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EXHIBIT 2.01
STOCK PURCHASE AGREEMENT
AMONG
BRODERBUND SOFTWARE, INC.,
INTUIT INC.
AND
XXXXXXX TECHNOLOGY, INC.
AUGUST 6, 1997
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into on
August 6, 1997 by and among Broderbund Software, Inc., a Delaware corporation
("Buyer"), Intuit Inc., a Delaware corporation ("Seller"), and Xxxxxxx
Technology, Inc., a California corporation and wholly-owned subsidiary of
Seller (the "Company" including its wholly owned subsidiaries), (Seller and the
Company are referred to herein together as the "Sellers") and, solely for
purposes of Section 8 and Section 10 of this Agreement, the Escrow Agent (as
defined below). Each of the Buyer and the Sellers are referred to herein
individually as a "Party" and, collectively, as the "Parties."
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, all of the issued and outstanding capital stock of the Company
(the "Stock") following the distribution of the Assigned Assets (as defined
below) and the Assumed Liabilities (as defined below) to Seller pursuant to the
plan of complete liquidation as described below, in consideration of the
Purchase Price (as defined below) and on the terms and conditions set forth
herein (the "Acquisition").
WHEREAS, Seller is effecting the Acquisition as part of a tax-free
plan of complete liquidation of the assets of the Company for tax purposes
pursuant to Section 332 of the Code (as defined below).
WHEREAS, in connection with such Acquisition, Buyer, Seller and the
Company desire to make certain representations, warranties and covenants
amongst one another.
WHEREAS, a portion of the Purchase Price payable by Buyer in
connection with the Acquisition shall be placed in escrow by Buyer, as provided
herein.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the warranties, and covenants
herein contained, the Parties hereto agree as follows.
1. DEFINITIONS:
"Acquisition" shall have the meaning set forth above.
"Acquisition Proposal" shall mean any inquiry or proposal relating to
(i) any merger, consolidation, sale of substantially all of the assets of or
similar transaction involving the Company, or (ii) the sale of any of the
outstanding shares of capital stock of the Company (including without
limitation by way of a tender offer or an exchange offer) or similar
transaction involving the Company.
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"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended,
of the United States.
"Affiliated Group" shall mean any affiliated group within the meaning
of Code Section 1504(a) or any similar group deemed to be an affiliated group
under a similar provision of state, local, or foreign law.
"Agreement" shall have the meaning set forth in the preamble above.
"Assigned Assets Liabilities" shall have the meaning set forth in
Section 2.1(b).
"Assigned Assets" shall have the meaning set forth in Section 2.1(b).
"Assumed Liabilities"shall have the meaning set forth in Section 8.1.
"Basis" shall have the meaning set forth in Section 8.1.
"Breach" and "Breaches" shall have the meanings set forth in Section
8.1.
"Business" shall mean the Company's business of developing, licensing,
marketing, selling and distributing consumer computer software products and
related services, excluding any and all business or businesses, acts, contracts
or activities related to the Assigned Assets and/or the Liabilities assumed
pursuant to the Distribution, Assignment and Assumption Agreement (as defined
below).
"Buyer" shall have the meaning set forth in the preamble above.
"Buyer's Basket" shall have the meaning set forth in Section 8.4(e).
"Cash" shall mean cash and cash equivalents within the meaning of
GAAP.
"Chemical Substance" means any chemical substance, including but not
limited to any: (i) pollutant, contaminant, irritant, chemical, raw material,
intermediate, product, by-product, slag, construction debris; (ii) industrial,
solid, liquid or gaseous toxic or hazardous substance, material or waste, (iii)
petroleum or any fraction thereof; (iv) asbestos or asbestos-containing
material; (v) polychlorinated biphenyls; (vi) chlorofluorocarbons; and, (vii)
any other substance, material or waste, which is identified or regulated under
any Environmental Law or Safety Law, as now in effect, or other comparable
laws.
"Closing" shall have the meaning set forth in Section 2.4.
"Closing Date" shall have the meaning set forth in Section 2.4.
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"Code" shall mean the Internal Revenue Code of 1986, as amended, of
the United States.
"Company" shall mean Xxxxxxx Technology, Inc. and both of its wholly
owned subsidiaries, collectively.
"Company Assets" shall have the meaning set forth in Section 2.1(a).
"Company Agents" shall mean officers, employees and consultants of the
Company.
"Company Employee Plan" shall refer to any Company plan, scheme,
program, policy, practice, contract, commitment, agreement or other arrangement
providing for pension, death benefit, gratuities, superannuation, performance
awards, stock or stock-related awards, share option, share participation, share
incentive, profit sharing, bonus, incentive, fringe benefits, medical, dental,
or other employee benefits of any kind, whether formal or informal, funded or
unfunded and whether or not legally binding, including without limitation, each
"employee benefit plan" within the meaning of Section 3(3) of ERISA, each
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA,
"employee welfare benefit plan" within the meaning of Section 3(1) of ERISA,
and each "multiemployer plan" within the meaning of Section 3(37) of ERISA, in
each case which is or has been maintained, contributed to, or required to be
contributed to, by the Company for the benefit of any Employee, and pursuant to
which the Company has or may have any material liability, contingent or
otherwise.
"Confidentiality Agreement" shall mean that certain Business
Evaluation Agreement between Buyer, Seller and the Company dated February 21,
1997.
"Continuing Lease" means that certain Building Lease dated January 18,
1991, as amended by First Amendment to Building Lease dated April 17, 1991 and
Second Amendment to Building Lease dated July 1, 1991, between the Company and
Hiawatha Development, as such is in effect on the date of this Agreement,
pursuant to which the Company leases its administrative facility located at Xxx
Xxxxxxx Xxxxx, Xxxxxxxx, Xxxx (the "Continuing Lease Premises"). The term
"Continuing Lease" does not include any modification or amendment of the
Continuing Lease made after the Closing Date or any lease agreement that
replaces, in whole or in part, the Continuing Lease.
"Continuing Lease Obligation" means the Company's obligation to pay,
when due under the terms of the Continuing Lease (other than when due to a
breach or violation of the Continuing Lease by the Company after the Closing),
fifty percent (50%) of the normal and usual rental payments due from the
Company under the Continuing Lease during the remainder of the current pending
term of the Continuing Lease, excluding any renewals or extensions of such
lease term ("Continuing Lease Rent") minus any amounts (including without
limitation any rent or other payments) payable, directly or indirectly, to the
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Company or the landlord of the Continuing Lease Premises by any future
sublessee of the Continuing Lease Premises (a "Sublessee") by which the Company
or Buyer, through the use of commercially reasonable efforts to sublease or
otherwise mitigate or reduce such rent obligation, reduces the amount of
Continuing Lease Rent payable or paid by the Company; provided however, that
during any time period during which the Company and/or Buyer and/or any
Affiliate of the Company or Buyer and/or any Sublessee occupy more than fifty
percent (50%) of the rentable space available in the Continuing Lease Premises,
the percentage of the Continuing Lease Rent payable by Seller as the Continuing
Lease Obligation hereunder shall be reduced to that percentage (which shall be
less than fifty percent (50%)) of the Continuing Lease Premises not used or
occupied by the Company, Buyer and/or any Affiliate of the Company or Buyer
and/or any Sublessee; and provided further, that the Continuing Lease
Obligation shall not include any obligation to pay any amounts that become due,
or whose payment is accelerated, after the Closing, as a result of (i) any
breach or violation of the Continuing Lease (or any amended or modified version
of the Continuing Lease) by Buyer or the Company or any of their respective
Affiliates, successors or assigns; or (ii) any wrongful or tortious act,
omission or other conduct by Buyer, the Company, any of their Affiliates
successor or assigns or any Sublessee; or (iii) any lease agreement or other
arrangement regarding the lease of the Continuing Lease Premises other than the
Continuing Lease, as defined above.
"Contract" shall have the meaning set forth in Section 3.16.
"Disclosed Liabilities" shall have the meaning set forth in Section
7.9
"Disclosure Letter" shall mean the Disclosure Letter of Seller dated
as of the date of this Agreement as delivered to Buyer concurrently with the
execution of this Agreement, which contains exceptions to Seller's
representations and warranties as set forth in Section 3. Such Disclosure
Letter may only be amended prior to Closing with the express written consent of
Buyer.
"Distribution, Assumption and Assignment Agreement" means the
Distribution, Assumption and Assignment Agreement in the form of Exhibit A to
be entered into by Seller and the Company after the Parties have entered into
this Agreement pursuant to a plan of complete liquidation of the Company for
tax purposes.
"Distributor Guarantees" shall have the meaning set forth in Section
7.10.
"Environment" shall mean real property and any improvements thereon,
and also includes, but is not limited to, air (including that within man-made
structures above or below ground), surface water, drinking water, groundwater,
land surface, subsurface strata and water body sediments.
"Environmental Authorizations" shall have the meaning set forth in
Section 3.23(a).
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"Environmental Law" shall mean any statute, statutory instrument,
common law, treaty, regulation or legal requirement relating to pollution, or
protection or cleanup of the Environment including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Resource Conservation and Recovery Act, as amended, the Clean Air
Act, as amended, and the Clean Water Act, as amended, relating to: (a) the
Release, containment, removal, remediation, response, cleanup or abatement of
any sort of any Chemical Substance; (b) the manufacture, generation,
formulation, processing, labeling, distribution, introduction into commerce,
use, treatment, handling, storage, recycling, disposal or transportation of any
Chemical Substance; or (c) exposure of persons, including employees, to any
Chemical Substance.
"Environmental Permit" shall mean any Permit or authorization from any
governmental authority required under, issued pursuant to, or authorized by,
any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Account" shall have the meaning set forth in Section 2.2(b).
"Escrow Agent" shall mean the person designated as the "Escrow Agent"
on the Signature page attached hereto, or any other reasonably acceptable
person appointed by Buyer in substitution therefor.
"Escrow Amount" shall have the meaning set forth in Section 2.2(b).
"Escrow Period" shall have the meaning set forth in Section 8.1.
"Extended Buyer Claim" shall have the meaning set forth in Section
8.1.
"Extended Seller Claim" shall have the meaning set forth in Section
8.1.
"Extremely Hazardous Substance" shall have the meaning set forth in
Section 302 of the Emergency Planning and Community Right-to-Know Act of 1986,
as amended.
"Fiduciary" shall have the meaning set forth in ERISA Section 3(21).
"Financial Statements" shall have the meaning set forth in Section
3.7.
"GAAP" shall mean United States generally accepted accounting
principles as in effect on the date of this Agreement.
"HSR Act" shall have the meaning set forth in Section 3.3.
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"Indebtedness" shall have the meaning set forth in Section 3.8.
"Intellectual Property" shall mean (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all Patents, (b) all trademarks, service marks, trade
dress, logos, trade names, and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith, (c) all copyrightable works, all copyrights, design
rights and all applications, registrations, and renewals in connection
therewith, (d) all mask-works and all applications, registrations, and renewals
in connection therewith, (e) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f) all computer
software (including data and related documentation), (g) all other proprietary
rights, and (h) all copies and tangible embodiments thereof (in whatever form
or medium).
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean the actual knowledge of the executive officers
of the applicable Party.
"Liability" shall have the meaning set forth in Section 8.1.
"Lien" shall mean any mortgage, pledge, lien, security interest,
charge, claim, equity, encumbrance, conditional sale or other title retention
device or arrangement for the purpose of subjection to the payment of any
Indebtedness, or restriction on the creation of any of the foregoing, whether
relating to any property or right or the income or profits therefrom; provided,
however, that the term "Lien" shall not include (i) statutory liens for Taxes
to the extent that the payment thereof is not in arrears or otherwise due, (ii)
encumbrances in the nature of zoning restrictions, easements, rights or
restrictions of record on the uses of real property if the same do not
materially detract from the value of the property encumbered thereby or
materially impair the use of such property in the businesses of the Sellers as
currently conducted, (iii) statutory or common law liens to secure landlords,
lessors or renters under leases or rental agreements confirmed to the premises
rented to the extent that no payment or performance under any such lease or
rental agreement is in arrears or is otherwise due, (iv) deposits or pledges
made in connection with, or to secure payment of, worker's compensation,
unemployment insurance, old age pension programs mandated under applicable laws
or other social security regulations, and (v) statutory or common law liens in
favor of carriers, warehousemen, mechanics and materials, statutory or common
law liens to secure claims for labor, materials or supplies and other like
liens, which secure obligations to the extent that payment thereof is not in
arrears or otherwise due.
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"Loss" and "Losses" shall have the meanings set forth in Section 8.1.
"Most Recent Balance Sheet" shall have the meaning set forth in
Section 3.7.
"Most Recent Financial Statements" shall have the meaning set forth in
Section 3.7.
"Officer's Indemnification Certificate" shall have the meaning set
forth in Section 8.1.
"Ordinary Course of Business" shall mean the ordinary course of a
Party's business consistent with such Party's past custom and practice
including with respect to quantity and frequency.
"Party" and "Parties" shall have the respective meanings set forth in
the preamble above.
"Patent" shall mean any: (i) patent, patent application, patent
disclosure or other patent right in any jurisdiction of the world; (ii) any
division, continuation, continuation-in-part, reissuance, reexamination, or
extension of a Patent; or (iii) any other patent right that is based upon an
item described in clause (i) or (ii) of this sentence.
"Person" shall mean an individual, a partnership, a corporation, an
association, a joint stock company, a trust, an unincorporated organization, or
a governmental entity (or any department, agency, or political subdivision
thereof).
"Premises" shall mean the real properties that are leased by the
Company under the Real Property Leases listed in Schedule 3.13(b) hereto.
"Proceedings" shall have the meaning set forth in Section 7.5.
"Prohibited Transaction" shall have the meaning set forth in ERISA
Section 406 and Code Section 4975.
"Purchase Price" shall have the meaning set forth in Section 2.2.
"Real Property Leases" shall have the meaning set forth in Section
3.13(b).
"Release" shall mean any actual spilling, leaking, pumping, pouring,
emitting, dispersing, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing of any Chemical Substance into the Environment that may
cause Liability under Environmental Laws (including the abandonment or
discarding of barrels, containers, tanks or other receptacles containing or
previously containing any Chemical Substance).
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"Reportable Event" shall have the meaning set forth in ERISA Section
4043.
"Returns" shall have the meaning set forth in Section 3.12(a).
"Safety Laws" shall mean any statute, statutory instrument, common
law, regulation, directive, code of practice or guidance notes, or legal
requirement relating to health or safety, including but not limited to the
Occupational Safety and Health Act, as amended, relating to: (a) exposure of
employees of the Company to any Chemical Substance, (b) the physical structure,
use or condition of a building, facility, fixture or other structure or
manufacturing processes, or (c) otherwise concerning the health and safety of
persons who work for the Company, whether as employees, consultants or
otherwise, or persons who visit the Premises or are in any way affected by the
activities of the Company or by persons who work for the Company.
"Schedules" shall mean the Schedules of Seller delivered to Buyer
concurrently with the execution of this Agreement which Schedules set forth the
specific information referenced in various sections of this Agreement. The
Schedules and the information contained therein shall not be deemed exceptions
to any of the representations or warranties contained herein, except that they
qualify Sections 3.13(b), 3.14(c)(iv), 3.21(a), 3.21(d) and 3.21(e) to the
extent set forth therein. Such Schedules may only be amended prior to Closing
with the express written consent of all parties hereto. The Schedules are
arranged to supplement various sections of this Agreement by corresponding or
cross- referencing specific lettered and numbered Sections contained herein.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Seller" and "Sellers" shall have the respective meanings set forth in
the preamble above.
"Seller's Basket" shall have the meaning set forth in Section 8.3(e).
"Stock" shall have the meaning set forth in the Preamble above.
"Subsidiary" or "Subsidiaries" shall mean any corporation, or
corporations, respectively, with respect to which a specified Person (or a
Subsidiary thereof) owns a majority of the voting stock or has the power to
vote or direct the voting of sufficient securities to elect a majority of the
directors of such corporation.
"Tax," "Taxation" or "Taxes" means any and all United States and other
foreign taxes, whether governmental, local or municipal, assessments and other
governmental or
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local or municipal charges, duties, impositions and liabilities, including
taxes based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, property transfer, franchise,
withholding, stamp, payroll, recapture, employment, national insurance, social
security, excise duties and rates together with all interest, penalties and
additions imposed with respect to such amounts.
"Tax Return" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Trademarks" shall mean any trademarks, service marks, trade dress,
logos, trade names, and corporate names, together with all goodwill associated
therewith.
2. PURCHASE AND SALE TRANSACTION.
2.1 Purchase and Sale of Stock.
(a) On the terms and subject to the conditions set forth
in this Agreement, at the Closing, Seller will sell, convey, transfer, assign
and deliver to Buyer, and Buyer will purchase and acquire from Seller on the
Closing Date, all of the Stock (and as a result thereof, all right, title, and
interest to any and all assets of the Company included in the assets listed on
the Most Recent Balance Sheet of the Company, except (i) those assets disposed
of or consumed in the Ordinary Course of Business since the date of the Most
Recent Balance Sheet, (ii) the Assigned Assets and (iii) those assets whose
disposition prior to the Closing is described in the Disclosure Letter (the
"Company Assets")), in exchange for the Purchase Price.
(b) The Parties acknowledge and agree that, immediately
prior to the effectiveness of the Closing, pursuant to a plan of complete
liquidation of the Company for tax purposes and the Distribution, Assignment
and Assumption Agreement, which will be entered into by the Company and Seller
after the Parties have entered into this Agreement, certain assets of the
Company as set forth on Schedule 2.1(b)-1 (the "Assigned Assets") will be
distributed to Seller, and those liabilities related to the Assigned Assets and
assumed by Seller under the Distribution, Assignment and Assumption Agreement
(the "Assigned Assets Liabilities") will be assumed by Seller and accordingly,
the Assigned Assets will not be owned by the Company at the Closing and thus
will not be acquired, directly or indirectly, by Buyer pursuant to its purchase
of the Stock hereunder. The Parties further acknowledge and agree that Seller
will assume all of the Assumed Liabilities (as defined in Section 8.1)
effective as of the Closing, except that Seller will have assumed the Assigned
Assets Liabilities effective immediately prior to the effectiveness of the
Closing.
(c) The Acquisition will be treated as a deemed asset
sale transaction for Tax purposes by virtue of the Parties making the
appropriate Code Section 338(g) and
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338(h)(10) elections, as specified in Sections 6.1(r) and 6.2(m) of this
Agreement. The Parties agree to report the Acquisition in the manner described
in the preceding sentence and none of the Parties will take any Tax position
inconsistent therewith in any Tax return or otherwise.
2.2 Purchase Price. Buyer agrees to pay to the Seller on the
Closing Date the purchase price (the "Purchase Price") as follows:
(a) Total Cash from Buyer. At the Closing, an aggregate
of U.S. $31,000,000 in cash, less the Escrow Amount set forth in Section 2.2(b)
below, by wire transfer to the Seller pursuant to wire transfer instructions
delivered by Seller to Buyer not less than 24 hours prior to the Closing.
(b) Escrow Amount. At the Closing, an aggregate of U.S.
$4,650,000 (the "Escrow Amount") of such $31,000,000 Purchase Price in cash
payable by Buyer shall be placed by Buyer into an escrow account (the "Escrow
Account"), such amount to be payable by wire to the Escrow Agent
contemporaneously with the Closing, to be held in escrow pursuant to the
provisions of Section 8 herein.
2.3 Transfer Tax. Seller shall bear and pay any transfer Taxes
(other than any sales or use tax), documentation charges, recording fees or
similar charges, fees or expenses that may become payable in connection with
the sale of the Stock and the Acquisition, and Seller shall bear and pay any
such Taxes (including sales and use Taxes) arising from the distribution of the
Assigned Assets and Assigned Assets Liabilities pursuant to the Distribution,
Assignment and Assumption Agreement).
2.4 The Closing. Subject to the terms and conditions of this
Agreement, the closing of the sale of the Stock by Seller to Buyer and the
other transactions contemplated by this Agreement (the "Closing") shall take
place immediately after (i) the distribution of the Assigned Assets and the
Assigned Assets Liabilities from the Company to Seller pursuant to the
Distribution, Assignment and Assumption Agreement and the plan of complete
liquidation of the Company referred to herein and (ii) the satisfaction and/or
waiver of all conditions listed in Section 6 hereof. Subject to compliance
with the foregoing, the Closing shall take place effective immediately after
the close of business, Pacific Time, on August 6, 1997 (the "Closing Date").
The Closing shall take place at the offices of Wilson, Sonsini, Xxxxxxxx &
Xxxxxx, Professional Corporation, in Palo Alto, California.
2.5 Deliveries at the Closing. At the Closing, the following
shall occur:
(i) Seller will deliver to Buyer the stock
certificate(s) representing the Stock.
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(ii) Seller will deliver to Buyer the various
certificates, instruments, and documents referred to in Section 6.1 below;
(iii) Seller will execute, acknowledge (if
appropriate), and deliver to the Buyer such other instruments of sale,
transfer, conveyance, and assignment of the Stock as Buyer and its counsel may
reasonably request;
(iv) Buyer will deliver (a) the Purchase Price
(less the Escrow Amount) to Seller and (b) the Escrow Amount to the Escrow
Agent, each as specified in Section 2.2 above;
(v) Buyer will deliver to Seller the various
certificates, instruments and documents referred to in Section 6.2 below;
(vi) Buyer and Seller shall deliver or cause to
be delivered to one another such other instruments and documents as are
reasonably necessary or appropriate to evidence the due execution, delivery and
performance of this Agreement; and
At any time, and from time to time after the Closing, at the
reasonable request of Buyer and without further consideration, Seller, at
Buyer's sole cost and expense, will execute and deliver such other instruments
of sale, transfer, conveyance, assignment and confirmation and take such lawful
action as Buyer may reasonably determine is necessary to transfer, convey and
assign to the Buyer, and to confirm the Buyer's title to or interest in the
Stock, to put the Buyer in actual possession and operating control of the
Business and to assist the Buyer in exercising all rights with respect thereto.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer that the statements contained
in this Section 3 are true and correct as of the date of this Agreement and, if
the Closing Date is different than the date of this Agreement, will be true and
correct as of the Closing Date (as though made as of the Closing Date and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3), except (i) for changes pursuant to the conduct of
the business of the Company occurring prior to the Closing in conformity with
this Agreement (including the Exhibits attached hereto) or (ii) as specifically
set forth in the Disclosure Letter, or (iii) for changes in the Company or its
business resulting from the distribution of the Assigned Assets and the
Assigned Assets Liabilities to Seller pursuant to the Distribution, Assignment
and Assumption Agreement.
3.1 Organization of the Sellers. Each of the Sellers is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. Seller is qualified to transact business as
a foreign corporation in the State of California and is a foreign corporation
in good standing under the laws of the State of California. The Company
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is, or at or prior to the Closing Date will be, duly qualified to transact
business as a foreign corporation in good standing under the laws of each
jurisdiction where such qualification is required and in which the Company's
failure to be so qualified would have a material adverse effect on the
Company's Business, financial condition or results of operations. The Company
has full power and authority, and all licenses, permits and authorizations
necessary to carry on the Business and to own and use the Company Assets and
properties owned and used by it except those that will be distributed to Seller
pursuant to the Distribution, Assignment and Assumption Agreement. Neither of
the Sellers is in default under or in violation of any provision of its
respective articles (or certificate) of incorporation or bylaws.
3.2 Authorization of Transaction. Each of the Sellers has full
corporate power and authority to execute and deliver this Agreement and to
perform its respective obligations hereunder. Without limiting the generality
of the foregoing, the board of directors of Seller has duly authorized the
execution, delivery, and performance of this Agreement by Seller, and the board
of directors of the Company has duly authorized the execution, delivery and
performance of this Agreement by the Company. This Agreement constitutes the
valid and legally binding obligation of Seller and the Company, enforceable
against Seller and the Company in accordance with its terms and conditions,
subject to the effect of bankruptcy or similar insolvency laws affecting the
rights of creditors generally and the availability of specific enforcement,
injunctive relief and other equitable remedies.
3.3 Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which either of the Sellers is
subject or any provision of any charter documents or bylaws of either Seller or
(ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Company is a party or by
which the Company is bound or to which any of the Company's assets (other than
any of the Assigned Assets) is subject (or result in the imposition of any Lien
upon any of the Company's assets other than any of the Assigned Assets).
Neither of the Sellers is required by any law to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement except for the lapsing of the
waiting period under 16 C.F.R. Section 800 et. seq. (the "HSR Act") without
commencement of any action to enjoin the transaction on the part of the Federal
Trade Commission or the Department of Justice.
3.4 Brokers' Fees. Neither of the Sellers has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which the Buyer
could become liable or obligated.
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3.5 Title to Stock.
(a) The Seller is the sole holder of outstanding capital
stock of the Company as of the date hereof.
(b) The Seller has good and marketable title to the
Stock; such shares of stock are free and clear of any Liens (as defined herein)
and free from any restriction on sale or transfer (other than restrictions
imposed by applicable securities laws), preemptive right, option, warrant or
any other claim of any kind or nature whatsoever by any person other than the
registered owner thereof. The delivery of the Shares to Buyer pursuant to this
Agreement upon Closing will transfer to Buyer legal and valid title to the
Shares being acquired free and clear of all Liens, or other claims of any kind
or nature whatsoever.
3.6 Subsidiaries. The Company owns all of the issued and
outstanding stock of Go Direct, Inc., an Iowa corporation and Xxxxxxx Ltd., a
U.K. corporation, and does not control, directly or indirectly or have any
direct or indirect equity participation in any other corporation, partnership,
trust or other business association.
3.7 Pro Forma Adjusted Financial Statements. Schedule 3.7 sets
forth the following unaudited pro forma adjusted financial statements of the
Company as a business unit of Seller (collectively, the "Financial
Statements"): (i) an unaudited pro forma adjusted balance sheet at July 31,
1996 and pro forma adjusted statements of income and cash flows for the fiscal
year ended July 31, 1996 and (ii) an unaudited pro forma adjusted balance sheet
of the Company as of June 30, 1997 (the "Most Recent Balance Sheet") and pro
forma adjusted statements of income and cash flows for the 11 month period
ended June 30, 1997 (the Most Recent Balance Sheet and such 11 month unaudited
pro forma adjusted statements of income and cash flows being hereinafter
referred to as the "Most Recent Financial Statements"). The Financial
Statements, specifically including the Most Recent Financial Statements, have
been derived from unaudited financial statements of the Company as a business
unit of Seller that were prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, and have been adjusted
in accordance with the assumptions, qualifications and adjustments expressly
set forth in the Financial Statements on a pro forma basis that excludes the
assets, liabilities, revenues, expenses and other financial statement items
related to the business associated with the Assigned Assets and certain of the
Assigned Assets Liabilities to be assumed by Seller pursuant to the
Distribution, Assignment and Assumption Agreement for all periods covered by
the Financial Statements, as provided therein. Subject to the adjustments,
assumptions and qualifications set forth therein, the Financial Statements
present fairly the financial condition and the results of operations of the
Company as of the date or dates of such Financial Statements and for the
periods covered thereby on the pro forma adjusted basis described herein and in
the Financial Statements and, subject to such pro forma adjustments,
assumptions and qualifications, are consistent with the books and records of
the Company that pertain to the Business of the Company, other than any
business related to the Assigned
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Assets or the Assigned Assets Liabilities assumed pursuant to the Distribution,
Assignment and Assumption Agreement (which books and records are correct and
complete in all material respects) except for normal year-end adjustments which
will not be material.
3.8 Indebtedness Guarantees. Except as set forth on the Most
Recent Financial Statements, the Company does not have any indebtedness for
money borrowed or for the deferred purchase price of property or services, or
capital lease obligations, or conditional sale or other title retention
agreements relating to the Business ("Indebtedness") and is not a guarantor or
otherwise liable for any Liability or obligation of any other Person for any
matter which relates to or affects or will affect the Business.
3.9 Absence of Changes. Since the Most Recent Balance Sheet date
and except as set forth in Section 3.9 of the Disclosure Letter, there has not
been any material adverse change in the Business, financial condition,
operations or results of operations of the Company, except for any such change
arising from the assignment of the Assigned Assets and the assumption of the
Assigned Assets Liabilities by Seller pursuant to the Distribution, Assignment
and Assumption Agreement. Without limiting the generality of the foregoing,
since such date, except as set forth in the Disclosure Letter or the
Distribution, Assignment and Assumption Agreement, and except for the
distribution of the Assigned Assets to Seller and the assumption of the
Assigned Assets Liabilities by Seller:
(a) The Company has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible other than in the Ordinary
Course of Business;
(b) The Company has not entered into any agreement,
contract, lease, or license (or series of related agreements, contracts,
leases, and licenses) relating to the Business other than in the Ordinary
Course of Business;
(c) no party (including the Company) has accelerated,
terminated, modified or canceled any agreement, contract, lease or license (or
series of related agreements, contracts, leases and licenses) involving
individually more than $15,000 to which the Company is a party or by which the
Company is bound;
(d) The Company has not imposed, or agreed to, or
suffered the imposition of any Lien in excess of $25,000 upon any of its
assets, tangible or intangible;
(e) The Company has not made any capital expenditure (or
series of related capital expenditures) involving more than $25,000, or
(f) The Company has not made any capital investment in,
any loan to, or any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans and acquisitions)
involving individually more than $10,000 other than
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pursuant to agreements with suppliers that were entered into in the Ordinary
Course of Business;
(g) The Company has not issued any note, bond or other
debt security or created, incurred, assumed or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$10,000 individually or $30,000 in the aggregate;
(h) The Company has not canceled, compromised, waived or
released any right or claim (or series of related rights and claims) involving
more than $15,000;
(i) The Company has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property other than
"shrink wrap" or site licenses to end-users;
(j) There has been no change made or authorized in the
Articles of Incorporation or bylaws of the Company;
(k) The Company has not issued, sold or otherwise
disposed of any of its capital stock, or granted any options, warrants or other
rights to purchase or obtain (including upon conversion, exchange or exercise)
any of its capital stock;
(l) Except for the authorization of a plan of complete
liquidation and the distribution of the Assigned Assets and the Assigned
Assets Liabilities to Seller as part thereof, the Company has not declared, set
aside or paid any dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased or otherwise acquired
any of its capital stock;
(m) The Company has not experienced any damage,
destruction or loss (whether or not covered by insurance) to its property in
excess of $10,000;
(n) The Company has not made any loan to any of its
directors, officers or employees, or entered into any other compensation
transaction with any of its directors, officers and employees that is not at
least partially deductible for Tax purposes;
(o) The Company has not entered into any employment or
severance agreement or arrangement (other than pursuant to the Company's
standard services agreement terms and conditions in the Ordinary Course of
Business), written or oral, or modified the terms of any existing such contract
or agreement;
(p) The Company has not granted any increase in the base
compensation of any of its directors, officers and employees;
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(q) The Company has not adopted, amended, modified or
terminated any Seller Employee Plan for the benefit of any of its directors,
officers and employees;
(r) The Company has not made any other change in
employment terms for any of its directors, officers and employees or entered
into any collective bargaining agreement, except as described in Section 3.9(r)
of the Disclosure Letter.
(s) The Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business; and
(t) The Company has not committed to any of the
foregoing.
3.10 Absence of Undisclosed Liabilities. The Company has no debts
or liabilities (and to the Sellers' Knowledge there is no Basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Company giving rise to any such Liability) except
for (i) debts and liabilities as are reflected in the Most Recent Financial
Statements and (ii) debts and liabilities arising in the Ordinary Course of
Business after the Most Recent Balance Sheet Date.
3.11 Legal and Other Compliance. The Company has complied in all
material respects with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of the United States federal, state, local, and other foreign
governments (and all agencies thereof) and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against the Company alleging any failure so to comply.
3.12 Taxes.
(a) The Company has accurately prepared and duly filed
all tax returns and given or delivered all material information, accounts,
notices, computations, statements and reports required to be filed, given or
delivered by the Company under any applicable legislation or regulations
relating to Taxation (whether of the United States or elsewhere in the world)
("Returns") and relating to any and all Taxes attributable to the Company or
its operations, or for which the Company is liable or has become liable, such
Returns are true and correct in all material respects and show all amounts paid
or required to be paid, and have been completed in accordance with applicable
law in all material respects. All taxes payable on the Returns have been paid
in full on a timely basis. The Company has duly and punctually withheld or
paid, all income tax, social security and other Taxes the Company is required
to withhold or pay with respect to its employees, independent contractors, or
other third parties.
(b) The provisions or reserves for the Company's Taxes
reflected in the Most Recent Balance Sheet are sufficient to discharge the
Taxes for all periods (or the
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portion of any period) ending on or prior to the date of such Most Recent
Balance Sheet, whensoever payable.
(c) No material Tax liability has been incurred by the
Company since the date of the Most Recent Balance Sheet other than in the
Ordinary Course of Business and adequate provision has been or will be made for
all Tax Liabilities incurred since that date through the Closing Date in
accordance with GAAP.
(d) The Company does not have, or prior to the Closing
will not have, any Tax, nor is there any Tax deficiency outstanding, proposed
or assessed, for which adequate provision has not been made in the Most Recent
Balance Sheet, nor has the Company executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax. No dispute, audit or other examination or investigation of the Tax
affairs of the Company is presently in progress. Except to the extent
reflected on the Most Recent Balance Sheet, the Company does not have any
Liability for unpaid Taxes, whether asserted or unasserted, known or unknown,
contingent or otherwise and there is no basis for the assertion of any such
Liability attributable to the Company, its assets or operations except for any
Liability for Taxes incurred in the Ordinary Course of Business since the date
of the Most Recent Balance Sheet that are not yet due and payable to the
applicable taxing authority. There are (or immediately following the Closing,
there will be) no Liens on the assets of the Company relating to or
attributable to Taxes.
3.13 Property, Plant and Equipment.
(a) Schedule 3.13(a) lists and describes all real
property owned by the Company;
(b) Schedule 3.13(b) lists and describes all real
property leased or subleased to the Company. The Company has delivered to Buyer
correct and complete copies of the leases and subleases listed on Schedule
3.13(b) (the "Real Property Leases"). Except as set forth on Schedule 3.13(a),
with respect to each of the Real Property Leases listed on Schedule 3.13(b):
(i) the lease or sublease is legal, valid,
binding, enforceable against the Company and, to the Seller's Knowledge,
against the other party thereto, subject to the effect of bankruptcy or similar
insolvency laws affecting the rights of creditors generally and the potential
unavailability of specific enforcement, injunctive relief and other equitable
remedies, and is in full force and effect;
(ii) upon obtaining any required consents of the
landlord to assignment or transfer of such lease or sublease necessitated by
the transactions contemplated by this Agreement, the lease or sublease will
continue to be legal, valid, binding, enforceable against the Company and, to
the Seller's Knowledge, against the other
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party thereto, subject to the effect of bankruptcy or similar insolvency laws
affecting the rights of creditors generally and the potential unavailability of
specific enforcement, injunctive relief and other equitable remedies, and in
full force and effect on identical terms following the consummation of the
Acquisition contemplated hereby;
(iii) neither the Company nor, to the Knowledge of
the Sellers, the other party to the lease or sublease is in breach or default
thereof;
(iv) to the Knowledge of the Company, no party to
such lease or sublease has overtly repudiated any provision thereof;
(v) The Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(vi) all facilities leased or subleased under the
Real Property Leases have received all approvals of governmental authorities
(including licenses and permits) required in connection with the operation
thereof as conducted by the Company and have been operated and maintained in
accordance with applicable laws, rules, and regulations in all material
respects;
(vii) all facilities leased or subleased under the
Real Property Leases are supplied with utilities and other services reasonably
necessary for the operation of said facilities.
(c) The Company does not use or occupy any premises other
than the Premises and the real property described in Schedules 3.13(a) and
3.13(b).
(d) The Company is in physical possession and actual
occupation of the whole of the Premises on an exclusive basis and no right of
occupation or enjoyment has been acquired by any third party or has been
granted or agreed to be granted to any third party.
(e) All monies due to each lessor or sublessor under each
of the Real Property Leases (whether or not reserved as rent) to which the
Company is a party or by which the Company is bound have been paid and none
have been commuted, waived or paid in advance of the due date for payment.
(f) The Premises are not subject to the payment of any
outgoings other than uniform business rates and water rates (and (in the case
of leaseholds) rent (inclusive of payments of taxes, insurances and operating
costs), insurance premiums, service charges and leasehold and subleasehold
expenses) and all outgoings have been paid when due and none are disputed under
the leases.
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(g) All covenants, restrictions, stipulations and other
encumbrances affecting the Premises, to the extent they have been affirmatively
agreed to by the Company, have been observed and performed in all material
respects.
(h) There are no current or existing facts or
circumstances which (with or without the taking of other action) would entitle
any third party to exercise a right of entry or forfeiture or to take
possession or which would in any other way affect or restrict the continued
possession, enjoyment or use of any of the Premises for its present purpose for
the duration of the term of the lease or sublease.
(i) All buildings and structures comprised in the
Premises are in a good state of repair and condition, reasonable wear and tear
excepted.
3.14 Intellectual Property.
(a) The Company owns or has the right to use pursuant to
license, sublicense, agreement or permission all Intellectual Property
reasonably necessary for the operation of the Business as such is currently
conducted. Each item of Intellectual Property owned or used by the Company
immediately prior to the Closing (other than any of the Assigned Assets)
hereunder will, immediately after the Closing, be owned or available for use by
the Buyer and the Company on identical terms and conditions as owned or
available for use by the Company prior to the Closing subject to obtaining any
required consents disclosed in Section 3.29 of the Disclosure Letter. The
Company has taken all commercially reasonable actions to maintain and protect
each item of Intellectual Property that the Company owns or uses.
(b) The Company does not infringe upon, misappropriate,
or use without a required license, any Intellectual Property rights of third
parties, nor has the Company received any written charge, complaint, claim,
demand, or notice alleging that the operation of the Business gives rise to any
such infringement, misappropriation, or misuse that has not previously been
finally resolved (including any claim that the Company must license or refrain
from using any Intellectual Property rights of any third party). To the
Knowledge of the Sellers, no third party has infringed upon, misappropriated,
or otherwise misused any Intellectual Property rights of the Company.
(c) Schedule 3.14(c) identifies each issued patent, and
each registered copyright, trademark, trade name, mask work, service xxxx or
other registration which has been issued to the Company by any governmental
entity with respect to any of its Intellectual Property, identifies each
pending patent application or application or other registration which the
Company has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission currently in effect
pursuant to which the Company has granted to any third party rights with
respect to any of the Company's Intellectual Property (together with any
exceptions) other than shrink wrap licenses to end users. The
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Sellers have delivered to Buyer correct and complete copies of all such issued
patents, and registered copyrights, trademarks, trade names, mask works,
service marks, registrations, applications, licenses, agreements, and
permissions (as amended to date) and have made available to the Buyer correct
and complete copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. With respect to each item of
Intellectual Property required to be identified on Schedule 3.14(c), except as
set forth in Section 3.14(c) of the Disclosure Letter:
(i) the Company possesses all right, title, and
interest in and to the item, or has the valid right to use the item, free and
clear of any Lien or license;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand has been filed or, to the
Knowledge of the Sellers, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(iv) except for indemnification provided in
connection with agreements set forth on Schedule 3.14(c) and Schedule 3.16, the
Company has not agreed to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to the item.
(d) Schedule 3.14(d) lists the items of Intellectual
Property that any third party owns and that the Company uses pursuant to
license, sublicense, agreement, or permission other than pursuant to shrinkwrap
software licenses or site licenses. The Company has delivered to Buyer correct
and complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). Except as described in Section 3.14(d) of the
Disclosure Letter, with respect to each item of Intellectual Property required
to be identified on Schedule 3.14(d):
(i) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding, enforceable against the
Company and, to the Knowledge of the Sellers, against the other party thereto,
and in full force and effect, subject to the effect of bankruptcy or similar
insolvency laws affecting the rights of creditors generally and the potential
unavailability of specific enforcement, injunctive relief and other equitable
remedies;
(ii) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms immediately following the consummation of
the transactions contemplated hereby;
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(iii) neither the Company, nor to the Knowledge of
the Sellers, any other party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) to the Knowledge of the Sellers, no party to
the license, sublicense, agreement, or permission has overtly repudiated any
provision thereof;
(v) with respect to each such sublicense, the
representations and warranties set forth in subsections (i) through (iv) above
are true and correct with respect to the underlying license;
(vi) the underlying item of Intellectual Property
is not subject to any outstanding injunction, judgment, order, decree, ruling,
or charge;
(vii) no action, suit proceeding, hearing,
investigation, charge, complaint, claim, or demand has been filed against
either of the Sellers or, to the Knowledge of the Sellers, any owner of such
Intellectual Property or, to the Knowledge of the Sellers, is threatened which
challenges the legality, validity, or enforceability of the underlying item of
Intellectual Property;
(viii) the Company has not granted any sublicense or
similar right with respect to the license, sublicense, agreement or permission
other than pursuant to shrink wrap licenses or site licenses to end users; and
(ix) the item of Intellectual Property does not,
infringe upon, misappropriate, or otherwise misuse any Intellectual Property
rights of third parties as a result of the continued operation of the Business.
3.15 Inventories. The inventory of the Company consists of raw
materials and supplies, manufactured and purchased parts, goods in process, and
finished goods, all of which is merchantable and fit for the purpose for which
it was procured or manufactured, and none of which is obsolete, damaged, or
defective, subject only to the reserve for inventory write down reflected in
the Most Recent Balance Sheet as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Company.
3.16 Contracts. Schedule 3.16 lists the following currently
effective contracts and other agreements (the "Contracts") to which the Company
is a party other than those that are required to be listed in any Schedule
called for by Section 3.13 or Section 3.14 of this Agreement:
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(a) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for lease
payments in excess of $25,000 per annum;
(b) any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year, or result
in a loss in excess of $10,000 on completion of performance, or involve
consideration in excess of $10,000;
(c) any agreement concerning the participation of the
Company in a partnership or joint venture;
(d) any agreement (or group of related agreements) under
which the Company has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation, in excess
of $25,000 or under which it has imposed a Lien on any of its assets, tangible
or intangible (other than liens given in the Ordinary Course of Business
relating to the sale of goods and provision of services);
(e) any agreement concerning a commitment of
confidentiality or noncompetition by the Company;
(f) any currently effective profit sharing, stock option,
stock purchase, stock appreciation, deferred compensation, severance, or other
plan or arrangement for the benefit of the Company's current or former
directors, officers, and employees (other than plans or arrangements of Seller
as to which the Company and Buyer do not have and shall not incur any
Liability);
(g) any collective bargaining agreement binding on the
Company;
(h) any currently effective written agreement for the
employment by the Company of any individual on a full-time, part-time,
consulting or other basis;
(i) any agreement under which the Company has advanced or
loaned any amount in excess of $1,000 (excluding normal advances or loans
associated with travel and meal expenses advanced in the Ordinary Course of
Business) to any of its directors, officers, and employees;
(j) any agreement pursuant to which the Company has an
obligation to pay royalties or make other payments in connection with the sale
of products or services by the Company in the Ordinary Course of Business;
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(k) any other agreement (or group of related agreements)
the performance of which involves payment by the Company of consideration in
excess of $100,000.
(l) any agreement, written or oral, between Seller and
the Company.
The Company has delivered to the Buyer a correct and complete copy of
each written agreement listed on Schedule 3.16 and a written summary setting
forth the terms and conditions of each oral agreement referred to in this
Section 3.16. With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect with respect to the
Company, subject to the effect of bankruptcy or similar insolvency laws
affecting the rights of creditors generally and the potential unavailability
of specific enforcement, injunctive relief and other equitable remedies and, to
the Knowledge of the Sellers is a legal, valid, binding and enforceable
agreement of the other party(ies) thereto, subject to the effect of bankruptcy
or similar insolvency laws affecting the rights of creditors generally and the
potential unavailability of specific enforcement, injunctive relief and other
equitable remedies; and (B) the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect after consummation of the
Acquisition (subject only to the receipt of applicable consents set forth in
Section 3.29 of the Disclosure Letter and, subject to the effect of bankruptcy
or similar insolvency laws affecting the rights of creditors generally and the
potential unavailability of specific enforcement, injunctive relief and other
equitable remedies) on identical terms immediately following the consummation
of the transactions contemplated hereby and, to the Knowledge of the Sellers,
will be a legal, valid, binding and enforceable agreement of the other
party(ies) thereto, subject to the effect of bankruptcy or similar insolvency
laws affecting the rights of creditors generally and the potential
unavailability of specific enforcement, injunctive relief and other equitable
remedies; and (C) the Company is not, and to the Knowledge of the Sellers, no
other party 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, under the agreement; and (D) to the
Knowledge of the Sellers, no party has overtly repudiated any provision of the
agreement.
3.17 Notes and Accounts Receivable. All notes and accounts
receivable of the Company shown on the Most Recent Balance Sheet are reflected
properly on the Company's books and records, are valid receivables subject to
no valid setoffs or counterclaims, are current and collectible, subject only to
bankruptcy proceedings and the reserve for bad debts reflected in the Most
Recent Balance Sheet as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Company.
3.18 Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company.
3.19 Litigation. Section 3.19 of the Disclosure Letter sets forth
each instance in which the Company (i) is subject to any outstanding
injunction, judgment, order, decree,
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ruling, or charge or (ii) is a party or, to the Knowledge of the Sellers, is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator.
3.20 Product Warranties; Defects; Liability. Each product
manufactured, sold, leased, or delivered by the Company (other than any product
included in the Assigned Assets) has been in substantial conformity with all
applicable contractual commitments and all express warranties made by the
Company, and the Company has no Liability other than an Assumed Liability (and
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability other than an Assumed Liability) for replacement or
repair thereof or other damages in connection therewith, subject only to the
reserve for product warranty claims reflected in the Most Recent Balance Sheet
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Company and labor costs associated with
warranty repairs which are immaterial. No product (other than any product
included in the Assigned Assets) manufactured, sold, leased, or delivered by
the Company is subject to any guaranty, warranty, or other indemnity beyond the
Company's applicable standard terms and conditions of sale or lease or beyond
that implied or imposed by applicable law.
3.21 Employees.
(a) The names of all Company Agents as of the date
hereof are set out on Schedule 3.21(a)-1. Except as set forth in Section
3.21(a) of the Disclosure Letter, such Company Agent and each person who was a
Company Agent immediately prior to the implementation of the reduction in the
Company's workforce announced by the Company on May 29, 1997, has executed: (i)
a confidentiality agreement in the form set forth on Schedule 3.21(a)-2 and
(ii) an inventions assignment agreement in the form set forth on Schedule
3.21(a)-3. No Company Agent has any rights (including but not limited to the
right to receive royalties or other payments from any of the Sellers in
exchange for licenses or other grants of rights to any Intellectual Property)
to any of the Company's Intellectual Property.
(b) Except as set forth in Section 3.21(b) of the
Disclosure Letter, to the Knowledge of the Sellers, no officer or management
employee has any plans to voluntarily terminate employment with the Company.
The Company is not a party to or bound by any collective bargaining agreement,
nor has the Company experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes. The Company has not
committed any unfair labor practice. Neither of the Sellers has any Knowledge
of any organizational effort presently being made or threatened by or on behalf
of any labor union with respect to employees of the Company.
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(c) There is not now outstanding any contract of service
or for services between the Company and any Company Agent providing for annual
compensation in excess of $30,000 which is not terminable by the Company at any
time without compensation (other than normal severance in the Ordinary Course
of Business).
(d) Except for the Company Agents who have been or shall
be terminated or receive notice of termination and who are identified on
Schedule 3.21(d), to the Knowledge of the Sellers, no present Company Agent has
given or received notice from the Company terminating his employment or
appointment.
(e) Except for Company Employee Plans identified in
Schedule 3.22(a), there are no loans or other benefits enjoyed by any Company
Agent in consideration of such person's employment with, or providing service
to, the Company.
(f) Except as set forth in Section 3.21(d) of the
Disclosure Letter, and except to the extent (if any) to which provision or
allowance therefor has been made in the Financial Statements, no Liability has
been incurred by the Company to make any redundancy payments or any protective
awards or to pay damages or compensation for wrongful or unfair dismissal or
for failure to comply with any order for the reinstatement or re-engagement of
any employee and no gratuitous payment has been made or promised by the Company
in connection with the actual or proposed termination or suspension of
employment or variation of any contract of employment of any present or former
director or employee.
(g) There are no claims filed or, to the Knowledge of the
Sellers, threatened against the Company (and neither of the Sellers is aware
of any circumstance which could reasonably be expected to give rise to the
making of any such claim) by any employee or former employee or xxxxxxx or
third party in respect of an accident or injury which is not fully covered by
insurance or by any employee, former employee, director or former director in
relation to the terms and conditions of employment or appointment.
3.22 Employee Benefits.
(a) Plans. Schedule 3.22(a) contains an accurate and
complete list of each Company Employee Plan. The Company has made no commitment
to establish any new Company Employee Plan.
(b) Documents. The Sellers have provided to Buyer (i)
correct and complete copies of all documents embodying or relating to each
Company Employee Plan including all amendments thereto and written
interpretations thereof; (ii) if the Company Employee Plan is funded, the most
recent annual and periodic accounting of Company Employee Plan assets; (iii)
all taxing or other governmental authority determination letters and rulings
relating to Company Employee Plans; and (iv) all communications material to any
employee relating to any Company Employee Plan, in each case, relating to any
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amendments, terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which would
result in any material Liability to either of the Sellers.
(c) Company Employee Plan Compliance. (i) The Company
has performed, in all material respects all obligations required to be
performed by the Company under the Company Employee Plans and each Company
Employee Plan has been established and maintained in all material respects in
accordance with its terms and in compliance with all applicable laws, statutes,
orders, rules and regulations; (ii) there are no actions, suits or claims which
have been filed, or, to the Knowledge of the Sellers, threatened or anticipated
(other than routine claims for benefits) against any Company Employee Plan or
against the assets of any Company Employee Plan; and (iii) each Company
Employee Plan can be amended, terminated or otherwise discontinued after the
Closing in accordance with its terms, without liability to the Company, Buyer
or their respective Affiliates (other than ordinary administration expenses
typically incurred in a termination event); and (iv) there are no inquiries or
proceedings which have been filed, or, to the Knowledge of the Sellers,
threatened by any governmental authority with respect to any Company Employee
Plan.
(d) Certain Plans. Other than the plans listed on
Schedule 3.22(a), the Company does not now, nor has it ever, maintained,
established, sponsored, participated in, or contributed to, any Company
Employee Plan which is subject to ERISA or Section 412 of the Code.
3.23 Environment, Health, and Safety.
(a) In addition to the definitions set forth in Section
1, for purposes of this Section 3.23: "Environmental Authorizations" means any
permits, licenses, consents or other authorizations required under any
Environmental Laws for the operation of the Business or the occupation or use
of the Premises;
(b) All Environmental Authorizations are in full force
and effect and no work or other investment is necessary to maintain any such
authorizations and there are no facts or circumstances currently in existence
which may lead to revocation, suspension, variation or non-renewal of such
authorizations.
(c) There are no processes being carried on or which have
been carried on at any time at the Premises by the Company which would require
any Environmental Authorization under any Environmental Law.
(d) The Company has never been required to hold, nor has
the Company held or applied for a waste disposal license or waste management
license under any Environmental Laws.
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(e) Except for retail cleaning solvents and normal office
supplies, no poisonous, noxious, polluting, unauthorized, dangerous or
environmentally harmful substances or articles, whether or not the same would
be designated as "controlled waste" or "special waste" under any Environmental
Laws, have been produced, treated, kept at or deposited on the Premises by the
Company or have been released or discharged by the Company from the Premises
including (for the avoidance of doubt but not further or otherwise) into any
public sewer or into any drain or sewer communicating with a public sewer from
the Premises.
(f) There are no deficiencies in the waste disposal
arrangements now or at any time carried on by the Company at or in respect of
the Business or Premises which cause the Company to fail to comply with any
existing or proposed Environmental Laws.
(g) All information provided by and on behalf of the
Sellers to any statutory authority and all records and data required to be
maintained by the Company under the provisions of any Environmental Laws
regarding the operation of the Business or any processes carried on at or
emissions, discharges or waste disposal from the Premises is complete and
accurate.
(h) There have been no uncured complaints or disputes
regarding the use of the Premises, noise generated by the Company on the
Premises, the release of any substances from the Premises and, to the Knowledge
of the Seller, there are no existing facts or circumstances which are likely to
lead to any such complaint or dispute.
(i) There is no actual or contingent liability to make
good, repair, reinstate or clean up the Premises or any land or buildings
formerly owned or occupied by the Company and no act, omission or circumstance
has given or prior to the Closing is likely to give rise in the future to any
such claim, investigation or other proceedings or any such liability under any
Environmental Laws.
(j) The Company has complied with all Environmental Laws
and Safety Laws and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed, served on and
commenced against the Company alleging any failure so to comply.
(k) The Company has not received any written prohibition
or improvement notices from any enforcement body, including and the relevant
local authority, with regard to breaches of Safety Laws.
(l) There have been no claims, investigations or
proceedings against or, to the Knowledge of Sellers, overtly threatened against
the Company or any of its directors, officers or employees in respect of
accidents, injuries, illness, disease or any other harm to the health and
safety of employees, contractors or any other persons caused by breaches of
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or otherwise and there are no facts or circumstances which may lead to any such
claims, investigations or proceedings.
(m) The Company has reasonably adequate employers
liability and public liability insurance covering the Business. Schedule
3.23(m) lists and describes such insurance policies. No claims in respect of
health and safety have been made or are contemplated under such insurance
policies.
3.24 Affiliated Transactions. No Affiliates of the Company owns
any asset, tangible or intangible, which is used in the Business.
3.25 Government Contracts. The Company is not, and has not
directly been a party to any contract or arrangement with any government agency
relating to the Business.
3.26 Distributors, Products, and Suppliers. Schedule 3.26 sets
forth a complete and accurate list of (a) the twenty largest distributors and
resellers for the Company's products (by dollar volume for the time period of
August 1, 1996 through June 30, 1997 (the "Measure Period") indicating the
written contractual arrangements, if any, with each such distributor or
reseller and the dollar volume of products distributed during the Measure
Period, (b) the twenty largest products (by gross sales) of the Company
(excluding products included in the Assigned Assets and Intuit products) during
the fiscal year ended July 31, 1996 and (c) suppliers of material product
development services to the Company that are material to the Company's
Business.
3.27 No Illegal Payments, Etc. Neither the Company nor, to the
Seller's knowledge, any of the Company's officers, employees, agents or
Affiliates has: (a) directly or indirectly given or agreed to give any illegal
gift, contribution, payment or similar benefit to any supplier, customer,
governmental official or employee or other person who was or is in a position
to help or hinder the Business (or assist in connection with any actual
transaction) or made or agreed to make any illegal contribution, or reimbursed
any illegal political gift or contribution made by any other person, to any
candidate for federal, state, local or foreign public office (i) which may
subject the Company to any damage or penalty in any civil, criminal or
governmental litigation or proceeding under United States law or (ii) the
noncontinuation of which has had or might have, individually or in the
aggregate, a material adverse effect on the Company.
3.28 Books and Records. The books and all corporate (including
minute books and stock record books) and financial records of the Company that
are related to the Business are complete and correct.
3.29 Consents. Except for lapsing of the waiting period pursuant
to the HSR Act, no consents are required to consummate the Acquisition and the
various transactions contemplated hereby, except as described in Section 3.29
of the Disclosure Letter which sets
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forth a true and correct list of the identities of any Person whose consent or
approval is so required and the matter, agreement or contract to which such
consent relates.
3.30 No Liquidation, Insolvency, Winding-Up.
(a) No order has been made, or petition presented, or
resolution passed for the winding-up of the Company (other than the complete
liquidation of the Company for Tax purposes) and there is not outstanding:
(i) any petition or order for the winding-up of
the Company;
(ii) any appointment of a receiver over the whole
or part of the undertaking of assets of the Company;
(iii) any petition or order for administration of
the Company;
(iv) any voluntary arrangement between the Company
and any of its creditors;
(v) any distress or execution or other process
levied in respect of the Company which remains undischarged; or
(vi) any unfulfilled or unsatisfied judgment or
court order against the Company.
(b) To the Sellers' Knowledge, there are no circumstances
which would entitle any Person to present a petition for the winding-up or
administration of either the Company or the Seller or to appoint a receiver
over the whole or any part of the undertaking or assets of the Company.
3.31 Disclosure. None of the representations and warranties
contained in Section 3 of this Agreement and the Schedules (both as qualified
by the Disclosure Letter), or any certificate furnished by Sellers to Buyer
pursuant to this Agreement and the Schedules hereto, contain any untrue
statement of a material fact or omit to state a material fact which would have
a material adverse effect on either the Business or the Company Assets.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller that the statements contained
in this Section 4 are true, correct and complete as of the date of this
Agreement and, if different than the date of this Agreement, will be true,
correct and complete as of the Closing Date as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout
this Section 4.
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4.1 Organization of Buyer. Buyer is duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation or formation. Buyer is qualified to transact business as a
foreign corporation in the state of California and is a foreign corporation in
good standing under the laws of the state of California.
4.2 Authority for Agreement. Buyer has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. The Board of Directors of
Buyer has approved this Agreement and the transactions contemplated hereby.
This Agreement constitutes the valid and legally binding obligation of Buyer,
enforceable in accordance with its terms and conditions.
4.3 Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Buyer is subject, or (ii)
violate any provision of any charter documents or bylaws of Buyer, or (iii)
violate any contract of Buyer required to be filed with the Securities and
Exchange Commission pursuant to the Securities Act or Securities Exchange Act.
Buyer is not required by any law to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement except for the lapsing of the waiting period
pursuant to the HSR Act without commencement of any action to enjoin the
transaction on the part of the Federal Trade Commission or the Department of
Justice.
4.4 Brokers' Fees. The Buyer does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which either of
the Sellers could become liable or obligated.
4.5 No Liquidation, Insolvency, Winding-Up.
(a) No order has been made, or petition presented, or
resolution passed for the winding-up of Buyer and there is not outstanding:
(i) any petition or order for the winding-up of
Buyer;
(ii) any appointment of a receiver over the whole
or part of the undertaking of assets of Buyer;
(iii) any petition or order for administration of
Buyer;
(iv) any voluntary arrangement between Buyer and
any of its creditors;
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(v) any distress or execution or other process
levied in respect of Buyer which remains undischarged; or
(vi) to the Knowledge of Buyer, any unfulfilled or
unsatisfied judgment or court order against Buyer.
(b) To the Knowledge of the Buyer, there are no
circumstances which would entitle any Person to present a petition for the
winding-up or administration of Buyer or to appoint a receiver over the whole
or any part of the undertaking or assets of Buyer.
(c) To the Knowledge of the Buyer, no petition has been
filed, either voluntarily or involuntarily, instituting bankruptcy proceedings
under United States federal or state bankruptcy laws with respect to Buyer.
4.6 Tax Representations.
(a) Prior to the Closing, neither Buyer nor any member of
its affiliated group as defined in Section 1504(a) of the Code will own, or has
owned, nor will be deemed under Section 318 of the Code to own or have owned,
any Company stock.
(b) Neither Buyer nor any member of its affiliated group
as defined in Section 1504(a) of the Code has acquired within the twelve (12)
months preceding the Closing, nor will acquire prior to the filing of an
election under Section 338(g) and Section 338(h)(10) of the Code or within
twelve (12) months following the Closing, any asset of the Company or a Company
affiliate other than assets acquired in the ordinary course of business.
(c) The Acquisition is not part of any plan by Buyer or
any member of its affiliated group as defined in Section 1504(a) of the Code to
make other "qualified stock purchases" as defined in Section 338(d)(3) and
Section 338(h)(4)(B) of the Code, of any Company affiliate.
4.7 Absence of Litigation. There is no claim, suit, action,
arbitration, proceeding or investigation pending, or, to the knowledge of
Buyer, threatened, against Buyer or any affiliate of Buyer or any of their
respective assets or properties that (i) would adversely affect Buyer's ability
to perform any of its obligations under this Agreement, (ii) seeks to enjoin,
prevent or delay the consummation of any of the transactions contemplated by
this Agreement, or (iii) might result in a material adverse effect on Buyer's
financial condition or solvency.
4.8 Investment Representations.
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(a) Buyer is acquiring the Stock in the Acquisition for
investment purposes for Buyer's own account only and not with a view to, or for
resale in connection with, any unlawful "distribution" thereof within the
meaning of the Securities Act. No one other than Buyer will acquire any
beneficial interest in the Stock at the Closing.
(b) Buyer is an "accredited investor" within the meaning
of Regulation D promulgated under the Securities Act. Buyer has sufficient
knowledge and experience in financial and business matters necessary to
evaluate and make an informed investment decision regarding the purchase of the
Stock of the Company pursuant hereto and has the capacity to protect Buyer's
own interests in connection with the Acquisition.
(c) Buyer acknowledges that the Sellers have made
available to Buyer the opportunity to examine such additional documents, and to
ask questions of, and receive answers from the Sellers concerning the Company,
its business, financial condition, management, activities and any other
information which Buyer considers relevant, important or material in making the
decision to participate in the Acquisition and to purchase the Stock.
(d) Buyer understands the tax consequences of investing
in the Stock and has not relied on Seller or Seller's counsel or auditors for
any advice regarding the tax consequences of the purchase of the Stock.
(e) Buyer understands that the Stock to be sold to Buyer
in the Acquisition has not been registered under the Securities Act and
constitutes "restricted securities" within the meaning of Rule 144 promulgated
under the Securities Act ("Rule 144"). Buyer is familiar with the provisions
of Rule 144.
(f) Buyer also understands and agrees that there will be
placed on the certificates evidencing the ownership of the Stock, the following
(or a substantially similar) legend (in addition to any legends required by
applicable state laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). THESE SECURITIES MAY NOT BE OFFERED,
SOLD, PLEDGED, OR TRANSFERRED UNLESS (1) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT (AND CURRENT PROSPECTUS) IS
IN EFFECT AS TO THE SECURITIES, OR (2) AN EXEMPTION THEREFROM
IS AVAILABLE. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS
IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
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5. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
5.1 General. Each of the Parties will use its best efforts to
take all action and to do all things necessary, proper, or advisable in order
to consummate and make effective the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to any Party
hereto necessary in connection with any legal requirements imposed upon any of
them or their respective subsidiaries in connection with the consummation of
the transactions contemplated by this Agreement, and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto
in obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any federal, state, local or foreign
governmental entity or other public or private third party required to be
obtained or made in connection with the Acquisition, or taking of any action
contemplated by this Agreement.
5.2 Notices and Consents. Sellers will use their best efforts to
obtain any material third party consents that are required to transfer the
Business to the Buyer, including, without limitation, the consents listed on
Schedule 3.29. The Sellers shall give any notices to, make any filings with,
and use their best efforts to obtain any authorizations, consents, and
approvals of governments and governmental agencies required in connection with
consummation of the transactions contemplated by this Agreement.
5.3 Operation of Business. Except as specifically contemplated
hereby, and except for the distribution of the Assigned Assets and the
assumption of the Assigned Assets Liabilities to Seller pursuant to the
Distribution, Assignment and Assumption Agreement immediately prior to the
Closing, and except for any actions taken to fulfill conditions to the Closing
of the Acquisition or that are contemplated by this Agreement, the Company will
not engage in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of
the foregoing and except as required by this Agreement, and except for the
distribution of the Assigned Assets and the assumption of the Assigned Assets
Liabilities to Seller pursuant to the Distribution, Assignment and Assumption
Agreement immediately prior to the Closing, the Company will not: (i) declare,
set aside, or pay any dividend or make any distribution with respect to its
capital stock or redeem, purchase, or otherwise acquire any of its capital
stock, (ii) pay any amount to any third party with respect to any Liability or
obligation (including any costs and expenses the Company has incurred or may
incur in connection with this Agreement and the transactions contemplated
hereby, other than to the Company's accountants and legal counsel) except in
the Ordinary Course of Business, except for (i) payments of fees and similar
amounts to any governmental authority in connection with the transactions
contemplated by this Agreement and (ii) any amounts paid to any person for any
purpose that, directly or indirectly, are related to compliance with or
fulfillment of any covenant, representation, warranty or
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condition to Closing set forth in this Agreement. Each of the Sellers shall:
(i) except with respect to the Company Agents listed on Schedule 3.21(d), use
its commercially reasonable efforts to keep available to Buyer the services of
the Company's other present Company Agents and independent contractors, and
(ii) preserve for the benefit of Buyer the goodwill of the Company's customers,
suppliers, landlords and others having business relations with it. The Company
will not engage in any practice, take any action, or enter into any transaction
of the sort and for the amounts described in Section 3.9 above.
5.4 Preservation of Business. Each of the Sellers will use their
best efforts to keep the Company's business and properties intact, including
its present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers and customers, except that
nothing in this Section will prevent the distribution of the Assigned Assets
and the Assigned Assets Liabilities to Seller pursuant to the Distribution,
Assignment and Assumption Agreement.
5.5 Treatment of Company Agents. The Company shall have
terminated or given notice of termination to the Company Agents listed on
Schedule 3.21(d). With respect to the Company employees to be employed by the
Company or Buyer after the Closing, Buyer shall provide compensation and stock
option grants to be paid to such employees in accordance with Buyer's Ordinary
Course of Business as if such Company employee were an employee of Buyer.
5.6 Full Access. Subject to the provisions of that certain
Business Evaluation Agreement between Seller and Buyer dated effective as of
February 21, 1997 (which shall apply, without limitation, to all "Proprietary
Information" (as defined therein) of the Company), each of the Sellers will
permit representatives of 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 Sellers, to all premises, properties, appropriate personnel, books, records
(including Tax records), contracts, and documents of or pertaining to the
Company.
5.7 Notice of Developments. Each Party will give prompt written
notice to the other Party of any material adverse development causing a breach
of any of its own representations and warranties in Section 3 and Section 4, as
the case may be. No disclosure by Sellers pursuant to this Section 5.7,
however, shall be deemed to amend or supplement the Schedules or to prevent or
cure any misrepresentations, breach of representation or warranty, or breach of
covenant unless expressly consented to in writing by Buyer.
5.8 No Solicitation. From and after the date of this Agreement
until the earlier of the Closing or termination of this Agreement pursuant to
its terms, the Sellers will not, and will cause their respective directors,
officers, employees, representatives, investment bankers, agents and affiliates
not to, directly or indirectly, (i) solicit or encourage submission of any
inquiries, proposals or offers by any Person, entity or group (other than Buyer
and its Affiliates, agents and representatives) in connection with any
Acquisition Proposal, or
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(ii) participate in any discussions or negotiations with, entertain any
propositions from, or disclose any information concerning the Company to, or
afford any access to the properties, books or records of the Company to, or
otherwise assist, facilitate or encourage, or enter into any agreement or
understanding with, any Person, entity or group (other than Buyer and its
affiliates, agents and representatives), in connection with any Acquisition
Proposal. In addition, subject to the other provisions of this Section 5.8,
from and after the date of this Agreement until the earlier of the Closing or
termination of this Agreement pursuant to its terms, Sellers will not, and will
cause their respective directors, officers, employees, representatives,
investment bankers, agents and Affiliates not to, directly or indirectly, make
or authorize any statement, recommendation or solicitation in support of any
Acquisition Proposal made by any Person, entity or group (other than Buyer).
Sellers will immediately cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing.
5.9 Best Efforts and Further Assurances. Each of the Parties
shall use its best efforts to effectuate the transactions contemplated hereby
and to fulfill and cause to be fulfilled the conditions to Closing under this
Agreement (including resolution of any litigation prompted hereby). Each Party
hereto, at the reasonable request of another Party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things as
may be necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.
6. CONDITIONS TO OBLIGATION TO CLOSE.
6.1 Conditions Precedent to Obligations of Buyer. The obligation
of Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) Representation and Warranties. The representations
and warranties set forth in Section 3 above and the Schedules (both, as
qualified by the Disclosure Letter) and all permitted updates thereto, shall be
true and correct in all material respects when made and shall be deemed to have
been made again at and as of the Closing Date and shall then be true and
correct in all material respects except for changes due to the conduct of the
Business prior to Closing in the Ordinary Course of Business or in conformity
with this Agreement;
(b) Performance by Sellers. The Sellers shall have
performed and complied with all of their covenants, obligations and conditions
of this Agreement required to be performed and complied with by them as of the
Closing, including each of the specific covenants contained in Section 5;
(c) Consents. The Sellers shall have procured all of
the consents, approvals or authorizations of the third parties listed on
Schedule 3.29, and the waiting
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period under the HSR Act shall have elapsed without the commencement of any
action to enjoin the Acquisition on the part of the Federal Trade Commission or
the Department of Justice.
(d) Absence of Litigation. No action, suit, or
proceeding shall be pending or threatened before any court or quasi-judicial
or administrative agency of any federal, state, local, or foreign jurisdiction
which has a likelihood of resulting in an unfavorable injunction, judgment,
order, decree, ruling, or charge that would (i) prevent consummation of any of
the material transactions contemplated by this Agreement, (ii) cause any of the
material transactions contemplated by this Agreement to be rescinded following
consummation, or (iii) affect adversely the right of Buyer to own the Stock or
to operate the Business or to use any of the Company Assets (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
(e) Absence of Material Adverse Change. Since the date
of this Agreement, there shall not have occurred any material adverse change in
the condition, financial or otherwise, business, properties, assets or
prospects of the Company Assets, Business, or the results of operation of the
Company, except as is contemplated by the terms of this Agreement and the
Distribution, Agreement and Assumption Agreement;
(f) Absence of Disasters. The Business and the Company
Assets shall not have been materially adversely affected in any way as a result
of fire, explosion, disaster, accident, labor dispute, any action by any
government or governmental authority, domestic or foreign, flood, civil
disturbance, or act of nature;
(g) Certificates. Seller shall have delivered to the
Buyer a certificate to the effect that each of the conditions specified above
in 6.1(a) through (f) are satisfied in all respects;
(h) Escrow Agent. The Escrow Agent shall have executed
and delivered a counterpart of this Agreement;
(i) Lien Removal. Liens in the Company Assets shall have
been discharged except for liens arising from: (i) Community Betterment
Economic Account Loans; and (ii) Kirkwood New Industrial Training Agreements.
(j) All Necessary Actions. All actions to be taken by
either of the Sellers 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 will be
reasonably satisfactory in form and substance to the Buyer.
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(k) Trademark License Agreements. The Sellers shall have
executed and delivered the Trademark License Agreements between the Company and
Seller in the form of Exhibits B-1 and B-2 attached hereto.
(l) Distribution Agreement. The Sellers shall have
executed and delivered the Distribution Agreement among Seller, the Company and
Buyer in the form of Exhibit C-1 attached hereto.
(m) Customer Information Cross-License Agreement. The
Sellers shall have executed and delivered the Customer Information
Cross-License Agreement among Seller, the Company and Buyer in the form of
Exhibit D attached hereto.
(n) Tax Business Transition Agreement. The Sellers shall
have executed and delivered the Tax Business Transition Agreement among Seller,
the Company and Buyer in the form of Exhibit E attached hereto.
(o) Tax Sharing Agreements. On or prior to the Closing
Date, all arrangements or agreements, if any, for the allocation of Taxes or
payment for Tax benefits with respect to a group of corporations which files a
consolidated, combined or unitary Tax Return which includes the Company shall
have been terminated, and neither the Seller nor Seller's Affiliates shall have
any further rights or obligations thereunder, and the Company shall not have
assumed the tax liability of any other person.
(p) Opinion of Fenwick & West LLP. The Seller shall have
delivered an opinion of counsel in the form of Exhibit F attached hereto.
(q) Xxxxxxx Agreement. The Company and Xxxxx Xxxxxxx
shall have executed the Agreement attached hereto at Exhibit G.
(r) Section 338 Election Executed and Delivered. The
Sellers shall have delivered to Buyer a signed, completed Form 8023-A,
electing under Section 338(h)(10) of the Code to treat the Acquisition as a
deemed asset sale pursuant to Section 2.1 of this Agreement.
Buyer may waive any condition specified in this Section 6.1 if it
executes a written waiver thereof, specifically referenced as such therein, at
or prior to the Closing.
6.2 Conditions Precedent to Obligations of the Sellers. The
obligation of each of the Sellers to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction of
the following conditions:
(a) Representations and Warranties. The representations
and warranties of Buyer set forth in Section 4 above shall be true and correct
when made and shall be
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deemed to have been made again at and as of the Closing Date and shall then be
true and correct;
(b) Performance by Buyer. The Buyer shall have performed
and complied with all of its covenants, obligations and conditions of this
Agreement required to be performed and complied with by it as of the Closing,
including, individually, with respect to each of the specific covenants
contained in Sections 5;
(c) Consents. The Buyer shall have procured all material
governmental approvals, including lapsing of the waiting period under the HSR
Act, to consummate the Acquisition;
(d) Absence of Litigation. No action, suit, or
proceeding shall be pending or threatened before any court or quasi-judicial
or administrative agency of any federal, state, local, or foreign jurisdiction
which has a likelihood of resulting in an unfavorable injunction, judgment,
order, decree, ruling, or charge that would (A) prevent consummation of any of
the material transactions contemplated by this Agreement or (B) cause any of
the material transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree,
ruling, or charge shall be in effect);
(e) All Necessary Actions. All actions to be taken by
either of the Sellers 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 will be
reasonably satisfactory in form and substance to the Buyer.
(f) Certificates. Buyer shall have delivered to the
Seller a certificate to the effect that each of the conditions specified above
in Section 6.2(a) through (d) are satisfied in all material respects; and
(g) Trademark License Agreements. The Sellers shall have
executed and delivered the Trademark License Agreements between the Company and
Seller in the form of Exhibits B-1 and B-2 attached hereto.
(h) Distribution Agreement. The Company shall have
executed and delivered the Product Distribution Agreement between the Company
and Seller in the form of Exhibit C-2 attached hereto.
(i) Customer Information Cross-License Agreement. Buyer
shall have executed and delivered the Customer Cross-License Agreement among
Seller, the Company and Buyer in the form of Exhibit D attached hereto.
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(j) Tax Business Transition Agreement. Buyer shall have
executed and delivered the Tax Business Transition Agreement among Seller, the
Company and Buyer in the form of Exhibit E attached hereto.
(k) Xxxxxxx Agreement. The Company and Xxxxx Xxxxxxx
shall have executed the Agreement attached hereto as Exhibit G.
(l) Opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx. Buyer
shall have delivered an opinion of counsel in the form of Exhibit H attached
hereto.
(m) Section 338 Election Executed and Delivered. Buyer
shall have delivered to Seller a signed, completed Form 8023-A, electing under
Section 338(g) and Section 338(h)(10) of the Code to treat the Acquisition as a
deemed asset sale, pursuant to Section 2.1 of this Agreement.
(n) Escrow Agent. The Escrow Agent shall have executed
and delivered a counterpart of this Agreement.
Seller may waive any condition specified in this Section 6.2 if it
executes a written waiver thereof, specifically referenced as such therein, at
or prior to the Closing.
7. ADDITIONAL AGREEMENTS.
Buyer and Seller hereby covenant and agree with respect to certain
matters as follows:
7.1 Section 338(h)(10) Election.
(a) In connection with the Acquisition (i) Seller shall
join with Buyer in making a timely election available under Section 338(h)(10)
of the Code and any corresponding elections available under state and local tax
laws (collectively, the "Election") with respect to the Acquisition, (ii) Buyer
and Seller shall, as promptly as practicable following the Closing Date,
cooperate with each other to take all actions necessary and appropriate
(including filing such forms, returns, elections, schedules and other documents
as may be required) to effect and preserve a timely Election in accordance with
Section 338 of the Code or any successor provisions (and all corresponding
state and local tax laws) and (iii) Buyer and Seller shall report the
Acquisition pursuant to this Agreement consistent with the Election.
(b) In connection with the Election, within 90 days after
Closing, Buyer shall provide to Seller a schedule which sets forth the proposed
allocation (the "Acquisition Allocation Schedule") of that portion of the
Purchase Price paid in connection with the Stock
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Purchase among the assets of the Company. Such allocations shall be made in
accordance with Section 338(h)(10) of the Code and any applicable Treasury
Regulations.
7.2 Returns; Indemnification; Liability for Taxes.
(a) Seller shall prepare and file (or cause to be
prepared and filed) on a timely basis all Tax Returns with respect to the
Company for all taxable periods ending on or before the Closing Date ("Company
Tax Returns") and shall pay, and shall indemnify and hold Buyer harmless
against and from (i) all Taxes of the Company for all taxable years or periods
which end on or before the Closing Date; (ii) all Taxes for all taxable years
or periods of all members or subsidiaries of any affiliated group of which the
Company is or has been a member prior to the Closing Date pertaining to the
Company and arising under Treasury Regulation Section 1.1502-6 or any similar
state statute; (iii) with respect to any taxable period commencing before the
Closing Date and ending after the Closing Date (a "Straddle Period") all Taxes
of the Company attributable to the portion of the Straddle Period prior to and
including the Closing Date (the "Pre-Closing Period"); and (iv) any transfer
Taxes payable by Seller pursuant to Section 2.3 of this Agreement. For
purposes of this Agreement, the portion of any Tax that is attributable to the
Pre-Closing Period shall be (i) in the case of a Tax that is not based on net
income, gross income, premiums or gross receipts, the total amount of such Tax
for the period in question multiplied by a fraction, the numerator of which is
the number of days in the Pre-Closing Period, and the denominator of which is
the total number of days in such Straddle Period, and (ii) in the case of a Tax
that is based on any of net income, gross income, premiums or gross receipts,
the Tax that would be due with respect to the Pre-Closing Period if such
Pre-Closing Period were a separate taxable period, except that exemptions,
allowances, deductions or credits that are calculated on an annual basis (such
as the deduction for depreciation or capital allowances) shall be apportioned
on a per diem basis. Notwithstanding the foregoing, any increase in property
or other ad valorem Taxes associated with a change of control of the Company
shall be considered attributable to the period following the Closing. For
purposes hereof, all Taxes which are the subject of this Article 7 arising from
the Acquisition hereof, including Taxes resulting from the Election, shall be
deemed to be Taxes attributable to the Pre-Closing Period and shall be the
responsibility of Seller.
(b) Buyer shall prepare and file (or cause to be prepared
and filed) on a timely basis all Tax Returns of the Company relating to periods
ending after the Closing Date and shall pay, and shall indemnify and hold
Seller harmless against and from (i) all Taxes of the Company for any taxable
year or period commencing after the Closing Date; (ii) all Taxes of the Company
for any Straddle Period (other than Taxes attributable to the Pre-Closing
Period); and (iii) and transfer Taxes payable by Buyer pursuant to Section 2.3
of this Agreement.
7.3 Refunds and Credits.
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(a) All refunds or credits of Taxes for or attributable
to taxable years or periods of the Company ending on or before the Closing Date
(or the Pre-Closing Period, in the case of a Straddle Period) shall be for the
account of Seller; all other refunds or credits of Taxes, for or attributable
to the Company shall be for the account of Buyer. Following the Closing, Buyer
shall cause the Company to forward to Seller the amount of any such refunds
(including refunds attributable to credits) due Seller pursuant to this section
after receipt or realization thereof by Buyer, and Seller shall forward (or
cause to be forwarded) to Buyer any refunds due to Buyer pursuant to this
section after receipt or realization thereof by Seller, in each case in
accordance with the provisions of subsection (b) below.
(b) Any payments of refunds (including refunds
attributable to credits) for Taxes required to be paid under this Agreement
shall be made within 10 business days of the receipt of any refund, as the case
may be. Any payments not made within such time period, shall be subject to an
interest charge of 10 % per annum.
7.4 Termination of Tax Sharing Agreements. Seller hereby agrees
and covenants that there are and will be no obligations of or to the Company
pursuant to any tax sharing agreement or any similar arrangement in effect at
any time on or before the Closing Date, and any further obligations that might
otherwise have existed thereunder shall be extinguished as of the Closing Date.
7.5 Conduct of Audits and Other Procedural Matters. Each party
shall, at its own expense, control any audit or examination by any Tax
Authority, and have the right to initiate any claim for refund or amended
return, and contest, resolve and defend against any assessment, notice of
deficiency or other adjustment or proposed adjustment of Taxes ("Proceedings")
for any taxable period for which that party is charged with payment or
indemnification responsibility under this Agreement. Each party shall promptly
forward to the other in accordance with Section 10.7 all written notifications
and other written communications, including if available the original envelope
showing any postmark, from any Tax Authority received by such party or its
affiliates relating to any liability for Taxes for any taxable period for which
such other party or any of its affiliates is charged with payment or
indemnification responsibility under this Agreement and each indemnifying party
shall promptly notify, and consult with, each indemnified party as to any
action it proposes to take with respect to any liability for Taxes for which it
is required to indemnify another party and shall not enter into any closing
agreement or final settlement with any Tax Authority with respect to any such
liability without the written consent of the indemnified parties, which consent
shall not be unreasonably withheld. In the case of any Proceedings relating to
any Straddle Period, Buyer shall control such Proceedings and shall consult in
good faith with Seller as to the conduct of such Proceedings. Seller shall
reimburse Buyer for such portion of the costs, including legal costs, of
conducting such Proceedings as is represented by the portion of the Tax with
respect to such Straddle Period for which Seller is liable pursuant to this
Agreement. Each party shall, at the expense of the requesting party, execute
or cause to be executed any powers of attorney or other documents reasonably
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requested by such requesting party to enable it to take any and all actions
such party reasonably requests with respect to any Proceedings which the
requesting party controls. The failure by a party to provide timely notice
under this subsection shall relieve the other party from its indemnification
obligations under Section 7.2 with respect to the subject matter of any
notification not timely forwarded, to the extent the other party has suffered a
loss or other economic detriment because of such failure to provide
notification in a timely fashion.
7.6 Access to Records following the Closing. Until the expiration
of the applicable statutes of limitations for Tax matters, Buyer and Seller
agree that so long as any books, records and files of the Company retained by
Seller or the books records and files delivered to the control of Buyer
pursuant to this Agreement, to the extent they relate to the operations of the
Company prior to the Closing Date, remain in existence and available, each
Party (at its expense) shall have the right upon prior notice to make
reasonable inspection and copies of the same at any time during business hours
for any proper purpose. Buyer and Seller shall use reasonable efforts not to
destroy or allow the destruction of any such books, records and files without
first offering in writing to deliver them to the other.
7.7 Confidentiality. The Parties acknowledge that Buyer and
Sellers have previously executed the Confidentiality Agreement, which
Confidentiality Agreement shall continue in full force and effect in
accordance with its terms.
7.8 Reimbursement of Excess Lease Capacity. The parties agree
that Buyer requires only approximately fifty percent (50%) of the Company's
administrative facility at One Xxxxxxx Drive and that the balance of such
facility would be "excess space." Therefore, Seller agrees to reimburse Buyer
for the Continuing Lease Obligation after the Closing.
7.9 Payment of Company Liabilities. Buyer hereby covenants and
agrees with Seller that, at all times on and after the Closing, Buyer will
cause the Company to promptly pay (or will itself promptly pay) or perform when
due any and all Disclosed Liabilities (as defined below). As used herein, the
term "Disclosed Liabilities" means all Liabilities of the Company to any
vendors, lessors and/or any other creditors that (i) existed at, or were
incurred or arose on or prior to, the time and date of the Closing; and (ii)
either (A) are reflected in the Most Recent Balance Sheet, (B) arise in the
Ordinary Course of Business of the Company after the date of the Most Recent
Balance Sheet or (C) arise under the terms of any agreement, contract or other
commitment of the Company that is disclosed in either the Disclosure Letter or
the Schedules. By way of illustration, but not limitation, the Disclosed
Liabilities include, but are not limited to, any obligations for the payment of
rent under leases, obligations for the payment of royalties or other payments
due under licenses, and the Distributor Guarantees (as defined below).
Notwithstanding the foregoing, "Disclosed Liabilities" will not include (i) the
Assumed Liabilities (ii) the Assumed Assets Liabilities or (iii) any other
Liabilities for which Seller is obligated to indemnify Buyer under the
provisions of Section 8 of this Agreement.
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7.10 Distributor Guarantees. Buyer acknowledges that, pursuant to
(i) a letter to Xxxxxx Micro dated July 19, 1995 that Seller has previously
provided to Buyer, and (ii) a letter to Tech Data Corporation dated December 4,
1996 that Seller has provided to Buyer (such letters being hereinafter
referred to as the "Distributor Guarantees"), Seller has guaranteed certain
obligations of the Company to Xxxxxx Micro and Tech Data Corporation. Buyer
hereby covenants and agrees with Seller to assume and cause to be paid when
due, any and all Liabilities of Seller arising under the Distributor
Guarantees. Nothing herein shall prevent Buyer from seeking or obtaining a
release of all liability under one or both of the Distributor Guarantees,
provided that any such release includes a full release of Seller and its
Affiliates from any Liabilities under the Distributor Guarantee being released.
7.11 Kirkwood Obligations. Buyer acknowledges that the Company is
party to six Industrial New Jobs Training Agreements with Kirkwood Community
College ("Kirkwood") dated as of various dates between June 1990 and September
1996 (collectively, the "Kirkwood Agreements"). The parties acknowledge and
agree that as of the Closing Date certain unused funds may be made available to
the Company for its use pursuant to the Kirkwood Agreements. Buyer and the
Company hereby covenant and agree with Seller that Buyer and the Company shall
not request, take, receive, utilize or spend any funds whatsoever that may be
available for disbursement to or use by the Company or Buyer pursuant to any of
the Kirkwood Agreements for any purpose whatsoever (including without
limitation the training of Company employees), except to the extent that such
amounts are accounts receivable of the Company at the Closing.
7.12 Non-Solicitation of Company Employees. For a period of one
(1) year beginning on the Closing Date, neither Seller nor any of Seller's
directors, officers, employees or Affiliates who are acting in such capacity on
behalf of Seller or any of its Affiliates, shall, without Buyer's prior written
consent, solicit, encourage or otherwise take any action intended to induce any
individual who is then an employee of the Company to terminate his or her
employment with the Company; provided however, that nothing herein will prevent
Seller or any of its Affiliates from hiring any employee of the Company who,
without any solicitation, encouragement or inducement by Seller or any of its
directors, officers, employees or Affiliates, independently applies for
employment with Seller or any of its Affiliates.
8. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND INDEMNIFICATION.
8.1 Certain Defined Terms. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Assumed Liabilities" shall mean (i) the Assigned Assets Liabilities
assumed by Seller pursuant to the Distribution, Assignment and Assumption
Agreement and (ii) those Liabilities set forth on Schedule 2.1(b)-2 and assumed
by Seller directly pursuant to the terms of this Agreement.
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"Basis" shall mean any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could reasonably form the
basis for any specified consequence.
"Breach" and "Breaches" mean:
(i) with respect to a "Breach" by Seller, (a) the
failure of any representation or warranty of Seller contained in Section 3 of
this Agreement, as qualified by the Disclosure Letter, to be true or correct on
and as of the Closing Date, (b) any breach by Seller of any of Seller's
covenants in this Agreement (including, without limitation, the failure to
promptly pay any of the Assumed Liabilities), excluding a breach of the
covenants contained in Sections 5.1 (General), 5.2 (Notices and Consents), 5.4
(Preservation of Business), 5.6 (Full Access), 5.8 (No Solicitation), 5.9 (Best
Efforts and Further Assurances), 7.7 (Confidentiality), or 7.12 (Non-
Solicitation of Company Employees), (c) any breach by the Company of any of the
Company's covenants in this Agreement if such covenant was to be performed by
the Company prior to the Closing except the covenants contained in Sections 5.1
(General), 5.2 (Notices and Consents), 5.4 (Preservation of Business), 5.6
(Full Access), 5.8 (No Solicitation), 5.9 (Best Efforts and Further
Assurances), or 7.7 (Confidentiality), (d) a breach by Seller of any of
Seller's representations, warranties or covenants in the Distribution,
Assignment and Assumption Agreement, or (e) the failure by Seller (except to
the extent permitted under this Agreement or as may be waived in writing by
Buyer) to assume control of, and pay both its and Buyer's reasonable costs of
the defense and settlement of, any actual or overtly threatened action, suit,
claim or proceeding brought by a third party based on any allegation or
allegations which, if true, would constitute a failure or breach described in
subclause (a), (b), (c), or (d) of this subparagraph (i); and
(ii) with respect to a "Breach" by Buyer: (a) the
failure of any representation or warranty of Buyer contained in Section 4 of
this Agreement to be true or correct on and as of the Closing Date; (b) any
breach by Buyer of any of Buyer's covenants in this Agreement, excluding a
breach of the covenants contained in Sections 5.1 (General), 5.7 (Notice of
Developments), 5.9 (Best Efforts and Further Assurances) and 7.7
(Confidentiality); (c) any breach by the Company of any of the Company's
covenants in this Agreement if such covenant is to be performed by the Company
after the Closing, except the covenant contained in Section 7.7
(Confidentiality), or (d) the failure by Buyer or (following the Closing) the
Company (except to the extent permitted under this Agreement or as may be
waived in writing by Seller) to assume control of, and pay both their and
Seller's reasonable costs of the defense and settlement of, any actual or
overtly threatened action, suit, claim or proceeding by a third party based on
any allegation or allegations which, if true, would constitute a failure or
breach described in subclause (a), (b) or (c) of this subparagraph (ii).
"Continuing Lease Obligation" shall have the meaning set forth in
Section 1 above.
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"Disclosed Liabilities" shall have the meaning set forth in Section
7.9 above.
"Escrow Account" shall have the meaning set forth in Section 2.2(b)
above.
"Escrow Agent" shall have the meaning set forth in Section 1 above.
"Escrow Amount" shall have the meaning set forth in Section 2.2(b)
above.
"Escrow Period" shall mean the period of time beginning on the Closing
Date and ending at 11:00 p.m. Pacific Time on the date eighteen (18) months
after the Closing Date.
"Extended Buyer Claim" shall mean any claim by Buyer for
indemnification from Seller in accordance with the provisions of this Section 8
that is: (i) based upon a Breach of: (A) any of Seller's covenants under
Section 2.3 (Tax), (B) any of Seller's representations and warranties under
Section 3.12 (Taxes) or Section 3.23 (Environment, Health and Safety); or (C)
any one or more of Seller's covenants under Section 7.1 (Section 338(h)(10)
Election), Section 7.2 (Returns; Indemnification; Liability for Taxes), Section
7.3 (Refunds and Credits), Section 7.4 (Termination of Tax Sharing Agreements),
Section 7.5 (Conduct of Audits and Other Procedural Matters), or Section 7.8
(Reimbursement of Excess Lease Capacity); or (ii) a claim for indemnification
by Buyer with respect to Seller's failure to pay any (or any portion) of the
Assumed Liabilities.
"Extended Seller Claim" shall mean any claim by Seller for
indemnification from Buyer in accordance with the provisions of this Section 8
that is based upon a Breach of (i) any of Buyer's representations under Section
4.6 (Tax Representations) or Section 4.8 (Investment Representations), or (ii)
a Breach of any one or more of Buyer's covenants under Section 7.1 (Section
338(h)(10) Election), Section 7.2 (Returns; Indemnification; Liability for
Taxes), Section 7.3 (Refunds and Credits), Section 7.5 (Conduct of Audits and
Other Procedural Matters), Section 7.9 (Payment of Company Liabilities),
Section 7.10 (Distributor Guarantees) or Section 7.11 (Kirkwood Obligations).
"Liability" shall mean any liability or obligation (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), including any liability for Taxes.
"Loss" and "Losses" shall mean Liabilities, obligations, judgments,
damages, deficiencies, assessments, Taxes, losses, fines, penalties, expenses,
fees, costs, amounts paid (including reasonable attorneys' and expert witness
fees and disbursements in connection with investigating, defending or settling
any action or threatened action); provided, however, that the amount of any
Loss shall be reduced by the amount of any insurance proceeds actually received
by the Person entitled to receive indemnification under this Agreement in
respect of such Loss.
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"Officer's Indemnification Certificate" shall mean a duly authorized
and executed certificate of Seller or Buyer, as applicable, which (i) states
that such Party (or the Company) has paid or has made a reasonable, good faith
determination that it will have to pay Loss(es) and (ii) specifies in
reasonable detail the individual items of Loss(es) included in the amount so
stated, (iii) states the date each such item was paid or reasonably determined
to be paid and the basis for such determination, and (iv) states the
representation, warranty or covenant to which such alleged item of Loss is
related and the factual basis on which such Party asserts that it is entitled
to indemnification for such asserted Loss(es) under this Agreement.
8.2 Survival of Representations and Warranties. All of the
representations, warranties and covenants of the Seller and Buyer contained
herein or in any document certificate or other instrument required to be
delivered hereunder shall survive the Closing Date and continue in full force
and effect until the expiration of the Escrow Period, on which date all such
warranties, representations and covenants shall expire; except that
notwithstanding the foregoing, all warranties, representations and covenants
relating to the Extended Buyer Claims and the Extended Seller Claims shall
survive until the expiration of the applicable legal statute of limitations
underlying such claim, provided however, that (i) the Extended Buyer Claims
relating to indemnification for Seller's failure to pay any (or a portion) of
the Assumed Liabilities and (ii) the Extended Seller's Claims relating to
indemnification for a Breach by Buyer of Sections 7.9 (Payment of Company
Liabilities), 7.10 (Distributors Guarantees) and 7.11 (Kirkwood Obligations),
shall survive indefinitely.
8.3 Indemnity by Seller.
(a) Subject to the terms and conditions of this
Agreement, Seller hereby agrees to indemnify, defend and hold harmless Buyer
and Buyer's directors, officers and Affiliates (which includes the Company, and
its officers, directors and Affiliates after the Closing) against and in
respect of all Loss(es) incurred or reasonably determined in good faith by
Buyer to be incurred by Buyer, or its directors, officers and affiliates, or
asserted against them to the extent that such Loss(es) arises from (i) a Breach
by Seller, or (ii) Seller's failure to pay any (or a portion) of the Assumed
Liabilities; provided that Buyer delivers to Seller an Officer's
Indemnification Certificate of Buyer asserting Buyer's claim for
indemnification for such actual or reasonably expected Loss(es) on or before
the applicable deadline for asserting such claim for indemnification under
Section 8.3(c) below.
(b) In the event of a pending or threatened action that
includes asserted claims which, if assumed to be true, would entitle Buyer or
any of its directors, officers or Affiliates to indemnification under Section
8.3(a), Buyer shall give prompt written notice of such action or actions to
Seller, and Seller shall be entitled to control the defense and negotiation, if
any, regarding settlement of such action or actions, at Seller's expense
(including the cost of any such settlement itself), and Buyer shall cooperate
with Seller, at Seller's expense, in the compromise or defense of any such
action or actions, provided that, in such event, (i) neither Buyer nor any
director, officer or Affiliate of Buyer shall agree to
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or enter into any settlement of such action or actions without Seller's prior
written consent, which consent shall not be unreasonably withheld, and/or (ii)
Seller shall not agree to or enter into any settlement that requires cessation
of Buyer's use or other similar restrictions on use of, any of the Company
Assets (other than the Assigned Assets) without the written consent of Buyer.
(c) In order for Buyer, Buyer's directors, officers or
Affiliates to be indemnified in accordance with Section 8.3(a) above, any claim
for indemnification made by Buyer or any of Buyer's directors, officers and
Affiliates under this Agreement must be set forth in an Officer's
Indemnification Certificate of Buyer that is delivered to Seller, and if such
Officer's Indemnification Certificate is delivered to Seller prior to the
expiration of the Escrow Period, it must also be delivered to the Escrow Agent
prior to the expiration of the Escrow Period. (The Parties agree that there is
no limit on the dollar amount of indemnification to which Buyer may become
entitled to pursuant to this Section 8.3.) No claim for indemnification (i)
that is not an Extended Buyer Claim may be made, raised or asserted in any
manner by Buyer or any director, officer or Affiliate of Buyer, or any of their
permitted successors or assigns unless such claim for indemnification hereunder
is set forth in an Officer's Indemnification Certificate of Buyer that is
delivered to Seller and the Escrow Agent prior to the expiration of the Escrow
Period, (ii) that is an Extended Buyer Claim (except as set forth in the
following item (iii)) may be made, raised or asserted in any manner by Buyer or
any director, officer or Affiliate of Buyer, or any of their permitted
successors or assigns, unless such claim for indemnification hereunder is set
forth in an Officer's Indemnification Certificate of Buyer that is delivered to
Seller prior to the expiration of the applicable legal statute of limitations
regarding such Extended Buyer Claim, except that (iii) to the extent that a
claim for indemnification is an Extended Buyer Claim related to the Assumed
Liabilities it may be brought at any time.
(d) Except for any rights of specific performance under
applicable law, the rights of indemnification afforded to Buyer and its
directors, officers and Affiliates under the foregoing provisions of this
Section 8.3 shall constitute the sole and exclusive right and remedy of Buyer
and its directors, officers and Affiliates with respect to (i) any Breach by
Seller or (ii) any claim, suit or action relating to the Assumed Liabilities or
any portion thereof.
(e) Notwithstanding anything herein to the contrary,
neither Buyer nor any of its directors, officers or Affiliates shall be
entitled to any indemnification of any claim from Seller under this Agreement
unless and until the aggregate amount of Loss(es) for which indemnification
would otherwise be available from Seller under this Section 8.3 exceeds an
aggregate of Three Hundred Thousand Dollars ($300,000) (the "Seller's Basket"),
after which time Buyer and its directors, officers and Affiliates will be
entitled, subject to the terms and conditions of this Section 8, to recover any
and all Loss with respect to which Buyer is entitled to indemnification
pursuant to Section 8.3(a) above; provided, however, that (except for claims
for indemnification relating to Section 3.23 (Environment, Health and
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49
Safety), which shall be subject to the above provisions regarding Seller's
Basket) claims for indemnification that are Extended Buyer Claims shall not be
subject to the above provisions of this subsection (e) regarding Seller's
Basket.
8.4 Indemnity by Buyer.
(a) Subject to the terms and conditions of this
Agreement, Buyer hereby agrees to indemnify, defend and hold harmless Seller,
Seller's directors, officers and Affiliates and those persons who were the
directors and officers of the Company immediately prior to the Closing (the
"Company Directors and Officers") against and in respect of all Loss(es)
incurred by or asserted against them to the extent that such Loss(es) arises
from a Breach by Buyer as provided in Section 8.1.
(b) In the event of a pending or threatened action that
includes asserted claims which, if assumed to be true, would entitle Seller or
any of its directors, officers or Affiliates or any of the Company Directors
and Officers to indemnification under Section 8.4(a), Seller shall give prompt
written notice of such action or actions to Buyer, and Buyer shall be entitled
to control the defense and negotiation, if any, regarding settlement of such
action or actions, at Buyer's expense (including the cost of any such
settlement itself), and Seller shall cooperate with Buyer, at Buyer's expense,
in the compromise or defense of any such action or actions, provided that, in
such event, (i) neither Seller nor any director, officer or Affiliate of Seller
shall agree to or enter into any settlement of such action or actions without
Buyer's prior written consent, which consent shall not be unreasonably
withheld, and/or (ii) Buyer shall not agree to or enter into any settlement
that requires cessation of Seller's use or other similar restrictions on use of
any of the Assigned Assets without the written consent of Seller.
(c) In order for Seller, Seller's directors, officers or
affiliates or the Company Directors and Officers to be indemnified in
accordance with Section 8.4(a) above, any claim for indemnification made by
Seller, any of Seller's directors, officers and Affiliates or any of the
Company Directors or Officers under this Agreement must be set forth in an
Officer's Indemnification Certificate of Seller that is delivered to Buyer. No
claim for indemnification: (i) that is not an Extended Seller Claim may be
made, raised or asserted in any manner by Seller, any director, officer or
Affiliate of Seller, any of the Company Directors or Officers or any of their
permitted successors or assigns, unless such claim for indemnification is set
forth in an Officer's Indemnification Certificate that is delivered to Buyer
prior to termination of the Escrow Period; (ii) that is an Extended Seller
Claim (except as set forth in the following item (iii)) may be made, raised or
asserted in any manner by Seller, any director, officer or Affiliate of Seller,
any of the Company Directors or Officers or any of their permitted successors
or assigns, unless such claim for indemnification hereunder is set forth in an
Officer's Indemnification Certificate of Seller that is delivered to Buyer
prior to the expiration of the applicable legal statute of limitations
regarding such Extended Seller Claim, except that (iii) a claim for
indemnification that is an Extended Seller
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Claim related to Section 7.9 (Payment of Company Liabilities), 7.10
(Distributor Guarantees) or 7.11 (Kirkwood Obligations) may be brought at any
time.
(d) Except for any rights of specific performance under
applicable law, the rights of indemnification afforded to Seller, Seller's
directors, officers and Affiliates or any of the Company Directors and Officers
under the foregoing provisions of this Section 8.4 shall constitute the sole
and exclusive right and remedy of Seller and its directors, officers and
Affiliates and the Company Directors and Officers with respect to any Breach by
Buyer.
(e) Notwithstanding anything herein to the contrary,
neither Seller nor any of its directors, officers or Affiliates nor any of the
Company Directors or Officers shall be entitled to any indemnification of any
claim from Buyer under this Agreement unless and until the aggregate amount of
Loss(es) for which indemnification would otherwise be available from Buyer
under this Section 8.4 exceeds an aggregate of Three Hundred Thousand Dollars
($300,000) (the "Buyer's Basket"), whereupon Seller and its directors, officers
and Affiliates and the Company Directors and Officers will be entitled to
recover any and all Loss(es) with respect to which Seller is entitled to
indemnification pursuant to Section 8.4(a) above; provided, however, that
claims for indemnification that are Extended Seller Claims shall not be subject
to the above provisions of this subsection (e) regarding Buyer's Basket.
8.5 Escrow Period; Distribution upon Termination of Escrow Period.
Subject to the following requirements, the Escrow Account shall be in existence
immediately following the Closing and shall terminate at the conclusion of the
Escrow Period whereupon, subject to the immediately following provision, all
funds in the Escrow Account shall immediately be delivered to Seller; provided
however, that if at the conclusion of the Escrow Period there is pending an
unresolved bona fide claim by Buyer for indemnification under Section 8.3(a)
which claim was brought in an Officer's Indemnification Certificate of Buyer
that was delivered to Seller and the Escrow Agent prior to the expiration of
the Escrow Period in accordance with this Section 8, then a portion of the
Escrow Amount equal to the amount of Loss claimed in good faith by Buyer in
such Officer's Indemnification Certificate shall remain in the Escrow Account
until such indemnification claim of Buyer has been satisfied or resolved in
accordance with the provisions of this Section 8. Notwithstanding the
foregoing, any funds, including interest thereon, in the Escrow Account which
are not the subject of a pending indemnification claim for Loss at the end of
the Escrow Period shall be paid to Seller immediately upon expiration of the
Escrow Period. After the expiration of the Escrow Period, as soon as all
pending claims have been resolved, the Escrow Agent shall deliver to Seller the
remaining portion of the Escrow Account not required to satisfy outstanding
claims for Losses.
8.6 Protection of Escrow Account.
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(a) The Escrow Agent shall hold and safeguard the Escrow
Account during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Buyer
and shall hold and dispose of the Escrow Account only in accordance with the
terms of this Section 8.
(b) The Escrow Account shall be invested in U.S. Treasury
bills with maturities of not more than thirty (30) days and any interest paid
on the Escrow Account shall be added to the Escrow Account and deemed part
thereof. Seller shall be liable for any Taxes with respect to income earned on
the Escrow Account and Buyer will direct the Escrow Agent to promptly release
from the Escrow Account to Seller, upon Seller's request an amount sufficient
to pay such Taxes when due.
8.7 Making of Claims.
(a) Buyer may not make any claim for indemnification
hereunder unless Buyer first delivers to Seller and (if such claim is made
within the Escrow Period) to the Escrow Agent, an Officer's Indemnification
Certificate of Buyer asserting such claim for indemnification.
(b) If such Officer's Indemnification Certificate of
Buyer is delivered to Seller and the Escrow Agent prior to expiration of the
Escrow Period, then the provisions of Section 8.8 shall apply to such claim for
indemnification.
(c) If such Officer's Indemnification Certificate of
Buyer is delivered to Seller after expiration of the Escrow Period, then Seller
shall have thirty (30) days after Seller's receipt of such Officer's
Indemnification Certificate to object to the indemnification claims set forth
in such Officer's Indemnification Certificate. If Seller does not object to
such indemnification claim or claims in a written statement and deliver such
written statement of objection to Buyer within such thirty (30) day period,
then Seller shall deliver to Buyer, as promptly as practicable, an amount equal
to the Loss(es) claimed by Buyer in such Officer's Indemnification Certificate.
8.8 Objections to Claims During Escrow Period. At the time of
delivery of any Officer's Indemnification Certificate to the Escrow Agent, a
duplicate copy of such Officer's Indemnification Certificate shall concurrently
be delivered to Seller by Buyer, and for a period of thirty (30) days after
delivery of such Officer's Indemnification Certificate to Seller, the Escrow
Agent shall make no delivery of all or any portion of the Escrow Amount unless
the Escrow Agent shall have received written authorization from Seller to make
such a delivery. After expiration of such thirty (30) day period, the Escrow
Agent shall, subject to the provisions of Sections 8.3 and 8.7, make delivery
to Buyer of cash from the Escrow Account equal to the amount of such Loss(es)
claimed in such Officer's Indemnification Certificate of Buyer; provided
however, that no such payment or delivery may be made by Escrow Agent if Seller
objects in a written statement to a claim in Buyer's Officer's
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Indemnification Certificate, and such objecting statement of Seller is
delivered to the Escrow Agent and Buyer prior to the expiration of such thirty
(30) day period.
8.9 Resolution of Conflicts; Arbitration.
(a) In case Seller shall so object in writing to any
claim or claims made in any Officer's Indemnification Certificate, Seller and
Buyer shall attempt in good faith to agree upon the rights of the respective
parties with respect to each of such claims. If Seller and Buyer should so
agree, a memorandum setting forth such agreement shall be prepared and signed
by both parties and, if such claims were made by Buyer and were set forth in an
Officer's Indemnification Certificate of Buyer that was delivered to both
Seller and the Escrow Agent prior to expiration of the Escrow Period such
memorandum shall be furnished to the Escrow Agent. The Escrow Agent shall be
entitled to rely on any such memorandum and shall distribute cash from the
Escrow Account in accordance with the terms thereof.
(b) If no such agreement of Buyer and Seller can be
reached after good faith negotiation, either the Buyer or Seller may demand
arbitration of the matter in accordance with this Agreement unless the amount
of the Loss is at issue in pending litigation with a third party, in which
event arbitration shall not be commenced until such amount is ascertained or
both Parties agree to arbitration, whichever is earlier; and in either such
event the matter shall be settled by arbitration conducted by a single
arbitrator acceptable to both Buyer and Seller in accordance with the
commercial arbitration rules of the American Arbitration Association as
modified by this Agreement. The arbitrator shall set a limited time period and
establish procedures designed to reduce the cost and time for discovery while
allowing the parties an opportunity, adequate in the sole judgement of the
arbitrator, to discover relevant information from the opposing Parties about
the subject matter of the dispute. The arbitrator shall rule upon motions to
compel or limit discovery and shall have the authority to impose sanctions,
including attorneys fees and costs, to the extent as a court of competent law
or equity, should the arbitrators determine that discovery was sought without
substantial justification or that discovery was refused or objected to without
substantial justification. The decision of the arbitrator as to the validity
and amount of any claim in such Officer's Certificate shall be binding and
conclusive upon the Parties to this Agreement, and notwithstanding anything
herein to the contrary, the Escrow Agent shall be entitled to act in accordance
with such decision and make or withhold payments out of the Escrow Account in
accordance therewith. Such decision shall be written and shall be supported by
written findings of fact and conclusions which shall set forth the award,
judgment, decree or order awarded by the arbitrator.
(c) Judgment upon any award rendered by the arbitrator
may be entered in any court having jurisdiction. Any such arbitration shall be
held in San Mateo County, California under the Rules of the American
Arbitration Association. The arbitrator shall determine how all expenses
relating to the arbitration shall be paid, including without limitation, the
respective expenses of each Party.
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(d) The foregoing arbitration provisions shall apply to
any dispute arising under or relating to this Agreement, concerning the Escrow,
or the indemnification obligations set forth in Sections 8.3 or 8.4.
9.9 Escrow Agent's Duties.
(a) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by both an officer of
Buyer and Seller, and may rely and shall be protected in relying or refraining
from acting on any instrument reasonably believed to be genuine and to have
been signed or presented by the proper party or parties. The Escrow Agent shall
not be liable for any act done or omitted hereunder as Escrow Agent while
acting in good faith and in the exercise of reasonable judgment, and any act
done or omitted pursuant to the advice of counsel shall be conclusive evidence
of such good faith.
(b) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the Parties hereto (except for
objections of Seller to Buyer's claims for indemnification as set forth in
Section 8.8 above, or as described in writing and signed by an officer of Buyer
and an officer of Seller) or by any other person, excepting only orders or
process of courts of law, and is hereby expressly authorized to comply with and
obey orders, judgments or decrees of any court. In case the Escrow Agent obeys
or complies with any such order, judgment or decree of any court, the Escrow
Agent shall not be liable to any of the Parties hereto or to any other person
by reason of such compliance, notwithstanding any such order, judgment or
decree being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
(c) The Escrow Agent shall not be liable in any respect
on account of the identity, authority or rights of the Parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(d) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(e) In performing any duties under this Agreement, the
Escrow Agent shall not be liable to any party for damages, losses, or expenses,
except for negligence or willful misconduct on the part of the Escrow Agent.
The Escrow Agent shall not incur any such liability for (A) any act or failure
to act made or omitted in good faith, or (B) any action taken or omitted in
reliance upon any instrument, including any written statement of affidavit
provided for in this Agreement that the Escrow Agent shall in good faith
believe to be genuine, nor will the Escrow Agent be liable or responsible for
forgeries, fraud, impersonations, or determining the scope of any
representative authority. In addition, the
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Escrow Agent may consult with legal counsel in connection with performing the
Escrow Agent's duties under this Agreement and shall be fully protected in any
act taken, suffered, or permitted by him/her in good faith in accordance with
the advice of counsel. The Escrow Agent is not responsible for determining and
verifying the authority of any person acting or purporting to act on behalf of
any party to this Agreement.
(f) If any controversy arises between the Parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and the Escrow Amount and may wait for settlement of any
such controversy by final appropriate legal proceedings or other means as, in
the Escrow Agent's discretion, the Escrow Agent may reasonably be required,
despite what may be set forth elsewhere in this Agreement. In such event, the
Escrow Agent will not be liable for damages. Furthermore, the Escrow Agent may
at its option, file an action of interpleader requiring the Parties to answer
and litigate any claims and rights among themselves. The Escrow Agent is
authorized to deposit with the clerk of the court all documents and the Escrow
Amount, except all cost, expenses, charges and reasonable attorney fees
incurred by the Escrow Agent due to the interpleader action and which the Buyer
and the Sellers' Agent jointly and severally agree to pay. Upon initiating such
action, the Escrow Agent shall be fully released and discharged of and from all
obligations and liability imposed by the terms of this Agreement.
(g) Buyer agrees to indemnify and hold Escrow Agent
harmless against any and all losses, claims, damages, liabilities, and
expenses, including reasonable costs of investigation, counsel fees, including
allocated costs of in-house counsel and disbursements that may be imposed on
Escrow Agent or incurred by Escrow Agent in connection with the performance of
his/her duties under this Agreement, including but not limited to any
litigation arising from this Agreement or involving its subject matter other
than arising out of its negligence or willful misconduct.
(h) The Escrow Agent may resign at any time upon giving
at least thirty (30) days written notice to Buyer and Seller; provided,
however, that no such resignation shall become effective until the appointment
by Buyer of a successor escrow agent who shall be reasonably acceptable to
Seller; provided that, Buyer hereby appoints as a successor escrow agent any
Person with which the Escrow Agent shall have been merged or consolidated, or
to which the Escrow Agent shall have transferred a substantial amount of its
escrow business, without any further action or execution of any further
documentation by any of the Parties upon notice to Buyer and Seller by the
Escrow Agent of such merger, consolidation or transfer. The successor escrow
agent shall execute and deliver an instrument accepting such appointment and it
shall, without further acts, be vested with all the estates, properties,
rights, powers, and duties of the predecessor escrow agent as if originally
named as Escrow Agent. Upon appointment of a successor escrow agent, the Escrow
Agent shall be discharged from any further duties and liability under this
Agreement.
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(i) Fees. All fees of the Escrow Agent for performance of
its duties hereunder shall be paid by Buyer. It is understood that the fees and
usual charges agreed upon for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this Agreement. In the
event that the conditions of this Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in this Agreement, or if
the Parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes
in, any litigation pertaining to the Escrow Account or its subject matter, the
Escrow Agent shall be reasonably compensated for such extraordinary services
and reimbursed for all costs, attorney's fees, including allocated costs of
in-house counsel, and expenses occasioned by such default, delay, controversy
or litigation. Buyer promises to pay these sums upon demand.
9. TERMINATION.
9.1 Termination of Agreement. Certain of the Parties may
terminate this Agreement prior to the Closing as provided below.
(a) The Parties may terminate this Agreement by mutual
written consent at any time prior to the Closing.
(b) The Parties may terminate this Agreement if the
Closing has not occurred by August 15, 1997 unless the Closing has not occurred
solely because the HSR waiting period has not yet elapsed; provided that, the
right to terminate this Agreement under this Section 9.1(b) shall not be
available to either Party hereto if the failure to have effected the Closing on
or prior to such date results primarily from such Party's (or its Affiliates')
breaching any representation, warranty or covenant contained in this Agreement.
(c) Buyer may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing in the event Seller has
breached any representation, warranty or covenant contained in this Agreement
in any material respect, Buyer has notified Seller of the breach, and the
breach has continued without cure for a period of twenty (20) days after the
notice of breach or by reason of the failure of any condition precedent under
Section 6.1 hereof to have been satisfied by August 15, 1997 (unless the
failure results primarily from Buyer itself breaching any representation,
warranty or covenant contained in this Agreement).
(d) Seller may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing in the event Buyer has
breached any representation, warranty or covenant contained in this Agreement
in any material respect, Seller has notified Buyer of the breach, and the
breach has continued without cure for a period of twenty (20) days after the
notice of breach or by reason of the failure of any condition precedent under
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Section 6.2 hereof (unless the failure results primarily from the Seller itself
breaching any representation, warranty or covenant contained in this
Agreement).
(e) Buyer may terminate this Agreement on or prior to the
Closing Date if there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated, issued or deemed applicable to the
Acquisition by any governmental entity, which would: (i) prohibit the Buyer's
ownership or operation of all or a material portion of the Business or the
Company Assets, or (ii) compel the Buyer to dispose of all or a material
portion of the Business or the Company Assets as a result of the Acquisition.
9.2 Effect of Termination
Any termination of this Agreement in accordance with Section
9.1(a) or (b) above will be effective immediately and any termination of this
Agreement in accordance with Section 9.1(d) or (e) will be effective
immediately upon the delivery of written notice by the terminating Party to the
other Parties hereto. In the event of the termination of this Agreement as
provided in Section 9.1, this Agreement shall be of no further force or effect,
except (i) as set forth in this Section 9.2, Section 9.3 and Article 10
(miscellaneous), each of which shall survive the termination of this Agreement.
No termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
9.3 Fees and Expenses.
(a) Each of Buyer and Seller will bear its own costs and
expenses (including legal and accounting fees and expenses) incurred in
connection with this Agreement, the Acquisition, and the transactions
contemplated hereby and thereby.
10. MISCELLANEOUS.
10.1 Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written
approval of the other Party; provided, however, that the Party may make any
public disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly-traded securities (in
which case the disclosing Party will advise the other Party prior to making the
disclosure).
10.2 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.
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10.3 Entire Agreement. This Agreement, the Exhibits, the
Disclosure Letter and the Schedules to be delivered contemporaneously herewith
and any of the documents set forth in Sections 6.1 and 6.2 constitute the
entire agreement among the Parties and the Escrow Agent and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof including that certain term sheet dated May 28, 1997 between Buyer and
Seller which shall terminate in its entirety upon the execution of this
Agreement.
10.4 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, interests, or obligations hereunder without the prior
written consent of the other Parties; provided, however, that after the Closing
Buyer may assign any or all of its rights and interests (but not its
obligations) hereunder to one or more, of its Affiliates provided no such
assignment shall affect or defeat any rights of Seller hereunder or relieve
Buyer of any obligation it has to Seller hereunder.
10.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.6 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.
10.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) upon
confirmation of facsimile, (ii) when sent by overnight delivery and (iii) when
mailed by registered or certified mail return receipt requested and postage
prepaid at the following address:
If to the Sellers: Intuit Inc.
0000 Xxxxxx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: General Counsel
Copy to: Fenwick & West, LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
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Attn: Xxxxxxx X. Xxxxxxxx, Esq.
If to the Buyer: Broderbund Software, Inc.
000 Xxxxxxx Xxxx.
Xxxxxx, Xxxxxxxxxx 00000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
Xxxxxxx X. Xxxxxxxxxx, Esq.
Copy to: Wilson, Sonsini, Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Tor X. Xxxxxx, Esq.
If to the Escrow Agent:
At the address set forth on the signature pages to
this Agreement.
Any Party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the address set
forth above 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 intended recipient or confirmation of delivery is obtained by the sender.
Any party hereto may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Party notice in the manner herein set forth.
10.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of California without giving effect to
any choice or conflict of law provision or rule of any other jurisdiction
whatsoever that would cause the application of the laws of any jurisdiction
other than California.
10.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Buyer and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or
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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.
10.10 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.
10.11 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. 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 prior to the Closing, unless the context
requires otherwise. The word "including" shall mean including without
limitation. Nothing in the Schedules hereto shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Schedule identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. The Parties intend that each
representation or warranty and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty or
covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in
breach of the first representation, warranty or covenant.
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SIGNATURES
IN WITNESS WHEREOF, the Parties hereto have executed this Stock
Purchase Agreement on the date first above written.
"BUYER"
BRODERBUND SOFTWARE, INC.
/s/ Xxxxxxx X. XxXxxxxxx
By ________________________________________________
Name:
Title:
"SELLERS"
INTUIT INC.
/s/ Xxxx X. Xxxxxxx
By ________________________________________________
Name: Xxxx X. Xxxxxxx
Title:
XXXXXXX TECHNOLOGY, INC.
/s/ Xxxx X. Xxxxxxx
By ________________________________________________
Name: Xxxx X. Xxxxxxx
Title:
"ESCROW AGENT"
/s/ Xxxx Xxx Xxxxxx
By ________________________________________________
Xxxx Xxx Xxxxxx
Trust Officer
First Trust of California, N.A.
Global Escrow Depositary
Services #SANF 0000
Xxx Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
61
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
2. PURCHASE AND SALE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
2.1 Purchase and Sale of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
2.3 Transfer Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
2.4 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
2.5 Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
3. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
3.1 Organization of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
3.2 Authorization of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
3.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
3.4 Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
3.5 Title to Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
3.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
3.7 Pro Forma Adjusted Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
3.8 Indebtedness Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
3.9 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
3.10 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.11 Legal and Other Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.13 Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
3.14 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
3.15 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
3.16 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
3.17 Notes and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.18 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.19 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.20 Product Warranties; Defects; Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.21 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
3.22 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
3.23 Environment, Health, and Safety. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
3.24 Affiliated Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
3.25 Government Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
3.26 Distributors, Products, and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
3.27 No Illegal Payments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
3.28 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
3.29 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
3.30 No Liquidation, Insolvency, Winding-Up. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
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3.31 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
4. REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
4.1 Organization of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
4.2 Authority for Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
4.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
4.4 Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
4.5 No Liquidation, Insolvency, Winding-Up. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
4.6 Tax Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
4.7 Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
4.8 Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
5. PRE-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
5.2 Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
5.3 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
5.4 Preservation of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
5.5 Treatment of Company Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
5.6 Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
5.7 Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
5.8 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
5.9 Best Efforts and Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
6. CONDITIONS TO OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
6.1 Conditions Precedent to Obligations of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
6.2 Conditions Precedent to Obligations of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . -37-
7. ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
7.1 Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
7.2 Returns; Indemnification; Liability for Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
7.3 Refunds and Credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
7.4 Termination of Tax Sharing Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
7.5 Conduct of Audits and Other Procedural Matters . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
7.6 Access to Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
7.7 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
7.8 Reimbursement of Excess Lease Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
7.9 Payment of Company Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
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7.10 Distributor Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
7.11 Kirkwood Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
7.12 Non-Solicitation of Company Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
8. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . -42-
8.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
8.2 Survival of Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
8.3 Indemnity by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
8.4 Indemnity by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
8.5 Escrow Period; Distribution upon Termination of Escrow Period . . . . . . . . . . . . . . . . . . -48-
8.6 Protection of Escrow Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
8.7 Making of Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
8.8 Objections to Claims During Escrow Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
8.9 Resolution of Conflicts; Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
8.10 Escrow Agent's Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -51-
9. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
9.1 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
9.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
10.1 Press Releases and Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
10.2 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
10.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
10.4 Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
10.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
10.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
10.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
10.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -56-
10.9 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -56-
10.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -56-
10.11 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -57-
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LIST OF EXHIBITS
Exhibit A Distribution, Assignment and Assumption Agreement
Exhibits B-1 and B-2 Trademark License Agreements
Exhibit C-1 and C-2 Distribution Agreements
Exhibit D Customer Information Cross-License Agreement
Exhibit E Tax Business Transition Agreement
Exhibit F Opinion of Fenwick & West LLP
Exhibit G Xxxxxxx Agreement
Exhibit H Opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation
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