SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: November 22, 1997
SAVOIR TECHNOLOGY GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-11560 94-2414428
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
254 East Hacienda Avenue, Campbell, CA 95008
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(Address of principal executive offices) (Zip Code)
(408) 379-0177
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(Registrant's telephone number,
including area code)
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Item 5. Other Events.
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On November 22, 1997, Savoir Technology Group, Inc. (the "Company")
entered into an Agreement and Plan of Reorganization (the "Reorganization
Agreement") by and among the Company, MCBA Systems, Inc., an Alabama corporation
("MCBA"), Michael N. Gunnells and John Harkins (together the "Selling
Shareholders"), attached hereto as Exhibit 2.1* and incorporated herein by
reference. Pursuant to the terms of the Reorganization Agreement, the Company
shall acquire all of the outstanding capital stock of MCBA through a reverse
triangular merger of a wholly-owned subsidiary of the Company into MCBA with
MCBA to be the surviving corporation (the "Merger"). Upon the consummation of
the Merger, the Selling Shareholders shall receive an aggregate of 900,000
shares of common stock, par value 0.01 per share, of the Company and the right
to receive certain earn-out payments based on MCBA's net pretax profits in 1998
and 1999.
MCBA is a value-added distributor for high technology mid-range
solutions in the IBM AS/400(R) and RS/6000(TM) systems market, and is one of
only four distributors in the United States authorized to resell IBM's S/390(R)
mainframe systems. For its fiscal year ended December 31, 1996, MCBA's revenue
was $23.5 million. For the first ten months of 1997, MCBA's revenue was
approximately $19.6 million.
On November 24, 1997, the Company issued the press release attached
hereto as Exhibit 99.1 and incorporated by reference. The press release related
to the Company's announcement that it had entered into the Reorganization
Agreement.
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* Confidential Treatment requested pursuant to a request for confidential
treatment filed with the Commission on December 19, 1997. The portions
of the exhibit for which confidential treatment has been requested have
been omitted from the exhibit. The omitted information has been filed
separately with the Commission as part of the confidential treatment
request.
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Item 7. Financial Statements and Exhibits.
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(a) Financial statements of business acquired.
After reviewing the financial statements of the
Company and MCBA, and consulting with its independent
auditors, the Company has determined that the
threshold for filing audited financial statements as
required by this Item 7(a) has not been met.
(b) Pro forma financial information.
After reviewing the financial statements of the
Company and MCBA, and consulting with its independent
auditors, the Company has determined that the
threshold for filing audited financial statements as
required by this Item 7(b) has not been met.
(c) Exhibits.
2.1* Agreement and Plan of Reorganization dated November
22, 1997, by and among Savoir Technology Group, Inc.,
MCBA Systems, Inc., Michael N. Gunnells and John
Harkins. Schedules to this Agreement omitted from this
report will be furnished to the Securities and Exchange
Commission upon request.
99.1 Press Release dated November 24, 1997.
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* Confidential Treatment requested pursuant to a request for confidential
treatment filed with the Commission on December 19, 1997. The portions
of the exhibit for which confidential treatment has been requested have
been omitted from the exhibit. The omitted information has been filed
separately with the Commission as part of the confidential treatment
request.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: December 19, 1997
SAVOIR TECHNOLOGY GROUP, INC.
By /s/ James W. Dorst
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James W. Dorst
Chief Financial Officer
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EXHIBIT INDEX
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Exhibit No. Description
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2.1* Agreement and Plan of Reorganization dated
November 22, 1997, by and among Savoir
Technology Group, Inc., MCBA Systems, Inc.,
Michael N. Gunnells and John Harkins. Schedules
to this Agreement omitted from this report will be
furnished to the Securities and Exchange
Commission upon request.
99.1 Press Release dated November 24, 1997.
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* Confidential Treatment requested pursuant to a request for confidential
treatment filed with the Commission on December 19, 1997. The portions
of the exhibit for which confidential treatment has been requested have
been omitted from the exhibit. The omitted information has been filed
separately with the Commission as part of the confidential treatment
request.
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CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF
THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY
FILED WITH THE COMMISSION.
EXECUTION COPY
EXHIBIT 2.1
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AGREEMENT AND PLAN OF REORGANIZATION
By and Among
SAVOIR TECHNOLOGY GROUP, INC.,
MCBA SYSTEMS, INC.,
MICHAEL N. GUNNELLS
and
JOHN HARKINS
November 22, 1997
<PAGE>
TABLE OF CONTENTS
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Page
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ARTICLE 1 DEFINITIONS.........................................................1
ARTICLE 2 PLAN OF REORGANIZATION; CLOSING..............................2
2.1 The Merger...................................................2
2.2 Effective Time...............................................2
2.3 Effect of the Merger.........................................2
2.4 Articles of Incorporation and Bylaws.........................2
2.5 Directors and Officers.......................................2
2.6 Effect on Capital Stock......................................2
(a) Plan of Merger; Initial Consideration................2
(b) Capital Stock of Acquisition Sub.....................3
(c) Treasury Stock and STG Owned Stock...................3
2.7 No Further Ownership Rights in MCBA Common Stock.............3
2.8 Lost, Stolen or Destroyed Certificates.......................3
2.9 Taking of Necessary Action; Further Action...................3
2.10 Tax Treatment................................................4
2.11 Reorganization...............................................4
2.12 Earn-Out Payments............................................4
2.13 Closing Date.................................................7
2.14 Escrow for Initial Consideration.............................7
2.15 Earn-Out Escrow..............................................7
2.17 Adjustments to Earn-Out Stock................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF MCBA AND
THE SELLING SHAREHOLDERS.....................................8
3.1 Organization.................................................9
3.2 Capital Structure; Title to Shares; Selling Shareholders
Authority................................................9
3.3 Obligations With Respect to Capital Stock....................9
3.4 Equity Investments...........................................9
3.5 Authority....................................................9
3.6 Consents and Approvals......................................10
3.7 Financial Statements........................................10
3.8 Business Changes............................................11
3.9 Fixed Assets; Properties....................................12
3.10 Accounts Receivable; Notes Receivable.......................13
3.11 Taxes.......................................................14
3.12 Employees; Compensation.....................................16
3.13 Compliance with Law.........................................16
3.14 Litigation..................................................17
3.15 Contracts...................................................17
3.16 No Default..................................................18
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Page
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3.17 Business and Customers.......................................18
3.18 Inventories..................................................18
3.19 Proprietary Rights...........................................19
3.20 Insurance....................................................20
3.21 Bank Accounts................................................20
3.22 Brokers or Finders...........................................20
3.23 Related Parties..............................................20
3.24 Certain Advances.............................................20
3.25 Union Activities.............................................21
3.26 ERISA........................................................21
3.27 Underlying Documents.........................................23
3.28 Full Disclosure..............................................23
3.29 Accounts Payable.............................................23
3.30 Liabilities..................................................23
3.31 Restricted Securities........................................23
3.32 Purchase Entirely for Own Account............................23
3.33 Permits......................................................24
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF STG........................24
4.1 Organization.................................................24
4.2 Authority....................................................24
4.3 Consents and Approvals.......................................25
4.4 Capital Structure............................................25
4.5 Financial Statements.........................................25
4.6 Securities and Exchange Commission Documents.................26
4.7 No Conflict..................................................26
4.8 Shares of STG Common Stock...................................26
4.9 Brokers or Finders...........................................26
4.10 Business Changes.............................................26
4.11 Rule 144.....................................................27
ARTICLE 5 COVENANTS RELATING TO CONDUCT OF BUSINESS....................27
5.1 Conduct of Business in Normal Course.........................27
5.2 Preservation of Business and Relationships...................27
5.3 Maintenance of Insurance.....................................27
5.4 Employees and Compensation...................................27
5.5 Dividends; Changes in Stock..................................27
5.6 Issuance of Securities.......................................28
5.7 Governing Documents..........................................28
5.8 No Other Bids................................................28
5.9 No Acquisitions..............................................28
5.10 No Dispositions..............................................28
5.11 Indebtedness.................................................28
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Page
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ARTICLE 6 ADDITIONAL AGREEMENTS.......................................29
6.1 Access to Information........................................29
6.2 Legal Conditions.............................................29
6.3 Good Faith...................................................29
6.4 STG Governing Documents......................................30
6.5 Current Available Information................................30
6.6 Legend; Stop Transfer Instructions...........................30
6.7 Continued Employment of MCBA Employees.......................30
6.8 Collection of Accounts Receivable; Sale of Inventory.........30
6.9 Books and Records............................................31
6.10 Registration Rights..........................................31
6.11 Preparation of Proxy Statement; Stockholder Meeting..........31
6.12 Formation of Acquisition Sub.................................31
ARTICLE 7 CONDITIONS PRECEDENT................................................31
7.1 Conditions to Obligations of STG and the MCBA Parties........31
(a) Third-Party Approvals................................32
(b) Legal Action.........................................32
(c) Securities Laws......................................32
(d) Governmental Consents................................32
7.2 Conditions to Obligations of STG.............................32
(a) Representations and Warranties.......................32
(b) STG Board Approval...................................33
(c) Performance of Obligations...........................33
(d) Opinion of MCBA's Counsel............................33
(e) Financial Statements.................................33
(f) No Material Adverse Change...........................33
(g) Gunnells, Non-Compete................................33
(h) Escrow Agreement.....................................33
(i) Earn-Out Escrow Agreement............................33
(j) FIRPTA Compliance....................................33
(k) Employment Agreement.................................33
(l) Acceptance of STG Employment Offers..................33
(m) Stockholder Approval.................................34
(n) MCBA Closing Date Unaudited Balance Sheet............34
(o) Consent of IBM.......................................34
(p) Consent of Debt Holders..............................34
(q) Innovative Business Systems, Inc.....................34
(r) Harkins, Non-Compete.................................34
(s) Transfer or Sublease of Leases.......................34
(t) Cancellation of Indebtedness.........................34
7.3 Conditions to Obligations of the MCBA Parties................35
(a) Representations and Warranties.......................35
(b) Performance of Obligations of STG....................35
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<PAGE>
(c) Opinion of STG's Counsel.............................35
(d) No Material Adverse Change...........................35
7.4 Best Efforts.................................................35
ARTICLE 8 INDEMNIFICATION AND ESCROW..........................................35
8.1 Indemnification by MCBA and the Selling Shareholders.........35
8.2 Escrow Fund..................................................36
8.3 Escrow Period................................................37
8.4 Protection of Escrow Fund....................................37
8.5 Distributions; Voting........................................37
8.6 Claims Upon Escrow Fund......................................37
8.7 Objections to Claims.........................................38
8.8 Resolution of Conflicts; Arbitration.........................38
8.9 Distribution upon Termination of Escrow Period...............39
8.10 Escrow Agent's Duties........................................39
8.11 Indemnification by STG.......................................39
8.12 Indemnification Procedure....................................40
ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER............................41
9.1 Termination..................................................41
9.2 Effect of Termination; Sole Remedy...........................42
9.3 Amendment....................................................43
9.4 Extension; Waiver............................................43
ARTICLE 10 GENERAL............................................................43
10.1 Notices......................................................43
10.2 Headings.....................................................44
10.3 Entire Understanding.........................................44
10.4 Counterparts.................................................44
10.5 Binding Nature...............................................44
10.6 Applicable Law...............................................44
10.7 Attorneys' Fees..............................................44
10.8 Payment of Expenses..........................................45
Exhibits
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Exhibit B MCBA Disclosure Schedule
Exhibit C STG Disclosure Schedule
Exhibit 2.15 Form of Earn-Out Escrow Agreement
Exhibit 6.10 Form of Registration Rights Agreement
Exhibit 7.2(d) Form of Opinion of MCBA's Counsel
Exhibit 7.2(g) Form of Michael N. Gunnells' Covenant Not to Compete
Exhibit 7.2(k) Form of Employment Agreement
Exhibit 7.2(q) Form of Innovative IRA
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Exhibit 7.2(r) Form of John Harkins and Innovative Covenant Not to Compete
Exhibit 7.3(c) Form of Opinion of STG's Counsel
Exhibit 8.2(a) Form of Escrow Agreement
Schedules
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Schedule 3.7 MCBA's Financial Statements
Schedule 3.8(c) MCBA Obligations
Schedule 3.8(d) MCBA Payments
Schedule 3.8(g) MCBA Pledged Collateral
Schedule 3.9(a) Fixed Assets; Properties
Schedule 3.10 Accounts Receivable; Notes Receivable
Schedule 3.11(c) Taxes
Schedule 3.12(b) Compensation
Schedule 3.15 Contracts
Schedule 3.17 Customers
Schedule 3.18 Inventories
Schedule 3.19(a) Proprietary Rights
Schedule 3.20 Insurance
Schedule 3.21 Bank Accounts
Schedule 3.26 Benefit Plans
Schedule 3.29 Accounts Payable
Schedule 3.30 Liabilities
Schedule 3.33 Permits
Schedule 6.7 Employees
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CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF
THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY
FILED WITH THE COMMISSION.
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), made and
entered into as of the 22nd day of November, 1997 by and among SAVOIR TECHNOLOGY
GROUP, INC., a Delaware corporation ("STG"), MCBA SYSTEMS, INC., an Alabama
corporation ("MCBA"), MICHAEL N. GUNNELLS ("Gunnells") and JOHN HARKINS
("Harkins") (such individuals referred to herein collectively as the "Selling
Shareholders" and, together with MCBA, the "MCBA Parties"),
W I T N E S S E T H:
WHEREAS, STG will cause a wholly owned Delaware corporation to be
formed as soon as practicable following the date hereof ("Acquisition Sub"); and
WHEREAS, the Boards of Directors of STG and MCBA have each determined
that it is in the best interests of their respective stockholders for STG to
acquire MCBA; and
WHEREAS, in furtherance of the acquisition, Acquisition Sub will merge
with and into MCBA in a reverse triangular merger (the "Merger"), with MCBA to
be the surviving corporation of the Merger; and
WHEREAS, the Merger and this Agreement require the vote of at least a
majority of the shares of common stock, par value $0.01 per share (the "STG
Common Stock"), of STG voting at a meeting duly called for the purpose of voting
on the Merger at which a majority of the outstanding shares are present in
person or by proxy, for the approval thereof (the "STG Stockholder Approval");
and
WHEREAS, upon the effectiveness of the Merger, all of the outstanding
shares of common stock, par value $0.10 per share (the "MCBA Common Stock"), of
MCBA will be converted into STG Common Stock; and
WHEREAS, the Merger is intended to be treated as a tax-free
reorganization pursuant to the provisions of section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"), by virtue of the
provisions of section 368(a)(2)(E) of the Code:
NOW, THEREFORE, in consideration of the promises and of the mutual
provisions, agreements and covenants herein contained, STG, MCBA and the Selling
Shareholders agree as follows:
ARTICLE 1
DEFINITIONS
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The terms defined in this Agreement shall have their respective defined
meanings whenever such terms are used in this Agreement unless the context
expressly or by necessary implication otherwise requires.
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ARTICLE 2
PLAN OF REORGANIZATION; CLOSING
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2.1 The Merger. At the Effective Time (as defined in Section 2.2
----------
hereof) and subject to and upon the terms and conditions of this Agreement, the
General Corporation Law ("DGCL") of the State of Delaware and Alabama law,
Acquisition Sub shall be merged with and into MCBA, the separate corporate
existence of Acquisition Sub shall cease, and MCBA shall continue as the
surviving corporation (the "Surviving Corporation").
2.2 Effective Time. As promptly as practicable after the satisfaction
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or waiver of the conditions precedent set forth in Article 7 hereof, the parties
hereto shall cause the Merger to be consummated by filing the Agreement of
Merger with the Secretary of State of the States of Alabama and Delaware, in
such form as required by, and executed in accordance with, the relevant
provisions of the Alabama Business Corporation Act and the DGCL (the time of
such filing being the "Effective Time").
2.3 Effect of the Merger. At the Effective Time, the effect of the
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Merger shall be as provided in the applicable provisions of Alabama law and in
the DGCL. Without limiting the generality of the foregoing, and subject thereto,
all of the assets, property, rights, privileges, powers and franchises of MCBA
and Acquisition Sub shall vest in MCBA, and all of the debts, liabilities and
duties of MCBA and Acquisition Sub shall become the debts, liabilities and
duties of MCBA.
2.4 Articles of Incorporation and Bylaws.
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(a) At the Effective Time, the Articles of Incorporation of MCBA, as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation unless otherwise determined by STG
prior to the Effective Time.
(b) The Bylaws of MCBA, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation until thereafter amended
as provided by Alabama law, the Articles of Incorporation of MCBA and the Bylaws
of MCBA.
2.5 Directors and Officers. The officers and directors of Acquisition
----------------------
Sub immediately prior to the Effective Time shall be the initial officers and
directors of the Surviving Corporation, each to hold office in accordance with
the Articles of Incorporation and Bylaws of MCBA and in each case until their
respective successors are duly appointed, qualified and elected.
2.6 Effect on Capital Stock. At the Effective Time, by virtue of the
-----------------------
Merger and without any further action on the part of Acquisition Sub, MCBA or
their respective shareholders, the following actions shall occur:
(a) Plan of Merger; Initial Consideration. Each share of MCBA Common
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Stock issued and outstanding immediately prior to the Effective Time or deemed
to be outstanding by virtue of any security outstanding at the Effective Time
that is convertible into,
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<PAGE>
exercisable or exchangeable for any capital stock of MCBA (each a "Share" and
together the "Shares") will be converted automatically into the right to
receive, and there shall be paid and issued as provided in this Agreement in
exchange for such Share: (i) that number of shares of STG Common Stock, as shall
equal Nine Hundred Thousand (adjusted pursuant to Section 2.17 hereof) divided
by the total number of Shares (the "Initial Consideration"). In addition, the
Selling Shareholders shall have the right to receive the Earn-Out Payments as
described in Section 2.17 hereof. Upon surrender of the certificate or
certificates representing the Shares at the Closing (as defined herein) new
certificates for STG Common Stock shall be issued in accordance with this
Section 2.6(a). Such certificates shall include an appropriate securities law
legend, providing, among other things, that the stock evidenced by the
certificates are being acquired for investment purposes and are restricted
securities, as set forth in Section 6.6(a) hereof. Ten percent (10%) of the
Initial Consideration of STG Common Stock will be held by the escrow agent
pursuant to the terms of Article 8 hereof.
(b) Capital Stock of Acquisition Sub. The shares of capital stock of
--------------------------------
Acquisition Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and become Five Thousand (5,000) validly issued, fully
paid and nonassessable shares of Common Stock of the Surviving Corporation.
(c) Treasury Stock and STG Owned Stock. Each Share issued and held in
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MCBA's treasury or owned by STG, and subsidiary of MCBA, STG or Acquisition Sub
shall automatically be cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefore.
2.7 No Further Ownership Rights in MCBA Common Stock. All shares of STG
------------------------------------------------
Common Stock issued upon the surrender for exchange of each Share in accordance
with the terms of this Agreement shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares. There shall be no further
registration of transfers on the record of MCBA of Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates evidencing Shares are presented to MCBA or STG for any reason, such
Shares shall be deemed void and canceled.
2.8 Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
certificates evidencing Shares shall have been lost, stolen or destroyed, STG
shall issue in exchange for such lost, stolen or destroyed certificates, upon
the making of an affidavit of that fact by the holder thereof, such Shares of
STG Common Stock.
2.9 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Acquisition Sub with the full
right, title and possession of all assets, property, rights, privileges, powers
and franchises of MCBA and Acquisition Sub, the officers and directors of MCBA
and Acquisition Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
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2.10 Tax Treatment. The parties intend that the Merger be treated as a
-------------
reorganization pursuant to the provisions of section 368(a)(1)(A) of the Code,
by virtue of the provisions of section 368(a)(2)(E) of the Code. The parties
hereto agree hereby to report the Merger as such.
2.11 Reorganization. The parties intend to adopt this Agreement as a
--------------
plan of reorganization and to consummate the Merger in accordance with the
provisions of section 368(a)(1)(A) of the Code, by virtue of the provisions of
section 368(a)(2)(E) of the Code. The parties believe that the total
consideration to be received in the Merger by the Selling Shareholders,
including the Initial Consideration and the payments received pursuant to
Section 2.12(b), Section 2.12(c) and Section 2.12(f) hereof, is equal to the
total value of the Shares to be surrendered in exchange therefor. No other
transaction other than the Merger represents, provides for or is intended to be
an adjustment to the consideration paid for the Shares. The parties shall not
take a position on any tax returns inconsistent with this Section 2.11. In
addition, STG represents now, and as of the Closing Date, that it presently
intends to continue MCBA's historic business or use a significant portion of
MCBA's business assets in a business (the "MCBA business of STG"). STG has no
current plan or intention to liquidate MCBA, to merge MCBA with and into another
corporation, to sell or otherwise dispose of the capital stock of MCBA or to
cause MCBA to sell or otherwise dispose of any of its assets, except for
dispositions made in the ordinary course of business or transfers described in
section 368(a)(2)(C) of the Code. The provisions and representations contained
or referred to in this Section 2.11 shall survive until the expiration of the
applicable statute of limitations.
2.12 Earn-Out Payments. The Selling Shareholders shall have the
-----------------
opportunity to receive additional STG Common Stock pursuant to the following
terms (the "Earn-Out Payments"):
(a) The Earn-out Payments received by the Selling Shareholders will be
based on the following components: (i) an amount equal to the MCBA Net Pretax
Profit Dollars (as defined in Section hereof) for the twelve (12) month period
ending December 31, 1998 (the "1998 Net Pretax Profit"); (ii) an amount equal to
the MCBA Net Pretax Profit Dollars for the twelve (12) month period ending
December 31, 1999 (the "1999 Net Pretax Profit"; (iii) an amount equal to five
(5) times the amount by which the 1998 Net Pretax Profit exceeds One Million
Eight Hundred Thousand Dollars ($1,800,000) (the "Year 1 Profit Component"); and
(iv) an amount equal to five (5) times the amount by which the 1999 Net Pretax
Profit exceeds One Million Eight Hundred Thousand Dollars ($1,800,000) (the
"Year 2 Profit Component").
(b) On or before January 31, 1999, STG shall calculate, and deliver
notice of such calculation to the Selling Shareholders (the "Year 1
Calculation"), the 1998 Net Pretax Profit. If the 1998 Net Pretax Profit exceeds
One Million Eight Hundred Thousand Dollars ($1,800,000), STG shall deliver to
the Selling Shareholders, pursuant to Section hereof, an Earn-Out Payment to be
paid to the Selling Shareholders equal to 75% of the Year 1 Profit Component
(together, the "1998 Earn-Out Payment").
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<PAGE>
(c) On or before January 31, 2000, STG shall calculate, and deliver
notice of such calculation to the Selling Shareholders (the "Year 2
Calculation"), the 1999 Net Pretax Profit. If the 1999 Net Pretax Profits exceed
One Million Eight Hundred Thousand Dollars ($1,800,000), STG shall deliver to
the Selling Shareholders, pursuant to Section hereof, an Earn-Out Payment to be
paid to the Selling Shareholders equal to (i) an amount equal to 25% of the Year
1 Profit Component and (ii) the Year 2 Profit Component (together, the "1999
Earn-Out Payment").
(d) The Earn-Out Payments shall be paid in STG Common Stock in equal
percentages to each of Gunnells and Harkins subject to the terms of Sections ,
and hereof. The value of the STG Common Stock to be issued as Earn-Out Payments
shall be calculated based on the average closing price of the STG Common Stock
(as quoted in the Wall Street Journal) for the ten (10) trading days up to, but
excluding, the second trading day before December 30, 1998 and December 30,
1999, as applicable. The STG Common Stock held in escrow provided for in Section
shall be disbursed from escrow as needed to make the Earn-Out Payments. The
remaining shares of STG Common Stock payable under this Section shall be newly
validly issued, fully paid and nonassessable, shares of STG Common Stock. The
aggregate amount of all shares of STG Common Stock issued as Earn-Out Payments
and as Initial Consideration shall not exceed Two Million Four Hundred Thousand
(2,400,000) shares of STG Common Stock, adjusted pursuant to Section
hereof.
(e) MCBA Net Pretax Profit Dollars shall be calculated as follows
("MCBA Net Pretax Profit Dollars"): MCBA Revenue - (MCBA Cost of Goods Sold +
MCBA Operating Expenses). For the purposes of this Section the following
definitions shall apply:
(i) MCBA Revenue shall mean all revenues, fees, promotional
payments, marketing development funds, service fees, fees from IBM
Credit Corporation and any other fees or payments derived from sales
through MCBA and System 390 sales through STG and its affiliates.
(ii) MCBA Cost of Goods Sold shall mean any direct cost
associated with the sales of hardware, software, or any type of
services through MCBA.
(iii) MCBA Operating Expenses shall mean those expenses
incurred in the operation of MCBA. This shall exclude any allocations
to MCBA of any corporate fees and expenses (including, but not limited
to, operating, overhead, administrative or similar costs and expenses)
from STG or any other affiliated company, but shall include the
interest costs of, or income from, the working capital necessary to the
operation of MCBA.
For the purpose of calculating the Earn-Out Payments and MCBA Net
Pretax Profit Dollars, separate books and records shall be maintained by STG
with respect to the MCBA Revenue, MCBA Cost of Goods Sold and MCBA Operating
Expenses. Such books and records shall be maintained in accordance with
generally accepted accounting principles ("GAAP") and classified consistent with
MCBA's past accounting practices.
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(f) The Selling Shareholders will be entitled to reasonable rights to
audit the EarnOut Payments. Upon receipt of the Earn-Out Calculations from STG,
the Selling Shareholders shall have ten (10) business days in which to request
in writing that STG deliver within ten (10) business days of such request the
books and records, and back up invoices and schedules, to the Selling
Shareholders or their accountant to confirm the EarnOut Calculations. If within
ten (10) business days after receipt of the Earn-Out Calculations from STG, the
Selling Shareholders do not request such books and records or if within thirty
(30) business days after receipt of such books and records the Selling
Shareholders do not object to the Earn-Out Calculations, STG shall deliver
instructions to its transfer agent to issue and deliver to the Selling
Shareholders the STG Common Stock pursuant to the EarnOut Payments as soon as
reasonably practicable. If the Selling Shareholders request such books and
records and within thirty (30) business days after receipt of such books and
records, the Selling Shareholders object, in writing to STG, to the Earn-Out
Calculations, STG and the Selling Shareholders shall work together in good faith
to see if they can reach an agreement on the appropriate Earn-Out Payment. If
within fourteen (14) calendar days the parties have not reached an agreement,
the parties shall choose a nationally recognized accounting firm mutually agreed
upon by STG and the Selling Shareholders who shall calculate the appropriate
Earn-Out Payment. If no such agreement can be reached, then each of STG and the
Selling Shareholders shall appoint one nationally recognized accounting firm,
which accounting firms shall pick a third nationally recognized accounting firm
who shall calculate the appropriate Earn-Out Payment. In the event that either
STG or the Selling Shareholders shall fail to select a nationally recognized
firm in accordance with the provisions of this subsection within thirty (30)
days after notice by the other party that such selection should be made, and
such other party has selected a nationally recognized accounting firm pursuant
to the provisions hereof, the nationally recognized accounting firm selected by
such party shall calculate the appropriate Earn-Out Payment. The decision of
such nationally recognized accounting firm shall be conclusive and binding on
both parties. Each of STG and the Selling Shareholders shall pay the costs and
expenses of its own accountant and the Selling Shareholders shall pay the costs
of the nationally recognized accounting firm selected by both parties or their
representatives (the "Independent Accountant"); provided, however, that if a
dispute arises that is resolved by the Independent Accountant and the amount of
the Earn-Out Payment as calculated by the Independent Accountant exceeds by more
than five percent (5%) the Earn-Out Calculations, STG shall pay the costs and
expenses of the Selling Shareholders' and the Independent Accountant's costs and
expenses.
(g) During the period subsequent to Closing and ending on May 31, 2000,
(i) STG shall conduct its business in conformity with sound business practices
and consistent with past practices and (ii) STG shall not take any voluntary
action for the purpose of preventing the Selling Shareholders from being able to
earn the Earn-Out Payments or avoiding or seeking to avoid the observance or
performance of any of the terms under this Section 2.12, and shall at all times
in good faith assist in carrying out all such actions as may be reasonably
necessary or appropriate in order to protect the rights of the Selling
Shareholders with respect to its ability to earn the Earn-Out Payments against
impairment. Notwithstanding this Section 2.12(g), nothing contained herein shall
require the officers and
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directors of STG to maintain STG's business in a manner or take actions that
would violate their fiduciary duties to STG and its shareholders.
(h) If between the date hereof and May 31, 2000, STG commences a
voluntary case under the federal bankruptcy laws or a petition is filed against
STG under the federal bankruptcy laws (the "Bankruptcy Date") and is not
dismissed within ninety (90) days, the Selling Shareholders shall be entitled to
receive out of the Earn-Out Escrow, as defined in Section 2.15 hereof, an amount
of STG Common Stock equal to the Earn-Out Payments earned by them at the time of
the Bankruptcy Date and, to the extent the Earn-Out Escrow is insufficient to
pay the Earn-Out Payments earned by the Selling Shareholders, the Selling
Shareholders shall be entitled to seek recovery of any remaining Earn-Out
Payments due as unsecured creditors of STG in the related bankruptcy
proceedings.
2.13 Closing Date. The Closing under this Agreement (the "Closing")
------------
shall be held not more than two (2) business days following the satisfaction of
all conditions precedent specified in this Agreement, unless duly waived by the
party entitled to satisfaction thereof. In any event, if the Closing has not
occurred on or before March 31, 1998, this Agreement may be terminated as
provided in Section 9.1(c) hereof. Such date on which the Closing is to be held
is herein referred to as the "Closing Date." The Closing shall be held at the
offices of Pillsbury Madison & Sutro LLP, 2550 Hanover St., Palo Alto,
California, at 10:00 a.m. on such date, or at such other time and place as STG
and MCBA may agree upon in writing.
2.14 Escrow for Initial Consideration. The Selling Shareholders agree
--------------------------------
that ten percent (10%) of the STG Common Stock issued to the Selling
Shareholders pursuant to Section 2.6(a) of this Agreement will be placed in
escrow, as described in Article 8 hereof, as security for indemnification as
provided in Article 8 hereof and for the Selling Shareholders' obligations under
Section 6.8 hereof until six (6) months after the Effective Time. On such date
STG, shall instruct the Escrow Agent to promptly deliver any share certificates
to the Selling Shareholders in equal proportion.
2.15 Earn-Out Escrow. At the Closing, STG shall pay to First Trust of
---------------
California, National Association, as escrow agent, Three Hundred Thousand
(300,000) shares of STG Common Stock, adjusted pursuant to Section 2.17 hereof,
issued to Gunnells and Harkins in equal proportion as owners, with voting and
distribution rights in accordance with the EarnOut Escrow Agreement, subject
only to the failure to achieve the Earn-Out Payments described in Section
hereof, and as security for indemnification as provided in Article 8 hereof and
for the Selling Shareholders' obligations under Section 6.8 hereof. The form of
Escrow Agreement for the Earn-Out Payments is in the form attached hereto as
EXHIBIT (the "Earn-Out Escrow Agreement").
2.16 Right of Set-Off.
----------------
(a) In addition to such other rights and remedies STG may have with
respect to the collection of Indemnifiable Damages (as defined in Section
hereof) owed by the Selling Shareholders to STG provided for in Article 8
hereof, the collection of Accounts Receivable
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or the Sale of Inventory (as defined in Section 6.8 hereof) provided for in
Section 6.8 hereof, STG shall have the right of set-off and shall have the right
to charge any part or all of the Indemnifiable Damages, or uncollected Accounts
Receivable or Unsold Inventory owed by the Selling Shareholders to STG against
the Earn-Out Payments upon compliance with the notice, dispute and arbitration
provisions as set forth in this Section 2.16 (the "Right of Set-Off").
(b) STG shall provide written notice to the Spokesperson (as defined in
Section 8.7 hereof), of STG's intent to exercise its Right of Set-Off (the
"Set-Off Notice"), specifying in reasonable detail the individual items of
Indemnifiable Damages included in the amount so stated, the date each such item
was paid or properly accrued, and the nature of the misrepresentation, breach of
warranty or claim to which such item is related.
(c) For the purpose of a Right of Set-Off pursuant to this Agreement,
each share of STG Common Stock shall be valued at an amount equal to the average
ten (10) day closing price per share of STG Common Stock on The Nasdaq Stock
Market prior to the date on which the STG Common Stock is to be paid as an
Earn-Out Payment.
(d) Upon receipt of the Set-Off Notice, the Spokesperson shall have
thirty (30) days after such delivery to object in writing to any Right of
Set-Off. If the Spokesperson shall object in writing to the Set-Off Notice, the
Spokesperson and STG shall attempt in good faith to agree upon the rights of the
respective parties with respect to each claim therein. If no such agreement can
be reached after good faith negotiation within sixty (60) days after objection
by either the Spokesperson or STG, either STG or the Spokesperson may demand
arbitration of the matter and the matter shall be settled by arbitration
conducted in the manner set forth in Section 8.8 hereof.
(e) STG shall use its best efforts to minimize any liabilities,
damages, deficiencies, claims, judgments, assessments, costs and expenses in
respect of which a Right of Set-Off may be sought under this Agreement, and
shall otherwise comply with all the provisions of Section 8.12 hereof.
2.17 Adjustments to Earn-Out Stock. The amount of STG Common Stock
-----------------------------
issued as Initial Consideration or Earn-Out Payments shall be adjusted to
reflect fully the effect of any stock split, reverse split, stock dividend
(including any dividend or distribution of securities convertible int STG Common
Stock), reorganization, recapitalization or other like change with respect to
STG Common Stock effected without consideration, occurring after the date
hereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF MCBA
--------------------------------------
AND THE SELLING SHAREHOLDERS
----------------------------
Except as otherwise set forth in the disclosure schedule attached
hereto as EXHIBIT B (the "Disclosure Schedule"), MCBA and the Selling
Shareholders represent and warrant to STG as of the date hereof as follows:
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3.1 Organization. MCBA is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Alabama, and is not
required to be qualified in any other jurisdiction except where the failure to
be so qualified will not have a material adverse effect on MCBA and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
3.2 Capital Structure; Title to Shares; Selling Shareholders Authority.
------------------------------------------------------------------
The authorized capital stock of MCBA consists of Ten Thousand (10,000) shares of
common stock, par value $0.10 per share. As of the date hereof and as of the
Closing Date, Five Thousand (5,000) shares of MCBA Common Stock were issued and
outstanding. Gunnells and Harkins are the sole shareholders of MCBA, and each
own Two Thousand Five Hundred (2,500) shares of MCBA Common Stock.
All of the outstanding MCBA Common Stock was issued in compliance with
applicable federal and state securities laws and regulations. All of the
outstanding shares of MCBA Common Stock are duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights created by
statute, MCBA's Articles of Incorporation or Bylaws, or any agreement to which
MCBA or the Selling Shareholders is a party.
Each Selling Shareholder has, and on the Closing Date will have, good
and marketable title to the shares of MCBA Common Stock proposed to be sold by
such Selling Shareholder and full right, power and authority to enter into this
Agreement and to sell, assign, transfer and deliver such shares of MCBA Common
Stock hereunder, free and clear of all voting trust arrangements, liens,
encumbrances, equities, security interests, restrictions and claims whatsoever;
and upon delivery of and payment for such shares of MCBA Common Stock hereunder,
Buyer will acquire good and marketable title thereto, free and clear of all
liens, encumbrances, equities, claims, restrictions, security interests, voting
trusts or other defects of title whatsoever.
3.3 Obligations With Respect to Capital Stock. There are no options,
-----------------------------------------
warrants, calls, rights, commitments or agreements of any character to which
MCBA or the Selling Shareholders is a party or by which it is bound obligating
MCBA or the Selling Shareholders to issue any shares of capital stock of MCBA or
obligating MCBA or the Selling Shareholders to grant, extend or enter into any
such option, warrant, call, right, commitment or agreement. There are no voting
trusts, proxies or other agreements with respect to the shares of capital stock
of MCBA.
3.4 Equity Investments. MCBA does not own any equity stock or interest,
------------------
directly or indirectly, in any corporation, partnership, joint venture, firm or
other entity. MCBA has no Subsidiaries (as such term is defined in Section
hereof).
3.5 Authority. MCBA has all requisite corporate power and authority to
---------
enter into this Agreement and, subject to satisfaction of the conditions set
forth herein, to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of MCBA. This Agreement has
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<PAGE>
been duly executed and delivered by MCBA and the Selling Shareholders and
constitutes the valid and binding obligation of MCBA and the Selling
Shareholders, enforceable in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the rights of creditors and the effect or availability of rules of law
governing specific performance, injunctive relief or other equitable remedies.
Provided the conditions set forth in Article 7 are satisfied, the execution and
delivery of this Agreement does not nor will not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation under (a) any provision of the Articles of Incorporation or
Bylaws of MCBA or (b) any material agreement or instrument, permit, franchise,
license, judgment, order, decree, rule or regulation of any court or
governmental agency or body applicable to MCBA or the Selling Shareholders or
their respective properties or assets.
3.6 Consents and Approvals. No consent, approval, order or
----------------------
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority (a
"Governmental Entity"), is required by or with respect to MCBA or the Selling
Shareholders in connection with the execution and delivery of this Agreement by
MCBA or the Selling Shareholders or the consummation by MCBA or the Selling
Shareholders of the transactions contemplated hereby or thereby, except (a) in
connection, or in compliance, with the provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (b) the filing
of the Certificate of Merger with the Secretary of State of the State of Alabama
and appropriate documents with the relevant authorities of other states in which
MCBA is qualified to do business, (c) such filings, authorizations, orders and
approvals as may be required by state takeover laws (the "State Takeover
Approvals") or state securities or "blue sky" laws, and (d) such other consents,
orders, authorizations, registrations, declarations and filings the failure of
which to be obtained or made would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on MCBA or prevent or
result in a third party materially delaying the consummation of the Merger.
3.7 Financial Statements. MCBA has furnished STG with audited
--------------------
statements of income and retained earnings for the fiscal year ended December
31, 1996 and MCBA's audited consolidated balance sheet at December 31, 1996 (the
"MCBA Audited Financials"). MCBA has furnished STG with a reviewed statement of
income and retained earnings for the fiscal year ended December 31, 1995 and
MCBA's reviewed consolidated balance sheet at December 31, 1995 (the "MCBA
Reviewed Financials"). MCBA has furnished STG with an unaudited statement of
income and retained earnings for the Nine (9) month period ended September 30,
1997 and MCBA's unaudited consolidated balance sheet at September 30, 1997 (the
"MCBA Balance Sheet"). All such financial statements are attached hereto as
SCHEDULE 3.7. Prior to Closing, MCBA shall furnish STG with an audited statement
of income and retained earnings for the fiscal year ended December 31, 1997 and
MCBA's audited consolidated balance sheet at December 31, 1997. Within sixty
(60) days following Closing, MCBA will furnish to STG an audited Closing Date
balance sheet of MCBA and statement of income and retained earnings for the
period ended as of the Closing Date (the
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<PAGE>
"Closing Date Balance Sheet"). All of the above financial statements are
hereinafter referred to as the "MCBA Financial Statements." The MCBA Financial
Statements have been and will be complete, true and accurate in all material
respects and, except for any interim financial statements, have been prepared by
an independent certified public accountant in accordance with GAAP applied on a
consistent basis during the periods involved, and are or will be in accordance
with MCBA's books and records, and fairly present the financial position of MCBA
and the results of its operations as of the date and for the periods indicated
thereon. At the date of the MCBA Balance Sheet (the "MCBA Balance Sheet Date")
and as of the Closing Date, MCBA had and will have no liabilities or
obligations, secured or unsecured (whether accrued, absolute, contingent or
otherwise) not reflected on the MCBA Balance Sheet or Closing Date Balance Sheet
or the accompanying notes thereto.
3.8 Business Changes. Since September 30, 1997, except as otherwise
----------------
contemplated by this Agreement or as disclosed in writing to STG, MCBA has
conducted its business only in the ordinary and usual course and, without
limiting the generality of the foregoing:
(a) There have been no changes in the condition (financial or
otherwise), business, net worth, assets, properties, employees, operations,
obligations or liabilities of MCBA which, in the aggregate, have had or may be
reasonably expected to have a materially adverse effect on the condition,
business, net worth, assets, prospects, properties or operations of MCBA.
(b) MCBA has not issued, or authorized for issuance, or entered into
any commitment to issue, any equity security, bond, note or other security of
MCBA.
(c) Except as disclosed on SCHEDULE 3.8(c), MCBA has not incurred debt
for borrowed money, nor incurred any obligation or liability except in the
ordinary and usual course of business and in any event not in excess of ten
Thousand Dollars ($10,000) for any single occurrence.
(d) Except for the payments identified in SCHEDULE 3.8(d), MCBA has not
paid any obligation or liability, or discharged, settled or satisfied any claim,
lien or encumbrance, except for current liabilities in the ordinary and usual
course of business and in any event not in excess of Ten Thousand Dollars
($10,000) for any single occurrence.
(e) MCBA has not declared or made any dividend, payment or other
distribution on or with respect to any share of capital stock of MCBA.
(f) MCBA has not purchased, redeemed or otherwise acquired or committed
itself to acquire, directly or indirectly, any share or shares of capital stock
of MCBA.
(g) Except as disclosed on SCHEDULE 3.8(g), MCBA has not mortgaged,
pledged, or otherwise encumbered any of its assets or properties, other than
inventory sold in the normal course of business or accounts receivable.
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<PAGE>
(h) MCBA has not disposed of, or agreed to dispose of, by sale, lease,
license or otherwise, any asset or property, tangible or intangible, except, in
the case of such other assets and property, in the ordinary and usual course of
business, and in each case for a consideration believed to be at least equal to
the fair value of such asset or property and in any event not in excess of Five
Thousand Dollars ($5,000) for any single item or TwentyFive Thousand Dollars
($25,000) in the aggregate other than inventory sold or returned in the normal
course of business.
(i) MCBA has not purchased or agreed to purchase or otherwise acquire
any securities of any corporation, partnership, joint venture, firm or other
entity; MCBA has not made any expenditure or commitment for the purchase,
acquisition, construction or improvement of a capital asset, except in the
ordinary and usual course of business and in any event not in excess of Five
Thousand Dollars ($5,000) for any single item or Twenty-Five Thousand Dollars
($25,000) in the aggregate.
(j) MCBA has not entered into any transaction or contract, or made any
commitment to do the same, except in the ordinary and usual course of business.
(k) MCBA has not sold, assigned, transferred or conveyed, or committed
itself to sell, assign, transfer or convey, any Proprietary Rights (as defined
in Section 3.19 hereof).
(l) MCBA has not adopted or amended any bonus, incentive,
profit-sharing, stock option, stock purchase, pension, retirement,
deferred-compensation, severance, life insurance, medical or other benefit plan,
agreement, trust, fund or arrangement for the benefit of employees of any kind
whatsoever, nor entered into or amended any agreement relating to employment,
services as an independent contractor or consultant, or severance or termination
pay, nor agreed to do any of the foregoing.
(m) MCBA has not effected or agreed to effect any change in its
directors, officers or key employees.
(n) MCBA has not effected or committed itself to effect any amendment
or modification in its Articles of Incorporation or Bylaws, except as
contemplated in this Agreement.
3.9 Fixed Assets; Properties.
------------------------
(a) SCHEDULE 3.9(a) sets forth the real and personal property,
including fixed assets and equipment, owned or leased by MCBA. The MCBA Balance
Sheet reflects and the Closing Date Balance Sheet will reflect all of the
personal property owned or leased and used by MCBA in its business or otherwise
held by MCBA, except for (i) property acquired or disposed of in the ordinary
and usual course of the business of MCBA since the date of such Balance Sheet,
and (ii) personal property not required under GAAP to be reflected thereon.
Except as reflected in the notes to the MCBA Balance Sheet and Closing Date
Balance Sheet or SCHEDULE 3.8(g), MCBA has good and marketable title to all
assets and properties listed on the MCBA Balance Sheet and Closing Date Balance
Sheet and thereafter
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<PAGE>
acquired, free and clear of any imperfections of title, lien, claim,
encumbrance, restriction, charge or equity of any nature whatsoever, except for
the lien of current taxes not yet delinquent. The fixed assets described in
SCHEDULE 3.9(a) constitute all of the tangible personal property (other than
inventory) currently used in the business. All of the fixed assets reflected on
the MCBA Balance Sheet and Closing Date Balance Sheet or thereafter acquired are
in good condition and repair for the requirements of the business as presently
conducted by MCBA.
(b) MCBA has provided STG with a full and complete list of all real and
personal property leased by MCBA or under option to purchase by MCBA. All such
property leased by MCBA is held under valid, existing and enforceable leases.
The operations of MCBA thereon do not violate any applicable material building
code, zoning requirement or classification, or pollution control ordinance or
statute relating to the property or to such operations.
(c) To the best of MCBA's and the Selling Shareholders' knowledge there
are no Hazardous Substances in, under or about the soil, sediment, surface water
or groundwater on, under or around any properties at any time owned, leased or
occupied by MCBA. MCBA has not disposed of any Hazardous Substances on or about
such property. MCBA has not disposed of any materials at any site being
investigated or remediated for contamination or possible contamination of the
environment. "Hazardous Substances" shall mean any substance regulated or
prohibited by any law or designated by any governmental agency to be hazardous,
toxic, radioactive, regulated medical waste or otherwise a danger to health or
the environment.
(d) MCBA has conducted its business in accordance with all applicable
laws, regulations, orders and other requirements of governmental authorities
relating to Hazardous Substances and the use, storage, treatment, disposal,
transport, generation, release and exposure of others to Hazardous Substances.
MCBA has not received any notice of any investigation, claim or proceeding
against MCBA relating to Hazardous Substances and MCBA is not aware of any fact
or circumstance which could involve MCBA in any environmental litigation,
proceeding, investigation or claim or impose any environmental liability upon
MCBA.
3.10 Accounts Receivable; Notes Receivable. SCHEDULE 3.10 contains a
-------------------------------------
summary of the accounts receivable of MCBA as of September 30, 1997,
together with an accurate aging of such accounts receivable. The accounts
receivable set forth on SCHEDULE 3.10 and those outstanding and unpaid as of the
Closing Date that will be reflected in the Closing Date Balance Sheet (together,
the "Accounts Receivable") arose out of or will arise out of the bona fide
furnishing of goods and services, each in the operation of the business of MCBA,
and require or will require no additional performance by MCBA. To the best of
MCBA's and the Selling Shareholders' knowledge the Accounts Receivable are
collectible at their full amounts, subject only to the amount of any bad debt
allowance reflected on the Closing Date Balance Sheet. Except as set forth on
SCHEDULE 3.10, the notes receivable are obligations of current customers of
MCBA, whether on an open account or cash on delivery basis, and there are no
disputes between MCBA and any obligor under any such note receiv-
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able with respect to the amount owing or the payment terms thereunder. MCBA has
provided STG with accurate information concerning amounts and aging of Accounts
Receivable and with an accurate customer list of MCBA. MCBA shall prepare an
Accounts Receivable report as of the end of the business day preceding the
Closing Date (the "Report") which shall include MCBA's trade accounts receivable
arising out of the operation of MCBA's business in the ordinary course which are
unpaid as of the Closing Date and which reconciles to the Closing Date Balance
Sheet. The Report shall be attached hereto as of the Closing Date as SCHEDULE
3.10.
3.11 Taxes.
-----
(a) For purposes of this Agreement, the following terms have the
following meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means any and all taxes, including without limitation (i) any income, profits,
alternative or add-on minimum tax, gross receipts, sales, use, value-added, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, net worth, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or assessment or charge of any kind whatsoever, together with any interest
or any penalty, addition to tax or additional amount imposed by any Governmental
Entity responsible for the imposition of any such tax (domestic or foreign) (a
"Taxing Authority"), (ii) any liability for the payment of any amounts of the
type described in clause (i) above as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period or as
the result of being a transferee or successor thereof, and (iii) any liability
for the payment of any amounts of the type described in clause (i) or (ii) above
as a result of any express or implied obligation to indemnify any other person.
(b) All Tax returns, statements, reports and forms (including estimated
Tax returns and reports and information returns and reports) required to be
filed with any Taxing Authority with respect to any Taxable period ending on or
before the Effective Time, by or on behalf of MCBA (collectively, the "MCBA
Returns"), have been or will be filed when due (including any extensions of such
due date), and all amounts shown to be due thereon on or before the Effective
Time have been or will be paid on or before such date. The MCBA Financial
Statements fully accrue all actual and contingent liabilities for Taxes with
respect to all periods through the dates thereof in accordance with GAAP. The
MCBA Balance Sheet (i) fully accrues consistent with past practices and in
accordance with GAAP all actual and contingent liabilities for Taxes with
respect to all periods through the MCBA Balance Sheet Date and (ii) properly
accrues consistent with past practices and in accordance with GAAP all
liabilities for Taxes payable after the MCBA Balance Sheet Date with respect to
all transactions and events occurring on or prior to such date. All information
set forth in the notes to the MCBA Financial Statements relating to Tax matters
is true, complete and accurate in all material respects.
(c) No Tax liability since the MCBA Balance Sheet Date has been
incurred other than in the ordinary course of business and adequate provision
has been made for all Taxes since that date in accordance with GAAP on at least
a quarterly or, with respect to employment taxes, monthly basis. MCBA has
withheld and paid to the applicable financial
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institution or Taxing Authority all amounts required to be withheld. Except as
set forth in SCHEDULE 3.11(c), all MCBA Returns filed with respect to federal
income tax returns for Taxable years of MCBA in the case of the United States,
have been examined and closed and copies of audit reports previously have been
provided to STG or are MCBA Returns with respect to which the applicable period
for assessment under applicable law, after giving effect to extensions or
waivers, has expired. MCBA has not granted any extension or waiver of the
limitation period applicable to any MCBA Returns.
(d) There is no claim, audit, action, suit, proceeding or investigation
now pending or, to the best knowledge of MCBA, threatened against or with
respect to MCBA in respect of any Tax or assessment. There are no liabilities
for Taxes with respect to any notice of deficiency or similar document of any
Tax Authority received by MCBA which have not been satisfied in full (including
liabilities for interest, additions to tax and penalties thereon and related
expenses). Neither MCBA nor any person on behalf of MCBA has entered into or
will enter into any agreement or consent pursuant to section 341(f) of the Code.
There are no liens for Taxes upon the assets of MCBA except liens for current
Taxes not yet due. Except as may be required as a result of the Merger, MCBA has
not been and will not be required to include any adjustment in Taxable income
for any Tax period (or portion thereof) pursuant to section 481 or 263A of the
Code or any comparable provision under state, local or foreign Tax laws as a
result of transactions, events or accounting methods employed prior to the
Effective Time.
(e) There is no contract, agreement, plan or arrangement, including
without limitation the provisions of this Agreement, covering any employee or
independent contractor or former employee or independent contractor of MCBA
that, individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to section 280G or section 162 of the Code
(as determined without regard to section 280G(b)(4)). Other than pursuant to
this Agreement, MCBA is not a party to or bound by (and will not prior to the
Effective Time become a party to or bound by) any tax indemnity, tax sharing or
tax allocation agreement (whether written, unwritten or arising under operation
of federal law as a result of being a member of a group filing consolidated tax
returns, under operation of certain state laws as a result of being a member of
a unitary group, or under comparable laws of other states or foreign
jurisdictions) which includes a party other than MCBA. None of the assets of
MCBA (i) is property that MCBA is required to treat as owned by any other person
pursuant to the so-called "safe harbor lease" provisions of former section
168(f)(8) of the Code, (ii) directly or indirectly secures any debt the interest
on which is tax exempt under section 103(a) of the Code, (iii) is "tax exempt
use property" within the meaning of section 168(h) of the Code or (iv) is
property the taxable disposition of which would give rise to "recognized
built-in gain" within the meaning of section 1374 of the Code or comparable
provisions of state, local or foreign Tax laws. MCBA has not participated in
(and prior to the Effective Time MCBA will not participate in) an international
boycott within the meaning of section 999 of the Code. MCBA has previously
provided or made available to STG true and correct copies of all MCBA Returns,
and, as reasonably requested by STG, prior to or following the date hereof,
presently existing information statements, reports, work papers, Tax opinions
and memoranda and other Tax data and documents.
-15-
<PAGE>
(f) Since the date of its incorporation, MCBA has validly elected to
be, has been continuously, and is currently and validly taxable as an "S
corporation" under section 1361, et seq., of the Code and comparable provisions
of applicable state, local and foreign Tax laws. No event has occurred nor will
have occurred prior to the Effective Time which has terminated or will
terminate, under section 1362(d) of the Code or comparable provisions of state,
local or foreign Tax laws, the election of TSI to be so taxable. As of the
Effective Time, and except as set forth in SCHEDULE 3.11(c), MCBA will have no
"accumulated earnings and profits" within the meaning of section 1362(d)(3) of
the Code or comparable provisions of state, local or foreign Tax laws.
(g) MCBA is not liable for and will not prior to the Effective Time
become a party to or liable for, nor will it become liable for in the future as
a result of any actions taken by MCBA or the Selling Shareholders prior to the
Effective Time, any taxes, including, without limitation, any payroll taxes,
incurred by Mini-Computer Business Application, Inc. or Innovative Business
Systems, Inc. (together, the "Affiliated Companies") including, without
limitation, as a result of any tax indemnity, tax sharing or tax allocation
agreement (whether written, unwritten or arising under operation of federal law
as a result of being a member of a group filing consolidated tax returns, under
operation of certain state laws as a result of being a member of a unitary
group, or under comparable laws of other states or foreign jurisdictions). MCBA
is not a party to or liable for, nor is any of the property of MCBA subject to
any liens relating to, the Installment Agreement by and among the Internal
Revenue Service ("IRS"), Mini-Computer Business Applications Inc. and Innovative
Business Systems, Inc. dated as of February 26, 1996.
3.12 Employees; Compensation. MCBA has provided in SCHEDULE 3.12(b) a
-----------------------
full and complete list of (a) all directors, officers, employees or consultants
of MCBA as of the date set forth thereon, specifying their names and job
designations, their dates of hire, the total amount paid or payable as wages,
salaries or other forms of direct compensation, the basis of such compensation,
whether fixed or commission or a combination thereof, and (b) except as set
forth on SCHEDULE 3.26, all employee profit sharing, stock option, stock
purchase, pension, bonus, incentive, retirement, medical reimbursement, life
insurance, deferred compensation or any other employee benefit plan or
arrangement. Since September 30, 1997, MCBA has not paid or committed itself to
pay to or for the benefit of any of its directors, officers, employees or
shareholders any compensation of any kind other than wages, salaries and
benefits at the times and rates in effect on SCHEDULE 3.12(b), nor has it
effected or agreed to effect any amendment or supplement to any employee profit
sharing, stock option, stock purchase, pension, bonus, incentive, retirement,
medical reimbursement, life insurance, deferred compensation or any other
employee benefit plan or arrangement except as set forth on SCHEDULE 3.12(b) or
SCHEDULE 3.26. MCBA does not have any bonus plan or obligations with respect to
any bonus plan, except as set forth in SCHEDULE 3.12(b).
3.13 Compliance with Law. All material licenses, franchises, permits,
-------------------
clearances, consents, certificates and other evidences of authority of MCBA
which are necessary to the conduct of MCBA's business ("Permits") are in full
force and effect and MCBA is not in violation of any Permit in any material
respect. The business of MCBA has been conducted
-16-
<PAGE>
in accordance with all applicable laws, regulations, orders and other
requirements of governmental authorities.
3.14 Litigation. Except for litigation initiated by MCBA relating to
----------
collections, there is no claim, dispute, action, proceeding, notice, order,
suit, appeal or investigation, at law or in equity, pending against MCBA, or
involving any of its assets or properties, before any court, agency, authority,
arbitration panel or other tribunal (other than those, if any, with respect to
which service of process or similar notice has not yet been made on MCBA), and
none have been threatened. MCBA and the Selling Shareholders are aware of no
facts which, if known to shareholders, customers, governmental authorities or
other persons, would result in any such claim, dispute, action, proceeding, suit
or appeal or investigation. MCBA is not subject to any order, writ, injunction
or decree of any court, agency, authority, arbitration panel or other tribunal,
nor is it in default with respect to any notice, order, writ, injunction or
decree.
3.15 Contracts. Except as provided herein, MCBA has provided STG with a
---------
complete list in SCHEDULE 3.15 of each executory contract and agreement in the
following categories to which MCBA is a party, or by which it is bound in any
respect: (a) agreements for the purchase, sale, lease or other disposition of
equipment, goods, materials, research and development, supplies, studies or
capital assets, or for the performance of services, in any case involving more
than Five Thousand Dollars ($5,000); (b) contracts or agreements for the joint
performance of work or services, and all other joint venture agreements; (c)
management or employment contracts, consulting contracts, collective bargaining
contracts, termination and severance agreements; (d) notes, mortgages, deeds of
trust, loan agreements, security guarantees, debentures, indentures, credit
agreements and other evidences of indebtedness; (e) pension, retirement,
profit-sharing, deferred compensation, bonus, incentive, life insurance,
hospitalization or other employee benefit plans or arrangements (including,
without limitation, any contracts or agreements with trustees, insurance
companies or others relating to any such employee benefit plan or arrangement);
(f) stock option, stock purchase, warrant, repurchase or other contracts or
agreements relating to any share of capital stock of MCBA; (g) contracts or
agreements with agents, brokers, consignees, sales representatives or
distributors; (h) contracts or agreements with any director, officer, employee,
consultant or shareholder; (i) powers of attorney or similar authorizations
granted by MCBA to third parties; (j) licenses, sublicenses, royalty agreements
and other contracts or agreements to which MCBA is a party, or otherwise
subject, relating to technical assistance or to Proprietary Rights (as defined
in Section 3.19 hereof); and (k) other material contracts.
MCBA has not entered into any contract or agreement containing
covenants limiting the right of MCBA or the Selling Shareholders to compete in
any business or with any person. As used in this Agreement, the terms "contract"
and "agreement" include every contract, agreement, commitment, understanding and
promise, whether written or oral.
The contract, dated January 11, 1996 and as amended on January 25,
1996, by and between MCBA and Bluebird Systems (the "Bluebird Contract")
provides that: (i) MCBA is obliged to pay commissions only to those customers
listed on SCHEDULE 3.15 hereto and (ii)
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<PAGE>
MCBA's obligations and liabilities pursuant to the Bluebird Contract are
contractually limited to an amount not to exceed Five Hundred Thousand Dollars
($500,000). MCBA has no other contractual obligations to Bluebird Systems or any
other person or entity related to Bluebird Systems.
Except for the loan agreement between Mini-Computer Business
Applications, Inc. and First Commercial Bank pursuant to which MCBA is debtor,
MCBA has no other bank line of credit, loans or other similar contracts or
agreements with banks or financial institutions.
3.16 No Default.
----------
(a) Each of the contracts, agreements or other instruments referred to
in Section 3.15 hereof and each of the standard customer agreements or contracts
of MCBA is a legal, binding and enforceable obligation by or against MCBA,
subject only to the effect of applicable bankruptcy, insolvency, reorganization,
moratorium or other similar federal or state laws affecting the rights of
creditors and the effect or availability of rules of law governing specific
performance, injunctive relief or other equitable remedies (regardless of
whether any such remedy is considered in a proceeding at law or in equity). To
the MCBA Parties' knowledge, no party with whom MCBA has an agreement or
contract is in default thereunder or has breached any term or provision thereof
which is material to the conduct of MCBA's business.
(b) MCBA has performed, or is now performing, the obligations of, and
MCBA is not in material default (or would by the lapse of time and/or the giving
of notice be in material default) in respect of, any contract, agreement or
commitment binding upon it or its assets or properties and material to the
conduct of its business. No third party has raised any claim, dispute or
controversy with respect to any of the executory contracts of MCBA, nor has MCBA
received written notice or warning of alleged nonperformance, delay in delivery
or other noncompliance by MCBA with respect to its obligations under any of
those contracts, nor are there any facts which exist indicating that any of
those contracts may be totally or partially terminated or suspended by the other
parties thereto.
3.17 Business and Customers. SCHEDULE 3.17 is a list of all of MCBA's
----------------------
customers from whom more than Five Thousand Dollars ($5,000) in revenues were
received in the Nine (9) months ended September 30, 1997 and up to the Closing
Date.
3.18 Inventories. The inventories of MCBA consist of items of a quality
-----------
and quantity usable and salable (within less than six (6) months from the date
of Closing) in the normal course of the business, subject only to balance sheet
reserves as set forth on the MCBA Balance Sheet or Closing Date Balance Sheet.
MCBA's inventories relating to MCBA's business which are on hand as of the
Closing Date shall be referred to herein as the "Inventories". A physical
inventory shall be taken no earlier than the weekend preceding the date of the
Closing (the "Physical Inventory"). A Physical Inventory list shall be prepared
that includes a description of each Inventory item, the number of units of each
item on hand as of the date of the Physical Inventory and the value of said
Inventory on a
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lower of cost or market basis (the "Listing"). The Listing is attached hereto as
SCHEDULE 3.18. In addition, a summary of inventory on hand as of September 30,
1997 is set forth in SCHEDULE 3.18. All items included in such inventories are
owned by MCBA. All inventory on hand at Closing will be set forth on the Closing
Date Balance Sheet. Except for inventory pledged as collateral to IBM Credit
Corporation, no items included in the Inventories have been pledged as
collateral or are held by MCBA on consignment from others. All the Inventories
reflected on the balance sheets included in the Financial Statements and on the
books of MCBA are based on quantities determined from month-end physical count,
and are valued in the Financial Statements at the lower of cost (last-in,
first-out) or market and on a basis consistent with that of prior periods.
3.19 Proprietary Rights.
------------------
(a) MCBA has provided STG with a complete list in writing in SCHEDULE
3.19(a) of all computer software, software programs, patents and applications
for patents, trademarks, trade names, service marks, and copyrights, and
applications therefor, owned or used by MCBA or in which it has any rights or
licenses, except for software used by MCBA and generally available on the
commercial market. MCBA has provided STG with a complete and accurate
description in SCHEDULE 3.19(a) of all agreements of MCBA with each officer,
employee or consultant of MCBA providing MCBA with title and ownership to
patents, patent applications, trade secrets and inventions developed or used by
MCBA in its business. All of such agreements so described are valid, enforceable
and legally binding, subject to the effect of applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the rights of creditors or
availability of rules of law governing specific performance, injunctive relief
or other equitable remedies (regardless of whether any such remedy is considered
in a proceeding at law or in equity).
(b) MCBA owns or possesses licenses or other rights to use all computer
software, software programs, patents, patent applications, trademarks, trademark
applications, trade secrets, service marks, trade names, copyrights, inventions,
drawings, designs, customer lists, proprietary know-how or information, or other
rights with respect thereto (collectively referred to as "Proprietary Rights"),
used in the business of MCBA, and the same are sufficient to conduct MCBA's
business as it has been and is now being conducted.
(c) To the best of MCBA's and the Selling Shareholders' knowledge, the
operations of MCBA do not conflict with or infringe, and no one has asserted to
MCBA or the Selling Shareholders that such operations conflict with or infringe,
on any Proprietary Rights, owned, possessed or used by any third party. To the
best of MCBA's and the Selling Shareholders' knowledge, there are no claims,
disputes, actions, proceedings, suits or appeals pending against MCBA with
respect to any Proprietary Rights (other than those, if any, with respect to
which service of process or similar notice may not yet have been made on MCBA),
and, none has been threatened against MCBA. To the knowledge of MCBA and the
Selling Shareholders, there are no facts or alleged facts which would reasonably
serve as a basis for any claim that MCBA does not have the right to use, free of
any rights or claims of others, all Proprietary Rights in the development,
manufacture, use, sale or other
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<PAGE>
disposition of any or all products or services presently being used, furnished
or sold in the conduct of the business of MCBA as it has been and is now being
conducted.
(d) To the best of MCBA's and the Selling Shareholders' knowledge, no
employee of MCBA is in violation of any term of any employment contract,
proprietary information and inventions agreement, non-competition agreement, or
any other contract or agreement relating to the relationship of any such
employee with MCBA or any previous employer.
3.20 Insurance. MCBA has provided STG with a complete list in SCHEDULE
---------
3.20 of all policies of insurance to which MCBA is a party or is a beneficiary
or named insured. MCBA has in full force and effect, with all premiums due
thereon paid, the policies of insurance set forth therein. All the insurable
properties of MCBA are insured in amounts and coverage and against risks and
losses which are adequate and usually insured against by persons holding or
operating similar properties in similar businesses. There were no claims in
excess of Ten Thousand Dollars ($10,000) asserted under any of the insurance
policies of MCBA in respect of all motor vehicle, general liability,
professional liability, errors and omissions, and worker's compensation claims,
nor medical claims in excess of Twenty-Five Thousand Dollars ($25,000) for the
period from the MCBA incorporation date to the date of this Agreement.
3.21 Bank Accounts. MCBA has furnished to STG a true and correct list
-------------
in SCHEDULE 3.21 setting forth the names and addresses of all banks, other
institutions and state governmental departments at which MCBA has accounts,
deposits or safety deposit boxes, or special deposits required to be held by
such state governmental departments with the nature of such account and the
names of all persons authorized to draw on or give instructions with respect to
such accounts or deposits, or to have access thereto, and the names and
addresses of all persons, if any, holding a power-of-attorney on behalf of MCBA.
All cash in such accounts is held in demand deposits and is not subject to any
restriction or limitation as to withdrawal.
3.22 Brokers or Finders. Except for dealings with Alliant Partners,
------------------
which was retained by STG, MCBA has not dealt with any broker or finder in
connection with the transactions contemplated by this Agreement. MCBA has not
incurred, and shall not incur, directly or indirectly, any liability for any
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.23 Related Parties. No officer or director of MCBA, or any Affiliate
---------------
of any such person, has, either directly or indirectly, (a) an interest in any
corporation, partnership, firm or other person or entity which currently
furnishes or sells services or products which are similar to those furnished or
sold by MCBA, or (b) a beneficial interest in any contract or agreement to which
MCBA is a party or by which MCBA may be bound. For purposes of this SECTION
3.23, there shall be disregarded any interest which arose solely from the
ownership of less than a two percent (2%) equity interest in a corporation whose
stock is regularly traded on any national securities exchange or in the
over-the-counter market.
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<PAGE>
3.24 Certain Advances. There are no receivables of MCBA owing from
----------------
directors, officers, employees, consultants or shareholders of MCBA, or owing by
any affiliate of any director or officer of MCBA, other than advances in the
ordinary and usual course of business to officers and employees for reimbursable
business expenses which are not in excess of Two Thousand Five Hundred Dollars
($2,500) for any one individual.
3.25 Union Activities. None of the employees of MCBA are represented by
----------------
any union or are parties to any collective bargaining arrangement, and no
attempts are being made to organize or unionize any of the MCBA employees.
3.26 ERISA.
-----
(a) SCHEDULE 3.26 hereto lists all employee pension benefit plans,
multi-employer plans and employee welfare benefit plans (as defined in section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) covering active, former or retired employees of MCBA. MCBA has
furnished to STG copies or descriptions of each employment, severance or other
similar contract, arrangement or policy and each plan, agreement, policy or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), vacation benefits, severance benefits, disability
benefits, early retirement benefits, death benefits, hospitalization benefits,
401(k) plans, retirement benefits, deferred compensation, profit-sharing,
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of compensation or post-retirement benefits.
(b) Except as set forth in SCHEDULE 3.26, MCBA and the Selling
Shareholders represent as follows:
(i) MCBA Retirement Plans; ERISA Affiliate Retirement Plans.
-------------------------------------------------------
(A) Each benefit plan is in substantial compliance with all
applicable laws and regulatory requirements, and has been administered
substantially in accordance with its terms. MCBA and the Selling
Shareholders know of no circumstances likely to result in the denial or
revocation of tax-qualification of any benefit plan intended to be
tax-qualified under Section 401(a) of the Code. No material
liabilities, other than for payment of benefits in the ordinary course,
have been incurred nor, to the knowledge of MCBA or the Selling
Shareholders, do any facts exist which are reasonably likely to result
in any material liability (whether or not asserted as of the date
hereof) of MCBA arising by virtue of any event, act or omission
occurring prior to the Closing Date with respect to any benefit plan.
To the knowledge of MCBA or the Selling Shareholders, no liens under
Code Section 412(n) or ERISA Section 4068(a) nor liabilities under
ERISA Section 4069(a) or Section 4201(a) exist with respect to any
employee benefit plan (within the meaning of Section 3(a) of ERISA) of
the MCBA or any member of an ERISA affiliated group (as defined under
Section 414(b), (c) or (m) of the Code) which would have a material
adverse effect on MCBA, nor do any facts exist which are reasonably
likely to result in the assertion of such liens or liabilities.
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<PAGE>
(B) MCBA does not sponsor any defined benefit plan as defined
in Section 3(35) of ERISA and has no liability with respect to any
defined benefit plan.
(C) To the best of MCBA's and the Selling Shareholders'
knowledge, with respect to the MCBA, Inc. Employee Savings and
Protection Plan, there has been no breach of fiduciary duty that would
result in liability that would be covered by a fidelity bond required
under Section 412 of ERISA.
(ii) MCBA multiemployer pension plans; ERISA Affiliate multiemployer
---------------------------------------------------------------
pension plans.
-------------
(A) MCBA has not withdrawn from a MCBA multiemployer pension
plan as defined in section 4001(a)(3) of ERISA, in a "complete
withdrawal" or a "partial withdrawal" as defined in sections 4203 and
4205 of ERISA, respectively, so as to result in a liability to MCBA
which has not been fully paid. To the best of MCBA's and the Selling
Shareholders' knowledge, no Affiliate has withdrawn from an Affiliate
multiemployer pension plan in a "complete withdrawal" or a "partial
withdrawal" as defined in sections 4203 and 4205 of ERISA,
respectively, so as to result in a material liability to MCBA which has
not been fully paid.
(B) To the best of MCBA's and the Selling Shareholders'
knowledge, with respect to each multiemployer pension plan: (i) no such
plan has been terminated or has been in reorganization under ERISA so
as to result in any material liability to MCBA under Title IV of ERISA;
and (ii) no proceeding has been initiated by any person (including the
PBGC) to terminate any such plan so as to result in any such material
liability.
(iii) MCBA Welfare Plans. To the best of MCBA's and the Selling
------------------
Shareholders' knowledge, each MCBA welfare plan, as defined in section
3(1) of ERISA, has been administered so as to comply with applicable
laws except where the failure to so comply would not have a material
adverse effect.
(iv) MCBA Benefit Arrangements. To the best of MCBA's and the Selling
-------------------------
Shareholders' knowledge, each MCBA benefit arrangement plan has been
administered so as to comply with applicable laws except where the
failure to so comply would not have a material adverse effect.
(v) No Severance or Accelerated Benefits Triggered. Except as otherwise
----------------------------------------------
provided in Section 3.26 hereof, no severance, extraordinary
compensation or similar payments are payable to any MCBA employee, nor
are any benefits of any MCBA employee accelerated, under the terms of
any employee benefit plan or agreement with an employee as a
consequence of the transaction contemplated by this Agreement which
would result in a liability for MCBA after the Closing Date for actions
taken on or before the Closing Date.
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<PAGE>
(vi) No Liens. Neither MCBA nor any of the Assets are subject to any
--------
lien under ERISA or the Code.
3.27 Underlying Documents. Copies of any underlying documents listed or
--------------------
described as having been disclosed to STG pursuant to this Agreement have been
furnished to STG. All such documents furnished to STG are true and correct
copies, and there are no amendments or modifications thereto that have not been
disclosed to STG. The minute books of MCBA contain complete and accurate records
of all meetings and other corporate actions taken by the directors and
shareholders of MCBA.
3.28 Full Disclosure. Any information furnished by MCBA to STG in
---------------
writing pursuant to this Agreement (including the Schedules hereto), at any time
prior to the Closing Date, does not and will not contain any untrue statement of
a material fact and does not and will not omit to state any material fact
necessary to make any statement, in light of the circumstances under which such
statement is made, not misleading.
3.29 Accounts Payable. SCHEDULE 3.29 contains a summary of the accounts
----------------
payable of MCBA as of September 30, 1997, together with an accurate aging of
such accounts payable. Those accounts payable and those outstanding on the
Closing Date that will be reflected in the Closing Date Balance Sheet
(collectively, the "Accounts Payable") arose or will arise in the normal and
ordinary course of the business of MCBA. Except as set forth on SCHEDULE 3.29,
the Accounts Payable are not past due and there are no collection actions
currently pending with respect to such Accounts Payable. Also listed in SCHEDULE
3.29 are the accounts payable arising out of the operation of MCBA's business in
the ordinary course which are unpaid as of the Closing Date.
3.30 Liabilities. Except as disclosed in the MCBA Balance Sheet or in
-----------
SCHEDULE 3.30, there are no liabilities or obligations of any nature to which
MCBA is subject, whether absolute, accrued, contingent or otherwise, and whether
due or to become due. Furthermore, MCBA and the Selling Shareholders know of no
basis for any assertion against MCBA of any such liability or obligation not
fully disclosed in the MCBA Financial Statements or in SCHEDULE 3.30. Except as
otherwise disclosed in SCHEDULE 3.30, the MCBA Financial Statements do not
contain any items of special or nonrecurring income or any other income not
earned in the ordinary course of business, except as expressly disclosed
therein.
3.31 Restricted Securities. The Selling Shareholders understand that
---------------------
the STG Common Stock may not be sold, transferred or otherwise disposed of
without registration under the Securities Act of 1933, as amended (the
"Securities Act"), or an exemption therefrom, and that in the absence of an
effective registration statement covering the STG Common Stock or an available
exemption from registration under the Securities Act, the STG Common Stock must
be held indefinitely. In particular, the Selling Shareholders are aware that the
STG Common Stock may not be sold pursuant to Rule 144 promulgated under the
Securities Act unless all of the conditions of that Rule are met.
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<PAGE>
3.32 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
MCBA and the Selling Shareholders in reliance upon the Selling Shareholders'
representation to STG, which by the Selling Shareholders' execution of this
Agreement they hereby confirm, that the STG Common Stock to be purchased by the
Selling Shareholders will be acquired for investment for their own account, not
as a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that the Selling Shareholders have no present intention of
selling, granting any participation in, or otherwise distributing the same. By
executing this Agreement, the Selling Shareholders further represent that they
do not have any contract, undertaking, agreement or arrangement with any person
to sell, transfer or grant participations to such person or to any third person,
with respect to the STG Common Stock.
3.33 Permits. MCBA's rights in, to or under any governmental licenses,
-------
environmental and other permits, approvals and authorizations which relate to
its assets, are listed in SCHEDULE 3.33.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF STG
-------------------------------------
Except as otherwise set forth in the disclosure schedule attached
hereto as EXHIBIT C by this Agreement, STG represents and warrants to MCBA and
the Selling Shareholders as of the date hereof as follows:
4.1 Organization. STG is a corporation duly incorporated, validly
------------
existing and in good standing under the laws of Delaware. STG is duly qualified
to do business and is in good standing in its state of incorporation and in each
other jurisdiction in which it owns or leases property or conducts business,
except where the failure to be so qualified would not have a material adverse
effect on the business of STG. STG has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, and possesses all licenses, franchises, rights and privileges
material to the conduct of its business.
4.2 Authority. STG has all requisite corporate power and authority to
---------
enter into this Agreement and the related agreements contemplated herein, and,
subject to satisfaction of the conditions set forth herein, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of STG. This Agreement
has been duly executed and delivered by STG and constitutes the valid and
binding obligation of STG enforceable in accordance with its terms, subject to
the effect of applicable bankruptcy, insolvency, reorganization or other similar
federal or state laws affecting the rights of creditors and the effect or
availability of rules of law governing specific performance, injunctive relief
or other equitable remedies. Provided the conditions set forth in Article 7
hereof are satisfied, the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation
-24-
<PAGE>
under (a) any provision of the Articles of Incorporation or Bylaws of STG, or
(b) any material agreement or instrument, permit, license, judgment, order,
statute, law, ordinance, rule or regulation applicable to STG or its properties
or assets, other than any such conflicts, violations, defaults, terminations,
cancelations or accelerations which individually or in the aggregate would not
have a material adverse effect on STG.
4.3 Consents and Approvals. No consent, approval, order or
----------------------
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority (a
"Governmental Entity"), is required by or with respect to STG in connection with
the execution and delivery of this Agreement by STG or the consummation by STG
of the transactions contemplated hereby or thereby, except (a) in connection, or
in compliance, with the provisions of the HSR Act, the Securities Act of 1933,
as amended (the "Securities Act") and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (b) the filing of the Certificate of Merger with
the Secretary of State of the State of Alabama and appropriate documents with
the relevant authorities of other states in which MCBA is qualified to do
business, (c) such filings, authorizations, orders and approvals as may be
required by state takeover laws (the "State Takeover Approvals") or state
securities or "blue sky" laws, (d) the listing of the STG Common Stock on The
Nasdaq Stock Market, and (e) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, reasonably be expected to have
a material adverse effect on STG or prevent or result in a third party
materially delaying the consummation of the Merger.
4.4 Capital Structure. The authorized capital stock of STG consists of
-----------------
25,000,000 shares of Common Stock, par value $0.01 per share, and 10,000,000
shares of Preferred Stock, par value $0.01 per share. As of October 3, 1997,
5,310,655 shares of STG Common Stock were issued and outstanding, and 2,250,500
shares of Series A Preferred Stock were issued and outstanding.
All of the outstanding shares of STG Common Stock are, and any shares
of STG Common Stock issuable upon exercise of any STG Option when issued
pursuant to such exercise will be, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights created by statute, STG's
Articles of Incorporation or Bylaws or any agreement to which STG is a party or
is bound.
4.5 Financial Statements. STG has furnished to MCBA its audited
--------------------
consolidated statement of operations, statement of stockholders' equity and
statement of cash flows for the three (3) fiscal years ended December 31, 1996
and STG's audited consolidated balance sheet at December 31, 1996; and the
unaudited consolidated statement of operations and statement of cash flows for
the nine (9) months ended September 30, 1997 and the unaudited consolidated
balance sheet at September 30, 1997. The balance sheet at September 30, 1997 is
hereinafter referred to as the "STG Balance Sheet," and all such financial
statements are hereinafter referred to collectively as the "STG Financial
Statements." The STG Financial Statements have been and will be prepared in
accordance with GAAP applied on a consistent basis during the periods involved,
and fairly present and
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<PAGE>
will present the consolidated financial position of STG and the results of its
operations as of the date and for the periods indicated thereon. At the date of
the STG Balance Sheet (the "STG Balance Sheet Date"), neither STG nor its
consolidated subsidiaries had any liabilities or obligations, secured or
unsecured (whether accrued, absolute, contingent or otherwise) not reflected on
the STG Balance Sheet or the accompanying notes thereto except for (a)
liabilities and obligations as may have arisen in the ordinary course of
business prior to the date of said Balance Sheet and which, under GAAP, would
not have been required to be reflected on such Balance Sheet; (b) liabilities
incurred in the ordinary course of business since the date of said balance sheet
which are usual and normal in amount and type; and (c) liabilities and
obligations as may have arisen as a result of the acquisition of Star Data
Systems, Inc., a Delaware corporation.
4.6 Securities and Exchange Commission Documents. STG has furnished to
--------------------------------------------
MCBA a true and complete copy of STG's Annual Report on Form 10-K, as amended,
for the year ended December 31, 1996, Quarterly Report on Form 10-Q for each of
the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997, and
Notice of Annual Meeting and Proxy Statement for STG's 1997 Annual Meeting, (the
"STG SEC Documents"). As of their respective filing dates, the STG SEC Documents
comply or will comply in all material respects with the requirements of the
Securities Act or the Exchange Act, and none of the STG SEC Documents contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading, except to the extent corrected by a subsequently filed STG SEC
Document.
4.7 No Conflict. Except as provided in EXHIBIT C, the execution and
-----------
delivery of this Agreement by STG and the performance of STG's obligations
hereunder: (a) are not in violation or breach of, and will not conflict with or
constitute a default under, any of the terms of the Articles of Incorporation or
Bylaws of STG or any of its Subsidiaries, or any material contract, agreement or
commitment binding upon STG or any of its assets or properties; (b) will not
result in the creation or imposition of any lien, encumbrance, equity or
restriction in favor of any third party upon any of the assets or properties of
STG; and (c) will not conflict with or violate any applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over STG or any of its assets or
properties.
4.8 Shares of STG Common Stock. The shares of STG Common Stock will,
--------------------------
when issued and delivered to the Selling Shareholders in accordance with this
Agreement, be duly authorized, validly issued, fully paid and nonassessable.
4.9 Brokers or Finders. Except for Alliant Partners, STG has not dealt
------------------
with any broker or finder in connection with the transactions contemplated by
this Agreement. Except with respect to Alliant Partners, STG has not incurred,
and shall not incur, directly or indirectly, any liability for any brokerage or
finders' fees or agents commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
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4.10 Business Changes. Since September 30, 1997, there have been no
----------------
changes in the condition (financial or otherwise), business, net worth, assets,
properties, employees, operations, obligations or liabilities of STG which, in
the aggregate, have had or may be reasonably expected to have a materially
adverse effect on the condition, business, net worth, assets, prospects,
properties or operations of STG.
4.11 Rule 144. Subject to Section 6.6 hereof, the Selling Shareholders
--------
will have the right to sell the shares of STG Common Stock received by them
under this Agreement pursuant to the terms and conditions of Rules 144 and 145
under the Securities Act and the holding period requirement of Rule 144(d) shall
apply to such shares. At Closing, STG will provide a letter from its counsel
addressed to MCBA specifying the method and requirements for transfer of the STG
Common Stock pursuant to Rules 144 and 145.
ARTICLE 5
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
During the period from the date hereof, and continuing until the
Closing Date, unless earlier terminated in accordance with Section 7.1 hereof,
MCBA and the Selling Shareholders covenant, and agree with STG that:
5.1 Conduct of Business in Normal Course. MCBA shall carry on the
------------------------------------
business and its activities diligently and in the ordinary course and shall not
make or institute any unusual or novel methods of purchase, sale, lease,
management, accounting or operation that will vary materially from the methods
used by MCBA as of September 30, 1997. MCBA shall maintain the nature and
quantities of inventories for the business in a normal and customary manner
consistent with prior practice.
5.2 Preservation of Business and Relationships. MCBA shall use its best
------------------------------------------
efforts to preserve its business organization intact, to keep available its
present employees, and to preserve its present relationships with suppliers,
customers and others having business relationships with it.
5.3 Maintenance of Insurance. Prior to the Closing, MCBA shall maintain
------------------------
in effect all insurance covering the business. If the Closing shall occur after
a renewal date for any such insurance, MCBA shall renew the insurance on the
same or substantially similar terms, limits of liability and other conditions.
5.4 Employees and Compensation. MCBA shall not do, or agree to do, any
--------------------------
of the following acts: (a) grant any increase in salaries payable or to become
payable to any employee, sales agent or representative; or (b) except as set
forth on SCHEDULE 3.12(b), increase benefits payable to any employee, sales
agent or representative under any executive compensation, bonus, pension,
profit-sharing, retirement, deferred compensation, severance, employee stock
option or stock purchase, group life, health and other employee benefit plans,
arrangements, practices or commitments. MCBA shall provide STG with reasonable
access to its employees during normal business hours.
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<PAGE>
5.5 Dividends; Changes in Stock. MCBA shall not and shall not propose
---------------------------
to (a) declare or pay any dividends on or make other distributions in respect of
any of its capital stock, (b) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of capital stock of MCBA, or (c)
repurchase or otherwise acquire any shares of its capital stock or rights to
acquire any shares of its capital stock.
5.6 Issuance of Securities. MCBA shall not issue, deliver, or sell or
----------------------
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock of any class or securities
convertible into, or rights, warrants or options to acquire, any such shares or
other convertible securities.
5.7 Governing Documents. MCBA shall not amend its Articles of
-------------------
Incorporation or Bylaws.
5.8 No Other Bids. Neither the Selling Shareholders, MCBA nor any of
-------------
their respective directors, officers or agents, will, directly or indirectly,
solicit or initiate or encourage any discussions or negotiations with, or
participate in any negotiations with or provide any information to or otherwise
cooperate in any other way with any corporation, partnership, person or other
entity or group (other than STG) concerning any merger, sale of substantial
assets, sale of shares of capital stock or any division of MCBA or control
thereof (collectively an "Acquisition Transaction"). STG shall be promptly
notified in writing by MCBA and the Selling Shareholders of any of the events
referred to in this Section 5.8 including a summary of the material terms of any
other bid and shall be provided with a copy of any such proposal.
5.9 No Acquisitions. MCBA shall not (a) acquire or agree to acquire by
---------------
merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or (b) otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to MCBA except in the ordinary course of business consistent with
prior practice.
5.10 No Dispositions. Except with contemporaneous notice to STG, MCBA
---------------
shall not lease or otherwise dispose of any of its assets (other than the sale
of inventory in the ordinary course of business), individually or in the
aggregate, except in the ordinary course of business consistent with prior
practice and in any event not in excess of Twenty-Five Thousand Dollars
($25,000) for any single item or more than Fifty Thousand Dollars ($50,000) in
the aggregate.
5.11 Indebtedness. MCBA shall not incur any indebtedness for borrowed
------------
money in an amount exceeding Five Thousand Dollars ($5,000) or guarantee any
such indebtedness or issue or sell any debt securities of MCBA or guarantee any
debt securities of others except in connection with the purchase of inventory
pursuant to the existing credit arrangement with IBM Credit Corporation.
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<PAGE>
ARTICLE 6
ADDITIONAL AGREEMENTS
---------------------
6.1 Access to Information. MCBA shall afford to STG and shall cause its
---------------------
independent accountants to afford to STG, and its accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Closing Date to MCBA's properties, books, contracts,
commitments and records and to the independent accountants reasonable access to
the audit work papers and other records of MCBA's accountants. During such
period, MCBA shall use reasonable efforts to furnish promptly to STG (a) a copy
of each report, schedule and other document filed or received by MCBA during
such period pursuant to the requirements of federal and state securities laws
and the HSR Act and (b) all other information concerning the business,
properties and personnel of MCBA as STG may reasonably request. STG will not use
such information for purposes other than this Agreement and will otherwise hold
such information in confidence (and STG will cause its consultants and advisors
also to hold such information in confidence). From and after the Closing Date,
STG will provide MCBA or the Selling Shareholders reasonable access to the books
and records to the extent necessary for such persons to respond to a tax audit
or in the event of any governmental action or the defense or prosecution of any
litigation.
6.2 Legal Conditions. Each party will take all reasonable actions
----------------
necessary to comply promptly with all legal requirements which may be imposed on
such party with respect to this Agreement and will promptly cooperate with and
furnish information to the other party in connection with any such requirements
imposed upon such other party or any Subsidiary of such other party in
connection with this Agreement. As used herein "Subsidiary" means a corporation
whose voting securities are owned directly or indirectly by the "parent"
corporation in such amounts as are sufficient to elect at least a majority of
the Board of Directors. Each party will take, and will cause its Subsidiaries to
take, all reasonable actions to obtain (and to cooperate with the other party
and its Subsidiaries in obtaining) any consent, authorization, order or approval
of, or any exemption by, any governmental authority, or other third party,
required to be obtained or made by such party or its Subsidiaries (or by the
other party or its Subsidiaries) in connection with this Agreement or the taking
of any action contemplated thereby.
6.3 Good Faith. Each party shall act in good faith in an attempt to
----------
cause to be satisfied all the conditions precedent to its obligations and those
of the other parties to this Agreement over which it has control or influence.
Each party will act in good faith and take all reasonable action within its
capability necessary to render accurate as of the Closing Date its
representations and warranties contained in this Agreement. Without limiting the
foregoing, each of STG, MCBA agree to use its reasonable best efforts to take,
or cause to be taken, all actions necessary to comply promptly with all legal
requirements that may be imposed on itself with respect to the Merger (which
actions shall include furnishing all information required under the HSR Act and
in connection with approvals of or filings with any other Governmental Entity)
and shall promptly cooperate with and furnish information to each other in
connection with any such requirements imposed upon any of them or any of their
Subsidiaries in connection with the Merger.
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<PAGE>
6.4 STG Governing Documents. STG agrees that, prior to the Closing, it
-----------------------
will give MCBA prompt notice of any amendment to its Articles of Incorporation
or Bylaws.
6.5 Current Available Information. From and after the Closing Date, and
-----------------------------
for so long as is necessary in order to permit the Selling Shareholders to sell
the STG Common Stock pursuant to Rule 144 under the Securities Act, STG shall
file on a timely basis all reports required to be filed by it pursuant to
section 13 of the Securities Exchange Act of 1934, as amended, referred to in
paragraph (c)(1) of Rule 144 under the Securities Act. STG is under no
obligation to register the sale, transfer or other disposition of any STG Common
Stock by or on behalf of MCBA or to take any other action necessary in order to
make compliance with an exemption from registration available except as
expressly provided for in this Agreement.
6.6 Legend; Stop Transfer Instructions. MCBA understands and agrees
----------------------------------
that:
(a) the STG Common Stock will bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF
ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED
PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES
LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER FEDERAL AND
STATE SECURITIES LAWS IS NOT REQUIRED.
; and
(b) stop transfer instructions will be given to STG's transfer agent
with respect to certificates evidencing the STG Common Stock. STG agrees to
remove promptly such stop transfer instructions and legend upon full compliance
with this Agreement by the undersigned, including, without limitation, a sale or
transfer of STG Common Stock in accordance with Rules 144 and 145.
6.7 Continued Employment of MCBA Employees. Prior to Closing, STG will
--------------------------------------
offer, conditioned on the closing, continued employment opportunities with
standard STG employment benefit programs (including credit for time of service
with MCBA) to the MCBA employees identified on SCHEDULE 6.7.
6.8 Collection of Accounts Receivable; Sale of Inventory. In the event
----------------------------------------------------
STG, using normal collection and sales practices, has not on or prior to six (6)
months from Closing collected of the Accounts Receivable an amount equal to or
greater than the amount set forth on the Closing Date Balance Sheet for the
Accounts Receivable balance (minus any allowance for doubtful accounts) or sold
the Inventory reflected on Closing Date Balance Sheet, the Selling Shareholders
shall remit to STG within thirty (30) days after six (6)
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<PAGE>
months from the Closing Date (the "Collection Period") the uncollected amount of
such accounts or the value of such Inventory, against STG's assignment to the
Selling Shareholders' of the applicable uncollected Accounts Receivable and
unsold Inventory. Inventory that is returned to and accepted by the vendor in
accordance with MCBA's stock rotation rights and limits will not be subject to
this Section 6.8. In satisfaction of its obligations hereunder, the Selling
Shareholders may deliver shares of STG Common Stock to STG, valued in accordance
with the provisions of Section 8.6(b) hereof. STG may make a claim against the
Escrow or Earn-Out Escrow for any amounts owed to STG under this Section 6.8,
but it shall not be STG's sole remedy.
6.9 Books and Records. Promptly after the Effective Time, MCBA shall
-----------------
deliver to STG all papers and records in MCBA's care, custody, or control
relating to its assets and the operation thereof, including, without limitation,
all purchasing and sales records, customer and vendor lists and all accounting
and financial records (collectively, the "Books and Records"), including the
minute books, corporate seal and stock records of MCBA.
6.10 Registration Rights. STG and Selling Shareholders shall enter into
-------------------
the Registration Rights Agreement in the form attached hereto as EXHIBIT 6.10.
6.11 Preparation of Proxy Statement; Stockholder Meeting. Promptly
---------------------------------------------------
following the date of this Agreement, STG shall prepare and file with the SEC a
Proxy Statement with the SEC. MCBA and the Selling Shareholders shall furnish to
STG all information concerning MCBA and the Selling Shareholders as may be
reasonably requested in connection with such action, and shall: (a) cause all
information so provided to be true and correct in all material respects; (b) not
omit from such information any material fact required to be stated therein or
necessary in order to make such information not misleading, and (c) correct any
information provided by it for use in the Proxy Statement that shall have become
false or misleading
6.12 Formation of Acquisition Sub. As soon as practicable following the
----------------------------
execution of this Agreement STG shall cause Acquisition Sub to be formed in the
State of Delaware and to take all corporate action necessary to approve and to
become a party to this Agreement. Each of the parties hereto agrees that upon
formation of Acquisition Sub it shall execute an amendment to this Agreement and
such other documents as may be necessary to cause Acquisition Sub to become a
party to this Agreement.
ARTICLE 7
CONDITIONS PRECEDENT
--------------------
7.1 Conditions to Obligations of STG and the MCBA Parties. The
obligations of STG and the MCBA Parties to consummate this Agreement shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions unless waived by both STG and MCBA Parties:
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<PAGE>
(a) Third-Party Approvals. Any and all consents or approvals required
---------------------
from third parties relating to contracts, agreements, licenses, leases and other
instruments, material to the respective businesses of STG and MCBA shall have
been obtained.
(b) Legal Action. No temporary restraining order, preliminary
------------
injunction or permanent injunction or other order preventing the consummation of
this Agreement shall have been issued by any federal or state court and remain
in effect, and no litigation seeking the issuance of such an order or
injunction, shall be pending which, in the good faith judgment of MCBA or STG
has a reasonable probability of resulting in such order, injunction or damages.
(c) Securities Laws. STG shall have received any and all permits,
---------------
authorizations, approvals and orders under federal and state securities laws for
the issuance of the STG Common Stock, including, without limitation, approval of
the California Commissioner of Corporations pursuant to sections 25110 and 25142
of the California Corporate Securities Laws without the imposition of any
conditions adverse to STG or which would require STG to amend its Articles of
Incorporation, Bylaws or any contract. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTIONS 25100, 25102, OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
(d) Governmental Consents. The waiting period applicable to the
---------------------
consummation of the Merger under the HSR Act shall have expired or been
terminated, and other than the filing provided for in Section 2.2 hereof, all
notices, reports and other filings required to be made prior to the Effective
Time by STG and MCBA with, and all consents, registrations, approvals, permits
and authorizations required to be obtained prior to the Effective Time by STG or
MCBA or any of their respective Subsidiaries from, any Governmental Entity in
connection with the execution and delivery of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby shall
have been made or obtained (as the case may be) upon terms and conditions that
are not reasonably likely to have a material adverse effect on the Company.
7.2 Conditions to Obligations of STG. The obligations of STG to
--------------------------------
consummate this Agreement are subject to the satisfaction on or prior to the
Closing Date of the following conditions, unless waived by STG:
(a) Representations and Warranties. The representations and warranties
------------------------------
of MCBA and the Selling Shareholders set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as if
made at and as of the Closing Date, except as otherwise contemplated by this
Agreement, and STG shall have received a
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<PAGE>
certificate or certificates signed by the chief executive officer of MCBA and
each of the Selling Shareholders to such effect.
(b) STG Board Approval. STG's Board of Directors shall have approved
------------------
this Agreement and the transactions contemplated hereby.
(c) Performance of Obligations. MCBA and the Selling Shareholders shall
--------------------------
have performed in all material respects all obligations required to be performed
by each under this Agreement prior to the Closing Date, and STG shall have
received a certificate signed by the chief executive officer of MCBA and each of
the Selling Shareholders to such effect.
(d) Opinion of MCBA's Counsel. STG shall have received an opinion dated
-------------------------
as of the Closing Date of Lanier Ford Shaver & Payne P.C., counsel to MCBA, in
substantially the form attached hereto as EXHIBIT 7.2(d).
(e) Financial Statements. Until the Closing Date, MCBA's Financial
--------------------
Statements for each month after the date of the most recent audited financial
statements shall be delivered to STG as soon as practicable thereafter.
(f) No Material Adverse Change. There shall have been no changes in the
--------------------------
condition (financial or otherwise), business, prospects, employees, operations,
obligations or liabilities of MCBA from the date of the last audited financial
statements which, in the aggregate, have had or may be reasonably expected to
have a materially adverse effect on the financial condition, business, or
operations of MCBA on a consolidated basis.
(g) Gunnells, Non-Compete. Gunnells shall have entered into a covenant
---------------------
not to compete, a form of which is attached hereto as EXHIBIT 7.2(g).
(h) Escrow Agreement. STG, First Trust of California, National
----------------
Association and the Selling Shareholders shall have entered into the Escrow
Agreement, a form of which is attached hereto as EXHIBIT 8.2(a).
(i) Earn-Out Escrow Agreement. STG, First Trust of California, National
-------------------------
Association and the Selling Shareholders shall have entered into the Earn-Out
Escrow Agreement, a form of which is attached hereto as EXHIBIT 2.15.
(j) FIRPTA Compliance. STG shall receive from the Selling Shareholders
-----------------
a certificate of non-foreign status conforming to the requirements of Income Tax
Regulations sections 1.1445-2(b)(2)(i) and (iii).
(k) Employment Agreement. Gunnells shall have entered into an
--------------------
employment agreement with STG in the form set forth in EXHIBIT 7.2(k) hereof.
(l) Acceptance of STG Employment Offers. A minimum of Seventy-Five
-----------------------------------
percent (75%) of employees of MCBA as set forth in SCHEDULE 6.7 shall have
accepted continuing employment with STG.
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<PAGE>
(m) Stockholder Approval. This Agreement and the transactions
--------------------
contemplated hereby shall have been approved in the manner required by
applicable law or the applicable regulations of any stock exchange or regulatory
body, as the case may be, by the holders of the issued and outstanding shares of
capital stock of STG.
(n) MCBA Closing Date Unaudited Balance Sheet. MCBA's net assets will
-----------------------------------------
exceed MCBA's net liabilities by One Hundred Thousand Dollars ($100,000) as set
forth on the most recent MCBA Balance Sheet provided pursuant to Section 7.2(e)
hereof.
(o) Consent of IBM. STG shall have received written consent from IBM
--------------
Corporation to the Agreement and the transfer of the IRA and the Business
Partner Agreement to STG.
(p) Consent of Debt Holders. STG shall have received written consent
-----------------------
from all necessary parties, including IBM Credit Corporation, Canpartners
Investments IV, LLC and Robert Fleming Inc. to the Agreement and the related
transactions, including the Registration Rights Agreement.
(q) Innovative Business Systems, Inc. Innovative Business Systems,
---------------------------------
Inc., an Alabama corporation, ("Innovative") shall have entered into the IRA
Agreement with STG attached hereto as EXHIBIT 7.2(q) prior to closing.
(r) Harkins, Non-Compete. Harkins and the Affiliated Companies shall
--------------------
have entered into a covenant not to compete in substantially the form of
EXHIBIT 7.2(r).
(s) Transfer or Sublease of Leases. MCBA shall use its best efforts to
------------------------------
provide that all of MCBA's rights and responsibilities under the Standard Office
Lease by and between Arden Realty Limited Partnership and MCBA for that space
known as 300 East Magnolia, Burbank, California, (the "Burbank Space") and the
Lease Agreement by and between The Prudential Insurance Company of America by
its authorized agent, Harber Realty Services, Inc and MCBA for that space known
as Technology Center, 4955 Corporate Drive, Huntsville, Alabama, (the
"Huntsville Space") and any other leases set forth in SCHEDULE 3.9(A) have been
transferred to another party (the "Lease Transferee") and shall provide evidence
agreeable to STG that MCBA no longer has any liabilities under said lease (the
"Lease Assignment"). If MCBA is unable to obtain consent to the Lease
Assignment, MCBA shall have entered into a sublease agreement for the entire
office space at the Burbank Space, and for the office space not used by MCBA at
the Huntsville Space on terms agreeable to STG.
(t) Cancellation of Indebtedness. MCBA shall arrange for the removal of
----------------------------
MCBA as a debtor to the loan agreement between Mini-Computer Business
Applications, Inc. and First Commercial Bank described in Section 3.15. MCBA
shall also arrange for the release of all liens imposed on MCBA pursuant to such
loan agreement.
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<PAGE>
7.3 Conditions to Obligations of the MCBA Parties. The obligations of
---------------------------------------------
the MCBA Parties to consummate the transactions contemplated hereby are subject
to the satisfaction on or prior to the Closing Date of the following additional
conditions unless waived by MCBA:
(a) Representations and Warranties. The representations and warranties
------------------------------
of STG set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as if made at and as of the
Closing Date, except as otherwise contemplated by this Agreement, and MCBA shall
have received a certificate signed by the chief executive officer and the chief
financial officer of STG to such effect.
(b) Performance of Obligations of STG. STG shall have performed in all
---------------------------------
material respects all obligations required to be performed by it under this
Agreement prior to the Closing Date, and MCBA shall have received a certificate
signed by the chief financial officer of STG to such effect.
(c) Opinion of STG's Counsel. MCBA shall have received an opinion dated
------------------------
the Closing Date of Pillsbury Madison & Sutro LLP, outside counsel to STG, in
substantially the form attached hereto as EXHIBIT 7.3(c).
(d) No Material Adverse Change. Since September 30, 1997 there shall
--------------------------
have been no changes in the condition (financial or otherwise), business,
prospects, employees, operations, obligations or liabilities of STG which, in
the aggregate, have had or may be reasonably expected to have a materially
adverse effect on the financial condition, business or operations of STG.
7.4 Best Efforts. All the parties hereto shall use their respective
------------
best efforts to cause the Closing Date to be not later than March 31, 1998.
ARTICLE 8
INDEMNIFICATION AND ESCROW
--------------------------
8.1 Indemnification by MCBA and the Selling Shareholders.
----------------------------------------------------
(a) The Selling Shareholders, after the Closing, agree to defend and
indemnify STG and their respective affiliates, directors, officers and
shareholders, and their respective successors and assigns (collectively, the
"STG Indemnitees"), against and hold each of them harmless from any and all
losses, liabilities, taxes, claims, suits, proceedings, demands, judgments,
damages, expenses and costs, including, without limitation, reasonable counsel
fees, costs and expenses incurred in the investigation, defense or settlement of
any claims covered by this indemnity (in this Section 8.1 collectively, the
"Indemnifiable Damages") which any such indemnified person may suffer or incur
by reason of (i) the inaccuracy, breach or nonfulfillment of any of the
representations, warranties, covenants or obligations of MCBA or the Selling
Shareholders contained in this Agreement or any documents, certificate or
agreement delivered pursuant hereto; (ii) any claim by any person under any
provision of any federal or state securities law relating to any transaction,
event, act or omission of or by MCBA or the Selling Shareholders occurring
before the Closing Date; or
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<PAGE>
(iii) any acts or omissions of the Affiliated Companies, or the Selling
Shareholders in their capacity as officer or directors the Affiliated Companies;
provided, however, that the total indemnity shall not exceed the fair market
value of the STG Common Stock issued to the Selling Shareholders, including the
Earn-Out Payments, calculated, for each of the Initial Consideration and each of
the Earn-Out Payments, based on the average Ten (10) day closing price per share
of STG Common Stock on The Nasdaq Stock Market prior to the date on which the
Initial Consideration or such Earn-Out Payment is issued. Nothing herein shall
limit in any way STG's remedies (iii) in the event of breach by MCBA or the
Selling Shareholders of any of their covenants or agreements hereunder which are
not also a representation or warranty or for willful fraud or intentionally
deceptive material misrepresentation or omission by MCBA or the Selling
Shareholders in connection herewith or with the transactions contemplated
hereby, (iv) in the event of a breach of the representations or warranties in
Section 3.11(c) hereof or (v) in the event of any liability of STG or MCBA for
any acts or omissions of the Affiliated Companies, or the Selling Shareholders
in their capacity as officer or directors of the Affiliated Companies.
(b) Without limiting the generality of the foregoing, with respect to
the measurement of Indemnifiable Damages, STG and, after the Closing Date, STG,
MCBA and the affiliates of any of them, shall have the right to be put in the
same financial position as they would have been in had each of the
representations, warranties and covenants of MCBA and the Selling Shareholders
been true and accurate or the same said parties had not breached any such
covenants or had any of the events, claims or liabilities referred to in this
Section 8.1 not occurred or been made or incurred.
(c) The Selling Shareholders will have no liability for indemnification
with respect to this Section 8.1 until the total of all Indemnifiable Damages
with respect to such matters exceeds Twenty-Five Thousand Dollars ($25,000).
However, this Section 8.1(c) will not apply to (i) any breach of any of the
Selling Shareholders' representations and warranties which either the Selling
Shareholders had knowledge of or reason to know of at any time prior to the date
on which such representations and warranties were made or (ii) any intentional
breach by the Selling Shareholders of any representation or warranty. The
Selling Shareholders will be jointly and severally liable for all Indemnifiable
Damages with respect to such breaches.
8.2 Escrow Fund.
-----------
(a) As security for the indemnity provided for in Section 8.1 hereof
and for the provisions of Section 6.8 hereof, a total of ten percent (10%) of
the STG Common Stock to be received by the Selling Shareholders pursuant to this
Agreement, exclusive of the EarnOut Payments, shall be registered in the name of
First Trust of California, National Association (or other institution selected
by STG with the reasonable consent of the Selling Shareholders) as escrow agent
(the "Escrow Agent"), such deposit to constitute an escrow fund (the "Escrow
Fund") to be governed by the terms set forth herein and in the Escrow Agreement
to be signed by all parties thereto, the form of which is attached as EXHIBIT
8.2(a). In the event of any conflict between the terms of this Agreement and the
Escrow Agreement, the terms of the Escrow Agreement shall govern. STG shall pay
all
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<PAGE>
costs and fees of the Escrow Agent for establishing and administering the Escrow
Fund. Upon compliance with the terms hereof, STG shall be entitled to obtain
indemnity from the Escrow Fund for all Indemnifiable Damages covered by the
indemnity provided for in Section 8.1 hereof and any amounts owed to it under
Section 6.8 hereof.
(b) As additional security for the indemnity provided for in Section
8.1 hereof and for the provisions of Section 6.8 hereof, STG shall be entitled
to obtain indemnity from the Earn-Out Escrow fund provided for in Section 2.15
hereof upon compliance with the terms therein and shall have the Right of
Set-Off against any Earn-Out Payments provided for in Section 2.12 hereof upon
compliance with the terms provided for in Section 2.16 hereof.
8.3 Escrow Period. The Escrow Fund shall remain in existence until six
-------------
(6) months after the Effective Time.
8.4 Protection of Escrow Fund. The Escrow Agent shall hold and
-------------------------
safeguard the Escrow Fund during the Escrow Period, shall treat such fund as a
trust fund in accordance with the terms of this Agreement and not as the
property of STG, and shall hold and dispose of the Escrow Fund only in
accordance with the terms hereof.
8.5 Distributions; Voting.
---------------------
(a) Any dividends payable in securities or other distributions of any
kind (including any shares received upon a stock split, stock dividend or
recapitalization) made in respect of any securities in the Escrow Fund shall be
held in the Escrow Fund subject to the rights of STG. Cash dividends, if any
shall be distributed to the Selling Shareholders.
(b) The Selling Shareholders shall have voting rights with respect to
the shares of stock in the Escrow Fund so long as such stock or other voting
securities are held in the Escrow Fund.
8.6 Claims Upon Escrow Fund.
-----------------------
(a) Upon receipt by the Escrow Agent on or before the last day of the
Escrow Period of a certificate signed by any officer of STG (an "Officer's
Certificate") stating that STG has paid or properly accrued Indemnifiable
Damages in an aggregate stated amount to which such party is entitled to
indemnity pursuant to this Agreement, and specifying in reasonable detail the
individual items of Indemnifiable Damages included in the amount so stated, the
date each such item was paid or properly accrued, and the nature of the
misrepresentation, breach of warranty or claim to which such item is related,
the Escrow Agent shall, subject to the provisions of Section 8.7 hereof, deliver
to STG out of the Escrow Fund, as promptly as practicable, the number of STG
Common Stock or amount of other assets held in the Escrow Fund to indemnify STG
against such Indemnifiable Damages.
(b) For the purpose of indemnity pursuant to this Agreement, each share
of STG Common Stock in the Escrow Fund shall be valued at an amount equal to the
average ten
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<PAGE>
(10) day closing price per share of STG Common Stock on The Nasdaq Stock Market
prior to the date on which the STG Common Stock is released from the Escrow as a
result of such indemnity.
8.7 Objections to Claims. Upon the time of delivery of an Officer's
--------------------
Certificate to the Escrow Agent, the Escrow Agent shall deliver a duplicate copy
of such certificate to the Selling Shareholders and for a period of thirty (30)
days after such delivery, the Escrow Agent shall make no delivery of STG Common
Stock or other property pursuant to Section 8.6 hereof unless the Escrow Agent
shall have received written authorization from the Spokesperson for the Selling
Shareholders ("Spokesperson"), initially Michael N. Gunnells, but also any
successor as chosen by the Selling Shareholders, to make such delivery. After
the expiration of such thirty (30) day period, the Escrow Agent shall make
delivery of the STG Common Stock or other property in the Escrow Fund in
accordance with Section 8.6 hereof, provided that no such payment or delivery
may be made if the Spokesperson shall object in a written statement to the claim
made in the Officer's Certificate, and such statement shall have been delivered
to the Escrow Agent prior to the expiration of such thirty (30) day period.
8.8 Resolution of Conflicts; Arbitration.
------------------------------------
(a) If the Spokesperson shall object in writing to the indemnity of the
STG Indemnitees in respect of any claim or claims made in any Officer's
Certificate, the Spokesperson and STG shall attempt in good faith to agree upon
the rights of the respective parties with respect to each of such claims. If the
Spokesperson and STG should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum
and distribute the STG Common Stock or other property from the Escrow Fund in
accordance with the terms thereof.
(b) If no such agreement can be reached after good faith negotiation
within sixty (60) days after objection by either the Spokesperson or STG, either
STG or the Spokesperson may demand arbitration of the matter and the matter
shall be settled by arbitration conducted by three arbitrators. STG and the
Spokesperson shall each select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator. The decision of the arbitrators so
selected as to the validity and amount of any claim in such Officer's
Certificate or by the Selling Shareholders shall be final and binding and
conclusive upon the parties to this Agreement, and, notwithstanding anything in
Section 8.7 hereof, the Escrow Agent shall be entitled to act in accordance with
such decision and make or withhold payments out of the Escrow Fund in accordance
therewith, if applicable.
(c) Judgment upon any award rendered by the arbitrators may be entered
in any court having jurisdiction. Any such arbitration shall be held in the City
of San Jose, California under the rules then in effect of the American
Arbitration Association. A claimant shall be deemed to be the non-prevailing
party in the event that the arbitrators award such claimant less than one-half
(1/2) of the amount claimed by it; otherwise, the other party shall be deemed to
be the non-prevailing party. The non-prevailing party to an
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<PAGE>
arbitration shall pay its own expenses, the fees of each arbitrator, the
administrative fee of the American Arbitration Association, and the reasonable
attorneys' fees and costs incurred by the other party to the arbitration as well
as the amount of any Indemnifiable Damages awarded and in addition interest
thereon from the date of actual loss or expenditure until the date paid at ten
percent (10%) per annum, or at the maximum rate permitted by applicable law if
less than ten percent (10%) per annum. In addition, if STG is the non-prevailing
party, it will pay for the reasonable travel and lodging expenses of the Selling
Shareholders.
8.9 Distribution upon Termination of Escrow Period. Immediately
----------------------------------------------
following termination of the Escrow Period, the Escrow Agent shall deliver to
the Selling Shareholders all of the STG Common Stock in the Escrow Fund in
excess of any amount of such STG Common Stock sufficient, in the reasonable
judgment of STG, to satisfy any claims specified in any Officer's Certificate
theretofore properly delivered to the Escrow Agent.
8.10 Escrow Agent's Duties.
---------------------
(a) The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein or in the Escrow Agreement and
may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall not be liable
for any act done or omitted hereunder as Escrow Agent while acting in good faith
and in the exercise of reasonable judgment, and any act done or omitted pursuant
to the advice of counsel shall be conclusive evidence of such good faith.
(b) The Escrow Agent is hereby expressly authorized to disregard any
and all orders by any party who is not authorized to give orders under the
Escrow Agreement, excepting only orders or process of courts of law, and is
hereby expressly authorized to comply with and obey orders, judgments or decrees
of any court. In case the Escrow Agent obeys or complies with any such order,
judgment or decree of any court, the Escrow Agent shall not be liable to any of
the parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(c) The Escrow Agent shall not be liable in any respect on account of
the identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.
(d) The Escrow Agent shall not be liable for the outlawing of any
rights under any statute of limitations with respect to this Agreement or any
documents deposited with the Escrow Agent.
8.11 Indemnification by STG. After the Closing Date, STG shall, as to
those representations, warranties, covenants and agreements which are herein
made or agreed to by STG, indemnify and hold harmless the Selling Shareholders
and MCBA's officers and directors (prior to the Closing) and their heirs and
assigns against and in respect of any damage, deficiency, losses or costs
incurred by the Selling Shareholders resulting from any
-39-
<PAGE>
material misrepresentation or breach of warranty or any nonfulfillment of any
covenant or agreement on the part of STG under this Agreement; provided,
however, that the total indemnity shall not exceed the fair market value of the
STG Common Stock issued to the Selling Shareholders, including the Earn-Out
Payments, calculated, for each of the Initial Consideration and each of the
Earn-Out Payments, based on the average Ten (10) day closing price per share of
STG Common Stock on the Nasdaq Stock Market prior to the date on which the
Initial Consideration or such Earn-Out Payment is issued. Nothing herein shall
limit in any way MCBA's or the Selling Shareholders' remedies in the event of
breach by STG of any of its covenants or agreements hereunder which are not also
a representation or warranty or for willful fraud or intentionally deceptive
material misrepresentation or omission by STG in connection herewith or with the
transactions contemplated hereby.
STG shall reimburse the Selling Shareholders for any liabilities,
damages, deficiencies, claims, actions, suits, proceedings, demands, judgments,
assessments, costs and expenses to which this Section 8.11 relates only if a
claim for indemnification is made by the Selling Shareholders within Two (2)
years from the Closing Date. Without limiting the generality of the foregoing,
with respect to the measure of Indemnifiable Damages, the Selling Shareholders
shall have the right to be put in the same financial position as they would have
been in had each of the representations, warranties and covenants of STG been
true and accurate or the same said parties had not breached any such covenants
or had any of the events, claims or liabilities referred to in this Section 8.11
not occurred or been made or incurred. Any dispute as to indemnification shall
be resolved by arbitration in accordance with Section 8.8 hereof.
8.12 Indemnification Procedure. A party seeking indemnification (the
-------------------------
"Indemnitee") shall use its best efforts to minimize any liabilities, damages,
deficiencies, claims, judgments, assessments, costs and expenses in respect of
which indemnity may be sought under this Agreement. The Indemnitee shall give
prompt written notice to the party from whom indemnification is sought (the
"Indemnitor") of the assertion of a claim for indemnification, but in no event
longer than (a) thirty (30) days after service of process in the event
litigation is commenced against the Indemnitee by a third party, or (b) sixty
(60) days after the assertion of such claim. No such notice of assertion of a
claim shall satisfy the requirements of this Section 8.12 unless it describes in
reasonable detail and in good faith the facts and circumstances upon which the
asserted claim for indemnification is based. If any action or proceeding shall
be brought in connection with any liability or claim to be indemnified
hereunder, the Indemnitee shall provide the Indemnitor twenty (20) calendar days
to decide whether to defend such liability or claim. During such period, the
Indemnitee shall take all necessary steps to protect the interests of itself and
the Indemnitor, including the filing of any necessary responsive pleadings, the
seeking of emergency relief or other action necessary to maintain the status
quo, subject to reimbursement from the Indemnitor of its expenses in doing so.
The Indemnitor shall (with, if necessary, reservation of rights) defend such
action or proceeding at its expense, using counsel selected by the insurance
company insuring against any such claim and undertaking to defend such claim, or
by other counsel selected by it and approved by the Indemnitee, which approval
shall not be unreasonably withheld or delayed. The Indemnitor shall keep the
Indemnitee fully apprised at all times of the status of the defense and shall
consult with the Indemnitee prior to the settlement of any
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<PAGE>
indemnified matter. Indemnitee agrees to use reasonable efforts to cooperate
with Indemnitor in connection with its defense of indemnifiable claims. In the
event the Indemnitee has a claim or claims against any third party growing out
of or connected with the indemnified matter, then upon receipt of
indemnification, the Indemnitee shall fully assign to the Indemnitor the entire
claim or claims to the extent of the indemnification actually paid by the
Indemnitor and the Indemnitor shall thereupon be subrogated with respect to such
claim or claims of the Indemnitee.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
9.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date:
(a) by mutual written consent of MCBA, the Selling Shareholders and
STG;
(b) by either STG, on the one hand, or MCBA and the Selling
Shareholders, on the other hand, if there has been a breach of any material
representation, warranty, covenant or agreement contained in this Agreement on
the part of the other party to this Agreement and, if such breach is curable,
such breach has not been cured within ten (10) days after written notice of such
breach;
(c) by either STG, on the one hand, or MCBA and the Selling
Shareholders, on the other hand, if the Closing shall not have occurred by March
31, 1998.
(d) by STG if any condition to STG's obligation to consummate this
Agreement as provided in Sections and hereof has not been satisfied or waived by
STG;
(e) by MCBA and the Selling Shareholders if any condition to MCBA's and
the Selling Shareholders' obligation to consummate this Agreement as provided in
Sections and hereof has not been satisfied or waived by MCBA;
(f) by MCBA and the Selling Shareholders if STG has failed to obtain
approval of the Stockholders of STG to the Agreement and the transactions
contemplated hereby pursuant to Section 7.2(m) hereof.
(g) by either STG, on the one hand, or MCBA and the Selling
Shareholders, on the other hand, if any court or Governmental Entity of
competent jurisdiction shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree or ruling or
other action shall have become final and nonappealable; provided, however, that
the right to terminate this Agreement pursuant to this Section 9.1(g) shall not
be available to any party who has not used its reasonable best efforts to cause
such order to be lifted.
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<PAGE>
9.2 Effect of Termination; Sole Remedy.
----------------------------------
(a) Notwithstanding any provisions in this Agreement to the contrary,
if the Closing does not occur, (i) neither STG, MCBA nor the Selling
Shareholders shall be entitled to indemnification for the falsity of any
representations or warranties or a breach of any of the covenants and agreements
contained herein to be performed at or prior to the Closing and (ii) STG's,
MCBA's and the Selling Shareholders' sole and exclusive remedy shall be the
receipt of the Termination Fee, if any, as provided in this Section 9.2. In the
event that this Agreement shall be terminated pursuant to Section 9.1 hereof,
all further obligations of the parties hereto under this Agreement (other than
pursuant to Sections 9.2 and 10 hereof) shall terminate without further
liability or obligation of either party to the other party hereunder.
(b) Subject to clause (c) of this Section 9.2 and except with respect
to terminations pursuant to Sections 9.1(a) and 9.1(g) above:
(i) If this Agreement is terminated by any party and (A) all of
the conditions of the Closing set forth in Sections and (except for the
approval of the Stockholders of STG to this Agreement and the
transactions contemplated hereby pursuant to Section 7.2(m) hereof)
have been, or are reasonably expected to be at or prior to the Closing,
satisfied or waived (or would be satisfied but for the failure of STG
to perform its obligations hereunder), and (B) the Selling Shareholders
are not in breach of this Agreement in any material respect, STG shall
pay to MCBA a termination fee of $250,000 within two (2) business days
of such termination, and the payment of such termination fee shall be
the sole remedy of the MCBA and the Selling Shareholders hereunder.
(ii) If this Agreement is terminated by any party and (A) all of
the conditions of the Closing set forth in Sections and hereof have
been, or are reasonably expected to be at or prior to the Closing,
satisfied or waived (or would be satisfied but for the failure of the
Selling Shareholders and MCBA to perform their respective obligations
hereunder), and (B) STG is not in breach of this Agreement in any
material respect, MCBA shall pay to STG a termination fee of $250,000
within two (2) business days of such termination, and the payment of
such termination fee shall be the sole remedy of STG hereunder.
(c) The parties hereto expressly agree that (i) the amounts set forth
in Section 9.2(b) hereof are intended to be liquidated damages for harm caused
by termination of this Agreement and are reasonable forecasts of just
compensation in the light of the anticipated harm which would be attributable to
such termination, (ii) losses incurred by reason of termination of this
Agreement would be incapable or difficult of estimation and (iii) otherwise
obtaining an adequate remedy would be inconvenient or nonfeasible.
(d) Notwithstanding the foregoing, neither STG nor MCBA shall be
required to pay such Termination Fee if the reason that the Closing has not
occurred is (i) the HSR Act
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<PAGE>
filing has not cleared (unless the failure to clear is due to a failure by
either party to make the necessary filing or provide the Federal Trade
Commission or the Antitrust Division of the United States Department of Justice
with requested information within a reasonable amount of time), (ii) a court
shall have issued a restraining order ("TRO") or an injunction (or a TRO or an
injunction is threatened) preventing the consummation or the Closing of the
transactions contemplated hereby, (iii) an action shall have been instituted by
any Governmental Body seeking to prevent consummation of or seeking material
damages in connection with the transactions contemplated hereby and such action
continues to be outstanding, (iv) if such termination occurs and is based on an
inaccuracy in the representation or warranty of the party who would otherwise be
obligated to pay such Termination Fee which has not been waived if the
representations and warranties subject to such inaccuracy were true and correct
in all material respects as of the date of this Agreement, (v) failure to obtain
any material third-party approval consent, waiver or permit necessary for the
consummation of the transactions contemplated by this Agreement (unless the
failure is due to a failure by either party to take some reasonable action) or
(vi) by mutual written consent of MCBA, STG and the Selling Shareholders.
9.3 Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed on behalf of each of the parties hereto.
9.4 Extension; Waiver. At any time prior to the Closing, STG or the
-----------------
MCBA Parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto or (c) waive compliance with any of the
agreements or conditions for the benefit thereof contained herein. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of all of the
parties hereto.
ARTICLE 10
GENERAL
-------
10.1 Notices. Any notice, request, instruction or other document to be
-------
given hereunder by any party to the other shall be in writing and delivered
personally or sent by certified mail, postage prepaid, by telecopy, or by
courier service, as follows:
Savoir Technology Group, Inc.
254 E. Hacienda Avenue
Campbell, CA 95008
Attention: Chief Financial Officer
Fax: (408) 370-4597
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<PAGE>
with a copy to: Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304
Attention: Ms. Katharine A. Martin
Fax: (415) 233-4545
And MCBA Systems, Inc.
4955 Corporate Drive
Huntsville, AL 35806
Attention: Michael N. Gunnells
Fax: (206) 726-9040
with a copy to: Lanier Ford Shaver & Payne P.C.
Suite 5000, 200 West Side Square
Huntsville, AL 35801-4816
Attention: Elizabeth W. Abel
Fax: (205) 533-9322
or to such other persons as may be designated in writing by the
parties, by a notice given as aforesaid.
10.2 Headings. The headings of the several sections of this Agreement
--------
are inserted for convenience of reference only and are not intended to affect
the meaning or interpretation of this Agreement.
10.3 Entire Understanding. The terms set forth in this Agreement
--------------------
including its Schedules and Exhibits are intended by the parties as a final,
complete and exclusive expression of the terms of their agreement and may not be
contradicted, explained or supplemented by evidence of any prior agreement, any
contemporaneous oral agreement or any consistent additional terms. The Schedules
and Exhibits attached to this Agreement are made a part of this Agreement.
10.4 Counterparts. This Agreement may be executed in counterparts, and
------------
when so executed each counterpart shall be deemed to be an original, and said
counterparts together shall constitute one and the same instrument.
10.5 Binding Nature. This Agreement shall be binding upon and inure to
--------------
the benefit of the parties hereto. No party may assign or transfer any rights
under this Agreement.
10.6 Applicable Law. This Agreement shall be governed by, construed and
--------------
enforced in accordance with the laws of the State of California without regard
to conflicts of laws provisions thereof.
10.7 Attorneys' Fees. If any action at law or in equity is necessary to
---------------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable
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attorneys' fees, costs and disbursements in addition to any other relief to
which such party may be entitled.
10.8 Payment of Expenses. Except as provided in Section 8.2 hereof,
-------------------
STG, MCBA and the Selling Shareholders shall each pay their own fees and
expenses incurred incident to the preparation and carrying out of the
transactions herein contemplated (including legal, accounting and travel).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, all as of the date first above written.
SAVOIR TECHNOLOGY GROUP, INC.,
a Delaware corporation
By /s/ P. Scott Munro
-----------------------------------------
Title President & CEO
--------------------------------------
MCBA SYSTEMS, INC., an Alabama
corporation
By /s/ Michael N. Gunnells
-----------------------------------------
Title President
--------------------------------------
SELLING SHAREHOLDERS
--------------------
/s/ Michael N. Gunnells
-------------------------------------------
Michael N. Gunnells
/s/ John Harkins
-------------------------------------------
John Harkins
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<PAGE>
EXHIBIT B
---------
No Disclosure Schedule provided.
<PAGE>
EXHIBIT C
---------
SAVOIR TECHNOLOGY GROUP, INC. DISCLOSURE LETTER
-----------------------------------------------
SAVOIR TECHNOLOGY GROUP, INC. ("STG") incorporates by reference all
-----------------------------
documents filed with the Securities and Exchange Commission over the past five
(5) years through November 7, 1997.
SECTION 4.2 - AUTHORITY.
STG requires consent to the transactions contemplated by the Agreement
from and/or must provide notice to IBM Credit Corporation ("ICC") pursuant to
the terms of (i) the Inventory and Working Capital Financing Agreement, as
amended on December 31, 1996 and September 30, 1997 between STG and ICC, (ii)
the Warrant Agreement between STG and ICC dated September 30, 1997 and (iii) the
Registration and Put Rights Agreement between STG and ICC dated September 30,
1997.
STG requires consent to the transactions contemplated by the Agreement
from and/or must provide notice to Canpartners Investments IV, LLC
("Canpartners") and Robert Fleming, Inc. ("Fleming") pursuant to (i) the Note
Purchase Agreement among STG as Issuer, STG Acquisition Corp., Savoir Technology
Group, Inc., Star Management Services, Inc., Inet Systems, Inc., Star Data
International, Sirius Investments, Inc. and Star Data Systems as Guarantors,
Fleming and Canpartners as purchasers (together, the "Purchasers") and
Canpartners as agent for the Purchasers (the "Agent") dated September 30, 1997,
(ii) the Warrant Agreement of STG, Canpartners and Fleming dated September 30,
1997, (iii) the Guarantor Security and Pledge Agreement between the Guarantors
and the Agent dated September 30, 1997 and (iv) the Registration and Put Rights
Agreement among STG and the Purchasers dated September 30, 1997.
SECTION 4.7 - NO CONFLICT.
See Section 4.2 hereof.
<PAGE>
EXHIBIT 2.15
------------
FORM OF EARN-OUT ESCROW AGREEMENT
---------------------------------
THIS EARN-OUT ESCROW AGREEMENT (the "Agreement"), made as of the ____
day of __________, 1998, by and among SAVOIR TECHNOLOGY GROUP, INC., a Delaware
-----------------------------
corporation ("STG"), MICHAEL N. GUNNELLS ("Gunnells"), JOHN HARKINS ("Harkins")
------------------- ------------
(each a "Selling Shareholder" and collectively the "Selling Shareholders"), and
FIRST TRUST OF CALIFORNIA, NATIONAL ASSOCIATION ("Escrow Agent"),
- -----------------------------------------------
W I T N E S S E T H:
WHEREAS, STG and Selling Shareholders have entered into an Agreement
and Plan of Reorganization dated November 22, 1997 (the "Agreement and Plan of
Reorganization"), a copy of which has been delivered to the Escrow Agent; and
WHEREAS, Section 2.15 of the Agreement and Plan of Reorganization
provides that STG will deposit into an escrow Three Hundred Thousand (300,000)
newly issued shares of STG Common Stock to Gunnells and Harkins in equal
proportion as owners, with the voting and distribution right as provided herein,
subject only to the failure to achieve the Earn-Out Payments described in
Section 2.12 of the Agreement and Plan of Reorganization, and for the purpose of
securing STG's claims for indemnification pursuant to Article 8 and Section 6.8
of the Agreement and Plan of Reorganization; and
WHEREAS, the Escrow Agent is willing to act as escrow agent for STG and
the Selling Shareholders on the terms and conditions hereinafter set forth:
NOW THEREFORE, in consideration of the mutual covenants, agreements and
conditions set forth herein, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined in this
-----------
Agreement shall have the meanings set forth in the Agreement and Plan of
Reorganization.
2. Establishment of Escrow. On the date of this Agreement, STG will
-----------------------
deliver to the Escrow Agent Three Hundred Thousand (300,000) newly issued shares
of STG Common Stock to be delivered to the Selling Shareholders in accordance
with Section 2.12 and 2.15 of the Agreement and Plan of Reorganization (the
"Earn-Out Escrow Fund"). The Earn-Out Escrow Fund shall be held by the Escrow
Agent in escrow subject to the terms and conditions set forth herein. STG shall
pay all costs and fees of the Escrow Agent in connection with this Agreement, as
set forth on the Depository Escrow Fee Schedule attached hereto.
3. Escrow Fund. The shares of Common Stock to be received by the
-----------
Selling Shareholders pursuant to this Agreement and the Agreement and Plan of
Reorganization shall be registered in the name of First Trust of California,
National Association (or other institution selected by STG with the reasonable
consent of the Selling Shareholders) as escrow agent (the "Escrow Agent"), such
deposit to constitute the Earn-Out Escrow Fund to
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<PAGE>
be governed by the terms set forth herein. STG shall pay all costs and fees of
the Escrow Agent for establishing and administering Earn-Out Escrow Fund.
4. Escrow Period. The Escrow Fund shall remain in existence until May
-------------
31, 2000.
5. Protection of Escrow Earn-Out Fund. The Escrow Agent shall hold and
----------------------------------
safeguard the Earn-Out Escrow Fund during the Escrow Period, shall treat such
fund as a trust fund in accordance with the terms of this Agreement and not as
the property of STG, and shall hold and dispose of the Earn-Out Escrow Fund only
in accordance with the terms hereof.
6. Distributions; Voting.
---------------------
(a) Any dividends payable in securities or other distributions of any
kind (including any shares received upon a stock split, stock dividend or
recapitalization) made in respect of any securities in the Earn-Out Escrow Fund
shall be held in the Earn-Out Escrow Fund. Cash dividends, if any, shall be
distributed to the Selling Shareholders in equal proportion.
(b) Each Selling Shareholder shall have voting rights with respect to
one half of the shares of stock in the Earn-Out Escrow Fund so long as such
stock or other voting securities are held in the Earn-Out Escrow Fund.
7. Payments from Escrow Earn-Out Fund.
----------------------------------
(a) Upon receipt by the Escrow Agent of a certificate signed by any
officer of STG (an "Officer's Certificate") stating that STG owes and has
accrued an Earn-Out payable to each of the Selling Shareholders in an aggregate
stated amount, the Escrow Agent shall deliver to each of the Selling
Shareholders, out of the Earn-Out Escrow Fund, as promptly as practicable, the
number of shares so specified in the Officer's Certificate.
(b) Upon receipt by the Escrow Agent on or before the last day of the
Escrow Period of a certificate signed by any officer of STG (an "Officer's
Certificate") stating that STG has paid or properly accrued Indemnifiable
Damages as defined in the Agreement and Plan of Reorganization in an aggregate
stated amount to which STG is entitled to indemnity pursuant to the Agreement
and Plan of Reorganization, and specifying in reasonable detail the individual
items of Indemnifiable Damages included in the amount so stated, the date each
such item was paid or properly accrued, and the nature of the misrepresentation,
breach of warranty or claim to which such item is related, the Escrow Agent
shall, subject to the provisions of Section 7(d) hereof, deliver to STG out of
the Earn-Out Escrow Fund, as promptly as practicable, the number of STG Common
Stock or amount of other assets held in the Earn-Out Escrow Fund to indemnify
STG against such Indemnifiable Damages.
(c) For the purpose of indemnity pursuant to this Agreement, each share
of STG Common Stock in the Earn-Out Escrow Fund shall be valued at an amount
equal to the average ten (10) day closing price per share of STG Common Stock on
The Nasdaq Stock
-2-
<PAGE>
Market prior to the date on which the STG Common Stock is released from the
Earn-Out Escrow Fund as a result of such indemnity.
(d) Objections to Claims. Upon the time of delivery of an Officer's
--------------------
Certificate to the Escrow Agent, the Escrow Agent shall deliver a duplicate copy
of such certificate to the Selling Shareholders and for a period of thirty (30)
days after such delivery, the Escrow Agent shall make no delivery of STG Common
Stock or other property pursuant to Section 7(b) hereof unless the Escrow Agent
shall have received written authorization from the Spokesperson for the Selling
Shareholders ("Spokesperson"), initially Gunnells, but also any successor as
chosen by the Selling Shareholders, to make such delivery. After the expiration
of such thirty (30) day period, the Escrow Agent shall make delivery of the STG
Common Stock or other property in the Earn-Out Escrow Fund in accordance with
Section 7(b) hereof, provided that no such payment or delivery may be made if
the Spokesperson shall object in a written statement to the claim made in the
Officer's Certificate, and such statement shall have been delivered to the
Escrow Agent prior to the expiration of such thirty (30) day period.
(e) Resolution of Conflicts; Arbitration.
------------------------------------
(i) If the Spokesperson shall object in writing to the indemnity of the
STG Indemnitees in respect of any claim or claims made in any Officer's
Certificate, the Spokesperson and STG shall attempt in good faith to agree upon
the rights of the respective parties with respect to each of such claims. If the
Spokesperson and STG should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum
and distribute the STG Common Stock or other property from the EarnOut Escrow
Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith negotiation
within sixty (60) days after objection by either the Spokesperson or STG, either
STG or the Spokesperson may demand arbitration of the matter and the matter
shall be settled by arbitration conducted by three arbitrators. STG and the
Spokesperson shall each select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator. The decision of the arbitrators so
selected as to the validity and amount of any claim in such Officer's
Certificate or by the Selling Shareholders shall be final and binding and
conclusive upon the parties to this Agreement, and, notwithstanding anything in
Section 7(d) hereof, the Escrow Agent shall be entitled to act in accordance
with such decision and make or withhold payments out of the Earn-Out Escrow Fund
in accordance therewith, if applicable.
(iii) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be held in
the City of San Jose, California under the rules then in effect of the American
Arbitration Association. A claimant shall be deemed to be the non-prevailing
party in the event that the arbitrators award such claimant less than one-half
(1/2) of the amount claimed by it; otherwise, the other party shall be deemed to
be the non-prevailing party. The non-prevailing party to an arbitration shall
pay its own expenses, the fees of each arbitrator, the administrative fee of
-3-
<PAGE>
the American Arbitration Association, and the reasonable attorneys' fees and
costs incurred by the other party to the arbitration as well as the amount of
any Indemnifiable Damages awarded and in addition interest thereon from the date
of actual loss or expenditure until the date paid at ten percent (10%) per
annum, or at the maximum rate permitted by applicable law if less than ten
percent (10%) per annum. In addition, if STG is the non-prevailing party, it
will pay for the reasonable travel and lodging expenses of the Selling
Shareholders.
(f) If on or before the last day of the Escrow Period STG commences a
voluntary case under the federal bankruptcy laws or a petition is filed against
STG under the federal bankruptcy laws (the "Bankruptcy Date") and is not
dismissed within ninety (90) days, the Selling Shareholders shall be entitled to
receive out of the Earn-Out Escrow Fund, an amount of STG Common Stock equal to
the Earn-Out Payments earned by them at the time of the Bankruptcy Date and, to
the extent the Escrow for Earn-Out is insufficient to pay the Earn-Out Payments
earned by the Selling Shareholders, the Selling Shareholders shall be entitled
to seek recovery of any remaining Earn-Out Payments due as unsecured creditors
of STG in the related bankruptcy proceedings.
8. Distribution upon Termination of Escrow Period. Immediately
----------------------------------------------
following termination of the Escrow Period, the Escrow Agent shall deliver to
STG any and all of the STG Common Stock remaining in the Earn-Out Escrow Fund.
9. Escrow Agent's Duties.
---------------------
(a) The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed to be genuine and to have been signed or presented by the proper party
or parties. The Escrow Agent shall not be liable for any act done or omitted
hereunder as Escrow Agent while acting in good faith and in the exercise of
reasonable judgment, and any act done or omitted pursuant to the advice of
counsel shall be conclusive evidence of such good faith.
(b) The Escrow Agent is hereby expressly authorized to disregard any
and all orders by any party who is not authorized to give orders under the
Escrow Agreement, excepting only orders or process of courts of law, and is
hereby expressly authorized to comply with and obey orders, judgments or decrees
of any court. In case the Escrow Agent obeys or complies with any such order,
judgment or decree of any court, the Escrow Agent shall not be liable to any of
the parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(c) The Escrow Agent shall not be liable in any respect on account of
the identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.
-4-
<PAGE>
(d) The Escrow Agent shall not be liable for the outlawing of any
rights under any statute of limitations with respect to this Agreement or any
documents deposited with the Escrow Agent.
10. Additional Escrow Provisions. The additional provisions of the
----------------------------
escrow shall be as set forth in the Fee Schedule and the "General Provisions for
Corporate Escrow Agreement" attached hereto (the "General Provisions").
11. Miscellaneous.
-------------
(a) This Agreement shall be governed by the laws of the State of
California without regard to principles of conflicts of laws.
(b) Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the other shall be in writing and delivered
personally or sent by certified mail, postage prepaid, by telecopy, or by
courier service, as follows:
Savoir Technology Group, Inc.
254 E. Hacienda Avenue
Campbell, CA 95008
Attention: Chief Financial Officer
Fax: (408) 370-4597
with a copy to: Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304
Attention: Ms. Katharine A. Martin
Fax: (415) 233-4545
And MCBA Systems, Inc.
4955 Corporate Drive
Huntsville, AL 35806
Attention: Michael N. Gunnells
Fax: (206) 726-9040
with a copy to: Lanier Ford Shaver & Payne P.C.
Suite 5000, 200 West Side Square
Huntsville, AL 35801-4816
Attention: Elizabeth W. Abel
Fax: (205) 533-9322
or to such other persons as may be designated in writing by the
parties, by a notice given as aforesaid.
(c) Attorneys' Fees. If any legal action is brought for the enforcement
---------------
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover
-5-
<PAGE>
reasonable attorneys' fees and other costs incurred in such action or
proceeding, in addition to any other relief to which it may be entitled.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SAVOIR TECHNOLOGY GROUP, INC.,
a Delaware corporation
By
----------------------------------------
Title
-------------------------------------
SELLING SHAREHOLDERS
--------------------
------------------------------------------
Michael N. Gunnells
------------------------------------------
John Harkins
ESCROW AGENT
------------
FIRST TRUST OF CALIFORNIA,
NATIONAL ASSOCIATION
By
----------------------------------------
Cora Murphy
Trust Officer
-6-
<PAGE>
EXHIBIT 6.10
------------
SAVOIR TECHNOLOGY GROUP, INC.
-----------------------------
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), entered into as
of __________, 1998 by and between SAVOIR TECHNOLOGY GROUP, INC., a Delaware
-----------------------------
corporation (the "Company") MICHAEL N. GUNNELLS ("Gunnells"), and JOHN HARKINS
------------------- ------------
("Harkins") (together the "Stockholders"),
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into that certain Agreement
and Plan of Reorganization (the "Agreement and Plan of Reorganization"), dated
as of November 22, 1997, by and among the Company, MCBA SYSTEMS, INC., an
------------------
Alabama corporation ("MCBA"), MICHAEL N. GUNNELLS and JOHN HARKINS (the "Selling
------------------- ------------
Stockholders") pursuant to which Acquisition Sub will merge with and into MCBA
in a reverse triangular merger (the "Merger"), with MCBA to be the surviving
corporation of the Merger; and
WHEREAS, upon the effectiveness of the Merger, all of the outstanding
common stock, par value $0.10 per share, of MCBA will be converted into common
stock, par value $0.01 per share, of the Company (the "Common Stock"); and
WHEREAS, the Company has granted registration rights to other parties
including: (i) the Registration Rights Agreement by and among the Company, Star
Technologies Inc., a California Corporation, Phillip D. Shipp, William E.
Galucci and Michael D. Gromek dated as of November 7, 1996; (ii) the
Registration Rights Agreement with Carlton Joseph Mertens II dated September 30,
1997; (iii) the Registration and Put Rights Agreement among the Company, Robert
Fleming Inc., a Delaware corporation and Canpartners Investments IV, LLC, a
California limited liability company dated September 30, 1997; and (iv) the
Registration and Put Rights Agreement between the Company and IBM Credit
Corporation, a Delaware corporation, dated September 30, 1997 (together the
"Prior Registration Rights Agreements") and may in the future grant registration
rights to other parties:
NOW, THEREFORE, in consideration for the mutual promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the undersigned
investors hereby agree as follows:
Article 1. Registration.
--------- ------------
1.1 Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following meanings:
-1-
<PAGE>
(a) "Advice": See the last paragraph of Section 1.4 hereof.
------
(b) "Commission" shall mean the Securities and Exchange Commission or
----------
any other federal agency at the time administering the Securities Act.
(c) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(d) "Holder" shall mean any holder of Registrable Securities.
------
(e) "Holders" shall mean all holders of Registrable Securities.
-------
(f) "Initiating Holders" shall mean any Holder or Holders who in the
------------------
aggregate hold not less than fifty percent (50%) of the outstanding Registrable
Securities.
(g) "Prior Registration Rights Agreements" shall have the meaning set
------------------------------------
forth in the recitals.
(h) "Prior Holders" shall mean the holders of Prior Registrable
-------------
Securities pursuant to the Prior Registration Rights Agreements.
(i) "Prior Registrable Securities" shall mean the registrable
----------------------------
securities and other securities as defined in each of the respective Prior
Registration Rights Agreements.
(j) "Prospectus" shall mean the prospectus included in any Registration
----------
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement,
including, without limitation, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement and
all other amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
(k) "Register," "registered" and "registration" shall refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(l) "Registrable Securities" shall mean shares of Common Stock issued
----------------------
to the Stockholders pursuant to the Agreement and Plan of Reorganization;
provided, however, that Registrable Securities shall not include any such shares
of Common Stock which have previously been registered or which have been sold by
Stockholder.
(m) "Registration Expenses": See Section 1.5 hereof.
---------------------
-2-
<PAGE>
(n) "Registration Statement" shall mean any registration statement of
----------------------
the Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including any Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
(o) "Rule 144" shall mean Rule 144 as promulgated by the Commission
--------
under the Securities Act, as such rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(p) "Rule 145" shall mean Rule 145 as promulgated by the Commission
--------
under the Securities Act, as such rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(q) "Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(r) "Selling Expenses" shall mean all underwriting discounts and
----------------
selling commissions applicable to the sale of the Registrable Securities.
(s) "Other Stockholders" shall mean persons other than Holders or Prior
------------------
Holders who, by virtue of agreements with the Company, are entitled to include
their securities in certain registrations hereunder.
(t) "Other Securities" shall mean any other securities of the Company
----------------
other than Registrable Securities or Prior Registrable Securities, including
shares of Common Stock issued or issuable upon conversion of shares of any
currently unissued series of Preferred Stock of the Company, with registration
rights.
1.2 Demand Registration.
-------------------
(a) If the Company shall receive from Initiating Holders at any time
after six (6) months have elapsed from the Closing Date (as defined in the
Agreement and Plan of Reorganization) a written request that the Company effect
a registration with respect to all or any part of the Registrable Securities,
the Company will:
(i) promptly give written notice of the proposed registration to
all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration (including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue sky or
other state securities laws, and appropriate compliance with the
Securities Act) and take such actions as would permit or facilitate the
sale and distribution of all or such portion of such Registrable
Securities as are specified in such request,
-3-
<PAGE>
together with all or such portion of the Registrable Securities of any
Holder or Holders joining in such request as are specified in a written
request received by the Company within twenty (20) business days after
such written notice from the Company is mailed or delivered.
(b) The Company shall file a Registration Statement as soon as
practicable after receipt of the request of the Initiating Holders under this
Section 1.2, but in any event within ninety (90) calendar days of receipt of
such request; provided, however, that if the Company shall furnish to the
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company it would be
detrimental to the Company and its securityholders for such Registration
Statement to be filed on or before the date filing would be required and it is
therefore essential to defer the filing of such Registration Statement, the
Company shall have the right to defer such filing to a date not later than one
hundred eighty (180) calendar days after receipt of such request; provided,
further that the Company may not defer more than one such filing in any twelve
(12) month period.
(c) Notwithstanding the foregoing, the Company shall not be obligated
to take any action to effect any such registration, qualification or compliance
pursuant to this Section 1.2:
(i) If, during the six (6) month period following the Closing
Date, the Company has initiated a registration which the Holders would
be eligible to participate in pursuant to Section 1.3 hereof (counting
for these purposes only registrations that have been declared or
ordered effective and pursuant to which securities have been sold and
registrations which have been withdrawn by the Holders unless the
Holders have elected to bear all Registration Expenses incurred by the
Company pursuant to Section 1.5 hereof and related to the Holders and
their withdrawal, and which expenses would, absent such election, have
been borne by the Company);
(ii) At any time before the date six (6) months after the Closing
Date;
(iii) If the Company shall have previously initiated any
registration pursuant to this Section 1.2 (counting for these purposes
only a registration which has been declared or ordered effective and
pursuant to which securities have been sold and any registration which
has been withdrawn by the Holders unless the Holders have elected to
bear all Registration Expenses incurred by the Company pursuant to
Section 1.5 hereof and related to the Holders and their withdrawal, and
which expenses would, absent such election, have been borne by the
Company);
(iv) If the Initiating Holders do not request that such offering
be firmly underwritten by underwriters selected by the Initiating
Holders (subject to the consent of the Company, which consent will not
be unreasonably withheld);
-4-
<PAGE>
(v) If the Company and the Initiating Holders are unable to
obtain the commitment of the underwriter described in clause (iv) above
to firmly underwrite the offer;
(vi) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in
effecting such registration, qualification, or compliance, unless the
Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act; or
(vii) If doing so would conflict with the rights of any parties
under the Prior Registration Rights Agreements.
(d) Underwriting. The right of any Holder to registration pursuant to
------------
this Section 1.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. A Holder may elect to include in
such underwriting all or a part of the Registrable Securities he holds.
(e) Other Stockholders; Company Securities. The Registration Statement
--------------------------------------
filed in accordance with Section 1.2 hereof pursuant to the request of the
Initiating Holders may include Other Securities of Other Stockholders, and may
include securities of the Company being sold for the account of the Company.
(f) Procedures. If the Company shall request inclusion in any
----------
registration pursuant to Section 1.2(e) hereof of securities being sold for its
own account, or if Other Stockholders shall request inclusion in any
registration pursuant to Section 1.2(e) hereof, the Initiating Holders shall, on
behalf of all Holders, offer to include such securities in the underwriting and
may condition such offer on their acceptance of the further applicable
provisions of this Agreement (including Section 1.8 hereof). The Company shall
(together with all Holders and Other Stockholders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders, which underwriters are reasonably acceptable to the Company.
Notwithstanding any other provision of this Section 1.2, if the representative
of the underwriters advises the Initiating Holders in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
number of shares to be included in the underwriting or registration shall be
allocated as set forth in Section 1.10 hereof. If a person who has requested
inclusion in such registration as provided above does not agree to the terms of
any such underwriting, such person shall be excluded therefrom by written notice
from the Company, the underwriter or the Initiating Holders. The securities so
excluded shall also be withdrawn from registration. Any Registrable Securities
or Other Securities excluded or withdrawn from such underwriting shall also be
withdrawn from such registration. If Registrable Securities or Other Securities
are so withdrawn from the registration and if the number of shares to be
included in such registration was previously reduced as a result of
-5-
<PAGE>
marketing factors pursuant to this Section 1.2(f), then the Company shall
allocate the right to include additional securities in the Registration as set
forth in Section 1.10 hereof.
1.3 Piggyback Registration.
----------------------
(a) If the Company shall determine to register any of its securities
either for its own account for cash or for the account of Prior Holders or Other
Stockholders exercising their respective demand registration rights (other than
(i) pursuant to Section 1.2 hereof, (ii) a registration relating solely to
employee benefit plans on Form S-1, Form S-8, or similar forms which may be
promulgated in the future, or (iii) a registration relating solely to a
Commission Rule 145 transaction on Form S-4 or similar form which may be
promulgated in the future), the Company will:
(i) Promptly give to each Holder written notice of the proposed
registration; and
(ii) Include in such registration (and in any related
qualification under blue sky laws or other state securities laws), and
in any underwriting involved therein, all the Registrable Securities
specified in a written request made by any Holder within twenty (20)
business days after such Holder receives such written notice from the
Company, except as set forth in Section 1.3(b) hereof.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
1.3(a)(i) hereof. In such event the right of the Holders to registration
pursuant to this Section 1.3 shall be conditioned upon the Holder's
participation in such underwriting and the inclusion of the Holder's Registrable
Securities in the underwriting to the extent provided herein. The Holders shall
(together with the Company, the Prior Holders and the Other Stockholders, if
any, distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 1.3, if the
underwriters determine that marketing factors require a limitation of the number
of securities to be underwritten and that the number of securities requested to
be included by the Company and holders of securities entitled to be included in
the registration exceeds the amount of securities compatible with the success of
the offering, and so advise the Company in writing, the Company may limit, to
the extent so advised by the underwriters, the amount of securities to be
included in the registration by the Holders, the Prior Holders and the Other
Stockholders. The Company shall advise the Holders, the Prior Holders and the
Other Stockholders of such limitation, and the number of Registrable Securities,
Prior Registrable Securities and Other Securities held by the Holders, the Prior
Holders and the Other Stockholders of the Company that may be included in the
registration shall be allocated among the Holders, the Prior Holders and Other
Stockholders requesting inclusion, in accordance with Section 1.10 hereof.
-6-
<PAGE>
If the Holder disapproves of the terms of any such underwriting,
including any reduction by the underwriter for market reasons, he or she may
elect not to be included in the registration by delivering written notice to the
Company at least five (5) days prior to the effective date of the Registration
Statement (unless otherwise mutually agreed by the Company and the Holder).
(c) The Company shall use all reasonable efforts to keep such
registration pursuant to this Section 1.3, and any qualification or compliance
under blue sky laws or other state securities laws which the Company determines
to obtain, effective for a period of one hundred eighty (180) days from the date
of effectiveness or for such shorter period that will terminate when all the
Registrable Securities covered by the Registration Statement have been sold
pursuant thereto or may be sold pursuant to Rule 144 or there cease to be
outstanding any Registrable Securities, whichever first occurs, provided that
the Company shall be deemed not to have used all reasonable efforts to keep such
registration, qualification or compliance effective during the requisite period
if it voluntarily takes any action that would result in any Holder not being
able to offer and sell his or her Registrable Securities during that period
unless such action is required by applicable law.
1.4 Registration Procedures. In the case of each registration effected
-----------------------
by the Company pursuant to Sections 1.2 and 1.3 hereof, the Company will keep
each Holder advised as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will use its best efforts to:
(a) Prepare and file with the Commission a Registration Statement or
Registration Statements on any appropriate form under the Securities Act
available for the sale of the Registrable Securities by the Holders thereof in
accordance with the intended method or methods of distribution thereof, and
cause each such Registration Statement to become effective and remain effective
as provided herein; provided, that before filing any such Registration Statement
or Prospectus or any amendments or supplements thereto (other than documents
that would be incorporated or deemed to be incorporated therein by reference and
that the Company is required by applicable securities laws or stock exchange
requirements to file) the Company shall furnish to each Holder copies of all
such documents proposed to be filed, which documents will be subject to the
review of the Holder and his counsel, if any, and the Company shall not file any
such Registration Statement or amendment thereto or any Prospectus or any
supplement thereto (other than such documents which, upon filing, would be
incorporated or deemed to be incorporated by reference therein and that the
Company is required by applicable securities laws or stock exchange requirements
to file) to which the Holders of a majority of the Registrable Securities, Prior
Registrable Securities and covered by such Registration Statement shall
reasonably object on a timely basis.
(b) Prepare and file with the Commission such amendments and
post-effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the applicable
period specified in Sections 1.2 and 1.3 hereof; cause the related Prospectus to
be amended or supplemented by any required Prospectus amendment or supplement,
and as so amended or supplemented to be filed
-7-
<PAGE>
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the methods of
disposition intended by the Holders thereof set forth in such Registration
Statement as so amended or in such Prospectus as so supplemented.
(c) Notify each Holder promptly, and (if requested by such Holder)
confirm such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the Commission or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to a Registration Statement or related
Prospectus or for additional information, (iii) of the issuance by the
Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of a Registration Statement or the initiation
of any proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (v) of the existence of any fact or the happening of any event which
makes any statement made in such Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or which requires the making of any changes in
such Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and (vi) of the Company's reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
(d) Use all reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest practicable
time.
(e) If reasonably requested by the Holders of a majority of the
Registrable Securities being sold, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the Company or the
Holders of a majority of such Registrable Securities, Prior Registrable
Securities and Other Securities agree should be included therein as required by
applicable law, (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment, and (iii) supplement or make amendments
to any Registration Statement consistent with clause (i) or (ii) above;
provided, that the Company shall not be required to
-8-
<PAGE>
take any actions under this Section 1.4(e) that are not, in the opinion of
outside counsel for the Company, in compliance with applicable law.
(f) Furnish to each Holder and his counsel, if any, upon request and
without charge, at least one conformed copy of the Registration Statement or
Registration Statements and any post-effective amendment thereto, including
financial statements (but excluding schedules, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits, unless
requested in writing by such Holder or counsel).
(g) Deliver to each Holder and his counsel, if any, without charge, as
many copies of the Prospectus or Prospectuses relating to such Registrable
Securities (including each preliminary prospectus) and any amendment or
supplement thereto as such Holders may reasonably request; and the Company
hereby consents to the use of such Prospectus or each amendment or supplement
thereto by each Holder in connection with the offering and sale of the
Registrable Securities covered by such Prospectus or any amendment or supplement
thereto.
(h) Prior to any public offering of Registrable Securities, to register
or qualify or cooperate with each Holder and his counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the blue
sky laws or other state securities laws of such jurisdictions within the United
States as any Holder reasonably requests in writing; keep each such registration
or qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided, that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it is not then so
qualified or (ii) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject.
(i) Cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities within the United States, except as may be
required solely as a consequence of the nature of any Holder, in which case the
Company will cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals, as may be necessary
to enable each Holder to consummate the disposition of such Registrable
Securities.
(j) Upon the occurrence of any event contemplated by Sections 1.4(c)(v)
or 1.4(c)(vi) hereof, prepare a supplement or post-effective amendment to each
Registration Statement or an amendment or supplement to the related Prospectus
or any document incorporated therein by reference or file any other required
document (such as Current Report on Form 8-K) so that, as thereafter delivered
to the purchasers of the Registrable Securities being sold thereunder, such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
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<PAGE>
(k) If necessary in connection with a disposition of Registrable
Securities and in accordance with the General Corporate Laws of the State of
Delaware, make available for inspection, at the offices where normally kept
during reasonable business hours, by a representative of any Holder and any
attorney or accountant retained by any Holder, financial and other records,
pertinent corporate documents and properties of the Company and its subsidiaries
as they may reasonably request, and cause the officers, directors and employees
of the Company and its subsidiaries to supply all information reasonably
requested by any such representative, attorney or accountant in connection with
such disposition; provided, that any records, information or documents that are
designated by the Company in writing as confidential at the time of delivery of
such records, information or documents shall be kept confidential by such
persons, and such persons shall so agree in writing, unless (i) such records,
information or documents are in the public domain or otherwise publicly
available, (ii) disclosure of such records, information or documents is required
by court or administrative order or is necessary to respond to inquiries of
regulatory authorities or (iii) disclosure of such records, information or
documents is otherwise required by law (including, without limitation, pursuant
to the requirements of the Securities Act).
(l) Comply with all applicable rules and regulations of the Commission
and make generally available to its security holders earning statements
satisfying the provisions of section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no later
than Forty-Five (45) calendar days after the end of any quarter (or Ninety (90)
calendar days after the end of any 12-month period if such period is a fiscal
year) commencing on the first day of the first fiscal quarter of the Company,
after the effective date of a Registration Statement.
(m) Enter into such agreements and take all such other actions in
connection therewith reasonably approved by the Company's management and its
Board of Directors in order to expedite or facilitate the disposition of such
Registrable Securities.
(n) Unless any Registrable Securities shall be in book-entry only form,
cooperate with each Holder to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends; and enable such Registrable Securities to be in such
denominations and registered in such names as each Holder may request.
(o) Provide the transfer agent for the Common Stock with printed
certificates for the Registrable Securities which are in a form eligible for
deposit with The Depository Trust Company.
(p) Cause the Common Stock to be listed on each securities exchange or
quotation system on which the Common Stock is then listed no later than the date
the Registration Statement is declared effective and, in connection therewith,
to the extent applicable, to make such filings under the Exchange Act and to
have such filings declared effective thereunder.
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<PAGE>
The Company may require each Holder, and each Holder agrees, to furnish
to the Company such information regarding the distribution of such Registrable
Securities as the Company may, from time to time, reasonably request in writing,
and the Company may exclude from such registration the Registrable Securities of
any Holder, if such Holder unreasonably fails to furnish such information within
a reasonable time after receiving such request. Each Holder agrees promptly to
furnish to the Company all information required to be disclosed in order to make
the information previously furnished to the Company by the Holder not
misleading. Any sale of any Registrable Securities by each Holder shall
constitute a representation and warranty by such Holder that the information
relating to such Holder and his plan of distribution is as set forth in the
Prospectus delivered by such Holder in connection with such disposition, that
such Prospectus does not as of the time of such sale contain any untrue
statement of a material fact relating to such Holder or his plan of distribution
and that such Prospectus does not as of the time of such sale omit to state any
material fact relating to such Holder or his plan of distribution necessary to
make the statements in such Prospectus, in the light of the circumstances under
which they were made, not misleading.
Each Holder agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Sections 1.4(c)(ii),
1.4(c)(iii), 1.4(c)(iv), 1.4(c)(v) or 1.4(c)(vi) hereof, such Holder will
forthwith discontinue disposition of such Registrable Securities covered by the
applicable Registration Statement or Prospectus until the Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Sections
1.4(j) hereof, or until he is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus. The Company agrees to give
the Advice promptly after it determines that the use of the applicable
Prospectus may be resumed.
1.5 Registration Expenses. All fees and expenses incident to the
---------------------
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any of the Registration Statements become
effective and whether or not any of the Registrable Securities are transferred
pursuant to the Registration Statement. Such fees and expenses shall include,
without limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to designation of the Registrable
Securities as eligible for trading on The Nasdaq Stock Market's National Market,
and (B) of compliance with applicable blue sky laws or other state securities
laws), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities in a form eligible for deposit
with The Depository Trust Company and of printing Prospectuses), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and the counsel for the Holders in connection with the
Registration (provided that the Company shall not be liable for the reasonable
fees and expenses of more than one separate firm for all parties other than the
Company participating in any transaction hereunder), (v) reasonable fees and
disbursements of all independent certified public accountants, (vi) Securities
Act liability insurance if the Company so desires such insurance, and (vii) fees
and expenses of all other persons retained by the Company. In addition, the
Company will, in any event, bear its own internal expenses (including,
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<PAGE>
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange on which similar securities issued by the
Company are then listed and the fees and expenses of any person, including
special experts, retained by the Company. The Company will not be responsible
for any Selling Expenses associated with the Registrable Securities.
1.6 Delay of Registration. The Holders shall not have any right to take
---------------------
any action to restrain, enjoin or otherwise delay any registration as a result
of any controversy that may arise with respect to the interpretation or
implementation of this Agreement, unless such registration pertains solely to
Registrable Securities.
1.7 Indemnification.
---------------
(a) The Company will indemnify each Holder and each person controlling
such Holder within the meaning of section 15 of the Securities Act, with respect
to which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or action in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
Registration Statement, prospectus, offering circular or other document, or any
amendment or supplement thereof, incident to any such registration,
qualification or compliance, or arising out of or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
in which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will reimburse each
Holder and each person controlling such Holder, each such underwriter and each
person who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action, provided that the Company will
not be liable to indemnify any Holder or underwriter in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by or on behalf of any
Holder or underwriter and stated to be specifically for use therein. It is
agreed that the indemnity agreement contained in this Section 1.7(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company.
(b) Each Holder will, if Registrable Securities held by the Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, and each person controlling
the Company within the meaning of section 15 of the Securities Act, and each
underwriter, if any, of the Company's securities
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<PAGE>
covered by such a Registration Statement, and each person who controls any
underwriter within the meaning of section 15 of the Securities Act against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such Registration Statement, prospectus, offering
circular or other document, or any amendment or supplement thereof, incident to
any such registration, qualification or compliance, or arising out of or based
upon any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, and
will reimburse the Company, such directors, officers, partners, legal counsel,
accountants, persons, underwriters or control persons for any legal and any
other expenses reasonably incurred in connection with investigating, preparing
or defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that it is judicially determined that such
untrue statement (or alleged untrue statement) or omission (or alleged omission)
was made in such Registration Statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by or on behalf of such Holder and
stated to be specifically for use therein. It is agreed that the indemnity
agreement contained in this Section 1.7(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of such Holder (which consent has not
been unreasonably withheld).
(c) Each party entitled to indemnification under this Section 1.7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld). Without limiting the generality of the foregoing, the Indemnified
Party may withhold its consent to any such counsel who also acts as counsel to
the Indemnifying Party (with respect to such claim or otherwise) and the
Indemnified Party reasonably believes that there exists a conflict of interest
between the Indemnified Party and the Indemnifying Party, with respect to such
claim or litigation. In such event, the Indemnifying Party shall bear the
expense of another counsel who shall represent the Indemnified Party and any
other persons or entities who have indemnification rights from the Indemnifying
Party hereunder, with respect to such claim or litigation, and shall be selected
as provided in the first sentence of this Section 1.7(c). The Indemnified Party
may participate in such defense at such party's expense (except to the extent
that the Indemnifying Party is required to pay the expense of such counsel
pursuant to this Section 1.7(c)), and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless such failure
is materially prejudicial to the Indemnifying Party in defending such claim or
litigation. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include
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<PAGE>
as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation.
(d) If the indemnification provided for in this Section 1.7 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with an underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
1.8 Lock-Up Agreement. In consideration for the Company agreeing to its
-----------------
obligations under this Article 1, each Holder agrees, upon the request of the
underwriters managing an underwritten offering of the Company's securities, not
to publicly (including pursuant to Rule 144(k) promulgated under the Securities
Act) sell, make any short sale of, pledge, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days) as the underwriters may specify from
the effective date of the Registration Statement pertaining to such offering
(the "Lock-Up Agreement").
The obligation of each Holder to enter into the Lock-Up Agreement
described herein shall terminate when such Holder's registration rights have
terminated pursuant to Section 1.2(a) or Section 1.3 hereof. The obligations
described in this Section 1.8 shall not apply to a registration relating solely
to employee benefit plans on Form S-1 or Form S-8 or similar forms which may be
promulgated in the future, or a registration relating solely to a Rule 145
transaction on Form S-4 or similar forms which may be promulgated in the future.
1.9 Information Requirements
------------------------
(a) The Company shall file in a timely manner the reports required to
be filed by it under the Securities Act and the Exchange Act, and if at any time
the Company is not required to file such reports, it will, upon the request of
any Holder, make publicly available other information so long as necessary to
permit sales pursuant to Rule 144 under the
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<PAGE>
Securities Act. The Company further covenants that it will cooperate with each
Holder and take such further action as such Holder may reasonably request
(including without limitation making such representations as any such holder may
reasonably request), all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144 under the
Securities Act. Upon the request of any Holder, the Company shall deliver to
such Holder a written statement as to whether it has complied with such filing
requirements.
(b) The Company shall file in a timely manner the reports required to
be filed by it under the Exchange Act and shall comply with all other
requirements set forth in the instructions to Form S-3 in order to allow the
Company to be eligible to file Registration Statements on Form S-3.
1.10 Allocation of Registration Opportunities. In any circumstance in
----------------------------------------
which all of the Registrable Securities, Prior Registrable Securities and Other
Securities requested to be included in a registration on behalf of the Holders,
Prior Holders and/or Other Stockholders cannot be so included as a result of
limitations imposed by the underwriters on the aggregate number of shares of
Registrable Securities, Prior Registrable Securities and Other Securities which
may be so included, the number of Registrable Securities, Prior Registrable
Securities and Other Securities which may be so included shall be allocated
among the Holders, the Prior Holders and Other Stockholders requesting inclusion
of securities in the following manner and order: (i) pro rata among the Prior
Holders on the basis of the number of Prior Registrable Securities that would be
held by such Prior Holders assuming conversion; provided, however, that, so that
such allocation shall not operate to reduce the aggregate number of Registrable
Securities, Prior Registrable Securities and/or Other Securities to be included
in such Registration, if any Prior Holders do not request inclusion of the
maximum number of Prior Registrable Securities allocated to them pursuant to the
above-described procedure, the remaining portion of their allocation shall be
reallocated among the other Prior Holders whose allocations did not satisfy
their requests pro rata on the basis of the number of Prior Registrable
Securities that would be held by such Prior Holders, assuming conversion, and
this procedure shall be repeated until all of the Prior Registrable Securities
that may be included in the registration on behalf of the Prior Holders have
been so allocated; (ii) pro rata among the Holders and Other Stockholders,
assuming conversion; provided, however, that, so that such allocation shall not
operate to reduce the aggregate number of Registrable Securities and Other
Securities to be included in such registration, if any Holder or Other
Stockholder does not request inclusion of the maximum number of Registrable
Securities and/or Other Securities allocated to them pursuant to the
above-described procedure, the remaining portion of their allocation shall be
reallocated among those Holders and Other Stockholders whose allocations did not
satisfy their requests pro rata on the basis of the number of Registrable
Securities or Other Securities that would be held by such Holder or Other
Stockholder, assuming conversion, and this procedure shall be repeated until all
of the Registrable Securities and Other Securities which may be included in the
registration on behalf of the Holders and Other Stockholders have been so
allocated. The Company shall not limit the number of Registrable Securities or
Prior
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<PAGE>
Registrable Securities to be included in a registration pursuant to this
Agreement in order to include securities held by securityholders with no
registration rights.
Article 2. Miscellaneous.
--------- -------------
2.1 No Inconsistent Agreements. The Company has not entered, as of the
--------------------------
date hereof, and shall not enter, on or after the date of this Agreement, any
agreement with respect to its securities which is inconsistent with the rights
granted to the Stockholders in this Agreement.
2.2 Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Company has obtained the written consent of the Stockholders.
2.3 Notices. Any notice, request, instruction or other document to be
-------
given hereunder by any party to the other shall be in writing and delivered
personally or sent by certified mail, postage prepaid, by telecopy, or by
courier service, as follows:
Savoir Technology Group, Inc.
254 E. Hacienda Avenue
Campbell, CA 95008
Attention: Chief Financial Officer
Fax: (408) 370-4597
with a copy to: Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304
Attention: Ms. Katharine A. Martin
Fax: (415) 233-4545
And MCBA Systems, Inc.
4955 Corporate Drive
Huntsville, AL 35806
Attention: Michael N. Gunnells
Fax: (206) 726-9040
with a copy to: Lanier Ford Shaver & Payne P.C.
Suite 5000, 200 West Side Square
Huntsville, AL 35801-4816
Attention: Elizabeth W. Abel
Fax: (205) 533-9322
or to such other address as any party may have furnished to the other parties in
writing in accordance herewith.
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<PAGE>
2.4 Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the heirs, personal representatives, successors and
permitted assigns of each of the parties. The registration rights of each Holder
under this Agreement are personal to such Holder and may not be transferred or
assigned. The Company may not assign its rights or obligations hereunder without
the prior written consent of the Holders.
2.5 Future Registration Rights. Notwithstanding any provision in this
--------------------------
Agreement, this Agreement will not in any way prohibit the granting by the
Company of any future registration rights.
2.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
2.7 Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
2.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS.
2.9 Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
2.10 Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and the registration rights
granted by the Company with respect to the Common Stock issued to the
Stockholders pursuant to the Agreement and Plan of Reorganization. Except as
provided in the Agreement and Plan of Reorganization, there are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted by the Company with
respect to the Common Stock. This Agreement supersedes all prior agreements and
understandings among the parties with respect to such registration rights.
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<PAGE>
2.11 Attorneys' Fees. In any action or proceeding brought to enforce
---------------
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing party, as determined by the court, shall
be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
2.12 Further Assurances. Each of the parties hereto shall use all
------------------
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things reasonably necessary, proper or advisable under
applicable law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and the other
documents contemplated hereby and consummate and make effective the transactions
contemplated hereby.
2.13 Termination. This Agreement and the obligations of the parties
-----------
hereunder shall terminate after the later of (a) three (3) years from the
Closing Date or (b) when all shares of Registrable Securities held by the
Holders may immediately be sold pursuant to Rule 144 or Rule 145 during any
ninety (90) day period, except for any liabilities, obligations or
indemnification under Sections 1.5 or 1.7 hereof or the proviso of Section
1.4(k) above, which shall remain in effect in accordance with their terms.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SAVOIR TECHNOLOGY GROUP, INC.
By
-----------------------------------------
Chief Financial Officer
THE STOCKHOLDERS
-------------------------------------------
Michael N. Gunnells
-------------------------------------------
John Harkins
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<PAGE>
EXHIBIT 7.2(d)
[FORM OF OPINION FOR MCBA SYSTEMS, INC.'S COUNSEL]
Savoir Technology Group, Inc.
Re: MCBA Systems, Inc.
Ladies and Gentlemen:
The undersigned, counsel to MCBA Systems, Inc., an Alabama corporation
(the "Company") and with regard to that certain Agreement and Plan of
Reorganization, dated as of November 22, 1997 (the "Reorganization Agreement")
by and among Savoir Technology Group, Inc., a Delaware corporation ("STG"), the
Company, Michael N. Gunnells and John Harkins (collectively the "Shareholders"),
and the performance thereof by the Company, is of the following opinion:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Alabama and has all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as now being conducted. The Company is qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
in the United States as to which the Company has represented to us that the
ownership of its property or the conduct of its business requires such
qualification and where any statutory fines or penalties or any corporate
disability imposed for the failure to qualify would materially and adversely
affect the Company, its assets, financial condition or operations. To our
knowledge, the Company has no subsidiaries.
2. The authorized capital stock of the Company consists of _______
shares of Common Stock, par value $__ per share (the "Common Stock"), of which
_____ shares are outstanding.
3. The Company does not have outstanding any options, warrants, calls,
conversion rights, commitments or agreements of any character to which the
Company is a party or by which the Company may be bound that do or may obligate
the Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the Company's capital stock or that do or may obligate the
Company to grant, extend or enter into any such option, warrant, call,
conversion right, commitment or agreement.
<PAGE>
Savoir Technology Group, Inc.
__________, 1997
Page 2
4. There are no rights of first refusal, co-sale rights, rights of
participation, rights of first offer, options or other restrictions on transfer
applicable to any share of Common Stock pursuant to the Company's Articles of
Incorporation or Bylaws or, to our knowledge, pursuant to any contract or
agreement of the Company or binding upon the Company.
5. The Company has all requisite corporate power and authority to enter
into the Reorganization Agreement, to execute, deliver and perform its
obligations thereunder and to consummate the transactions contemplated thereby.
The execution and delivery of the Reorganization Agreement, the performance by
the Company of its obligations thereunder and the consummation of the
transactions contemplated thereby, have been duly and validly authorized by all
necessary corporate action on the part of the Company, including approval by its
Board of Directors and by the shareholders of the Company. The Reorganization
Agreement is the legal, valid and binding obligations of the Company enforceable
against the Company in accordance with its terms.
6. Each of the Shareholders has the right, power and capacity to
execute and deliver the Reorganization Agreement and the Shareholders' Closing
Documents and to sell, transfer and deliver the Shares pursuant to the
Reorganization Agreement and the Shareholders' Closing Documents. The
Reorganization Agreement and each of the Shareholders' Closing Documents have
been duly authorized, executed and delivered by or on behalf of each of the
Shareholders. Upon delivery of the certificates representing the Common Stock on
behalf of the Shareholders pursuant to the terms of the Reorganization Agreement
and payment therefor by STG, assuming that STG is not aware of any adverse claim
with respect thereto, will transfer all rights and interests in and to the
Shares to STG, free of any adverse claim.
7. To our knowledge, no consent, approval, order or authorization of,
or registration, declaration or filing with, any third party, court,
administrative agency or commission or other governmental authority, is required
by or with respect to the Company in connection with the execution and delivery
of the Reorganization Agreement or the exhibits by the Company or the
consummation by the Company of the transactions contemplated thereby, except as
required by the Reorganization Agreement or the exhibits and except for such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws
and the laws of any foreign country.
8. To our knowledge there is no action, suit, proceeding, claim,
arbitration or investigation pending or threatened to which the Company or the
Shareholders is a party which questions the validity of the Reorganization
Agreement or which would have a material and adverse effect on the present
assets, operations or financial condition of the Company.
<PAGE>
Savoir Technology Group, Inc.
__________, 1997
Page 3
9. The execution, delivery and performance of the Reorganization
Agreement and the consummation by the Company of the transactions contemplated
thereby (i) do not or will not conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right to termination, cancellation or acceleration of any obligation under
(a) any provision of the Articles of Incorporation or Bylaws of the Company or
(b) any contract, agreement or instrument, permit, franchise, license, judgment
or other agreement or rule, applicable to the Company or its operations,
properties or assets, (ii) do not or will not violate or contravene any
governmental statute, rule or regulation applicable to the Company or any order,
writ, judgment, injunction, decree, determination or award which has been
entered against the Company and of which we are aware, the violation or
contravention of which would have an adverse effect on the present assets,
operations or financial condition of the Company, and (iii) do not constitute a
default under the provisions of any contract to which the Company is a party.
Very truly yours,
<PAGE>
EXHIBIT 7.2(g)
--------------
FORM OF AGREEMENT NOT TO COMPETE
--------------------------------
THIS AGREEMENT NOT TO COMPETE (the "Non-Compete"), made and entered
into as of __________, 1997 by and between SAVOIR TECHNOLOGY GROUP, INC., a
-----------------------------
Delaware corporation ("STG"), and MICHAEL N. GUNNELLS ("Gunnells"),
-------------------
W I T N E S S E T H:
WHEREAS, Gunnells is a shareholder and officer of MCBA Systems, Inc.,
an Alabama corporation ("MCBA"); and
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Reorganization, dated as of November 22, 1997 (the "Agreement") by and among
STG, Gunnells and Harkins (together, Gunnells and Harkins are referred to herein
as the "Shareholders"), the Shareholders intend to sell, convey, transfer,
assign and deliver all of the issued and outstanding capital stock of MCBA (the
"Shares"), to STG in exchange for certain consideration; and
WHEREAS, Gunnells and STG are parties to that certain Letter Agreement
pursuant to which Gunnells will be an employee of STG; and
WHEREAS, this Non-Compete is a condition precedent to the transaction
contemplated in the Agreement, and STG would not consummate the transactions
contemplated by the Agreement absent the execution by Gunnells of this
Non-Compete:
NOW, THEREFORE, in consideration of the above recitals and the mutual
promises contained in this Non-Compete and for other and further valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Definitions. Capitalized terms not otherwise defined in this
-----------
Agreement shall have the meanings set forth in the Agreement.
2. Term. STG and Gunnells hereby enter into this Non-Compete for a term
----
of the greater of (a) three (3) years after Closing, or (b) one (1) year after
the termination of active employment of Gunnells by STG.
3. Consideration for Agreement Not to Compete. The sole consideration
------------------------------------------
for the faithful performance of the obligations specified in Section 4 hereof by
Gunnells shall be the consideration received by Gunnells under the Agreement.
4. Agreement Not to Compete. The Parties hereto agree that for the term
------------------------
of this Non-Compete and except with respect to Gunnells's duties and
responsibilities as an employee of STG, Gunnells will not, in any of the
jurisdictions set forth in Exhibit A hereto, directly or indirectly: (a) sell
computer hardware, including, without limitation,
-1-
<PAGE>
midrange and mainframe computer systems, or services to value-added resellers,
resellers, midrange or mainframe distributors or systems integrators or (b)
approach, contact or solicit any employee of STG, MCBA or any affiliate of STG
to leave the employ of STG, MCBA or any of its affiliates except through general
employment advertising.
5. Interpretation.
--------------
(a) Gunnells recognizes that the foregoing covenant in Section 4
hereof, and the territorial, time and other limitations with respect thereto,
are reasonable and properly required for the adequate protection of the
acquisition of the Shares by STG, and agrees that such limitations are
reasonable with respect to the business activities of Gunnells.
(b) The parties hereto recognize that the laws and public policies of
the various states of the United States and Delaware may differ as to the
validity and enforceability of covenants similar to those contained in Section 4
hereof. It is the intention of the parties that the provisions of Section 4
hereof shall be enforced to the fullest extent permissible under the laws and
public policies of the State of Delaware and of any other jurisdiction in which
enforcement may be sought, but that the unenforceability (or the modification to
conform with such laws or public policies) of any provisions hereof shall not
render unenforceable or impair the remainder of Section 4 hereof. To the extent
that Section 4 hereof shall be declared unenforceable in any one or more of such
jurisdictions, such declaration shall not affect Section 4 hereof with respect
to each other jurisdiction, as Section 4 hereof shall be construed to be
severable and independent. If any provision of Section 4 hereof shall be
determined to be invalid or unenforceable, either in whole or in part, Section 4
hereof shall be deemed amended to delete or modify, as necessary, the offending
provisions and to alter the balance of Section 4 hereof in order to render the
same valid and enforceable to the fullest extent permissible as aforesaid.
6. Remedies. In the event of a breach or a threatened breach of any of
--------
the covenants contained in Section 4 hereof, STG shall, in addition to the
remedies provided by law and in addition to seeking damages through the
arbitration proceeding as provided in Section 13 hereof, have the right and
remedy to have such covenants specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any material breach of any
of the covenants will cause irreparable injury to STG and that money damages
will not provide an adequate remedy to STG.
7. Successors and Assigns. This Non-Compete shall inure to the benefit
----------------------
of the successors and assigns of STG. Gunnells may not assign his individual
obligations hereunder, and any such proposed assignment shall be void. Subject
to the foregoing, this Non-Compete shall inure to the benefit of, and bind the
successors, heirs, personal representatives and assigns of Gunnells.
8. Waiver. The failure of any party to insist, in any instance, upon
------
performance of any of the terms or conditions of this Non-Compete shall not be
construed as a waiver of future performance of any such term or condition, and
the obligations of any party with respect thereto shall continue in full force
and effect.
-2-
<PAGE>
9. Effectiveness. The effectiveness of this Non-Compete is expressly
-------------
conditioned on the closing of the transaction specified in the Agreement.
10. Entire Agreement. This Non-Compete and the Agreement set forth the
----------------
entire agreement between the Parties with respect to the subject matter hereof
and may be amended only by an agreement in writing signed by the party against
whom enforcement of any amendment is sought.
11. Notices. All notices and demands provided for by this Non-Compete
-------
shall be in writing and (unless otherwise specifically provided herein) shall be
deemed to have been given when mailed by first class mail enclosed in a
registered or certified post-paid envelope addressed to the addresses of the
parties set forth below or to such changed address as any such party may have
fixed by notice; provided, however, that any notice of change of address shall
be effective only upon receipt.
Savoir Technology Group, Inc.
254 E. Hacienda Avenue
Campbell, CA 95008
Attention: Chief Financial Officer
Fax: (408) 370-4597
with a copy to: Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304
Attention: Ms. Katharine A. Martin
Fax: (415) 233-4545
And MCBA Systems, Inc.
4955 Corporate Drive
Huntsville, AL 35806
Attention: Michael N. Gunnells
Fax: (206) 726-9040
with a copy to: Lanier Ford Shaver & Payne P.C.
Suite 5000, 200 West Side Square
Huntsville, AL 35801-4816
Attention: Elizabeth W. Abel
Fax: (205) 533-9322
12. Governing Law. This Non-Compete and its validity, construction and
-------------
performance shall be governed in all respects by the internal laws of the
State of Delaware without giving effect to principles of conflict of laws.
13. Arbitration. All disputes arising out of or relating to this
-----------
Non-Compete shall be determined by binding arbitration in accordance with the
then current Commercial
-3-
<PAGE>
Arbitration Rules of the American Arbitration Association. If the amount in
controversy in the arbitration exceeds Two Hundred Fifty Thousand Dollars
($250,000), exclusive of interest, attorneys' fees and costs, the arbitration
shall be conducted by a panel of three (3) neutral arbitrators. The parties
shall endeavor to select neutral arbitrators by mutual agreement. If such
agreement cannot be reached within thirty (30) calendar days after a dispute has
arisen which is to be decided by arbitration, any party or the parties jointly
shall request the American Arbitration Association to submit to each party an
identical panel of fifteen (15) persons. Alternate strikes shall be made to the
panel, commencing with the party bringing the claim, until the name of three (3)
persons remain, or one person if the case is to be heard by a single arbitrator.
The parties may, however, by mutual agreement request the American Arbitration
Association to submit additional panels of possible arbitrators. The person(s)
thus remaining shall be the arbitrator(s) for such arbitration. If three (3)
arbitrators are selected, the arbitrators shall elect a chairperson to preside
at all meetings and hearings. If a dispute is to be resolved by a sole
arbitrator in accordance with the terms hereof, or if the dispute is to be
resolved by a panel of three (3) arbitrators, as provided hereinabove, then such
sole arbitrator or the chairperson of such panel, as the case may be, shall be a
member of a state bar engaged in the practice of law in the United States or a
retired member of a state or the federal judiciary in the United States. The
award of the arbitrator(s) shall require a majority of the arbitrators in the
case of a panel of arbitrators, shall be in writing and reasoned, shall be based
on the evidence admitted and the substantive law of the state of Delaware and
shall contain an award for each issue and counterclaim. The award shall be made
within thirty (30) days following the close of the final hearing and the filing
of any post-hearing briefs authorized by the arbitrator(s). The award of the
arbitrator(s) shall be final and binding on the parties hereto and the subject
matter. The arbitration shall be governed by the United States Arbitration Act,
9 U.S.C. ss. 1-16, and judgment upon the award rendered by the arbitrator(s) may
be entered by any court having jurisdiction thereof. The place of arbitration
shall be San Francisco, California. Each party shall be entitled to inspect and
obtain a copy of relevant documents in the possession or control of the other
party and to take depositions of the other party's employees, agents,
representatives and witnesses (including expert witnesses). All such discovery
shall be in accordance with procedures approved by the arbitrator(s). Unless
otherwise provided in the award, each party shall bear its own costs of
discovery. No party shall be entitled to submit interrogatories to the other
parties. All discovery shall be expedited, consistent with the nature and
complexity of the claim or dispute and consistent with fairness and justice. The
arbitrator(s) shall have the power to compel any party to comply with discovery
requests of the other parties and to issue binding orders relating to any
discovery dispute which shall be enforceable in the same manner as awards. The
arbitrator(s) also shall have the power to impose sanctions for abuse or
frustration of the arbitration process, including without limitation, the
refusal to comply with orders of the arbitrator(s) relating to discovery and
compliance with subpoenas. The arbitrator(s) are not empowered to award damages
in excess of actual damages and each party hereby irrevocably waives any right
to recover such damages with respect to any dispute resolved by arbitration.
14. Attorneys. Pillsbury Madison & Sutro LLP has only represented STG
---------
in connection with this transaction. Gunnells has had an opportunity to consult
with his counsel regarding the terms of this Non-Compete.
-4-
<PAGE>
15. Counterparts. This Non-Compete may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have hereto executed this Agreement as
of the date first written above.
SAVOIR TECHNOLOGY GROUP, INC.
By
--------------------------------------
Title
-----------------------------------
----------------------------------------
Michael N. Gunnells
-5-
<PAGE>
EXHIBIT A
I. California Counties:
-------------------
1. Alameda 22. Riverside
2. Alpine 23. Sacramento
3. Calaveras 24. San Benito
4. Contra Costa 25. San Bernardino
5. El Dorado 26. San Diego
6. Fresno 27. San Francisco
7. Glenn 28. San Joaquin
8. Kern 29. San Luis Obispo
9. Kings 30. San Mateo
10. Lake 31. Santa Barbara
11. Los Angeles 32. Santa Clara
12. Madera 33. Santa Cruz
13. Marin 34. Sierra
14. Mariposa 35. Siskiyou
15. Mendocino 36. Solano
16. Merced 37. Sonoma
17. Monterey 38. Stanislaus
18. Napa 39. Sutter
19. Nevada 40. Ventura
20. Orange 41. Yolo
21. Placer 42. Yuba
II. United States.
-------------
1. All of the States of the United States other than California.
2. Washington, D.C.
III. Canada, Mexico and Puerto Rico.
------------------------------
A-1
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF
THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY
FILED WITH THE COMMISSION.
EXHIBIT 7.2(k)
--------------
FORM OF EMPLOYMENT AGREEMENT
----------------------------
Savoir Technology Group, Inc.
254 East Hacienda Avenue
Campbell, California 95008
_____ __, 1998
Mr. Michael N. Gunnells
Dear Mr. Gunnells:
This letter agreement sets forth the terms and conditions of your
employment with Savoir Technology Group, Inc. (the "Company").
In consideration of the mutual covenants and promises made in this
letter agreement, you and the Company agree as follows:
1. Employment. Commencing as of ____ __, 1998 (the "Effective Date"),
----------
you will serve as the Vice President of S-390 Sales and Marketing of the
Company. You will be given such duties, responsibilities and authority as are
appropriate to such position. Throughout the term of your employment, you will
devote such business time and energies to the business and affairs of the
Company as are reasonably needed to carry out your duties and responsibilities
as Vice President of S-390 Sales and Marketing of the Company, subject to the
overall supervision and direction of the President and Chief Executive Officer
of the Company and the Company's Board of Directors.
2. Term. Your employment with the Company will continue through the
end of [***************] unless the Company and you mutually agree that an
adequate replacement has been identified. [***********************************
***********************************************] subject to the terms and
provisions of paragraph 5 hereof.
3. Salary. For your services to the Company as the Vice President of
------
S-390 Sales and Marketing of the Company, you will be paid a base salary,
payable semi-monthly during each month of employment, at an annualized rate of
[*******************************] per year.
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
-1-
<PAGE>
Mr.
_____ __, 1997
Page 2
4. Incentive Payment. The Company shall pay you a quarterly incentive
-----------------
payment of [****************************] conditioned upon the attainment of
certain quarterly performance criteria related to return on assets of the S-390
Business of the Company, as specified by the Board of Directors of the Company.
Such payments shall be based on your performance during each calendar quarter
and shall be paid within thirty (30) days of the end of each such quarter.
5. Employee Benefit Programs. During the term of your employment, you
-------------------------
will be entitled to participate in all employee benefit programs of the Company
at the time or thereafter made available to the Company's executives or salaried
employees generally, including, without limitation, pension and other retirement
plans, profit sharing plans, group life insurance, accidental death and
dismemberment insurance, hospitalization, surgical, major medical and dental
coverage, sick leave (including salary continuation arrangements), long-term
disability, vacations, holidays and other employee benefit programs sponsored by
the Company. The Company shall reimburse you, in accordance with the Company's
policy in effect from time to time, for all travel, entertainment and other
business expenses incurred by you in the performance of your duties and
responsibilities hereunder.
6. Consequences of Termination of Employment.
-----------------------------------------
(a) For Cause. Following the Effective Date, the Company may terminate
---------
your employment for "Cause," subject to the notice requirement and right to cure
set forth below. "Cause" will exist in the event you are convicted of a felony
or, in carrying out your duties, you are guilty of gross negligence or gross
misconduct resulting, in either case, in material harm to the Company, XYZ or
XYZ's relationship with IBM Corporation. In the event that the Company desires
to terminate your employment for Cause, it shall be required to provide written
notice to you of the act or omission complained of, giving reasonably specific
details and to the extent such act or omission may be cured or corrected within
a period of sixty (60) calendar days, you shall be given a period of sixty (60)
calendar days in which to cure or correct such act or omission, in which case if
you cure or correct the specified act or omission within such sixty (60)
calendar day period, the right to terminate for Cause with respect of such act
or omission shall be extinguished. You may, at the option of the Company and
without the Company or XYZ thereby incurring any liability to you, be suspended
with pay during the pendency of such cure period until the earlier of such time
as such act or omission is cured or corrected or the end of such sixty (60)
calendar day period. In the event your employment is properly terminated for
Cause in accordance with this Section 6(b), the Company shall pay you any unpaid
salary and accrued and unpaid bonus due you pursuant to paragraphs 3 and 4 above
through the date of termination and you will be entitled to no other
compensation from the Company pursuant to this Agreement.
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
-2-
<PAGE>
Mr.
_____ __, 1997
Page 3
(b) Without Cause. Following the Effective Date, the Company may
-------------
terminate your employment without Cause. In such event, (i) the Company shall
pay you any unpaid salary and accrued and unpaid bonus due you pursuant to
paragraphs 3 and 4 above through the date of termination, (ii) the Company shall
continue to pay you your base salary for a period of nine (9) months following
your termination of employment, paid to you in accordance with the schedule set
forth in paragraph 3 above, and (iii) subject to any employee contribution
applicable to you on the date of termination, for a nine (9) month period
following the date of termination, you shall be entitled to continue
participation, and the Company shall continue to pay for the cost of your
participation, in the Company's group medical and dental insurance plans,
provided that you are entitled to continue such participation under applicable
state and federal law and plan terms. It shall be a condition precedent of
payment to you of such consideration pursuant to the preceding two sentences
that you execute a full and complete release of the Company, each of its
subsidiaries and their respective past, present and future officers, directors,
employees, consultants, attorneys, agents and shareholders, in form and
substance reasonably acceptable to the Company and its counsel, of any claims
you may have against any of them, to the extent such claims arise from your
employment hereunder (the "Release"); provided, however, in no event shall you
be required to release any rights to indemnification under the charter documents
or bylaws of the Company or under any indemnification agreement to which you are
a party.
(c) Voluntary Termination. In the event you terminate your employment
---------------------
with the Company of your own volition, such termination will have the same
consequences as a termination for Cause under subparagraph 6(a) above.
(d) Change in Responsibilities Following a Change in Control. Following
--------------------------------------------------------
the Effective Date, in the event your duties and responsibilities as _____ of
XYZ are substantially reduced, without Cause, within twelve (12) months
following a Change of Control (defined below) of the Company, your resulting
resignation of employment will be treated as a termination of employment by the
Company without Cause in accordance with subparagraph 6(a) above. "Change of
Control" as used herein shall be defined as the occurrence of any of the
following events:
(i) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least fifty percent (50%)
of the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation; or
-3-
<PAGE>
Mr.
_____ __, 1997
Page 4
(ii) The shareholders of the Company approve (A) a plan of
complete liquidation of the Company or (B) an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets; or
(iii) Any "person" (as defined in sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities.
(e) Death or Disability. If your employment is terminated due to your
-------------------
death or a permanent disability that prevents you from performing your duties
hereunder, the Company shall pay you, or your estate, as the case may be, any
unpaid salary and accrued and unpaid bonus due you pursuant to paragraphs 3 and
4 above through the date of termination.
7. Assignability; Binding Nature. Commencing on the Effective Date,
-----------------------------
this letter agreement will be binding upon you and the Company and your
respective successors, heirs, personal representatives and assigns. This letter
agreement may not be assigned by you except that your rights to compensation and
benefits hereunder, subject to the limitations of this letter agreement, may be
transferred by will or operation of law. No rights or obligations of the Company
under this letter agreement may be assigned or transferred except by operation
of law in the event of a merger or consolidation in which the Company is not the
continuing entity, or the sale or liquidation of all or substantially all of the
assets of the Company provided that the assignee or transferee is the successor
to all or substantially all of the assets of the Company and assumes the
Company's obligations under this letter agreement contractually or as a matter
of law.
8. Governing Law; Arbitration. This letter agreement will be deemed a
--------------------------
contract made under, and for all purposes shall be construed in accordance with,
the laws of Delaware. Any controversy or claim relating to this letter
agreement, any breach thereof, and any claims you may have against the Company
or any officer, director or employee of the Company or arising from or relating
to your employment with the Company, will be settled solely and finally by
arbitration in accordance with the rules of the American Arbitration Association
("AAA") then in effect in the State of Delaware, and judgment upon such award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. The arbitrator may provide that the cost of the arbitration (including
reasonable legal fees) incurred by you or the Company will be borne by the
non-prevailing party.
-4-
<PAGE>
Mr.
_____ __, 1997
Page 5
9. Withholding. Anything to the contrary notwithstanding, following the
-----------
Effective Date all payments made by the Company hereunder to you or your estate
or beneficiaries will be subject to tax withholding pursuant to any applicable
laws or regulations. In lieu of withholding, the Company may, in its sole
discretion, accept other provision for payment of taxes as required by law,
provided it is satisfied that all requirements of law affecting its
responsibilities to withhold such taxes have been satisfied.
10. Entire Agreement. Except as otherwise specifically provided herein
----------------
this letter agreement contains all of the legally binding understandings and
agreements between you and the Company pertaining to the subject matter of this
letter agreement and supersedes all such agreements, whether oral or in writing,
previously entered into between the parties.
11. Miscellaneous. No provision of this letter agreement may be amended
-------------
or waived unless such amendment or waiver is agreed to by you and the Board of
Directors of the Company in writing. No waiver by you or the Company of the
breach of any condition or provision of this letter agreement will be deemed a
waiver of a similar or dissimilar provision or condition at the same or any
prior or subsequent time. In the event any portion of this letter agreement is
determined to be invalid or unenforceable for any reason, the remaining portions
shall be unaffected thereby and will remain in full force and effect to the
fullest extent permitted by law.
This letter agreement may be executed in any number of counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
-5-
<PAGE>
Mr.
_____ __, 1997
Page 6
Please acknowledge your acceptance and understanding of this letter
agreement by signing and returning it to me by 5:00 p.m. on _____ __, 1998. A
copy of the signed letter agreement will be sent to you for your records.
Sincerely,
SAVOIR TECHNOLOGY GROUP, INC.
By:
-----------------------------------
Title:
--------------------------------
ACKNOWLEDGED AND AGREED:
- --------------------------------------
Michael N. Gunnells
Dated: _____ __, 1998
Address: ----------------------------
----------------------------
----------------------------
-6-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF
THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY
FILED WITH THE COMMISSION.
EXHIBIT 7.2(q)
--------------
FORM OF INDUSTRY REMARKETER AFFILIATE AGREEMENT
-----------------------------------------------
THIS INDUSTRY REMARKETER AFFILIATE AGREEMENT (this "Agreement"), dated
as of _____ 1998, is made by and between SAVOIR TECHNOLOGY GROUP, INC., a
-----------------------------
Delaware corporation ("Savoir") having offices at 254 East Hacienda Avenue,
Campbell, California 95008 and MCBA SYSTEMS, INC. or its successor in interest,
------------------
an Alabama corporation ("MCBA"), having offices at 4955 Corporate Drive, Suite
300, Huntsville, Alabama 35805 (Savoir and MCBA are together referred to as
"STG"), and INNOVATIVE BUSINESS SYSTEMS, INC. or its successor in interest, an
---------------------------------
Alabama corporation, having offices at 4955 Corporate Drive, Suite 300,
Huntsville, Alabama 35805 ("IRA").
RECITALS:
A. STG is authorized to market and distribute certain Products,
including IBM Products, to resellers; STG is authorized and wishes to appoint
IRA as a solution provider affiliate to sell to End-Users the IBM Products it
acquires exclusively from STG and to engage IRA to sell other non-IBM Products
it acquires from STG to End-Users; and IRA is willing to serve in such
capacities.
B. For the consideration and mutual promises set forth in this
Agreement, the parties agree as follows:
1. Definitions. The terms used in this Agreement have the following
-----------
meanings:
1.1 "End User" means anyone, unaffiliated with IRA, who acquires
Products for its own use and not for resale.
1.2 "IBM" means International Business Machines, Inc. and its
subsidiaries.
1.3 "Machine" means an IBM or non-IBM machine, its features,
conversions, upgrades, elements, accessories, cables or any combination of them
(provided by IBM or another OEM to STG) approved by IBM or another OEM to be
provided to IRA.
1.4 "Original Equipment Manufacturer" or "OEM" means an original
equipment manufacturer, including without limitation IBM.
1.5 "Product" means a Machine, Program or Service which STG has been
authorized to distribute to IRA.
1.6 "Person" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
-1-
<PAGE>
1.7 "Program" means an IBM or non-IBM licensed program (provided by IBM
or another OEM to STG) approved by IBM or the other OEM to be provided to IRA.
Program does not include an OEM's licensed internal code.
1.8 "Service" means assistance performed or marketed by STG, including
without limitation use of a resource (such as a network) approved by IBM to be
provided to IRA.
1.9 "Subsidiary" means with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries.
1.10 "Agreement and Plan of Reorganization" means the Agreement and
Plan of Reorganization dated November, 1997, by and among Savoir, MCBA, Michael
N. Gunnells and John Harkins, as amended.
1.11 "Value Added Enhancement" or "VAE" means the industry specific IBM
approved Application Software Program.
2. Appointment of Industry Remarketer Affiliate. STG hereby appoints
--------------------------------------------
IRA as one of its industry remarketer affiliates (also referred to as solution
provider affiliates) of IBM Products for marketing and sale to End Users in the
United States and Puerto Rico with IRA's VAEs. This appointment is not exclusive
with respect to STG and STG has entered into and reserves the right to enter
into similar agreements with others for the purpose of marketing and
distributing Products. This appointment is exclusive with respect to providing
IBM Products to IRA for resell and IRA agrees to not enter into any similar
arrangement with any others for the purpose of selling IBM Products to End
Users.
3. IRA Obligations.
---------------
3.1 IBM Requirements. IRA shall be subject to any obligations or
----------------
restrictions imposed by IBM under the terms of any applicable agreement between
STG and IBM, as such terms may change from time to time, or between IRA and IBM,
as such terms may change from time to time, and IRA agrees to be bound by and
comply with any such obligations or restrictions. In particular, and without
limitation, IRA will comply with all IBM requirements set forth in IRA's
agreement with IBM, as amended from time to time. In the event IRA breaches any
of the IBM requirements set forth in IRA's agreement with IBM, IRA shall
reimburse STG for any losses or damages caused to STG by said breaches.
4. STG Obligations.
---------------
4.1 Support. STG will provide telephone support to IRA
-------
[****************]. STG will also provide telephone support to IRA's End Users
through its Business Partner
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
-2-
<PAGE>
Solutions Technical Support facility at [**************************************
*******************************************************************************
************************************************************************].
At the direction of IRA, STG will either invoice IRA or such End User for STG's
services with respect to such End Users. If IRA decides to offer monthly support
contracts to End Users, then STG agrees to provide the services under the
contracts entered into by IRA, or enter into contracts directly with such End
Users, as may be elected by IRA. The applicable charge by STG to IRA or such End
Users, as the case may be, shall be as follows:
<TABLE>
<CAPTION>
Monthly Support Charge Monthly Support Charge
for Service From 8-5 CST for 24-Hour Service,
IBM Product on Business Days Only 7 Days a Week
----------- ----------------------- --------------
<S> <C> <C>
RS 6000 family and $[*****] $[****]
AS 400 family
</TABLE>
IRA shall be entitled to all proceeds received from End Users in excess of the
above described STG service charges.
5. Delivery and Title.
------------------
5.1 Delivery. Upon receipt of each purchase order by STG, if the
--------
Product is not then in STG's inventory, STG will, as soon as reasonably possible
but in no event later than two (2) days following receipt of such purchase
order, place the order with IBM or other applicable OEM. With respect to
Products in STG's inventory or after receipt of such products from the
applicable OEM, STG shall ship such Products, as soon as reasonably possible,
F.O.B. STG's or IBM's or the other OEM's facility in the continental United
States. Such Products shall be insured by STG at IRA's cost; provided, however,
IRA shall not be obligated to pay any shipping or insurance charges to the
extent such charges are paid by IBM or other OEM. All Products shall be packaged
for shipment in accordance with STG's usual and customary practices which shall
be reasonably calculated to provide adequate protection for its Products. The
method of shipment and common carrier shall be selected by IRA.
5.2 Passing of Title. Title to the IBM or other Machines will pass from
----------------
STG to IRA. IRA shall pass title to the Machines directly to the End User or, if
applicable, to a third party financing institution on behalf of the End User.
IBM and other OEMs do not transfer title to Programs.
6. Price; Payment.
--------------
6.1 Product Costs; Payment Terms.
----------------------------
(a) IRA shall acquire the Products from STG at the prices of each such
Product as per Exhibit B to this Agreement (the "Price Schedule"). The prices
set forth on the Price
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
-3-
<PAGE>
Schedule shall be increased or decreased, as the case may be, from time to time
for the following reasons: (i) to comply with SECTION 6.1(B) below; and (ii) to
reflect increases or decreases, as the case may be, in the OEM's price to STG.
The prices set forth on the Price Schedule may also be increased or decreased by
STG every Six (6) months to reflect general market conditions.
(b) STG agrees to provide IRA with pricing with respect to each
Product which [****************************************************************
*******************************************************************************
*************************************************************************].
(c) For Products which do not have a price set forth on the Price
Schedule, the cost to IRA shall be based upon a [***************] gross margin
to STG.
(d) STG shall not be responsible for any applicable taxes resulting
exclusively from IRA's purchases of Products under this Agreement, other than
taxes based on STG's sales or income. Payment of STG's invoice shall be due
forty-five (45) days after the invoice date.
(e) Any price decrease for a Product as contemplated by SECTION 6.1(a)
above shall be effective on the effective date of the OEM's corresponding price
reduction with respect to such Product. IRA shall receive the benefit of any
such OEM price reduction with respect to any Product covered by such price
reduction that (i) as of the effective date of such OEM price reduction, has
been ordered by IRA and has not been shipped, or has been shipped but not
installed with the End User (and STG receives the price decrease with respect to
such Product), or (ii) is ordered by IRA subsequent to the effective date of
such OEM price reduction. Any price increase for a Product as contemplated by
SECTION 6.1(A) above shall be effective on the effective date of the OEM's price
increase with respect to such Product.
6.2 Delinquent Payments. If IRA's account becomes delinquent, and the
-------------------
amount of such account is not in dispute, STG may do one or more of the
following: (a) impose a finance charge, up to the maximum permitted by law, on
the delinquent portion of the balance due; or (b) pursue any other remedy
available at law to collect such delinquent amount.
7. Arbitration. Any unresolved dispute arising out of or relating to
-----------
this Agreement, any schedule, certificate or other document delivered by any
party in connection with this Agreement or incident to the transactions
contemplated hereby or the breach, inaccuracy, termination or validity hereof or
thereof or otherwise arising out of or relating to the transactions contemplated
hereby and thereby, or any other agreement among them or between any of them,
whether entered into prior to, on or subsequent to the date of this Agreement or
those arising under any federal, state or local law, regulation or ordinance,
shall be determined by binding arbitration in accordance with certain aspects of
the then current Commercial Arbitration Rules of the American Arbitration
Association. If the amount in controversy in the arbitration exceeds Two Hundred
Fifty Thousand Dollars ($250,000), exclusive of interest, attorneys' fees and
costs or if the controversy relates to the
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
-4-
<PAGE>
termination of this Agreement pursuant to SECTION 9.2 below, the arbitration
shall be conducted by a panel of three (3) neutral arbitrators. Otherwise, the
arbitration shall be conducted by a single neutral arbitrator. The parties shall
endeavor to select neutral arbitrators by mutual agreement. If such agreement
cannot be reached within ten (10) business days after a dispute has arisen which
is to be decided by arbitration, any party or the parties jointly shall request
the American Arbitration Association to submit to each party an identical panel
of fifteen (15) persons. Alternate strikes shall be made to the panel,
commencing with the party bringing the claim, until the name of three (3)
persons remain, or one (1) person if the case is to be heard by a single
arbitrator. The parties may, however, by mutual agreement request the American
Arbitration Association to submit additional panels of possible arbitrators. The
person(s) thus remaining shall be the arbitrator(s) for such arbitration. If
three (3) arbitrators are selected, the arbitrators shall elect a chairperson to
preside at all meetings and hearings. If a dispute is to be resolved by a sole
arbitrator in accordance with the terms hereof, or if the dispute is to be
resolved by a panel of three (3) arbitrators as provided hereinabove, then such
sole arbitrator or the chairperson of such panel, as the case may be, shall be a
member of a state bar engaged in the practice of law in the United States or a
retired member of a state or the federal judiciary in the United States. The
award of the arbitrator(s) shall require a majority of the arbitrators in the
case of a panel of arbitrators, shall be in writing and reasoned, shall be based
on the evidence admitted and the substantive law of the State of Delaware and
shall contain an award for each issue and counterclaim. The award shall be made
within thirty (30) days following the close of the final hearing and the filing
of any post-hearing briefs authorized by the arbitrator(s). The award of the
arbitrator(s) shall be final and binding on the parties hereto and the subject
matter. The arbitration shall be governed by the United States Arbitration Act,
9 U.S.C. ss. 1--16, and judgment upon the award rendered by the arbitrator(s)
may be entered by any court having jurisdiction thereof. The place of
arbitration shall be San Jose, California. Each party shall be entitled to
inspect and obtain a copy of relevant documents in the possession or control of
the other party and to take depositions of the other party's employees, agents,
representatives and witnesses (including expert witnesses). All such discovery
shall be in accordance with procedures approved by the arbitrator(s). Unless
otherwise provided in the award, each party shall bear its own costs of
discovery. No party shall be entitled to submit interrogatories to the other
parties. All discovery shall be expedited, consistent with the nature and
complexity of the claim or dispute and consistent with fairness and justice. The
arbitrator(s) shall have the power to compel any party to comply with discovery
requests of the other parties and to issue binding orders relating to any
discovery dispute which shall be enforceable in the same manner as awards. The
arbitrator(s) also shall have the power to impose sanctions for abuse or
frustration of the arbitration process, including without limitation, the
refusal to comply with orders of the arbitrator(s) relating to discovery and
compliance with subpoenas. The arbitrator(s) are not empowered to award damages
in excess of actual damages and the IRA and STG hereby irrevocably waive any
right to recover such damages with respect to any dispute resolved by
arbitration. Each of the parties agrees to participate in good faith in the
arbitration process and take all reasonable actions to conclude such arbitration
as soon as possible.
8. Term. Subject to earlier termination in accordance with SECTION 9 of
----
this Agreement, the term of this Agreement shall commence on the date set forth
above and
-5-
<PAGE>
continue for a period of [***************] months thereafter at which time this
Agreement will terminate unless otherwise mutually agreed to by the Parties
hereto.
9. Termination.
-----------
9.1 Termination by STG; Expiration. STG shall have the right to (a)
------------------------------
terminate this Agreement immediately upon written notice to IRA if STG is
notified by IBM that IRA no longer meets IBM's guidelines and (b) terminate its
obligation with respect to providing any other OEM's Products to IRA if IRA no
longer meets such OEM's guidelines.
9.2 Termination by IRA. IRA reserves the right to terminate this
------------------
Agreement, upon written notice to STG if STG's contractual relationship with IBM
is terminated or expires and is not renewed.
9.3 Effect of Termination or Expiration. Upon the expiration or
-----------------------------------
termination of this Agreement, IRA will (a) continue to fulfill its obligations
to End Users and in such a way as not to reflect adversely on STG or the
Products; (b) pay to STG when due all outstanding amounts including, but not
limited to, any amounts owing under SECTION 6 hereof within forty-five (45) days
of the invoice date. Upon the expiration or termination of this Agreement, STG
will (a) continue to fulfill its obligations to End Users and in such a way as
not to reflect adversely on IRA, or the Products and (b) pay IRA all due and
outstanding amounts including, without limitation, any amounts due and owing to
IRA under SECTION 4.1 hereof.
10. Confidentiality. STG acknowledges and agrees that this Agreement is
---------------
being executed in connection with the consummation of the transactions
contemplated by the Agreement and Plan of Reorganization. Savoir and MCBA,
jointly and severally, agree to use commercially reasonable efforts to assist
IRA to maintain its present business relationship with the End User customers of
MCBA for the benefit of IRA. Savoir and MCBA jointly and severally agree that
they will (and will cause each person under their control to) keep confidential
and not use any confidential information or make available to any others any
documents, files, customer lists, price lists, or other papers or information
concerning such End User Business except if required pursuant to an order of any
court or administrative agency or otherwise required by law.
11. Miscellaneous Provisions.
------------------------
11.1 Independent Contractor. STG and IRA are independent contractors.
----------------------
Neither party will have any right or authority to act on behalf of the other and
neither party shall represent that it has such right or authority.
11.2 Assignment. IRA agrees not to assign, or otherwise transfer, this
----------
Agreement or its rights under it or delegate its obligations or appoint another
reseller (including a related company) or agent to represent it, without the
consent of STG which shall not be unreasonably withheld. Any attempt to do
either is void. STG agrees not to (a) assign, or otherwise transfer, this
Agreement or its rights under it or (b) delegate its obligations or
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
-6-
<PAGE>
appoint another distributor (including a related company) or agent to represent
it without the consent of IRA, which shall not be unreasonably withheld. A
Change in Control of IRA shall be deemed an assignment for the purposes of this
Section.
11.3 Severability. If any provision of this Agreement, or the
------------
application thereof, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement, and (if appropriate) such
provision to other persons or circumstances, shall remain in full force and
effect and be interpreted so as best to reasonably effect the intent of the
parties hereto.
11.4 Waiver, Amendment, Modification. Any waiver, amendment or other
-------------------------------
modification of this Agreement will not be effective unless in writing and
signed by the party against whom enforcement is sought. The failure by either
party to exercise any of its rights hereunder will not be deemed a waiver of
such rights in the future or a waiver of any other rights under this Agreement.
11.5 Notices. Any notice, approval or other communication required or
-------
permitted under this Agreement between the parties will be given in writing and
will be sent by facsimile, electronic mail or airmail, postage prepaid, to the
address specified above or to any other address that may be designated by prior
notice. Any notice, approval or other communication delivered by facsimile or
electronic mail will be deemed to have been received the day it is sent, as
confirmed by transmission receipt. Any notice, approval or other communication
sent by airmail will be deemed to have been received on the seventh business day
after its date of posting.
11.6 Governing Law. This Agreement will be governed by and interpreted
-------------
in accordance with the laws of the State of Delaware, excluding its conflict of
law principles.
11.7 Entire Agreement. This Agreement constitutes the complete and
----------------
entire statement of all terms, conditions and representations of agreement
between STG and IRA with respect to the subject matter contained herein and
supersedes all prior oral or written agreements or understandings.
INNOVATIVE BUSINESS SYSTEMS, SAVOIR TECHNOLOGY GROUP, INC.
INC.
By By
------------------------------- -------------------------------
Title Title
---------------------------- -----------------------------
-7-
<PAGE>
MCBA SYSTEMS, INC.
By
-------------------------------
Title
----------------------------
-8-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF
THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY
FILED WITH THE COMMISSION.
EXHIBIT B
---------
<TABLE>
MCBA PRICE SCHEDULE
-------------------
<CAPTION>
[******] [****] [****] [*************
*****************]
<S> <C> <C> <C> <C>
[************] [***] [***] [***] [**********************]
[***] [***] [***] [***] [**********************]
[********] [***] [***] [***] [**********************]
</TABLE>
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
-9-
<PAGE>
EXHIBIT 7.2(r)
--------------
FORM OF AGREEMENT NOT TO COMPETE
--------------------------------
THIS AGREEMENT NOT TO COMPETE (the "Non-Compete"), made and entered
into as of __________, 1997 by and among SAVOIR TECHNOLOGY GROUP, INC., a
-----------------------------
Delaware corporation ("STG"), and each of INNOVATIVE BUSINESS SYSTEMS, INC., an
---------------------------------
Alabama corporation ("IRA"), MCBA, INC., an Alabama corporation ("MCBA") and
----------
JOHN HARKINS ("Harkins"),
- ------------
W I T N E S S E T H:
WHEREAS, Harkins is a shareholder and officer of MCBA Systems, Inc., an
Alabama corporation ("MCBA Systems"), a shareholder and officer of MCBA and a
shareholder and officer of IRA; and
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Reorganization, dated as of November 22, 1997 (the "Agreement") by and among
STG, MCBA Systems, STG Acquisition Corp. and Michael N. Gunnells and John
Harkins (together, Michael N. Gunnells and Harkins are referred to herein as the
"Shareholders"), the Shareholders intend to sell, convey, transfer, assign and
deliver all of the issued and outstanding capital stock of MCBA Systems (the
"Shares"), to STG in exchange for certain consideration; and
WHEREAS, this Non-Compete is a condition precedent to the transaction
contemplated in the Agreement, and STG would not consummate the transactions
contemplated by the Agreement absent the execution by IRA, MCBA and Harkins of
this Non-Compete:
NOW, THEREFORE, in consideration of the above recitals and the mutual
promises contained in this Non-Compete and for other and further valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto agree as follows:
1. Definitions. Capitalized terms not otherwise defined in this
-----------
Agreement shall have the meanings set forth in the Agreement.
2. Term. STG and each of IRA, MCBA and Harkins hereby enter into this
----
Non-Compete for a term of three (3) years after Closing.
3. Consideration for Covenant Not to Compete. The sole consideration
-----------------------------------------
for the faithful performance of the obligations specified in Section 4 hereof by
Harkins, MCBA and IRA shall be the consideration received by Harkins under the
Agreement.
4. Agreement Not to Compete. The Parties hereto agree that for the term
------------------------
of this Non-Compete, each of IRA, MCBA and Harkins will not, in any of the
jurisdictions set forth in Exhibit A hereto, directly or indirectly, or through
any affiliate: (a) sell as a distributor computer hardware, including, without
limitation, midrange and mainframe computer systems, or services to value-added
resellers, resellers, midrange or mainframe
-1-
<PAGE>
distributors or systems integrators or (b) approach, contact or solicit any
employee of STG or any affiliate of STG to leave the employ of STG or any of its
affiliates except through general employment advertising.
5. Interpretation.
--------------
(a) Each of IRA, MCBA and Harkins recognize that the foregoing covenant
in Section 4, and the territorial, time and other limitations with respect
thereto, are reasonable and properly required for the adequate protection of the
acquisition of the Shares by STG, and agrees that such limitations are
reasonable with respect to the business activities of IRA, MCBA and Harkins.
(b) The Parties recognize that the laws and public policies of the
various states of the United States and Delaware may differ as to the validity
and enforceability of covenants similar to those contained in Section 4. It is
the intention of the parties that the provisions of Section 4 shall be enforced
to the fullest extent permissible under the laws and public policies of the
State of Delaware and of any other jurisdiction in which enforcement may be
sought, but that the unenforceability (or the modification to conform with such
laws or public policies) of any provisions hereof shall not render unenforceable
or impair the remainder of Section 4. To the extent that Section 4 shall be
declared unenforceable in any one or more of such jurisdictions, such
declaration shall not affect Section 4 with respect to each other jurisdiction,
as Section 4 shall be construed to be severable and independent. If any
provision of Section 4 shall be determined to be invalid or unenforceable,
either in whole or in part, Section 4 shall be deemed amended to delete or
modify, as necessary, the offending provisions and to alter the balance of
Section 4 in order to render the same valid and enforceable to the fullest
extent permissible as aforesaid.
6. Remedies. In the event of a breach or a threatened breach of any of
--------
the covenants contained in Section 4, STG shall, in addition to the remedies
provided by law and in addition to seeking damages through the arbitration
proceeding as provided in Section 13 hereof, have the right and remedy to have
such covenants specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any material breach of any of the covenants
will cause irreparable injury to STG and that money damages will not provide an
adequate remedy to STG.
7. Successors and Assigns. This Non-Compete shall inure to the benefit
----------------------
of the successors and assigns of STG. Neither IRA, MCBA nor Harkins may assign
its or his individual obligations hereunder, and any such proposed assignment
shall be void. Subject to the foregoing, this Non-Compete shall inure to the
benefit of, and bind the heirs, personal representatives, successors and assigns
of MCBA, IRA and Harkins.
8. Waiver. The failure of any party to insist, in any instance, upon
------
performance of any of the terms or conditions of this Non-Compete shall not be
construed as a waiver of future performance of any such term or condition, and
the obligations of any party with respect thereto shall continue in full force
and effect.
-2-
<PAGE>
9. Effectiveness. The effectiveness of this Non-Compete is expressly
-------------
conditioned on the closing of the transaction specified in the Agreement.
10. Entire Agreement. This Non-Compete and the Agreement set forth the
----------------
entire agreement between the Parties with respect to the subject matter hereof
and may be amended only by an agreement in writing signed by the party against
whom enforcement of any amendment is sought.
11. Notices. All notices and demands provided for by this Non-Compete
-------
shall be in writing and (unless otherwise specifically provided herein) shall be
deemed to have been given when mailed by first class mail enclosed in a
registered or certified post-paid envelope addressed to the addresses of the
parties set forth below or to such changed address as any such party may have
fixed by notice; provided, however, that any notice of change of address shall
be effective only upon receipt.
If to STG: Savoir Technology Group, Inc.
254 E. Hacienda Avenue
Campbell, CA 95008
Attention: Chief Financial Officer
Fax: (408) 370-4597
with a copy to: Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304
Attention: Ms. Katharine A. Martin
Fax: (415) 233-4545
If to IRA, Innovative Business Systems, Inc.
Harkins or 4955 Corporate Drive
MCBA: Huntsville, AL 35806
Attention: John Harkins
Fax: (206) 726-9040
with a copy to: Lanier Ford Shaver & Payne P.C.
Suite 5000, 200 West Side Square
Huntsville, AL 35801-4816
Attention: Elizabeth W. Abel
Fax: (205) 533-9322
12. Governing Law. This Non-Compete and its validity, construction and
-------------
performance shall be governed in all respects by the internal laws of the State
of Delaware without giving effect to principles of conflict of laws.
13. Arbitration. All disputes arising out of or relating to this
-----------
Non-Compete shall be determined by binding arbitration in accordance with the
then current Commercial
-3-
<PAGE>
Arbitration Rules of the American Arbitration Association. If the amount in
controversy in the arbitration exceeds Two Hundred Fifty Thousand Dollars
($250,000), exclusive of interest, attorneys' fees and costs, the arbitration
shall be conducted by a panel of three (3) neutral arbitrators. The parties
shall endeavor to select neutral arbitrators by mutual agreement. If such
agreement cannot be reached within thirty (30) calendar days after a dispute has
arisen which is to be decided by arbitration, any party or the parties jointly
shall request the American Arbitration Association to submit to each party an
identical panel of fifteen (15) persons. Alternate strikes shall be made to the
panel, commencing with the party bringing the claim, until the name of three (3)
persons remain, or one person if the case is to be heard by a single arbitrator.
The parties may, however, by mutual agreement request the American Arbitration
Association to submit additional panels of possible arbitrators. The person(s)
thus remaining shall be the arbitrator(s) for such arbitration. If three (3)
arbitrators are selected, the arbitrators shall elect a chairperson to preside
at all meetings and hearings. If a dispute is to be resolved by a sole
arbitrator in accordance with the terms hereof, or if the dispute is to be
resolved by a panel of three (3) arbitrators, as provided hereinabove, then such
sole arbitrator or the chairperson of such panel, as the case may be, shall be a
member of a state bar engaged in the practice of law in the United States or a
retired member of a state or the federal judiciary in the United States. The
award of the arbitrator(s) shall require a majority of the arbitrators in the
case of a panel of arbitrators, shall be in writing and reasoned, shall be based
on the evidence admitted and the substantive law of the state of Delaware and
shall contain an award for each issue and counterclaim. The award shall be made
within thirty (30) days following the close of the final hearing and the filing
of any post-hearing briefs authorized by the arbitrator(s). The award of the
arbitrator(s) shall be final and binding on the parties hereto and the subject
matter. The arbitration shall be governed by the United States Arbitration Act,
9 U.S.C. ss. 1-16, and judgment upon the award rendered by the arbitrator(s) may
be entered by any court having jurisdiction thereof. The place of arbitration
shall be San Jose, California. Each party shall be entitled to inspect and
obtain a copy of relevant documents in the possession or control of the other
party and to take depositions of the other party's employees, agents,
representatives and witnesses (including expert witnesses). All such discovery
shall be in accordance with procedures approved by the arbitrator(s). Unless
otherwise provided in the award, each party shall bear its own costs of
discovery. No party shall be entitled to submit interrogatories to the other
parties. All discovery shall be expedited, consistent with the nature and
complexity of the claim or dispute and consistent with fairness and justice. The
arbitrator(s) shall have the power to compel any party to comply with discovery
requests of the other parties and to issue binding orders relating to any
discovery dispute which shall be enforceable in the same manner as awards. The
arbitrator(s) also shall have the power to impose sanctions for abuse or
frustration of the arbitration process, including without limitation, the
refusal to comply with orders of the arbitrator(s) relating to discovery and
compliance with subpoenas. The arbitrator(s) are not empowered to award damages
in excess of actual damages and each party hereby irrevocably waives any right
to recover such damages with respect to any dispute resolved by arbitration.
-4-
<PAGE>
14. Attorneys. Pillsbury Madison & Sutro LLP has only represented STG
---------
in connection with this transaction. IRA, MCBA and Harkins have had an
opportunity to consult with its/his counsel regarding the terms of this
Non-Compete.
15. Counterparts. This Non-Compete may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have hereto executed this Agreement as
of the date first written above.
SAVOIR TECHNOLOGY GROUP, INC.
By
-------------------------------------
Title
----------------------------------
INNOVATIVE BUSINESS SYSTEMS, INC.
By
-------------------------------------
Title
----------------------------------
MCBA, INC.
By
-------------------------------------
Title
----------------------------------
---------------------------------------
John Harkins
-5-
<PAGE>
EXHIBIT A
---------
I. California Counties:
-------------------
1. Alameda 22. Riverside
2. Alpine 23. Sacramento
3. Calaveras 24. San Benito
4. Contra Costa 25. San Bernardino
5. El Dorado 26. San Diego
6. Fresno 27. San Francisco
7. Glenn 28. San Joaquin
8. Kern 29. San Luis Obispo
9. Kings 30. San Mateo
10. Lake 31. Santa Barbara
11. Los Angeles 32. Santa Clara
12. Madera 33. Santa Cruz
13. Marin 34. Sierra
14. Mariposa 35. Siskiyou
15. Mendocino 36. Solano
16. Merced 37. Sonoma
17. Monterey 38. Stanislaus
18. Napa 39. Sutter
19. Nevada 40. Ventura
20. Orange 41. Yolo
21. Placer 42. Yuba
II. United States
-------------
1. All of the States of the United States other than California.
2. Washington, D.C.
III. Canada, Mexico and Puerto Rico.
------------------------------
A-1
<PAGE>
EXHIBIT 7.3(c)
--------------
FORM OF OPINION OF FMT'S COUNSEL
--------------------------------
____, 1998
MCBA Systems, Inc.
Huntsville, Alabama
Re: Savoir Technology Group, Inc. - Acquisition of MCBA
Systems, Inc.
Ladies and Gentlemen:
We have acted as counsel for Savoir Technology Group, Inc. ("STG") in
connection with the Agreement and Plan of Reorganization (the "Reorganization
Agreement"), dated as of November 22, 1997, by and among STG, MCBA Systems, Inc
("MCBA"), Michael N. Gunnells ("Gunnells") and John Harkins ("Harkins"). This
letter is provided to you in satisfaction of the requirement set forth in
Section 7.3(c) of the Reorganization Agreement. Terms not otherwise defined
herein have the meanings given to them in the Reorganization Agreement.
In connection with the foregoing, we have examined the Reorganization
Agreement, the exhibits and schedules to the Reorganization Agreement, records
of proceedings of the directors and shareholders of STG, the Articles of
Incorporation and Bylaws of STG, certificates of officers of STG and public
officials, and such other documentation as we have deemed necessary or advisable
in order to render the opinions expressed herein.
Based upon the foregoing, it is our opinion that:
1. STG is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. STG has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted.
2. STG has all requisite corporate power and authority to enter into
the Reorganization Agreement and the related agreements contemplated therein,
and, subject to satisfaction of the conditions set forth in the Reorganization
Agreement, to consummate the transactions contemplated thereby. The execution
and delivery of the Reorganization
<PAGE>
MCBA Systems, Inc.
______ __, 1998
Page 2
Agreement and the consummation of the transactions contemplated thereby have
been duly authorized by all necessary corporate action on the part of STG. The
Reorganization Agreement has been duly executed and delivered by STG and
constitutes the valid and binding obligation of STG enforceable in accordance
with its terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization or other similar federal or state laws affecting the rights of
creditors and the effect or availability of rules of law governing specific
performance, injunctive relief or other equitable remedies. Provided the
conditions set forth in Article 7 to the Reorganization Agreement are satisfied,
to our knowledge, the execution and delivery of the Reorganization Agreement do
not, and the consummation of the transactions contemplated thereby will not,
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation under any provision of the
Articles of Incorporation or Bylaws of STG and STG Acquisition, or any contract
identified as a material contract in STG's Form 10-K for the fiscal year ended
December 31, 1996.
3. To our knowledge, no consent, approval, order or authorization of,
or registration, declaration or filing with, any governmental authority is
required by or with respect to STG in connection with the execution and delivery
of the Reorganization Agreement by STG or the consummation by STG of the
transactions contemplated thereby, except for (a) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required by the Reorganization Agreement, (b) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and (c) the listing of the STG Common Stock on
The Nasdaq Stock Market.
4. The authorized capital stock of STG consists of 25,000,000 shares of
Common Stock, par value $0.01 per share and 10,000,000 shares of Preferred
Stock, par value $0.01 per share.
5. The shares of STG Common delivered to you in connection with the
Reorganization Agreement are duly authorized, validly issued, and when paid for
in accordance with the Reorganization Agreement, will be fully paid and
nonassessable.
The foregoing opinion is subject to the following qualifications:
We have assumed the genuineness of all signatures, the authenticity of
all documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as photostatic or telecopied originals, the
legal capacity of all natural persons, and as to documents executed by entities
other than STG, that such entity has complied with any applicable requirement to
file tax returns and pay taxes under applicable state franchise tax laws and had
the power to enter into and perform its obligations under such documents, and
that such documents have been duly authorized, executed and delivered by, and
are binding upon and enforceable against such entities. This opinion is limited
in
<PAGE>
MCBA Systems, Inc.
______ __, 1998
Page 3
all respects to matters governed by the laws of the State of California, the
General Corporation Law of the State of Delaware and the federal laws of the
United States, and we express no opinion concerning the laws or regulations of
any other jurisdiction or jurisdictions.
We assume that you know of no agreements, understandings or
negotiations between the parties not set forth in the Reorganization Agreement
that would modify the terms or rights and obligations of the parties thereunder.
Whenever a statement herein is qualified by "to the best of our
knowledge," "we are not aware" or similar phrase, it indicates that in the
course of our representation of STG no information that would give us current
actual knowledge of the inaccuracy of such statement has come to the attention
of the attorneys in this firm who have rendered legal services in connection
with this transaction. We have not made any independent investigation to
determine the accuracy of such statement, except as expressly described herein.
This opinion is being delivered to you by us as counsel to STG and may
not be delivered to or relied upon by any other person without our express
written approval.
Very truly yours,
E-05573
<PAGE>
EXHIBIT 8.2
-----------
FORM OF ESCROW AGREEMENT
------------------------
THIS ESCROW AGREEMENT, made as of the ____ day of __________, 1998, by
and among SAVOIR TECHNOLOGY GROUP, INC., a Delaware corporation ("STG"), MICHAEL
----------------------------- -------
N. GUNNELLS ("Gunnells") and JOHN HARKINS ("Harkins") (together the "Selling
- -----------
Shareholders"), and FIRST TRUST OF CALIFORNIA, NATIONAL ASSOCIATION ("Escrow
-----------------------------------------------
Agent"),
W I T N E S S E T H:
WHEREAS, STG and the Selling Shareholders have entered into an
Agreement and Plan of Reorganization dated November 22, 1997 (the "Agreement and
Plan of Reorganization"), a copy of which has been delivered to the Escrow
Agent; and
WHEREAS, Section 8.2 of the Agreement and Plan of Reorganization
provides that STG will deposit ten percent (10%) of the shares of STG Common
Stock payable to the Selling Shareholders as Initial Consideration pursuant to
Section 2.6(a) of the Agreement and Plan of Reorganization into an escrow for
the purpose of securing STG's claims for indemnification pursuant to Article 8
and Section 6.8 of the Agreement and Plan of Reorganization; and
WHEREAS, the Escrow Agent is willing to act as escrow agent for STG and
the Selling Shareholders on the terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual covenants, agreements
and conditions set forth herein, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined in this
-----------
Agreement shall have the meanings set forth in the Agreement and Plan of
Reorganization.
2. Establishment of Escrow. On the date of this Agreement, STG will
-----------------------
deliver to the Escrow Agent ten percent (10%) of the shares of STG Common Stock
payable to the Selling Shareholders as initial consideration pursuant to Section
2.6(a) of the Agreement and Plan of Reorganization registered in the name of the
Escrow Agent in accordance with Section 8.2 of the Agreement and Plan of
Reorganization (the "Escrow Fund"). The Escrow Fund shall be held by the Escrow
Agent in escrow subject to the terms and conditions set forth herein. STG shall
pay all costs and fees of the Escrow Agent in connection with this Agreement, as
set forth on the Depository Escrow Fee Schedule attached hereto (the "Fee
Schedule").
3. Escrow Provisions. The provisions of the escrow shall be as set
-----------------
forth in Sections 8.2 through 8.10 of the Agreement and Plan of Reorganization,
the Fee Schedule and the "General Provisions for Corporate Escrow Agreement"
attached hereto (the "General Provisions"). In the event of any conflict between
Sections 8.2 through 8.10 of the Agreement and Plan of Reorganization and the
General Provisions or the Fee Schedule, the General Provisions and the Fee
Schedule shall govern, provided that STG shall pay all costs
-1-
<PAGE>
and fees of the Escrow Agent in connection with this Agreement and the Selling
Shareholders shall have no liability therefor.
4. Miscellaneous.
-------------
(a) This Agreement shall be governed by the laws of the State of
California without regard to principles of conflicts of laws.
(b) Any notice, request, instruction or other document to be given
hereunder by any party to the other shall be in writing and delivered personally
or sent by certified mail, postage prepaid by telecopy, or by courier service,
as follows:
Savoir Technology Group, Inc.
254 E. Hacienda Avenue
Campbell, CA 95008
Attention: Chief Financial Officer
Fax: (408) 370-4597
with a copy to: Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304
Attention: Ms. Katharine A. Martin
Fax: (415) 233-4545
And MCBA Systems, Inc.
4955 Corporate Drive
Huntsville, AL 35806
Attention: Michael N. Gunnells
Fax: (206) 726-9040
with a copy to: Lanier Ford Shaver & Payne P.C.
Suite 5000, 200 West Side Square
Huntsville, AL 35801-4816
Attention: Elizabeth W. Abel
Fax: (205) 533-9322
or to such other persons as may be designated in writing by the
parties, by a notice given as aforesaid.
(c) Attorneys' Fees. If any legal action is brought for the enforcement
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover
-2-
reasonable attorneys' fees and other costs incurred in such action or
proceeding, in addition to any other relief to which it may be entitled.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SAVOIR TECHNOLOGY GROUP, INC.,
a Delaware corporation
By
--------------------------------------
Title
-----------------------------------
SELLING SHAREHOLDERS
--------------------
----------------------------------------
Michael N. Gunnells
----------------------------------------
John Harkins
ESCROW AGENT
------------
FIRST TRUST OF CALIFORNIA,
NATIONAL ASSOCIATION
By
--------------------------------------
Cora Murphy
Trust Officer
-3-
EXHIBIT 99.1
------------
SAVOIR TECHNOLOGY GROUP CONTINUES EXPANSION IN IBM MIDRANGE BUSINESS; ANNOUNCES
AGREEMENT TO ACQUIRE MCBA SYSTEMS
Campbell, California, November 24, 1997 -- Savoir Technology Group, Inc. (Nasdaq
National Market - SVTG), formerly Western Micro Technology, Inc., announced
today that it has signed a definitive agreement to acquire MCBA Systems, Inc.
MCBA Systems will become a division of Business Partner Solutions, Inc. ("BPS"),
a subsidiary of Savoir, which concentrates on the sales and support of IBM
midrange servers. MCBA Systems, headquartered in Huntsville, Alabama,
distributes IBM AS/400(R) and RS/6000(TM) midrange servers and is one of only
four distributors in the United States authorized to resell IBM's S/390(R)
mainframe systems. MCBA Systems revenue for the first ten months of this year
are $19.6 million.
The consideration to be paid for MCBA Systems is 900,000 shares of Savoir common
stock, issued at closing, with an additional earn-out based upon future
performance. The acquisition is subject to a number of conditions including the
approval by the shareholders of Savoir Technology Group, the consent of certain
of Savoir's lenders, and standard regulatory approvals.
"This acquisition is consistent with our overall growth strategy", said Scott
Munro, President and CEO of Savoir Technology Group. "MCBA System's location in
the Southeast provides for complete national geographic presence and with the
addition of the IBM S/390 to our extensive line of IBM products we can provide
our customers with large scale computer systems previously unavailable to us.
More importantly, we expect this transaction will be an accretive one based upon
MCBA Systems historical and projected financial performance."
"We're very excited to become a part of the Business Partner Solutions team,"
said Mike Gunnells, President of MCBA Systems. "BPS will provide us the ability
to offer our resellers additional resources in areas such as complex integration
and leasing, which will enhance their ability to grow and service their customer
base more effectively. Combining our organizations will definitely strengthen
our position as one of IBM's leading distributors in the midrange and mainframe
marketplace."
Savoir Technology Group oversees the successful operation of it's wholly owned
subsidiary; Business Partner Solutions, Inc. and future strategic acquisitions
which fall outside of the market focus of their current businesses. Savoir is
responsible for providing strategic direction, corporate finance resources, a
state-of-the-art information management system, technical integration centers
and efficient logistical support to enable its subsidiaries to deliver to and
service a growing network of customers. For more information, visit Savoir
<PAGE>
Technology Groups' web site at www.svtg.com.
Savoir Technology Group will continue to operate under the name, Western Micro
Technology, Inc. when referring to it's non-IBM distribution business. Western
Micro Technology is a leading distributor of Intel enterprise-level servers for
the Microsoft Windows NT and Unix market, storage and custom solutions to value
added resellers, systems integrators, and original equipment manufacturers
(OEMs). Western Micro provides comprehensive solutions, along with an array of
innovative services to help their customers compete more effectively. Leading
products and services from world class manufacturers are represented such as
Data General, IBM, NCR, SCO, Sun Microsystems, Unisys, and others. For more
information, visit Western Micro's web site at www.westernmicro.com
Business Partner Solutions, Inc. is one of the nation's largest distributors of
IBM midrange products with strong market focus on IBM AS/400 and IBM RS/6000
product lines. BPS employs approximately 200 professionals dedicated to the
sales, service, and support of IBM midrange servers and wireless products to
sophisticated valued added resellers. Additional services include light
manufacturing through IBMs Authorized Assembler Program and a host of leasing
programs. Key suppliers to BPS include IBM, Motorola, and Telxon wireless
products. For more information, visit Business Partner Solutions' web site at
www.bpsolutions.net.
When used in this disclosure, the words "estimate", "project", "intend",
"expect" and similar expressions are used to identify forward-looking
statements. Such statements are subject to risks and uncertainties that could
cause actual results to differ materially. For a discussion of certain of such
risks, see "Factors Affecting Future Results" contained within the Company's
documents filed quarterly with the Securities and Exchange Commission. Readers
are cautioned not to place undue reliance on these forward looking statements,
which speak only as of the date hereof. There can be no assurances that the
transaction described above will be completed since it is subject to a number of
contingencies. The Company undertakes no obligation to publicly release updates
or revisions to these statements.
###
For More Information Contact:
Sandra M. Salah
Vice President, Corporate Relations
Savoir Technology Group, Inc.
408-341-4712
[email protected]
Savoir Technology Group and the Savoir Technology Group logo are trademarks of
Savoir Technology Group, Inc. Business Partner Solutions, BPS, and the Business
Partner Solutions
<PAGE>
logo are trademarks of Business Partner Solutions, Inc. Western Micro
Technology, Western Micro, and the Western Micro logo are registered trademarks
of Western Micro Technology, Inc. IBM, IBM AS/400, IBM S/390 are registered
trademarks and IBM RS/6000 is a trademark of International Business Machine
Corporation and are used under license. All other company and/or product names
are respective property of their prospective holders and should be treated as
such.
