights" legend) necessary (under the FAR or other
applicable Legal Requirements) to ensure that no Governmental Body or other
person or entity is able to acquire any unlimited rights with respect to such
technical data, computer software or Company Proprietary Assets;
(xix) MS has not made any disclosure to any Governmental Body
pursuant to any voluntary disclosure agreement;
(xx) MS has not entered into any cost type Government
Contract;
(xxi) MS is not and will not be required to make any filing
with or give any notice to, or to obtain any consent from, any Governmental Body
under or in connection with any Government Contract or Government Bid as a
result of or by virtue of the execution, delivery of performance of this
Agreement or any of the other agreements referred to in this Agreement; and
(xxii) Neither MS, nor any director, officer, agent, employee or other person
acting on behalf of MS has used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others or
established or maintained any unlawful or unrecorded funds. Neither MS, nor any
director, officer, agent, employee or other person acting on behalf of MS has
accepted or received any unlawful contributions, payments, gifts or
expenditures.
(f) The performance of the MS Contracts will not result in any
violation of or failure to comply with any Legal Requirement.
(g) No Person is renegotiating, or has the right to renegotiate,
any amount paid or payable to MS under any MS Contract or any other term or
provision of any MS Contract.
(h) The Contracts identified in Part 2.13 of the Disclosure
Schedule and the Excluded Contracts collectively constitute all of the Contracts
necessary to enable MS to conduct its business in the manner in which its
business is currently being conducted and in the manner in which its business is
proposed to be conducted.
(i) Part 2.13 of the Disclosure Schedule identifies and provides an
accurate and complete description of each proposed Contract as to which any bid,
offer, award, written proposal, term sheet or similar document has been
submitted or received by MS that is currently open.
(j) Part 2.13 of the Disclosure Schedule provides an accurate
description and breakdown of MS's backlog as of October 1, 1999 under the MS
Contracts.
2.14 Security Matters. MS is in compliance with all security and
related requirements on its Government Contracts.
2.15 Liabilities; Major Suppliers.
(a) MS has no Liabilities, except for:
(i) liabilities identified as such in the "liabilities" column
of the Unaudited Interim Balance Sheet;
(ii) accounts payable (of the type required to be reflected as
current liabilities in the "liabilities" column of a balance sheet prepared in
accordance with GAAP) incurred by MS in the Ordinary Course of Business since
August 31, 1999;
(iii) MS's obligations under the Contracts listed in Part 2.13
of the Disclosure Schedule and under Excluded Contracts, to the extent that the
existence of such obligations is ascertainable solely by reference to such
Contracts; and
(iv) liabilities set forth in Part 2.15 of the Disclosure
Schedule.
(b) Part 2.15 of the Disclosure Schedule:
(i) provides an accurate and complete breakdown and aging of
MS's accounts payable as of August 31, 1999;
(ii) provides an accurate and complete breakdown of all
customer deposits, deferred revenue and other deposits held by MS in excess of
$1,000 (with any unlisted deposits, deferred revenue and other deposits not
exceeding $15,000 in the aggregate) as of the date of this Agreement; and
(iii) provides an accurate and complete breakdown of MS's
long-term debt as of the date of this Agreement.
(c) MS has not paid, and MS is not and will not become liable for
the payment of, any fees (including brokers, finders or advisory fees), costs or
expenses of the type referred to in Section 7.4(a).
(d) Part 2.15 of the Disclosure Schedule accurately identifies, and
provides an accurate and complete breakdown of the amounts paid to, each
supplier or other Person that received (i) more than $200,000 from MS in 1997,
(ii) more than $200,000 from MS in 1998, or (iii) more than $200,000 from MS in
the first three quarters of 1999.
2.16 Compliance With Legal Requirements.
(a) Except as set forth in Part 2.16 of the Disclosure Schedule:
(i) MS is in full compliance with each Legal Requirement that
is applicable to it or to the conduct of its business or the ownership or use of
any of its assets;
(ii) MS has at all times been in full compliance with each
Legal Requirement that is or was applicable to it or to the conduct of its
business or the ownership or use of any of its assets;
(iii) no event has occurred, and no condition or circumstance
exists, that might (with or without notice or lapse of time) constitute or
result directly or indirectly in a violation by MS of, or a failure on the part
of MS to comply with, any Legal Requirement; and
(iv) MS has not received, at any time, any notice or other
communication (in writing or otherwise) from any Governmental Body or any other
Person regarding (i) any actual, alleged, possible or potential violation of, or
failure to comply with, any Legal Requirement, or (ii) any actual, alleged,
possible or potential obligation on the part of MS to undertake, or to bear all
or any portion of the cost of, any cleanup or any remedial, corrective or
response action of any nature.
(b) MS does not have any report, study, survey or other document
that addresses or otherwise relates to the compliance of MS with, or the
applicability to MS of, any Legal Requirement.
(c) To the best of the Knowledge of MS and the Selling
Shareholders, no Governmental Body has proposed or is considering any Legal
Requirement that, if adopted or otherwise put into effect, (i) may have an
adverse effect on MS's business, condition, assets, liabilities, operations,
financial performance, net income or prospects or on the ability of MS or any of
the Selling Shareholders to comply with or perform any covenant or obligation
under any of the Transactional Agreements, or (ii) may have the effect of
preventing, delaying, making illegal or otherwise interfering with any of the
Transactions.
2.17 Governmental Authorizations.
(a) Part 2.17 of the Disclosure Schedule identifies:
(i) each Governmental Authorization that is held by MS; and
(ii) each other Governmental Authorization that, to the best
of the Knowledge of MS and the Selling Shareholders, is held by any of MS's
employees and relates to or is useful in connection with MS's business.
MS has delivered to the Purchaser accurate and complete copies of all
of the Governmental Authorizations identified in Part 2.17 of the Disclosure
Schedule, including all renewals thereof and all amendments thereto. Each
Governmental Authorization identified or required to be identified in Part 2.17
of the Disclosure Schedule is valid and in full force and effect.
(b) Except as set forth in Part 2.17 of the Disclosure Schedule:
(i) MS and its employees are, and MS and its respective
employees have at all times been, in full compliance with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 2.17 of the Disclosure Schedule;
(ii) no event has occurred, and no condition or circumstance
exists, that might (with or without notice or lapse of time) (A) constitute or
result directly or indirectly in a violation of or a failure to comply with any
term or requirement of any Governmental Authorization identified or required to
be identified in Part 2.17 of the Disclosure Schedule, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, termination
or modification of any Governmental Authorization identified or required to be
identified in Part 2.17 of the Disclosure Schedule;
(iii) MS has never received, and, to the best of the Knowledge
of MS and the Selling Shareholders, no employee of MS has ever received, any
notice or other communication (in writing or otherwise) from any Governmental
Body or any other Person regarding (A) any actual, alleged, possible or
potential violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible or potential
revocation, withdrawal, suspension, cancellation, termination or modification of
any Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations required to be identified in Part
2.17 of the Disclosure Schedule have been duly filed on a timely basis with the
appropriate Governmental Bodies, and each other notice or filing required to
have been given or made with respect to such Governmental Authorizations has
been duly given or made on a timely basis with the appropriate Governmental
Body.
(c) The Governmental Authorizations identified in Part 2.17 of the
Disclosure Schedule constitute all of the Governmental Authorizations necessary
(i) to enable MS to conduct its business in the manner in which its business is
currently being conducted and in the manner in which its business is currently
proposed to be conducted, and (ii) to permit MS to own and use its assets in the
manner in which they are currently owned and used and in the manner in which
they are currently proposed to be owned and used.
2.18 Tax Matters.
(a) Each Tax required to have been paid, or claimed by any
Governmental Body to be payable, by MS (whether pursuant to any Tax Return or
otherwise) has been duly paid in full or on a timely basis. Any Tax required to
have been withheld or collected by MS has been duly withheld and collected; and
(to the extent required) each such Tax has been paid to the appropriate
Governmental Body.
(b) Part 2.18 of the Disclosure Schedule accurately identifies all
Tax Returns required to be filed by or on behalf of any of MS with any
Governmental Body with respect to any taxable period ending on or before the
Closing Date ("MS Returns"). Except as set forth in Part 2.18 of the Disclosure
Schedule, all MS Returns (i) have been filed when due, and (ii) have been filed
accurately and completely and prepared in full compliance with all applicable
Legal Requirements. All amounts shown on the MS Returns to be due on or before
the Closing Date, and all amounts otherwise payable in connection with the MS
Returns on or before the Closing Date, have been or will be paid on or before
the Closing Date. MS has delivered to the Purchaser accurate and complete copies
of all MS Returns filed since December 31, 1995.
(c) The MS Financial Statements fully accrue all actual and contingent
liabilities for Taxes with respect to all periods through the dates thereof in
accordance with GAAP. MS has established, in the Ordinary Course of Business,
reserves adequate for the payment of all Taxes for the period from September 30,
1995 through the Closing Date, and MS will disclose the dollar amount of such
reserves to the Purchaser on or prior to the Closing Date.
(d) Each MS Return relating to income Taxes that has been filed
with respect to any period ended on or prior to December 31, 1995 has either (i)
been examined and audited by all relevant Governmental Bodies, or (ii) by virtue
of the expiration of the limitation period under applicable Legal Requirements,
is no longer subject to examination or audit by any Governmental Body. Part 2.18
of the Disclosure Schedule accurately identifies each examination or audit, if
any, of any MS Return that has been conducted since December 31, 1986. MS has
made available to the Purchaser accurate and complete copies of all audit
reports and similar documents (to which MS has access) relating to MS Returns.
Except as set forth in Part 2.18 of the Disclosure Schedule, no extension or
waiver of the limitation period applicable to any of the MS Returns has been
granted (by MS or any other Person), and no such extension or waiver has been
requested from MS.
(e) Except as set forth in Part 2.18 of the Disclosure Schedule, no
claim or other Proceeding is pending or has been threatened against or with
respect to MS in respect of any Tax. There are no unsatisfied Liabilities for
Taxes (including liabilities for interest, additions to tax and penalties
thereon and related expenses) with respect to any notice of deficiency or
similar document received by MS. MS has not entered into and has not become
bound by any agreement or consent pursuant to Section 341(f) of the Code. MS has
not been, and MS will not be, required to include any adjustment in taxable
income for any tax period (or portion thereof) pursuant to Section 481 or 263A
of the Code or any comparable provision under state or foreign Tax laws as a
result of transactions or events occurring, or accounting methods employed,
prior to the Closing.
(f) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of MS that, individually or collectively, could give rise
directly or indirectly to the payment of any amount that would not be deductible
pursuant to Section 280G or Section 162 of the Code. MS is not, and MS has never
been, a party to or bound by any tax indemnity agreement, tax sharing agreement,
tax allocation agreement or similar Contract.
2.19 Employee and Labor Matters.
(a) Part 2.19 of the Disclosure Schedule accurately sets forth,
with respect to each employee of MS earning an annual base salary of $40,000 or
greater (including any employee of MS who is on a leave of absence or on layoff
status):
(i) the name of such employee and the date as of which such
employee was originally hired by MS;
(ii) such employee's title, and a description of such
employee's duties and responsibilities;
(iii) the aggregate dollar amount of the compensation
(including wages, salary, commissions, director's fees, fringe benefits,
bonuses, profit-sharing payments and other payments or benefits of any type)
received by such employee from MS with respect to services performed in 1998;
(iv) such employee's annualized compensation as of the date of
this Agreement;
(v) each Current Benefit Plan in which such employee
participates or is eligible to participate; and
(vi) any Governmental Authorization that is held by such
employee and that relates to or is useful in connection with MS's business.
(b) Part 2.19 of the Disclosure Schedule accurately identifies each
former employee of MS who is receiving or is scheduled to receive (or whose
spouse or other dependent is receiving or is scheduled to receive) any benefits
(whether from MS or otherwise) relating to such former employee's employment
with MS; and Part 2.19 of the Disclosure Schedule accurately describes such
benefits.
(c) Except as set forth in Part 2.19 of the Disclosure Schedule, MS
is not a party to or bound by, and MS has never been a party to or bound by, any
employment agreement or any union contract, collective bargaining agreement or
similar Contract.
(d) The employment of each of MS's employees is terminable by MS at
will. MS has delivered to the Purchaser accurate and complete copies of all
employee manuals and handbooks, disclosure materials, policy statements and
other materials relating to the employment of the current and former employees
of MS.
(e) To the best of the Knowledge of MS and the Selling
Shareholders:
(i) no employee of MS intends to terminate his employment with
MS;
(ii) no employee of MS has received an offer to join a
business that may be competitive with MS's business; and
(iii) no employee of MS is a party to or is bound by any
confidentiality agreement, noncompetition agreement or other Contract (with any
Person) that may have an adverse effect on (A) the performance by such employee
of any of his duties or responsibilities as an employee of MS, or (B) MS's
business or operations.
(f) MS is not engaged, and has never been engaged, in any unfair
labor practice of any nature. There has never been any slowdown, work stoppage,
labor dispute or union organizing activity, or any similar activity or dispute,
affecting MS or any of its employees. There is not now pending, and no Person
has threatened to commence, any such slowdown, work stoppage, labor dispute or
union organizing activity or any similar activity or dispute. No event has
occurred, and no condition or circumstance exists, that might directly or
indirectly give rise to or provide a basis for the commencement of any such
slowdown, work stoppage, labor dispute or union organizing activity or any
similar activity or dispute.
2.20 Benefit Plans; ERISA.
(a) Part 2.20 of the Disclosure Schedule identifies and provides an
accurate and complete description of each Current Benefit Plan and each Past
Benefit Plan. MS has never established, adopted, maintained, sponsored,
contributed to, participated in or incurred any Liability with respect to any
Employee Benefit Plan, except for the Company Plans identified in Part 2.20 of
the Disclosure Schedule; and MS has never provided or made available any fringe
benefit or other benefit of any nature to any of its employees, except as set
forth in Part 2.20 of the Disclosure Schedule.
(b) No Company Plan:
(i) provides or provided any benefit guaranteed by the Pension
Benefit Guaranty Corporation;
(ii) is or was a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA; or
(iii) is or was subject to the minimum funding standards of
Section 412 of the Code or Section 302 of ERISA.
There is no Person that (by reason of common control or otherwise) is
or has at any time been treated together with MS as a single employer within the
meaning of Section 414 of the Code.
(c) MS has delivered to the Purchaser, with respect to each Company
Plan:
(i) an accurate and complete copy of such Company Plan and all
amendments thereto (including any amendment that is scheduled to take effect in
the future);
(ii) an accurate and complete copy of each Contract (including
any trust agreement, funding agreement, service provider agreement, insurance
agreement, investment management agreement or recordkeeping agreement) relating
to such Company Plan;
(iii) an accurate and complete copy of any description,
summary, notification, report or other document that has been furnished to any
employee of MS with respect to such Company Plan;
(iv) an accurate and complete copy of any form, report,
registration statement or other document that has been filed with or submitted
to any Governmental Body with respect to such Company Plan; and
(v) an accurate and complete copy of any determination letter,
notice or other document that has been issued by, or that has been received by
MS from, any Governmental Body with respect to such Company Plan.
(d) Each Current Benefit Plan is being operated and administered in
full compliance with the provisions thereof, and each Company Plan has at all
times been operated and administered in full compliance with the provisions
thereof. Each contribution or other payment that is required to have been
accrued or made under or with respect to any Company Plan has been duly accrued
and made on a timely basis.
(e) Each Current Benefit Plan complies and is being operated and
administered in full compliance with, and each Company Plan has at all times
complied and been operated and administered in full compliance with, all
applicable reporting, disclosure and other requirements of ERISA and the Code
and all other applicable Legal Requirements. MS has never incurred any Liability
to the Internal Revenue Service or any other Governmental Body with respect to
any Company Plan; and no event has occurred, and no condition or circumstance
exists, that might (with or without notice or lapse of time) give rise directly
or indirectly to any such Liability. Neither MS, nor any Person that is or was
an administrator or fiduciary of any Company Plan (or that acts or has acted as
an agent of MS or any such administrator or fiduciary), has engaged in any
transaction or has otherwise acted or failed to act in a manner that has
subjected or may subject MS to any Liability for breach of any fiduciary duty or
any other duty. No Company Plan, and no Person that is or was an administrator
or fiduciary of any Company Plan (or that acts or has acted as an agent of any
such administrator or fiduciary):
(i) has engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code;
(ii) has failed to perform any of the responsibilities or
obligations imposed upon fiduciaries under Title I of ERISA; or
(iii) has taken any action that (A) may subject such Company
Plan or such Person to any Tax, penalty or Liability relating to any "prohibited
transaction," or (B) may directly or indirectly give rise to or serve as a basis
for the assertion (by any employee or by any other Person) of any claim under,
on behalf of or with respect to such Company Plan.
(f) No inaccurate or misleading representation, statement or other
communication has been made or directed (in writing or otherwise) to any current
or former employee of MS (i) with respect to such employee's participation,
eligibility for benefits, vesting, benefit accrual or coverage under any Company
Plan or with respect to any other matter relating to any Company Plan, or (ii)
with respect to any proposal or intention on the part of MS to establish or
sponsor any Employee Benefit Plan or to provide or make available any fringe
benefit or other benefit of any nature.
(g) Except as set forth in Part 2.20 of the Disclosure Schedule, MS
has not advised any of its employees (in writing or otherwise) that it intends
or expects to establish or sponsor any Employee Benefit Plan or to provide or
make available any fringe benefit or other benefit of any nature in the future.
2.21 Environmental Matters.
(a) MS is not liable or potentially liable for any response cost or
natural resource damages under Section 107(a) of CERCLA, or under any other
so-called "superfund" or "superlien" law or similar Legal Requirement, at or
with respect to any site.
(b) MS has never received any notice or other communication (in
writing or otherwise) from any Governmental Body or other Person regarding any
actual, alleged, possible or potential Liability arising from or relating to the
presence, generation, manufacture, production, transportation, importation, use,
treatment, refinement, processing, handling, storage, discharge, release,
emission or disposal of any Hazardous Material. No Person has ever commenced or
threatened to commence any contribution action or other Proceeding against MS in
connection with any such actual, alleged, possible or potential Liability; and
no event has occurred, and no condition or circumstance exists, that may
directly or indirectly give rise to, or result in MS becoming subject to, any
such Liability.
(c) Except as set forth in Part 2.21 of the Disclosure Schedule, MS
has never generated, manufactured, produced, transported, imported, used,
treated, refined, processed, handled, stored, discharged, released or disposed
of any Hazardous Material (whether lawfully or unlawfully). Except as set forth
in Part 2.21 of the Disclosure Schedule, MS has never permitted (knowingly or
otherwise) any Hazardous Material to be generated, manufactured, produced, used,
treated, refined, processed, handled, stored, discharged, released or disposed
of (whether lawfully or unlawfully):
(i) on or beneath the surface of any real property that is, or
that has at any time been, owned by, leased to, controlled by or used by MS;
(ii) in or into any surface water, groundwater, soil or air
associated with or adjacent to any such real property; or
(iii) in or into any well, pit, pond, lagoon, impoundment,
ditch, landfill, building, structure, facility, improvement, installation,
equipment, pipe, pipeline, vehicle or storage container that is or was located
on or beneath the surface of any such real property or that is or has at any
time been owned by, leased to, controlled by or used by MS.
(d) All property that is owned by, leased to, controlled by or used
by MS, and all surface water, groundwater, soil and air associated with or
adjacent to such property:
(i) is in clean and healthful condition;
(ii) except as set forth in Part 2.21 of the Disclosure
Schedule is free of any Hazardous Material and any harmful chemical or physical
conditions; and
(iii) is free of any environmental contamination of any
nature.
(e) Each storage tank or other storage container that is or has
been owned by, leased to, controlled by or used by MS, or that is located on or
beneath the surface of any real property owned by, leased to, controlled by or
used by MS:
(i) is in sound condition; and
(ii) has been demonstrated by accepted testing methodologies
to be free of any corrosion or leaks.
2.22 Sale of Products; Performance of Services.
(a) Each product that has been sold by MS to any Person:
(i) conformed and complied in all respects with the terms and
requirements of any applicable warranty or other Contract and with all
applicable Legal Requirements; and
(ii) was free of any design defects, programming errors,
construction defects or other defects or deficiencies at the time of sale. All
repair services, technical, maintenance and other services that have been
performed by MS were performed properly and in full conformity with the terms
and requirements of all applicable warranties and other Contracts and with all
applicable Legal Requirements.
(b) MS will not incur or otherwise become subject to any Liability
arising directly or indirectly from any product manufactured or sold, or any
repair services or other services performed by, MS on or at any time prior to
the Closing Date.
(c) No product manufactured or sold by MS has been the subject of
any recall or other similar action; and no event has occurred, and no condition
or circumstance exists, that might (with or without notice or lapse of time)
directly or indirectly give rise to or serve as a basis for any such recall or
other similar action relating to any such product.
(d) Except as set forth in Part 2.22 of the Disclosure Schedule, no
customer or other Person has ever asserted or threatened to assert any claim
against MS (i) under or based upon any warranty provided by or on behalf of MS,
or (ii) under or based upon any other warranty relating to any product sold by
MS or any services performed by MS. To the best of the Knowledge of MS and the
Selling Shareholders, no event has occurred, and no condition or circumstance
exists, that might (with or without notice or lapse of time) directly or
indirectly give rise to or serve as a basis for the assertion of any such claim.
(e) MS has in place, and has at all times had in place, an adequate
and appropriate quality control system that is at least as comprehensive and
effective as the quality control systems customarily maintained by Comparable
Entities.
2.23 Insurance.
(a) Part 2.23 of the Disclosure Schedule accurately sets forth,
with respect to each insurance policy maintained by or at the expense of, or for
the direct or indirect benefit of, MS:
(i) the name of the insurance carrier that issued such policy
and the policy number of such policy;
(ii) whether such policy is a "claims made" or an
"occurrences" policy;
(iii) a description of the coverage provided by such policy
and the material terms and provisions of such policy (including all applicable
coverage limits, deductible amounts and co-insurance arrangements and any
non-customary exclusions from coverage);
(iv) the annual premium payable with respect to such policy,
and the cash value (if any) of such policy; and
(v) a description of any claims pending, and any claims that
have been asserted in the past, with respect to such policy.
Part 2.23 also identifies (1) each pending application for insurance
that has been submitted by or on behalf of MS, and (2) each self-insurance or
risk-sharing arrangement affecting MS or any of its assets. MS has delivered to
the Purchaser accurate and complete copies of all of the insurance policies
identified in Part 2.23 of the Disclosure Schedule (including all renewals
thereof and endorsements thereto) and all of the pending applications identified
in Part 2.23 of the Disclosure Schedule.
(b) Each of the policies identified in Part 2.23 of the Disclosure
Schedule is valid, enforceable and in full force and effect, and has been issued
by an insurance carrier that, to the best of the Knowledge of MS and the Selling
Shareholders, is solvent, financially sound and reputable. All of the
information contained in the applications submitted in connection with said
policies was (at the times said applications were submitted) accurate and
complete, and all premiums and other amounts owing with respect to said policies
have been paid in full on a timely basis. The nature, scope and dollar amounts
of the insurance coverage provided by said policies are sufficient to adequately
insure MS's business, assets, operations, key employees, services and potential
liabilities; and said insurance coverage is at least as comprehensive as the
insurance coverage customarily maintained by Comparable Entities.
(c) Except as set forth in Part 2.23 of the Disclosure Schedule,
there is no pending claim under or based upon any of the policies identified in
Part 2.23 of the Disclosure Schedule; and no event has occurred, and no
condition or circumstance exists, that might (with or without notice or lapse of
time) directly or indirectly give rise to or serve as a basis for any such
claim.
(d) MS has not received:
(i) any notice or other communication (in writing or
otherwise) regarding the actual or possible cancellation or invalidation of any
of the policies identified in Part 2.23 of the Disclosure Schedule or regarding
any actual or possible adjustment in the amount of the premiums payable with
respect to any of said policies;
(ii) any notice or other communication (in writing or
otherwise) regarding any actual or possible refusal of coverage under, or any
actual or possible rejection of any claim under, any of the policies identified
in Part 2.23 of the Disclosure Schedule; or
(iii) any indication that the issuer of any of the policies
identified in Part 2.23 of the Disclosure Schedule may be unwilling or unable to
perform any of its obligations thereunder.
2.24 Related Party Transactions. Except as set forth in Part 2.24 of
the Disclosure Schedule:
(a) no Related Party has, and no Related Party has at any time
since December 31, 1995 had, any direct or indirect interest of any nature in
any asset used in or otherwise relating to the business of MS;
(b) no Related Party is, or has at any time since December 31, 1995
been, indebted to MS;
(c) since December 31, 1995, no Related Party has entered into, or
has had any direct or indirect financial interest in, any Contract, transaction
or business dealing of any nature involving MS;
(d) no Related Party is competing, or has at any time since
December 31, 1995 competed, directly or indirectly, with MS in any market served
by MS;
(e) no Related Party has any claim or right against MS; and
(f) no event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time) directly or indirectly give
rise to or serve as a basis for any claim or right in favor of any Related Party
against MS.
2.25 Certain Payments, Etc. Neither MS nor any officer, employee, agent
or other Person associated with or acting for or on behalf of MS, has at any
time, directly or indirectly:
(a) used any corporate funds (i) to make any unlawful political
contribution or gift or for any other unlawful purpose relating to any political
activity, (ii) to make any unlawful payment to any governmental official or
employee, or (iii) to establish or maintain any unlawful or unrecorded fund or
account of any nature;
(b) made any false or fictitious entry, or failed to make any entry
that should have been made, in any of the books of account or other records of
MS;
(c) made any payoff, influence payment, bribe, rebate, kickback or
unlawful payment to any Person;
(d) performed any favor or given any gift which was not deductible
for federal income tax purposes;
(e) made any payment (whether or not lawful) to any Person, or
provided (whether lawfully or unlawfully) any favor or anything of value
(whether in the form of property or services, or in any other form) to any
Person, for the purpose of obtaining or paying for (i) favorable treatment in
securing business, or (ii) any other special concession; or
(f) agreed, committed, offered or attempted to take any of the
actions described in clauses "(a)" through "(e)" above.
2.26 Proceedings; Orders.
(a) Except as set forth in Part 2.26 of the Disclosure Schedule,
there is no pending Proceeding, and no Person has threatened to commence any
Proceeding:
(i) that involves MS or that otherwise relates to or might
affect MS's business or any of the assets owned or used by MS (whether or not MS
is named as a party thereto); or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
Transactions.
Except as set forth in Part 2.26 of the Disclosure Schedule, no event
has occurred, and no claim, dispute or other condition or circumstance exists,
that might directly or indirectly give rise to or serve as a basis for the
commencement of any such Proceeding.
(b) Except as set forth in Part 2.26 of the Disclosure Schedule, no
Proceeding has ever been commenced by or against MS; and no Proceeding otherwise
involving or relating to MS has been pending or threatened at any time.
(c) MS has delivered to the Purchaser accurate and complete copies
of all pleadings, correspondence and other written materials to which MS has
access that relate to the Proceedings identified in Part 2.26 of the Disclosure
Schedule.
(d) There is no Order to which MS, or any of the assets owned or
used by MS, is subject; and none of the Selling Shareholders is subject to any
Order that relates to MS's business or to any of the assets owned or used by MS.
(e) To the best of the Knowledge of MS and the Selling
Shareholders, no officer or employee of MS is subject to any Order that
prohibits such officer or employee from engaging in or continuing any conduct,
activity or practice relating to MS's business.
(f) There is no proposed Order that, if issued or otherwise put
into effect, (i) may have an adverse effect on MS's business, condition, assets,
liabilities, operations, financial performance, net income or prospects (or on
any aspect or portion thereof) or on the ability of MS or any of the Selling
Shareholders to comply with or perform any covenant or obligation under any of
the Transactional Agreements, or (ii) may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the Transactions.
2.27 Authority; Binding Nature of Agreements.
(a) MS has the absolute and unrestricted right, power and authority
to enter into and to perform its obligations under this Agreement; and the
execution, delivery and performance by MS of this Agreement have been duly
authorized by all necessary action on the part of MS and its shareholders, board
of directors and officers. This Agreement constitutes the legal, valid and
binding obligation of MS, enforceable against MS in accordance with its terms.
(b) Each Selling Shareholder has the absolute and unrestricted
right, power and capacity to enter into and to perform such Selling
Shareholder's obligations under each of the Transactional Agreements to which
such Selling Shareholder is or may become a party. This Agreement constitutes
the legal, valid and binding obligation of each of the Selling Shareholders,
enforceable against each of the Selling Shareholders in accordance with its
terms. Upon the execution of each of the other Transactional Agreements at the
Closing, each of such other Transactional Agreements will constitute the legal,
valid and binding obligation of each Selling Shareholder who is a party thereto,
and will be enforceable against such Selling Shareholder in accordance with its
terms.
(c) The respective spouses of the Selling Shareholders have the
absolute and unrestricted right, power and capacity to execute and deliver and
to perform their obligations under the Spousal Consents being executed by them.
Said Spousal Consents constitute their legal, valid and binding obligations,
enforceable against them in accordance with their terms.
(d) The Agent has the unrestricted right, power, authority and
capacity to act for and bind each of the Selling Shareholders with respect to
all matters relating to the Transactional Agreements and the Transactions.
2.28 Non-Contravention; Consents. Except as set forth in Part 2.28 of
the Disclosure Schedule, neither the execution and delivery of any of the
Transactional Agreements, nor the consummation or performance of any of the
Transactions, will directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of (i) any
of the provisions of MS's articles of incorporation or bylaws, or (ii) any
resolution adopted by MS's shareholders, MS's board of directors or any
committee of MS's board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which MS or any of the Selling Shareholders, or any
of the assets owned or used by MS, is subject;
(c) cause MS, the Purchaser or any affiliate of the Purchaser to
become subject to, or to become liable for the payment of, any Tax;
(d) cause any of the assets owned or used by MS to be reassessed or
revalued by any taxing authority or other Governmental Body;
(e) contravene, conflict with or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by MS or any of its employees or that otherwise relates to MS's
business or to any of the assets owned or used by MS;
(f) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any MS Contract other than an
Excluded Contract;
(g) give any Person the right to (i) declare a default or exercise
any remedy under any MS Contract (other than an Excluded Contract), (ii)
accelerate the maturity or performance of any MS Contract (other than an
Excluded Contract), or (iii) cancel, terminate or modify any MS Contract (other
than an Excluded Contract);
(h) contravene, conflict with or result in a violation or breach of
or a default under any provision of, or give any Person the right to declare a
default under, any Contract to which any of the Selling Shareholders is a party
or by which any of the Selling Shareholders is bound; or
(i) result in the imposition or creation of any Encumbrance upon or
with respect to any asset owned or used by MS.
Except as set forth in Part 2.28 of the Disclosure Schedule, neither MS
nor any of the Selling Shareholders was, is or will be required to make any
filing with or give any notice to, or to obtain any Consent from, any Person in
connection with the execution and delivery of any of the Transactional
Agreements or the consummation or performance of any of the Transactions.
2.29 Year 2000 Compliance. Except as set forth in Part 2.29 of the
Disclosure Schedule, all of MS' products (including products sold, marketed or
distributed by MS) and internal systems are designed to be used prior to, during
and after the year 2000, and are Year 2000 Compliant.
2.30 Brokers. Neither MS nor any of the Selling Shareholders has agreed
or become obligated to pay, or has taken any action that might result in any
Person claiming to be entitled to receive, any brokerage commission, finder's
fee or similar commission or fee in connection with any of the Transactions
other than Xxxxxx Xxxxxxx & Associates as set forth in Section 7.23.
2.31 Selling Shareholders.
(a) Each Selling Shareholder has the capacity and financial
capability to comply with and perform all of such Selling Shareholder's
covenants and obligations under each of the Transactional Agreements to which
such Selling Shareholder is or may become a party.
(b) No Selling Shareholder:
(i) has, at any time, (A) made a general assignment for the
benefit of creditors, (B) filed, or had filed against such Selling Shareholder,
any bankruptcy petition or similar filing, (C) suffered the attachment or other
judicial seizure of all or a substantial portion of such Selling Shareholder's
assets, (D) admitted in writing such Selling Shareholder's inability to pay such
Selling Shareholder's debts as they become due, (E) been convicted of, or
pleaded guilty to, any felony, or (F) taken or been the subject of any action
that may have an adverse effect on such Selling Shareholder's ability to comply
with or perform any of such Selling Shareholder's covenants or obligations under
any of the Transactional Agreements; or
(ii) is subject to any Order that may have an adverse effect
on such Selling Shareholder's ability to comply with or perform any of such
Selling Shareholder's covenants or obligations under any of the Transactional
Agreements.
(c) There is no Proceeding pending, and no Person has threatened to
commence any Proceeding, that may have an adverse effect on the ability of any
Selling Shareholder to comply with or perform any of such Selling Shareholder's
covenants or obligations under any of the Transactional Agreements. No event has
occurred, and no claim, dispute or other condition or circumstance exists, that
might directly or indirectly give rise to or serve as a basis for the
commencement of any such Proceeding.
2.32 Full Disclosure.
(a) None of the Transactional Agreements contains or will contain
any untrue statement of fact; and none of the Transactional Agreements omits or
will omit to state any fact necessary to make any of the representations,
warranties or other statements or information contained therein not misleading.
(b) Except as set forth in Part 2.32 of the Disclosure Schedule,
there is no fact within the Knowledge of MS or any of the Selling Shareholders
(other than publicly known facts relating exclusively to political or economic
matters of general applicability that will adversely affect all Comparable
Entities) that (i) may have an adverse effect on MS's business, condition,
assets, liabilities, operations, financial performance, net income or prospects
(or on any aspect or portion thereof) or on the ability of MS or any of the
Selling Shareholders to comply with or perform any covenant or obligation under
any of the Transactional Agreements, or (ii) may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the Transactions.
(c) All of the information set forth in the Disclosure Schedule,
and all other information regarding MS and its business, condition, assets,
liabilities, operations, financial performance and net income that has been
furnished to the Purchaser or any of its Representatives by or on behalf of MS
or any of MS's Representatives, is accurate and complete in all respects.
(d) MS and the Selling Shareholders have provided the Purchaser and
the Purchaser's Representatives with full and complete access to all of MS's
records and other documents and data.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants, to and for the benefit of the
Selling Shareholders, as follows:
3.1 Acquisition of Shares. The Purchaser is not acquiring the Shares
with the current intention of making a public distribution thereof.
3.2 Authority; Binding Nature of Agreement. Upon the adoption of
appropriate resolutions by the Purchaser's board of directors:
(a) the Purchaser will have the absolute and unrestricted right,
power and authority to enter into and perform its obligations under this
Agreement;
(b) the execution, delivery and performance of this Agreement by
the Purchaser will have been duly authorized by all necessary action on the part
of the Purchaser and its board of directors; and
(c) this Agreement will constitute the legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms.
3.3 Brokers. Except for fees payable to Xxxxxxxxxx and Partners, Inc.
pursuant to its agreement with the parent company of the Purchaser, the
Purchaser has not agreed or become obligated to pay, and has not taken any
action that might result in any Person claiming to be entitled to receive, any
brokerage commission, finder's fee or similar commission or fee in connection
with any of the Transactions.
4. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE
The Purchaser's obligation to purchase the Shares and to take the other
actions required to be taken by the Purchaser at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Purchaser, in whole or in part, in accordance
with Section 7.16):
4.1 Accuracy of Representations. All of the other representations and
warranties made by MS and the Selling Shareholders in this Agreement (considered
collectively), and each of said representations and warranties (considered
individually), shall have been accurate in all material respects as of the date
of this Agreement.
4.2 Performance of Obligations.
(a) MS and the Selling Shareholders shall have executed and
delivered each of the agreements required to be executed and delivered by MS or
the Selling Shareholders pursuant to Section 1.4(b).
(b) The Selling Shareholders shall have delivered to the Purchaser
the certificates representing the Shares as required by Section 1.4(b)(i), and
each Selling Shareholder shall have executed and delivered each of the other
documents required to be executed and delivered by such Selling Shareholders
pursuant to Section 1.4(b).
(c) All of the other covenants and obligations that MS and the
Selling Shareholders are required to comply with or to perform at or prior to
the Closing (considered collectively), and each of said covenants and
obligations (considered individually), shall have been duly complied with and
performed in all material respects.
4.3 Approval of Purchaser's Board of Directors; Consents.
(a) The Purchaser's board of directors shall have ratified the
execution of this Agreement by the Purchaser and shall have approved the
consummation of the Transactions.
(b) Each of the Consents identified in Part 2.28 of the Disclosure
Schedule shall have been obtained and shall be in full force and effect.
4.4 No Adverse Change. There shall have been no adverse change in MS's
business, condition, assets, liabilities, operations, financial performance, net
income or prospects (or in any aspect or portion thereof) since August 31, 1999
other than an increase in negative Working Capital of approximately $100,000.
4.5 Additional Documents. Purchaser shall have received such other
documents as the Purchaser may request in good faith for the purpose of (i)
evidencing the accuracy of any representation or warranty made by MS or any of
the Selling Shareholders, (ii) evidencing the compliance by MS or any of the
Selling Shareholders with, or the performance by MS or any of the Selling
Shareholders of, any covenant or obligation set forth in this Agreement, (iii)
evidencing the satisfaction of any condition set forth in this Section 4, or
(iv) otherwise facilitating the consummation or performance of any of the
Transactions.
4.6 No Proceedings. There shall not have been commenced or threatened
against the Purchaser, or against any Person affiliated with the Purchaser, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Transactions, or (b) that may have the effect of
preventing, delaying, making illegal or otherwise interfering with any of the
Transactions.
4.7 No Claim Regarding Stock Ownership or Sale Proceeds. No Person
shall have made or threatened any claim asserting that such Person (a) may be
the holder or the beneficial owner of, or may have the right to acquire or to
obtain beneficial ownership of, any capital stock or other securities of MS, or
(b) may be entitled to all or any portion of the Purchase Price.
4.8 No Prohibition. Neither the consummation nor the performance of any
the Transactions will, directly or indirectly (with or without notice or lapse
of time), contravene or conflict with or result in a violation of, or cause the
Purchaser or any Person affiliated with the Purchaser to suffer any adverse
consequence under, (a) any applicable Legal Requirement or Order, or (b) any
Legal Requirement or Order that has been proposed by or before any Governmental
Body.
4.9 Termination of Warrant Rights. All rights to receive Warrants to
purchase shares of MS' capital stock upon the payment in full of the obligations
evidenced by the Convertible Loan Agreement shall be terminated in exchange for
the right to receive cash pursuant to Section 1.2(d).
4.10 Termination of Options. All Options (other than the Options of
Xxxx Xxxxxxx which have all been exercised) shall have been terminated in
exchange for the right to receive cash pursuant to Section 1.2(d).
5. CONDITIONS PRECEDENT TO SELLING SHAREHOLDERS' OBLIGATION TO CLOSE
The Selling Shareholders' obligation to sell the Shares and to take the
other actions required to be taken by the Selling Shareholders at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by the Agent, in whole or in
part, in accordance with Section 7.16):
5.1 Accuracy of Representations. All of the representations and
warranties made by the Purchaser in this Agreement (considered collectively),
and each of said representations and warranties (considered individually), shall
have been accurate in all material respects as of the date of this Agreement and
shall be accurate in all material respects as of the Scheduled Closing Time as
if made at the Scheduled Closing Time.
5.2 Purchaser's Performance.
(a) The Purchaser shall have made the cash payments contemplated by
Sections 1.4(b)(i) and paid or caused to be paid the outstanding indebtedness of
MS under the Convertible Loan Agreement and under the credit agreement with
Union Bank of California, N.A.
(b) All of the other covenants and obligations that the Purchaser
is required to comply with or to perform pursuant to this Agreement at or prior
to the Closing (considered collectively), and each of said covenants and
obligations (considered individually), shall have been complied with and
performed in all material respects.
5.3 No Injunction. There shall not be in effect any injunction that
shall have been entered by a court of competent jurisdiction since the date of
this Agreement and that prohibits the sale of the Shares by the Selling
Shareholders to the Purchaser.
5.4 Modification of Xxxx Note. Concurrent with the Closing, Xxxxxxx X.
Xxxx ("Xxxx") shall have exchanged the Secured Promissory Note dated August 11,
1998 (the "Secured Note") for a new unsecured promissory note with an original
principal amount of $500,000 in the form of Exhibit F hereto (the "New Note")
and Purchaser shall have paid or shall have caused MS to have paid Xxxx in cash
$900,000 in principal and any accrued interest on the Secured Note. Titan shall
cause MS to pay the New Note, less any setoffs, in accordance with its terms.
6. INDEMNIFICATION, ETC.
6.1 Survival of Representations and Covenants.
(a) The representations, warranties, covenants and obligations of
each party shall survive (without limitation):
(i) the Closing and the sale of the Shares to the Purchaser;
(ii) any sale or other disposition of any or all of the Shares
by the Purchaser; and
(iii) any Acquisition Transaction effected by or otherwise
involving the Purchaser or MS.
All of said representations, warranties, covenants and obligations
shall remain in full force and effect and shall survive until 11:59 p.m. on the
18th month anniversary of the Closing Date.
(b) The representations, warranties, covenants and obligations of
MS and the Selling Shareholders, and the rights and remedies that may be
exercised by the Indemnitees, shall not be limited or otherwise affected by or
as a result of any information furnished to, or any investigation made by or
Knowledge of, any of the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
MS and the Selling Shareholders in this Agreement.
6.2 Indemnification by Selling Shareholders.
(a) The Selling Shareholders, jointly and severally, shall hold
harmless and indemnify each of the Indemnitees from and against, and shall
compensate and reimburse each of the Indemnitees for, any Damages which are
directly or indirectly suffered or incurred by any of the Indemnitees or to
which any of the Indemnitees may otherwise become subject at any time
(regardless of whether or not such Damages relate to any third-party claim) and
which arise directly or indirectly from or as a direct or indirect result of, or
are directly or indirectly connected with:
(i) any Breach of any representation or warranty made by MS or
any of the Selling Shareholders in this Agreement (without giving effect to any
update to the Disclosure Schedule) or in the Closing Certificate;
(ii) any Breach of any representation, warranty, statement,
information or provision contained in the Disclosure Schedule;
(iii) any Breach of any covenant or obligation of MS or any of
the Selling Shareholders;
(iv) any Liability to which MS or any of the other Indemnitees
may become subject and that arises directly or indirectly from or relates
directly or indirectly to (A) any product manufactured or sold, or any service
performed, by or on behalf of MS on or at any time on or prior to the Closing
Date, (B) the presence of any Hazardous Material at any site owned, leased,
occupied or controlled by MS on or at any time on or prior to the Closing Date,
or (C) the generation, manufacture, production, transportation, importation,
use, treatment, refinement, processing, handling, storage, discharge, release or
disposal of any Hazardous Material (whether lawfully or unlawfully) by or on
behalf of MS on or at any time on or prior to the Closing Date;
(v) any matter identified or referred to in Part 2.16 or Part
2.26 of the Disclosure Schedule (including with limitation Generation Systems,
Rock Island Arsenal, Navy Public Works Center - Pearl Harbor (customer no.
2296), Smithfield Foods, Inc. (customer no. 322), Lexington Medical (customer
no. 3266), Ivanhoe, Inc., Processing Concepts and the Xxxxxxxx claims);
(vi) any claim by any former Option or Warrant holder relating
to the cash-out of the Options or Warrants pursuant to Section 1.2(d) of this
Agreement;
(vii) any Liability (on a dollar for dollar basis) arising
from MS' ownership of an equity interest in Cima Computacion & Informatica, S.A.
de C.V.;
(viii) any Liability (as measured by the loss of tax benefit
resulting from a reduction in the net operating loss) or cash expense (on a
dollar for dollar basis) incurred by MS or the Purchaser as a result of MS'
adjustment to taxable income resulting from the change from the cash method of
accounting to the accrual method of accounting;
(ix) any Liability not to exceed $50,000 incurred on or before
December 31, 1999 to make the accounting system Year 2000 Compliant;
(x) any Proceeding relating directly or indirectly to any
Breach, alleged Breach, Liability or matter of the type referred to in clause
"(i)," "(ii)," "(iii)," "(iv)," "(v)," "(vi)," "(vii)," "(viii)" or "(x)" above
(including any Proceeding commenced by any Indemnitee for the purpose of
enforcing any of its rights under this Section 6).
(b) The Selling Shareholders acknowledge and agree that, if there
is any Breach of any representation, warranty or other provision relating to MS
or MS's business, condition, assets, liabilities, operations, financial
performance or net income (or any aspect or portion thereof), or if MS becomes
subject to any Liability of the type referred to in clauses "(iv)" "(vii)" or
(viii) of Section 6.2(a) or becomes subject to a claim referred to in clauses
"(v)," "(vi)" or "(vii)", then the Purchaser itself shall be deemed, by virtue
of its ownership of common stock of MS, to have incurred Damages, if any, as a
result of such Breach, Liability, claim or matter. Nothing contained in this
Section 6.2(b) shall have the effect of (i) limiting the circumstances under
which the Purchaser may otherwise be deemed to have incurred Damages for
purposes of this Agreement, (ii) limiting the other types of Damages that the
Purchaser may be deemed to have incurred (whether in connection with any such
Breach or Liability or otherwise), or (iii) limiting the rights of MS or any of
the other Indemnitees under this Section 6.2.
6.3 Threshold/Limitation.
(a) Subject to Section 6.3(c), the Selling Shareholders shall not
be required to make any indemnification payment pursuant to Section 6.2 for any
Breach of any of their representations and warranties until such time as the
total amount of all Damages (including the Damages arising from such Breach and
all other Damages arising from any other Breaches of any representations or
warranties) that have been directly or indirectly suffered or incurred by any
one or more of the Indemnitees, or to which any one or more of the Indemnitees
has or have otherwise become subject, exceeds $150,000 in the aggregate,
provided that this limitation shall not apply with respect to any claim for
indemnity made with respect to any claim subject to Section 6.11. At such time
as the total amount of such Damages exceeds $150,000 in the aggregate, the
Indemnitees shall be entitled to be indemnified against all Damages arising from
any Breach of any representations and warranties in excess of the first $50,000
in Damages, which shall be a deductible.
(b) Subject to Section 6.3(c), the Selling Shareholders shall have
no liability with respect to the matters described in Section 6.2 (whether
arising from a third party claim or otherwise) to the extent total payments made
by the Selling Shareholders with respect to such matters (excluding any Damages
or Losses paid by Xxxx pursuant to Section 6.11) exceed $3,000,000.
(c) The limitation on the Selling Shareholders' obligations that is
set forth in Section 6.3(a) or 6.3(b) shall not apply to (i) any Breach of any
of the Specified Representations, or (ii) any Breach arising directly or
indirectly as a result of reckless or willful misconduct on the part of any
director, officer, management employee, or other Representative of MS or any of
the Selling Shareholders on or prior to the Closing Date.
6.4 Right to Require Cure of Breach. Without limiting the generality of
anything contained in Section 6.2, subject to the threshold and deductible in
Section 6.3(a) and the limitation in 6.3(b), if there is any Breach of any
representation or warranty made by MS or any of the Selling Shareholders, then
the Selling Shareholders, jointly and severally, shall be obligated to pay such
amounts to MS and take such other actions as the Purchaser may in good faith
request for the purpose of causing such Breach to be corrected, cured and
eliminated in all respects (at no cost to MS or the Purchaser).
6.5 No Contribution. Each Selling Shareholder waives, and acknowledges
and agrees that such Selling Shareholder shall not have and shall not exercise
or assert or attempt to exercise or assert, any right of contribution or right
of indemnity or any other right or remedy against MS in connection with any
indemnification obligation or any other Liability to which such Selling
Shareholder may become subject under any of the Transactional Agreements or
otherwise in connection with any of the Transactions.
6.6 Interest. Except with respect to Damages set off against the Second
Installment on which the Purchaser pays no interest, any party that is required
to indemnify any other Person pursuant to this Section 6 with respect to any
Damages shall also be required to pay such other Person interest on the amount
of such Damages (for the period commencing as of the date on which such other
Person first incurred or otherwise became subject to such Damages and ending on
the date on which the applicable indemnification payment is made by such party)
at a floating rate three percentage points above the rate of interest publicly
announced by Bank of America, N.T. & S.A. from time to time as its prime, base
or reference rate.
6.7 Setoff. In addition to any rights of setoff or other rights that
the Purchaser or any of the other Indemnitees may have at common law or
otherwise, the Purchaser shall have the right to set off any amount that may be
owed to any Indemnitee under this Section 6 against the Second Installment;
provided that Purchaser complies with the following procedure:
(a) Prior to any setoff, the Purchaser shall deliver to the Agent a
claim notice (a "Claim Notice") that shall state in reasonable detail: (i) the
nature of the Breach (or Loss), Liability or other matter for which
indemnification is sought under Section 6, (ii) the estimated amount of such
Damages (or Losses), Liability or matter and the date on which such Damages (or
Losses), Liability or matter were suffered or incurred or are expected in good
faith to be suffered or incurred.
(b) Upon the request of the Agent, the Purchaser shall reasonably
provide non-privileged documents, records and other information relating to each
claim in the Claim Notice.
(c) If the Agent agrees with the Claim Notice or fails to respond
within 30 calendar days commencing on the date of delivery of the Claim Notice,
then Buyer may set off the claims set forth in the Claims Notice against the
Second Installment.
(d) If, during the 30 day period commencing on the date of delivery
of a Claim Notice, Purchaser shall have received a written notice from or on
behalf of the Agent stating that Agent in good faith disputes the claim asserted
in such Claim Notice, then the Purchaser shall not make any set off against the
Second Installment for a period of 45 days during which the Purchaser and Agent
shall engage in discussions about a potential resolution of the disputed claims
in accordance with Section 7.22. If the Purchaser and the Agent fail to resolve
any dispute in accordance with Section 7.22, then the Purchaser may set off the
full amount of claim set forth in the disputed Claim Notice, without prejudice
to the right of the Agent (on behalf of the Selling Shareholders) to seek
recovery of the setoff amount through an arbitration proceeding under Section
7.24 of this Agreement.
6.8 Nonexclusivity of Indemnification Remedies. The indemnification
remedies and other remedies provided in this Section 6 shall not be deemed to be
exclusive. Accordingly, the exercise by any Person of any of its rights under
this Section 6 shall not be deemed to be an election of remedies and shall not
be deemed to prejudice, or to constitute or operate as a waiver of, any other
right or remedy that such Person may be entitled to exercise (whether under this
Agreement, under any other Contract, under any statute, rule or other Legal
Requirement, at common law, in equity or otherwise); provided, however, that any
right or remedy that such Person may be entitled to exercise shall be subject to
the liability limits in Section 6.3.
6.9 Defense of Third Party Claims. In the event of the assertion or
commencement by any Person of any claim or Proceeding (whether against MS,
against any other Indemnitee or against any other Person) with respect to which
any of the Selling Shareholders may become obligated to indemnify, hold
harmless, compensate or reimburse any Indemnitee pursuant to this Section 6, the
Purchaser shall have the right, at its election, to designate the Agent to
assume the defense of such claim or Proceeding at the sole expense of the
Selling Shareholders. If the Purchaser so elects to designate the Agent to
assume the defense of any such claim or Proceeding:
(a) the Agent shall proceed to defend such claim or Proceeding in a
diligent manner with counsel satisfactory to the Purchaser;
(b) the Purchaser shall make available to the Agent any
non-privileged documents and materials in the possession of the Purchaser that
may be necessary to the defense of such claim or Proceeding;
(c) the Agent shall keep the Purchaser informed of all material
developments and events relating to such claim or Proceeding;
(d) the Purchaser, at its own expense, shall have the right to
participate in the defense of such claim or Proceeding;
(e) the Agent shall not settle, adjust or compromise such claim or
Proceeding without the prior written consent of the Purchaser (which consent
shall not be unreasonably withheld if the settlement includes a general release
of MS and the Purchaser, involves no prohibition or restriction on the use of
any asset of MS or Purchaser or the conduct of any business by MS or Purchaser
and requires no payment from the Purchaser or MS); and
(f) the Purchaser may at any time (notwithstanding the prior
designation of the Agent to assume the defense of such claim or Proceeding)
assume the defense of such claim or Proceeding.
If the Purchaser does not elect to designate the Agent to assume the
defense of any such claim or Proceeding (or if, after initially designating the
Agent to assume such defense, the Purchaser elects to assume such defense), the
Purchaser may proceed with the defense of such claim or Proceeding on its own.
If the Purchaser so proceeds with the defense of any such claim or Proceeding on
its own:
(i) all reasonable expenses relating to the defense of such
claim or Proceeding (whether or not incurred by the Purchaser) shall be borne
and paid exclusively by the Selling Shareholders;
(ii) the Selling Shareholders shall make available to the
Purchaser any non-privileged documents and materials in the possession or
control of any of the Selling Shareholders that may be necessary to the defense
of such claim or Proceeding;
(iii) the Purchaser shall keep the Agent informed of all
material developments and events relating to such claim or Proceeding;
(iv) the Agent, at its own expense, shall have the right to
participate in the defense of such claim or proceeding; and
(v) the Purchaser shall have the right to settle, adjust or
compromise such claim or Proceeding with the prior written consent of the Agent;
provided, however, that the Agent shall not unreasonably withhold such consent.
6.10 Exercise of Remedies by Indemnitees Other Than Purchaser. No
Indemnitee (other than the Purchaser or any successor thereto or assign thereof)
shall be permitted to assert any indemnification claim or exercise any other
remedy under this Agreement unless the Purchaser (or any successor thereto or
assign thereof) shall have consented to the assertion of such indemnification
claim or the exercise of such other remedy.
6.11 Survival of Indemnity in favor of MS. In addition to any other
rights of indemnification granted hereunder, any and all rights to indemnity
granted by Xxxx pursuant to that certain Agreement and Plan of Merger dated
August 11, 1998 among JBS Acquisition, Inc., MS and Xxxx as modified by that
certain Settlement Agreement and Release dated April 30, 1999 among MS and the
parties thereto (collectively, the "Indemnity Agreement"), shall remain in full
force and effect and shall survive the Closing of the transactions contemplated
by this Agreement. The Purchaser or MS shall collect any Losses (as defined in
the Indemnity Agreement) first from Xxxx through an offset against the New Note
and relate to a matter for which the Selling Shareholders are obligated to
provide indemnity under this Agreement in accordance with the Indemnity
Agreement. To the extent Damages attributable to the Losses exceed the New Note,
then the Purchaser may recover any shortfall against the Selling Shareholders
(with such right to collect the balance surviving the termination of the
representations and warranties) without regard to whether any deductible or
threshold has been satisfied. If both the Rock Island Arsenal claim and the
Generation Systems claim disclosed on Part 2.26 of the Disclosure Schedule are
finally settled or resolved by final non-appealable judgment prior to the
maturity of the New Note for less than an aggregate of $300,000 in Damages or
Losses to MS (that have not otherwise been paid or reimbursed by Xxxx), then the
Purchaser will cause MS to prepay principal on the New Note in an amount equal
to the difference between $300,000 and the aggregate Losses or Damages to MS
from such claims (that have not otherwise been paid or reimbursed by Xxxx)
within five (5) business days of the final resolution of both the claims. To the
extent that the Selling Shareholders (other than Xxxx) indemnify any Indemnitee
pursuant to Section 6.11 with respect to any Loss other than one attributable to
Rock Island Arsenal or Generation Systems, then the Selling Shareholders
(excluding Xxxx) shall be subrogated to MS' rights under the Indemnity Agreement
with respect to such Loss; provided however, that if Xxxx joins MS, Purchaser or
any Indemnitee as parties to any claim brought by the Selling Shareholders under
the Indemnity Agreement or cross-claims against MS, Purchaser or any Indemnitee,
then the Selling Shareholders shall indemnify and hold the Purchaser and the
Indemnitee harmless for any Damages, including legal fees incurred.
7. MISCELLANEOUS PROVISIONS
7.1 Joint and Several Liability. Subject to Section 6.5:
(a) the Selling Shareholders jointly and severally agree that they
shall be jointly and severally liable with MS for the due and timely compliance
with and performance of each of the covenants and obligations of MS set forth in
this Agreement and that is to be performed prior to the Closing; and
(b) each Selling Shareholder agrees that such Selling Shareholder
shall be jointly and severally liable with each of the other Selling
Shareholders for the due and timely compliance with and performance of each of
the covenants and obligations of such other Selling Shareholders set forth in
this Agreement.
7.2 Selling Shareholders' Agent.
(a) The Selling Shareholders hereby irrevocably nominate,
constitute and appoint JBS Acquisition Company, LLC as the agent and true and
lawful attorney-in-fact of the Selling Shareholders (the "Agent"), with full
power of substitution, to act in the name, place and stead of the Selling
Shareholders for purposes of executing any documents and taking any actions that
the Agent may, in its sole discretion, determine to be necessary, desirable or
appropriate in connection with any of the Transactional Agreements or any of the
Transactions. JBS Acquisition Company, LLC hereby accepts its appointment as
Agent.
(b) The Selling Shareholders hereby grant to the Agent full
authority to execute, deliver, acknowledge, certify and file on behalf of the
Selling Shareholders (in the name of any or all of the Selling Shareholders or
otherwise) any and all documents that the Agent may, in its sole discretion,
determine to be necessary, desirable or appropriate, in such forms and
containing such provisions as the Agent may, in its sole discretion, determine
to be appropriate (including the General Release referred to in Section
1.4(b)(iv), the Closing Certificate and any amendment to or waiver of rights
under any of the Transactional Agreements). Notwithstanding anything to the
contrary contained in any of the Transactional Agreements:
(i) the Purchaser shall be entitled to deal exclusively with
the Agent on all matters relating to the this Agreement and the Transaction
(including all matters relating to any notice to, or any Consent to be given or
action to be taken by, any Selling Shareholder); and
(ii) each Indemnitee shall be entitled to rely conclusively
(without further evidence of any kind whatsoever) on any document executed or
purported to be executed on behalf of any Selling Shareholder by the Agent, and
on any other action taken or purported to be taken on behalf of any Selling
Shareholder by the Agent, as fully binding upon such Selling Shareholder.
(c) The Selling Shareholders recognize and intend that the power of
attorney granted in Section 7.4(a):
(i) is coupled with an interest and is irrevocable;
(ii) may be delegated by the Agent; and
(iii) shall survive the death or incapacity of each of the
Selling Shareholders.
(d) The Agent shall be entitled to treat as genuine, and as the
document it purports to be, any letter, facsimile, telex or other document that
is believed by its to be genuine and to have been telexed, telegraphed, faxed or
cabled by a Selling Shareholder or to have been signed and presented by a
Selling Shareholder.
(e) If for any reason there is no Agent at any time, all references
herein to the Agent shall be deemed to refer to the Selling Shareholders.
(f) All expenses incurred by the Agent in connection with the
performance of her duties as Agent shall be borne and paid by the Selling
Shareholders.
7.3 Further Assurances. Each party hereto shall execute and/or cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the Transactions.
7.4 Fees and Expenses.
(a) Without limiting the generality of anything contained in
Section 7.4(b), the Selling Shareholders shall bear and pay all fees, costs and
expenses (including all legal fees and expenses payable to counsel for MS) that
have been incurred or that are in the future incurred by, on behalf of or for
the benefit of MS or any of the Selling Shareholders in connection with:
(i) the negotiation, preparation and review of any term sheet
or similar document relating to any of the Transactions;
(ii) the investigation and review conducted by the Purchaser
and its Representatives with respect to MS's business (and the furnishing of
information to the Purchaser and its Representatives in connection with such
investigation and review);
(iii) the negotiation, preparation and review of this
Agreement (including the Disclosure Schedule), the other Transactional
Agreements and all certificates, opinions and other instruments and documents
delivered or to be delivered in connection with the Transactions;
(iv) the preparation and submission of any filing or notice
required to be made or given in connection with any of the Transactions, and the
obtaining of any Consent required to be obtained in connection with any of the
Transactions; and
(v) the consummation and performance of the Transactions.
MS shall not bear or pay, and the Selling Shareholders shall not permit
MS to bear or pay, any such fees, costs or expenses.
(b) Subject to the provisions of Section 6 (including the
indemnification and other obligations of the Selling Shareholders thereunder),
the Purchaser shall bear and pay all fees, costs and expenses (including all
legal fees and expenses payable to Xxxxxx Godward LLP) that have been incurred
or that are in the future incurred by or on behalf of the Purchaser in
connection with:
(i) the negotiation, preparation and review of any term sheet
or similar document relating to any of the Transactions;
(ii) the investigation and review conducted by the Purchaser
and its Representatives with respect to MS's business;
(iii) the negotiation, preparation and review of this
Agreement, the other Transactional Agreements and all certificates, opinions and
other instruments and documents delivered or to be delivered in connection with
the Transactions; and
(iv) the consummation and performance of the Transactions.
7.5 Attorneys' Fees. If any legal action or other legal proceeding
relating to any of the Transactional Agreements or the enforcement of any
provision of any of the Transactional Agreements is brought against any party
hereto, the prevailing party shall be entitled to recover reasonable attorneys'
fees, costs and disbursements (in addition to any other relief to which the
prevailing party may be entitled). 7.6 Notices. Any notice or other
communication required or permitted to be delivered to any party under this
Agreement shall be in writing and shall be deemed properly delivered, given and
received when delivered (by hand, by registered mail, by courier or express
delivery service or by facsimile) to the address or facsimile number set forth
beneath the name of such party below (or to such other address or facsimile
number as such party shall have specified in a written notice given to the other
parties hereto):
if to MS:
X.X. Systems, Inc.
00000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx Xxxxx, XX 00000
Attention: President
Facsimile: (000) 000-0000
if to JKS Separate Property Trust or Xxxx Xxxxxxx
Xxxx Xxxxxxx
0000 Xxxxxxxxxxx
Xxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
if to Xxxx Living Trust:
Xxxxxxx X. Xxxx
00-000 Xxxxx Xxxxx
Xx Xxxxxx, XX 00000
Facsimile: (000) 000-0000
if to JBS Acquisition Company, LLC:
JBS Acquisition Company, LLC
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
if to Epicor Software Corporation:
Epicor Software Corporation
000 Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
if to the Purchaser:
Xxxxx Xxxxxxx
Xxxxxxx.xxx, Inc.
c/o The Titan Corporation
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxx, XX 00000-0000
Facsimile: (000) 000-0000
if to The Titan Corporation:
Xxxxxxxx X. Xxxxxxxx
The Titan Corporation
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxx, XX 00000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxxx
Xxxxxx Godward LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Facsimile: (000) 000-0000
7.7 Publicity. Without limiting the generality of anything contained in
this Agreement, on and at all times after the Closing Date:
(a) no press release or other publicity concerning any of the
Transactions shall be issued or otherwise disseminated by or on behalf of any of
the Selling Shareholders, and the Selling Shareholders shall continue to keep
the existence and terms of this Agreement and the other Transactional Agreements
strictly confidential; and
(b) each Selling Shareholder shall keep strictly confidential, and
shall not use or disclose to any other Person, any non-public document or other
information in such Selling Shareholder's possession that relates directly or
indirectly to the business of MS, the Purchaser or any affiliate of the
Purchaser.
7.8 Waiver and Termination of Epicor Option Rights. Upon the execution
of this Agreement, Epicor Software Corporation ("Epicor") hereby waives any and
all rights or options it may have under that certain Purchase Option Agreement
dated as of August 11, 1998 (the "Purchase Option Agreement") by and among MS,
Epicor (as successor to DataWorks Corporation ("DataWorks")), Xxxx X. Xxxxxxx,
JBS Acquisition Company, LLC ("JBSAC"), JKS Separate Property Trust ("JKS") and
Xxxxxxx X. Xxxx, or otherwise to purchase outstanding shares of MS capital stock
and each Shareholder (on behalf of itself and its Affiliates) agrees that as of
the Closing Date, such rights and the Purchase Option Agreement will terminate
without the payment of any additional consideration therefor.
7.9 Waiver and Termination of Shareholder Rights. Upon the execution of
this Agreement, each Shareholder (on behalf of such Shareholder and its
Affiliates) and MS hereby waive any and all rights such party or its Affiliates
may have under that certain Shareholders Agreement dated as of August 11, 1998
by and among MS, JBSAC, Epicor (as successor to DataWorks), JKS and Xxxxxxx X.
Xxxx and agree that as of the Closing Date, such rights and the Shareholders
Agreement will terminate without the payment of any additional consideration
therefor.
7.10 Time of the Essence. Time is of the essence of this Agreement.
7.11 Headings. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
7.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
7.13 Governing Law; Venue.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
(b) Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement may be brought
or otherwise commenced in any state or federal court located in the County of
San Diego, California. Each party to this Agreement:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in the County of San Diego,
California (and each appellate court located in the State of California) in
connection with any such legal proceeding;
(ii) agrees that each state and federal court located in the
County of San Diego, California shall be deemed to be a convenient forum; and
(iii) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or federal court
located in the County of San Diego, California, any claim that such party is not
subject personally to the jurisdiction of such court, that such legal proceeding
has been brought in an inconvenient forum, that the venue of such proceeding is
improper or that this Agreement or the subject matter of this Agreement may not
be enforced in or by such court.
(c) Each Selling Shareholder agrees that, if any Proceeding is
commenced against any Indemnitee by any Person in or before any court or other
tribunal anywhere in the world, then such Indemnitee may proceed against such
Selling Shareholder in such court or other tribunal with respect to any
indemnification claim or other claim arising directly or indirectly from or
relating directly or indirectly to such Proceeding or any of the matters alleged
therein or any of the circumstances giving rise thereto.
(d) Nothing contained in Section 7.13(b) or 7.13(c) shall be deemed
to limit or otherwise affect the right of any Indemnitee to commence any legal
proceeding or otherwise proceed against MS or any of the Selling Shareholders in
any other forum or jurisdiction.
(e) The Selling Shareholders irrevocably constitute and appoint the
Agent as their agent to receive service of process in connection with any legal
proceeding relating to this Agreement or the enforcement of any provision of
this Agreement.
(f) The Selling Shareholders and the Purchaser (for itself and the
Indemnitees) irrevocably waive the right to a jury trial in connection with any
legal proceeding relating to this Agreement or the enforcement of any provision
of this Agreement.
7.14 Successors and Assigns. This Agreement shall be binding upon: MS
and its successors and assigns (if any); the Selling Shareholders and their
respective personal representatives, executors, administrators, estates, heirs,
successors and assigns (if any); and the Purchaser and its successors and
assigns (if any). This Agreement shall inure to the benefit of: MS; the Selling
Shareholders; the Purchaser; the other Indemnitees (subject to Section 6.10);
and the respective successors and assigns (if any) of the foregoing. The
Purchaser may freely assign any or all of its rights under this Agreement
(including its indemnification rights under Section 6), in whole or in part, to
any other Person without obtaining the consent or approval of any other party
hereto or of any other Person.
7.15 Remedies Cumulative; Specific Performance. The rights and remedies
of the parties hereto shall be cumulative (and not alternative).
(a) Each Selling Shareholder agrees that:
(i) in the event of any Breach or threatened Breach by such
Selling Shareholder of any covenant, obligation or other provision set forth in
this Agreement, the Purchaser shall be entitled (in addition to any other remedy
that may be available to it) to (i) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and (ii) an injunction restraining such Breach or threatened
Breach; and
(ii) neither the Purchaser nor any other Indemnitee shall be
required to provide any bond or other security in connection with any such
decree, order or injunction or in connection with any related action or
Proceeding.
(b) The Purchaser agrees that in the event of any Breach or
threatened Breach by such Purchaser of any covenant, obligation or other
provision set forth in this Agreement, the Selling Shareholders shall be
entitled (in addition to any other remedy that may be available to it) to (i) a
decree or order of specific performance or mandamus to enforce the observance
and performance of such covenant, obligation or other provision, and (ii) an
injunction restraining such Breach or threatened Breach. The Selling
Shareholders shall not be required to provide any bond or other security in
connection with any such decree, order or injunction or in connection with any
related action or Proceeding.
7.16 Waiver.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
7.17 Amendments. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of the Purchaser and the Agent.
7.18 Severability. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
7.19 Parties in Interest. Except for the provisions of Section 6
hereof, none of the provisions of this Agreement is intended to provide any
rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
7.20 Entire Agreement. The Transactional Agreements set forth the
entire understanding of the parties relating to the subject matter thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter thereof.
7.21 Construction.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
7.22 Negotiation of Disputes. If a dispute arises between the parties
relating to the interpretation or performance of this Agreement, including any
right of setoff, and the parties cannot resolve the dispute within thirty days
of a written request by either party to the other, such dispute shall be
referred to the Chief Executive Officer, Chief Financial Officer or General
Counsel of the Purchaser and the Agent for resolution. Such persons shall hold a
meeting to attempt in good faith to negotiate a resolution of the dispute prior
to pursuing other available remedies. If within 10 business days after such
meeting, the Chief Executive Officer, Chief Financial Officer or General Counsel
of the Purchaser and the Agent have not succeeded in negotiating a resolution of
the dispute, such dispute may be resolved through arbitration pursuant to
Section 7.24.
7.23 Transaction Fee. The Selling Shareholders agree to pay to Xxxxxx
Xxxxxxx & Associates from the first installment of the Purchase Price, a fee in
the amount of $35,000.
7.24 Arbitration. Disputes that have not been successfully resolved
pursuant to Section 7.22 may be submitted to final and binding arbitration under
the then current commercial rules and regulations of JAMS Endispute ("JAMS")
relating to voluntary arbitration in San Diego, California. The arbitration
shall be conducted by three arbitrators, one selected by each party to the
arbitration and one selected by arbitrators appointed by the parties. If the
arbitrators cannot agree on a third arbitrator, the third arbitrator shall be
selected in accordance with the JAMS rules. If a party fails to designate an
arbitrator within the time limits set by the JAMS rules, the arbitrator selected
by the other party shall be the sole arbitrator. All arbitrators must be
knowledgeable in the subject matter at issue in the dispute. Each party shall
initially bear its own costs and legal fees associated with such arbitration and
the parties shall split the cost of the arbitrators. The prevailing party in any
such arbitration shall be entitled to recover from the other party the
reasonable attorneys' fees, costs and expenses incurred by such prevailing party
in connection with such arbitration including cost of the arbitrators. The
decision of the arbitrator(s) shall be final and may be sued on or enforced by
the party in whose favor it runs in any court of competent jurisdiction at the
option of the successful party. The rights and obligations of the parties to
arbitrate any dispute relating to the interpretation or performance of this
Agreement, shall survive the expiration or termination of this Agreement for any
reason. The arbitrator(s) shall be empowered to award specific performance,
injunctive relief and other equitable remedies as well as damages, but shall not
be empowered to award punitive or exemplary damages or award any damages in
excess of any limitations set forth in this Agreement.
7.25 Deloitte & Touche Consent. The Agent shall use its best efforts to
obtain any consent of Deloitte & Touche LLP required by the Purchaser in
connection with the filing of any consolidated financial statements of the
Purchaser in any registration statement, report or other filing made by the
Purchaser or the parent of the Purchaser with the Securities and Exchange
Commission, or any blue sky securities authority or any securities exchange or
market.
7.26 Titan as Signing Party. Titan is signing this Agreement solely as
a party to Sections 1.2(c) and 5.4 and Titan does not guarantee performance of
any of the Purchaser's obligations under this Agreement.
The parties hereto have caused this Agreement to be executed and
delivered as of the date first written above.
PURCHASER: XXXXXXX.XXX, INC.,
a Delaware corporation
By: /s/ Xxxx X. XxXxxxx
Its: Vice President & CFO
MS: X.X. SYSTEMS, INC.,
a California corporation
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Chairman of the Board
By: /s/ Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
Secretary
SELLING SHAREHOLDERS: JKS SEPARATE PROPERTY TRUST
By: /s/ Jan Xxxxx Xxxxxxx
Jan Xxxxx Xxxxxxx
Trustee
THE XXXX LIVING TRUST
By: /s/ Xxxxxxx X. Xxxx
Xxxxxxx X. Xxxx
Co-Trustee
JBS ACQUISITION COMPANY, LLC
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Chairman
EPICOR SOFTWARE CORPORATION
By:
Name:
Title:
/s/ Xxxx Xxxxxxx
XXXX XXXXXXX
THE TITAN CORPORATION,
a Delaware corporation
By: /s/ Xxxx X. XxXxxxx
Its: Executive Vice President & CFO
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale or other disposition of all or any portion of MS's
business or assets (other than in the Ordinary Course of Business);
(b) the issuance, sale or other disposition of (i) any capital
stock of MS, (ii) any option, call, warrant or right (whether or not
immediately exercisable) to acquire any capital stock of MS, or (iii)
any security, instrument or obligation that is or may become
convertible into or exchangeable for any capital stock of MS; or
(c) any merger, consolidation, business combination, share
exchange, reorganization or similar transaction involving MS.
Agent. "Agent" shall have the meaning specified in Section 7.2 of the
Agreement.
Agreement. "Agreement" shall mean the Stock Purchase Agreement to which
this Exhibit A is attached (including the Disclosure Schedule), as it may be
amended from time to time.
Best Efforts. "Best Efforts" shall mean the efforts that a prudent
Person desiring to achieve a particular result would use in order to ensure that
such result is achieved as expeditiously as possible.
Breach. There shall be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is or has been (a)
any inaccuracy in or breach of, or any failure to comply with or perform, such
representation, warranty, covenant, obligation or other provision, or (b) any
claim (by any Person) or other circumstance that is inconsistent with such
representation, warranty, covenant, obligation or other provision; and the term
"Breach" shall be deemed to refer to any such inaccuracy, breach, failure, claim
or circumstance.
CERCLA. "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act.
Closing. "Closing" shall have the meaning specified in Section 1.4(a)
of the Agreement.
Closing Certificate. "Closing Certificate" shall have the meaning
specified in Section 1.4(b)(v) of the Agreement.
Closing Date. "Closing Date" shall have the meaning specified in
Section 1.4(a) of the Agreement.
Code. "Code" shall mean the Internal Revenue Code of 1986.
Company. "Company" shall mean MS.
Company Plan. "Company Plan" shall mean any Current Benefit Plan or
Past Benefit Plan.
Comparable Entities. "Comparable Entities" shall mean Entities (other
than MS) of comparable size to MS that are engaged in businesses similar to MS's
business.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean any written, oral, implied or other
agreement, contract, understanding, arrangement, instrument, note, guaranty,
indemnity, representation, warranty, deed, assignment, power of attorney,
certificate, purchase order, work order, insurance policy, benefit plan,
commitment, covenant, assurance or undertaking of any nature.
Current Benefit Plan. "Current Benefit Plan" shall mean any Employee
Benefit Plan that is currently in effect and:
(a) that was established or adopted by MS or any ERISA Affiliate or
is maintained or sponsored by MS;
(b) in which MS participates;
(c) with respect to which MS or any ERISA Affiliate is or may be
required or permitted to make any contribution; or
(d) with respect to which MS or any ERISA Affiliate is or may
become subject to any Liability.
Damages. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, Liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including any legal fee, expert fee, accounting fee or
advisory fee), charge, cost (including any cost of investigation) or expense of
any nature.
Disclosure Schedule. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) delivered to the Purchaser on behalf of
MS and the Selling Shareholders, a copy of which is attached to the Agreement
and incorporated in the Agreement by reference.
Employee Benefit Plan. "Employee Benefit Plan" shall have the meaning
specified in Section 3(3) of ERISA.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, equity, trust, equitable
interest, claim, preference, right of possession, lease, tenancy, license,
encroachment, covenant, infringement, interference, Order, proxy, option, right
of first refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974.
ERISA Affiliate. "ERISA Affiliate" shall mean any Person that is, was
or would be treated as a single employer with MS under Section 414 of the Code.
Excluded Contract. "Excluded Contract" shall mean any MS Contract that:
(a) MS has entered into in the Ordinary Course of Business;
(b) has a term of less than 12 months or may be terminated by MS
(without penalty) within 90 days after the delivery of a termination
notice by MS; and
(d) does not contemplate or involve the payment of cash or other
consideration in an amount or having a value in excess of $25,000.
GAAP. "GAAP" shall mean generally accepted accounting principles,
applied on a basis consistent with the basis on which the MS Financial
Statements were prepared.
Governmental Authorization. "Governmental Authorization" shall mean
any:
(a) permit, license, certificate, franchise, concession, approval,
consent, ratification, permission, clearance, confirmation,
endorsement, waiver, certification, designation, rating, registration,
qualification or authorization that is, has been or may in the future
be issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal
Requirement; or
(b) right under any Contract with any Governmental Body.
Government Bid. "Government Bid" shall mean any quotation, bid or
proposal submitted to any Governmental Body or any proposed prime contractor or
higher-tier subcontractor of any Governmental Body.
Governmental Body. "Governmental Body" shall mean any:
(a) nation, principality, state, commonwealth, province, territory,
county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency,
bureau, branch, office, commission, council, board, instrumentality,
officer, official, representative, organization, unit, body or Entity
and any court or other tribunal);
(d) multi-national organization or body; or
(e) individual, Entity or body exercising, or entitled to exercise,
any executive, legislative, judicial, administrative, regulatory,
police, military or taxing authority or power of any nature.
Government Contract. "Government Contract" shall mean any prime
contract, subcontract, letter contract, purchase order or delivery order
executed or submitted to or on behalf of any Governmental Body or any prime
contractor or higher-tier subcontractor, or under which any Governmental Body or
any such prime contractor otherwise has or may acquire any right or interest
other than any contract, subcontract, letter contract, purchase order or
delivery order that was fully performed by MS before the Closing Date.
Hazardous Material. "Hazardous Material" shall include:
(a) any petroleum, waste oil, crude oil, asbestos, urea
formaldehyde or polychlorinated biphenyl;
(b) any waste, gas or other substance or material that is explosive
or radioactive;
(c) any "hazardous substance," "pollutant," "contaminant,"
"hazardous waste," "regulated substance," "hazardous chemical" or
"toxic chemical" as designated, listed or defined (whether expressly or
by reference) in any statute, regulation or other Legal Requirement
(including CERCLA, any other so-called "superfund" or "superlien" law,
the Resource Conservation Recovery Act, the Federal Water Pollution
Control Act, the Toxic Substances Control Act, the Emergency Planning
and Community Right-to-Know Act and the respective regulations
promulgated thereunder);
(d) any other substance or material (regardless of physical form)
or form of energy that is subject to any Legal Requirement which
regulates or establishes standards of conduct in connection with, or
which otherwise relates to, the protection of human health, plant life,
animal life, natural resources, property or the enjoyment of life or
property from the presence in the environment of any solid, liquid,
gas, odor, noise or form of energy; and
(e) any compound, mixture, solution, product or other substance or
material that contains any substance or material referred to in clause
"(a)", "(b)", "(c)" or "(d)" above.
Indemnitees. "Indemnitees" shall mean the following Persons:
(a) the Purchaser;
(b) the Purchaser's current and future affiliates (including MS);
(c) the respective Representatives of the Persons referred to in
clauses "(a)" and "(b)" above; and
(d) the respective successors and assigns of the Persons referred
to in clauses "(a)", "(b)" and "(c)" above;
provided, however, that (i) MS shall not be entitled to exercise any
rights as an Indemnitee prior to the Closing, and (ii) the Selling Shareholders
shall not be deemed to be "Indemnitees."
Knowledge. An individual shall be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter;
or
(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonably diligent and comprehensive investigation concerning the
truth or existence of such fact or other matter.
MS shall be deemed to have "Knowledge" of a particular fact or other
matter if any officer, management employee or other Representative of MS has
Knowledge of such fact or other matter.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, legislation, constitution,
principle of common law, resolution, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation, ruling, directive,
pronouncement, requirement, specification, determination, decision, opinion or
interpretation that is, has been or may in the future be issued, enacted,
adopted, passed, approved, promulgated, made, implemented or otherwise put into
effect by or under the authority of any Governmental Body.
Liability. "Liability" shall mean any debt, obligation, duty or
liability of any nature (including any unknown, undisclosed, unmatured,
unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious,
derivative, joint, several or secondary liability), regardless of whether such
debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with GAAP and regardless of whether such
debt, obligation, duty or liability is immediately due and payable.
MS. "MS" shall mean X.X. Systems, Inc. dba Mainsaver Corporation and
Mainsaver, a California corporation.
MS Contract. "MS Contract" shall mean any Contract:
(a) to which MS is a party;
(b) by which MS or any of its assets is or may become bound or
under which MS has, or may become subject to, any obligation; or
(c) under which MS has or may acquire any right or interest.
MS Financial Statements. "MS Financial Statements" shall have the
meaning specified in Section 2.4(a) of the Agreement.
MS Returns. "MS Returns" shall have the meaning specified in Section
2.18(a) of the Agreement.
Options. "Options" shall mean all options to acquire Class B Nonvoting
Common Stock under the 1998 Stock Option/Stock Issuance Plan and any other
options, warrants or other rights to acquire any capital stock of MS.
Order. "Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence,
subpoena, writ or award that is, has been or may in the future be
issued, made, entered, rendered or otherwise put into effect by or
under the authority of any court, administrative agency or other
Governmental Body or any arbitrator or arbitration panel; or
(b) Contract with any Governmental Body that is, has been or may in
the future be entered into in connection with any Proceeding.
Ordinary Course of Business. An action taken by or on behalf of MS
shall not be deemed to have been taken in the "Ordinary Course of Business"
unless:
(a) such action is recurring in nature, is consistent with MS's
past practices and is taken in the ordinary course of MS's normal
day-to-day operations;
(b) such action is taken in accordance with sound and prudent
business practices;
(c) such action is not required to be authorized by MS's
shareholders, MS's board of directors or any committee of MS's board of
directors and does not require any other separate or special
authorization of any nature; and
(d) such action is similar in nature and magnitude to actions
customarily taken, without any separate or special authorization, in
the ordinary course of the normal day-to-day operations of other
Entities that are engaged in businesses similar to MS's business.
Past Benefit Plan. "Past Benefit Plan" shall mean any Employee Benefit
Plan (other than a Current Benefit Plan):
(a) of which MS or any ERISA Affiliate has ever been a "plan
sponsor" (as defined in Section 3(16)(B) of ERISA) or that otherwise
has at any time been established, adopted, maintained or sponsored by
MS or by any ERISA Affiliate;
(b) in which MS or any ERISA Affiliate has ever participated;
(c) with respect to which MS or any ERISA Affiliate has ever made,
or has ever been required or permitted to make, any contribution; or
(d) with respect to which MS or any ERISA Affiliate has ever been
subject to any Liability.
Person. "Person" shall mean any individual, Entity or Governmental
Body.
Proceeding. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination or investigation that is,
has been or may in the future be commenced, brought, conducted or heard by or
before, or that otherwise has involved or may involve, any Governmental Body or
any arbitrator or arbitration panel.
Proprietary Asset. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered and whether or not
relating to a published work), trademark application, trade name, fictitious
business name, service xxxx (whether registered or unregistered), service xxxx
application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know-how, franchise,
system, computer software, invention, design, blueprint, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset.
Purchase Price. "Purchase Price" shall have the meaning specified in
Section 1.2 of the Agreement.
Purchaser. "Purchaser" shall mean Xxxxxxx.xxx, Inc., a Delaware
corporation.
Related Party. Each of the following shall be deemed to be a "Related
Party":
(a) each of the Selling Shareholders;
(b) each individual who is, or who has at any time been, an officer
of MS;
(c) each member of the family of each of the individuals referred
to in clauses "(a)" and "(b)" above; and
(d) any Entity (other than MS) in which any one of the individuals
referred to in clauses "(a)", "(b)" and "(c)" above holds (or in which
more than one of such individuals collectively hold), beneficially or
otherwise, a material voting, proprietary or equity interest.
Representatives. "Representatives" shall mean officers, directors,
management employees or agents, attorneys, accountants and other professional
advisors and representatives. The Selling Shareholders and all other Related
Parties shall be deemed to be "Representatives" of MS.
Selling Shareholders. "Selling Shareholders" shall have the meaning
specified in the introductory paragraph of the Agreement.
Shares. "Shares" shall have the meaning specified in Recital "A" to the
Agreement.
Specified Representations. "Specified Representations" shall mean the
representations and warranties set forth in Sections 2.1, 2.3, 2.18 and 2.21 of
the Agreement.
Spousal Consents. "Spousal Consents" shall mean the Spousal Consents
being executed by the respective spouses of the Selling Shareholders
contemporaneously with the execution and delivery of the Agreement.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, estimated tax, gross receipts tax, value-added tax, surtax,
excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, occupation tax, inventory tax, occupancy tax,
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), that is, has been or
may in the future be (a) imposed, assessed or collected by or under the
authority of any Governmental Body, or (b) payable pursuant to any tax-sharing
agreement or similar Contract.
Tax Return. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information that
is, has been or may in the future be filed with or submitted to, or required to
be filed with or submitted to, any Governmental Body 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
Legal Requirement relating to any Tax.
Transactional Agreements. "Transactional Agreements" shall mean:
(a) the Agreement;
(b) the Spousal Consents;
(c) the Noncompetition Agreement referred to in Section 1.4(b)(ii)
of the Agreement;
(d) the Employment Agreement referred to in Section 1.4(b)(iii) of
the Agreement;
(e) the General Release referred to in Section 1.4(b)(iv) of the
Agreement; and
(f) the Closing Certificate.
Transactions. "Transactions" shall mean (a) the execution and delivery
of the respective Transactional Agreements, and (b) all of the transactions
contemplated by the respective Transactional Agreements, including:
(i) the sale of the Shares by the Selling Shareholders to the
Purchaser in accordance with the Agreement; and
(ii) the performance by MS, the Selling Shareholders and the
Purchaser of their respective obligations under the Transactional
Agreements and the exercise by MS, the Selling Shareholders and the
Purchaser of their respective rights under the Transactional
Agreements.
Unaudited Interim Balance Sheet. "Unaudited Interim Balance Sheet"
shall have the meaning specified in Section 2.4(a)(iii) of the Agreement.
Working Capital. "Working Capital" shall mean as of the Closing Date
the difference between MS' current assets and MS' current liabilities as
determined under GAAP except that the calculation of Working Capital will
exclude the principal outstanding balance under MS' credit facility with Union
Bank of California, N.A. provided that the total principal balance does not
exceed $1,800,000 and exclude the current portion of capital leases.
Notwithstanding the foregoing, any cash contributions made or deemed to be made
by Purchaser at Closing to fund the cash-out of Options or Warrants or the
repayment or retirement of indebtedness, the receipt of the exercise price of
the Xxxxxxx Options and the deemed receipt of the exercise price of the cashed
out Options and Warrants shall be excluded from the calculation of Working
Capital and any indebtedness required or repaid concurrently with the Closing
shall be deemed to remain on the books of the Closing Date.
Year 2000 Compliant. "Year 2000 Compliant" shall mean, in regard to any
product sold, marketed or distributed or internal system, that such product or
internal system can individually continue to be used normally and to operate
successfully (both in functionality and performance in all material respects)
over the transition into the twenty first century when used in accordance with
the documentation relating to such product or internal system, including being
able to, before, on and after January 1, 2000 substantially conform to the
following: (i) use logic pertaining to dates that allow users to identify and/or
use the century portion of any date fields without special processing; and (ii)
respond to all date elements and date input so as to resolve any ambiguity as to
century in a disclosed, defined and pre-determined manner and provide date
information in ways that are unambiguous as to century, either by permitting or
requiring the century to be specified or where the data element is represented
without a century, the correct century is unambiguous for all manipulations
involving that element.
CONSENT OF SPOUSE
The undersigned acknowledges that the undersigned has read the Stock
Purchase Agreement, dated as of November 2, 1999, among: XXXXXXX.XXX, INC., a
Delaware corporation (the "Purchaser"), JB SYSTEMS, INC., doing business as X.X.
SYSTEMS, INC. D.B.A. MAINSAVER and MAINSAVER CORPORATION, a California
corporation ("MS"), and the following parties (the "Selling Shareholders"): JKS
SEPARATE PROPERTY TRUST, THE XXXX LIVING TRUST, JBS ACQUISITION COMPANY, LLC,
EPICOR SOFTWARE CORPORATION and XXXX XXXXXXX (the "Agreement"). Capitalized
terms used and not otherwise defined in this Consent of Spouse have the
respective meanings given to them in the Agreement.
The undersigned, intending to be legally bound:
1. represents and warrants that the undersigned is the spouse of
_____________;
2. consents to and approves the execution, delivery and performance by
the undersigned's spouse of, and agrees to be bound by, (i) the Agreement, (ii)
the General Release to be executed and delivered by the undersigned's spouse at
the Closing, (iii) the Noncompetition Agreement to be executed and delivered by
the undersigned's spouse at the Closing, (iv) the Employment Agreement to be
executed and delivered by the undersigned's spouse at the Closing, and (v) the
Closing Certificate;
3. consents to and approves (i) the sale to the Purchaser of those of
the Shares held by the undersigned's spouse, and (ii) the consummation of the
Transactions;
4. agrees that, as of the Closing, the undersigned's entire interest
(including, without limitation, the undersigned's entire community property
interest), if any, in the Shares shall automatically be assigned and transferred
to the Purchaser (without the necessity of any further signature or action on
the part of, or any notice to, the undersigned);
5. agrees that, as of the Closing, any rights or claims that the
undersigned may have against or with respect to MS or any of the Shares shall
automatically be fully, irrevocably and unconditionally waived, released and
discharged (without the necessity of any further signature or action on the part
of, or any notice to, the undersigned);
6. represents and warrants that the undersigned has never assigned or
transferred (and has never purported or agreed to assign or transfer), to any
Person, any interest in, or any right or claim against or with respect to, MS or
any of the Shares or to be released or transferred by the undersigned's spouse;
8. agrees to execute and deliver any document, and to take any other
action, that the Purchaser may reasonably request for the purpose of (i) vesting
in the Purchaser good and valid title to the Shares, free of any Encumbrances,
or (ii) facilitating, consummating or evidencing any of the Transactions;
9. irrevocably appoints the undersigned's spouse (with full power of
substitution) as the undersigned's agent and attorney-in-fact for the purpose of
executing and delivering (on behalf of the undersigned) any Contract, Consent or
other document, and for the purpose of taking any other action, relating
directly or indirectly to MS or any of the Shares; and
10. represents and warrants that the undersigned has had the
opportunity to obtain legal advice, from counsel of the undersigned's own
choosing, as to the undersigned's legal rights and as to the legal effect of
this Consent of Spouse.
The representations, warranties, covenants, obligations and other
provisions set forth in this Consent of Spouse shall survive the Closing,
notwithstanding any investigation conducted with respect thereto or any
Knowledge of the Purchaser or any other Person.
Dated: ___________ __, 1999
[NAME]
STOCK PURCHASE AGREEMENT
among:
XXXXXXX.XXX, INC.
a Delaware corporation;
X.X. SYSTEMS, INC.
d.b.a.
MAINSAVER CORPORATION AND MAINSAVER,
a California corporation;
and
JKS SEPARATE PROPERTY TRUST, THE XXXX LIVING TRUST,
JBS ACQUISITION COMPANY, LLC,
EPICOR SOFTWARE CORPORATION AND
XXXX XXXXXXX
and
THE TITAN CORPORATION
a Delaware corporation
Dated as of November 2, 1999
TABLE OF CONTENTS
1. SALE AND PURCHASE OF SHARES; RELATED TRANSACTIONS.....................1
1.1 Sale and Purchase of Shares..................................1
1.2 Purchase Price...............................................1
1.3 Post-Closing Purchase Price Adjustment.......................3
1.4 Closing......................................................4
2. REPRESENTATIONS AND WARRANTIES OF MS AND SELLING SHAREHOLDERS.........4
2.1 Due Organization; No Subsidiaries; Etc.......................4
2.2 Articles of Incorporation and Bylaws; Records................5
2.3 Capitalization, Etc..........................................6
2.4 Financial Statements.........................................7
2.5 Absence of Changes...........................................8
2.6 Title to Assets..............................................9
2.7 Bank Accounts...............................................10
2.8 Receivables; Major Customers................................10
2.9 Inventory...................................................11
2.10 Equipment, Etc..............................................11
2.11 Real Property...............................................12
2.12 Proprietary Assets..........................................12
2.13 Contracts...................................................13
2.14 Security Matters............................................17
2.15 Liabilities; Major Suppliers................................17
2.16 Compliance With Legal Requirements..........................18
2.17 Governmental Authorizations.................................18
2.18 Tax Matters.................................................20
2.19 Employee and Labor Matters..................................21
2.20 Benefit Plans; ERISA........................................22
2.21 Environmental Matters.......................................24
2.22 Sale of Products; Performance of Services...................25
2.23 Insurance...................................................26
2.24 Related Party Transactions..................................27
2.25 Certain Payments, Etc.......................................27
2.26 Proceedings; Orders.........................................28
2.27 Authority; Binding Nature of Agreements.....................29
2.28 Non-Contravention; Consents.................................29
2.29 Year 2000 Compliance........................................30
2.30 Brokers.....................................................30
2.31 Selling Shareholders........................................31
2.32 Full Disclosure.............................................31
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER..........................32
3.1 Acquisition of Shares.......................................32
3.2 Authority; Binding Nature of Agreement......................32
3.3 Brokers.....................................................32
4. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE..............32
4.1 Accuracy of Representations.................................33
4.2 Performance of Obligations..................................33
4.3 Approval of Purchaser's Board of Directors; Consents........33
4.4 No Adverse Change...........................................33
4.5 Additional Documents........................................33
4.6 No Proceedings..............................................33
4.7 No Claim Regarding Stock Ownership or Sale Proceeds.........34
4.8 No Prohibition..............................................34
4.9 Termination of Warrant Rights...............................34
4.10 Termination of Options......................................34
5. CONDITIONS PRECEDENT TO SELLING SHAREHOLDERS' OBLIGATION TO CLOSE....34
5.1 Accuracy of Representations.................................34
5.2 Purchaser's Performance.....................................34
5.3 No Injunction...............................................35
5.4 Modification of Xxxx Note...................................35
6. INDEMNIFICATION, ETC.................................................35
6.1 Survival of Representations and Covenants...................35
6.2 Indemnification by Selling Shareholders.....................35
6.3 Threshold/Limitation........................................37
6.4 Right to Require Cure of Breach.............................37
6.5 No Contribution.............................................38
6.6 Interest....................................................38
6.7 Setoff......................................................38
6.8 Nonexclusivity of Indemnification Remedies..................39
6.9 Defense of Third Party Claims...............................39
6.10 Exercise of Remedies by Indemnitees Other Than Purchaser....40
6.11 Survival of Indemnity in favor of MS........................40
7. MISCELLANEOUS PROVISIONS.............................................41
7.1 Joint and Several Liability.................................41
7.2 Selling Shareholders' Agent.................................41
7.3 Further Assurances..........................................42
7.4 Fees and Expenses...........................................42
7.5 Attorneys' Fees.............................................43
7.6 Notices.....................................................43
7.7 Publicity...................................................45
7.8 Waiver and Termination of Epicor Option Rights..............45
7.9 Waiver and Termination of Shareholder Rights................45
7.10 Time of the Essence.........................................46
7.11 Headings....................................................46
7.12 Counterparts................................................46
7.13 Governing Law; Venue........................................46
7.14 Successors and Assigns......................................47
7.15 Remedies Cumulative; Specific Performance...................47
7.16 Waiver......................................................47
7.17 Amendments..................................................48
7.18 Severability................................................48
7.19 Parties in Interest.........................................48
7.20 Entire Agreement............................................48
7.21 Construction................................................48
7.22 Negotiation of Disputes.....................................49
7.23 Transaction Fee.............................................49
7.24 Arbitration.................................................49
7.25 Deloitte & Touche Consent...................................49
7.26 Titan as Signing Party......................................49
EXHIBITS
Exhibit A:........Certain Definitions
Exhibit B:........Form of Noncompetition Agreement
Exhibit C:........Form of Employment Agreement
Exhibit D:........Form of General Release
Exhibit E: Form of opinion letter from Xxxxx Xxxxxxxx
Exhibit F: Form of Xxxxxxx X. Xxxx'x New Note
DISCLOSURE SCHEDULES
Part 2.1(c): Foreign Qualifications
Part 2.1(d): Directors & Officers
Part 2.3(d): Repurchase of Capital Stock or Other Securities
Part 2.5: Absence of Changes
Part 2.6(b): Leased or Licensed Assets
Part 2.7: Bank Accounts
Part 2.8(a): Receivables - Breakdown & Aging
Part 2.8(b): Receivables - Not Collected
Part 2.8(c): Revenues - Breakdown
Part 2.9: Inventory
Part 2.10(a): Tangible Assets
Part 2.10(b): Tangible Assets - Compliance/Condition
Part 2.11: Real Property Leases - Description
Part 2.12(a): Company Proprietary Assets
Part 2.12(b): Disclosure of Company Proprietary Assets
Part 2.12(d): Exceptions
Part 2.12(e): Licenses/Covenants
Part 2.12(f): Company Employees Confidential Information Agreement
Part 2.13(a): Contracts
Part 2.13(c): Contracts - Breach/Violation
Part 2.13(e): Contracts - Guarantee/Compliance/Warranties
Part 2.13(i): Contracts - Bids/Offers
Part 2.13(j): Contracts - Backlog
Part 2.15(a): Liabilities
Part 2.15(b)(i): Accounts Payable - Breakdown/Aging
Part 2.15(b)(ii): Customer Deposits
Part 2.15(b)(iii): Long Term Debt
Part 2.15(d): Large Suppliers
Part 2.16(a): Exceptions to Compliance with Legal Requirements
Part 2.17(a): Governmental Authorizations
Part 2.17(b): Exceptions
Part 2.18(b): List of Tax Returns
Part 2.18(d) Tax Examinations/Audits
Part 2.18(e) Tax Liabilities
Part 2.19(a) Employee Information
Part 2.19(a) Benefits Payable to Former Employees
Part 2.20(a) Current & Past Employee Benefit Plans
Part 2.20(g) New Benefit Plan
Part 2.21(c) Exceptions Regarding Hazardous Material
Part 2.22(d) Claims
Part 2.23(a) Schedule of Insurance Policies
Part 2.23(b) Pending Claims
Part 2.24 Related Party Transactions
Part 2.26(a) Pending Proceedings/Threats
Part 2.26(b) Past Proceedings
Part 2.28 Consents
Part 2.32(b) Exceptions to Full Disclosure
