Confidential Materials omitted and filed separately
with the Securities and Exchange Commission
Asterisks denote such omissions
STOCK PURCHASE AGREEMENT
AMONG
OPEN MARKET, INC.
XXXX ELSEVIER INC. AND FOLIO CORPORATION
FEBRUARY 20, 1997
STOCK PURCHASE AGREEMENT
This Agreement (the "Agreement") dated as of February 20, 1997 is by and
among Open Market, Inc., a Delaware corporation with its principal office at 000
Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 (the "Buyer"), Folio Corporation, a
Utah corporation with its principal office at 0000 Xxxxx 000 Xxxx, Xxxxx, Xxxx
00000 (the "Company"), and Xxxx Elsevier Inc., a Massachusetts corporation with
an office at 000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 and the sole
stockholder of the Company ("Stockholder"), who owns all of the issued and
outstanding capital stock of every kind and description of the Company.
Preliminary Statement
1. The Stockholder owns, or at the Closing (as defined below) will own,
1,480 shares (the "Shares") of the common stock, no par value per share
(the "Common Stock") of the Company, which Shares will represent all of the
issued and outstanding shares of capital stock of the Company immediately prior
to the Closing.
2. The Buyer desires to purchase, and the Stockholder desires to sell,
the Shares for the consideration set forth below, upon the terms and subject to
the conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows.
1. Purchase and Sale of the Shares.
1.01 Purchase of the Shares from the Stockholder. Upon the terms
and subject to the conditions of this Agreement, at the closing of the
transactions contemplated by this Agreement (the "Closing"), the Stockholder
shall sell, transfer, convey, assign and deliver to the Buyer, and the Buyer
shall purchase, acquire and accept from the Stockholder, the Shares. At the
Closing, the Stockholder shall deliver to the Buyer a certificate evidencing
such Shares duly endorsed in blank or with stock power(s) duly executed by the
Stockholder.
1.02 Further Assurances. At any time and from time to time after
the Closing, at the Buyer's request and without further consideration, the
Stockholder shall promptly execute and deliver such instruments of sale,
transfer, conveyance, assignment and confirmation, and take all such other
action as the Buyer may reasonably request, in order to more effectively
transfer, convey and assign to the Buyer, and to confirm the Buyer's title to,
all of the Shares, to put the Buyer in actual possession and operating control
of the assets, properties and business of the Company, to assist the Buyer in
exercising all rights with respect thereto and to carry out the purpose and
intent of this Agreement.
1.03 Base Purchase Price.
(a) The purchase price to be paid by the Buyer for the
Shares and the non-competition agreement in Section 9.03 hereof
shall be Forty-Five Million Dollars ($45,000,000) (the "Base Purchase Price"),
subject to adjustment pursuant to Sections 1.04 and 1.05 hereof. In payment of
the Base Purchase Price, the Buyer shall deliver to the Stockholder:
(i) at the Closing, the sum of Ten Million Dollars ($10,000,000) by wire
transfer of immediately available funds to an account designated by the
Stockholder;
(ii) at the Closing, that number of shares of common stock, $.001 par value
per share ("Buyer Common Stock"), of the Buyer, determined by dividing
$12,500,000 by the Average Closing Price. The Average Closing Price
shall equal the average of the reported closing price of a share of
Buyer Common Stock on the Nasdaq National Market for each of the ten
(10) trading days immediately preceding the public announcement by Buyer
of the acquisition by Buyer of the Company;
(iii) on January 5, 1998, a number of shares of Buyer Common Stock (subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares)
equal to the number of shares issued to the Stockholder pursuant to
clause (ii) above (the shares issued pursuant to this Section
1.03(a)(ii) and (iii) shall be collectively referred to herein as the
"Buyer Shares"); and
(iv) at the Closing, the promissory note of the Buyer in the original
principal amount of $10,000,000 in the form attached hereto as Exhibit
A.
(b) From and after the Closing, the Stockholder shall
have registration rights with respect to Buyer Common Stock issued to
Stockholder hereunder in accordance with the provisions of Appendix I hereto,
which are incorporated herein by reference.
(c) On or before the Closing the parties shall mutually
agree on the allocation of the Base Purchase Price among the Shares and the non-
competition agreement contained in Section 9.03 hereof. Further, any
amounts allocated for the non-competition agreement shall be deemed to be
included in the payment made to Stockholder pursuant to Section 1.03(a)(i).
1.04 Post-Closing Adjustments. The Base Purchase Price set forth
in Section 1.03 hereof shall be subject to adjustment after the date of the
Closing (the "Closing Date") as follows:
(a) As promptly as possible following the Closing Date,
the Buyer shall cause Xxxxxx Xxxxxxxx LLP, independent public accountants for
the Buyer (the "Buyer's Auditors"), to conduct an audit of the books and records
of the Company as of the Closing Date. Not later than 75 days after the Closing
Date, the Buyer shall cause the Buyer's Auditors to deliver a balance sheet of
the Company as of the Closing Date (as corrected pursuant to Section 1.04(c)
hereof, the "Closing Balance Sheet") to each of the parties to this Agreement.
The Closing Balance Sheet shall be prepared in accordance with United States
generally accepted accounting principles ("USGAAP"), and in a manner consistent
with the Financial Statements of the Company referred to in Section 3.06 except
to the extent inconsistent with USGAAP, without any adjustments applicable
solely as a result of the acquisition of the Shares by the Buyer on the Closing
Date, and shall be certified without qualification by the Buyer's Auditors in
accordance with generally accepted auditing standards. The Closing Balance Sheet
shall be accompanied by a statement prepared by the Buyer's Auditors setting
forth the basis for the determination of the items and values reflected on the
Closing Balance Sheet.
(b) The Stockholder and one firm of independent
certified public accountants acting on behalf of the Stockholder (the
"Stockholder's Auditors") shall have the right to review the work papers of the
Buyer's Auditors utilized in preparing the Closing Balance Sheet, and shall have
full access to the books, records, properties and personnel of the Company for
purposes of verifying the accuracy and fairness of the presentation of the
Closing Balance Sheet. The Stockholder shall
work in good faith and reasonably cooperate with the Buyer and the Buyer's
Auditors in the preparation of the Closing Balance Sheet and the resolution of
any dispute in connection therewith pursuant to paragraph (c) below.
(c) The values or amounts for each item reflected on the
Closing Balance Sheet shall be binding upon the Stockholder (absent fraud or
manifest error), unless the Stockholder gives written notice within 45 days
after delivery of the Closing Balance Sheet, of disagreement with any of the
values or amounts shown on the Closing Balance Sheet, specifying as to each such
item in reasonable detail, the nature and extent of such disagreement (the
"Dispute Notice"). If the Buyer and the Stockholder are unable to resolve any
such disagreement within 45 days after the date of delivery of the Dispute
Notice, the disagreement shall be submitted to arbitration in accordance with
the provisions of Section 11 hereof. If as a result of the resolution of any
disputes by agreement or by arbitration pursuant to Section 11, any amount shown
in the Closing Balance Sheet is determined to be not in conformance with the
provisions hereof, such nonconforming amount shall be deleted from the Closing
Balance Sheet and the conforming amount shall be inserted in lieu thereof. The
Closing Balance Sheet, as so conformed, shall constitute the Closing Balance
Sheet for purposes of this Agreement.
(d) The Buyer shall pay the fees and disbursements of
the Buyer's Auditors. The fees and disbursements of the Stockholder's Auditors
incurred in the review of the Closing Balance Sheet shall be paid by the
Stockholder.
(e) Immediately upon the expiration of the 45-day period
for giving the Dispute Notice, if no Dispute Notice is received by the Buyer, or
immediately upon the resolution of disputes, if any, pursuant to this Section
1.04, the Base Purchase Price shall be adjusted as follows (as so adjusted, the
"Adjusted Purchase Price"):
(i) If the Closing Net Worth of the Company (as such term is defined
below) on the Closing Date is less than $14,963,000, the deficiency
shall be deducted from the Base Purchase Price to obtain the Adjusted
Purchase Price.
(ii) If the Closing Net Worth of the Company on the Closing Date is more
than $14,963,000, the excess shall be added to the Base Purchase Price
to obtain the Adjusted Purchase Price.
(iii) The term "Closing Net Worth" of the Company is defined as the excess of
the total assets over the total liabilities as shown in the Closing
Balance Sheet adjusted for the items (A) through (F) described below:
(A) The aggregate amount of allowance for uncollectible accounts
receivable and the allowance for sales returns and concessions included in the
Closing Balance Sheet in excess of the aggregate amount of the same allowances
included in the Company's unaudited financial statements prepared by the
Stockholder as of the Closing Date ("Unadjusted Balance Sheet") will be excluded
from the computation of Closing Net Worth. The Seller agrees that the Unadjusted
Balance Sheet shall contain allowances for uncollectible accounts receivable and
sales returns and concessions at an aggregate amount equal to or greater than
the aggregate amount ($264,279) included in the Company's financial statements
as of December 31, 1996 in preparing the Unadjusted Balance Sheet.
(B) The aggregate net amount of all intangible assets resulting from the
purchase of the Company by the Stockholder in December 1994 included in the
Closing Balance Sheet will be excluded from the computation of Closing Net Worth
of the Company.
(C) The amount of Taxes (as defined in Section 3.09(a)) accruals
included in the Closing Balance Sheet in excess of the amount of Taxes accruals
included in the Unadjusted Balance Sheet will be excluded from the computation
of Closing Net Worth of the Company.
(D) All liabilities due and payable to the
Stockholder and its Affiliates will be excluded from the computation of Closing
Net Worth of the Company other than obligations arising from arm's-length
transactions for the sale of products or services entered into in the Ordinary
Course of Business or as otherwise contemplated hereby.
(E) The amount of deferred revenue included in the Closing Balance Sheet
in excess of the amount of deferred revenue included in the Unadjusted Balance
Sheet will be excluded from the computation of Closing Net Worth of the Company.
(F) The amount of reserves for potential litigation settlements included
in the Closing Balance Sheet in excess of the amount of reserves for potential
litigation settlements included in the Unadjusted Balance Sheet will be excluded
from the computation of Closing Net Worth.
(G) Fixed assets shall be recorded in the Closing Balance Sheet at their
historical values less accumulated depreciation through the Closing Date, using
the same useful lives, as used in the preparation of the Unadjusted Balance
Sheet.
1.05 Payments on Account of Adjustments.
(a) If the Adjusted Purchase Price is less than the Base
Purchase Price, the difference together with interest thereon at the rate of 8%
per annum from the Closing Date to the payment of such difference, shall be paid
to the Buyer immediately upon the expiration of the 45-day period for giving the
Dispute Notice, if no Dispute Notice is given, or immediately upon final
resolution, in accordance with Section 11 hereof, of any dispute in connection
with the determination of the Adjusted Purchase Price.
(b) If the Adjusted Purchase Price is more than the Base
Purchase Price, the difference together with interest thereon at the rate of 8%
per annum from the Closing Date to the payment of such difference, shall be paid
to the Stockholder immediately upon the expiration of the 45-day period for
giving the Dispute Notice, if no Dispute Notice is
given, or immediately upon final resolution, in accordance with Section 11
hereof, of any dispute in connection with the determination of the Adjusted
Purchase Price.
(c) All amounts except interest payable pursuant to
paragraph (a) or (b) of this Section 1.05, shall be paid by Buyer or the
Stockholder, as applicable, by the delivery and transfer of Buyer Shares with an
aggregate value equal to the amount to be paid; for purposes of determining said
aggregate value, the value of a share of Buyer Common Stock shall be equal to
the Average Closing Price. Interest will be payable in cash.
(d) Notwithstanding the above, any adjustment amount
payable hereunder may, at the option of the party making such payment, be made
in cash. Any adjustment amount in excess of $5,000,000 shall be paid in cash.
1.06 Closing. The Closing shall take place at the offices
of Xxxx and Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 at 10:00
a.m., Boston Time, on the earlier of March 3, 1997 or the third business day
after the expiration or termination of all applicable waiting periods (and any
extensions thereof) under the Xxxx-Xxxxx-Xxxxxx Act (as defined below) or at
such other place, time or date as may be mutually agreed upon in writing by the
parties. The transfer of the Shares by the Stockholder to the Buyer shall be
deemed to occur at 10:00 a.m., Boston Time, on the Closing Date.
1.07 Election.
(a) Subject to the conditions in paragraph (b) below the
Stockholder agrees, if so directed by the Buyer, to join with Buyer in making an
election under Section 338(h)(10) of the Code (and any corresponding elections
allowable under state, local, or foreign tax law) (collectively, a "Section
338(h)(10) Election") with respect to the purchase and sale of the Shares
hereunder. Stockholder will pay any Tax, including any liability of the Company
for Tax resulting from the application to it of Treasury
Regulations under Section 338, attributable to the making of the Section
338(h)(10) Election and will indemnify the Buyer and the Company against any
adverse consequences arising out of any failure to pay such Tax. Stockholder
will also pay any state, local, or foreign tax (and indemnify the Buyer and the
Company, against any adverse consequences arising out of any failure to pay such
Tax) attributable to an allowable election under state, local or foreign law
similar to the election available under Section 338(g) of the Code (or which
results from the making of an election under Section 338(g) of the Code) with
respect to the purchase and sale of the stock of the Company hereunder.
(b) Notwithstanding paragraph (a) above, the Stockholder
need not agree to join in the Section 338(h)(10) Election unless either (i) such
Election does not cause Stockholder to incur any greater Tax liability resulting
from the sale of the Shares than it would have incurred had such Election not
been made or (ii) Buyer will pay to Stockholder an additional cash amount which
indemnifies Stockholder for such additional liability incurred.
2. Representations of the Stockholder Regarding the Shares.
The Stockholder represents and warrants to the Buyer as follows:
(a) The Stockholder has good and marketable title to the
Shares, free and clear of any and all covenants, conditions, restrictions,
voting trust arrangements, liens, charges, encumbrances, options and adverse
claims or rights whatsoever ("Claims").
(b) The Stockholder has the full right, power and
authority to enter into this Agreement and to transfer, convey and sell the
Shares to the Buyer at the Closing and, upon consummation of the purchase
contemplated hereby, the Buyer will acquire from the Stockholder good and
marketable title to such Shares, free and clear of all Claims.
(c) The Stockholder is not a party to, subject to or
bound by any agreement or any judgment, order, writ, prohibition,
injunction or decree of any court or other governmental body which would prevent
the execution or delivery of this Agreement by the Stockholder or the transfer,
conveyance and sale of the Shares to the Buyer pursuant to the terms hereof.
(d) Except for Xxxxxxxxx & Xxxxx LLC, no broker or
finder has acted for the Stockholder or the Company in connection with this
agreement or the transactions contemplated hereby, and no broker or finder is
entitled to any brokerage or finder's fee or other commissions in respect of
such transactions based upon agreements, arrangements or understandings made by
or on behalf of the Stockholder or the Company.
3. Representations and Warranties of the Stockholder and the Company.
The Stockholder and the Company, jointly and severally,
represent and warrant to the Buyer that the statements contained in this Section
3 are true and correct, except as set forth in the disclosure schedule attached
hereto (the "Disclosure Schedule"). The Disclosure Schedule shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Section 3.
3.01 Organization, Qualification and Corporate Power. The
Company is a corporation duly organized, validly existing and in corporate and
tax good standing under the laws of the State of Utah. The Company is duly
qualified to conduct business and is in corporate and tax good standing under
the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
failure to so qualify will not have a material adverse effect on the assets,
business, financial condition, results of operations or future prospects of the
Company. The Company has all requisite corporate power and authority to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it. The Company has furnished to the Buyer
true and complete copies of its Articles of Incorporation and By-laws, each as
amended and as in effect on the date hereof. The Company is not in default under
or in violation of any provision of its Articles of Incorporation or By-laws.
3.02 Capitalization. The authorized capital stock of the
Company consists of 1,000 shares of Common Stock, no par value per share, all of
which shares are issued and outstanding and owned of record and beneficially by
the Stockholder and at the Closing the authorized capital stock of the Company
will consist of 1,500 shares of Common Stock, no par value per share, of which
1,480 shares will be issued and outstanding and owned of record and beneficially
by the Stockholder. All of the issued and outstanding Shares are, and prior to
the Closing will be, duly authorized, validly issued, fully paid, nonassessable
and free of all preemptive rights. There are no outstanding or authorized
options, warrants, rights, agreements or commitments to which the Company is a
party or which are binding upon the Company providing for the issuance,
disposition or acquisition of any of its capital stock. There are no outstanding
or authorized stock appreciation, phantom stock or similar rights with respect
to the Company. There are no agreements, voting trusts, proxies or
understandings with respect to the voting, or registration under the Securities
Act of 1933, of any shares of capital stock of the Company. All of the issued
and outstanding shares of capital stock of the Company were issued in compliance
with applicable federal and state securities laws.
3.03 Authority. The Company has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement and the performance by
the Company and the Stockholder of this Agreement and the consummation by the
Company and the Stockholder of the transactions contemplated hereby have been
duly and validly authorized by all necessary
corporate action on the part of the Company and the Stockholder, as applicable.
This Agreement has been duly and validly executed and delivered by the Company
and the Stockholder, respectively, and constitutes a valid and binding
obligation of the Company, and the Stockholder, respectively, enforceable
against the Company and the Stockholder, respectively, in accordance with its
terms.
3.04 Noncontravention. Subject to compliance with the
applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "Xxxx-Xxxxx-Xxxxxx Act"), neither the execution and
delivery of this Agreement by the Company and the Stockholder, nor the
consummation by the Company and the Stockholder of the transactions contemplated
hereby, will (a) conflict with or violate any provision of the charter or by-
laws of the Company or the Stockholder, (b) require on the part of the Company
or the Stockholder any filing with, or any permit, authorization, consent or
approval of, any court, arbitrational tribunal, administrative agency or
commission or other governmental or regulatory authority or agency (a
"Governmental Entity"), (c) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver under, any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement
or mortgage for borrowed money, instrument of indebtedness, Security Interest
(as defined below) or other arrangement to which the Company or the Stockholder
is a party or by which the Company or the Stockholder is bound or to which any
of their respective assets is subject, other than any conflict, breach, default,
acceleration, termination, modification or cancellation which individually or in
the aggregate would not have a material adverse effect on any of the assets,
business, financial condition, results of operations or future prospects of the
Company (a "Material
Adverse Effect") or on the ability of the parties to consummate the transactions
contemplated by this Agreement, (d) result in the imposition of any Security
Interest upon any assets of the Company or (e) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or the
Stockholder or any of their respective properties or assets. For purposes of
this Agreement, "Security Interest" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien (whether arising by contract or by
operation of law), other than (i) mechanic's, materialmen's, and similar liens,
(ii) liens arising under worker's compensation, unemployment insurance, social
security, retirement, and similar legislation, and (iii) liens on goods in
transit incurred pursuant to documentary letters of credit, in each case arising
in the ordinary course of business consistent with past custom and practice
(including with respect to frequency and amount) ("Ordinary Course of Business")
of the Company and not resulting in a material Adverse Effect.
3.05 Subsidiaries. The Company has no subsidiaries and the
Company has no equity or other ownership interest in any corporation,
partnership or other entity.
3.06 Financial Statements; Cash Balance.
(a) The Company has provided to the Buyer the unaudited
balance sheets and statements of income, changes in stockholder's equity and
cash flows for each of the last two fiscal years for the Company. Except as set
forth in Section 3.06 of the Disclosure Schedule, such financial statements
(collectively, the "Financial Statements") have been prepared in accordance with
USGAAP applied on a consistent basis throughout the periods covered thereby,
fairly present the financial condition, results of operations and cash flows of
the Company as of the respective dates thereof and for the periods referred to
therein and are consistent with the books and records of the Company.
(b) The Stockholder warrants that as of the Closing Date
the Company will have at least $1.00 of cash balances as reflected on the books
and records of the Company.
3.07 Absence of Certain Changes. Since December 31, 1996,
(a) there has not been any material adverse change in any of the assets,
business, financial condition or results of operations of the Company, nor has
there occurred any event or development which could reasonably be foreseen to
result in such a material adverse change in the future, and (b) the Company has
not taken any of the actions set forth in paragraphs (a) through (n) of Section
5.04.
3.08 Undisclosed Liabilities. Except as otherwise disclosed
in Section 3.08 of the Disclosure Schedule and for Assumed Taxes (as defined
below), the Company does not have any liability (whether known or unknown,
absolute or contingent, liquidated or unliquidated and due or to become due),
except for (a) liabilities shown on the balance sheet dated December 31, 1996
("1996 Balance Sheet"), (b) liabilities which have arisen since December 31,
1996 in the Ordinary Course of Business and which are similar in nature and
amount to the liabilities which arose during the comparable period of time in
the immediately preceding fiscal period and (c) liabilities incurred in the
Ordinary Course of Business which are not required by USGAAP to be reflected on
a balance sheet.
3.09 Tax Matters.
(a) Except for Taxes (as defined below) for which Stockholder
has assumed liability pursuant to Section 7.01 herein ("Assumed Taxes"), the
Company has filed all Tax Returns (as defined below) that it was required to
file and all such Tax Returns were correct and complete in all material
respects. The Company has paid all Taxes that are shown to be due on any such
Tax Returns. The unpaid Taxes of the Company for tax periods through December
31, 1996 do not exceed the accruals and reserves (other than reserves for
deferred taxes) for Taxes set forth on the 1996 Balance Sheet. The Company does
not have any actual or potential liability for any unpaid Tax obligation of any
taxpayer (including without limitation any affiliated group of corporations or
other entities that included the Company during a prior period), whether
pursuant to law or pursuant to any tax sharing agreement or otherwise, other
than the Company. Except as set forth in Section 3.09 of the Disclosure Schedule
and except for Assumed Taxes, all Taxes that the Company is or was required by
law to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper Governmental Entity responsible
for the imposition or collection of Taxes (the "Taxing Authority"). For purposes
of this Agreement, "Taxes" means all taxes, charges, fees, levies or other
similar assessments or liabilities, including without limitation income, gross
receipts, ad valorem, premium, value-added, excise, real property, personal
property, sales, use, transfer, withholding, employment, payroll and franchise
taxes imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of the United
States or any such government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest or dispute thereof. For purposes of this Agreement,
"Tax Returns" means all reports, returns, declarations, statements or other
information required to be supplied to a Taxing Authority in connection with
Taxes.
(b) The Company has delivered to the Buyer correct and complete
copies of all pro forma federal and state income Tax Returns, examination
reports and statements of deficiencies assessed against or agreed to by the
Company since December 2, 1994. The federal income Tax Returns of the Company
have been audited by the Internal Revenue Service or are closed by the
applicable statute of limitations for all taxable years through
December 31, 1992. No examination or audit of any Tax Returns of the Company by
any Governmental Entity is currently in progress or, to the knowledge of the
Company or the Stockholder, threatened or contemplated. Neither the Company nor
the Stockholder has waived any statute of limitations with respect to Taxes or
agreed to an extension of time with respect to a Tax assessment or deficiency.
(c) The Company is not a "consenting corporation" within the
meaning of Section 341(f) of the Internal Revenue Code of 1986, as amended (the
"Code"), and none of the assets of the Company are subject to an election under
Section 341(f) of the Code. The Company has not made or is not obligated to make
any payment or is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Section
280G of the Code or that are subject to any excise tax under Section 4999 of the
Code. The Company has not been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(l)(A)(ii) of the Code. The Company is currently not
a party to any Tax allocation or sharing agreement.
(d) The Company is not, and has not ever been, a member of an
"affiliated group" of corporations (within the meaning of Section 1504 of the
Code), other than the group of which it presently is a member and other than the
consolidated group of The Xxxx Corporation.
3.10 Assets. The Company owns or leases all tangible assets
necessary for the conduct of its businesses as presently conducted and as
presently proposed to be conducted. Each such tangible asset with a net book
value in excess of $10,000 is free from material defects, has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear) and is suitable for the purposes for
which it presently is used. No asset of the Company (tangible or intangible) is
subject to any Security Interest. Attached to the Disclosure
Schedule is a materially true, correct and complete list of each asset owned or
leased by the Company with a net book value in excess of $10,000.
3.11 Owned Real Property. Section 3.11 of the Disclosure
Schedule lists the address of the sole parcel of real property that the Company
owns (together with all improvements on and appurtenances to said parcel, the
"Real Estate"). With respect to the Real Estate:
(a) the Company has good and clear record and marketable title
to the Real Estate, insurable by a recognized national title insurance company
at standard rates, free and clear of any Security Interest, easement, covenant,
restriction, lien, reservation, tenancy or other obligation except for the
recorded easements, covenants and other restrictions set forth in Section 3.11
of the Disclosure Schedule (the "Permitted Encumbrances");
(b) there are no (i) pending or, to the knowledge of the Company
or the Stockholder, threatened condemnation proceedings relating to the Real
Estate, (ii) pending or, to the knowledge of the Company or the Stockholder,
threatened litigation or administrative actions relating to the Real Estate, or
(iii) other matters affecting adversely the occupancy, ownership or value of the
Real Estate or the use of the same as an office building with ancillary uses
(the "Intended Uses");
(c) the legal description for the Real Estate contained in the
existing title insurance policy therefor describes the Real Estate fully and
adequately; the Real Estate may be used as of right under applicable zoning and
land use laws for the Intended Uses, and the buildings and improvements thereon
are located within the boundary lines of the described parcels of land
comprising the Real Estate, are not in violation of current setback
requirements, zoning laws and ordinances and do not encroach on any easement
which may burden the Real Estate; the Real Estate does not serve any adjoining
property for any purpose inconsistent with the Intended Uses; and the Real
Estate is not located within any flood plain or subject to any
similar type restriction for which any permits or licenses necessary to the use
thereof have not been obtained;
(d) there are no leases, subleases, licenses or agreements,
written or oral, granting to any party or parties (other than the Company) the
right of use or occupancy of any portion of the Real Estate, and no party other
than the Company currently uses or occupies any portion of the Real Estate;
(e) there are no outstanding options or rights of first refusal
to purchase the Real Estate or any portion thereof or interest therein;
(f) all facilities located on the Real Estate are supplied with
utilities and other services necessary for the operation of such facilities,
including gas, electricity, water, telephone, sanitary sewer and storm sewer,
all of which services are adequate for the Intended Uses and in accordance with
all applicable laws, ordinances, rules and regulations and are provided via
public roads or via permanent, irrevocable, appurtenant easements benefiting the
Real Estate;
(g) the Real Estate abuts on and has direct vehicular access to
a public road or access to a public road via a permanent, irrevocable,
appurtenant easement benefiting the Real Estate;
(h) the Company has not received notice of, and to the best of
the Company's or the Stockholder's knowledge, there is no proposed or pending
proceeding to change or redefine the zoning classification of all or any portion
of the Real Estate;
(i) the improvements constructed on the Real Estate are in good
condition and proper order, free of roof leaks, insect infestation, and material
construction defects, and all mechanical and utility systems servicing such
improvements are in good condition and proper working order, free of material
defects;
(j) the Real Estate is an independent unit which does not rely
on any facilities (other than the facilities of public utility
and water companies) located on any other property (i) to fulfill any zoning,
building code, or other municipal or governmental requirement, (ii) for
structural support or the furnishing of any essential building systems or
utilities, including, but not limited to electric, plumbing, mechanical,
heating, ventilating, and air conditioning systems, or (iii) to fulfill the
requirements of any lease. No building or other improvement not included in the
Real Estate relies on any part of the Real Estate to fulfill any zoning,
building code, or other municipal or governmental requirement or for structural
support or the furnishing of any essential building systems or utilities;
(k) except as set forth in Section 3.11 of the Disclosure
Schedule, no work has been performed on or materials supplied to the Real Estate
within any applicable statutory period which could give rise to mechanics or
materialmen's liens;
(l) except as set forth in Section 3.11 of the Disclosure
Schedule, there are no taxes or betterment assessments other than current real
estate taxes pending or payable against the Real Estate and there are no
contingencies existing under which any assessment for real estate taxes may be
retroactively filed against the Real Estate; there are no taxes or levies,
permit or connection fees which must be paid respecting existing curb cuts,
sewer hookups, water-main hookups or services of a like nature; and the Real
Estate is assessed by local property assessors as a tax parcel or parcels
separate from all other tax parcels;
(m) no notices, permits, licenses, approvals, taxes or fees
relating to the Real Estate, including transfer taxes and recording fees, are
required to be filed, secured or paid for in connection with the transaction
described in this Agreement;
(n) the Real Estate complies with the requirements of (i) all
environmental, pollution control, waste products and sewage control statutes,
laws, codes, ordinances, rules, orders, regulations and decrees
of any and all Governmental Entities and (ii) all building, zoning, subdivision,
health, safety and all other applicable statutes, laws, codes, ordinances,
rules, orders, regulations and decrees of any and all Government Entities except
to the extent that the violation of which will not have a Material Adverse
Effect;
(o) Section 3.11 of the Disclosure Schedule sets forth a true,
correct and complete list of all title insurance policies, surveys, engineering
reports, if any, and hazardous waste reports prepared by or on behalf of the
Company or the Stockholder since December 2, 1994 with respect to the Real
Estate, true, correct and complete copies of which have previously been
delivered by the Company to the Buyer;
(p) no consent of any mortgagee of the Real Estate or other
third party holding an interest in the Real Estate is required in connection
with the transactions contemplated under this Agreement; and
(q) the Company has delivered to the Buyer true, correct and
complete copies of the following materials relating to the Real Estate, to the
extent in the Stockholder's or the Company's possession: appraisals, title
insurance policies currently in force, surveys, engineering and structural
reports, warranties, as-built plans and specifications and environmental site
assessments.
3.12 Intellectual Property.
(a) The Company owns, or is licensed or otherwise
possesses legally enforceable rights to use, all patents and registered
trademarks, and all material trademarks, trade names, service marks, copyrights,
and any applications for such patents, trademarks, trade names, service marks
and copyrights, schematics, technology, know-how, computer software programs or
applications and tangible or intangible proprietary information or material
(collectively, "Intellectual Property") that are used to conduct its business as
currently conducted or currently planned to be conducted in the manner so
planned. It is understood that Buyer
is not acquiring any rights hereunder to any intellectual property of the
Stockholder or its Affiliates (other than the Company) which is either (i) used
by the Company in the marketing of its products in order to identify the
Company's affiliation with the Stockholder and its Affiliates or (ii) used by
such Affiliates or the Stockholder in their capacity as licensees or
distributors of the Company's products in order to identify themselves as the
distributor of the relevant product or to associate such product with their own
products marketed in association with such product. Section 3.12 of the
Disclosure Schedule lists (i) all patents and patent applications and all
trademark, and service xxxx registrations and applications therefor, registered
copyrights, and other material trademarks, trade names and service marks which
are used in the business of the Company, including the jurisdictions in which
each such Intellectual Property right has been issued or registered or in which
any such application for such issuance or registration has been filed, (ii) all
material written licenses, sublicenses and other agreements to which the Company
is a party and pursuant to which any person is authorized to use any
Intellectual Property rights, and (iii) all material written licenses,
sublicenses and other agreements as to which the Company is a party and pursuant
to which the Company is authorized to use any third party patents, trademarks,
copyrights, or other intellectual property right, including software ("Third
Party Intellectual Property Rights") which are used in the business of the
Company or which form a part of any product or service of the Company. The
Company is not a party to any oral license, sublicense or agreement which, if
reduced to written form, would be required to be listed in Section 3.12 of the
Disclosure Schedule under the terms of this Section 3.12(a).
(b) The Company is not, nor will it be as a result of
the execution and delivery of this Agreement or the performance of the Company's
obligations under this Agreement, in breach of any license,
sublicense or other agreement relating to the Intellectual Property or Third
Party Intellectual Property Rights.
(c) The Company has not been named, and to the knowledge
of the Company or the Stockholder has not been threatened to be named, in any
suit, action or proceeding which involves a claim of infringement of any
Intellectual Property right of any third party. The manufacturing, marketing,
licensing or sale of the products or performance of the service offerings of the
Company do not infringe any Intellectual Property right of any third party; and
to the knowledge of the Company or the Stockholder, except as set forth in
Section 3.12 of the Disclosure Schedule, the Intellectual Property rights of the
Company are not being infringed by activities, products or services of any third
party.
3.13 Inventory. All inventory of the Company consists of a
quality and quantity usable and saleable in the Ordinary Course of Business,
except for obsolete items and items of below-standard quality, all of which have
been written-off or written-down to net realizable value on the 1996 Balance
Sheet. All inventories not written-off have been priced at the lower of cost or
market on a first-in, first-out basis. The quantities of each type of inventory,
whether raw materials, work-in-process or finished goods, are not excessive or
deficient in the present circumstances of the Company.
3.14 Real Property Leases. Section 3.14 of the Disclosure
Schedule lists all real property leased or subleased to the Company (except for
leases or subleases with remaining terms of less than 12 months and for which
the lease payments are less than $1,500 per year) and lists the square footage
leased thereunder, the term of such lease, any extension and expansion options,
and the rent payable thereunder, including additional rent payable on account of
real estate taxes and operating expenses. The Company has delivered to the Buyer
true, correct and complete copies of the leases and subleases listed in Section
3.14 of the Disclosure Schedule,
together with all amendments and modifications of the same and all agreements
supplemental thereto. With respect to each lease and sublease listed in Section
3.14 of the Disclosure Schedule:
(a) the lease or sublease is legal, valid and binding and in
full force and effect;
(b) the lease or sublease will continue to be legal, valid and
binding and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect prior to the Closing;
(c) neither the Company nor, to the knowledge of the Company or
the Stockholder, no other party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(d) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(e) the Company does not have any obligation to pay any leasing
or brokerage commission relating to any such lease or sublease, either currently
or upon renewal;
(f) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold;
(g) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities;
(h) to the knowledge of the Company or the Stockholder, the
owner of the facility leased or subleased has good and clear record and
marketable title to the parcel of real property, free and clear of any Security
Interest, easement, covenant or other restriction, except for recorded
easements, covenants, and other restrictions which do not impair the intended
uses, occupancy or value of the property subject thereto; and
(i) the Company has obtained non-disturbance agreements from
the holder of each superior Security Interest and ground lease in connection
with each such lease or sublease (each of which is listed in Section 3.14 of the
Disclosure Schedule); and the representations and warranties set forth in
clauses (a) through (d) of this Section 3.14 with respect to leases and
subleases are true and correct with respect to such nondisturbance agreements.
3.15 Contracts. Section 3.15 of the Disclosure Schedule lists
the following written arrangements (including without limitation written
agreements) to which the Company is a party (other than the agreements and
arrangements disclosed pursuant to Section 3.26):
(a) any written arrangement (or group of related
written arrangements) for the lease of personal property from or to third
parties providing for lease payments in excess of $50,000 per annum;
(b) any written arrangement (or group of related
written arrangements) for the purchase or sale of raw materials, commodities,
supplies, products or other personal property or for the furnishing or receipt
of services (i) which calls for performance over a period of more than one year,
(ii) which involves more than the sum of $50,000, or (iii) in which the Company
has granted manufacturing rights, "most favored nation" pricing provisions or
exclusive marketing or distribution rights relating to any products or territory
or has agreed to purchase a minimum quantity of goods or services or has agreed
to purchase goods or services exclusively from a certain party;
(c) any written arrangement establishing a
partnership or joint venture;
(d) any written arrangement (or group of related
written arrangements) under which it has created, incurred, assumed, or
guaranteed (or may create, incur, assume, or guarantee) indebtedness (including
capitalized lease obligations) involving more than $20,000 or under which it has
imposed (or may impose) a Security Interest on any of its assets, tangible or
intangible;
(e) any written arrangement concerning
confidentiality or noncompetition (other than with respect to customers'
confidential information pursuant to customer agreements in the Ordinary Course
of Business);
(f) any written arrangement involving the
Stockholder or its affiliates, as defined in Rule 12b-2 under the Securities
Exchange Act of 1934 ("Affiliates");
(g) any written arrangement under which the
consequences of a default or termination could have a Material Adverse Effect;
and
(h) any other written arrangement (or group of
related written arrangements) involving more than $100,000 and not entered into
in the Ordinary Course of Business.
The Company has delivered to the Buyer a correct and complete copy of each
written arrangement (as amended to date) listed in Section 3.15 of the
Disclosure Schedule. With respect to each written arrangement so listed: (i) the
written arrangement is legal, valid and binding and in full force and effect;
(ii) the written arrangement will continue to be legal, valid and binding and in
full force and effect immediately following the Closing in accordance with the
terms thereof as in effect prior to the Closing; and (iii) neither the Company
and, to the knowledge of the Stockholder or the Company, no other party, is in
material breach or default, and no event has occurred which with notice or lapse
of time would constitute a material breach or default or permit termination,
modification, or acceleration, under the written arrangement. The Company is not
a party to any oral contract, agreement or other arrangement which, if reduced
to written form, would be required to be listed in Section 3.15 of the
Disclosure Schedule under the terms of this Section 3.15.
3.16 Accounts Receivable. All accounts receivable of the
Company reflected on the 1996 Balance Sheet are valid receivables subject to no
setoffs or counterclaims and are current and collectible (within 150 days
after the date on which it first became due and payable), net of the applicable
reserve for bad debts on the 1996 Balance Sheet. All accounts receivable
reflected in the financial or accounting records of the Company that have arisen
since December 31, 1996 are valid receivables subject to no setoffs or
counterclaims and are collectible, net of a reserve for bad debts.
3.17 Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company, except those with respect to customs
agents, legal counsel, and other similar limited purpose powers issued in the
Ordinary Course of Business.
3.18 Insurance. Section 3.18 of the Disclosure Schedule lists
each insurance policy (including fire, theft, casualty, general liability,
workers compensation, business interruption, environmental, product liability
and automobile insurance policies and bond and surety arrangements) to which the
Company has been a party, a named insured, or otherwise the beneficiary of
coverage at any time since December 2, 1994. With respect to each such policy,
(i) prior to the Closing, each such insurance policy is in full force and
effect; (ii) each such policy of which the Company is the primary insured will
continue to be in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect prior to the Closing; (iii) prior
to the Closing, the Company is not in breach or default (including with respect
to the payment of premiums or the giving of notices) under such policy, and no
event has occurred which, with notice or the lapse of time, would constitute
such a breach or default or permit termination, modification or acceleration,
under such policy; and (iv) the Company has not received any notice from the
insurer disclaiming coverage or reserving rights with respect to a particular
claim or such policy in general. The Company has not incurred any loss, damage,
expense or liability covered by any such insurance policy for which it has not
properly asserted a claim under such policy.
3.19 Litigation. Section 3.19 of the Disclosure Schedule
identifies (a) any unsatisfied judgement, order, decree, stipulation or
injunction and (b) any claim, complaint, action, suit, proceeding, hearing or
investigation of or in any Governmental Entity or before any arbitrator to which
the Company is a party or, to the knowledge of the Company or the Stockholder,
is threatened to be made a party. None of the complaints, actions, suits,
proceedings, hearings, and investigations set forth in Section 3.19 of the
Disclosure Schedule as related to the claims of BSV (as defined in the
Disclosure Schedule) will result in a cost, expense or liability to the Company
or its Affiliate in excess of the amount of reserves for potential litigation
settlements included in the Unadjusted Balance Sheet.
3.20 Product Warranty. No product manufactured, sold, leased,
licensed or delivered by the Company is subject to any guaranty, warranty, right
of return or other indemnity beyond the documented terms and conditions of sale,
license or lease (or any applicable warranty obligations imposed by law).
Section 3.20 of the Disclosure Schedule sets forth the aggregate expenses
incurred by the Company in fulfilling their obligations under their guaranty,
warranty, right of return, swap out and indemnity provisions during each of the
fiscal years covered by the Financial Statements; and the Company or the
Stockholder do not know of any reason why such expenses should significantly
increase as a percentage of sales in the future.
3.21 Employees. Section 3.21 of the Disclosure Schedule
contains a list of (i) all employees of the Company, along with the position and
the annual rate of compensation of each such person and (ii) all independent
contractors of the Company retained to develop products of the Company, along
with a brief description of the terms of each such contractor's arrangement with
the Company. Except as set forth in Section 3.21 of the Disclosure Schedule,
each such employee and contractor has entered into a confidentiality and
assignment of inventions agreement with the Company, a
copy of which has previously been delivered to the Buyer. To the knowledge of
the Company or the Stockholder, no key employee or group of employees has any
plans to terminate employment with the Company. Each employee or independent
contractor whose work product is included in the development of products or
Intellectual Property of the Company have entered into a confidentiality and
assignment of inventions agreement with the Company. The Company is not a party
to or bound by any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. Neither the Company nor the Stockholder have any knowledge
of any organizational effort being made or threatened, either currently or
within the past two years, by or on behalf of any labor union with respect to
employees of the Company. Except as set forth in Section 3.21 of the Disclosure
Schedule, neither the Company nor the Stockholder has any knowledge of any
former employees of the Company engaged in an enterprise competitive with the
Company.
3.22 Employee Benefits. (a) Section 3.22(a) of the Disclosure
Schedule contains a complete and accurate list of all Employee Benefit Plans (as
defined below) maintained, or contributed to, by the Company or any ERISA
Affiliate since December 2, 1994 (as defined below). For purposes of this
Agreement, "Employee Benefit Plan" means any "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), any "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA), and any other written or oral plan, agreement or
arrangement involving direct or indirect compensation, including without
limitation insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation, which are maintained by the
Company or an ERISA Affiliate or under which the Company or an ERISA Affiliate
is obligated to provide benefits. For purposes of this Agreement, "ERISA
Affiliate" means any entity which is, or was at any time after December 2, 1994,
a member of (i) a controlled group of corporations (as defined in Section 414(b)
of the Code), (ii) a group of trades or businesses under common control (as
defined in Section 414(c) of the Code), or (iii) an affiliated service group (as
defined under Section 414(m) of the Code or the regulations under Section 414(o)
of the Code), any of which includes or included the Company. Each Employee
Benefit Plan has been administered in all material respects in accordance with
its terms and each of the Company and the ERISA Affiliates has in all material
respects met its obligations with respect to such Employee Benefit Plan and has
made all required contributions thereto. The Company and each ERISA Affiliate
have complied with Section 4980B of the Code and Part 6 of Subtitle 2 of Title I
of ERISA. The Company and all Employee Benefit Plans are in compliance in all
material respects with the currently applicable provisions of ERISA and the Code
and the regulations thereunder.
(b) There are no investigations by any Governmental
Entity, termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Employee Benefit Plans and proceedings
with respect to qualified domestic relations orders), suits or proceedings
against or involving any Employee Benefit Plan or asserting any rights or claims
to benefits under any Employee Benefit Plan that could give rise to any material
liability of the Company.
(c) All the Employee Benefit Plans that are intended
to be qualified under Section 401(a) of the Code have received determination
letters from the Internal Revenue Service to the effect that such Employee
Benefit Plans are qualified and the plans and the trusts related thereto are
exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, no such determination letter has been revoked and
revocation has not been threatened, and no such Employee Benefit Plan has been
amended since the date of its most recent determination letter or application
therefor in any material respect, and no act or omission has occurred, that
would adversely affect its qualification or materially increase its cost.
(d) (i) No Employee Benefit Plan has incurred any
"accumulated funding deficiency" as such term is defined in Section 302 of ERISA
and Section 412 of the Code (whether or not waived) and no lien has arisen under
Section 302(f) of ERISA; (ii) no event or condition exists which would be deemed
a reportable event within the meaning of Section 4043(c) of ERISA which could
result in a material liability to the Company and no condition exists which
could subject the Stockholder or the Company to a material fine under Section
4071 of ERISA; (iii) all premium payments with respect to the Employee Benefit
Plans required to be made prior to the Closing Date to the Pension Benefit
Guaranty Corporation (the "PBGC") have been or will be made prior to the Closing
Date; (iv) neither the Stockholder nor the Company is subject to any liability
to the PBGC for any termination of any Employee Benefit Plan occurring on or
prior to the Closing Date; (v) with respect to each Employee Benefit Plan that
is subject to Title IV of ERISA, the present value of accrued benefits under
such Plan, based on the actuarial assumptions used for funding purposes in the
most recent actuarial report prepared by such Plan's actuary with respect to
such Plan, did not, as of the valuation date used in such report, exceed the
current value of the assets of such Plan allocable to such accrued benefits as
of such valuation date and no material adverse change in the funded status of
any such Plan has occurred since such valuation date; and (vi) no amendment has
been made to any Employee Benefit Plan subject to Section 412 of the Code which
would require the provision of additional security pursuant to Section
401(a)(29) of
the Code.
(e) At no time has the Company after December 2,
1994 or any ERISA Affiliate been obligated to contribute to any "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA).
(f) There are no unfunded obligations under any
Employee Benefit Plan providing benefits after termination of employment to any
employee of the Company (or to any beneficiary of any such employee), including
but not limited to retiree health coverage and deferred compensation, but
excluding continuation of health coverage required to be continued under Section
4980B of the Code and insurance conversion privileges under state law.
(g) No act or omission has occurred and no condition
exists with respect to any Employee Benefit Plan maintained by the Company, or
any ERISA Affiliate that would subject the Company or any ERISA Affiliate to any
material fine, penalty, tax or liability of any kind imposed under ERISA or the
Code.
(h) No Employee Benefit Plan is funded by,
associated with, or related to a "voluntary employee's beneficiary association"
within the meaning of Section 501(c)(9) of the Code.
(i) No Employee Benefit Plan, plan documentation or
agreement, summary plan description or other written communication distributed
generally to employees by its terms prohibits the Company from terminating its
participation in any such Employee Benefit Plan. Each Employee Benefit Plan may
be amended or terminated without liability to the Company.
(j) Section 3.22(j) of the Disclosure Schedule
discloses each: (i) agreement with any director, executive officer or other
employee of the Company with an annual salary in excess of $80,000 (A) the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving the Company of the nature of any
of the transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such
director, executive officer or such employee; (ii) agreement, plan or
arrangement under which any person may receive payments from the Company that
may be subject to the tax imposed by Section 4999 of the Code or included in the
determination of such person's "parachute payment" under Section 280G of the
Code; and (iii) agreement or plan binding the Company, including without
limitation any stock option plan, stock appreciation right plan, restricted
stock plan, stock purchase plan, severance benefit plan, or any Employee Benefit
Plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
3.23 Environmental Matters. (a) The Company has complied with
all applicable Environmental Laws (as defined below), including, without
limitation, Environmental Laws relating to ownership or operation of the Real
Estate. There is no pending or, to the knowledge of the Company or the
Stockholder, threatened civil or criminal litigation, written notice of
violation, formal administrative proceeding, or investigation, inquiry or
information request by any Governmental Entity, relating to any Environmental
Law involving the Company or the Real Estate. For purposes of this Agreement,
"Environmental Law" means any federal, state or local law, statute, rule or
regulation or the common law relating to the environment or occupational health
and safety, including without limitation any statute, regulation or order
pertaining to (i) treatment, storage, disposal, generation and transportation of
industrial, toxic or hazardous substances or solid or hazardous waste; (ii) air,
water and noise pollution; (iii) groundwater and soil contamination; (iv) the
release or threatened release into the environment of industrial, toxic or
hazardous substances, or solid or hazardous waste, including without limitation
emissions, discharges, injections, spills, escapes or dumping of pollutants,
contaminants or chemicals; (v) the protection of wildlife, marine sanctuaries
and wetlands, including without limitation all endangered and threatened
species; (vi) storage tanks, vessels and containers; (vii) underground and other
storage tanks or vessels, abandoned, disposed or discarded barrels, containers
and other closed receptacles; (viii) health and safety of employees and other
persons; and (ix) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or oil or petroleum
products or solid or hazardous waste. As used above, the terms "release" and
"environment" shall have the meaning set forth in the federal Comprehensive
Environmental Compensation, Liability and Response Act of 1980 ("CERCLA").
(b) There have been no releases of any Materials of
Environmental Concern (as defined below) into the environment at any parcel of
real property or any facility formerly or currently owned, operated or
controlled by the Company. With respect to any such releases of Materials of
Environmental Concern, the Company has given all required notices to
Governmental Entities (copies of which have been provided to the Buyer). Neither
the Company nor the Stockholder is aware of any releases of Materials of
Environmental Concern at parcels of real property or facilities other than those
owned, operated or controlled by the Company that could reasonably be expected
to have an impact on the real property or facilities owned, operated or
controlled by the Company. For purposes of this Agreement, "Materials of
Environmental Concern" means any chemicals, pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA), solid wastes and
hazardous wastes (as such terms are defined under the federal Resources
Conservation and Recovery Act), toxic materials, oil or petroleum and
petroleum products.
(c) Set forth in Section 3.23(c) of the Disclosure
Schedule is a list of all environmental reports, investigations and audits
relating to premises currently or previously owned or operated by the Company
(whether conducted by or on behalf of the Company or a third party, and whether
done at the initiative of the Company or directed by a Governmental Entity or
other third party) which were issued or conducted during the past five years and
which the Company has possession of or access to. Complete and accurate copies
of each such report, or the results of each such investigation or audit, have
been provided to the Buyer.
(d) Set forth in Section 3.23(d) of the Disclosure
Schedule is a list of all of the solid and hazardous waste transporters and
treatment, storage and disposal facilities that have been utilized by the
Company since December 2, 1994. Neither the Company nor the Stockholder is aware
of any material environmental liability of any such transporter or facility.
3.24 Legal Compliance. The Company, and the conduct and
operations of its business, is in compliance with each law (including rules and
regulations thereunder) of any federal, state, local or foreign government, or
any Governmental Entity, which (a) affects or relates to this Agreement or the
transactions contemplated hereby or (b) is applicable to the Company or its
business, except for any violation of or default under a law referred to in
clause (b) above which reasonably may be expected not to have a material adverse
effect on any of the assets, business, financial condition, results of
operations or future prospects of the Company.
3.25 Permits. Section 3.25 of the Disclosure Schedule sets
forth a list of all permits, licenses, registrations, certificates, orders or
approvals from any Governmental Entity (including without limitation those
issued or required under Environmental Laws, United States export regulations
and those relating to the occupancy or use of owned or leased
real property) ("Permits") issued to or held by the Company. Such listed Permits
are the only Permits that are required for the Company to conduct its business
as presently conducted, except for those the absence of which would not have any
material adverse effect on any of the assets, business, financial condition,
results of operations or future prospects of the Company. Each such Permit is in
full force and effect and, to the best knowledge of the Company or the
Stockholder, no suspension or cancellation of such Permit is threatened and
there is no basis for believing that such Permit will not be renewable upon
expiration. Each such Permit will continue in full force and effect following
the Closing without necessity of notifying or obtaining consent of any
Governmental Entity or other third party.
3.26 Certain Business Relationships With Affiliates. Except
as set forth in Section 3.26 of the Disclosure Schedule and arrangements that
will be terminated on or before the Closing Date, no Affiliate of the Company
(a) owns any property or right, tangible or intangible, which is used in the
business of the Company, (b) has any claim or cause of action against the
Company, or (c) owes any money to the Company. Section 3.26 of the Disclosure
Schedule describes any transactions or relationships between the Company and any
Affiliate thereof which are reflected in the statements of operations of the
Company included in the Financial Statements.
3.27 Brokers' Fees. Except for amounts payable to Xxxxxxxxx &
Xxxxx LLC by the Stockholder, neither the Company nor the Stockholder has any
liability or obligation to pay any fees or commissions to any broker or finder
with respect to the transactions contemplated by this Agreement.
3.28 Books and Records. Since December 2, 1994, the minute
books of the Company contain the complete and authentic record of the
proceedings of the Company's stockholders, Board of Directors or any committee
thereof and of all written consents executed in lieu of the holding of any
such meeting. The books and records of the Company accurately reflect in all
material respects the assets, liabilities, business, financial condition and
results of operations of the Company and have been maintained in accordance with
good business and bookkeeping practices.
3.29 Customers and Suppliers. Except as disclosed in Section
3.26 of the Disclosure Schedule, all unfilled customer orders or commitments
obligating the Company to process, manufacture or deliver products or perform
services have been entered into in the Ordinary Course of Business. No material
supplier of the Company has indicated within the past year that it will refuse
the Company's orders to supply materials, products, or services to it and no
material customer of the Company has indicated within the past year that it will
stop, or materially decrease the rate of, buying, leasing or licensing
materials, products or services from the Company. Section 3.29 of the Disclosure
Schedule sets forth a list of (a) each customer that accounted for more than 3%
of the revenues of the Company during the last full fiscal year and the amount
of revenues accounted for by such customer during each such period and (b) each
supplier that is the sole supplier of any significant product or component to
the Company.
3.30 Disclosure. No representation or warranty by the Company
or Stockholder contained in this Agreement, and no statement contained in the
Disclosure Schedule or any other document, certificate or other instrument
delivered to or to be delivered by or on behalf of the Company or the
Stockholder pursuant to this Agreement, and no other statement made by the
Company or Stockholder or any of its representatives in connection with this
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading. The Company and the Stockholder
have disclosed to the Buyer all material information relating to
the business of the Company or the transactions contemplated by this Agreement.
3.31 Investment. The Stockholder is acquiring the Buyer
Shares hereunder for its own account for investment and not with a view to, or
for sale in connection with, any distribution thereof, nor with any present
intention of distributing or selling the same; and, except as contemplated by
this Agreement, the Stockholder has no present or contemplated agreement,
undertaking, arrangement, obligation, indebtedness or commitment providing for
the distribution thereof.
4.Representations and Warranties of the Buyer
The Buyer represents and warrants to the Stockholder as follows:
4.01 Organization. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
4.02 Authorization of Transaction. The Buyer has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution and delivery of this
Agreement by the Buyer and the performance of this Agreement and the
consummation of the transactions contemplated hereby by the Buyer have been duly
and validly authorized by all necessary corporate action on the part of the
Buyer. This Agreement has been duly and validly executed and delivered by the
Buyer and constitutes a valid and binding obligation of the Buyer, enforceable
against it in accordance with its terms.
4.03 Noncontravention. Except for applicable requirements of
the Xxxx-Xxxxx-Xxxxxx Act, neither the execution and delivery of this Agreement
by the Buyer, nor the consummation by the Buyer of the transactions contemplated
hereby, will (a) conflict with or violate any provision of the charter or by-
laws of the Buyer, (b) require on the part of the Buyer any filing with, or
permit, authorization, consent or approval of, any Governmental Entity, (c)
conflict with, result in breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of, create in
any party any
right to accelerate, terminate, modify or cancel, or require any notice, consent
or waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest or other arrangement to which the Buyer is a
party or by which it is bound or to which any of its assets are subject, other
than any conflict, breach, default, acceleration, termination, modification or
cancellation which individually or in the aggregate would not have a material
adverse effect on the assets, business, financial condition, results of
operations or future prospects of the Buyer or on the ability of the parties to
consummate the transactions contemplated by this Agreement, or (d) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Buyer or any of its properties or assets.
4.04 Broker's Fees. Except for amounts payable to Xxxxx &
Company by the Buyer, the Buyer has no liability or obligation to pay any fees
or commissions to any broker or finder with respect to the transactions
contemplated by this Agreement.
4.05 Capitalization of the Buyer. On the date hereof, the
Buyer's authorized capital stock consists of (i) 100,000,000 shares of Common
Stock, $.001 par value, of which 28,565,246 shares were issued and outstanding
as of December 31, 1996 and (ii) 2,000,000 shares of Preferred Stock, $.10 par
value per share, none of which are issued or outstanding on the date hereof. All
of the outstanding shares of capital stock of the Buyer have been and on the
Closing Date will be duly and validly issued and are, or will be, fully paid and
non-assessable.
4.06 Buyer Shares. Prior to the Closing Date, Buyer will have
taken all actions necessary to authorize and approve the issuance of the Buyer
Shares, and as of the Closing Date, the Buyer Shares will, when issued in
accordance herewith, be duly authorized, validly issued, fully paid and
nonassessable.
4.07 Commission Filings. Buyer has filed and delivered to the
Company and the Stockholder all forms, reports and documents required to be
filed by Buyer with the Securities and Exchange Commission ("SEC") under the
Exchange Act since May 28, 1996 (collectively, the "SEC Documents"). The SEC
Documents (i) at the time filed, complied in all material respects with the
applicable requirements of the Exchange Act, and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such SEC
Documents or necessary in order to make the statements in such SEC Documents, in
the light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of Buyer included in the SEC
Documents (the "Buyer Financial Statements") complied when filed as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, and were, when
filed, in accordance with the books and records of Buyer, complete and accurate
in all material respects, and presented fairly the consolidated financial
position and the consolidated results of operations, changes in stockholders'
equity and cash flows of Buyer and its subsidiaries as of the dates and for the
periods indicated, in accordance with USGAAP, consistently applied, subject in
the case of interim financial statements to normal year-end adjustments and the
absence of certain footnote information.
4.08 No Material Adverse Changes. Since the date of the most
recent SEC Documents, no event has occurred which has had a material adverse
effect on the results of operations, condition (financial or otherwise), assets,
properties, business or prospects of the Buyer and no action, suit, claim or
proceeding has been filed, or threatened in writing, which if adversely
determined, would result in a material adverse effect
on the Buyer or its business.
4.09 Litigation. Except as may be described in the SEC
Documents (i) there is no action, suit, judicial or administrative proceeding,
arbitration or investigation pending, or, to the knowledge of Buyer, threatened,
against or involving Buyer or any of its subsidiaries, or any of their
properties or rights, before any court, arbitrator, or administrator or
governmental body, (ii) there is no judgment, decree, injunction, rule or order
of any court, governmental department, commission, agency, instrumentality or
arbitrator against Buyer or any of its subsidiaries; or (iii) neither Buyer nor
any of its subsidiaries is in violation of any term of any judgment, decree,
injunction or order outstanding against them which, in the case of any of
clauses (i), (ii) or (iii), would have a material adverse effect on the results
of operations, condition (financial or otherwise), assets, properties, business
or prospects of the Buyer or would prevent the consummation of this Agreement.
4.10 Disclosure. The Buyer has made available to the
Stockholder any and all written information which it has requested and has
answered all inquiries related to the Buyer made by the Stockholder. No
representation or warranty by the Buyer in this Agreement or in any Exhibit
hereto, or in any list, statement, document or information set forth in or
attached to any Schedule delivered or to be delivered pursuant hereto, contains
any untrue statement of a material fact or omits any material fact necessary, in
light of the circumstances in which they are made, in order to make the
statements contained therein not false or misleading.
4.11 Investment. The Buyer is acquiring the Shares hereunder
for its own account and not with a view to, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
the same; and, except as contemplated by this Agreement, the Buyer has no
present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the distribution thereof.
5. Covenants.
5.01 Best Efforts. Each of the parties hereto shall use its
best efforts, to the extent commercially reasonable, to take all actions and to
do all things necessary, proper or advisable to consummate the transactions
contemplated by this Agreement.
5.02 Notices and Consents. The Company shall use its best
efforts to obtain, at its expense, all such material waivers, permits, consents,
approvals or other authorizations from third parties and Governmental Entities,
and to effect all such registrations, filings and notices with or to third
parties and Governmental Entities, as may be required by or with respect to the
Company in connection with the transactions contemplated by this Agreement.
5.03 Xxxx-Xxxxx-Xxxxxx Act. Each of the parties shall
promptly file any Notification and Report Forms and related material that it may
be required to file with the Federal Trade Commission and the Antitrust Division
of the United States Department of Justice under the Xxxx-Xxxxx-Xxxxxx Act,
shall use its best efforts to obtain an early termination of the applicable
waiting period, and shall make any further filings or information submissions
pursuant thereto that may be necessary, proper or advisable.
5.04 Operation of Business. Except as contemplated by this
Agreement, during the period from the date of this Agreement through the
Closing, the Company shall conduct its operations in the Ordinary Course of
Business and in compliance with all applicable laws and regulations and, to the
extent consistent therewith, use all reasonable efforts to preserve intact its
current business organization, keep its physical assets in good working
condition, keep available the services of its current officers and employees,
pay all of its accounts payable when due and preserve its relationships with
customers, suppliers and others having business dealings with it to the end
that its goodwill and ongoing business shall not be impaired in any material
respect. Without limiting the generality of the foregoing, prior to the Closing,
the Company shall not without the written consent of the Buyer or as otherwise
disclosed herein:
(a) issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) or
authorize the issuance, sale or delivery of, or redeem or repurchase, any stock
of any class or any other securities or any rights, warrants or options to
acquire any such stock or other securities;
(b) split, combine or reclassify any shares of its
capital stock; declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock;
(c) create, incur or assume any debt not currently
outstanding (including obligations in respect of capital leases); assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person or entity; or
make any loans, advances or capital contributions to, or investments in, any
other person or entity;
(d) enter into, adopt or amend any Employee Benefit
Plan with respect to the Company or any employment or severance agreement or
arrangement of the type described in Section 3.22(j) or (except for normal
increases in the Ordinary Course of Business) increase in any manner the
compensation or fringe benefits of, or materially modify the employment terms
of, its directors, officers or employees, generally or individually, or pay any
benefit not required by the terms in effect on the date hereof of any existing
Employee Benefit Plan;
(e) acquire, sell, lease, encumber or dispose of any
assets or property (including without limitation any shares or other equity
interests in
or securities of any corporation, partnership, association or other business
organization or division thereof), other than purchases and sales of assets in
the Ordinary Course of Business;
(f) amend its charter or by-laws;
(g) change in any material respect its accounting
methods, principles or practices, except insofar as may be required by a
generally applicable change in USGAAP;
(h) discharge or satisfy any Security Interest or
pay any obligation or liability other than in the Ordinary Course of Business
except as contemplated by Section 5.09 hereof;
(i) mortgage or pledge any of its property or assets
or subject any such assets to any Security Interest;
(j) sell, assign, transfer or license any
Intellectual Property, other than in the Ordinary Course of Business;
(k) enter into, amend, terminate, take or omit to
take any action that would constitute a violation of or default under, or waive
any rights under, any material contract or agreement;
(l) make or commit to make any capital expenditure
in excess of $50,000 per item;
(m) take any action or fail to take any action
permitted by this Agreement with the knowledge that such action or failure to
take action would result in any of the representations and warranties of the
Company or the Stockholder set forth in this Agreement becoming untrue; or
(n) agree in writing or otherwise to take any of the
foregoing actions.
5.05 Full Access. The Company shall permit representatives
of the Buyer to have full access (at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Company) to all
premises, properties, financial and accounting records, contracts, other records
and documents, and personnel, of or pertaining to the Company (other than
consolidated tax returns, consolidated financial statements and records and
Employee Benefit Plans of the Stockholder). The Buyer (a) shall treat and hold
as confidential any Confidential
Information (as defined below), (b) shall not use any of the Confidential
Information except in connection with this Agreement, and (c) if this Agreement
is terminated for any reason whatsoever, shall return to the Company all
tangible embodiments (and all copies) thereof which are in its possession. For
purposes of this Agreement, "Confidential Information" means any confidential or
proprietary information of the Company that is furnished in writing to the Buyer
by the Company in connection with this Agreement and is labelled confidential or
proprietary; provided, however, that it shall not include any information (i)
which, at the time of disclosure, is available publicly or in the industry
segment to which it relates, (ii) which, after disclosure, becomes available
publicly or in the industry segment to which it relates through no fault of the
Buyer, or (iii) which the Buyer knew or to which the Buyer had access prior to
disclosure. Notwithstanding the above, the parties shall agree on a mutually
satisfactory reasonable process by which Buyer may interview employees and, on
an anonymous basis, mutually agreed customers, of the Company.
5.06 Notice of Breaches. The Company and the Stockholder
shall promptly deliver to the Buyer written notice of any event or development
that would (a) render any statement, representation or warranty of the Company
or the Stockholder in this Agreement (including the Disclosure Schedule)
inaccurate or incomplete in any material respect, or (b) constitute or result in
a breach by the Company or the Stockholder of, or a failure by the Company or
the Stockholder to comply with, any agreement or covenant in this Agreement
applicable to such party. The Buyer shall promptly deliver to the Company and
the Stockholder written notice of any event or development that would (i) render
any statement, representation or warranty of the Buyer in this Agreement
inaccurate or incomplete in any material respect, or (ii) constitute or result
in a breach by the Buyer of, or a failure by the Buyer
to comply with, any agreement or covenant in this Agreement applicable to such
party. No such disclosure shall be deemed to avoid or cure any such
misrepresentation or breach.
5.07 Exclusivity. The Company and the Stockholder shall not,
and the Company and the Stockholder shall use their best efforts to cause their
Affiliates and each of its officers, directors, employees, representatives and
agents not to, directly or indirectly, (a) encourage, solicit, initiate, engage
or participate in discussions or negotiations with any person or entity (other
than the Buyer) concerning any merger, consolidation, sale of material assets,
recapitalization (except as contemplated by Section 5.09) or other business
combination involving the Company or any division of the Company or (b) provide
any non-public information concerning the business, properties or assets of the
Company to any person or entity (other than the Buyer). Notwithstanding the
foregoing, the Buyer acknowledges that the Stockholder and the Company have
recently solicited offers relating to the sale of the Company, and that
Stockholder may receive and acknowledge, but will not respond favorably to or
further negotiate expressions of interest or responses to such solicitation. The
Company and the Stockholder shall immediately notify the Buyer of, and shall
disclose to the Buyer all details of, any inquiries, discussions or negotiations
of the nature described in the first sentence of this Section 5.07.
5.08 Amendment of Bonuses. Prior to the Closing, the
Stockholder shall cause to be amended (in a manner reasonably satisfactory to
the Buyer) each of the so-called "stay" and "transaction completion" bonuses
previously offered by the Stockholder to certain employees of the Company (which
the Company represents will not exceed an aggregate amount set forth in Section
5.08 of the Disclosure Schedule) so that each such employee elects in writing
prior to the Closing to receive any such bonus on the date it is earned either
in (i) cash or (ii) fully-exercisable options to purchase that
number of shares of Buyer Common Stock having an aggregate exercise price equal
to the amount of the bonus earned by such employee; where the exercise price per
share shall be equal to the closing price of a share of Buyer Common Stock on
the trading day preceding the grant of such option. The Stockholder shall
deliver to Buyer prior to or at Closing in cash an amount equal to the aggregate
amount payable in cash to all employees electing the cash option under this
Section 5.08 including amounts in respect of payroll and withholding (including
employer related) tax with respect to such amounts. Buyer shall promptly return
to Stockholder within three business days the balance of such cash not used by
Buyer to satisfy the cash payment obligations under this Section 5.08.
5.09 Debt to the Stockholder. Prior to the Closing Date the
Stockholder shall make a capital contribution to the Company in an amount to
enable the Company to pay in full its indebtedness to the Stockholder and its
Affiliates (other than indebtedness permitted by Section 6.01(l)) and the
Company shall discharge such indebtedness with the proceeds of such capital
contribution.
5.10 Employee Benefit Plans. As of the Closing Date, the
Stockholder shall have vested each employee of the Company in his or her accrued
benefit under the Stockholder's defined benefit plan and salary investment
(401(k) plan), shall have taken all necessary steps, including without
limitation, the giving of notice as required by Section 2.04(h) of ERISA, to
cease accruals of benefits under the Stockholder's defined benefit plans for all
employees of the Company and shall have provided all necessary notice to
distribute benefits under the Stockholder's 401(k) plan to the Company's
employees, and the Company shall have terminated its participation in all
Employee Benefit Plans of the Stockholder and its Affiliates (other than those
plans solely relating to the Company).
6. Conditions to Closing.
6.01 Conditions to Obligations of the Buyer. The obligations
of the Buyer under this Agreement are subject to fulfillment, prior to or at the
Closing Date, of the following conditions, each of which may be waived in
writing in the sole discretion of the Buyer:
(a) the Company and the Stockholder shall have
obtained all of the waivers, permits, consents, approvals or other
authorizations, and effected all of the registrations, filings and notices,
required hereby, except for any which if not obtained or effected would not have
a material adverse effect on any of the assets, business, financial condition,
results of operations or future prospects of the Company or on the ability of
the parties to consummate the transactions contemplated by this Agreement;
(b) the representations and warranties of the
Company and the Stockholder set forth in Sections 2 and 3 hereof shall be true
and correct in all material respects when made on the date hereof and shall be
true and correct as of the Closing Date as if made as of the Closing Date,
except for representations and warranties made as of a specific date, which
shall be true and correct as of such date;
(c) the Company shall have performed or complied in
all material respects with its agreements and covenants required to be performed
or complied with under this Agreement as of the Closing;
(d) no action, suit or proceeding shall be pending
or threatened by or before any Governmental Entity wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) prevent or delay
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation or (iii) affect adversely the right of the Buyer to own,
operate or control any of the assets or operations of the Company, and no such
judgment, order, decree, stipulation or injunction shall be in effect;
(e) the Company and the Stockholder shall have
delivered to the Buyer a certificate (without qualification as to knowledge or
materiality or otherwise) to the effect that each of the conditions specified in
clauses (a) through (d) of this Section 6.01 is satisfied in all respects;
(f) all applicable waiting periods (and any
extensions thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or
otherwise been terminated;
(g) the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the Company listed
on Schedule 6.01 attached hereto;
(h) all actions to be taken by the Company in
connection with the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to the Buyer;
(i) the Buyer shall have received from Stockholder
the cash amount determined in accordance with Section 5.08 hereof;
(j) no action or proceeding by or before any
Governmental Entity shall have been instituted or threatened by any person
whatsoever which shall seek to restrain, prohibit or invalidate the transactions
contemplated by this Agreement or which might affect the right of the Buyer to
own the Shares or to own or operate the business of the Company after the
Closing;
(k) on or prior to the Closing Date, the Buyer shall
have executed employment contracts and other arrangements with Xxxxxxx Xxxxxxx,
Xxxx Xxxxxxxx, Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxx Wolgramm, Xxxxx Xxxxxxxx and
Xxxx Xxxxx, upon substantially the terms set forth in Schedule 6.01B; provided,
however, that this condition shall be deemed to be satisfied with respect to any
such employee to the extent such employee agrees to remain employed by the
Company after the Closing on terms and conditions no less favorable than those
in effect prior to the Closing;
(l) there shall not be outstanding on the Closing
Date any obligation of the Company to the Stockholder or any Affiliate of the
Stockholder, other than obligations arising from arms' length transactions for
the sale of products or services entered into in the Ordinary Course of Business
or as otherwise contemplated hereby;
(m) if required under the applicable lease or
sublease, the Buyer shall have received estoppel certificates from each lessor
from whom the Company leases real property, pursuant to which such lessor
consents to the transfer of control of the Company resulting from the
transaction contemplated in this Agreement, and certifying that there are no
outstanding claims against the Company under any such lease or sublease;
(n) the Buyer shall have received estoppel
certificates from each tenant to whom the Company leases real property
certifying that there are no outstanding claims against the Company under any
such lease;
(o) the Buyer shall have received an endorsement
(the "Title Endorsement") to the existing title insurance policy for the Real
Estate, dated not less than two (2) business days prior to Closing, containing
no exceptions other than the Permitted Encumbrances and otherwise in form and
substance reasonably satisfactory to the Buyer;
(p) the Buyer shall have received such affidavits
and indemnities executed by the Company as the issuer of the Title Endorsement
may reasonably require in order to omit from the Title Endorsement all
exceptions for (i) judgments, bankruptcies or other returns against persons or
entities whose names are the same as or similar to those of the Company ; (ii)
parties in possession other than under rights to possession granted under
leases; and (iii) mechanics' or materialmens' liens;
(q) the Buyer shall have received a certificate of
occupancy for the Real Estate from the Governmental Entity having jurisdiction
thereover, evidencing that the Real Estate may be used legally for the Intended
Uses;
(r) the Buyer shall have been permitted to continue its
reasonable due diligence with respect to the Real Estate;
(s) the Stockholder shall have paid all transaction
success fees due to employees who have elected to receive such fees in cash;
(t) the Stockholder shall have caused all amounts of
accrued payroll deducted to purchase American Depositary Shares of the
Stockholder's Affiliates under the Xxxx US Holdings Monthly Stock Incentive Plan
to have been applied to the purchase of such shares under such plan;
(u) the Company shall have entered into
confidentiality, noncompetition and assignment of inventions agreement with
Xxxxx X. Xxxxxxxx and Xxxx X. Xxxxx on terms reasonably satisfactory to the
Buyer; and
(v) the Stockholder shall have assigned to the
Company all right, title and interest in and to any agreement between the
employees of the Company and the Stockholder with respect to noncompetition,
nondisclosure and assignment of invention by delivery of an instrument in form
and substance reasonably satisfactory to the Buyer.
6.02 Conditions to Obligations of the Stockholder. The
obligations of the Stockholder under this Agreement are subject to the
fulfillment, prior to or at the Closing Date, of the following conditions
precedent, which may be waived in writing in the sole discretion of the
Stockholder:
(a) the representations and warranties of the Buyer
set forth in Section 4 shall be true and correct when made on the date hereof
and shall be true and correct in all material respects as of the Closing Date as
if made as of the Closing Date, except for representations and warranties made
as of a specific date, which shall be true and correct in all material respects
as of such date;
(b) the Buyer shall have performed or complied in
all material respects with its agreements and covenants required to be performed
or complied with under this Agreement as of or prior to the Closing Date;
(c) the Buyer shall have delivered to the Company a
certificate (without qualification as to knowledge or materiality or otherwise)
to the effect that each of the conditions specified in clauses (a) and (b) of
this Section 6.02 is satisfied in all respects;
(d) all applicable waiting periods (and any
extensions thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or
otherwise been terminated;
(e) all actions to be taken by the Buyer in
connection with the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to the Stockholder; and
(f) the Buyer shall be in compliance with all
applicable reporting requirements under Sections 13 or 15(d) of the Securities
Exchange Act of 1934.
7. Tax Matters.
7.01. Tax Indemnification by the Stockholder.
(a) The Stockholder shall indemnify and hold the
Buyer and the Company and any successor corporations thereto or Affiliates
thereof (including future Affiliates) harmless, on an after-tax basis, from and
against the following Taxes with respect to the Company:
(i) any and all Taxes for any taxable period ending (or deemed,
pursuant to Section 7.03, to end) on or before the Closing Date due and payable
by such entities and not otherwise accrued on the Closing Balance Sheet; and
(ii) Any liability of such entities under Treasury Regulation Section
1.1502-6 or under any comparable or similar provision under state, local or
foreign laws or regulations for periods ending on or prior to the Closing Date.
(b) Amounts payable pursuant to this Section 7.01
shall be computed after taking into account all Tax consequences to the Buyer
(or its Affiliates) of (i) the receipt of (or the right to receive) the
indemnification payment and (ii) the incurrence of the liability that gave rise
to the right to receive the indemnification payment. Thus it is the intention of
the parties that the Buyer be held harmless with respect to the liability that
gave rise to the right to the indemnification
payment on an after-Tax basis. The parties agree that to the maximum extent
allowable under applicable Tax laws, amounts payable to the Buyer pursuant to
this Section 7.01 shall be payable in cash and treated (and reported on all
applicable Tax Returns) as additional adjustments to the original purchase price
payable by the Buyer to the Stockholder.
7.02 Tax Indemnification by the Buyer.
(a) The Buyer shall indemnify and hold the
Stockholder and any successor corporations thereto and any Affiliates thereof
harmless, on an after-tax basis, from and against, any and all Taxes for any
taxable period beginning (or deemed pursuant to Section 7.03 to begin) after the
Closing Date, due or payable by the Company or by the Stockholder.
(b) Amounts payable pursuant to this Section 7.02
shall be computed after taking into account all Tax consequences to the
Stockholder (or its Affiliates) of (i) the receipt of (or the right to receive)
the indemnification payment and (ii) the incurrence of the liability that gave
rise to the right to receive the indemnification payment. Thus it is the
intention of the parties that the Stockholder be held harmless with respect to
the liability that gave rise to the right to the indemnification payment on an
after-Tax basis.
7.03 Allocation of Certain Taxes.
(a) The Buyer and the Stockholder agree that if the
Company is permitted but not required under applicable foreign, state or local
Tax laws to treat the Closing Date as the last day of a taxable period, the
Buyer and the Stockholder shall treat such day as the last day of a taxable
period. The Buyer and the Stockholder agree that they will treat the Company as
if it ceased to be part of the Stockholder's affiliated group, within the
meaning of Section 1504 of the Code, as of the close of business on the Closing
Date.
(b) Any Taxes for a taxable period beginning before
the
Closing Date and ending after th e Closing Date with respect to the Company
shall be paid by the Buyer or the Company, and the Taxes for such period shall
be apportioned for purposes of Section 7.01 and Section 7.02 between the
Stockholder and the Buyer based on the actual operations of the Company during
the portion of such period ending on the Closing Date and the portion of such
period beginning on the day following the Closing Date, and for purposes of the
provisions of Sections 7.01, 7.02, 7.05 and 7.06(c), each portion of such period
shall be deemed to be a taxable period (whether or not it is in fact a taxable
period).
(c) With respect to any Taxes referred to in
paragraph (b) above:
(i) Fifteen days after the Closing Balance Sheet is agreed to by the
Buyer and the Stockholder or adopted pursuant to Section 1.4, the Buyer shall
present the Stockholder with a schedule detailing the computation of the Tax
that would have been due for the taxable period ending on the Closing Date if
the Closing Date were the last day of the taxable period (the "Hypothetical Pre-
Cut-Off Period Tax");
(ii) Ten days after the Buyer presents the Stockholder with the
schedule described in clause (i) above, (x) the Stockholder shall pay the
Company the amount by which the Hypothetical Pre-Cut-Off Period Tax exceeds the
sum of any estimated payments made prior to the Closing Date with respect to
such Tax for the current taxable year, or (y) the Company or the Buyer shall pay
the Stockholder the amount by which the sum of any estimated payments made prior
to the Closing Date with respect to such Tax for the current taxable year
exceeds the Hypothetical Pre-Cut-Off Period Tax; and
(iii) In the event the Stockholder disputes the Buyer's computation of
the Hypothetical Pre-Cut-Off Period Tax or of any of the payments described in
clause (ii) above, the Buyer or the Company shall nevertheless pay any amounts
due to the appropriate Taxing Authority pending adjustment after the resolution
of such dispute, which
shall be resolved in the manner set forth in Section 1.4 hereof.
(d) All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by
Stockholder when due, and Stockholder will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sale, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, Buyer will, and will cause its Affiliates to, join
in the execution of any such Tax Returns and other documentation.
7.04 Filing Responsibility.
(a) The Stockholder shall prepare and file or shall
cause the Company to prepare and file the following Returns with respect to the
Company:
(i) All income Tax Returns for any taxable period ending on or
before the Closing Date other than Returns for Taxes referred to in Section
7.03; and
(ii) All other Tax Returns required to be filed (taking into account
extensions) prior to the Closing Date;
(b) The Buyer shall, subject to the provisions of
Section 7.04(c), file all other Tax Returns with respect to the Company.
(c) With respect to any Tax Return for taxable
periods beginning before the Closing Date and ending after the Closing Date, the
Buyer shall consult with the Stockholder concerning each such Return and report
all items with respect to the period ending on the Closing Date in accordance
with the instructions of the Stockholder, unless otherwise agreed by the
Stockholder and the Buyer; provided, however, that if the Buyer is advised by
counsel that the filing of any Return and the reporting on such Return of any
item in accordance with the instructions of the Stockholder would subject the
Buyer, the Company or any Affiliate to any penalties or fines,
the Buyer may file such Return without regard to the Stockholder's instructions
relating to such item. The Buyer shall cause the Company to provide the
Stockholder with a copy of each proposed Return at least 15 days prior to the
filing of such Return, and the Stockholder may provide comments thereon, which
comments shall be delivered within seven days of receiving such copies.
7.05 Refunds and Carrybacks.
(a) The Stockholder shall be entitled to an amount
equal to any refunds or credits of Taxes (on an after-tax basis) attributable to
taxable periods (or portions thereof, determined in accordance with Section
7.03) ending on or before the Closing Date.
(b) The Buyer, the Company and/or their Affiliates,
as the case may be, shall be entitled to any refunds or credits of Taxes
attributable to taxable periods (or portions thereof determined in accordance
with Section 7.03) beginning after the Closing Date.
(c) The Buyer shall or shall cause the Company
promptly to forward to the Stockholder or to reimburse the Stockholder for any
refunds or credits due the Stockholder (pursuant to the terms of this Agreement)
after receipt thereof, and the Stockholder shall promptly forward to the Buyer
(pursuant to the terms of this Agreement) or reimburse the Buyer for any refunds
or credits due the Buyer after receipt thereof.
(d) The Buyer and the Company agree that, with
respect to any Tax, the Company shall not carry back any item of loss, deduction
or credit which arises in any taxable period ending after the Closing Date into
any taxable period ending on or before the Closing Date.
7.06 Cooperation and Exchange of Information.
(a) The Buyer and the Stockholder and their
respective Affiliates shall cooperate in the preparation of all Tax Returns and
audits for any Tax periods for which one party could reasonably require the
assistance of the other party in obtaining any necessary information. Such
cooperation shall include, but not be limited to, furnishing prior years' Tax
Returns or return preparation packages illustrating previous reporting practices
or containing historical information relevant to the preparation of such Tax
Returns, and furnishing such other information within such party's possession
requested by the party filing such Tax Returns as is relevant to their
preparation. Such cooperation and information also shall include without
limitation provision of powers of attorney for the purpose of signing Tax
Returns and defending audits and promptly forwarding copies of appropriate
notices and forms or other communications received from or sent to any Taxing
Authority which relate to the Company, and providing copies of all relevant Tax
Returns, together with accompanying schedules and related workpapers, documents
relating to rulings or other determinations by any Taxing Authority and records
concerning the ownership and tax basis of property, which the requested party
may possess. The Buyer and the Company and their respective Affiliates or the
Stockholder shall make their respective employees and facilities available on a
mutually convenient basis to provide explanation of any documents or information
provided hereunder.
(b) For a period of ten (10) years after the Closing
Date or such longer period as may be required by law, the Buyer shall, and shall
cause the Company to, retain and not destroy or dispose of all Returns
(including supporting materials), books and records (including computer files)
of, or with respect to the activities or Taxes of, such entities for all taxable
periods ending (or deemed, pursuant to Section 7.03, to end) on or prior to the
Closing Date to the extent the Buyer or the Company received or had possession
of such records on the Closing Date. Thereafter, the Buyer shall not destroy or
dispose of any such Returns, books or records unless it first offers such
Returns, books and records to the Stockholder in writing and the Stockholder
fails to accept such offer within sixty (60) days of its being
made.
(c) For a period of ten (10) years after the Closing
Date or such longer period as may be required by law, the Stockholder (or its
Affiliates) shall retain and not destroy or dispose of all Returns (including
supporting materials), books and records (including computer files) of, or with
respect to the activities or Taxes of the Company for all taxable periods ending
(or deemed, pursuant to Section 7.03, to end) on or prior to the Closing Date to
the extent the Stockholder did not deliver such records to the Buyer or the
Company. Thereafter, the Stockholder shall not destroy or dispose of any such
Returns, books or records unless it first offers such Returns, books and records
to the Buyer in writing and the Buyer fails to accept such offer within sixty
(60) days of its being made.
(d) The Stockholder shall have the right, at its own
expense, to control any audit or examination by any Taxing Authority ("Tax
Audit"), initiate any claim for refund, contest, resolve and defend against any
assessment, notice of deficiency, or other adjustment or proposed adjustment
relating to any and all Taxes for any taxable period ending on or before the
Closing Date with respect to the Company. The Buyer shall have the right, at its
own expense, to control any other Tax Audit, initiate any other claim for
refund, and contest, resolve and defend against any other assessment, notice of
deficiency, or other adjustment or proposed adjustment relating to Taxes with
respect to the Company; provided that, with respect to any state, local or
foreign Taxes for any taxable period beginning before the Closing Date and
ending after the Closing Date, the Buyer shall consult with the Stockholder with
respect to the resolution of any issue that would affect the Stockholder, and
not settle any such issue, or file any amended return relating to such issue,
without the consent of the Stockholder, which consent shall not unreasonably be
withheld. Where consent to a settlement is withheld by the Stockholder pursuant
to this Section, the Stockholder may
continue or initiate any further proceedings at its own expense, provided that
any liability of the Buyer, after giving effect to this Agreement, shall not
exceed the liability that would have resulted had the Stockholder not withheld
its consent. The Stockholder shall furnish the Buyer and the Company with its
cooperation in a manner comparable to that described in Section 7.06(a) to
effect the purposes of this Section 7.06(d).
(e) If the Buyer or the Company (as the case may be)
on the one hand, or the Stockholder on the other, fails to provide any
information requested by the other party in the time specified herein, or if no
time is specified pursuant to this Section 7.06, within a reasonable period, or
otherwise fails to do any act required of it under this Section 7.06, then the
party failing to so provide the information or do such act shall be obligated,
notwithstanding any other provision of this Agreement, to indemnify the party
requesting the information or act and shall so indemnify the requesting party
and hold such party harmless from and against any and all costs, claims or
damages, including, without limitation, all Taxes or deficiencies thereof,
payable as a result of such failure. Notwithstanding the foregoing, the party
that failed to deliver the information or do the act requested, shall in no
event be obligated to make any payments pursuant to this Section 7.06(e) or
otherwise be liable, if such party used all reasonable efforts to provide the
requested information or perform the requested act.
7.07 Tax Sharing Agreements.
(a) The parties acknowledge that any and all
existing tax sharing agreements or arrangements binding or benefiting the
Company shall be terminated as of the close of business on the Closing Date.
(b) Any amounts due from or to the Company under any
tax sharing agreement shall be paid by the appropriate party immediately before
the Closing Date and as of the Closing Date there shall be no amounts payable
or receivable under any such agreements.
7.08 Certain Tax Elections.
(a) The Stockholder shall not, and shall not permit
the Company, to change any existing or adopt any new tax accounting principle,
method of accounting, or tax election with respect to the Company, except as
provided herein or as agreed to by the Buyer or as may be required by law.
(b) The Stockholder (or the common parent of the
Stockholder Consolidated Group), shall not make, and hereby warrants that there
is not in effect, any election as provided under Treasury Regulation Section
1.1502-20(g)(1) with respect to the Company, except as provided herein or as
agreed to by the Buyer.
7.09 Nonforeign Affidavit. The Stockholder shall furnish the
Buyer an affidavit, stating, under penalty of perjury, the transferor's United
States taxpayer identification number and that the transferor is not a foreign
person, pursuant to Section 1445(b)(2) of the Code.
7.10 Termination and Survival. Notwithstanding anything in this
Agreement to the contrary, this Section 7 shall remain in effect and its
provisions shall survive for the full period of all applicable statutes of
limitation relating to the assessment of Taxes (giving effect to any extension,
waiver or mitigation thereof) plus one year.
8. Indemnification
8.01 By the Stockholder and the Company. If the Closing
occurs, the Stockholder hereby indemnifies and holds harmless the Buyer and the
Company, and if the Closing does not occur, the Stockholder and the Company,
jointly and severally, hereby indemnify and hold harmless the Buyer, from and
against any and all debts, obligations and other liabilities (whether absolute,
accrued, contingent, fixed or otherwise, or whether known or unknown, or due or
to become due or otherwise), monetary damages, fines, fees, penalties, interest
obligations, deficiencies, losses and expenses (including without limitation
amounts paid in settlement, interest, court
costs, costs of investigators, fees and expenses of attorneys, accountants,
financial advisors and other experts, and other expenses of litigation) incurred
or suffered by the Buyer and, if the Closing occurs, the Company (collectively,
the "Losses") in connection with each and all of the following:
(a) any misrepresentation or breach of any
representation or warranty made by the Stockholder or the Company in this
Agreement;
(b) any breach of any covenant, agreement or
obligation of the Stockholder or the Company contained in this Agreement or any
other agreement, instrument or document contemplated by this Agreement;
(c) any misrepresentation contained in any
statement, certificate or schedule furnished by the Stockholder or the Company
pursuant to this Agreement or in connection with the transactions contemplated
by this Agreement; and
(d) any claims against, or liabilities or
obligations of, the Company with respect to (i) benefits of current or former
employees of the Company arising under any Employee Benefit Plan maintained or
sponsored by the Stockholder, regardless of whether such benefits accrued before
or after the Closing Date, (ii) any liability imposed on the Company for a
complete or partial withdrawal (as defined for purposes of Section 4203 and 4205
of ERISA, respectively) from a multiemployer plan occurring at any time prior to
the Closing Date and (iii) any fines, liabilities or excise taxes imposed on the
Company for acts or omissions which occurred prior to the Closing Date with
respect to an Employee Benefit Plan maintained at any time by the Stockholder,
the Company or an Affiliate of the Company after December 31, 1990.
8.02 Claims for Indemnification. Whenever any claim shall
arise for indemnification under this Section 8, the Buyer or the Company, as the
case may be, seeking indemnification (the "Indemnified Party"), shall promptly
notify the Stockholder of the claim and, when known, the facts constituting the
basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice shall specify, if known, the amount or an estimate of
the amount of the liability arising therefrom. The Indemnified Party shall not
settle or compromise any claim by a third party for which it is entitled to
indemnification hereunder without the prior written consent, which shall not be
unreasonably withheld or delayed, of the Stockholder; provided, however, that if
suit shall have been instituted against the Indemnified Party and the
Stockholder shall not have taken control of such suit after notification thereof
as provided in Section 8.03 of this Agreement, the Indemnified Party shall have
the right to settle or compromise such claim upon giving notice to the
Stockholder as provided in Section 8.03.
8.03 Defense by the Stockholder. In connection with any claim
which may give rise to indemnity hereunder resulting from or arising out of any
claim or legal proceeding by a person other than the Indemnified Party, the
Stockholder, at its cost and expense, may, upon written notice to the
Indemnified Party, assume the defense of any such claim or legal proceeding if
the Stockholder acknowledges to the Indemnified Party in writing the obligation
of the Stockholder to indemnify the Indemnified Party with respect to all
elements of such claim. If the Stockholder assumes the defense of any such claim
or legal proceeding, the Stockholder shall select counsel reasonably acceptable
to the Indemnified Party to conduct the defense of such claims or legal
proceedings and at the sole cost and expense of the Stockholder shall take all
steps necessary in the defense or settlement thereof. The Stockholder shall not
consent to a settlement of, or the entry of any judgment arising from, any such
claim or legal proceeding, without the prior written consent of the Indemnified
Party (which consent shall not be unreasonably withheld or delayed). The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its own
counsel and at its own expense. If the Stockholder does not assume the defense
of any such claim or litigation resulting therefrom within 15 days after the
date such claim is made: (a) the Indemnified Party may defend against such claim
or litigation in such manner as it may deem appropriate, including, but not
limited to, settling such claim or litigation, after giving notice of the same
to the Stockholder, on such terms as the Indemnified Party may deem appropriate,
and (b) the Stockholder shall be entitled to participate in (but not control)
the defense of such action, with its counsel and at its own expense. If the
Stockholder thereafter seeks to question the manner in which the Indemnified
Party defended such third party claim or the amount or nature of any such
settlement, the Stockholder shall have the burden to prove by a preponderance of
the evidence that the Indemnified Party did not defend or settle such third
party claim in a reasonably prudent manner.
8.04 Payment of Indemnification Obligation. All
indemnification by the Stockholder hereunder and any indemnification by the
Company if the Closing does not occur, shall be effected by payment of cash or
delivery of a cashier's or certified check in the amount of the indemnification
liability or, at the election of the Stockholder, by delivery and transfer to
the Buyer of Buyer Shares, having an aggregate value in the amount of the
indemnification liability. For purposes hereof, the value of a share of Buyer
Common Stock delivered in payment of an indemnification liability shall equal
the average of the reported closing price of a share of Buyer Common Stock on
the Nasdaq National Market for the ten (10) trading days immediately preceding
such payment. Notwithstanding anything contained herein to the contrary, any
amounts (i) paid by the Stockholder to the Buyer in respect of Section 7 hereof,
(ii) paid by the Stockholder in cash to employees of the Company in respect of
amounts due under Section 5.08 for which the Buyer shall incur a liability for
Taxes (not otherwise satisfied directly or reimbursed to Buyer by the
Stockholder), (iii) due to the Buyer under the provisions of
Section 9.06 or (iv) paid by the Stockholder to the Buyer in respect of a breach
by the Stockholder or the Company of any of the representations or warranties
included in Section 3.19 with respect to the claims against the Company by BSV
(as defined in the Disclosure Schedule), shall be paid to the Buyer in cash and
without reference to either of the dollar limitations set forth in Section 8.06
below.
8.05 Survival of Representations; Claims for Indemnification.
All representations and warranties made by the Stockholder and the Company in
this Agreement, or in any instrument or document furnished in connection with
this Agreement or the transactions contemplated hereby, shall survive the
Closing and any investigation at any time made by or on behalf of the
Indemnified Party for a period of two years. Notwithstanding the foregoing, the
representations and warranties relating to tax matters shall be governed by
Section 7 hereof, and the representations set forth in Sections 3.22 and 3.23
shall survive for the longer of two years or any applicable statute of
limitations. If a notice is asserted in writing prior to the termination of such
representation and warranty and identified as a claim for indemnification
pursuant to this Section 8, then (notwithstanding the expiration of such time
period) the representation or warranty applicable to such claim shall survive
until, but only for purposes of, the resolution of such claim. Claims which are
based upon fraud by the Stockholder shall survive until finally resolved and
satisfied in full.
8.06 Limitations. Notwithstanding anything to the contrary
herein, (a) the aggregate liability of the Stockholder and, if the Closing does
not occur, the Company for Losses under this Section 8 shall not exceed
$22,000,000 and (b) the Stockholder and, if the Closing does not occur, the
Company shall be liable under this Section 8 for only that portion of the
aggregate Losses which exceeds $50,000, subject, however, to the provisions of
the last sentence of Section 8.04. Except with respect to claims
based on fraud, claims covered in Section 7 hereof and the rights of a party
hereto in accordance with Section 12.12 hereof, the rights of an Indemnified
Party under this Section 8 shall be the exclusive remedy of the Indemnified
Party with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement of the Company or the Stockholder contained in this Agreement. If the
Closing occurs, the Stockholder shall not have any right of contribution against
the Company with respect to any breach by the Company of any of its
representations, warranties, covenants or agreements.
9. Post-Closing Agreements
Each of the Stockholder and Buyer, as applicable, agrees that
from and after the Closing Date:
9.01 Proprietary Information.
(a) The Stockholder and each Affiliate shall hold in
confidence and shall use commercially reasonable efforts (or, if more stringent,
the policies and procedures it uses itself with respect to its own confidential
information of similar value) to have all officers, directors and personnel who
continue after the Closing to be employed by the Stockholder or any Affiliate
thereof to hold in confidence all knowledge and information of a secret or
confidential nature with respect to the business of the Company and not to
disclose, publish or make use of the same without the written consent of the
Buyer, except to the extent that such information shall have become public
knowledge other than by breach of this Agreement by the Stockholder.
(b) If (i) the employment of an officer, director or
other employee of the Stockholder or any Affiliate thereof, to whom secret or
confidential knowledge or information concerning the business of the Company has
been disclosed, is terminated and (ii) such individual is subject to an
obligation to maintain such knowledge or information in
confidence after such termination, the Stockholder shall, upon request by the
Buyer, take all reasonable steps at its expense to enforce such confidentiality
obligation in the event of an actual or threatened breach thereof.
(c) The Stockholder agrees that the remedy at law
for any breach of this Section 9.01 would be inadequate and that the Buyer shall
be entitled to injunctive relief in addition to any other remedy it may have
upon breach of any provision of this Section 9.01.
9.02 No Solicitation or Hiring of Former Employees. For a
period of two years after the Closing Date, neither the Stockholder nor any
Affiliate thereof shall (a) solicit (except for advertisements in publications
of general circulation) any person who was an employee of the Company on the
date hereof or the Closing Date to terminate his employment with the Buyer (or
the Company, as the case may be) or to become an employee of the Stockholder or
any Affiliate thereof, or (b) hire any person who was such an employee on the
date hereof or on the Closing Date.
9.03 Non-Competition Agreement.
(a) For the consideration contained in Section 1.03,
for a period of five years after the Closing Date, neither the Stockholder nor
any Affiliate thereof shall, except as an officer or employee of the Company,
solicit customers of the Company, other than an Affiliate of the Stockholder, to
replace in whole or in part any product of the Company with any competitive
software product.
(b) Neither the Stockholder nor any Affiliate
thereof shall develop, manufacture, market or sell any product which is directly
derived from confidential or proprietary information of the Company; however,
Buyer acknowledges that Stockholder and its Affiliates are engaged in the
businesses of developing and marketing information management and information
processing software, including database search engines, and will not be
restricted in its current or future activities except in accordance with the law
or as set forth
elsewhere in this Agreement.
(c) The parties hereto agree that the duration and
scope of the provisions set forth in this Section 9.03 are reasonable. In the
event that any court of competent jurisdiction determines that the duration or
scope, or both, are unreasonable and that such provision is to that extent
unenforceable, the parties hereto agree that the provision shall remain in full
force and effect for the greatest time period and in the greatest area that
would not render it unenforceable. The Stockholder agrees that damages are an
inadequate remedy for any breach of this Section 9.03 and that the Buyer shall,
whether or not it is pursuing any potential remedies at law, be entitled to
equitable relief in the form of preliminary and permanent injunctions without
bond or other security upon any actual or threatened breach of this non-
competition provision.
9.04 Strategic Relationship. As soon as practicable following
the Closing, the Stockholder and Buyer will enter into good faith discussions to
explore the possibility of a more extensive commercial relationship between the
Buyer and its Affiliates and the Stockholder and its Affiliates relating to the
future Internet-based commerce activities of Stockholder and its Affiliates.
9.05 Options. Promptly following the Closing, Buyer will
grant to all employees of the Company options to purchase Buyer Common Stock
under Buyer's stock option plan. Stockholder shall be reasonably satisfied that
the terms of, and number of shares covered by, such grants are not less
favorable to the employees of the Company than the options most recently granted
to employees of Buyer. Notwithstanding the foregoing, if and to the extent that
Buyer's stock option plan does not have sufficient shares authorized and
unallocated to grant such options, the Board of Directors of Buyer shall
recommend that such shares be authorized at the next annual meeting of
stockholders of Buyer, and such options shall be granted as soon as
practicable following such stockholder approval.
9.06 Accounts Receivable.
(a) As soon as practicable after the Closing Date,
Buyer shall cause the Company to furnish the Stockholder with a complete and
correct list (the "Receivables List") of the accounts receivable of the Company
as of the Closing Date (the "Closing Receivables"). Buyer shall furnish the
Stockholder with access to all such records and other information as the
Stockholder may reasonably require to verify the amounts collected by Buyer with
respect to the Closing Receivables.
(b) For a period of 150 days after the Closing Date,
Buyer shall cause the Company to use commercially reasonable efforts to collect
all of the Closing Receivables in accordance with billing and collection
practices no less diligent than those applied by Buyer in the collection of its
own accounts receivable (provided that Buyer and the Company shall not be
obligated to commence litigation to collect Closing Receivables) and Buyer shall
deliver to the Stockholder, on or before each fifteenth calendar day of June and
October 1997 a collection report ("Collection Report") setting forth:
(i)the amount of collections of Closing Receivables
during the immediately preceding three calendar months;
(ii)the amount of Closing Receivables outstanding at
the end of the calendar month immediately preceding the date of such report;
(iii)if applicable, the amount of any Closing
Receivables reclassified as uncollectible during the immediately preceding three
calendar months in accordance with Buyer's normal accounting policies and
practices; and
(iv)if and to the extent requested by the Stockholder,
the name of any payor of a Closing Receivable during the three calendar months
immediately preceding the date of such report, the date and amount of each such
payment and, if available, an identification of the invoice or invoices to which
each such payment relates.
(c) For the purpose of determining amounts of
Closing Receivables collected by the Company or Buyer, (i) if a payment is
specified by the account-debtor as being in payment of a specific Closing
Receivable,
the payment shall be applied to that receivable and (ii) all payments by an
account-debtor that are not specified as being in payment of a specific
receivable shall be applied to accounts receivable due in such amount from that
account-debtor to the Company (or in the case of multiple accounts receivable in
the same amount, to the earliest such receivable, except to the extent that such
account-debtor has given notice that it is disputing or otherwise refusing to
pay any specific receivable in whole or in part).
(d) Buyer and the Company shall not compromise,
settle or adjust the amount of any of the Closing Receivables without the prior
written consent of the Stockholder. Buyer and the Company shall apply the same
policies and practices to the extension of credit to an account-debtor which has
a Closing Receivable that Buyer would apply if that account-debtor had a
comparable outstanding account receivable to Buyer. Buyer shall not solicit the
payment of other accounts receivable owed to Buyer, the Company or any other
affiliate of Buyer in preference to Closing Receivables.
(e) At the request and expense of the Stockholder,
Collection Reports and supporting documentation may be audited from time to time
by the Stockholder's independent certified public accountants on reasonable
prior notice, during the Company's normal business hours and in such a manner so
as to not disrupt the Company's ordinary course of operations. In connection
with Closing Receivables reported at any time as uncollectible, Buyer and the
Company shall afford the Stockholder reasonable opportunity to review the
history of each such Closing Receivable.
(f) To the extent that Buyer or the Company have not
collected the full amount of the Closing Receivables reflected on the
Receivables List (less the allowances for uncollectible accounts receivable and
sales returns and concessions shown on the Unadjusted Balance Sheet), after
giving effect to all adjustments, concessions and settlements made and any
reasonable collection fees paid, in each case in accordance
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission
Asterisks denote such omissions
with paragraph (b) hereof, by the date that is 150 days after the Closing Date
(the "Settlement Date"), then Buyer shall submit to the Stockholder an itemized
statement of all uncollected Closing Receivables reflected on the Receivables
List (less the amount of the reserve shown thereon), and the Stockholder shall
remit to Buyer the amount set forth in such statement within 30 days after
receipt of such statement.
9.07 Purchase of Products. The Stockholder agrees that
following the Closing Date it and its Affiliates shall purchase currently
deliverable products and/or prepay guaranteed minimum royalties of the Company
in a non-refundable amount equal to no less than ************ prior to March 31,
1997. The Stockholder will not unreasonably withhold approval of terms which
Buyer reasonably believes will allow the Company to recognize the revenue prior
to March 31, 1997 with respect thereto on a basis consistent with USGAAP.
9.08 Employee Benefits Plan. Promptly following the Closing
the Stockholder shall terminate all Company employees' participation in any
Employee Benefit Plan and all post-Closing Company liabilities with respect
thereto shall have been discharged.
10. Termination.
10.01 Termination of Agreement. The parties may terminate this
Agreement prior to the Closing, as provided below:
(a) the parties may terminate this Agreement by
mutual written consent;
(b) the Buyer may terminate this Agreement by giving
written notice to the Company and the Stockholder in the event the Company or
the Stockholder is in breach, and the Company or the Stockholder may terminate
this Agreement by giving written notice to the Buyer in the event the Buyer is
in breach, of any material representation, warranty, or covenant contained in
this Agreement, and such breach is material and is not remedied within 10 days
of delivery of written notice thereof;
(c) the Buyer may terminate this Agreement by giving
written notice to the Company and the Stockholder if the Closing shall not have
occurred on or before the 60th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 6.01 hereof
(unless the failure results primarily from a breach by the Buyer of any
representation, warranty or covenant contained in this Agreement); or
(d) the Company or the Stockholder may terminate
this Agreement by giving written notice to the Buyer if the Closing shall not
have occurred on or before the 60th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 6.02 hereof
(unless the failure results primarily from a breach by the Company or the
Stockholder of any representation, warranty or covenant contained in this
Agreement).
10.02 Effect of Termination. If any party terminates this
Agreement pursuant to Section 10.01, all obligations of the parties hereunder
shall terminate without any liability of any party to any other party (except
for any liability of any party for breaches of this Agreement); provided,
however, that the confidentiality provisions contained herein shall survive any
such termination.
11. Dispute Resolution
11.01 General. In the event that any dispute should arise
between the parties hereto with respect to any matter covered by this Agreement,
including, without limitation, the calculation of the Closing Net Worth of the
Company, the parties hereto shall resolve such dispute in accordance with the
procedures set forth in this Section 11.
11.02 Consent of the Parties. In the event of any dispute
between the parties with respect to any matter covered by this Agreement, the
parties shall first use their best efforts to resolve such dispute among
themselves. If the parties are unable to resolve the dispute within 30 calendar
days after
the commencement of efforts to resolve the dispute, the dispute (including, if
necessary, whether such dispute is arbitrable) will be submitted to arbitration
in accordance with Subsection 11.03 hereof.
11.03 Arbitration.
(a) Either the Buyer or the Stockholder may submit
any matter referred to in Subsection 11.02 hereof to arbitration by notifying
the other parties hereto, in writing, of such dispute. Within 10 days after
receipt of such notice, the Buyer and the Stockholder shall designate in writing
one arbitrator to resolve the dispute; provided, that if the parties hereto
cannot agree on an arbitrator within such 10-day period, the arbitrator shall be
selected by the American Arbitration Association. The arbitrator so designated
shall not be an employee, consultant, officer, director or stockholder of any
party hereto or any Affiliate of any party to this Agreement.
(b) Within 15 days after the designation of the
arbitrator, the arbitrator, the Buyer and the Stockholder shall meet, at which
time the Buyer and the Stockholder shall be required to set forth in writing all
disputed issues and a proposed ruling on each such issue.
(c) The arbitrator shall set a date for a hearing,
which shall be no later than 30 days after the submission of written proposals
pursuant to paragraph (b) above, to discuss each of the issues identified by the
Buyer and the Stockholder. Each such party shall have the right to be
represented by counsel. The arbitration shall be governed by the commercial
arbitration rules of the American Arbitration Association; provided, that the
arbitrator shall have sole discretion with regard to the admissibility of
evidence.
(d) The arbitrator shall use his best efforts to
rule on each disputed issue within 30 days after the completion of the hearings
described in paragraph (c) above. The determination of the arbitrator as to the
resolution of any dispute shall be binding and conclusive upon all parties
hereto. All rulings of the arbitrator shall be in writing and shall be delivered
to the parties hereto.
(e) Each party in any arbitration shall be
responsible for its own fees and expenses, except as otherwise determined by the
arbitrator.
(f) Any arbitration pursuant to this Subsection
11.03 shall be conducted in Boston, Massachusetts. Any arbitration award may be
entered in and enforced by any court having jurisdiction thereover and the
parties hereby consent and commit themselves to the jurisdiction of the courts
of The Commonwealth of Massachusetts and the United States District Courts for
Massachusetts for purposes of the enforcement of any arbitration award.
12. Miscellaneous.
12.01 Press Releases and Announcements. No party shall issue
any press release or public disclosure relating to the subject matter of this
Agreement without the prior approval of the other parties; provided, however,
that any party may make any public disclosure it believes in good faith is
required by law, regulation or the rules of any applicable stock exchange where
the securities of any party or its Affiliate are listed (in which case the
disclosing party shall advise the other parties and provide them with a copy of
the proposed disclosure prior to making the disclosure).
12.02 No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns.
12.03 Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements, or representations by or among
the parties, written or oral, with respect to the subject matter hereof.
12.04 Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties named herein and their
respective
successors and permitted assigns. No party may assign either this Agreement or
any of its rights or interests, or obligations hereunder except to an Affiliate,
without the prior written approval of the other parties. Notwithstanding any
such assignment each party shall remain primarily liable for its obligations
hereunder and not as a surety.
12.05 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12.06 Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.07 Notices. All notices, requests, demands, claims, and
other communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service, in each case to the intended recipient as
set forth below:
If to the Company
prior to Closing to: Copy to:
Folio Corporation Xxxxx Xxxxxxxxxxxx, Esq.
5072 North 000 Xxxx Xxxx Xxxxxxxx Xxx.
Xxxxx, Xxxx 00000 000 Xxxxxxxxxx Xxxxxx
Attn: President Xxxxxx, XX 00000-0000
If to the Company
after the Closing: Copy to:
Folio Corporation Xxxx and Xxxx LLP
c/o Open Market, Inc. 00 Xxxxx Xxxxxx
000 Xxxxx Xxxxxx Xxxxxx, XX 00000
Xxxxxxxxx, XX 00000 Attn: Xxxx X. Xxxxx, Esq.
Attn: Legal Counsel
If to the Buyer: Copy to:
Open Market, Inc. Xxxx and Xxxx LLP
000 Xxxxx Xxxxxx 00 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000 Xxxxxx, XX 00000
Attn: Legal Counsel Attn: Xxxx X. Xxxxx, Esq.
If to the Stockholder: Copy to:
Xxxx Elsevier Inc. Xxxxx Xxxxxxxxxxxx, Esq.
000 Xxxx Xxxxxx Xxxx Elsevier Inc.
Xxx Xxxx, XX 00000 000 Xxxxxxxxxx Xxxxxx
Attn: I. Xxxxxxx Xxxxxx Xxxxxx, XX 00000-0000
Any party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
12.08 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal law (and not the law of conflicts) of
The Commonwealth of Massachusetts.
12.09 Amendments and Waivers. The parties may mutually amend
any provision of this Agreement at any time. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
all of the parties. No waiver by any party of any default, misrepresenta-tion,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
12.10 Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the final
judgment of a court of competent jurisdiction declares that any term or
provision hereof is invalid or unenforceable, the parties agree that the court
making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
12.11 Expenses. Each of Buyer and Stockholder shall bear its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. The
Stockholder shall bear the Company's costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby; provided, that the Company shall bear the accounting
expenses related to the normal auditor's review of the Company's financial
statements for the year ended December 31, 1996, which expenses shall be deemed
to be not in connection with this Agreement and the transactions contemplated
hereby.
12.12 Specific Performance. Each of the parties acknowledges
and agrees that one or more of the other parties would be damaged irreparably in
the event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached. Accordingly,
each of the parties agrees that the other parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the parties and the matter, in
addition to any other remedy to which it may be entitled, at law or in equity.
12.13 Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party. Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. Terms of inclusion shall be
construed to mean including without limitation.
12.14 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
OPEN MARKET, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Title: Chief Financial Officer
---------------------------
XXXX ELSEVIER INC.
By: /s/ Xxxxx X. Xxxxxxxxxxxx
------------------------------
Title: Vice President
---------------------------
FOLIO CORPORATION
By /s/ Xxxxx X. Xxxxxxxxxxxx
-----------------------------
Title: Vice President
---------------------------
