<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO
13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
Peritus Software Services, Inc.
---------------------------------------------------------------
(Name of Issuer)
Common Stock, $.01 Par Value
---------------------------------------------------------------
(Title of Class of Securities)
714006103
---------------------------------------------------------------
(CUSIP Number)
James C. Kennedy, Esq.
One East Fourth Street
Cincinnati, Ohio 45202
(513) 579-2538
---------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 1, 1997
---------------------------------------------------------------
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [ ].
Page 1 of 86 Pages
<PAGE>
CUSIP NO. 469858401 13D Page 2 of 86
Pages
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
American Financial Group, Inc. 31-1422526
American Financial Corporation 31-0624874
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
See Item 3
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio corporations
7 NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH:
SOLE VOTING POWER
- - -
8 SHARED VOTING POWER
2,175,000 (See Item 5)
9 SOLE DISPOSITIVE POWER
- - -
10 SHARED DISPOSITIVE POWER
2,175,000 (See Item 5)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,175,000 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.2% (See Item 5)
14 TYPE OF REPORTING PERSON*
HC
HC
<PAGE>
CUSIP NO. 469858401 13D Page 3 of 86 Pages
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Carl H. Lindner
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
See Item 3
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States Citizen
7 NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH:
SOLE VOTING POWER
- - -
8 SHARED VOTING POWER
2,175,000
9 SOLE DISPOSITIVE POWER
- - -
10 SHARED DISPOSITIVE POWER
2,175,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON,
2,175,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.2%
14 TYPE OF REPORTING PERSON*
IN
<PAGE>
CUSIP NO. 46985840 13D Page 4 of 86
Pages
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Carl H. Lindner III
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
See Item 3
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States Citizen
7 NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH:
SOLE VOTING POWER
- - -
8 SHARED VOTING POWER
2,175,000
9 SOLE DISPOSITIVE POWER
- - -
10 SHARED DISPOSITIVE POWER
2,175,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,175,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.2%
14 TYPE OF REPORTING PERSON*
IN
<PAGE>
CUSIP NO. 46985840 13D Page 5 of 86
Pages
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
S. Craig Lindner
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
See Item 3
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States Citizen
7 NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH:
SOLE VOTING POWER
- - -
8 SHARED VOTING POWER
2,175,000
9 SOLE DISPOSITIVE POWER
- - -
10 SHARED DISPOSITIVE POWER
2,175,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,175,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.2%
14 TYPE OF REPORTING PERSON*
IN
<PAGE>
CUSIP NO. 46985840 13D Page 6 of 86 Pages
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Keith E. Lindner
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
See Item 3
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States Citizen
7 NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH:
SOLE VOTING POWER
- - -
8 SHARED VOTING POWER
2,175,000
9 SOLE DISPOSITIVE POWER
- - -
10 SHARED DISPOSITIVE POWER
2,175,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,175,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.2%
14 TYPE OF REPORTING PERSON*
IN
<PAGE>
This Schedule 13D is filed on behalf of American Financial
Group, Inc. ("American Financial"), American Financial
Corporation ("AFC")and Carl H. Lindner, Carl H. Lindner III, S.
Craig Lindner and Keith E. Lindner (collectively, the "Lindner
Family") (American Financial, AFC and the Lindner Family are
collectively referred to as the "Reporting Persons").
As of September 30, 1997, the Lindner Family beneficially
owned approximately 36% of the outstanding common stock of
American Financial and American Financial beneficially owned all
of the common stock of AFC (approximately 79% of AFC's
outstanding voting equity securities). Through their ownership
of common stock of American Financial and their positions as
directors and executive officers of American Financial and AFC,
the members of the Lindner Family may be deemed to be controlling
persons with respect to American Financial and AFC.
Item 1. Security and Issuer.
This Schedule relates to shares of Common Stock, par value
$.01 per share, ("Peritus Common Stock"), issued by Peritus
Software Services, Inc., a Massachussetts corporation
("Peritus"). The principal executive offices of Peritus are
located at 304 Concord Road, Billerica, Massachussetts 01821.
Item 2. Identity and Background.
See the schedule attached hereto as Exhibit 1 which contains
additional information concerning the Reporting Persons.
Item 3. Source and Amount of Funds or Other Consideration.
Effective December 1, 1997, pursuant to the terms of an
Asset Purchase Agreement between Peritus, its wholly-owned
subsidiary Twoquay, Inc. ("Twoquay"), American Premier
Underwriters, Inc., a wholly-owned subsidiary of AFC ("APU") and
Millennium Dynamics, Inc., a wholly-owned subsidiary of APU
("MDI"), dated October 22, 1997 (the "Agreement"), APU sold
substantially all of the assets and related liabilities of MDI's
business to Twoquay for $30 million in cash and 2,175,000 shares
of Peritus Common Stock (the "Purchase Price"). On November 28,
1997 (the business day prior to the closing), the closing price
of a share of Pertitus Common Stock on the NASDAQ National Market
System was $17.125.
Prior to the acquisition of the Peritus Common Stock, the
Reporting Persons owned no Peritus equity securities.
- 7 -
<PAGE>
Item 4. Purpose of Transaction.
The Reporting Persons consider their beneficial ownership of
Peritus equity securities as an investment which they continue to
evaluate. Although they have no present plans to do so, from
time to time the Reporting Persons may acquire additional Peritus
equity securities or dispose of some or all of the Peritus equity
securities which they beneficially own.
Pursuant to Section 12 of the Agreement, on or within 30
days following the closing on December 1, 1997, the Reporting
Persons may request the Peritus Board of Directors to vote to
elect a nominee of the Reporting Persons as a Class II director
of the Peritus Board. The Reporting Persons are currently
considering whether to exercise such nomination right.
Except as set forth in Section 12 of the Agreement, relating
to the nomination of an additional director, the Reporting
Persons presently have no plans or proposals that relate to or
would result in any of the actions specified in clauses (a)
through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
As of December 2, 1997, the Reporting Persons (through APU)
beneficially owned 2,175,000 shares of Peritus Common Stock (or
approximately 14.2% of the outstanding shares of Peritus Common
Stock).
Except as set forth in Item 3 of this Schedule, to the best
knowledge and belief of the undersigned, no transactions
involving Peritus equity securities have been effected during the
past 60 days by the Reporting Persons or by the directors or
executive officers of American Financial or AFC.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer.
None
- 8 -
<PAGE>
Item 7. Material to be filed as Exhibits.
(1) Schedule referred to in Item 2.
(2) Asset Purchase Agreement initially referred to in
Item 3.
(3) Agreement required pursuant to Regulation Section
240.13d-1(f)(1) promulgated under the Securities
Exchange Act of 1934, as amended.
(4) Powers of Attorney executed in connection with
filings under the Securities Exchange Act of 1934, as
amended.
After reasonable inquiry and to the best knowledge and
belief of the undersigned, it is hereby certified that the
information set forth in this statement is true, complete and
correct.
Dated: December 3, 1997
AMERICAN FINANCIAL GROUP, INC.
By: James C. Kennedy
James C. Kennedy, Deputy General
Counsel and Secretary
AMERICAN FINANCIAL CORPORATION
By: James C. Kennedy
James C. Kennedy, Deputy General
Counsel and Secretary
Carl H. Lindner*
Carl H. Lindner
Carl H. Lindner III*
Carl H. Lindner III
S. Craig Lindner*
S. Craig Lindner
Keith E. Lindner*
Keith E. Lindner
James C. Kennedy
*By James C. Kennedy, Attorney-in-Fact
- 9 -
<PAGE> Exhibit 1
Item 2. Identity and Background.
American Financial is a holding company which was formed to
acquire and own all of the outstanding common stock of both
American Financial Corporation ("AFC") and American Premier
Underwriters, Inc. in a transaction which was consummated in
April 1995. American Financial is engaged primarily in specialty
and multi-line property and casualty insurance businesses and in
the sale of tax-deferred annuities and certain life and health
insurance products.
Carl H. Lindner's principal occupation is as Chairman of the
Board of Directors and Chief Executive Officer of American
Financial. Mr. Lindner has been Chairman of the Board and Chief
Executive Officer of AFC since it was founded over 35 years ago
and has been Chairman of the Board and Chief Executive Officer of
American Premier Underwriters, Inc. since 1987. He is also
Chairman of the Board of American Financial Enterprises, Inc.
("AFE").
Carl H. Lindner III's principal occupation is as Co-
President of American Financial. He is also Co-President of AFC.
S. Craig Lindner's principal occupations are as Co-President
of American Financial and President of American Annuity Group,
Inc., an affiliate of American Financial. He is also Co-
President of AFC.
Keith E. Lindner's principal occupations are as Co-President
of American Financial and President and Chief Operating Officer
of Chiquita Brands International, Inc., an affiliate of American
Financial. He is also Co-President of AFC.
The identity and background of the executive officers,
directors and controlling persons of American Financial and AFC
(other than the Lindner Family, which is set forth above) are as
follows:
1. Theodore H. Emmerich is a retired managing partner of
Ernst & Young, certified public accountants, Cincinnati, Ohio.
He is presently a director of American Financial and AFC. Mr.
Emmerich's address is 1201 Edgecliff Place, Cincinnati, Ohio,
45206.
2. James E. Evans' principal occupation is as Senior Vice
President and General Counsel of American Financial. He is also
Senior Vice President and General Counsel of AFC.
3. Thomas M. Hunt's principal occupation is as President of
Hunt Petroleum Corporation, an oil and gas production company.
He is presently a director of American Financial and AFC. Mr.
Hunt's business address is 5000 Thanksgiving Tower, 1601 Elm
Street, Dallas, Texas, 75201.
4. William R. Martin's principal occupation is as Chairman
of the Board of MB Computing, Inc., a privately held computer
software development company. He is presently a director of
American Financial and AFC. Mr. Martin's business address is 245
46th Avenue, St. Petersburg Beach, Florida 33706.
- 10 -
<PAGE>
5. Gregory C. Thomas, for more than five years prior to
his retirement in September 1996, was Executive Vice President
and Chief Financial Officer of Citicasters Inc. Mr. Thomas'
address is 1026 Stephens Road, Maineville, Ohio 45039.
6. William W. Verity's principal occupation is as Chairman
and Chief Executive Officer of ENCOR Holdings, Inc., develop and
manufacture of plastic molded components. He is also a director
of Chiquita. Mr. Verity's address is 3905 Vincennes Road, Suite
305, Indianapolis, Indiana 46268.
7. Alfred W. Martinelli's principal occupation is as
Chairman of the Board and Chief Executive Officer of Buckeye
Management Company, which is the sole general partner of Buckeye
Partners, L.P., a limited partnership principally engaged in
pipeline transportation of refined petroleum. Mr. Martinelli's
address is 269 Glenmoor Road, Gladwyne, Pennsylvania 19035. He
is also a director of AAG.
8. Fred J. Runk's principal occupation is as Senior Vice
President and Treasurer of American Financial. He is also Senior
Vice President and Treasurer of AFC.
9. Thomas E. Mischell's principal occupation is as Senior
Vice President - Taxes of American Financial. He is also a
Senior Vice President of AFC.
The following are persons who are executive officers of AFC
who are not also executive officers of American Financial:
1. Sandra W. Heimann's principal occupation is as a Vice
President of AFC.
2. Robert C. Lintz's principal occupation is as a Vice
President of AFC.
The Lindner Family and American Financial may be deemed to
be controlling persons with respect to AFC.
Unless otherwise noted, the business address of American
Financial, AFC and each of the persons listed above is One East
Fourth Street, Cincinnati, Ohio, 45202, and all of the
individuals are citizens of the United States.
None of the persons listed above have during the last five
years (i) been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) been a party
to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or
is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with
respect to such laws.
- 11 -
<PAGE>
Exhibit 2
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is entered
into as of October 22, 1997 by and among Peritus Software
Services, Inc., a Massachusetts corporation ("Peritus"), and
Twoquay, Inc., a Delaware corporation and a wholly owned
subsidiary of Peritus (the "Buyer" and, together with Peritus,
the "Buyer Entities"), and American Premier Underwriters, Inc., a
Pennsylvania corporation ("APU" or the "Seller"), and Millennium
Dynamics, Inc., an Ohio corporation and a wholly owned subsidiary
of APU ("MDI" and, together with APU, the "Seller Entities").
The Buyer Entities and the Seller Entities are collectively
referred to herein as the "Parties," and are sometimes
individually referred to herein as a "Party").
Preliminary Statement
The Buyer desires to purchase, and Peritus desires to cause
the Buyer to purchase, and the Seller desires to sell,
substantially all of the assets and business of MDI, for the
consideration set forth below and the assumption of certain of
the Seller's liabilities set forth below, subject to the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth and other good and valuable consideration,
the receipt of which is hereby acknowledged, the Parties hereby
agree as follows:
1. Merger of MDI and the Seller; Sale and Delivery of the
Assets.
1.1 Merger of MDI and the Seller. As described in
Section 5.10 hereof, prior to the closing of the transactions
contemplated by this Agreement (the "Closing"), MDI shall be
merged with and into the Seller (the "Merger"), and by operation
of law, all of MDI=s assets and liabilities, and all other rights
of any kind or nature associated with MDI's business
-12-
<PAGE>
(collectively, the "MDI Business") shall be transferred to the
Seller.
1.2 Delivery of the Assets.
(a) Subject to and upon the terms and conditions of
this Agreement, at the Closing, the Seller shall sell, transfer,
convey, assign and deliver to the Buyer, and the Buyer shall
purchase from the Seller, the following properties, assets and
other claims, rights and interests:
(i) all office supplies, maintenance supplies,
packaging materials, spare parts and similar items of the MDI
Business (collectively, the "Office Supplies") which exist on the
Closing Date (as defined below);
(ii) all accounts, accounts receivable, notes and
notes receivable relating to the MDI Business existing on the
Closing Date which are payable to the Seller, including any
security held by the Seller for the payment thereof (the
accounts, accounts receivable, notes and notes receivable,
including any related security therein, to be transferred to the
Buyer pursuant hereto are collectively referred to herein as the
"Accounts Receivable");
(iii) all prepaid expenses of the Seller
relating to the MDI Business existing on the Closing Date and any
cash balances relating to the MDI Business remaining on the
Closing Date after satisfying the conditions set forth in
subsection 5.9;
(iv) all rights of the Seller under the contracts,
agreements, leases, licenses and other instruments relating to
the MDI Business all as set forth on Schedule 2.16 attached
hereto, except for those under the Credit Agreement between the
Seller and MDI and the Agreement of Allocation of Payment of
Federal Income Tax (the "Tax Sharing Agreement") between the
Seller Entities and certain of their Affiliates (as defined
below) (collectively, the "Contract Rights");
-13-
<PAGE>
(v) all books, records and accounts,
correspondence, production records, technical, accounting,
manufacturing and procedural manuals, customer lists, employment
records, studies, reports or summaries relating to any
environmental conditions or consequences of any operation
relating to the MDI Business, present or former, as well as all
studies, reports or summaries relating to any environmental
aspect or the general condition of the Assets (as defined below),
and any confidential information which has been reduced to
writing relating to or arising solely out of the MDI Business;
(vi) all rights of the Seller under express or
implied warranties from the suppliers of the MDI Business;
(vii) all of the machinery, computer and other
equipment, tools, software, hardware, maintenance machinery and
equipment and furniture relating to the MDI Business owned by the
Seller on the Closing Date, whether or not reflected as capital
assets in the accounting records of the Seller relating to the
MDI Business (collectively, the "Fixed Assets");
(viii) all of the Seller's right, title and
interest in and to all Intellectual Property, as defined in
Subsection 2.24(f);
(ix) all copies of and media containing all source
code, object code, flow charts, program descriptions, program
listings, libraries, tools, utilities, databases, data, diagrams,
diagnostics, alpha and beta versions and all related
documentation and commentaries, owned, licensed or used by the
Seller Entities in the conduct of the MDI Business (the
"Software"); and
(x) except as specifically provided in
Subsection 1.2(b) hereof, all other assets, properties, claims,
rights and interests of the Seller relating to the MDI Business
which exist on the Closing Date, of every kind and nature and
description, whether tangible or intangible, real, personal or
mixed.
-14-
<PAGE>
(b) Notwithstanding the provisions of paragraph (a)
above, the assets to be transferred to the Buyer under this
Agreement shall not include those assets listed on Schedule
1.2(b) attached hereto or any tax rights or benefits arising or
in any way related to the Tax Sharing Agreement (the "Excluded
Assets").
(c) The Office Supplies, Accounts Receivable, Contract
Rights, Fixed Assets, Intellectual Property, Software and other
properties, assets and business of the Seller relating to the MDI
Business described in paragraph (a) above, other than the
Excluded Assets, shall be referred to collectively as the
"Assets."
1.3 Further Assurances. At any time and from time to time
after the Closing, at the reasonable request of either or both of
the Buyer Entities and without further consideration, the Seller
or Seller Entities promptly shall execute and deliver such
instruments of sale, transfer, conveyance, assignment and
confirmation, and take such other action, as either or both of
the Buyer Entities may reasonably request to more effectively
transfer, convey and assign to the Buyer, and to confirm the
Buyer's title to, all of the Assets, to put the Buyer in actual
possession and operating control thereof, to assist the Buyer in
exercising all rights with respect thereto and to carry out the
purpose and intent of this Agreement. At any time and from time
to time after the Closing, at the request of either or both of
the Seller Entities and without further consideration, the Buyer
or Buyer Entities promptly shall execute and deliver such
instruments of assumption and confirmation, and take such other
action, as either or both of the Seller Entities may reasonably
request to more effectively confirm the Buyer=s assumption of the
Assumed Liabilities (as defined below).
1.4 Purchase Price.
(a) The purchase price to be paid to the Seller by the
Buyer for the Assets shall be (i) the cash sum of $30,000,000
(the "Cash Portion of the Purchase Price") and (ii) the number of
-15-
<PAGE>
shares (the "Stock Portion of the Purchase Price" or the
"Shares") of the common stock, $.01 par value per share, of
Peritus (the "Peritus Common Stock") determined as set forth in
the following sentence. If (a) the Average Share Price (as
defined below) is $25.00 or less, the Stock Portion of the
Purchase Price shall be 2,222,000 shares of Peritus Common Stock;
(b) the Average Share Price is between $25.00 and $30.00, the
Stock Portion of the Purchase Price shall be determined as set
forth in Schedule 1.4; or (c) the Average Share Price is greater
than $30.00, the Stock Portion of the Purchase Price shall be
determined by dividing (x) $60,000,000 by (y) the Average Share
Price (rounded down to the nearest whole share). The "Average
Share Price" is the average of the closing sale price of the
Peritus Common Stock on the Nasdaq National Market for the five
trading days beginning on the second trading day immediately
preceding the date hereof and ending on the second trading day
immediately following the date hereof. The Cash Portion of the
Purchase Price and the Stock Portion of the Purchase Price are
collectively referred to herein as the "Purchase Price." The
Purchase Price shall be payable in the manner described in
paragraph (b) of this Subsection 1.4.
(b) At the Closing, the Buyer shall deliver to the
Seller (i) the Cash Portion of the Purchase Price by wire
transfer of immediately available funds to an account designated
by the Seller, and (ii) a stock certificate registered in the
name of the Seller representing the Stock Portion of the Purchase
Price.
1.5 Assumption of Liabilities; Etc.
(a) At the Closing, the Buyer shall execute and
deliver an Instrument of Assumption of Liabilities (the
"Instrument of Assumption") substantially in the form attached
hereto as Exhibit A, pursuant to which it shall assume and agree
to perform, pay and discharge the following liabilities,
obligations and commitments of the Seller relating to the MDI
Business (the "Assumed Liabilities"):
-16-
<PAGE>
(i) all trade accounts payable and accrued
expenses reflected on the balance sheet of MDI as of September
30, 1997 previously delivered to the Buyer (the "Current Balance
Sheet"), less any payments made from September 30, 1997 (the
"Balance Sheet Date") to the Closing Date and excluding any
liability under the Credit Agreement between MDI and APU;
(ii) all trade accounts payable and accrued
expenses of the Seller relating to the MDI Business incurred in
the ordinary course of business from the Balance Sheet Date to
the Closing Date, other than liabilities and liens for Taxes (as
defined below) or deferred Taxes, liabilities under the Tax
Sharing Agreement, liabilities under the Credit Agreement between
MDI and APU, accounts payable which are outstanding for more than
three months as of the Closing Date and accounts payable that are
contingent or are not fixed in amount as of the Closing Date;
(iii) all obligations of the Seller relating
to the MDI Business continuing after the Closing under the leases
and contracts set forth on Schedule 1.5 attached hereto which
become due and payable after the Closing Date; and
(iv) all other liabilities and obligations of the
Seller specifically set forth in Schedule 1.5 attached hereto.
(b) The Buyer shall not at the Closing assume or agree
to perform, pay or discharge, and the Seller shall remain
unconditionally liable for, all obligations, liabilities and
commitments, fixed or contingent, of the Seller other than the
Assumed Liabilities.
(c) Notwithstanding any provision herein to the
contrary, the Buyer shall be solely liable for the prompt and
full discharge of the Assumed Liabilities and also for any
liability arising from, or in connection with the Assets acquired
by the Buyer after the consummation of the transactions
contemplated hereby, including, without limitation, any such
liabilities arising by reason of any violation or claimed
violation by the Buyer, by acts or events or omissions arising or
-17-
<PAGE>
occurring after the Closing, of any federal, state or local law,
rule, regulation, ordinance or any requirement of any government
authority.
1.6 [Intentionally omitted].
1.7 The Closing. The Closing shall take place at the
offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts at 9:00 a.m., Boston time, on the third business
day after the conditions set forth in Section 6 have been
satisfied, or at such other place, time or date as may be
mutually agreed upon in writing by the parties hereto. The
transfer of the Assets by the Seller to the Buyer shall be deemed
to occur at the open of business on the date of the Closing (the
"Closing Date").
1.8 Apportionment.
(a) Prepaid premiums on insurance if assigned as
herein provided, water and sewer use charges, transfer taxes and
recording fees, if any, incurred in connection with the transfer
of the Assets contemplated hereby, and real property taxes for
the then current tax period, shall be apportioned and adjusted as
of the Closing Date and the net amount thereof shall be added to
or deducted from, as the case may be, the Cash Portion of the
Purchase Price.
(b) If the amount of such real property taxes has not
been determined at the Closing Date, they shall be apportioned on
the basis of such taxes assessed for the preceding year, with a
reapportionment as soon as the new tax rate and valuation can be
ascertained; and, if the taxes which are to be apportioned shall
thereafter be reduced by abatement, the amount of such abatement,
less the reasonable cost of obtaining the same, shall be
apportioned between the Buyer and the Seller, provided that no
Party shall be obligated to institute or prosecute proceedings
for an abatement unless otherwise agreed. If such proceedings
are commenced, the Party commencing the same shall give the other
Party notice thereof and shall prosecute such proceedings and not
discontinue the same without first giving the other Party notice
-18-
<PAGE>
of its intention so to do and reasonable opportunity to be
substituted in such proceedings; and the other Party agrees to
cooperate in such proceedings without being obligated to incur
any expense in connection therewith.
(c) If the amounts of any common area charges under
real property leases transferred to the Buyer have not been
determined at the Closing Date, they shall be apportioned on the
basis of such charges assessed for the preceding year, with a
reapportionment upon and in the event of any new apportionment or
valuation method or scheme; and if such charges which are to be
apportioned shall thereafter be reduced, the amount of such
reduction shall be apportioned between the Buyer and the Seller.
2. Representations of the Seller Entities. The Seller Entities
each jointly and severally represents and warrants to the Buyer
Entities as follows:
2.1 Organization. Each of the Seller Entities is a
corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation, and has all
requisite power and authority (corporate and other) to own its
properties, to carry on its business as now being conducted, to
execute and deliver this Agreement and the agreements
contemplated herein, and to consummate the transactions
contemplated hereby (it being understood and agreed that, for
purposes of this Agreement, the "transactions contemplated
hereby" shall include, without limitation, the Merger). MDI has
no subsidiaries and does not own or control, directly or
indirectly, any shares of capital stock of any other corporation
or any interest in any partnership, joint venture, limited
liability company or other non-corporate enterprise. Each of the
Seller Entities is duly qualified to conduct business and is in
good standing in all jurisdictions in which its ownership of
property or the character of its business requires such
qualification, except where the failure to qualify would not have
a material adverse effect on the business, properties, assets or
condition (financial or otherwise) of such Seller Entity.
Certified copies of the Articles of Incorporation and Code of
-19-
<PAGE>
Regulations of the Seller Entities, each as amended to date, have
been previously delivered to the Buyer, are complete and correct,
and no amendments have been made thereto or have been authorized
since the date thereof.
2.2 Ownership of MDI. APU is the sole beneficial and
record owner of all of the outstanding securities of MDI.
2.3 Authorization. The execution and delivery by each of
the Seller Entities of this Agreement, and the agreements
provided for herein, and the consummation by each of the Seller
Entities of all transactions contemplated hereby, have been duly
authorized by all requisite corporate and shareholder action.
This Agreement and all such other agreements and obligations
entered into and undertaken in connection with the transactions
contemplated hereby to which each Seller Entity is a party,
assuming the due execution and delivery by the Buyer, constitute
the valid and legally binding obligations of the respective
Seller Entity, enforceable against the respective Seller Entity
in accordance with their respective terms. The execution,
delivery and performance by the Seller Entities of this Agreement
and the agreements provided for herein, and the consummation by
each Seller Entity of the transactions contemplated hereby and
thereby, will not, with or without the giving of notice or the
passage of time or both, (a) violate the provisions of any law,
rule or regulation applicable to such Seller Entity; (b) violate
the provisions of the Articles of Incorporation or Code of
Regulations of such Seller Entity; (c) violate any judgment,
decree, order or award of any court, governmental body or
arbitrator applicable to such Seller Entity; or (d) except as set
forth on Schedule 2.3 attached hereto, conflict with or result in
the breach or termination of any term or provision of, or
constitute a default under, or cause any acceleration under, or
cause the creation of any lien, charge or encumbrance upon the
properties or assets of such Seller Entity pursuant to, any
indenture, mortgage, deed of trust or other instrument or
agreement to which such Seller Entity is a party or by which it
or any of its properties is or may be bound. Schedule 2.3
attached hereto sets forth a true, correct and complete list of
-20-
<PAGE>
all consents and approvals of third parties that are required in
connection with the consummation by the Seller Entities of the
transactions contemplated by this Agreement.
2.4 Ownership of the Assets. Schedule 2.4(i) attached
hereto sets forth a true, correct and complete list of all
claims, liabilities, liens, pledges, charges, encumbrances and
equities of any kind affecting the Assets (collectively, the
"Encumbrances"). As of the date hereof, MDI is, and at the
Closing the Seller will be, the true and lawful owner of the
Assets, and the Seller will have the right to sell and transfer
to the Buyer good, clear, record and marketable title to the
Assets, free and clear of all Encumbrances of any kind, except as
set forth on Schedule 2.4(ii) attached hereto (the "Permitted
Encumbrances"). The delivery to the Buyer of the instruments of
transfer of ownership contemplated by this Agreement will vest
good and marketable title to the Assets in the Buyer, free and
clear of all liens, mortgages, pledges, security interests,
restrictions, prior assignments, encumbrances and claims of any
kind or nature whatsoever, except for the Permitted Encumbrances.
There are no liens on any Assets that arose in connection with
any failure (or alleged failure) to pay any Tax.
2.5 Financial Statements.
(a) The Seller Entities have previously delivered to
the Buyer MDI=s audited balance sheets as of December 31, 1995
and 1996 and June 30, 1997 (the "Audited Balance Sheets") and the
related statements of operations, shareholder's equity and cash
flows of MDI for the fiscal years ended December 31, 1995 and
1996 and the six months ended June 30, 1997 (collectively,
including the Audited Balance Sheets, the "Audited Financial
Statements"). The Seller Entities have also previously delivered
to the Buyer MDI=s Current Balance Sheet and the related
statements of operations, shareholder's equity and cash flows of
MDI for the three and nine-month periods ended September 30, 1997
(collectively, the "Current Financial Statements"). The Audited
Financial Statements and the notes thereto and the Current
Financial Statements (collectively, the "Financial Statements")
-21-
<PAGE>
have been prepared in accordance with generally accepted
accounting principles ("GAAP") and are certified without
qualification by MDI's independent public accountants, in the
case of the Audited Financial Statements, and have been certified
by MDI's chief financial officer, in the case of the Current
Financial Statements.
(b) The Financial Statements fairly present, as of
their respective dates, in all material respects, the financial
condition, retained earnings, assets and liabilities of MDI and
the results of operations and cash flows of the MDI Business for
the periods indicated; and the amounts shown as accrued for
current and deferred income and other taxes, if any, in the
Financial Statements are sufficient for the payment of all
accrued and unpaid federal, state and local income taxes,
interest, penalties, assessments or deficiencies applicable to
MDI or the MDI Business, whether disputed or not, for the
applicable period then ended and periods prior thereto.
2.6 Absence of Undisclosed Liabilities. Except as and to
the extent (a) reflected and reserved against in the Current
Balance Sheet, (b) set forth on Schedule 2.6 attached hereto or
(c) incurred in the ordinary course of business after the date of
the Current Balance Sheet and not material in amount, either
individually or in the aggregate, neither the Seller nor MDI has
incurred any liability or obligation, secured or unsecured,
whether accrued, absolute, contingent, unasserted or otherwise,
affecting the Assets. For purposes of this Subsection 2.6,
"material" means any amount in excess of $10,000.
2.7 Litigation. Except as set forth on Schedule 2.7
attached hereto, MDI is not a party to, or to the knowledge of
the Seller Entities threatened with, and none of the Assets are
subject to, any litigation, suit, action, investigation,
proceeding or controversy before any court, administrative agency
or other governmental authority relating to or affecting the
Assets or the business or condition (financial or otherwise) of
MDI. Neither of the Seller Entities is in violation of or in
default with respect to any judgment, order, writ, injunction,
-22-
<PAGE>
decree or rule of any court, administrative agency or
governmental authority or any regulation of any administrative
agency or governmental authority relating to the MDI Business.
2.8 Insurance. Schedule 2.8 attached hereto sets forth a
true, correct and complete list of all fire, theft, casualty,
general liability, workers compensation, business interruption,
environmental impairment, product liability, automobile and other
insurance policies insuring the Assets or the MDI Business and of
all life insurance policies maintained for any of the employees
engaged in the MDI Business, specifying the type of coverage, the
amount of coverage, the premium, the insurer and the expiration
date of each such policy (collectively, the "Insurance Policies")
and all claims made under such Insurance Policies since December
31, 1995. True, correct and complete summaries of all of the
Insurance Policies have been previously delivered by the Seller
Entities to the Buyer. The Insurance Policies are in full force
and effect and are in amounts and of a nature which are adequate
and customary for the MDI Business. All premiums due on the
Insurance Policies or renewals thereof have been paid and there
is no default under any of the Insurance Policies. Except as set
forth on Schedule 2.8 attached hereto, neither of the Seller
Entities has received any notice or other communication from any
issuer of the Insurance Policies since December 31, 1995
cancelling or materially amending any of the Insurance Policies,
materially increasing any deductibles or retained amounts
thereunder, or materially increasing the annual or other premiums
payable thereunder, and, to the knowledge of the Seller Entities,
no such cancellation, amendment or increase of deductibles,
retainages or premiums is threatened.
2.9 Inventory. There is no inventory of raw materials or
goods to be sold or licensed to third parties relating to the MDI
Business.
2.10 Fixed Assets. Schedule 2.10 attached hereto sets forth
a true, correct and complete list of all Fixed Assets as of the
date hereof, including a description and the book value thereof.
Schedule 2.10, as updated pursuant to Subsection 7.9 hereof,
shall set forth a true, correct and complete list of all Fixed
-23-
<PAGE>
Assets as of the date three business days prior to the Closing
Date (the "Schedule Date"), including a description and valuation
thereof. All of the Fixed Assets, taken as a whole, are in good
operating condition and repair, normal wear and tear excepted,
are currently used by MDI in the ordinary course of business and
in the production of products of and provision of services by
MDI, and normal maintenance has been consistently performed with
respect to such Fixed Assets. As of the Closing Date, all of the
Fixed Assets shall be in good operating condition and repair,
normal wear and tear excepted.
2.11 Leases. Schedule 2.11 attached hereto sets forth a
true, correct and complete list as of the date hereof of all
leases of real property, identifying separately each ground
lease, relating to the MDI Business (the "Leases"). True,
correct and complete copies of the Leases, and all amendments,
modifications and supplemental agreements thereto, have
previously been delivered by the Seller Entities to the Buyer.
The Leases are in full force and effect, are binding and
enforceable against MDI, and as of the Closing Date, shall be
binding and enforceable against the Seller, in accordance with
their respective terms and, except as set forth on Schedule 2.11
attached hereto, have not been modified or amended since the date
of delivery to the Buyer. No party to any Lease has sent written
notice to the other claiming that such party is in default
thereunder, which remains uncured. Except as set forth on
Schedule 2.11 attached hereto, there has not occurred any event
by either Seller Entity which would constitute a breach of or
default in the performance of any material covenant, agreement or
condition required to be performed by either Seller Entity
contained in any Lease, nor has there occurred any event which
with the passage of time or the giving of notice or both would
constitute such a material breach or material default. Neither
Seller Entity is obligated to pay any leasing or brokerage
commission relating to any Lease and, except as set forth on
Schedule 2.11 attached hereto, will not have any enforceable
obligation to pay any leasing or brokerage commission upon the
renewal of any Lease. Except as set forth on Schedule 2.11
attached hereto, no material construction, alteration or other
leasehold improvement work with respect to any of the Leases
-24-
<PAGE>
remains to be paid for or to be performed by either Seller
Entity. The Financial Statements contain adequate reserves to
provide for the restoration of the properties subject to the
Leases at the end of the respective Lease terms, to the extent
required by the Leases.
2.12 Change in Financial Condition and Assets. Except as
set forth on Schedule 2.12 attached hereto, since the Balance
Sheet Date, there has been no change which materially and
adversely affects the business, properties, assets or condition
(financial or otherwise) of MDI or the MDI Business. The Seller
Entities have no knowledge of any existing or threatened
occurrence, event or development which, as far as can be
reasonably foreseen, could have a material adverse effect on MDI
or the business, properties, assets or condition (financial or
otherwise) of MDI or the MDI Business.
2.13 Tax Matters. Each of the Seller Entities has filed all
Tax Returns which are required to be filed and has paid all Taxes
which have become due or which have been claimed to be due. Each
of the Seller Entities is current in the payment of all Taxes.
Except as set forth on Schedule 2.13 attached hereto, no
deficiencies have been asserted or assessed relating to the MDI
Business as a result of any audit by the Internal Revenue Service
or any state or local taxing authority and no such deficiency or
audit has been proposed or threatened.
As used in this Agreement, the following terms shall have
the following respective meanings.
(i) "Affiliated Group" means an affiliated group
as defined in Section 1504 of the Code (or any analogous
combined, consolidated or unitary group defined under state,
local or foreign income Tax law) of which the Seller Entities are
or have been members.
(ii) "Code" means the Internal Revenue Code of
1986, as amended.
-25-
<PAGE>
(iii) "Tax" means any (A) federal, state,
local or foreign income, gross receipts, franchise, estimated,
alternative minimum, add-on minimum, sales, use, transfer,
registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental,
customs, duties, real property, capital stock, social security,
unemployment, disability, payroll, license, employee or other
withholding, or other tax, of any kind whatsoever, whether
disputed or not, including any interest, penalties or additions
to tax or additional amounts in respect of the foregoing; (B)
liability of either of the Seller Entities for the payment of any
amounts of the type described in clause (A) arising as a result
of being (or ceasing to be) a member of any Affiliated Group (or
being included (or required to be included) in any Tax Return
relating thereto or as a party to any Tax allocation or Tax
sharing agreement or any other contractual obligation to
indemnify any other person with respect to Taxes); and (C)
liability of either of the Seller Entities for the payment of any
amounts of the type described in clause (A) as a transferee or
successor, by contract (including as a result of any express or
implied obligation to indemnify or otherwise assume or succeed to
the liability of any other person), or otherwise.
(iv) "Tax Returns" means returns, declarations,
reports, claims for refund, information returns or other
documents (including any related or supporting schedules,
statements or information) filed or required to be filed in
connection with the determination, assessment or collection of
Taxes of any party or administration of any laws, regulations or
administrative requirements relating to any Taxes.
2.14 Accounts Receivable. Schedule 2.14 attached hereto
sets forth a true, correct and complete list of all Accounts
Receivable, including an aging thereof as of the Balance Sheet
Date. Schedule 2.14, as updated pursuant to Subsection 7.9
hereof, shall set forth a true, correct and complete list of the
Accounts Receivable as of the Schedule Date, including an aging
thereof. All Accounts Receivable arose out of the sales or
licenses, products or services in the ordinary course of business
-26-
<PAGE>
and, to the knowledge of the Seller Entities, are collectible in
the face value thereof within 180 days of the date of invoice,
using normal collection procedures, net of the reserve for
doubtful accounts as set forth thereon, which reserve the Seller
Entities reasonably believe is adequate and was calculated in
accordance with generally accepted accounting principles
consistently applied.
2.15 Books and Records. The general ledgers and books of
account relating to the MDI Business, all federal, state and
local income, franchise, property and other Tax Returns relating
to the MDI Business, and all other books and records relating to
the MDI Business are in all material respects complete and
correct and have been maintained in accordance with good business
practice and in accordance, in all material respects, with all
applicable procedures required by laws and regulations.
2.16 Contracts and Commitments.
(a) Schedule 2.16 attached hereto contains a true,
complete and correct list and description of the following
contracts and agreements, whether written or oral (except as set
forth below) (collectively, the "Contracts"):
(i) all loan agreements, indentures, mortgages
and guaranties relating to the MDI Business or by which MDI or
any of the Assets are bound;
(ii) all pledges, conditional sale or title
retention agreements, security agreements, equipment obligations,
personal property leases and lease purchase agreements relating
to any of the Assets to which either Seller Entity is a party;
(iii) all contracts, agreements, commitments,
purchase orders or other understandings or arrangements relating
to the MDI Business which involve payments or receipts by either
Seller Entity of more than $10,000 in the case of any single
contract, agreement, commitment, understanding or arrangement
under which full performance (including payment) has not been
rendered by all parties thereto;
-27-
<PAGE>
(iv) all collective bargaining agreements, written
employment and consulting agreements, severance or separation
agreements, change-in-control agreements, executive compensation
plans, bonus plans, deferred compensation agreements, pension
plans, retirement plans, employee stock option or stock purchase
plans and group life, health and accident insurance and other
employee benefit plans, agreements, arrangements or commitments
to which either Seller Entity is a party or by which either
Seller Entity or any of its property is bound that will be
assumed by the Buyer;
(v) all agency, distributor, sales representative
and similar agreements relating to the MDI Business to which
either Seller Entity is a party;
(vi) all contracts, agreements or other
understandings or arrangements relating to the MDI Business
between either Seller Entity and any stockholder or affiliate (as
such term is defined in the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the
"Securities Act")) of the Seller Entities ("Affiliate");
(vii) all leases relating to the MDI Business,
whether operating, capital or otherwise;
(viii) all contracts, agreements and other
documents or information relating to past disposal of waste
(whether or not hazardous) with respect to the MDI Business;
(ix) all contracts, agreements, licenses,
commitments, purchase orders or other understandings relating to
the MDI Business to which either Seller Entity is a party
obligated to or pursuant to which either Seller Entity (A) is
otherwise obligated to perform maintenance services for (i) a
period in excess of one year subsequent to the Closing Date or
(ii) nominal or no consideration or (B) has licensed its products
for nominal or no consideration; and
(x) any other material agreement or contract
relating to the MDI Business entered into by either Seller
Entity.
-28-
<PAGE>
(b) Except as set forth on Schedule 2.16(b) attached
hereto:
(i) each Contract is a valid and binding
agreement of the applicable Seller Entity, enforceable against
such Seller Entity in accordance with its terms, and the Seller
Entities do not have any knowledge that any Contract is not a
valid and binding agreement of the other parties thereto;
(ii) the applicable Seller Entity has fulfilled
all material obligations required pursuant to the Contracts to
have been performed by such Seller Entity on its part prior to
the date hereof;
(iii) to the knowledge of the Seller Entities,
neither Seller Entity is in breach of or default under any
Contract, and no event has occurred which with the passage of
time or giving of notice or both would constitute such a default,
result in a loss of rights or result in the creation of any lien,
charge or encumbrance, thereunder or pursuant thereto;
(iv) to the knowledge of the Seller Entities,
there is no existing breach or default by any other party to any
Contract, and no event has occurred which with the passage of
time or giving of notice or both would constitute a default by
such other party, result in a loss of rights or result in the
creation of any lien, charge or encumbrance thereunder or
pursuant thereto;
(v) Neither Seller Entity is restricted by any
Contract from carrying on its business anywhere in the world; and
(vi) Neither Seller Entity has received notice of
any product liability or product warranty claim under the
Contracts, and neither Seller Entity is aware of any threatened
claims.
-29-
<PAGE>
(c) Except as set forth on Schedule 2.3 or
Schedule 2.16(c) attached hereto, the continuation, validity and
effectiveness of each Contract will not be affected by the
transfer thereof to Buyer under this Agreement and all such
Contracts are assignable to the Buyer without a consent.
(d) True, correct and complete copies of all Contracts
have previously been delivered by the Seller Entities to the
Buyer.
2.17 Compliance with Agreements and Laws. Each Seller
Entity has all requisite licenses, permits and certificates,
including environmental, health and safety permits, from federal,
state and local authorities necessary to conduct the MDI Business
and own and operate the Assets (collectively, the "Permits").
Schedule 2.17 attached hereto sets forth a true, correct and
complete list of all material Permits, copies of which have
previously been delivered by the Seller to the Buyer. Neither of
the Seller Entities is in violation of any law, regulation or
ordinance (including, without limitation, laws, regulations or
ordinances relating to building, zoning, environmental, disposal
of hazardous substances, land use or similar matters) relating to
the MDI Business, the violation of which could have a material
adverse effect on either Seller Entity or the MDI Business. The
MDI Business does not violate, in any material respect, any
federal, state, local or foreign laws, regulations or orders
(including, but not limited to, any of the foregoing relating to
employment discrimination, occupational safety, environmental
protection, hazardous waste (as defined in the Resource
Conservation and Recovery Act, as amended, and the regulations
adopted pursuant thereto), conservation, or corrupt practices,
the enforcement of which would have a material and adverse effect
on the results of operations, condition (financial or otherwise),
assets or properties of the MDI Business. Except as set forth on
Schedule 2.17 attached hereto, neither Seller Entity has since
December 31, 1995 received any notice or communication from any
federal, state or local governmental or regulatory authority or
otherwise of any such violation or noncompliance relating to the
MDI Business.
-30-
<PAGE>
2.18 Employee Relations.
(a) Each of the Seller Entities is in material
compliance with all federal, state and local laws relating to the
MDI Business respecting employment and employment practices,
terms and conditions of employment, and wages and hours, and is
not engaged in any unfair labor practice, and there are no
arrears in the payment of wages or social security taxes relating
to the MDI Business.
(b) Except as set forth on Schedule 2.18(b) attached
hereto:
(i) none of the employees engaged in the MDI
Business is represented by any labor union;
(ii) there is no unfair labor practice complaint
relating to the MDI Business pending before the National Labor
Relations Board or any state or local agency;
(iii) there is no pending labor strike or
other labor trouble relating to the MDI Business (including,
without limitation, any organizational drive);
(iv) there is no labor grievance pending relating
to the MDI Business;
(v) there is no pending representation question
respecting the employees engaged in the MDI Business; and
(vi) there are no pending arbitration proceedings
arising out of or under any collective bargaining agreement
relating to the MDI Business, or to the knowledge of the Seller
Entities, any basis for which a claim may be made under any such
collective bargaining agreement.
(c) The Seller Entities have made available to the
Buyer a true, correct and complete list of (a) the employee
benefits provided by the Seller Entities to the employees engaged
in the MDI Business and all contracts or agreements between the
-31-
<PAGE>
Seller Entities and such employees, and (b) the current payroll
relating to such employees, including the job descriptions and
salary or wage rates, showing separately for each such person who
received an annual salary in excess of $30,000 the amounts paid
or payable as salary and bonus payments for the year ended
December 31, 1996 and for the nine months ended September 30,
1997.
(d) For purposes of this Subsection 2.18, the term
"employee" shall be construed to include sales agents and other
independent contractors who spend a majority of their working
time on the MDI Business.
2.19 Absence of Certain Changes or Events. Except as set
forth on Schedule 2.19 attached hereto, since the Balance Sheet
Date, neither Seller Entity has entered into any transaction
relating to the MDI Business which is not in the usual and
ordinary course of business, and, without limiting the generality
of the foregoing, with respect to the MDI Business has:
(a) incurred any material obligation or liability for
borrowed money;
(b) discharged or satisfied any lien or encumbrance or
paid any obligation or liability other than current liabilities
reflected in the Current Balance Sheet;
(c) mortgaged, pledged or subjected to lien, charge or
other encumbrance any of the Assets;
(d) sold or purchased, assigned or transferred any of
its tangible assets or cancelled any debts or claims, except for
inventory sold, raw materials purchased and obsolete assets
disposed of in the ordinary course of business;
(e) made any amendment to or termination of any
Contract or done any act or omitted to do any act which would
cause the material breach of any Contract;
-32-
<PAGE>
(f) suffered any losses, whether insured or uninsured,
and whether or not in the control of such Seller Entity, in
excess of $2,500 in the aggregate, or waived any rights of any
value;
(g) authorized or issued recall notices for any of its
products or initiated any safety investigations;
(h) received notice of any litigation, warranty claim
or products liability claims; or
(i) made any material change in the terms, status or
funding condition of any employee plan.
2.20 Customers. Schedule 2.20 attached hereto sets forth a
true, correct and complete list of the names and addresses of all
customers of the MDI Business which accounted for more than 5% of
MDI's total sales in the fiscal year ended December 31, 1996 and
the nine months ended September 30, 1997. Except as set forth on
Schedule 2.20 attached hereto, none of such customers has
notified either of the Seller Entities that it intends to
discontinue its current relationship with respect to the MDI
Business.
2.21 [Intentionally omitted]
2.22 [Intentionally omitted]
2.23 Prepayments and Deposits. Schedule 2.23 attached
hereto sets forth all prepayments or deposits with respect to the
MDI Business from customers for products to be shipped, or
services to be performed, after the Closing Date which have been
received by either Seller Entity as of the date hereof.
2.24 Intellectual Property.
(a) As of the date hereof, MDI owns or has the right
to use, and as of the Closing Date the Seller will own or have
the right to use, all Intellectual Property (as defined in
Subsection 2.24(f)) used in the operation of the MDI Business or
-33-
<PAGE>
necessary for the operation of the MDI Business as presently
conducted. Except as set forth on Schedule 2.24(a) attached
hereto, each item of Intellectual Property will be transferred to
the Buyer at Closing, and each such item of Intellectual Property
available for use by either Seller Entity will be available for
use by the Buyer on identical terms and conditions immediately
following the Closing. Each Seller Entity has taken all
reasonable measures to protect the proprietary nature of each
item of Intellectual Property, and to maintain in confidence all
trade secrets and confidential information, that it owns or uses.
Except as set forth on Schedule 2.24(a) attached hereto, no other
person or entity has any rights to any of the Intellectual
Property owned or used by either Seller Entity, and, to the
knowledge of the Seller Entities, no other person or entity is
infringing, violating or misappropriating any of the Intellectual
Property.
(b) None of the Intellectual Property infringes,
violates or constitutes a misappropriation of (or in the past
infringed, violated or constituted a misappropriation of) any
Intellectual Property rights of any other person or entity.
Neither Seller Entity has received any complaint, claim or notice
alleging any such infringement, violation or misappropriation,
and to the knowledge of the Seller Entities, there is no basis
for any such complaint, claim or notice.
(c) Schedule 2.24(c) attached hereto identifies, with
respect to the MDI Business, each (i) trademark, copyright and
patent registration, (ii) pending trademark, copyright and patent
application, and (iii) license or other agreement pursuant to
which either Seller Entity has granted any rights to any third
party with respect to any of its Intellectual Property. The
Seller Entities have delivered to the Buyer correct and complete
copies of all such patent, trademark and copyright registrations
and applications (as amended to date) and such licenses and
agreements (as amended to date) and have specifically identified
and made available to the Buyer correct and complete copies of
all other written documentation evidencing ownership of, and any
claims or disputes relating to, each such item. Except as set
-34-
<PAGE>
forth in Schedule 2.24(c) attached hereto, with respect to each
item of Intellectual Property that MDI owns as of the date hereof
and that the Seller will own immediately preceding the Closing:
(i) such Seller Entity possesses all right, title
and interest in and to such item;
(ii) such item is not subject to any outstanding
judgment, order, decree, stipulation or injunction; and
(iii) other than as set forth in the
agreements referred to in Schedule 2.16 attached hereto, neither
Seller Entity has agreed to indemnify any person or entity for or
against any infringement, misappropriation or other conflict with
respect to such item.
(d) Schedule 2.24(d) attached hereto identifies each
item of Intellectual Property used in the operation of the MDI
Business at any time during the period covered by the Financial
Statements, or that either Seller Entity plans to use in
connection with the MDI Business in the future, that is owned by
a party other than a Seller Entity. The Seller Entities have
supplied the Buyer with correct and complete copies of all
licenses, sublicenses or other agreements (as amended to date)
pursuant to which either Seller Entity uses such Intellectual
Property, all of which are listed on Schedule 2.16 and Schedule
2.24(d) attached hereto. Except as set forth in Schedule 2.16
and Schedule 2.24(d) attached hereto, with respect to each such
item of Intellectual Property:
(i) the license, sublicense or other agreement
covering such item is legal, valid, binding, enforceable and in
full force and effect;
(ii) such license, sublicense or other agreement
will continue to be legal, valid and binding, enforceable and in
full force and effect upon and immediately following the Closing
in accordance with the terms thereof as in effect prior to the
Closing;
-35-
<PAGE>
(iii) neither of the Seller Entities, nor, to
the knowledge of the Seller Entities, any other party to such
license, sublicense or other agreement, is in breach or default,
and no event has occurred which with notice or lapse of time
would constitute a breach or default or permit termination,
modification or acceleration thereunder;
(iv) the underlying item of Intellectual Property
is not subject to any outstanding judgment, order, decree,
stipulation or injunction;
(v) neither Seller Entity has agreed to indemnify
any person or entity for or against any interference,
infringement, misappropriation or other conflict with respect to
such item; and
(vi) other than as set forth in the agreements
referred to in Schedule 2.16 attached hereto, no license or other
fee is payable upon any transfer or assignment of such license,
sublicense or other agreement.
(e) Schedule 2.24(e) attached hereto accurately
identifies and describes in summary fashion the functions of all
Software (as defined in Subsection 1.1(a)(ix)) developed by MDI
(the "Seller Software") and identifies the nature of the rights
therein of MDI as of the date hereof and of the Seller
immediately preceding the Closing. Schedule 2.24(e) attached
hereto identifies all computer programs, libraries, databases or
other software not owned by the Seller Entities but embedded in
or necessary for the use of the Seller Software (the "Third Party
Software"). Except as set forth in Schedule 2.24(e) attached
hereto:
(i) The documentation, manuals, flow charts or
other materials to be transferred to the Buyer pursuant hereto
document in reasonable detail all of the functions of the Seller
Software and Third Party Software and are sufficient and adequate
to provide for their use by end users skilled in the use of such
programs.
-36-
<PAGE>
(ii) Other than as described on Schedule 2.24(e)
attached hereto, neither Seller Entity has disclosed the source
code for any of the Seller Software or other confidential or
proprietary information constituting, embodied in or pertaining
to the Seller Software to any person and each has taken
reasonable measures to prevent such disclosure, other than
disclosure of such source code to employees or independent
contractors engaged in the MDI Business, in each case pursuant to
valid and binding nondisclosure agreements with such persons or
entities which are in full force and effect. Other than as
described on Schedule 2.24(e) attached hereto, all of the Seller
Software has been created by regular employees of MDI within the
scope of their employment by MDI or by independent contractors of
MDI who, in either case, have executed agreements maintaining the
confidentiality of the Seller Software and expressly assigning,
in the case of such regular employees and such independent
contractors, all such regular employees and such independent
contractors' right, title and interest in the Seller Software to
MDI.
(iii) Except as disclosed on Schedule 2.24(e)
attached hereto, neither Seller Entity has distributed the Seller
Software or Third Party Software except pursuant to and in
compliance with the Contracts. No licensees are permitted to
distribute the Seller Software except pursuant to a valid written
sublicense agreement, a form of which has been provided to the
Buyer. Other than as described on Schedule 2.24(e) attached
hereto, no third party may legally use the Seller Software except
pursuant to a written license agreement, a form of which has been
provided to the Buyer or a sublicense agreement, as described
above.
(f) "Intellectual Property" means, with respect to the
MDI Business, all (i) patents, patent applications, patent
disclosures and all related continuation, continuation-in-part,
divisional, reissue, reexamination, utility model, certificate of
invention and design patents, patent applications, registrations
and applications for registrations, (ii) trademarks, service
marks, trade dress, logos, trade names and corporate names
-37-
<PAGE>
including, without limitation "Millennium Dynamics, Inc." and
registrations and applications for registration thereof, (iii)
copyrights and registrations and applications for registration
thereof (including moral rights), (iv) mask works and
registrations and applications for registration thereof, (v)
computer software, data and documentation, (vi) trade secrets and
confidential business information, whether patentable or
unpatentable and whether or not reduced to practice, know-how,
manufacturing and production processes and techniques, research
and development information, copyrightable works, financial,
marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and
information, (vii) other proprietary rights relating to any of
the foregoing, and (viii) copies and tangible embodiments
thereof.
2.25 Employee Benefit Plans. All of the pension, benefit,
profit sharing, stock, retirement, deferred compensation,
welfare, insurance, disability, bonus, vacation pay, severance or
separation pay, change in control or other similar plans,
programs and agreements, whether reduced to writing or not,
relating to the employees engaged in the MDI Business, or
maintained at any time by either Seller Entity with respect to
such employees, are in compliance, in all material respects, with
the requirements prescribed by any and all statutes, orders or
governmental rules or regulations currently in effect, including,
but not limited to, ERISA and the Internal Revenue Code of 1986,
as amended, applicable to such employee plans.
2.26 Real Estate. Neither Seller Entity owns any real
property relating to the MDI Business.
2.27 Acquired Assets Complete. The Assets are, when
utilized by a labor force substantially similar to that employed
by MDI on the date hereof, adequate to conduct the business
operations conducted by MDI on the date hereof.
2.28 Regulatory Approvals. All consents, approvals,
authorizations and other requirements prescribed by any law, rule
or regulation which must be obtained or satisfied by the Seller
-38-
<PAGE>
Entities and which are necessary for the execution and delivery
by the Seller Entities of this Agreement and the documents to be
executed and delivered by the Seller Entities in connection
herewith are set forth on Schedule 2.28 attached hereto and have
been, or will be prior to the Closing Date, obtained and
satisfied.
2.29 Indebtedness to and from Officers, Directors and
Shareholders. Except as set forth on Schedule 2.29 attached
hereto, MDI is not, as of the date hereof, and the Seller will
not be, as of the Closing Date, indebted, directly or indirectly,
to any person who is an officer, director or shareholder of
either Seller Entity or any Affiliate of any such person in any
amount whatsoever other than for salaries for services rendered
to the MDI Business or reimbursable business expenses thereof,
all of which have been reflected on the Current Financial
Statements, and no such officer, director, shareholder or
affiliate is indebted to MDI, as of the date hereof, or will be
indebted to the Seller, as of the Closing Date, except for
advances made to employees engaged in the MDI Business in the
ordinary course of business to meet reimbursable business
expenses anticipated to be incurred by such obligor.
2.30 Powers of Attorney and Suretyships. Except as set
forth on Schedule 2.30 attached hereto, neither Seller Entity has
any general or special powers of attorney outstanding with
respect to the MDI Business (whether as grantor or grantee
thereof) and, with respect to the MDI Business, has no obligation
or liability (whether actual, accrued, accruing, contingent or
otherwise) as guarantor, surety, co-signor, endorser, co-maker,
indemnitor or otherwise in respect of the obligation of any
person, corporation, partnership, joint venture, association,
organization or other entity, except as endorser or maker of
checks or letters of credit, respectively, endorsed or made in
the ordinary course of business.
2.31 Investment Representation. The Seller is acquiring the
Shares from the Buyer for its own account for investment and not
with a view to, or for sale in connection with, any distribution
-39-
<PAGE>
thereof in violation of any federal, state or local securities
laws. The Seller is an "accredited investor," as such term is
defined in Rule 501 of Regulation D of the Securities Act.
2.32 Disclosure. No representation or warranty by the
Seller Entities in this Agreement or in any Exhibit hereto, or in
any list, statement, document or information set forth in or
attached to any Schedule delivered or to be delivered pursuant to
this Agreement, contains or will contain any untrue statement of
a material fact or omits or will omit any material fact necessary
in order to make the statements contained therein not misleading.
The Seller Entities have disclosed to the Buyer all material
facts pertaining to the transactions contemplated by this
Agreement.
3. Representations of the Buyer Entities. The Buyer Entities
each jointly and severally represents and warrants to the Seller
Entities as follows:
3.1 Organization and Authority.
(a) The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware, and has requisite power and authority (corporate and
other) to own its properties and to carry on its business as now
being conducted. The Buyer has full power to execute and deliver
this Agreement and the agreements contemplated herein and to
consummate the transactions contemplated hereby and thereby.
(b) Peritus is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth
of Massachusetts, and has requisite power and authority
(corporate and other) to own its properties and to carry on its
business as now being conducted. Peritus has full power to
execute and deliver this Agreement and the agreements
contemplated herein and to consummate the transactions
contemplated hereby and thereby.
(c) The Buyer and Peritus have delivered to the Seller
Entities certified copies of their respective Charters and
-40-
<PAGE>
Bylaws, each as amended to date, which are complete and correct,
and no amendments have been made thereto or have been authorized
since the date hereof.
3.2 Capitalization of Peritus. As of September 30, 1997,
the authorized capital stock of Peritus consisted of (i)
50,000,000 shares of Peritus Common Stock, of which 13,162,242
shares were issued and outstanding, and (ii) 5,000,000 shares of
preferred stock, $.01 par value per share, of which no shares
were issued and outstanding. All of the outstanding shares of
capital stock of Peritus have been, and on the Closing Date will
be, duly and validly issued and are, or will be, fully paid and
nonassessable. On the date hereof, the authorized capital stock
of the Buyer consists of 3,000 shares of common stock, $.01 par
value per share, of which 100 shares are issued and outstanding.
Peritus owns of record and beneficially all of the outstanding
shares of common stock of the Buyer.
3.3 Authorization. The execution and delivery of this
Agreement by each of the Buyer and Peritus, and the agreements
provided for herein, and the consummation by the Buyer and
Peritus of all transactions contemplated hereby, have been duly
authorized by all requisite corporate action on the part of the
Buyer and Peritus. This Agreement and all such other agreements
and written obligations entered into and undertaken in connection
with the transactions contemplated hereby, assuming the due
execution and delivery by the parties other than the Buyer
Entities, constitute the valid and legally binding obligations of
the Buyer and Peritus, enforceable against them in accordance
with their respective terms. The execution, delivery and
performance of this Agreement and the agreements provided for
herein, and the consummation by the Buyer and Peritus of the
transactions contemplated hereby and thereby, will not, with or
without the giving of notice or the passage of time or both, (a)
violate the provisions of any law, rule or regulation applicable
to the Buyer or Peritus; (b) violate the provisions of the
Charter or Bylaws of the Buyer or Peritus; (c) violate any
judgment, decree, order or award of any court, governmental body
or arbitrator applicable to such Buyer Entity; or (d) conflict
with or result in the breach or termination of any term or
-41-
<PAGE>
provision of, or constitute a default under, or cause any
acceleration under, or cause the creation of any lien, charge or
encumbrance upon the properties or assets of the Buyer or Peritus
pursuant to, any indenture, mortgage, deed of trust or other
agreement or instrument to which it or its properties is a party
or by which the Buyer or Peritus respectively is or may be bound.
Schedule 3.3 attached hereto sets forth a true, correct and
complete list of all consents and approvals of third parties that
are required in connection with the consummation by the Buyer
Entities of the transactions contemplated by this Agreement.
3.4 Reports and Financial Statements. Peritus has
previously furnished to the Seller Entities complete and accurate
copies, as amended or supplemented, of its (a) Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 1997, as filed
with the Securities and Exchange Commission (the "Commission")
and (b) all other reports filed by Peritus under Section 13 of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), with the Commission since July 2, 1997 (such reports are
collectively referred to herein as the "Peritus Reports"). The
Peritus Reports constitute all of the documents required to be
filed by Peritus under Section 13 of the Exchange Act with the
Commission since July 2, 1997. As of their respective dates, the
Peritus Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated herein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. Since the date of the latest filed Peritus Report,
Peritus has had no obligation to file a Current Report on
Form 8-K under the Exchange Act. The audited financial
statements and unaudited interim financial statements of Peritus
included in the Peritus Reports (i) comply in all material
respects with applicable accounting requirements and the
published rules and regulations of the Commission with respect
thereto, (ii) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto, and
in the case of quarterly financial statements, as permitted by
Form 10-Q under the Exchange Act), (iii) fairly present the
consolidated financial condition, results of operations and cash
-42-
<PAGE>
flows of Peritus as of the respective dates thereof and for the
periods referred to therein, and (iv) are consistent with the
books and records of Peritus.
3.5 Disclosure. No representation or warranty by either
the Buyer or Peritus in this Agreement or in any Exhibit hereto,
or in any list, statement, document or information set forth in
or attached to any Schedule delivered or to be delivered pursuant
hereto, contains or will contain any untrue statement of a
material fact or omits or will omit any material fact necessary
in order to make the statements contained therein, in light of
the circumstances in which they were made, not misleading. The
Buyer Entities have disclosed to the Seller Entities all material
facts pertaining to the transactions contemplated by this
Agreement.
3.6 No Material Adverse Change. Since June 30, 1997,
except as disclosed in a Peritus Report or as otherwise disclosed
in Schedule 3.6 attached hereto: (i) there has been no change
which materially and adversely affects the business, properties,
assets or condition (financial or otherwise) of Peritus (any such
change is called a "Material Adverse Change"); (ii) Peritus and
its subsidiaries, considered as one entity, have not incurred any
material liability or obligation, indirect, direct or contingent,
not in the ordinary course of business nor entered into any
material transaction or agreement not in the ordinary course of
business; and (iii) there has been no dividend or distribution of
any kind declared, paid or made by Peritus or, except for
dividends paid to Peritus or any of its subsidiaries on any class
of capital stock or repurchase or redemption by Peritus or any of
its subsidiaries of any class of capital stock.
3.7 Nasdaq. The Shares shall have been approved for
listing on the Nasdaq National Market on or prior to the Closing
Date, subject only to official notice of issuance.
3.8 Litigation. Except as set forth on Schedule 3.8
attached hereto, Peritus is not a party to, or to the knowledge
of Peritus threatened with, and none of its assets are subject
to, any litigation, suit, action, investigation, proceeding or
-43-
<PAGE>
controversy before any court, administrative agency or other
governmental authority relating to or affecting its assets or the
business or condition (financial or otherwise) of Peritus.
Peritus is not in violation of or in default with respect to any
judgment, order, writ, injunction, decree or rule of any court,
administrative agency or governmental authority or any regulation
of any administrative agency or governmental authority.
3.9 Intellectual Property Rights. Peritus and its
subsidiaries own or possess sufficient trademarks, trade names,
patent rights, copyrights, licenses, approvals, trade secrets and
other similar rights (collectively, "Peritus Intellectual
Property Rights") reasonably necessary to conduct their
businesses as now conducted; and the expected expiration of any
of such Peritus Intellectual Property Rights would not result in
a Material Adverse Change. Neither Peritus nor any of its
subsidiaries has received any notice of infringement or conflict
with asserted intellectual property rights of others, which
infringement or conflict, if the subject of an unfavorable
decision, would result in a Material Adverse Change.
3.10 All Necessary Permits, etc. Peritus and each subsidiary
possess such valid and current certificates, authorizations or
permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct their
respective businesses, and neither Peritus nor any subsidiary has
received any notice of proceedings relating to the revocation or
modification of, or noncompliance with, any such certificate,
authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, could
result in a Material Adverse Change.
3.11 Title to Properties. Except as described in the
Peritus Reports, Peritus and each of its subsidiaries has good
and valid title to all the properties and assets reflected as
owned in the Peritus Reports, in each case free and clear of any
security interests, mortgages, liens, encumbrances, equities,
claims and other defects, except such as do not materially and
adversely affect the value of such property and do not materially
interfere with the use made or proposed to be made of such
-44-
<PAGE>
property by Peritus or such subsidiary. The real property,
improvements, equipment and personal property held under lease by
Peritus or any subsidiary are held under valid and enforceable
leases, with such exceptions as are not material and do not
materially interfere with the use made or proposed to be made of
such real property, improvements, equipment or personal property
by Peritus, or such subsidiary.
3.12 Tax Law Compliance. Peritus and its consolidated
subsidiaries have filed all necessary federal, state and foreign
income and franchise Tax Returns and have paid all Taxes required
to be paid by any of them and, if due and payable, any related or
similar assessment, fine or penalty levied against any of them,
except for assessments, fines or penalties contested in good
faith for which adequate reserves have been provided to the
extent required by generally accepted accounting principles.
Peritus has made adequate charges, accruals and reserves
reasonably determined by Peritus in the applicable financial
statements in the Peritus Reports in respect of all federal,
state and foreign income and franchise Taxes for all periods as
to which the Tax liability of Peritus or any of its consolidated
subsidiaries has not been finally determined.
3.13 Peritus Not an "Investment Company." Peritus is not,
and after consummation of the transactions contemplated hereby
will not be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment
Company Act"), and will conduct its business in a manner so that
it will not become subject to the Investment Company Act.
3.14 Insurance. Each of Peritus and its subsidiaries is
insured by financially sound and reputable institutions with
policies in such amounts and with such deductibles and covering
such risks as are generally deemed adequate and customary for
their businesses including, but not limited to, policies covering
real and personal property owned or leased by Peritus and its
subsidiaries against theft, damage, destruction and acts of
vandalism. Peritus has no reason to believe that it or any
subsidiary will not be able (i) to renew its existing insurance
coverage as and when such policies expire or (ii) to obtain
-45-
<PAGE>
comparable coverage from similar institutions as may be necessary
or appropriate to conduct its business as now conducted and at a
cost that would not result in a Material Adverse Change. Neither
Peritus nor any subsidiary has been denied any insurance coverage
which it has sought or for which it has applied.
4. Access to Information; Public Announcements.
4.1 Access to Management, Properties and Records.
(a) From the date of this Agreement until the Closing
Date, each of the Seller Entities shall afford the officers,
attorneys, accountants and other authorized representatives of
each of the Buyer Entities access upon reasonable notice and
during normal business hours to all management personnel,
offices, properties, books and records relating to the MDI
Business, so that the Buyer Entities may have full opportunity to
make such investigation as they shall desire to make of the
management, business, properties and affairs of the Seller
Entities relating to the MDI Business, and the Buyer Entities
shall be permitted to make abstracts from, or copies of, all such
books and records. The Seller shall furnish to the Buyer
Entities such financial and operating data and other information
as to the Assets and the MDI Business as the Buyer Entities shall
reasonably request.
(b) The Seller Entities shall authorize the release to
the Buyer or to Peritus of all files pertaining to the Assets or
the MDI Business held by any federal, state, county or local
authorities, agencies or instrumentalities, other than files with
respect to which the Seller Entities are under a legal or
contractual obligation of confidentiality.
4.2 Confidentiality. Each and every one of the Parties
agrees to be bound by the terms of that certain Confidentiality
Agreement dated August 11, 1997 by and between Peritus and MDI
(the "Confidentiality Agreement") as if and whether or not such
Party is a signatory thereto.
-46-
<PAGE>
4.3 Public Announcements. The parties agree that prior to
the Closing Date, except as otherwise required by law, any and
all public announcements or other public communications
concerning this Agreement and the purchase of the Assets by the
Buyer shall be subject to the approval of both parties, which
approval shall not be unreasonably withheld.
5. Pre-Closing Covenants of the Seller Entities. From and
after the date hereof and until the Closing Date:
5.1 Conduct of Business. The Seller Entities shall carry
on the MDI Business substantially in the same manner as
heretofore and shall not make or institute any unusual or new
methods of manufacture, purchase, sale, shipment or delivery,
lease, license management, accounting or operation, and shall not
ship or deliver any quantity of products in excess of normal
shipment or delivery levels, except as agreed to in writing by
the Buyer or Peritus. All of the Assets shall be used, operated,
repaired and maintained in a normal business manner consistent
with past practice.
5.2 Absence of Material Changes. Without the prior written
consent of the Buyer or Peritus, and except as set forth in
Subsection 1.1 hereof, the Seller Entities shall not:
(a) take any action to amend MDI=s Articles of
Incorporation or Code of Regulations;
(b) issue any stock, bonds or other corporate
securities of MDI or grant any option or issue any warrant to
purchase or subscribe to any of such securities or issue any
securities convertible into such securities;
(c) incur any obligation or liability (absolute or
contingent) relating to the MDI Business, except current
liabilities incurred and obligations under contracts entered into
in the ordinary course of business;
(d) declare or make any payment or distribution to
MDI=s shareholders with respect to their stock or purchase or
redeem any shares of MDI=s capital stock;
-47-
<PAGE>
(e) mortgage, pledge, or subject to any lien, charge
or any other encumbrance any of the Assets;
(f) sell, assign, or transfer any of the Assets,
except for products sold or licensed in the ordinary course of
business, at a normal profit margin, and for not less than
replacement cost;
(g) cancel any debts or claims relating to the MDI
Business, except in the ordinary course of business;
(h) merge or consolidate with or into any corporation
or other entity;
(i) make, accrue or become liable for any bonus,
profit sharing or incentive payment relating to the MDI Business,
except for accruals under existing plans, if any, or increase the
rate of compensation payable or to become payable by either
Seller Entity to any officers, directors or employees engaged in
the MDI Business, other than increases in the ordinary course of
business consistent with past practice;
(j) make any election or give any consent under the
Code or the Tax statutes of any state or other jurisdiction or
make any termination, revocation or cancellation of any such
election or any consent or compromise or settle any claim for
past or present Tax due;
(k) waive any rights of material value relating to the
MDI Business;
(l) modify, amend, alter or terminate any executory
contracts of a material value relating to the MDI Business or
which are material in amount;
(m) take or permit any act or omission constituting a
breach or default under any contract, indenture or agreement
relating to the MDI Business or by which the Assets are bound;
-48-
<PAGE>
(n) fail to use its best efforts to (i) preserve the
possession and control of the Assets and the MDI Business,
(ii) keep in service the present officers and key employees
engaged in the MDI Business, (iii) preserve the goodwill of the
customers, suppliers, agents, brokers and others having business
relations with the MDI Business, and (iv) keep and preserve the
MDI Business existing on the date hereof until after the Closing
Date;
(o) fail to operate the MDI Business and maintain the
books, accounts and records relating to the MDI Business in the
customary manner and in the ordinary or regular course of
business and maintain in good repair the premises, fixtures,
machinery, furniture and equipment relating to the MDI Business;
(p) enter into any leases, contracts, agreements or
understandings relating to the MDI Business other than those
entered into in the ordinary course of business calling for
payments which in the aggregate do not exceed $10,000 for each
such lease, contract, agreement or understanding;
(q) engage any employee in the MDI Business for a
salary in excess of $50,000 per annum;
(r) materially alter the terms, status or funding
condition of any employee plan relating to employees engaged in
the MDI Business; or
(s) commit or agree to do any of the foregoing in the
future.
5.3 Taxes. The Seller Entities will, on a timely basis,
file all Tax Returns for and pay any and all Taxes which shall
become due or shall have accrued (a) on account of the operation
of the MDI Business or the ownership of the Assets on or prior to
the Closing Date or (b) on account of the sale of the Assets
(including a pro-rata portion of all personal property and excise
taxes payable with respect to the Assets by either Seller
Entity).
-49-
<PAGE>
5.4 Communication with Customers and Suppliers.
(a) Unless instructed otherwise by the Buyer or by
Peritus in writing, the Seller Entities will accept customer
orders with respect to the MDI Business in the ordinary course of
business and consistent with past practice.
(b) The Seller Entities and the Buyer will cooperate
in communication with suppliers and customers to accomplish the
transfer of the Assets to the Buyer on the Closing Date.
5.5 Compliance with Laws. The Seller Entities will comply, in
all material respects, with all laws and regulations which are
applicable to the MDI Business and the ownership of the Assets
and will perform and comply with all contracts, commitments and
obligations relating to the MDI Business by which each of them is
bound.
5.6 Continued Truth of Representations and Warranties of
the Seller Entities. The Seller Entities, individually or
collectively, will not take any actions which would result in any
of the representations or warranties set forth in Section 2
hereof being untrue.
5.7 Continuing Obligation to Inform. From time to time
prior to the Closing, the Seller Entities will deliver or cause
to be delivered to the Buyer supplemental information concerning
events subsequent to the date hereof which would render any
statement, representation or warranty in this Agreement or any
information contained in any Schedule inaccurate or incomplete in
any material respect at any time after the date hereof until the
Closing Date.
5.8 Exclusive Dealing. The Seller Entities, individually
or collectively, will not, directly or indirectly, through any
officer, director, agent or otherwise, (a) solicit, initiate or
encourage submission of proposals or offers from any person
relating to any acquisition or purchase of all or a material
portion of the Assets, or any equity interest in, MDI or any
equity investment, merger, consolidation or business combination
-50-
<PAGE>
with MDI, or (b) participate in any discussions or negotiations
regarding, or furnish to any other person, any non-public
information with respect to, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any
effort or attempt by any other person to do or seek any of the
foregoing. The Seller Entities shall promptly notify the Buyer
or Peritus if any such proposal or offer, or any inquiry or
contact with any person with respect thereto, is made.
5.9 Collection of Receivables and Borrowings Under APU
Credit Agreement. After the date of this Agreement, the Seller
Entities shall continue to collect the Accounts Receivable in the
ordinary course of business and use the proceeds therefrom to
fund the operations of the MDI Business, including employee
compensation (but excluding payments under Section 20 hereof) and
the payment of trade payables. In the event that such
collections are insufficient to fund such operations, APU agrees
to advance sufficient funds to continue such operations and to
comply with Section 7.12 hereof as of the Closing Date. In the
event that, at the time of the Closing, the Seller has any cash
on hand relating to the MDI Business, it shall be permitted to
retain such cash to the extent that the amount owed to APU by MDI
under the APU Credit Agreement at the time of the Merger exceeds
$5.6 million, and any additional cash relating to the MDI
Business remaining after such repayment shall be transferred to
the Buyer as required by Section 1.2(a)(iii) hereof.
5.10 Merger of MDI and Seller. As a result of the Merger,
the Seller will be directly responsible for the representations
and warranties contained herein relating to the MDI Business.
Prior to the Closing, MDI shall be merged with and into the
Seller and, by operation of law, the MDI Business shall become
the property of the Seller. At the Closing, the Seller shall
transfer the Assets to the Buyer in accordance with
Subsection 7.15(a) hereof and the Buyer shall assume the Assumed
Liabilities from the Seller in accordance with Subsection 1.5
hereof.
-51-
<PAGE>
6. Best Efforts to Obtain Satisfaction of Conditions.
6.1 Satisfaction of Conditions. The Seller Entities and
the Buyer covenant and agree to use their best efforts to obtain
the satisfaction of the conditions specified in this Agreement.
The Buyer agrees to cooperate with the Seller Entities in efforts
to obtain, or cause to be obtained, prior to the Closing Date,
consents to the assignment to and assumption by the Buyer of all
licenses, leases, and other contracts and instruments and rights
set forth on Schedule 2.16 attached hereto that require the
consent of any third party by reason of the transactions
contemplated by this Agreement; provided, however, that the
Seller Entities shall be required to obtain the consents to the
contracts set forth on Schedule 6.1 attached hereto (the
"Material Consents") prior to Closing.
6.2 Hart-Scott-Rodino-Act. Each of the Parties shall
promptly file any Notification and Report Forms and related
material that it may be required to file with the Federal Trade
Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act ("HSR"),
shall use its best efforts to obtain an early termination of the
applicable waiting period, and shall make any further filings or
information submissions pursuant thereto that may be necessary,
proper or advisable; provided, however, that neither of the Buyer
Entities shall be obligated to respond to formal requests for
additional information or documentary material pursuant to 16
C.F. R. 803.20 under HSR except to the extent it elects to do so
in its sole discretion.
7. Conditions to Obligations of the Buyer Entities. The
obligations of the Buyer Entities under this Agreement are
subject to the fulfillment, at the Closing Date, of the following
conditions precedent, each of which may be waived in writing in
the sole discretion of either of the Buyer Entities:
7.1 Continued Truth of Representations and Warranties of
the Seller Entities; Compliance with Covenants and Obligations.
The representations and warranties of the Seller Entities (other
-52-
<PAGE>
than the representations and warranties in Sections 2.10 and
2.14) shall be true on and as of the Closing Date and the
representations and warranties of the Seller Entities in Sections
2.10 and 2.14 shall be true on and as of the Schedule Date, as
though such representations and warranties were made on and as of
such respective dates, except for any changes permitted by the
terms hereof or consented to in writing by the Buyer or Peritus.
The Seller Entities shall have performed and complied with all
terms, conditions, covenants, obligations, agreements and
restrictions required by this Agreement to be performed or
complied with by each of them, respectively, prior to or at the
Closing Date.
7.2 Corporate Proceedings. All corporate and other
proceedings required to be taken on the part of each of the
Seller Entities to authorize or carry out the Merger and this
Agreement and to convey, assign, transfer and deliver the Assets
shall have been taken.
7.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the
consent, authorization or approval of which is necessary under
any applicable law, rule, order or regulation, including without
limitation the Hart-Scott-Rodino Act, for the consummation by the
Seller Entities of the Merger and the transactions contemplated
by this Agreement and the operation of the MDI Business by the
Buyer shall have consented to, authorized, permitted or approved
such transactions.
7.4 Consents of Lenders, Lessors and Other Third Parties.
The Seller shall have received the Material Consents and all
consents necessary to effect the Merger and transfer ownership of
the Assets from MDI to the Seller immediately prior to the
Closing.
7.5 Adverse Proceedings. No action or proceeding by or
before any court or other governmental body shall have been
instituted or threatened by any governmental body or person
whatsoever which shall seek to restrain, prohibit or invalidate
-53-
<PAGE>
the Merger or the transactions contemplated by this Agreement or
which might affect the right of the Buyer to own or use the
Assets after the Closing.
7.6 Opinion of Counsel. The Buyer shall have received an
opinion of Keating, Muething & Klekamp, P.L.L., counsel to the
Seller Entities, dated as of the Closing Date, in such form as
the Buyer or its counsel shall reasonably request, including that
the Merger does not affect the transfer of the Assets or the MDI
Business to the Buyer in accordance with this Agreement.
7.7 [Intentionally omitted].
7.8 The Assets. Except for the Permitted Encumbrances, at
the Closing the Buyer shall receive good, clear, record and
marketable title to the Assets, free and clear of all liens,
liabilities, security interests and encumbrances of any nature
whatsoever.
7.9 Update. The Seller Entities shall have provided the
Buyer with a true, correct and complete list and amount, as of
the Schedule Date, of:
(a) the Fixed Assets;
(b) the Accounts Receivable, including an aging
thereof;
(c) the trade accounts payable and accrued expenses
assumed pursuant to Subsection 1.5(a)(i) and (ii) hereof;
(d) all unfilled customer orders; and
(e) all shipments made during the period from October
1, 1997 through the Schedule Date, the nature of which
information shall not be materially different from the
information supplied by the Seller Entities as of the date hereof
on Schedules 2.10 and 2.14 attached hereto.
-54-
<PAGE>
7.10 Assignment of Insurance Policies. On or prior to the
Closing Date, the Seller Entities shall have assigned to the
Buyer the insurance policy with Lloyds of London (Policy No.
MPL00673800).
7.11 [Intentionally omitted].
7.12 Trade Payables. On the Closing Date, there shall be no
obligations to suppliers and vendors of goods and services and
other trade creditors with respect to the MDI Business which have
been outstanding for more than three months.
7.13 Registration Rights Waivers. On or prior to the
Closing Date, Peritus shall have received from the necessary
number of signatories to that certain Registration Rights
Agreement dated as of March 15, 1996, as amended, by and among
Peritus and the signatories thereto, a waiver of Section 15(i) of
such agreement prohibiting the grant by Peritus to any third
party of any registration rights more favorable than or
inconsistent with those contained within such agreement.
7.14 [Intentionally omitted].
7.15 Closing Deliveries. The Buyer shall have received at
or prior to the Closing each of the following documents:
(a) a bill of sale substantially in the form attached
hereto as Exhibit B;
(b) such instruments of conveyance, assignment and
transfer, in form and substance satisfactory to the Buyer, as
shall be appropriate to convey, transfer and assign to, and to
vest in, the Buyer, good, clear, record and marketable title to
the Assets except for the Permitted Liens;
(c) all technical data, formulations, product
literature and other documentation relating to the MDI Business;
-55-
<PAGE>
(d) such contracts, files and other data and documents
pertaining to the Assets or the MDI Business as the Buyer may
reasonably request;
(e) copies of the general ledgers and books of account
relating to the MDI Business, and all federal, state and local
income, franchise, property and other Tax Returns, or relevant
portions thereof, filed by the Seller Entities with respect to
the Assets since inception;
(f) such certificates of the Seller's officers and
such other documents evidencing satisfaction of the conditions
specified in Section 7 as the Buyer shall reasonably request;
(g) a certificate of the Secretary of State of the
Commonwealth of Pennsylvania as to the legal existence and good
standing of the Seller and a certificate of the Secretary of
State of the State of Ohio as to the legal existence and good
standing of MDI immediately prior to the Merger;
(h) a certificate of the Secretary or Assistant
Secretary of each Seller Entity attesting to the incumbency of
such Seller's Entity=s officers, the authenticity of the
resolutions authorizing the transactions contemplated by the
Agreement, and the authenticity and continuing validity of the
charter documents delivered pursuant to Subsection 2.1;
(i) estoppel certificates from each lessor with
respect to the Leases consenting to the assumption of such Lease
by the Buyer and representing that there are no outstanding
claims under any such Lease;
(j) the schedules listed in Subsection 7.9;
(k) evidence of compliance with all state and federal
environmental, occupational, work place disclosure and right to
know laws with respect to the MDI Business;
(l) the Registration Rights Agreement substantially in
the form attached hereto as Exhibit C;
-56-
<PAGE>
(m) cross receipt executed by the Buyer and the
Seller;
(n) assignment of the corporate name Millennium
Dynamics, Inc.;
(o) such other documents, instruments or certificates
as the Buyer may reasonably request;
(p) certificates of the Secretaries of State of the
State of Ohio and the Commonwealth of Pennsylvania as to the
completion of the Merger; and
7.16 Financial Statements. Peritus shall have received
from the Seller Entities on or prior to the Closing Date the
financial statements of MDI required by Item 7(a) of the
Commission's Current Report on Form 8-K, which financial
statements will conform to the requirements of and for the
periods specified in Rule 3-05(b) of Regulation S-X of the
Commission, including audited financial statements of MDI for the
three and nine months ended September 30, 1997.
7.17 Offer of Employment by Seller Entities. One or more
Affiliates of the Seller shall have offered the employees of MDI
listed on Schedule 7.17 attached hereto positions of employment
that are substantially equivalent in terms of compensation and
working conditions to their current positions with MDI.
8. Conditions to Obligations of the Seller Entities.
The obligations of the Seller Entities under this Agreement
are subject to the fulfillment, at the Closing Date, of the
following conditions precedent, each of which may be waived in
writing at the sole discretion of either of the Seller Entities:
8.1 Continued Truth of Representations and Warranties of
the Buyer Entities; Compliance with Covenants and Obligations.
The representations and warranties of each of the Buyer Entities
in this Agreement shall be true on and as of the Closing Date as
though such representations and warranties were made on and as of
-57-
<PAGE>
such date, except for any changes consented to in writing by the
Seller Entities. The Buyer Entities shall have performed and
complied with all terms, conditions, obligations, agreements and
restrictions required by this Agreement to be performed or
complied with by any of them, respectively, prior to or at the
Closing Date.
8.2 Corporate Proceedings. All corporate and other
proceedings required to be taken on the part of each of the Buyer
Entities to authorize or carry out this Agreement shall have been
taken.
8.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the
consent, authorization or approval of which is necessary under
any applicable law, rule, order or regulation for the
consummation by the Buyer of the transactions contemplated by
this Agreement shall have consented to, authorized, permitted or
approved such transactions.
8.4 Consents of Lenders, Lessors and Other Third Parties.
The Buyer shall have received all requisite consents and
approvals of all lenders, lessors and other third parties whose
consent or approval is required in order for the Buyer to
consummate the transactions contemplated by this Agreement.
8.5 Adverse Proceedings. No action or proceeding by or
before any court or other governmental body shall have been
instituted or threatened by any governmental body or person
whatsoever which shall seek to restrain, prohibit or invalidate
the transactions contemplated by this Agreement or which might
affect the right of the Seller to transfer the Assets.
8.6 Opinion of Counsel. The Seller shall have received an
opinion of Hale and Dorr LLP, counsel to the Buyer Entities,
dated as of the Closing Date, in such form as the Seller or its
counsel shall reasonably request.
8.7 Closing Deliveries. The Seller shall have received at
or prior to the Closing each of the following documents:
-58-
<PAGE>
(a) such certificates of the Buyer's officers and such
other documents evidencing satisfaction of the conditions
specified in this Section 8 as the Seller shall reasonably
request;
(b) a certificate of the Secretary of State of the
State of Delaware as to the legal existence and good standing of
the Buyer in Delaware;
(c) a certificate of the Secretary of State of the
Commonwealth of Massachusetts as to the legal existence and good
standing of Peritus in Massachusetts;
(d) a certificate of the Secretary of the Buyer
attesting to the incumbency of the Buyer's officers, the
authenticity of the resolutions authorizing the transactions
contemplated by this Agreement, and the authenticity and
continuing validity of the charter documents delivered pursuant
to Subsection 3.1;
(e) Instrument of Assumption of Liabilities executed
by the Buyer and accepted by the Seller;
(f) payment of the Purchase Price;
(g) the Registration Rights Agreement, substantially
in the form attached hereto as Exhibit C;
(h) cross receipt executed by the Buyer and the
Seller; and
(i) such other documents, instruments or certificates
as the Seller may reasonably request.
8.8 Update. The Buyer shall have provided the Seller
Entities with a true, correct and complete list, as of the date
three business days prior to Closing, of the disclosure schedules
referred to in Section 3 of this Agreement, the nature of the
information on which schedules shall not be materially different
from the information supplied by the Buyer as of the date hereof.
-59-
<PAGE>
8.9 Selection of Director. The Seller shall have received
reasonably satisfactory evidence of the election of one director
to the Board of Directors of Peritus pursuant to Section 12
hereof.
8.10 Offer of Employment by Buyer Entities. The Buyer
Entities shall have offered to hire as employees at will those
individuals employed by MDI and listed on Schedule 8.10 attached
hereto to positions of employment that are substantially
equivalent in terms of compensation and working conditions to
their current positions with MDI.
9. Indemnification.
9.1 By the Buyer Entities and the Seller Entities. Each of
the Buyer Entities and each of the Seller Entities, jointly and
severally, hereby indemnifies and holds harmless the other
Parties against all claims, damages, losses, liabilities, costs
and expenses (including, without limitation, settlement costs and
any legal, accounting or other expenses for investigating or
defending any actions or threatened actions) reasonably incurred
by either of the Buyer Entities or either of the Seller Entities,
as the case may be, in connection with each and all of the
following:
(a) Any breach by the indemnifying party of any
representation or warranty in this Agreement;
(b) Any breach of any covenant, agreement or
obligation of the indemnifying party contained in this Agreement
or any other agreement, instrument or document contemplated by
this Agreement; and
(c) Any misrepresentation contained in any statement,
certificate or schedule furnished by the indemnifying party
pursuant to this Agreement or in connection with the transactions
contemplated by this Agreement.
-60-
<PAGE>
9.2 By the Seller Entities. Each of the Seller Entities
further agrees, jointly and severally, to indemnify and hold
harmless each of the Buyer Entities from any and all claims,
damages, losses, liabilities, costs and expenses (including,
without limitation, settlement costs and any legal, accounting or
other expenses for investigating or defending any actions or
threatened actions) reasonably incurred by either of the Buyer
Entities, in connection with each and all of the following:
(a) Any claims against, or liabilities or obligations
of, the Seller Entities or against the Assets not specifically
assumed by the Buyer pursuant this Agreement;
(b) The failure of the Buyer to obtain the protections
afforded by compliance with the notification and other
requirements of the bulk sales laws in force in the jurisdictions
in which such laws may be applicable to either the Seller
Entities or the transactions contemplated by this Agreement;
(c) Any violation by the Seller Entities of, or any
failure by the Seller Entities to comply with, any law, ruling,
order, decree, regulation or zoning, environmental or permit
requirement applicable to the MDI Business or the Assets, whether
or not any such violation or failure to comply has been disclosed
to the Buyer or to Peritus, including any costs incurred by the
Buyer or Peritus (i) in order to bring the Assets into compliance
with environmental laws as a consequence of noncompliance with
such laws on the Closing Date or (ii) in connection with the
transfer of the Assets; and
(d) Any Tax liabilities or obligations of the Seller
Entities.
9.3 By the Buyer Entities. Each of the Buyer Entities
further agrees, jointly and severally, to indemnify and hold
harmless each of the Seller Entities from any and all claims,
damages, losses, liabilities, costs and expenses (including,
without limitation, settlement costs and any legal, accounting or
-61-
<PAGE>
other expenses for investigating or defending any actions or
threatened actions) reasonably incurred by either of the Seller
Entities, in connection with any failure by the Buyer to pay,
perform or discharge any Assumed Liabilities.
9.4 Claims for Indemnification. Whenever any claim shall
arise for indemnification hereunder the Party seeking
indemnification (the "Indemnified Party"), shall promptly notify
the Party from whom indemnification is sought (the "Indemnifying
Party") of the claim and, when known, the facts constituting the
basis for such claim. In the event of any such claim for
indemnification hereunder resulting from or in connection with
any claim or legal proceedings by a third-party, the notice to
the Indemnifying Party shall specify, if known, the amount or an
estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a
third party for which it is entitled to indemnification hereunder
without the prior written consent of the Indemnifying Party,
which shall not be unreasonably withheld, unless suit shall have
been instituted against it and the Indemnifying Party shall not
have taken control of such suit after notification thereof as
provided in Subsection 9.5 of this Agreement.
9.5 Defense by Indemnifying Party. In connection with any
claim giving rise to indemnity hereunder resulting from or
arising out of any claim or legal proceeding by a person who is
not a party to this Agreement, the Indemnifying Party at its sole
cost and expense may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding
if it acknowledges to the Indemnified Party in writing its
obligations to indemnify the Indemnified Party with respect to
all elements of such claim. The Indemnified Party shall be
entitled to participate in (but not control) the defense of any
such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim
or litigation resulting therefrom within one month after the date
such claim is made, (a) provided that counsel for the Indemnified
Party shall have been approved by the Indemnifying Party, which
approval shall not be unreasonably withheld, the Indemnified
-62-
<PAGE>
Party may defend against such claim or litigation, in such manner
as it may deem appropriate, including, but not limited to,
settling such claim or litigation, after giving notice of the
same to the Indemnifying Party, on such terms as the Indemnified
Party may deem appropriate, and (b) the Indemnifying Party shall
be entitled to participate in (but not control) the defense of
such action, with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in
which the Indemnified Party defended such third-party claim or
the amount or nature of any such settlement, the Indemnifying
Party shall have the burden to prove by a preponderance of the
evidence that the Indemnified Party did not defend or settle such
third-party claim in a reasonably prudent manner.
9.6 Payment of Indemnification Obligation. All
indemnification by the Buyer Entities or the Seller Entities
hereunder (to the extent not satisfied in the manner specified in
the preceding sentence) shall be effected by payment of cash or
delivery of a cashier's or certified check in the amount of the
indemnification liability. In no event shall the amount of any
recovery by the Buyer Entities or the Seller Entities hereunder,
after taking into consideration insurance proceeds, if any, be
more than 100% of any loss.
9.7 Survival of Representations; Claims for
Indemnification. All representations and warranties made by the
Parties herein or in any instrument or document furnished in
connection herewith shall survive the Closing and any
investigation at any time made by or on behalf of the Parties.
All such representations and warranties shall expire on the first
anniversary of the Closing Date, except for claims, if any,
asserted in writing prior to such first anniversary, which shall
survive until finally resolved and satisfied in full. All claims
and actions for indemnity pursuant to this Section 9 for breach
of any representation or warranty shall be asserted or maintained
in writing by a Party hereto on or prior to the expiration of
such one-year period. Notwithstanding anything to the contrary
in this Section 9 (i) no Buyer Entity shall be entitled to
receive, and no Seller Entity shall be obligated to pay, the
first $250,000 in the aggregate of indemnity obligations
-63-
<PAGE>
otherwise payable by a Seller Entity to a Buyer Entity pursuant
to breaches of the joint and several representations and
warranties of each Seller Entity contained in Section 2 of this
Agreement and (ii) no Seller Entity shall be entitled to receive,
and no Buyer Entity shall be obligated to pay the first $250,000
in the aggregate of indemnity obligations otherwise payable by a
Buyer Entity to a Seller Entity pursuant to breaches of the joint
and several representations and warranties of each Buyer Entity
contained in Section 3 of this Agreement.
10. Restricted Stock.
10.1 Restricted Shares. Because the Shares will not have
been registered under the Securities Act, or applicable state
securities laws as of the Closing Date, the Seller is aware that
any resale inconsistent with the Securities Act may create
liability on its part and/or the part of Peritus, and agrees not
to assign, sell, pledge, transfer or otherwise dispose of or
transfer any Shares unless registered under the Securities Act
and applicable state securities laws, or an opinion is given by
counsel satisfactory to Peritus that such registration is not
required.
10.2 Share Legend. The Seller agrees that each certificate
representing any of the Shares will bear a legend substantially
as follows:
"These shares have not been registered under the Securities
Act of 1933, as amended. They may not be offered or transferred
by sale, assignment, pledge or otherwise unless (i) a
registration statement for the shares under the Securities Act of
1933, as amended, is in effect or (ii) the corporation has
received an opinion of counsel, which opinion is satisfactory to
the corporation, to the effect that such registration is not
required under the Securities Act of 1933, as amended."
11. Post-Closing Agreements. Each of the Seller Entities agrees
that from and after the Closing Date:
-64-
<PAGE>
11.1 Proprietary Information.
(a) Each Seller Entity shall hold in confidence, and
use its best efforts to have all of its officers, directors and
personnel hold in confidence, all knowledge and information of a
secret or confidential nature with respect to the MDI Business
and shall not disclose, publish or make use of the same without
the consent of the Buyer, except to the extent that such
information shall have become public knowledge other than by
breach of this Agreement by the Seller Entities.
(b) Each of the Seller Entities agrees that the remedy
at law for any breach of this Subsection 11.1 would be inadequate
and that the Buyer shall be entitled to injunctive relief in
addition to any other remedy it may have upon breach of any
provision of this Subsection 11.1.
11.2 No Solicitation or Hiring of Certain Employees. Except
as provided by law or as set forth herein, for a period of three
years after the Closing Date, no Seller Entity shall solicit any
person who was an employee engaged in the MDI Business on the
Closing Date and hired by the Buyer on the Closing Date to
terminate employment with the Buyer or to become an employee of
a Seller Entity, unless such employee is terminated by the Buyer.
Except as provided by law or as set forth herein, for a period of
three years after the Closing Date, no Buyer Entity shall solicit
any person employed by APU or any Affiliate of APU who, as of the
Closing Date, was an employee (i) engaged in the MDI Business or
(ii) employed by APU or any of its Affiliates in an executive
capacity or in computer research and development, if such
employee was (a) employed by APU or any Affiliate of APU on the
Closing Date or (b) hired by APU or any Affiliate of APU on or
within three days of the Closing Date, unless such employee is
terminated by APU or such Affiliate.
11.3 Non-Competition and Non-Solicitation.
(a) In consideration of the Purchase Price, the Seller
agrees that during the three-year period beginning on the Closing
Date (the "Non-Competition Period"), it will not in any capacity,
-65-
<PAGE>
either separately, jointly, or in association with others,
directly or indirectly, as an officer, director, consultant,
agent, employee, owner, partner, joint venturer, distributor,
dealer, representative, stockholder, investor, lender or
otherwise, engage or have a financial interest in any business
located anywhere in the Restricted Area (as herein defined)
which, as of the Closing Date, competes with either Buyer Entity
or with any affiliates thereof (excepting only the ownership by
the Seller Entities and their affiliates of the outstanding
securities of Peritus and the ownership of not more than 5% of
the outstanding securities of any class listed on an exchange or
regularly traded in the over-the-counter market). "Restricted
Area" means the entire world. An entity shall be deemed to
compete with a Buyer Entity or an affiliate as of a particular
time if the entity then manufactures, produces or markets any
product or service which is competitive with, and may be
purchased in replacement or substitution of, any product or
service which was being designed, manufactured, produced,
marketed or developed by MDI prior to the Merger, and which is
then being designed, manufactured, produced, marketed or
developed by a Buyer Entity or an affiliate. A product or
service shall be deemed to be under development by MDI, a Buyer
Entity or an affiliate of a Buyer Entity, as the case may be, as
of a particular date only if MDI, such Buyer Entity or such
affiliate, as the case may be, have devoted significant resources
to the development thereof and intends to market such product or
service within the next 365 days of such date.
(b) The Seller further agrees that during the Non-
Competition Period it will not in any capacity, either
separately, jointly or in association with others, directly or
indirectly, solicit, divert or take away, attempt to take away or
otherwise contact any of the clients, customers, accounts,
distributors, dealers or representatives of either Buyer Entity
as shown by the records of such Buyer Entity, that were clients,
customers, distributors, accounts, dealers or representatives of
the Seller at any time during the two years immediately preceding
the Closing Date if such solicitation or contact is for the
specific purpose of selling products or services that compete
-66-
<PAGE>
with any products or services that either of the Buyer Entities
had available for sale to its clients, customers, accounts,
distributors, dealers or representatives or prospects on the
Closing Date. The Seller further agrees that during the Non-
Competition Period it will not in any capacity, either
separately, jointly or in association with others, directly or
indirectly, recruit, solicit or hire (other than by means of
general advertising) any employee or consultant of a Buyer Entity
or induce or attempt to induce any employee or consultant of a
Buyer Entity to terminate his or her employment or consultancy
with, or otherwise cease his or her relationship with, such Buyer
Entity.
(c) The Parties agree that the duration and geographic
scope of the non-competition and non-solicitation provisions set
forth in this Section 11.3 are reasonable. In the event that any
court determines that the duration or the geographic scope, or
both, are unreasonable and that such provisions are to that
extent unenforceable, the parties hereto agree that the
provisions shall remain in full force and effect for the greatest
time period and in the greatest area that would not render them
unenforceable. The parties intend that these non-competition and
non-solicitation provisions shall be deemed to be a series of
separate covenants, one for each and every county of each and
every state of the United States of America and each and every
political subdivision of each and every country outside the
United States of America where this provision is intended to be
effective. The Seller agrees that damages are an inadequate
remedy for any breach of these provisions and that each of the
Buyer Entities shall, whether or not it is pursuing any potential
remedies at law, be entitled to equitable relief in the form of
preliminary and permanent injunctions without bond or other
security upon any actual or threatened breach of these non-
competition and non-solicitation provisions.
(d) The provisions of Sections 11.2 and 11.3 of this
Agreement supersede the non-competition and non-solicitation
provisions in the Confidentiality Agreement.
-67-
<PAGE>
11.4 Sharing of Data.
(a) The Seller shall have the right for a period of
five years following the Closing Date to have reasonable access
to such books, records and accounts, including financial and tax
information, correspondence, production records, employment
records and other similar information as are transferred to the
Buyer pursuant to the terms of this Agreement for the limited
purposes of concluding its involvement in the MDI Business prior
to the Closing Date and for complying with its obligations under
applicable securities, tax, environmental, employment or other
laws and regulations. The Buyer shall have the right for a
period of five years following the Closing Date to have
reasonable access to those books, records and accounts, including
financial and tax information, correspondence, production
records, employment records and other records which are retained
by the Seller pursuant to the terms of this Agreement to the
extent that any of the foregoing relates to the MDI Business
transferred to the Buyer hereunder or is otherwise needed by the
Buyer in order to comply with its obligations under applicable
securities, tax, environmental, employment or other laws and
regulations.
(b) The Seller and the Buyer agree that from and after
the Closing Date they shall cooperate fully with each other to
facilitate the transfer of the Assets from the Seller Entities to
the Buyer and the operation thereof by the Buyer.
11.5 Use of Name. The Seller agrees not to use the name
"Millennium Dynamics, Inc." or any derivation thereof after the
Closing Date in connection with any business. Other than to
comply with the provisions of the preceding sentence, the Seller
agrees not to use the name "Millennium Dynamics, Inc." or any
derivations thereof after the Closing Date.
11.6 Cooperation in Litigation. Each Party will fully
cooperate with the other in the defense or prosecution of any
litigation or proceeding already instituted or which may be
instituted hereafter against or by such Party relating to or
-68-
<PAGE>
arising out of the conduct of the MDI Business prior to or after
the Closing Date (other than litigation arising out the
transactions contemplated by this Agreement). The Party
requesting such cooperation shall pay the out-of-pocket expenses
(including legal fees and disbursements) of the Party providing
such cooperation and of its officers, directors, employees and
agents reasonably incurred in connection with providing such
cooperation, but shall not be responsible to reimburse the Party
providing such cooperation for such party's time spent in such
cooperation or the salaries or costs of fringe benefits or
similar expenses paid by the Party providing such cooperation to
its officers, directors, employees and agents while assisting in
the defense or prosecution of any such litigation or proceeding.
11.7 Repurchase of Accounts Receivable.
(a) For a period of 90 days after the Closing Date
(the "Collection Period"), the Buyer shall use its reasonable
efforts to collect the Accounts Receivable. The Buyer may, but
shall not be obligated to, use a collection agency or commence
legal actions in connection with such collection efforts. On the
Schedule Date, the Buyer shall give notice to the Seller Entities
designating those Accounts Receivable which the Buyer wishes the
Seller to purchase. Within ten days after receipt of such notice
from the Buyer, the Seller shall purchase (without recourse to
the Buyer) such designated Accounts Receivable then remaining
unpaid for a purchase price equal to 90% of the face amount
thereof. Thirty days after the Schedule Date, the Buyer shall
give notice to the Seller designating those remaining Accounts
Receivable which the Buyer wishes the Seller to purchase. Within
ten days after receipt of such notice from the Buyer, the Seller
shall purchase (without recourse to the Buyer) such remaining
designated Accounts Receivable for a purchase price equal to 80%
of the face amount thereof. Sixty days after the Schedule Date,
the Buyer shall give notice to the Seller designating those
remaining Accounts Receivable which the Buyer wishes the Seller
to purchase. Within ten days after the receipt of such notice
from the Buyer, the Seller shall purchase such remaining
-69-
<PAGE>
designated Accounts Receivable for a purchase price equal to 70%
of the face amount thereof. Ninety days after the Schedule Date,
the Buyer shall give notice to the Seller designating those
remaining Accounts Receivable which the Buyer wishes the Seller
to purchase. Within ten days after the receipt of such notice
from the Buyer, the Seller shall purchase such remaining
designated Accounts Receivable for a purchase price equal to 60%
of the face amount thereof.
(b) Upon the Seller's repurchase of any unpaid Account
Receivable pursuant to this Subsection 11.7, (i) the Buyer shall
promptly deliver to the Seller any tangible evidence of such
Account Receivable then in the possession of the Buyer or under
its control, and (ii) the Seller shall be entitled to such
customary and reasonable actions as it deems necessary or
desirable in order to collect such unpaid Account Receivable;
provided, that the Seller shall consult with the Buyer prior to
taking any collection action which might reasonably be expected
to jeopardize the Buyer's relationship with such customer. The
Buyer will, from time to time after such repurchase, execute and
deliver to the Seller such instruments and other documents as the
Seller may reasonably request to assist the Seller in its
collection efforts.
(c) In the event that any payment received by the
Buyer during the Collection Period is remitted by a customer
which is indebted under both Accounts Receivable and an account
receivable arising out of the sale or license of inventory,
products or services in the ordinary course of business after the
Closing Date (a "New Receivable"), such payments shall first be
applied to the Accounts Receivable due from such customer and the
balance remaining after payment in full of all Accounts
Receivable due from such customer shall be applied to the New
Receivable; provided, however, that (i) with respect to any
Account Receivable being contested or disputed by the payor
thereof, no portion of the amount in dispute shall be deemed to
have been collected by the Buyer in respect of the Account
Receivable due from such customer (unless otherwise directed by
the customer) until all amounts owed by such customer to the
Buyer for New Receivables have been paid or such dispute has been
-70-
<PAGE>
resolved, whichever occurs first (it being understood that
undisputed amounts of Accounts Receivable shall be applied in
accordance with the priorities set forth above in this
Subsection 11.7) and (ii) the foregoing priorities shall not
apply to sums received by the Buyer which are specifically
identified by the customer as being tendered in payment of a New
Receivable. The Buyer agrees not to induce any customer to
identify any payment as being in respect of a New Receivable,
except in the event the Buyer reasonably determines to sell to
said customer on a C.O.D. basis only.
(d) The Buyer will cooperate, at the Seller's expense,
with the Seller in collecting any Accounts Receivable which are
repurchased by the Seller pursuant to this Subsection 11.7;
provided, however, that the foregoing shall not require the Buyer
to be a party to any action brought by the Seller to collect such
Accounts Receivable.
(e) The Buyer agrees to furnish to the Seller within
15 days after the end of each month during the Collection Period
a statement setting forth the Accounts Receivable collected
during such month and a trial balance of the uncollected Accounts
Receivable showing the aging thereof as of the end of such month.
(f) The Seller hereby authorizes the Buyer to open any
and all mail addressed to either Seller Entity (if delivered to
the Buyer) if received on or after the Closing Date and hereby
grants to the Buyer a power of attorney to endorse and cash any
checks or instruments made payable or endorsed to either Seller
Entity or its order and received by the Buyer with respect to the
MDI Business.
(g) The Seller agrees that it will forward promptly to
the Buyer any monies, checks or instruments received by the
Seller after the Closing Date with respect to the Accounts
Receivable, except with respect to those Accounts Receivable
which are repurchased by the Seller pursuant to this
Subsection 11.7.
-71-
<PAGE>
(h) Any sums received by the Buyer in respect of
Accounts Receivable (and so identified by the relevant account
debtor) after their repurchase by the Seller pursuant to
Subsections 11.7(a) hereof shall be promptly transmitted by the
Buyer to the Seller. In addition, if receipt by the Buyer of
unidentified sums of money from an account debtor who owes any
Account Receivable repurchased by the Seller pursuant to
Subsections 11.7(a) hereof results in such account debtor having
an aggregate credit balance with the Buyer, the Buyer shall
promptly transmit to the Seller an amount of money equal to the
lesser of (a) such aggregate credit balance or (b) the remaining
unpaid balance of all Accounts Receivable which have been
repurchased by the Seller and are payable by such account debtor
to the Seller.
11.8 License. On or after the Closing Date, the Buyer shall
grant to each of APU, American Annuity Group, Inc. and Great
American Insurance Company (collectively, the "Users") a
nonexclusive, perpetual license to use the current version of
Vantage Year 2000 and any other versions of such product
subsequently developed to operate on other operating platforms
(the "Products"). Each of the Users shall pay for maintenance of
the Products at Buyer's then current rates. The Buyer shall
enter into license agreements with each of the Users to license
such Products containing the Buyer's customary terms and
conditions.
11.9 Affiliated Leases. Each of the Seller Entities agrees,
and shall cause their Affiliates to agree, that the Lease to MDI
with respect to the property located in the Dixie Terminal
Building, as in effect as of the date hereof, shall, upon
transfer to the Buyer pursuant to the terms of this Agreement,
remain in effect under the same material terms as in effect on
the date hereof for a period of at least 365 days subsequent to
the Closing Date and shall not be terminated, amended or
otherwise materially modified without the prior written consent
of the Buyer.
-72-
<PAGE>
11.10 Computer Access. Each of the Seller Entities
agrees that any and all access currently enjoyed by MDI from an
Affiliate of the Seller, pursuant to an oral or written
agreement, customary practice or otherwise, to the mainframe
hardware and networks of such Affiliate, and, to the extent that
the Buyer is a tenant in the Dixie Terminal Building, telephone
and voicemail systems of such Affiliate, shall remain in effect
and be enjoyed by the Buyer under the same material terms as in
effect on the date hereof for a period of at least one year
subsequent to the Closing Date and shall not be terminated,
amended or otherwise materially modified without the prior
written consent of the Buyer. Each of the Seller Entities will
offer to extend the computer access under this Subsection 11.10
for at least two additional years, subject to available capacity
for the Seller and its Affiliates, at then current market rates
not to exceed ten percent per year above the prior year's rate.
11.11 Benefit Plan Payments. All of the employees
engaged in the MDI Business who are participants in the American
Financial Group, Inc. Retirement and Savings Plan (the "AFG
Plan") shall be entitled to the benefits under the AFG Plan,
which shall be paid by the Seller or its Affiliates, through the
Closing Date.
11.12 Bonus Payments. The Seller shall pay any bonuses
due to the employees engaged in the MDI Business for the year
ending December 31, 1997 pursuant to any oral or written bonus
plan, arrangement or agreement.
12. Election of Seller Director.
Peritus agrees that upon a written request by the Seller on
or within 30 days subsequent to the Closing the Board of
Directors of Peritus (the "Peritus Board") will vote to elect a
nominee of the Seller designated in such notice as a Class II
director of the Peritus Board, provided that, such designated
nominee is approved by the Peritus Board in its reasonable
discretion.
-73-
<PAGE>
13. Termination of Agreement
13.1 Termination by Lapse of Time. This Agreement shall
terminate at 5:00 p.m., Boston time, on December 31, 1997, if the
transactions contemplated hereby have not been consummated,
unless such date is extended by the written consent of all of the
parties hereto.
13.2 Termination by Agreement of the Parties. This
Agreement may be terminated by the mutual written agreement of
the parties hereto. In the event of such termination by
agreement, the Buyer Entities shall have no further obligation or
liability to the Seller Entities under this Agreement, and the
Seller Entities shall have no further obligation or liability to
the Buyer Entities under this Agreement.
13.3 Termination by Reason of Breach. This Agreement may be
terminated by the Seller Entities, if at any time prior to the
Closing there shall occur a breach of any of the representations,
warranties or covenants of the Buyer Entities or the failure by
the Buyer Entities to perform any condition or obligation
hereunder, and may be terminated by the Buyer Entities, if at any
time prior to the Closing there shall occur a breach of any of
the representations, warranties or covenants of the Seller
Entities or the failure of the Seller Entities to perform any
condition or obligation hereunder.
14. Transfer and Sales Tax
Notwithstanding any provisions of law imposing the burden of
such Taxes on the Seller or the Buyer, as the case may be, the
Seller shall be responsible for and shall pay (a) all sales, use
and transfer Taxes, and (b) all governmental charges, if any,
upon the sale or transfer of any of the Assets hereunder or
related to the Merger. If the Seller shall fail to pay such
amounts on a timely basis, the Buyer may pay such amounts to the
appropriate governmental authority or authorities, and the Seller
shall promptly reimburse the Buyer for any amounts so paid by the
Buyer.
-74-
<PAGE>
15. Brokers
15.1 For the Seller. Each of the Seller Entities represents
and warrants that it has not engaged any broker or finder other
than NationsBanc Montgomery Securities, Inc. ("Montgomery") or
incurred any liability for brokerage fees, commissions or
finder's fees in connection with the transactions contemplated by
this Agreement other than to Montgomery. The Seller agrees to
pay all fees, expenses and other compensation owed to Montgomery.
The Seller agrees to indemnify and hold harmless the Buyer
against any claims or liabilities asserted against it by any
person acting or claiming to act as a broker or finder on behalf
of the Seller Entities.
15.2 For the Buyer. The Buyer and Peritus each represents
and warrants that it has not engaged any broker or finder other
than H.C. Wainwright & Co., Inc. ("Wainwright") or incurred any
liability for brokerage fees, commission or finder's fees in
connection with the transactions contemplated by this Agreement.
The Buyer or Peritus each agrees to pay all fees, expenses and
other compensation owed to Wainwright. The Buyer and Peritus
each agrees to indemnify and hold harmless the Seller against any
claims or liabilities asserted against it by any person acting or
claiming to act as a broker or finder on behalf of the Buyer or
Peritus.
16. Notices
Any notice, request, demand, claim, or other communication
hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly
delivered four business days after it is sent by United States
certified mail, return receipt requested, postage prepaid, or one
business day after it is sent via a reputable overnight courier
service, in each case to the intended recipient as set forth
below:
-75-
<PAGE>
To MDI: Copy to:
Millennium Dynamics, Inc. Keating, Muething & Klekamp,
49 East Fourth Street P.L.L.
Cincinnati, Ohio 45202 1800 Provident Tower
Attention: Michael D. Rice, One East Fourth Street
Esq. Cincinnati, Ohio 45202
Vice President and General Attention: Paul V. Muething,
Counsel Esq.
To the Seller: Copy to:
American Premier Underwriters, Keating, Muething & Klekamp,
Inc. P.L.L.
One East Fourth Street 1800 Provident Tower
Cincinnati, Ohio 45202 One East Fourth Street
Attention: James C. Kennedy, Cincinnati, Ohio 45202
Esq. Attention: Paul V. Muething,
Deputy General Counsel and Esq.
Secretary
To the Buyer: Copy to:
Twoquay, Inc. Hale and Dorr LLP
c/o Peritus Software Services, 60 State Street
Inc. Boston, Massachusetts 02109
304 Concord Road Attention: Peter B. Tarr,
Billerica, Massachusetts 01821- Esq.
3485
Attention: Eugene J. DiDonato,
Esq.
Vice President and General
Counsel
-76-
<PAGE>
To Peritus: Copy to:
Peritus Software Services, Inc. Hale and Dorr LLP
304 Concord Road 60 State Street
Billerica, Massachusetts 01821- Boston, Massachusetts 02109
3485 Attention: Peter B. Tarr,
Attention: Eugene J. DiDonato, Esq.
Esq.
Vice President and General
Counsel
Either Party may give any notice, request, demand, claim or
other communication hereunder by personal delivery or telecopy,
but no such notice, request, demand, claim or other communication
shall be deemed to have been duly given unless and until it
actually is received by the Party or individual for whom it is
intended. Any notice sent by telecopy shall be followed by a
confirmation copy sent by reputable overnight business courier
service. Either Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are
to be delivered by giving the other Party notice in the manner
herein set forth.
17. Successors and Assigns.
This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns, except that the Buyer and the Seller Entities may not
assign their respective obligations hereunder without the prior
written consent of the other party; provided, however, that the
Buyer may assign this Agreement, and its rights and obligations
hereunder, to a subsidiary or Affiliate. Any assignment in
contravention of this provision shall be void. No assignment
shall release the Buyer or Peritus from any obligation or
liability under this Agreement.
-77-
<PAGE>
18. Entire Agreement; Amendments; Attachments.
(a) This Agreement, all Schedules and Exhibits hereto, the
Confidentiality Agreement and all agreements and instruments to
be delivered by the parties pursuant hereto represent the entire
understanding and agreement between the Parties with respect to
the subject matter hereof and supersede all prior oral and
written and all contemporaneous oral negotiations, commitments
and understandings between such Parties. The Buyer Entities and
the Seller Entities, by the consent of their respective Boards of
Directors, or officers authorized by such Boards, may amend or
modify this Agreement, in such manner as may be agreed upon, by a
written instrument executed by the Buyer Entities and the Seller
Entities.
(b) If the provisions of any Schedule or Exhibit to this
Agreement are inconsistent with the provisions of this Agreement,
the provision of the Agreement shall prevail. The Exhibits and
Schedules attached hereto or to be attached hereafter are hereby
incorporated as integral parts of this Agreement.
19. Expenses.
Except as otherwise expressly provided herein, the Buyer and
the Seller shall each pay their own expenses, including without
limitation, legal, accounting, HSR filing fees, investment
banking and other professional fees, in connection with this
Agreement and the transactions contemplated hereby, including
without limitation the Merger.
20. Severance and Termination Payments.
The Seller shall pay all severance, termination and other
payments (whether in the form of cash, securities or other
consideration) pursuant to any written or oral agreements of the
Seller, MDI or their Affiliates and expenses applicable to those
certain members of executive management listed on Schedule 20
attached hereto, such members of executive management
representing all of the members of executive management to whom
severance, termination and other payments are due pursuant to
-78-
<PAGE>
such written or oral agreements, and provided the Buyer complies
with Section 8.10 of this Agreement, any other compensation
payable to employees engaged in the MDI Business under applicable
plant closing or similar laws. In addition to the foregoing, the
Seller shall pay up to $150,000 of severance costs (exclusive of
payments under applicable plant closing and similar laws and any
other compensation payable to employees engaged in the MDI
Business) for other employees engaged in the MDI Business whose
employment is terminated during the three days prior to the date
hereof or after the date hereof up to and including the Closing
Date. Provided the Seller complies with Section 7.17 of this
Agreement, the Buyer will assume all other severance obligations
(up to an aggregate of $300,000) relating to the employees
engaged in the MDI Business (other than to the extent that those
obligations are covered in the preceding two sentences) whose
employment is terminated following the date of this Agreement.
21. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts,
without reference to its conflicts of laws rules.
22. Section Headings.
The section headings are for the convenience of the parties
and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.
23. Severability.
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
-79-
<PAGE>
24. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which
shall be one and the same document.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of and on the date first above written.
PERITUS SOFTWARE SERVICES, INC.
_________________________________
By:
Title:
TWOQUAY, INC.
_________________________________
By: Title:
AMERICAN PREMIER UNDERWRITERS, INC.
__________________________________
By:
Title:
MILLENNIUM DYNAMICS, INC.
___________________________________
By:
Title:
-80-
<PAGE>
Exhibit 3
AGREEMENT
This Agreement executed this 7th day of April, 1995, is by
and among American Premier Group, Inc. ("American Premier") and
American Financial Corporation ("AFC"), both Ohio corporations,
located at One East Fourth Street, Cincinnati, Ohio 45202, and
Carl H. Lindner ("CHL"), Carl H. Lindner III (CHL III), S. Craig
Lindner ("SCL") and Keith E. Lindner ("KEL"), each an individual,
the business address of each is One East Fourth Street,
Cincinnati, Ohio 45202. CHL, CHL III, SCL and KEL are referred
to herein collectively as the Lindner Family.
WHEREAS, as of the date of this Agreement, American Premier
owns 100% of the common stock of AFC and the Lindner Family
beneficially owns approximately 49.9% of American Premier's
outstanding Common Stock and each member of the Lindner Family is
a director and executive officer of American Premier and AFC;
WHEREAS, the Lindner Family may be deemed to be the
beneficial owner of securities held by American Premier, AFC and
their subsidiaries pursuant to Regulation Section 240.13d-3
promulgated under the Securities Exchange Act of 1934, as
amended;
WHEREAS, American Premier and AFC and their subsidiaries
from time to time must file statements pursuant to certain
sections of the Securities Exchange Act of 1934, as amended,
concerning the ownership of equity securities of public
companies;
NOW THEREFORE BE IT RESOLVED, that American Premier, AFC and
the Lindner Family, do hereby agree to file jointly with the
Securities and Exchange Commission any schedules or other filings
or amendments thereto made by or on
- 81 -
<PAGE>
behalf of American Premier, AFC or any of their subsidiaries
pursuant to Section 13(d), 13(f), 13(g), and 14(d) of the
Securities Exchange Act of 1934, as amended.
AMERICAN PREMIER GROUP, INC.
AMERICAN FINANCIAL CORPORATION
By: /s/ James E. Evans
James E. Evans
Vice President & General
Counsel
/s/ Carl H. Lindner
Carl H. Lindner
/s/ Carl H. Lindner III
Carl H. Lindner III
/s/ S. Craig Lindner
S. Craig Lindner
/s/ Keith E. Lindner
Keith E. Lindner
- 82 -
<PAGE>
Exhibit 4
POWER OF ATTORNEY
I, Carl H. Lindner, do hereby appoint James E. Evans and
James C. Kennedy, or either of them, as my true and lawful
attorneys-in-fact to sign on my behalf individually and as
Chairman of the Board of Directors and Chief Executive Officer of
American Financial Group, Inc. or as a director or executive
officer of any of its subsidiaries and to file with the
Securities and Exchange Commission any schedules or other filings
or amendments thereto made by me or on behalf of American
Financial Group, Inc. or any of its subsidiaries pursuant to
Sections 13(d), 13(f), 13(g), and 14(d) of the Securities and
Exchange Act of 1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand at
Cincinnati, Ohio this 4th day of April, 1995.
/s/ Carl H. Lindner
Carl H. Lindner
- 83 -
<PAGE>
POWER OF ATTORNEY
I, Carl H. Lindner III, do hereby appoint James E. Evans and
James C. Kennedy, or either of them, as my true and lawful
attorneys-in-fact to sign on my behalf individually and as an
officer or director of American Financial Group, Inc. or as a
director or executive officer of any of its subsidiaries and to
file with the Securities and Exchange Commission any schedules or
other filings or amendments thereto made by me or on behalf of
American Financial Group, Inc. or any of its subsidiaries
pursuant to Sections 13(d), 13(f), 13(g), and 14(d) of the
Securities and Exchange Act of 1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand at
Cincinnati, Ohio this 4th day of April, 1995.
/s/ Carl H. Lindner III
Carl H. Lindner III
- 84 -
<PAGE>
POWER OF ATTORNEY
I, S. Craig Lindner, do hereby appoint James E. Evans and
James C. Kennedy, or either of them, as my true and lawful
attorneys-in-fact to sign on my behalf individually and as an
officer or director of American Financial Group, Inc. or as a
director or executive officer of any of its subsidiaries and to
file with the Securities and Exchange Commission any schedules or
other filings or amendments thereto made by me or on behalf of
American Financial Group, Inc. or any of its subsidiaries
pursuant to Sections 13(d), 13(f), 13(g), and 14(d) of the
Securities and Exchange Act of 1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand at
Cincinnati, Ohio this 4th day of April, 1995.
/s/ S. Craig Lindner
S. Craig Lindner
- 85 -
<PAGE>
POWER OF ATTORNEY
I, Keith E. Lindner, do hereby appoint James E. Evans and
James C. Kennedy, or either of them, as my true and lawful
attorneys-in-fact to sign on my behalf individually and as an
officer or director of American Financial Group, Inc. or as a
director or executive officer of any of its subsidiaries and to
file with the Securities and Exchange Commission any schedules or
other filings or amendments thereto made by me or on behalf of
American Financial Group, Inc. or any of its subsidiaries
pursuant to Sections 13(d), 13(f), 13(g), and 14(d) of the
Securities and Exchange Act of 1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand at
Cincinnati, Ohio this 4th day of April, 1995.
/s/ Keith E. Lindner
Keith E. Lindner
- 86 -