EXHIBIT 99.2
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STOCK PURCHASE AGREEMENT
by and among
NRT INCORPORATED
as the Purchaser,
SOTHEBY'S HOLDINGS, INC.
as the Seller,
and
CENDANT CORPORATION
as the Purchaser Guarantor
Dated as of February 17, 2004
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS AND TERMS.................................................................1
Section 1.1 Definitions...................................................................1
Section 1.2 Other Interpretive Provisions................................................12
ARTICLE II PURCHASE AND SALE...................................................................13
Section 2.1 Purchase and Sale of Shares..................................................13
Section 2.2 Purchase Price...............................................................13
Section 2.3 Closing; Deliveries and Payment..............................................14
Section 2.4 Purchase Price Adjustments...................................................15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER.......................................17
Section 3.1 Authority and Validity.......................................................17
Section 3.2 Organization.................................................................18
Section 3.3 No Conflict; Governmental Consents...........................................19
Section 3.4 Financial Statements.........................................................20
Section 3.5 Absence of Certain Changes or Events.........................................20
Section 3.6 Assets.......................................................................22
Section 3.7 Litigation and Claims; Compliance with Laws..................................24
Section 3.8 Insurance....................................................................25
Section 3.9 Environmental Matters........................................................26
Section 3.10 Material Contracts...........................................................26
Section 3.11 Intellectual Property........................................................29
Section 3.12 Taxes........................................................................30
Section 3.13 Employee Benefits; ERISA.....................................................32
Section 3.14 Labor Matters................................................................34
Section 3.15 Affiliate Transactions.......................................................35
Section 3.16 Listings.....................................................................36
Section 3.17 Sales Associates.............................................................36
Section 3.18 Employees....................................................................37
Section 3.19 Broker Affiliates............................................................37
Section 3.20 Client Trust Funds...........................................................38
Section 3.21 Brokers, Finders, etc........................................................38
Section 3.22 Certain Reorganization Matters...............................................38
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.....................................39
Section 4.1 Authority; Validity..........................................................39
Section 4.2 Organization.................................................................39
Section 4.3 No Conflict; Governmental Consents...........................................40
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Section 4.4 Financing....................................................................40
Section 4.5 Litigation...................................................................40
Section 4.6 Investment Representation....................................................41
Section 4.7 Brokers, Finders, etc........................................................41
ARTICLE V COVENANTS ...........................................................................41
Section 5.1 Reasonable Best Efforts; Further Assurances..................................41
Section 5.2 Public Disclosure; Confidentiality...........................................42
Section 5.3 Employee Plans...............................................................42
Section 5.4 Change of Control Payments...................................................44
Section 5.5 Employees....................................................................44
Section 5.6 Insurance....................................................................45
Section 5.7 Closing Date Transactions....................................................45
Section 5.8 Certain Services and Benefits Provided by Affiliates.........................45
Section 5.9 Pendings.....................................................................45
Section 5.10 Mortgage LLC.................................................................46
Section 5.11 Lease Matters................................................................46
Section 5.12 Litigation...................................................................47
Section 5.13 2004 Capital Plan............................................................48
ARTICLE VI CERTAIN TAX MATTERS.................................................................48
Section 6.1 Preparation and Filing of Tax Returns; Payment of Taxes......................48
Section 6.2 Section 338(h)(10) Election..................................................49
Section 6.3 Tax Indemnification..........................................................50
Section 6.4 Tax Refunds..................................................................52
Section 6.5 Tax Indemnification Procedures...............................................53
Section 6.6 Transfer and Similar Taxes...................................................55
Section 6.7 Termination of Tax Indemnification Agreements................................55
Section 6.8 Conflicts; Survival..........................................................55
Section 6.9 Tax Treatment................................................................55
Section 6.10 Assistance and Cooperation...................................................55
Section 6.11 Limitations on Actions that Can Increase Pre-Closing Period or
Straddle Period Taxes........................................................56
ARTICLE VII SURVIVAL AND INDEMNIFICATION.......................................................56
Section 7.1 Survival of Representations and Warranties...................................56
Section 7.2 Indemnification by the Seller................................................57
Section 7.3 Indemnification by the Purchaser.............................................58
Section 7.4 Limitations on Indemnification...............................................59
Section 7.5 Notice and Resolution of Claim...............................................61
Section 7.7 Exclusive Remedy.............................................................63
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ARTICLE VIII GUARANTEE.........................................................................63
Section 8.1 Guarantee....................................................................63
Section 8.2 Waiver of Notices, Etc.......................................................64
Section 8.3 Reinstatement................................................................65
Section 8.4 Waiver of Subrogation; Subordination.........................................65
Section 8.5 Successors and Assigns.......................................................65
ARTICLE IX MISCELLANEOUS.......................................................................65
Section 9.1 Notices......................................................................65
Section 9.2 Amendment; Waiver............................................................67
Section 9.3 Assignment...................................................................67
Section 9.4 Entire Agreement.............................................................67
Section 9.5 Parties in Interest..........................................................67
Section 9.6 Expenses.....................................................................67
Section 9.7 Governing Law; Jurisdiction; Service of Process..............................68
Section 9.8 Limitations of Remedies......................................................68
Section 9.9 No Implied Warranties........................................................68
Section 9.10 Specific Performance.........................................................69
Section 9.11 Counterparts.................................................................69
Section 9.12 Severability.................................................................69
Section 9.13 Headings.....................................................................69
Exhibits
Exhibit A - License Agreement
Exhibit B - Form of Transition Services Agreement
Exhibit C - FIRPTA Certificate
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STOCK PURCHASE AGREEMENT, dated as of February 17, 2004 (this
"Agreement"), among NRT Incorporated, a Delaware corporation (the "Purchaser"),
Cendant Corporation, a Delaware corporation (the "Purchaser Guarantor"), and
Sotheby's Holdings, Inc., a Michigan corporation ("Seller").
W I T N E S S E T H :
WHEREAS, on the terms and conditions set forth herein, Seller desires
to sell, convey, transfer, assign and deliver to the Purchaser, and the
Purchaser desires to purchase from Seller, all of the issued and outstanding
shares of capital stock (the "Shares") of Sotheby's International Realty, Inc.,
a Michigan corporation and a wholly-owned subsidiary of Seller (the "Company");
WHEREAS, in connection with the transactions contemplated herein the
Seller is willing to make certain representations and warranties and to
indemnify the Purchaser and its Affiliates upon the terms and conditions set
forth herein;
WHEREAS, in connection with the transactions contemplated herein, the
Purchaser is willing to make certain representations and warranties to the
Seller and to indemnify the Seller and its Affiliates upon the terms and
conditions set forth herein;
WHEREAS, in connection with the transactions contemplated herein, the
Purchaser Guarantor is willing to make certain representations and warranties to
the Seller and to provide a guaranty to the Seller and its Affiliates upon the
terms and conditions set forth herein; and
WHEREAS, as a condition to, and in connection with, the execution and
delivery of this Agreement, the parties and certain of their Affiliates are
entering into the Related Agreements (as defined below).
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Definitions. Capitalized terms used in this Agreement shall
have the meanings set forth in this Agreement. In addition, as used in this
Agreement, the following terms shall have the following meanings:
"Accounting Referee" shall have the meaning given in Section 2.4.
"Affiliate" shall mean, as to any Person, (i) any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such Person or
(ii) any corporation or organization of which such Person is a general partner.
The term "control" (including, with correlative meanings, the terms "controlled
by" and "under common control with"), as applied to any Person, means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
voting securities or other ownership interest, by contract or otherwise.
Notwithstanding the foregoing, for purposes of this definition, (i) the
Affiliates of the Seller shall be its Subsidiaries and (ii) the Affiliates of
the Company prior to the Closing shall be the Seller and its Subsidiaries.
"Agreement" shall have the meaning given in the introduction to this
Agreement.
"Balance Sheet" shall mean the balance sheet of the Business as of the
Balance Sheet Date.
"Balance Sheet Date" shall mean December 31, 2003.
"Broker Affiliate" shall mean a Person (other than Seller and its
Subsidiaries) that is a member of the real estate brokerage services affiliation
network of the Business or otherwise has rights to operate as a licensee of the
Company conducting real estate brokerage business or as a franchisee of the
Business.
"Broker Affiliate Agreement" shall mean any agreement between the
Company or any of its Affiliates, on the one hand, and one or more Broker
Affiliates, on the other hand.
"Business" shall mean the real estate brokerage business as currently
conducted by Seller and its Affiliates (other than Mortgage LLC), other than in
connection with the business of Mortgage LLC, in the Territory and the
businesses ancillary or related thereto, including relocation, referral, title
search, title insurance, appraisal, closing and escrow services, mortgage
origination, mortgage brokerage and mortgage banking, homeownership tools and
services, personal lines insurance, home warranty, real estate marketing,
property management, concierge services, other settlement services and products,
and services ancillary or related to any of the foregoing, in any such case
solely to the extent conducted in the Territory, whether through brokerage
offices owned or operated by Seller or one of its Affiliates or pursuant to one
or more Broker Affiliate Agreements, but excluding in each case the Excluded
Assets.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banks in New York City are authorized or obligated by law or
executive order to close.
"Capital Plan" shall mean the 2004 Capital Plan of the Company
provided to the Purchaser on or prior to the date hereof.
"Cleanup" shall mean all actions required under Environmental Laws to:
(i) clean up, remove, treat or remediate Hazardous Materials in the indoor or
outdoor environment; (ii) prevent the Release of Hazardous Materials that could
result in a liability to the Company or a violation of Environmental Laws by the
Company; or (iii) respond to any government requests
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for information or documents in any way relating to clean-up, removal, treatment
or remediation or potential clean-up, removal, treatment or remediation of
Hazardous Materials in the indoor or outdoor environment.
"Client Trust Funds" shall mean all binder deposit accounts and other
client trust funds relating to Pendings.
"Closing" shall mean the consummation of the transactions contemplated
by this Agreement.
"Closing Date" shall mean the date of the Closing.
"Closing Date Balance Sheet" shall have the meaning given in Section
2.4.
"Closing Date Indebtedness" shall have the meaning given in Section
2.4.
"Closing Date Purchase Price" shall have the meaning given in Section
2.2.
"Closing Date Share Purchase Price" shall have the meaning given in
Section 2.2.
"Closing Date Working Capital" shall have the meaning given in Section
2.4.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning given in the recitals.
"Company Plans" shall have the meaning given in Section 3.13.
"Computer Programs" shall mean (i) any and all computer software
programs, including all source and object code, (ii) databases and compilations,
including any and all data and collections of data, whether machine readable or
otherwise, and (iii) all descriptions, flow-charts and other work product used
to design, plan, organize and develop any of the foregoing, and any and all
documentation, including user manuals and training materials, relating to any of
the foregoing, provided that Computer Programs shall not include any mass
marketed or off-the-shelf (i) computer software programs, (ii) "shrink wrap"
licenses or (iii) third party databases and compilations.
"Continuation Period" shall have the meaning given in Section 5.5.
"Current Assets" shall mean, without duplication, the sum of the
Company's: (i) unrestricted cash and cash equivalents, (ii) trade and other
accounts receivable, (iii) commissions receivable on closed (settled)
transactions (it being understoond that Current
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Assets shall not include any amounts payable to Seller with respect to Pendings
in accordance with Section 5.9), (iv) notes receivable (to the extent a current
asset), (v) prepaid expenses (to the extent a current asset), and (vi) other
current assets (but excluding any restricted cash); in each case as of the close
of business on the Closing Date, accounted for in accordance with GAAP on a
basis consistent with prior periods.
"Current Liabilities" shall mean, without duplication, the sum of the
Company's: (i) trade accounts payable, (ii) accrued and unpaid salaries, bonuses
and vacation pay, (iii) commissions payable on closed (settled) transactions,
(iv) obligations under the current portion of all capitalized leases, and (v)
other current liabilities, in each case as of the close of business on the
Closing Date, accounted for in accordance with GAAP on a basis consistent with
prior periods; provided that Current Liabilities shall be adjusted to the extent
necessary to exclude: (A) any reserves reflected on the Closing Date Balance
Sheet for any litigation, legal action, arbitration, proceeding, demand, claim
or known investigation for which Seller has the obligation to indemnify the
Purchaser Indemnified Parties pursuant to Section 7.2(iii), (iv) or (v), (B) any
obligations relating to cash advances owed by the Company to the Seller or any
of its Affiliates to the extent that such cash advances shall have been deemed
terminated in full as of the Closing (it being agreed that all such cash
advances to the extent owing immediately prior to the Closing shall be deemed
terminated in full as of the Closing without any such further obligations
relating thereto) and (C) any obligations to be satisfied with restricted cash
or cash equivalents of the Company (it being understood that such obligations
shall only be excluded to the extent of such applicable restricted cash on a
dollar-for-dollar basis). Any liability that would be classified as a Current
Liability for purposes of this definition but which is also classified as
"Indebtedness" under the definition thereof in this Section 1.1 shall be treated
as a Current Liability and shall not be treated as Indebtedness for purposes of
the calculations in this Agreement.
"Damages" shall have the meaning given in Section 7.2.
"Disclosure Schedules" shall mean the disclosure schedules attached to
this Agreement.
"dollars" shall have the meaning given in Section 1.2.
"Election" shall have the meaning given in Section 6.2.
"Election Period" shall have the meaning given in Section 7.5.
"Employees" shall have the meaning given in Section 5.5.
"Environmental Claim" shall mean any written claim, action, cause of
action, investigation or written notice by any Person alleging potential
liability (including potential liability for investigatory costs, Cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from
either (a) the presence, or Release, of any Hazardous Materials at any location
owned,
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leased or operated by the Company, or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
"Environmental Laws" shall mean all Laws relating to pollution,
protection of human health as it relates to Hazardous Materials or the
environment, including Laws relating to Releases or threatened Releases of
Hazardous Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, and all Laws with regard to record keeping, notification,
disclosure and reporting requirements respecting Hazardous Materials.
"Environmental Permits" shall mean all permits, approvals, licenses,
certificates, exemptions and any other authorizations under any Environmental
Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall have the meaning given in Section 3.13.
"Estimated Indebtedness" shall have the meaning given in Section 2.2.
"Estimated Working Capital" shall have the meaning given in Section
2.2.
"Excluded Assets" shall mean (i) the Excluded Intellectual Property
and (ii) the Support Assets.
"Excluded Business" shall mean any business conducted by Seller or its
Affiliates (including for the period prior to Closing, the Company) other than
the Business.
"Excluded Companies" shall mean Sotheby's International Realty of
Colorado, Inc., a Michigan corporation, and Sotheby's France.
"Excluded Intellectual Property" shall mean the intellectual property
licensed under the License Agreement, all registrations and applications
therefor, all goodwill related thereto and all other rights of Seller and its
Affiliates related thereto.
"Financial Statements" shall have the meaning given in Section 3.4.
"FIRPTA Certificate" shall have the meaning given in Section 2.3.
"GAAP" shall mean United States generally accepted accounting
principles and practices as currently in effect. For avoidance of doubt, the
parties acknowledge that GAAP requires real estate brokerage transactions to be
accounted for on a closed (settled) basis.
"Governmental Authority" shall mean any national, federal, state,
local or foreign judicial, legislative, executive, regulatory or administrative
authority, self-regulatory organization or arbitrator having legally binding
authority.
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"Guarantee" shall have the meaning given in Section 8.1.
"Hazardous Materials" shall mean all pollutants, contaminants, toxic
or other hazardous substances, wastes, petroleum and petroleum products,
asbestos or asbestos-containing materials or products, polychlorinated
biphenyls, radon or lead or lead-based paints or materials.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"Improvements" shall mean all improvements and fixtures located on or
attached to any Real Property (but in any event excluding any personal
property).
"Indebtedness" of any Person at any date shall include, without
duplication, (a) all indebtedness (including interest payments or prepayments
required prior to satisfaction) of such Person for borrowed money or for
deferred purchase price of property or services (other than current liabilities
for trade payables incurred and payable in the ordinary course of business
consistent with past practice), including earn-out or similar contingent
purchase amounts, other than any earn-out or similar contingent purchase amounts
payable pursuant to the Xxxxxxx Hole Agreement (but, for the avoidance of doubt,
the amounts owed in respect of obligations under the Pines-Aspen Sublease are
not considered to be earn-out or similar contingent purchase amounts and are
included in Indebtedness), (b) any other indebtedness of such Person which is
evidenced by a note, mortgage, bond, debenture or similar instrument, (c) all
obligations of such Person under capitalized leases (other than the current
portion thereof to the extent reflected in Current Liabilities), (d) all
obligations of such Person in respect of acceptances issued or created for the
account of such Person, (e) all obligations of such Person to make payments
pursuant to sale-leaseback transactions, (f) all loans from officers of such
Person (excluding advances made for reimbursable expenses of such officers), (g)
all inter-company balances owed by such Person to any of its Affiliates, (h) all
amounts payable under severance, change of control bonus and similar
arrangements upon or as a result of the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby (but not as a result
of any termination (including constructive termination) or other action taken
thereafter to the extent that the amount payable upon such termination or other
action taken thereafter is not, as a result of the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby,
greater than the amount payable if termination were to occur in the absence of
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby), (i) all Indebtedness of others of the types
referred to in clauses (a) through (h) above which is guaranteed by such Person,
and (j) all liabilities secured by any Lien other than any Permitted Lien,
provided, however, that Indebtedness shall not include any liabilities related
to Taxes and accounts payable incurred in the ordinary course of business and
reflected in the Closing Date Working Capital.
"Indemnified Benefits Liabilities" shall have the meaning given in
Section 5.3.
"Indemnified Party" shall have the meaning given in Section 7.5.
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"Indemnifying Party" shall have the meaning given in Section 7.5.
"Indemnity Payments" shall have the meaning given in Section 7.6.
"IRS" shall mean the Internal Revenue Service of the United States.
"Xxxxxxx Hole Agreement" shall mean the Asset Purchase Agreement,
dated as of October 14, 2003, among the Company, Real Estate Services, Ltd., and
certain other parties listed therein.
"Laws" shall mean any federal, state, foreign or local law, common
law, statute, ordinance, rule, regulation, order, judgment, administrative
order, decree, administrative or judicial decision and any other executive,
legislative, regulatory or administrative proclamation in each case having
binding legal effect.
"Leases" shall have the meaning given in Section 3.6.
"Lease Security" shall have the meaning given in Section 5.11.
"License Agreement" shall mean the Trademark License Agreement among
Seller, Licensor, Licensee and Parent Guarantor executed concurrently with the
execution of this Agreement, a copy of which is attached to this Agreement as
Exhibit A.
"Licensee" shall mean Monticello Licensee Corporation.
"Licensor" shall mean SPTC, Inc., a Nevada corporation and an indirect
wholly owned subsidiary of Seller or any other Person designated as "Licensor"
pursuant to the License Agreement.
"Liens" shall mean any lien, pledge, mortgage, security interest,
option, right of first refusal or any similar encumbrance, or, with respect to
the Shares any restriction on transfer.
"Listings" shall have the meaning given in Section 3.16.
"Litigation" shall mean any litigation, legal action, arbitration,
proceeding, demand, claim or known investigation, brought by or against the
Company or any of its Affiliates (with respect to the Business) (or any of their
respective employees or sales associates if and to the extent that such Persons
are entitled to indemnity, reimbursement or contribution therefor from the
Company, Seller or their Affiliates or covered therefor under the insurance
policies applicable to the Company) by or before any Governmental Authority in
each case with respect to any claim if and solely to the extent arising out of
or resulting from events, circumstances, actions or failures to act occurring or
existing prior to the Closing.
"Material Contracts" shall have the meaning given in Section 3.10.
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"Mortgage LLC" shall mean Sotheby's Xxxxxx Mortgage Services LLC, a
Delaware limited liability company.
"Mortgage LLC Partner" shall mean Xxxxxx Brothers Bank, FSB.
"Mortgage LLC Contracts" shall mean the agreements listed on Schedule
1.1(a) as currently in effect.
"Mortgage LLC Operating Agreement" shall mean the Limited Liability
Company Operating Agreement of Sotheby's Xxxxxx Mortgage Services, LLC, dated
May 17, 2000, by and between the Company and Mortgage LLC Partner, as amended.
"Obligations" shall have the meaning given in Section 8.1.
"Organizational Documents" shall mean, as to any Person, the
certificate of incorporation and bylaws or memorandum and articles of
association or other organizational documents of such Person.
"Option" shall have the meaning given to in the License Agreement.
"Pendings" shall have the meaning given in Section 5.9.
"Permits" shall mean as to any Person, all licenses, permits,
franchises, orders, approvals, concessions, registrations, authorizations and
qualifications under any federal, state, local or foreign laws with any and all
Governmental Authorities or with any and all industry or other nongovernmental
self-regulatory organizations that are issued to such Person, including
Environmental Permits.
"Permitted Liens" shall mean any (i) Liens disclosed on Schedule
1.1(b), (ii) Liens for Taxes that are not yet due and payable, (iii) Liens for
Taxes that are due and payable but that are being contested in good faith
through appropriate proceedings and with respect to which adequate reserves have
been established on the Balance Sheet in accordance with GAAP, (iv) requirements
and restrictions of zoning, building and other laws, rules and regulations, (v)
licenses, easements, encumbrances, encroachments and other imperfections of
title and Liens which do not impair in any material respect the continued
operation of the Business in the manner currently conducted by the Seller, (vi)
in the case of leased property, all Liens and other matters, whether or not of
record, affecting the title of the lessor (and any underlying lessor) of the
leased property, (vii) statutory landlord's liens and Liens granted to landlords
under any Leases, (viii) Liens arising under conditional sales contracts and
equipment leases with third parties entered into in the ordinary course of
business, and (ix) statutory carriers', warehousemen's, materialmen's and
mechanics' Liens that, in the aggregate, could not reasonably be expected to be
material.
"Person" shall mean an individual, a corporation, a partnership,
limited liability company, an association, a trust or other entity or
organization.
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"Pines-Aspen Sublease" shall mean the Pines-Aspen Sublease, Sublicense
and Option Agreement, dated as of October 28, 2003, between Real Estate
Services, Inc., RnR LLC and the Company.
"Plans" shall have the meaning given in Section 3.13.
"Post-Closing Periods" shall have the meaning given in Section 6.3.
"Pre-Closing Periods" shall have the meaning given in Section 6.3.
"Pre-Closing Period Tax Returns" shall have the meaning given in
Section 6.1.
"Purchaser" shall have the meaning given in the introduction to this
Agreement.
"Purchaser Business" shall mean the real estate brokerage and the real
estate brokerage franchise businesses of the Purchaser and its Affiliates.
"Purchaser Deductible Amount" shall have the meaning given in Section
7.4.
"Purchaser Guarantor" shall have the meaning given in the introduction
to this Agreement.
"Purchase Price" shall have the meaning given in Section 2.2.
"Purchaser Indemnified Parties" shall have the meaning given in
Section 7.2.
"Purchaser Material Adverse Effect" shall mean a material adverse
effect on (i) the sales, assets, properties, operations, business, results of
operations or financial condition of the Purchaser Business taken as a whole or
(ii) the ability of the Purchaser to consummate the transactions contemplated by
this Agreement or to perform its obligations under this Agreement.
"Purchaser Plans" shall have the meaning given in Section 5.3.
"Real Property" shall have the meaning given in Section 3.6.
"Recoveries" shall mean as to any Person, any indemnity, contribution
or other similar payments (but in any case excluding insurance payments)
actually recovered by such Person from a third party that is not an Affiliate of
such Person, with respect to Damages and with respect to amounts payable
pursuant to Section 6.3.
"Related Agreements" shall mean the License Agreement and the
Transition Services Agreement.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration in
each case into the indoor or outdoor environment (including ambient air, surface
water, groundwater and surface or
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subsurface strata), or onto, into or out of any property, including the movement
of Hazardous Materials through or in the air, soil, surface water, groundwater
or property.
"Reorganization" shall have the meaning given in Section 3.22.
"Sales Associates" shall have the meaning given in Section 3.17.
"Seller" shall have the meaning given in the introduction to this
Agreement.
"Seller Cap Amount" shall have the meaning given in Section 7.4.
"Seller Deductible Amount" shall have the meaning given in Section
7.4.
"Seller Indemnified Parties" shall have the meaning given in Section
7.3.
"Seller Material Adverse Effect" shall mean a material adverse effect
on (i) the sales, assets, properties, operations, business, results of
operations or financial condition of the Company taken as a whole or (ii) the
ability of the Seller to consummate the transactions contemplated by this
Agreement or perform its obligations under this Agreement; provided, however,
that, only with respect to the Seller's representations and warranties included
in Section 3.5(a), (A) changes resulting from the transactions contemplated by
this Agreement and the Related Agreements or the announcement or making public
thereof (whether by the parties hereto or otherwise), (B) changes that affect
the real estate brokerage industry generally and (C) changes in general economic
conditions, shall not be considered in determining whether there has been a
Seller Material Adverse Effect; provided further that any such changes described
in clauses (B) or (C) do not have a disproportionate impact on the Company.
"Share Purchase Price" shall have the meaning given in Section 2.2.
"Shares" shall have the meaning given in the recitals.
"Sotheby's France" shall mean Sotheby's International Realty, SA, a
French corporation.
"Straddle Periods" shall have the meaning given in Section 6.3.
"Straddle Period Tax Returns" shall have the meaning given in Section
6.1.
"Sublease" means each lease, sublease or other right of occupancy
affecting or relating to a property in which the Company is the landlord,
sublandlord or licensor, either pursuant to the terms of a lease agreement,
sublease or other occupancy agreement or as successor to any prior landlord,
sublandlord or licensor.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited liability company, partnership or other organization, whether
incorporated or unincorporated, of
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which such Person or any other subsidiary of such Person beneficially owns a
majority of the total combined voting or equity interests.
"Support Assets" shall mean all assets and rights of any nature of the
Seller and its Affiliates (other than the Company), used or held for use in
connection with the provision of (i) Support Services to the Company (including
the right to receive such services) and (ii) the Services (as defined in the
Transition Services Agreement) to the Purchaser and its Affiliates following the
Closing.
"Support Services" shall mean administrative and corporate services
and benefits of a type generally provided internally by Seller and its
Affiliates (other than the Company) generally to all of their businesses,
including operations and information technology support; computer and
information processing services; finance, accounting and payroll and back office
services; financial systems; treasury services (including banking, insurance,
administration, taxation and internal audit); procurement services; risk
management; corporate communications; general administrative services; executive
and management services; legal services; human resources services; publication
services; and travel services.
"Tax Claim" shall have the meaning given in Section 6.5.
"Tax Indemnification Agreement" shall have the meaning given in
Section 3.12.
"Tax Indemnity Payments" shall have the meaning given in Section 6.3.
"Tax Law" shall mean any Law relating to Taxes.
"Tax Return" shall mean any return, report, declaration, information
return or other document (including any related or supporting information)
required to be filed with any Governmental Authority with respect to Taxes,
including any amendments thereof.
"Taxes" shall mean (i) any and all taxes and other governmental
charges of the same or of a similar nature (including, but not limited to, taxes
on or with respect to net or gross income, franchise, profits, gross receipts,
capital, sales, use, ad valorem, value added, transfer, real property transfer,
transfer gains, inventory, capital stock, license, payroll, employment, social
security, unemployment, severance, occupation, real or personal property,
estimated taxes, rent, excise, occupancy, recordation, bulk transfer,
intangibles, alternative minimum, doing business, withholding and stamp),
together with any interest thereon, penalties (or other governmental charges of
the same or of a similar nature), additions to tax or additional amounts with
respect thereto, imposed by the United States (federal, state or local) or other
applicable jurisdiction; and (ii) any liability for the payment of any amounts
described in clause (i) as a result of the Company having been a member of an
affiliated, consolidated, combined, unitary or similar group or as a result of
transferor or successor liability.
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"Territory" shall mean each of the following countries: (i) Canada,
(ii) Barbados, (iii) Israel, (iv) Mexico, (v) Nassau, the Bahamas, (vi) St.
Barthelemy, (vii) St. Xxxxxx, (viii) Turks & Caicos and (ix) the United States
of America (including the U.S. Virgin Islands).
"Transfer Taxes" shall have the meaning given in Section 6.6.
"Transferred Intellectual Property" shall mean all of the following
used solely in the Business as currently conducted: patents, patent
applications, rights in inventions, invention disclosures, trade secrets,
know-how (including customer lists, customer information and personal data),
trademarks, service marks, logos, designs, trade dress, slogans, trade names,
domain names, and copyrights (including all registrations and pending
applications, or rights to apply for registration, of any of the foregoing),
Computer Programs, and any licenses or user rights related to the foregoing, and
all other intellectual property rights of a similar or corresponding character;
provided, however, that Transferred Intellectual Property excludes the Excluded
Intellectual Property.
"Transition Services Agreement" shall mean the Transition Services
Agreement between the Seller and the Purchaser, in the form attached hereto as
Exhibit B.
"Treasury Regulations" shall mean the United States Tax regulations,
including Temporary regulations, promulgated under the Code, as the same may be
amended hereafter from time to time (including corresponding provisions of
succeeding United States Tax regulations).
"Working Capital" shall mean (A) Current Assets excluding any (i)
prepaid, deferred or other items in each case to the extent related to Taxes and
(ii) intercompany balances between the Company, on the one hand, and the Seller
or any of its Affiliates, on the other hand, minus (B) Current Liabilities
excluding any (i) accrued, deferred or other items, in each case to the extent
related to Taxes, (ii) intercompany balances (including accrued interest)
between the Company, on the one hand, and the Seller or any of its Affiliates,
on the other hand and (iii) any liabilities or accruals for bonuses to be paid
to Employees for the year 2004.
Section 1.2 Other Interpretive Provisions.
(a) The words "hereof," "herein," "hereto," "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(b) Terms defined in the singular shall have a comparable meaning when
used in the plural, and vice versa except for any reference to the Company which
shall only be interpreted in accordance with its respective definitions in
Section 1.1.
(c) The terms "dollars" and "$" shall mean United States dollars.
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(d) The word "including" shall mean including without limitation and
the words "include" and "includes" shall have corresponding meanings. The words
"or" and "any" are not exclusive.
(e) The term "agreement" shall mean any agreement whether written or
oral.
(f) A reference to a law includes any amendment thereto, and any
modification or re-enactment thereof, any legislative provision substituted
therefor and any rules, regulations and statutory instruments issued thereunder
or pursuant thereto.
(g) When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement unless otherwise indicated.
(h) The word "knowledge" shall mean (i) in the case of the Seller,
what Xxxxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxxxx, Xxxxxxxxx X. Xxxxxxxxx, Xxxxxx X.
Xxxxxx, Xxxxxxxx X. Xxxxxx, Xxxxx Xxxxxxxx, Xxxxxxx Xxxx and Xxxx Xxxxx actually
knew or, in the course of performing his or her duties in a reasonable and
prudent manner, should have known, and (ii) in the case of the Purchaser, what
any executive officer of the Purchaser actually knew or, in the course of
performing his duties in a reasonable and prudent manner, should have known;
provided that in the case of clause (i) or (ii) none of the individuals listed
above shall be required to make any special review, inquiry or investigation in
connection with the execution, delivery and performance of this Agreement.
(i) In the event that the final day of any time period provided herein
based on calendar days does not fall on a Business Day, such time period shall
be extended such that the final day of such period shall fall on the next
Business Day thereafter.
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of Shares. Upon the terms set forth in this
Agreement, at the Closing, Seller shall sell, convey, transfer, assign and
deliver to the Purchaser, and the Purchaser shall purchase from Seller, all of
the Shares, free and clear of all Liens.
Section 2.2 Purchase Price.
(a) In consideration of the sale and transfer of the Shares and the
execution and delivery of the Related Agreements upon the terms of this
Agreement, at the Closing, the Purchaser shall pay to the Seller $98,862,509.80
(the "Closing Date Purchase Price"), of which amount (i) $53,712,509.80 is the
purchase price for the Shares (the "Closing Date Share Purchase Price"), subject
to adjustment pursuant to Section 2.4, (as so adjusted, the "Share Purchase
Price"), (ii) $45,000,000 is in consideration of the licenses and rights granted
to Licensee pursuant to Article II of the License Agreement (without giving
effect to the Option (as defined in the License Agreement)) (the "License
Purchase Price") and (iii) $150,000 is in
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consideration of the grant to Licensee of the Option (together with the Share
Purchase Price and the License Purchase Price, the "Purchase Price").
(b) Seller has delivered to the Purchaser a good faith estimated
calculation of the Working Capital as of the Closing Date (the "Estimated
Working Capital"), which has been certified by the Chief Financial Officer of
Seller in his official capacity and the Chief Financial Officer of the Company
in his official capacity. The Estimated Working Capital is equal to zero.
(c) Seller has delivered to the Purchaser a good faith estimated
calculation of any aggregate Indebtedness of the Company as of the Closing Date
(the "Estimated Indebtedness"), which has been certified by the Chief Financial
Officer of the Seller in his official capacity and the Chief Financial Officer
of the Company in his official capacity. The Closing Date Share Purchase Price
reflects a decrease of $1,807,490.20, the amount of such Estimated Indebtedness.
Section 2.3 Closing; Deliveries and Payment.
(a) Upon the terms set forth in this Agreement, the Closing shall take
place at the offices of Xxxxxxxxx & Xxxxxxx, 1330 Avenue of the Americas, New
York, New York, concurrently with the execution and delivery of this Agreement
and shall be effective as of the close of business on the Closing Date.
(b) The Seller is delivering, or causing to be delivered, to the
Purchaser at the Closing:
(i) certificates representing all of the Shares duly endorsed or
accompanied by stock powers duly executed in blank and otherwise in a form
satisfactory to the Purchaser for transfer on the books of the Company (with any
requisite transfer tax stamps attached by the Seller);
(ii) a good standing certificate for the Company issued by the
applicable Secretary of State dated within ten (10) Business Days prior to the
Closing Date;
(iii) the corporate minute books of the Company;
(iv) duly executed resignations of each of the directors of the
Company;
(v) a duly executed certificate ("FIRPTA Certificate") from the
Seller that complies with the requirements of Section 1445 of the Code and the
Treasury Regulations promulgated thereunder in the form of Exhibit C.
Notwithstanding anything to the contrary contained herein, if the Seller fails
to deliver a FIRPTA Certificate and the Purchaser elects to proceed with the
Closing, the Purchaser shall be entitled to withhold the amount required to be
withheld pursuant to Section 1445 of the Code from the Share Purchase Price;
(vi) the License Agreement, duly executed by the Licensor and the
Seller;
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(vii) written evidence of the termination and release of any and
all guarantees by the Company of the Seller's or its Affiliates' obligations
under any Indebtedness of the Seller or its Affiliates and the release of any
related Liens affecting the Company or the Shares;
(viii) written evidence of the delivery of a notice of
termination of the Mortgage LLC Operating Agreement in accordance with its
terms; and
(ix) a duly executed Internal Revenue Service Form 8023 with
respect to the Company.
(c) The Purchaser is delivering, or causing to be delivered, to the
Seller at the Closing:
(i) the Closing Date Purchase Price in immediately available
funds by wire transfer to the account or accounts designated on Schedule 2.2(a);
and
(ii) the License Agreement, duly executed by the Licensee and the
Parent Guarantor.
Section 2.4 Purchase Price Adjustments.
(a) Working Capital and Indebtedness Adjustments.
(i) As soon as reasonably practicable, and in any event, within
one hundred twenty (120) days following the Closing Date, the Purchaser shall
deliver to the Seller a consolidated balance sheet of the Business as of the
close of business on the Closing Date (the "Closing Date Balance Sheet"), which
shall set forth a calculation of the Working Capital of the Company (including
the components thereof in reasonable detail) (the "Closing Date Working
Capital") and any Indebtedness of the Company (including the components thereof
in reasonable detail), as of the close of business on the Closing Date (the
"Closing Date Indebtedness"). If the Purchaser does not deliver the Closing Date
Balance Sheet prior to the expiration of 120 days after the Closing Date and the
Seller does not, within 120 days following the Closing Date, provide the
Purchaser with written notice that it believes that the Estimated Working
Capital or the Estimated Indebtedness did not reflect the Closing Date Working
Capital or the Closing Date Indebtedness, respectively, then the Estimated
Working Capital and the Estimated Indebtedness, as applicable, shall constitute
the Closing Date Working Capital and/or the Closing Date Indebtedness, as
applicable, and shall be final and binding on the parties. The Closing Date
Balance Sheet, the Closing Date Working Capital and the Closing Date
Indebtedness shall be prepared in good faith in accordance with GAAP on a basis
consistent with prior periods based on the books and records of the Company and
shall be certified by the Chief Financial Officer of the Purchaser in his
official capacity.
(ii) Until the Closing Date Working Capital and Closing Date
Indebtedness have become final in accordance with Section 2.4(a), the Purchaser
shall
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(i) provide the Seller and its authorized representatives with access to its and
the Company's working papers, (ii) use commercially reasonable efforts to have
their accountants to provide access to their working papers (subject to the
expectation by the Seller of a customary indemnification agreement with such
accountants), and (iii) provide reasonable access to the books and records,
assets and liabilities and senior financial staff of the Company (and otherwise
will cooperate with the Seller and its authorized representatives), to the
extent relevant to the determination of the Closing Date Working Capital and
Closing Date Indebtedness.
(iii) If the Seller in good faith disagrees with the Purchaser's
calculation of the Closing Date Working Capital or Closing Date Indebtedness as
set forth on the Closing Date Balance Sheet, the Seller may within sixty (60)
days after receipt thereof deliver a written notice to the Purchaser disagreeing
with such calculation. Any such notice of disagreement shall specify in
reasonable detail those items or amounts comprising the Closing Date Working
Capital or the Closing Date Indebtedness as to which the Seller disagrees and
the basis of such disagreement to the extent known by the Seller. If no such
notice of disagreement is timely delivered, the Closing Date Working Capital and
the Closing Date Indebtedness shall be final and binding on the parties.
(iv) If (A) a notice of disagreement shall be timely delivered
pursuant to Section 2.4(a)(iii), or (B) the Purchaser does not timely deliver
the Closing Date Balance Sheet, and pursuant to Section 2.4(a)(i), the Seller
timely delivers written notice that they believe the Estimated Working Capital
or the Estimated Indebtedness should be changed, the Seller and the Purchaser
shall, during the thirty (30) days (or such longer period as they may mutually
agree) following such delivery, use their commercially reasonable efforts to
reach agreement on the disputed items or amounts. If such an agreement is
reached, the Closing Date Working Capital or the Closing Date Indebtedness as so
agreed shall be final and binding on the parties. If, at the end of such period,
the parties are unable to reach such an agreement, the New York City office of a
nationally recognized accounting firm not then acting as the principal outside
accountant for the Company, the Seller or the Purchaser and as mutually agreed
by the Purchaser and the Seller (the "Accounting Referee"), shall be retained by
the parties to review promptly this Agreement and the disputed items or amounts.
If the parties are unable to agree mutually upon an Accounting Referee then each
party shall select a nationally recognized accounting firm. Such two (2)
nationally recognized accounting firms shall then in turn mutually select a
separate nationally recognized accounting firm not then acting as the principal
outside accountant for the Company, the Seller or the Purchaser who shall then
be designated as the "Accounting Referee." In connection therewith, the
Accounting Referee shall consider only those items or amounts in the Closing
Date Working Capital or the Closing Date Indebtedness as to which the Seller has
disagreed. The parties shall use commercially reasonable efforts to cause the
Accounting Referee to deliver to the Seller and the Purchaser, as promptly as
practicable, but in any event within thirty (30) days of being referred the
matter, a report setting forth its adjustments, if any, to the Closing Date
Balance Sheet or the Closing Date Indebtedness (including any adjustments to
non-disputed items necessary as a result of changes to disputed items) and the
calculations supporting such adjustments. Such report shall be final and binding
upon the parties and the Closing Date Working Capital or the Closing Date
Indebtedness, as adjusted pursuant to such
16
report, shall be final and binding on the parties. The cost of the Accounting
Referee's review and report shall be borne equally by the Purchaser and the
Seller.
(v) If the Estimated Working Capital is negative and exceeds the
final Closing Date Working Capital, then the Seller shall pay or cause to be
paid to the Purchaser, as an adjustment to the Share Purchase Price, with
interest as provided in Section 2.4(b), the amount of such excess. If the
Estimated Working Capital is positive and exceeds the final Closing Date Working
Capital, then the Purchaser shall pay or cause to be paid to the Seller, as an
adjustment to the Share Purchase Price, with interest as provided in Section
2.4(b), the amount of such excess. If the final Closing Date Working Capital
exceeds the Estimated Working Capital, then the Purchaser shall pay to the
Seller, as an adjustment to the Share Purchase Price, with interest as provided
in Section 2.4(b), an amount equal to the amount of such excess.
(vi) If the Estimated Indebtedness reflected on the Closing Date
Balance Sheet exceeds the final Closing Date Indebtedness, then the Purchaser
shall pay to the Seller, as an adjustment to the Share Purchase Price, with
interest as provided in Section 2.4(b), the amount of such excess. If the final
Closing Date Indebtedness reflected on the Closing Date Balance Sheet exceeds
the Estimated Indebtedness, then the Seller shall pay to the Purchaser, as an
adjustment to the Share Purchase Price, with interest as provided in Section
2.4(b), the amount of such excess.
(vii) If a party to this Agreement is both required to make a
payment and entitled to receive a payment pursuant to Sections 2.4(a)(v) and
2.4(a)(vi), then such party shall have the right, upon written notice to the
other party, to offset its obligation to make such payment by the amount of the
payment that it is entitled to receive from the party pursuant to such Sections.
(b) Payments and Interest. Any payments pursuant to this Section 2.4
shall be made by wire transfer of immediately available funds to accounts at
United States banks designated in writing by the Purchaser or Seller, as the
case may be. Any amount due pursuant to this Section 2.4 shall bear interest for
the period from and including the Closing Date to but excluding the payment date
at the rate of three percent (3%) per annum.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchaser as follows:
Section 3.1 Authority and Validity. The Seller is a company validly
existing and in good standing under the laws of the state of its incorporation.
The Seller has the corporate power and authority to execute and deliver this
Agreement and the Transition Services Agreement and to consummate the
transactions contemplated hereunder and thereunder. The execution, delivery and
performance of this Agreement and the Transition Services Agreement
17
by the Seller and the consummation by the Seller of the transactions
contemplated hereunder and thereunder, have been duly and validly authorized by
the Seller and no other corporate proceedings on the part of the Seller or the
Company are necessary to authorize this Agreement and the Transition Services
Agreement or the consummation of the transactions contemplated hereunder or
thereunder. Each of this Agreement and the Transition Services Agreement have
been duly executed and delivered by the Seller and, assuming due execution and
delivery thereof by the Purchaser, constitutes a valid and binding obligation of
the Seller enforceable against the Seller in accordance with its terms, except
as may be limited by any bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws affecting the enforcement of creditors'
rights generally or by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 3.2 Organization.
(a) Schedule 3.2(a) sets forth the capitalization (authorized and
outstanding capital stock), including the record and beneficial owner thereof,
of the Company. All of the Shares have been duly authorized, were validly issued
and are fully paid and non-assessable and are directly owned legally and
beneficially by the Seller, in each case free and clear of all Liens.
(b) The Company has the requisite corporate power and authority to
own, lease and operate its properties and assets and to carry on the Business as
it is now being conducted and, to the extent legally applicable, is duly
qualified as a foreign corporation to do business and is in good standing in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be so qualified and in good standing, individually or in the
aggregate, could not reasonably be expected to be material.
(c) Complete and correct copies of the Organizational Documents of the
Company, as in effect on the date hereof, have been delivered or made available
to the Purchaser.
(d) Upon giving effect to the Reorganization, the Company will have no
direct or indirect Subsidiaries and the Company does not own, directly or
indirectly, any equity or other ownership interest in any corporation,
partnership, joint venture or other Person. Other than this Agreement, there are
no options, warrants, calls, rights, commitments or agreements of any kind to
which the Company or any of its Affiliates are parties or by which any of them
is bound or to which they are subject, relating to the sale, issuance or voting
of, or the granting of rights to acquire, any shares of the capital stock of any
class or series of, or other equity interest in, the Company or any securities
convertible or exchangeable into or evidencing the right to purchase any shares
of capital stock of any class or series of, or other equity interest in, the
Company or obligating the Company or any of its Affiliates to enter into any
such option, warrant, call, right, commitment or agreement.
(e) The Excluded Companies have not actively conducted, or contributed
in any way to the operation of the Business, or owned or held for use any assets
relating to the Business,
18
except that Sotheby's France is currently a franchisor of a real estate
brokerage business outside of the Territory.
(f) Of Seller and its Affiliates, only the Company is engaged in the
Business, other than Seller and its Affiliates to the extent such Person
provides Support Services, licenses the Excluded Intellectual Property to the
Company or holds any interest in the Excluded Assets.
(g) The Listing Exchange, LLC, a New York limited liability company,
has been dissolved in accordance with applicable Law and the Company does not
have, nor shall it have, any liabilities or obligations with respect to the
Listing Exchange, LLC, its business or the termination thereof.
(h) To the knowledge of Seller, the Company does not maintain nor does
it have in its possession any stock transfer records and no other Person is in
possession of any such stock transfer records of the Company.
Section 3.3 No Conflict; Governmental Consents.
(a) Except as set forth on Schedule 3.3(a), neither the execution,
delivery or performance by the Seller of this Agreement nor the consummation of
the transactions contemplated hereby will (i) violate any provision of any
Organizational Document of the Seller or the Company, (ii) require any consent,
approval or notice under, violate, or result in the violation or breach of any
provisions of, constitute a default (or an event which, with notice or lapse of
time or both, could reasonably be expected to constitute a default) under,
result in the termination of, accelerate the performance required by or result
in a right of termination or acceleration, or result in the loss of a benefit
under any Permit (the loss of which due to the sale of the Shares cannot be
cured by a routine re-filing for such Permit with the applicable Governmental
Authority without any material cost) or Material Contract to which the Company
or the Business is a party or by which any of the Company's assets are bound,
(iii) result in the creation of any Lien, other than any Permitted Lien, upon
any of the properties or assets of the Company or on the Shares, or (iv) violate
any Law applicable to the Seller or the Company, except, in the case of clauses
(ii) through (iv) above, for violations, breaches, defaults, terminations,
accelerations, loss of benefits or creations of Liens that, individually or in
the aggregate, could not reasonably be expected to be material.
(b) No consent, order or authorization of, or registration,
declaration or filing with, any Governmental Authority is required to be
obtained or made (other than any obtained or made prior to the Closing) by the
Seller or the Company in connection with the execution, delivery and performance
of this Agreement or the Transition Services Agreement, or the consummation of
the transactions contemplated hereby or thereby, that has not been obtained or
made, as applicable, except (i) with respect to any Permits the loss of which
due to the sale of the Shares cannot be cured by a routine re-filing for such
Permit with the applicable Governmental Authority without any material cost,
(ii) where the failure to obtain or make any such consent, order, authorization,
registration, declaration or filing, individually or the aggregate, could not
reasonably be expected to be material or (iii) for any consent, order or
authorization of, or
19
registration, declaration or filing with, any Governmental Authority that would
otherwise not be required to be obtained or made but for the specific regulatory
status of the Purchaser or its Affiliates or a material change in the manner in
which the Business is conducted by the Purchaser after the Closing from the
manner in which the Business was conducted by the Seller and its Affiliates
prior to the Closing.
Section 3.4 Financial Statements.
(a) Attached hereto as Schedule 3.4(a) are the unaudited consolidated
balance sheets as of December 31, 2002 and 2003, and the income statement of the
Business as of and for the fiscal years ended December 31, 2002 and 2003
(together with the Balance Sheet, the "Financial Statements"). The Financial
Statements have been prepared in accordance with GAAP (except for the absence of
footnotes) applied on a consistent basis during the periods involved and fairly
present in all material respects the financial position of the Business as of
the dates thereof and the results of operations for the periods then ended,
except to the extent that historical retained earnings relating to the operation
of the business of the Mortgage LLC have not been excluded therefrom.
(b) Except as set forth on Schedule 3.4(b), the Indebtedness of the
Company consists only of the amounts owed pursuant to the Pines-Aspen Sublease.
The Company has cash or cash equivalents on hand at least equal to the amount of
customer escrow funds delivered to the Company by its customers, together with
all interest thereon accrued to the Closing Date. Schedule 3.4(b) sets forth the
names of all financial and other similar institutions at which the Company
maintains accounts, deposits or safe deposit boxes of any nature and the account
numbers thereof, in each case which information is correct and complete in all
material respects.
(c) There are no material liabilities or obligations of the Company of
any nature (absolute, accrued, contingent or otherwise) due or to become due,
that are required in accordance with GAAP applied consistently with the
Financial Statements to be reflected on a consolidated balance sheet of the
Business, other than (i) liabilities to the extent disclosed, reflected or
reserved against on the Balance Sheet, and (ii) liabilities incurred since the
Balance Sheet Date in the ordinary course of business consistent with past
practice, which, individually or in the aggregate could not reasonably be
expected to be material.
(d) The calculation of Estimated Working Capital and the calculation
of Indebtedness, in each case as of the Closing Date, delivered by the Seller to
the Purchaser were prepared in good faith in accordance with GAAP, applied on a
consistent basis, by the Seller based on the books and records of the Company.
Section 3.5 Absence of Certain Changes or Events. Except as set forth on
Schedule 3.5 or as expressly provided in this Agreement (including Sections
3.22, 5.3, 5.4 and 5.5), since the Balance Sheet Date the Company has conducted
the Business in the ordinary course of business and consistent with past
practice and has not:
20
(a) had any development or event which, individually or in the
aggregate, has had or could reasonably be expected to have, a Seller Material
Adverse Effect;
(b) declared, set aside or paid any non-cash dividend or other
distribution (whether in securities or property or any combination thereof) in
respect of any class or series of its capital stock or other interests;
(c) (i) sold, leased, licensed, transferred or disposed of any
material assets or rights, other than in the ordinary course of business
consistent with past practice, (ii) incurred any Lien upon any material assets
other than Permitted Liens, (iii) acquired, leased or licensed any material
assets other than in the ordinary course of business consistent with past
practice;
(d) paid, discharged or satisfied any material liability, obligation
or Lien (other than any Permitted Liens), other than payment, discharge or
satisfaction of (i) Indebtedness or (ii) liabilities, obligations or Liens in
the ordinary course of business consistent with past practice;
(e) changed any of the accounting or material tax accounting
principles, practices or methods, or changed reserve policies or materially
changed reserve practices except as required by concurrent changes in GAAP;
(f) (i) made any material change in the compensation payable or to
become payable to any of its officers, directors, employees, agents, consultants
or sales associates (which is understood in this Agreement not to include the
same of any Broker Affiliate) (other than general changes in compensation of
employees who are not officers or directors in the ordinary course of business
consistent with past practice), (ii) entered into or amended any employment,
severance, consulting (other than in the ordinary course of business),
termination or other agreement or employee benefit plan or made any loans to any
of its officers, directors, employees, agents, consultants or sales associates
(other than advances of expenses in the ordinary course consistent with past
practice) or (iii) made any change in its existing borrowing or lending
arrangements for or on behalf of any of such Persons pursuant to an employee
benefit plan or otherwise;
(g) (i) made any accrual or commitment for future payment of any
pension, retirement allowance, unused vacation days or other employee benefit to
any officer, director, employee, sales associate or Affiliate, except payments
and accruals made in the ordinary course consistent with past practice, (ii)
adopted or paid, granted, issued, accelerated or accrued salary or other
payments or benefits pursuant to any pension, profit-sharing, bonus, extra
compensation, incentive, deferred compensation, stock or share purchase, stock
or share option, stock appreciation right, group insurance, severance pay,
retirement or other employee benefit plan, agreement or arrangement, or any
employment or consulting agreement, or made any payments or grants in relation
to the foregoing other than in the ordinary course consistent with past
practice, or (iii) amended in any material respect any such existing plan,
agreement or arrangement in a manner inconsistent with the foregoing;
21
(h) other than commissions, management sales incentives,
administrative bonuses, other compensation or advances or reimbursement of
expenses in the ordinary course consistent with past practice, made any
payments, loans, advances or other distributions to, or entered into any
transaction, agreement or arrangement with, any of its officers, directors,
employees, agents, consultants or sales associates involving in any individual
case an amount in excess of $10,000;
(i) other than specifically set forth in the Capital Plan, made or
entered into an agreement to make any capital expenditures in excess of $50,000;
(j) settled or compromised any material Tax liability, agreed to any
adjustment of any material Tax attribute, made, changed or revoked any material
election with respect to Taxes, surrendered any right to claim a material refund
of Taxes, consented to any extension or waiver of the statute of limitations
period applicable to any material Taxes, Tax Return or Tax Claim, amended any
material Tax Return, or entered into any closing agreement with respect to
material Taxes;
(k) made any material change in its working capital practices
generally, including materially accelerating any collections of cash or accounts
receivable or materially deferring payments or accruals;
(l) had a judgment entered or settled any Litigation resulting in a
loss, payment or other cost to the Company, after receipt of insurance payments,
in excess of $50,000 individually, or $250,000 in the aggregate;
(m) altered through merger, liquidation, reorganization, restructuring
or in any other material fashion its corporate structure or ownership or amended
its Organizational Documents in any material respect;
(n) entered into or amended in any material respect any agreement
which (i) has any non-competition, geographical restriction or similar covenant
relating to the Business, or (ii) is a Broker Affiliate Agreement, in each case
other than in the ordinary course consistent with past practice; or
(o) agreed to take any of the foregoing actions.
Section 3.6 Assets.
(a) Except as set forth on Schedule 3.6, the Company owns, or
otherwise has a valid leasehold or licensee interest providing sufficient and
legally enforceable (subject to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law))
rights to use, all of the property, assets and rights necessary or material to
its conduct of the Business as currently conducted (other than the Support
Services and the services to be provided under the Transition Services
Agreement) or otherwise used or held for use by it in the Business.
22
Set forth on Schedule 3.6(a) is a list which is true and correct (to the
knowledge of Seller) in all material respects of all material fixed assets of
the Business as of the date hereof. The Company has good title (including a
license or leasehold interest, as applicable) to all properties, assets and
rights reflected on the Balance Sheet or acquired since the Balance Sheet Date,
free and clear of all Liens except Permitted Liens, other than properties,
assets and rights which are not in the aggregate material. Such material assets
reflected on the Balance Sheet or acquired since the Balance Sheet Date are,
considered in the aggregate, in reasonable operating condition and repair
(ordinary wear and tear excepted) in all material respects, and have been
reasonably maintained in all material respects. For the avoidance of doubt, the
Seller is not in any event making any representations or warranties in this
Section 3.6 or elsewhere in this Agreement as to the title or condition of any
of the Excluded Assets.
(b) The Company does not own any real property and the Company has not
acquired or disposed of any ownership interest in any real property since
December 31, 2001. Schedule 3.6(b) identifies (i) each lease, sublease or other
occupancy agreement pursuant to which real property is leased by the Company, or
by Seller or one of its Affiliates on behalf of the Company, including any real
property owned by Seller or its Affiliates and leased to the Company (any such
leased real property, "Real Property", and any such Person leasing any such Real
Property, a "Lessee"), and each amendment, modification or extension of any such
lease (collectively, the "Leases"), (ii) the Lessee thereof and (iii) the name
of the lessor thereof. Each Lessee has a good and valid leasehold interest under
each Lease to which it is a party pursuant to which such Lessee has the right to
use the Real Property demised by such Lease in accordance with the terms of such
Lease, free and clear of all Liens except Permitted Liens. To the Seller's
knowledge, the current use of the Real Property by the Company does not violate
in any material respect the certificate of occupancy thereof, any local zoning
or similar land use or other Laws or the applicable Lease. The Company has not
received written notice of any pending or threatened condemnation proceeding, or
of any sale or other disposition in lieu of condemnation, affecting any of the
Real Property that it leases under any Lease. Except pursuant to the Subleases
set forth on Schedule 3.6(b), the Company has not subleased any of the Real
Property or given any third party any license or other right to occupy any
portion of the Real Property leased by it (other than the access provided to
employees, consultants, independent contractors (and their assistants) and sales
associates to work in the offices). To the Seller's knowledge, no monetary or
material non-monetary default exists by the Company under any Sublease. Except
as set forth in Schedule 3.6(b), to the Seller's knowledge, no subtenant is in
monetary or material non-monetary default, and no condition or event exists
which with the giving of notice or the passage of time, or both would constitute
a monetary or material non-monetary default by any subtenant under any Sublease.
Except as set forth in Schedule 3.6(b), no Real Property is used by any Lessee
for any purpose other than the conduct of the Business.
(c) The Seller has delivered or made available to the Purchasers a
copy of each Lease (or in the case of oral agreements a summary of the material
terms thereof) that is correct and complete in all material respects. Except as
set forth in Schedule 3.6(c), and in any event except to the extent that with
respect to such Lease, the same could not reasonably be expected to be material,
(i) each Lease is the legal, valid and binding obligation of the Lessee
thereunder,
23
enforceable against such Lessee in accordance with its terms (subject to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting the enforcement of creditors' rights generally or by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law), (ii) none of the Leases or
Subleases has been modified in any material respect except (and only to the
extent set forth therein) by a written amendment specifically identified as such
in Schedule 3.6(b), (iii) other than with respect to matters covered by Section
3.3(a), neither the Company nor, to the knowledge of the Seller, any landlord or
any other party to any Lease or any Sublease, is in material breach or default
under any Lease or any Sublease, and no event or circumstance exists or has
occurred which, with the delivery of notice, the passage of time or both, could
reasonably be expected to constitute a material breach or default under any
Lease or any Sublease by the Company or, to the knowledge of the Seller, any
other party thereto, (v) to the Seller's knowledge, the full amount of the
security deposit, if any, required to be deposited with respect to any Lease or
any Sublease is on deposit as so required, and (vi) the Company has not
collaterally assigned or granted any security interest in any Lease or any
Sublease or any interest therein other than in connection with any Lien to be
released at the Closing.
(d) To the knowledge of Seller, no account receivable of the Business
is owned by any Person other than the Company.
(e) To the knowledge of Seller, all of the Improvements are,
considered in the aggregate, in reasonably good condition and repair (ordinary
wear and tear excepted) in all material respects.
(f) All Improvements located on any Real Property are adequately
supplied, in all material respects, with utilities (including water, sewage,
disposal, electricity, gas and telephone) and other services necessary for their
operation as the same are currently operated. To the knowledge of the Seller,
there are no pending, planned, threatened or proposed cutbacks, moratoriums,
restrictions or other limitations or impairments of any of the foregoing as they
would materially affect any Real Property.
Section 3.7 Litigation and Claims; Compliance with Laws.
(a) Schedule 3.7(a) sets forth all Litigation pending or, to the
knowledge of the Seller, threatened with respect to Business, including a
reasonably detailed description thereof. Except as indicated on Schedule 3.7(a),
there is no Litigation pending or, to the Seller's knowledge, threatened in
writing by any customers, potential customers, employees, prospective employees
or others against the Company or its Affiliates relating to alleged unlawful
discrimination or sexual harassment by the Company nor, to the knowledge of the
Seller, is any Governmental Authority is investigating any such allegation that,
individually or in the aggregate, could reasonably be expected to be material.
There is no unsatisfied judgment or any injunction, decree, order or other
determination of an arbitrator or Governmental Authority issued against, or to
the knowledge of the Seller, binding upon the Company or any of its properties
or assets. There is no Litigation pending or, to the knowledge of the Seller,
threatened
24
against the Seller or the Company or any of its Affiliates, which seeks to
prevent consummation of the transactions contemplated hereby or which seeks
damages in connection with the transactions contemplated hereby, and no
temporary restraining order, preliminary or permanent injunction or other order
or decree which prevents the consummation of the transactions contemplated
hereby has been issued against the Seller or the Company or any of its
Affiliates and remains in effect.
(b) (i) Except as set forth on Schedule 3.7(b)(i), the Company and the
Seller (with respect to the Business) and, to their knowledge, their respective
employees and agents acting in their capacity as such on behalf of the Business,
are in compliance in all material respects with all Organizational Documents and
Laws which affect the Business, including (A) holding all Permits (except for
Permits the loss of which due to the sale of the Shares cannot be cured by a
routine re-filing for such Permit with the applicable Governmental Authority
without any material cost) necessary for the conduct of the Business, and
complying in all material respects with each such Permit (other than action
required in connection with the execution, delivery or performance by the Seller
of this Agreement or the consummation of the transactions contemplated hereby)
and (B) being in compliance in all material respects with all Laws having the
purpose of prohibiting unlawful discrimination against customers or potential
customers.
(ii) Except as set forth on Schedule 3.7(b)(ii), since December
31, 2001, the Company and the Seller have not received any written communication
from any Governmental Authority of a competent jurisdiction asserting that the
Company or the Seller (with respect to the Business) is not in compliance in all
material respects with any Organizational Document or Law applicable to the
Company or the Seller (with respect to the Business).
(c) The Company and the Seller have complied in all material respects
with all requirements of Law applicable to the Company and the Seller with
respect to the treatment of Client Trust Funds or assets subject to escheat, and
to the knowledge of the Seller, there is no investigation by any Governmental
Authority ongoing or threatened with respect to any such matter and, to the
knowledge of Seller, no basis exists for any such investigation. Neither the
Company nor, to the knowledge of the Seller, any director, officer, agent or
employee acting in their capacity as such on behalf of the Company or the
Business has: (A) used corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (B)
made any direct or indirect unlawful payments to government officials or
employees; or (C) paid any bribe, payoff, kickback or other unlawful payment.
Section 3.8 Insurance.
(a) Effective as of the Closing, there are no insurance policies in
effect and maintained by the Company other than the errors and omission policy
which will be assigned to the Seller or terminated at or prior to the Closing.
(b) Since December 31, 2001, the Company has maintained uninterrupted
claims-made errors and omissions insurance. The Company has not received written
notice of default
25
under any such policy, nor received written notice of any pending or threatened
termination or cancellation, coverage limitation or reduction, or material
premium increase with respect to any such policy other than increases in the
ordinary course.
(c) No letters of credit have been posted and no cash has been
restricted to support any material reserves for insurance on the Balance Sheet.
Section 3.9 Environmental Matters.
(a) The Company has been and is in compliance in all material respects
with all Environmental Laws (which compliance includes the possession by the
Company of all material Environmental Permits required for the operations of the
Business as presently conducted under applicable Environmental Laws, and
material compliance with the terms and conditions thereof). Since January 1,
1999, the Company and the Seller have not received any written communication
from any Governmental Authority alleging that the Company or the Seller or any
of its Affiliates (with respect to the Business) has not been in such
compliance. There are no material Environmental Permits used by the Company in
the conduct of the Business.
(b) There are no Environmental Claims pending or, to the knowledge of
the Seller, threatened against the Company or, with respect to the Business, the
Seller or any of its Affiliates or to the Seller's knowledge against any Person
who is entitled to indemnity, contribution or reimbursement with respect thereto
from the Company.
(c) The Company, the Seller or any of their Affiliates have not
placed, stored, deposited, discharged, buried, dumped or disposed or caused the
Release of any Hazardous Materials on, beneath or from any Real Property or
other property currently or formerly owned, operated or leased by the Company or
any predecessor of the Company, other than Hazardous Materials typically used in
office buildings in the ordinary course, which materials have been used in
compliance with applicable Environmental Laws and which could not reasonably be
expected to result in any material liability to the Company.
Section 3.10 Material Contracts.
(a) Schedule 3.10 set forth a list that is correct and complete in all
material respects (without duplication), with respect to the Company, of all
contracts or other agreements having in effect any continuing obligation (or, in
the case of oral agreements, summaries of the material terms thereof as to which
the Seller has knowledge) to which the Company is a party or by or to which the
Company or any of its assets or properties is bound (such contracts and
agreements in such schedule being "Material Contracts"), of the following types,
excluding in clauses (i) through (xv), (A) the Leases listed on Schedule 3.6(b),
(B) the Listings listed on Schedule 3.16, (C) any employment, termination,
severance, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, stock appreciation right or other stock-based incentive plan,
program, agreement, or similar arrangement applicable to employees, consultants,
independent contractors or sales associates of the Company listed on Schedule
3.13(a), (D) the Related Agreements, (E) the Broker Affiliate Agreements listed
on
26
Schedule 3.19(a) and (F) the Mortgage LLC Contracts, all of which shall be
deemed to be Material Contracts to the extent set forth in clauses (i) through
(xvi):
(i) any advertising, market research and other marketing
agreements which (A) contain firm commitments by the Company to make annual
payments in excess of $100,000, which commitments have a remaining term of at
least one year; and (B) which are not terminable on notice of one hundred and
twenty (120) days or less without the payment of any termination fee or similar
payment.
(ii) any employment, severance, non-competition, restricted stock
agreement, consulting or other agreements (in each case excluding stock or share
option agreements) with any current or former stockholder, director, officer,
sales associate, consultant (other than consultant agreements entered into in
the ordinary course of business) or employee of the Company, under which the
Company has an obligation to make any payment in excess of $10,000 in each
individual case as of the date hereof, in each case other than the agreements
with independent contractors listed on Schedule 3.17;
(iii) any agreements (A) evidencing Indebtedness, interest rate
swap or hedging arrangements, sale and leaseback transactions or other similar
financing transactions involving payments in excess of $10,000 or (B)
restricting the ability of the Company or the Seller (with respect to the
Business) to incur Indebtedness or make any loan or advance;
(iv) any agreements, except those entered into in the ordinary
course of business, providing for indemnification by the Company or the Seller
(with respect to the Business) of any Person;
(v) any agreements with any Governmental Authority (except those
entered into in the ordinary course of business) (A) requiring remaining
payments by the Company in excess of $50,000; and (B) which are not terminable
on notice of one hundred and twenty (120) days or less without the payment of
any termination fee or similar payment;
(vi) any agreements providing for the purchase of goods by, or
the furnishing of services to, the Company (A) requiring remaining payments by
the Company in excess of $100,000 and (B) which are not terminable on notice of
one hundred and twenty (120) days or less without the payment of any termination
fee or similar payment;
(vii) any agreements for the furnishing of services by the
Company in exchange for payments in excess of $100,000 in any calendar year and
which are not terminable on notice of one hundred and twenty (120) days or less
without the payment of any termination fee or similar payment;
(viii) any agreements (including settlement agreements and
consent agreements) pursuant to which (A) the Company licenses the right to use
any material Transferred Intellectual Property to any Person or from any Person
or (B) any Person has the
27
right to acquire rights in any material Transferred Intellectual Property from
the Company or the Seller with respect to the Business;
(ix) any confidentiality agreements entered into by the Company
during the period commencing two (2) years prior to the date of this Agreement,
which will continue to be in effect after the Closing, and pursuant to which the
Company was restricted from providing information to third parties and any
agreements pursuant to which the Company has agreed to provide any information
regarding any of its listings to any third party, other than agreements entered
into with clients, customers, co-brokers and multiple listing service providers
of the Business in the ordinary course of business;
(x) any shareholder, voting trust or similar agreements relating
to the Business or the Company to which the Company or the Seller (or any
Affiliate thereof) is a party and any Organizational Documents to which the
Company, Seller (or any Affiliate thereof) is a party;
(xi) any agreements relating to the Business or the Company to
which the Company or the Seller is a party (other than agreements with or
involving the Mortgage LLC set forth on Schedule 1.1(a)) relating to the
provision of mortgage, escrow or title services by the Company or relating to
the purchase by the Company of property pursuant to any guaranteed sales or
other similar programs or any other similar settlement services;
(xii) any lease agreements with respect to personal property to
which the Company is a party which (A) requires the Company to make annual
payments in excess of $75,000 and (B) are not terminable on notice of one
hundred and twenty (120) days or less without the payment of any termination fee
or similar payment;
(xiii) any agreements that limit or purport to limit the ability
of the Company or any Affiliate of the Company to compete in any business (other
than agreements with or involving the Mortgage LLC set forth on Schedule
1.1(a));
(xiv) all agreements, other than agreements to be terminated at
or prior to the Closing and other than accounts payable incurred in the ordinary
course of business and reflected in the Closing Date Working Capital, between
the Company, on the one hand, and any current or former shareholder, director,
officer or other Affiliate of the Company, on the other hand, (A) requiring
remaining payments by the Company in excess of $50,000 and (B) which are not
terminable on notice of one hundred and twenty (120) days or less without the
payment of any termination fee or similar payment;
(xv) all other agreements which cannot be terminated upon notice
of one hundred and twenty (120) days or less and will require payments by the
Company of an amount in excess of $100,000 in any calendar year and which have a
remaining term of at least one year; and
(xvi) all Broker Affiliate Agreements.
28
(b) Each Material Contract (other than the Leases, which are the
subject of Section 3.6(c)) is a legal, valid and binding obligation of, and
enforceable against, the Company, and, to the knowledge of the Seller, the other
parties thereto, and is in full force and effect, subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
affecting the enforcement of creditors' rights generally or by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Company is not (and with the giving of
notice or lapse of time would not be) in material breach of, or material default
under, any Material Contract and, to the knowledge of the Seller, no other party
thereto is in material breach of, or material default under, any Material
Contract. The Company has not received written notice in the last year that any
party to a Material Contract intends to terminate such Material Contract prior
to the termination date specified therein, or that any other party is in
material breach of, or material default under, any Material Contract. Except as
listed on Schedule 3.10(b), copies of all Material Contracts have been
previously delivered or made available to the Purchaser.
(c) (i) Other than the Broker Affiliate Agreements listed on Schedule
3.19(a), neither the Company nor its Affiliates is party to, or is not otherwise
bound by, any agreement, arrangement or any commitment relating to franchise
matters involving the Business, including the Company being a franchisee,
sub-franchisee or franchisor, sub-franchisor of any Person or under any
obligation to any Person with respect to a franchisee or franchisor (or
sub-franchisor or sub-franchisee) relationship, or the Company having granted
any Person the right currently in effect to operate a franchised business using
any trademark or tradename owned or used by the Company or the right to sell or
grant others a franchise to use any trademarks or tradenames owned by the
Company.
(ii) Neither the Company nor any of its Affiliates is party to,
or is otherwise bound by, any agreement, arrangement or commitment providing any
Person with rights of refusal, buy/sell rights or similar rights with respect to
any material asset or material property of the Company or any aspect of the
Business.
(iii) Other than in connection with the business of Mortgage LLC,
neither the Company nor any of its Affiliates (other than the Mortgage LLC) is
party to or is otherwise bound by any agreement, arrangement or commitment with
any third parties with respect to the brokering, origination, marketing or
processing of mortgage loans or to provide escrow, mortgage or title services to
the Company or any other settlement service.
Section 3.11 Intellectual Property. The Company owns all right, title and
interest in and to, or has a license, sublicense or otherwise permission to use,
all of the Transferred Intellectual Property, free and clear of all Liens other
than Permitted Liens, except where the failure to own or possess rights to any
such Transferred Intellectual Property could not reasonably be expected to be
material. The Company has taken all reasonable actions to protect its interest
in such Transferred Intellectual Property except where the failure to take any
action could not reasonably be expected to be material. Schedule 3.11 sets forth
a complete and accurate, in all material respects, list of all U.S. and foreign
registrations and applications for any
29
Transferred Intellectual Property owned by the Company, and identifies for and
with reference to each of the foregoing the owner thereof. Except as set forth
on Schedule 3.11, the registrations listed on Schedule 3.11 are valid and
subsisting, in full force and effect in all material respects, and have not been
cancelled, expired or abandoned. Except as set forth on Schedule 3.11, there is
no, nor has there been any in the past two (2) years, Litigation pending or, to
the knowledge of the Seller, threatened, and neither the Seller nor the Company
has received or sent any written notice of a claim or suit (i) alleging that the
Transferred Intellectual Property or the conduct of the Business with respect
thereto infringes upon or otherwise violates any intellectual property rights of
any third party or (ii) challenging the ownership, use, validity or
enforceability of any Transferred Intellectual Property, in each case that could
not reasonably be expected to be material. There is no, nor has there been any
in the past two (2) years, Litigation pending or threatened by the Company
alleging that a third party has, and to the knowledge of the Seller no third
party has, infringed or otherwise violated or is infringing on or otherwise
violating the Transferred Intellectual Property, except where any such
infringement could not reasonably be expected to be material. There are no
settlements, consents, judgments, orders or consent agreements, which restrict
the Company's right to use any Transferred Intellectual Property in the
Business.
Section 3.12 Taxes.
(a) Except as set forth on Schedule 3.12 (a)(i) through (xi):
(i) The Company has (A) duly and timely filed (or there has been
duly and timely filed on its behalf) with the appropriate Governmental
Authorities all material Tax Returns required to be filed by it, and all such
Tax Returns are true, correct and complete in all material respects, (B) timely
paid (or there has been timely paid on its behalf) all Taxes shown as due on
such Tax Return and (C) established (or there has been established on its
behalf) on the Balance Sheet (in accordance with GAAP) reserves that are
adequate for the payment of any Taxes not yet due and payable or that are being
contested in good faith;
(ii) Except in connection with the transactions contemplated by
this Agreement, since the Balance Sheet Date, the Company has not incurred any
liability for Taxes other than in the ordinary course of business consistent
with past practice;
(iii) The Company has complied in all material respects with all
applicable Laws relating to the payment and withholding of Taxes (including, but
not limited to, withholding in connection with payments to employees,
independent contractors, creditors, stockholders, partners or other third
parties) and has, within the time and manner prescribed by Law, withheld and
paid over to the proper Governmental Authorities all material amounts required
to be withheld and paid over under all applicable Laws;
(iv) There are no Liens for Taxes upon any assets or properties
of the Company except for Liens that are described in either clause (ii) or
(iii) of the definition of Permitted Liens. There are no outstanding waivers or
comparable consents regarding the
30
application of the statute of limitations with respect to any Taxes or Tax
Returns of the Company;
(v) The Company has not requested an extension of time within
which to file any Tax Return in respect of any taxable period for which such Tax
Return has not since been filed;
(vi) No jurisdiction in which the Company does not file a Tax
Return has made a claim in writing that the Company is required to file a Tax
Return for such jurisdiction and the Seller has no knowledge that any such
jurisdiction has otherwise made any such claim;
(vii) No federal, state, local or foreign audits or other
administrative proceedings have formally commenced or are presently pending with
regard to any Taxes or Tax Returns of or including the Company, and no written
notification has been received and the Seller has no knowledge that such an
audit or other proceeding is pending or threatened with respect to any Taxes due
from or with respect to the Company or any Tax Return filed by or with respect
to the Company;
(viii) No deficiency for any Tax has been assessed with respect
to the Company which has not been paid in full or reserved for on the Balance
Sheet in accordance with GAAP;
(ix) No power of attorney which is currently in force has been
granted by or with respect to the Company with respect to any matter relating to
Taxes;
(x) Since December 31, 2000, the Company has not changed any
method of accounting, received a ruling from any Tax authority or signed an
agreement with any Tax authority which would affect the Purchaser (or any of its
Affiliates) or the Company after the Closing;
(xi) Since December 31, 2000, no closing agreement pursuant to
Section 7121 of the Code (or any predecessor provision) or any similar provision
of any state, local or foreign Law has been entered into by or with respect to
the Company; and
(xii) The Company has not been a member of a federal, state or
local consolidated, combined, unitary or similar group other than the group in
which Seller is the common parent.
(b) For United States federal income tax purposes, the Seller is the
parent of an affiliated group of corporations of which the Company is a member.
(c) (i) The federal income Tax Returns of the Company for all tax
years through December 31, 2000, have been examined and the tax years agreed
with by the Internal Revenue Service, and no adjustments to any such Tax Returns
were made, or (ii) the statute of limitations with respect to all such Tax
Returns has expired.
31
(d) For the two year period ending on the date hereof, the Company has
not been a "distributing corporation" or a "controlled corporation" in a
distribution intended to qualify under Section 355(a) of the Code.
(e) The Company is not a party to, is not bound by, and does not have
any obligation under, any Tax sharing agreement, Tax indemnification agreement
or similar contract or arrangement, whether written or, to the knowledge of the
Seller, unwritten ("Tax Indemnification Agreement"), and the Company does not
have any potential liability or obligation to any Person as a result of, or
pursuant to, any such Tax Indemnification Agreement.
Section 3.13 Employee Benefits; ERISA.
(a) Except as provided in the following sentence, Schedule 3.13(a)
contains a correct and complete list of (i) each material employment,
termination, severance, bonus, deferred compensation, incentive compensation,
stock purchase, stock option, stock appreciation right or other stock-based
incentive plan, program, agreement, or arrangement applicable to employees,
consultants, independent contractors or sales associates of the Company; (ii)
each severance, change-in-control, or termination pay, surgical, hospitalization
or other medical, disability, life or other insurance, supplemental unemployment
benefits and other "welfare" plan, fund or program (within the meaning of
Section 3(1) of ERISA) applicable to employees, consultants, independent
contractors or sales associates of the Company; (iii) each profit-sharing, stock
bonus or pension plan, program, agreement or arrangement (within the meaning of
Section 3(2) of ERISA) applicable to employees, consultants, independent
contractors or sales associates of the Company; and (iv) each other material
employee benefit plan, fund, program, agreement or arrangement, that are
sponsored, maintained or contributed to or required to be contributed to by the
Company or any trade or business, whether or not incorporated (including Seller
and its Affiliates) (an "ERISA Affiliate"), that together with the Company would
be deemed a "single employer" within the meaning of Section 4001(b)(1) of ERISA
or to which the Company or an ERISA Affiliate has any liability or potential
liability for the benefit of any current or former employee or director of the
Company (collectively, the "Plans"). Notwithstanding anything in the foregoing
to the contrary, Schedule 3.13(a) needs only list those Plans that are (i)
sponsored by the Company (ii) agreements to which the Company is a party, or
(iii) that relate to severance; provided however that nothing in this sentence
is intended to limit or otherwise alter the definition of the term "Plan".
Neither the Company nor any ERISA Affiliate has any formal plan or commitment,
whether legally binding or not, to create any additional Plan or modify or
change any existing Plan in any material respect (except as required by law)
that would affect any current or former employee of the Company. The Plans
sponsored by the Company, as identified in Schedule 3.13(a), that will continue
to be sponsored by the Company after the Closing are identified as "Company
Plans".
(b) With respect to each of the Plans, copies of each of the following
documents that are correct and complete in all material respects have previously
been made available to the Purchaser: (i) a copy of the Plan documents
(including all amendments thereto) for each written Plan or a written
description of any Plan that is not otherwise in writing; (ii) a copy of the
three
32
(3) most recent annual reports and actuarial reports, if required under ERISA,
and the most recent report prepared with respect thereto in accordance with
Statement of Financial Accounting Standards No. 87; (iii) a copy of the most
recent summary plan description and all other subsequent summaries of material
modifications; (iv) if the Plan is funded through a trust or any other funding
vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof, if any; and (v)
the most recent determination letter received from the IRS with respect to each
Plan that is intended to be qualified under Section 401(a) of the Code.
(c) Except as otherwise disclosed under Schedule 3.13(c), no Plan is a
"Multiemployer Plan," as such term is defined in Section 3(37) of ERISA. No
liability under Title IV or Section 302 of ERISA has been incurred by the
Company or any ERISA Affiliate that has not been satisfied in full, and no
condition exists that presents a material risk to the Company or any ERISA
Affiliate of incurring any such liability. The Company does not have any
liability (i) under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii)
under Sections 412 and 4971 of the Code, or (iv) as a result of failure to
comply with the continuation coverage requirements of Section 601 et seq. of
ERISA and Section 4980B of the Code.
(d) All contributions required to be made with respect to any Plan as
of the Balance Sheet Date have been timely made or are reflected on the Balance
Sheet in all material respects in accordance with GAAP.
(e) None of the Company, any ERISA Affiliate nor any of the Plans, nor
any trust created thereunder, nor to the knowledge of the Seller, any trustee or
plan administrator thereof, has engaged in a transaction or has taken or failed
to take any action in connection with which the Company, any of the Plans, any
trust created thereunder, or any trustee or administrator thereof, or any party
dealing with any Plan or any such trust would subject the Company or the Plans
to any material liability for either a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed pursuant to Section 4975(a) or (b) of
the Code. All contributions and premiums which the Company is required to pay
under the terms of each of the Plans and the Code, have, to the extent required,
been paid or properly recorded on the financial statements or records of the
Company in all material respects.
(f) (i) Each of the Company Plans and any Plan that is a qualified
defined contribution pension plan has been operated and administered in all
material respects in accordance with their terms and any Organizational
Documents and Law, including ERISA and the Code; (ii) each of the Plans that is
intended to be "qualified" within the meaning of Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service, and
no circumstance exists that is or could reasonably be expected to result in a
revocation of any such favorable determination letter or loss of the
qualification of such Plan under Section 401(a) of the Code; (iii) no fund
established under any Company Plan is intended to satisfy the requirements of
Section 501(c)(9) of the Code; and (iv) there are no pending, or to the
knowledge of the Seller, threatened claims by or on behalf of any Company Plan,
by any employee or beneficiary under any such Company Plan, or otherwise
involving any such
33
Company Plan (other than routine claims for benefits or relating to qualified
domestic relations orders). No Person is entitled to receive any "gross-up"
payment from the Company in the event that the excise Tax of section 4999(a) is
imposed on such Person.
(g) No Company Plan provides benefits, including death,
hospitalization, surgical, medical or similar benefits (whether or not insured),
with respect to current or former employees of the Company or any ERISA
Affiliate after retirement or other termination of service (other than coverage
mandated by applicable Laws or death benefits under any "employee pension
plan"). The Company has no liability, contingent or otherwise, under any excess
benefit plan or supplemental executive retirement plan.
(h) Except as otherwise set forth on Schedule 3.13(a) or as provided
in Sections 5.3, 5.4, or 5.5, the consummation of the transactions contemplated
by this Agreement will not, either alone or in combination with another event,
(i) entitle any current or former employee, officer or director of the Company
to severance pay, unemployment compensation or any other similar payment or (ii)
accelerate the time of payment or vesting, or increase the amount of or
otherwise enhance any benefit due any such employee, officer or director.
(i) The Company is not a party to any agreement, plan, contract or
arrangement that would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code.
Section 3.14 Labor Matters.
(a) (i) No labor strike, slowdown, stoppage or lockout of the
Company's employees is pending, or to the knowledge of the Seller, threatened
against the Company and during the past three (3) years there has not been any
such action, (ii) the Company is not party to or bound by any collective
bargaining or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of the Company, (iii) to the knowledge of the Seller, no
employees of the Company are represented by any labor organization with respect
to their employment with the Company, nor to the knowledge of the Seller does
any question concerning labor representation exist concerning such employees
with respect to their employment with the Company and the Seller has no
knowledge of any union organizing activities among such employees with respect
to their employment with the Company within the past three (3) years, (iv) the
Company is not engaged in any unfair labor practices as defined in the National
Labor Relations Act or other applicable Laws, (v) no unfair labor practice
charge or complaint against the Company is pending or, to the knowledge of the
Seller, threatened before the National Labor Relations Board or any similar
agency, (vi) to the knowledge of Seller, no charges or complaints with respect
to or relating to the Company are pending before the Equal Employment
Opportunity Commission or any other agency responsible for the prevention of
unlawful employment practices, (vii) the Company has not received within the
past three (3) years any written notice of the intent of any Governmental
Authority responsible for the enforcement of labor or employment laws to conduct
an investigation with respect to or relating to the Company and, to the
knowledge of the Seller, no
34
such investigation is in progress, (viii) no written complaints or lawsuits are
pending or, to the knowledge of the Seller, threatened by or on behalf of any
class or group of applicants for employment or retention, or present or former
employees or sales associates of the Company or the Seller, alleging breach by
the Company of any express or implied contract of employment, any Laws governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with the employment relationship, and (ix) except
as set forth on Schedule 3.13(a), no employment contracts or severance
agreements exist with any employee of the Company.
(b) The Company and the Seller have at all times in the past three (3)
years properly classified each of their respective employees as employees and
each of their independent contractors as independent contractors, as applicable,
except for any failure which could not reasonably be expected to be material.
There is no action, suit or investigation pending, or to the knowledge of the
Seller, threatened, against the Company by any Person challenging or questioning
the classification by the Company or the Seller of any Person as an independent
contractor, including any claim for unpaid benefits, for or on behalf of, any
such Persons.
(c) No more than ten of the Company's employees have suffered an
"employment loss" (as defined in the Worker Adjustment and Retraining
Notification Act) during the six-month period prior to the date of this
Agreement.
(d) The Company and the Seller (with respect to the Business) and, to
the knowledge of the Seller, each person acting as an agent thereof in his or
her capacity as such, is in compliance in all material respects with all
federal, state and local laws, statutes and regulations having the purpose or
effect of prohibiting unlawful discrimination against customers or potential
customers and, to the knowledge of the Seller, the Seller or the Company or
their Affiliates have received no written complaints from any person or
governmental agency that the Company or the Seller (with respect to the
Business) or any person acting as an agent thereof has engaged in any unlawful
discrimination.
Section 3.15 Affiliate Transactions.
(a) As of the Closing, all agreements between the Company, on the one
hand, and any current or former director or officer of the Company or Seller, on
the other hand, shall be deemed terminated without any further liability of the
Company thereunder.
(b) Other than accounts payable incurred in the ordinary course of
business and reflected in the Closing Date Working Capital and other than
obligations under letters of credit or guarantees relating to Leases under which
the Company is the Lessee, any Indebtedness or other amounts owing between the
Company, on the one hand, and Seller or any of its Affiliates, on the other
hand, have been paid or terminated. The Seller and the Company have caused all
agreements (other than the Related Agreements and other than letters of credit
or guarantees relating to Leases under which the Company is the Lessee) between
the Company, on the one hand, and any of its Affiliates, on the other hand, to
be terminated in all respects, and there is no
35
liability thereunder on the part of the Company under such terminated
agreements, other than amounts owed in respect of (i) current referrals and (ii)
other transactions in the ordinary course of business.
Section 3.16 Listings.
(a) Schedule 3.16(a) sets forth, as of February 10, 2004, an
itemization that is correct and complete in all material respects based on the
books and records of the Company of all of the Company's rights under open real
estate listings (whether or not pursuant to a listing agreement) between the
Company and owners of real property ("Listings"), other than Listings that may
exist but as to which the Seller does not have specific knowledge. As of the
date of this Agreement, the information set forth on Schedule 3.16(a) continues
to be correct and complete in all material respects except for such changes
since that date resulting from the conduct of the Business in the ordinary
course consistent with past practices and for changes that may have occurred but
as to which the Seller does not have specific knowledge.
(b) Other than in connection with the business of the Mortgage LLC,
the Company has no loan commitments or other commitments to fund the purchase of
real property, including under mortgage brokerage arrangements between the
Company and any prospective purchasers of real property, third party investors
or banks.
(c) Other than the Client Trust Funds the Company does not have any
open title or escrow accounts.
Section 3.17 Sales Associates. Schedule 3.17 sets forth the current
commission schedule for the Company that is correct and complete in all material
respects and a list that is correct and complete in all material respects of the
sales associates affiliated with the Business as of January 31, 2004 (the "Sales
Associates"), and with respect to each such Sales Associate the following
information: (i) the name of such Sales Associate, (ii) the office in which such
Sales Associate is located or otherwise affiliated, (iii) the commission split
in effect immediately prior to the date of this Agreement (as set forth in the
Company's Commission Plan for 2004, annexed to Schedule 3.17), (iv) such Sales
Associate's total sales commissions earned for each of calendar year 2003 and
for the period from January 1, 2004 through January 31, 2004 and (v) with
respect to the commissions set forth under clause (iv), the Sales Associate's
portion of such commissions earned, on one hand, and the Company's portion of
such commissions earned, on the other hand. To the knowledge of the Seller, as
of the date of this Agreement, such list continues to be correct and complete in
all material respects except for such changes since that date resulting from the
conduct of the Business in the ordinary course consistent with past practices.
The Company has not changed its commission schedule other than as reflected in
the Sales Associates Commission Plan for 2004, or increased any Sales
Associate's commission split (except based upon increased sales commissions
earned of such Sales Associate consistent with corporate policy and past
practices), since January 1, 2004. Except as set forth on Schedule 3.17, the
Sales Associates have each executed an Independent Contractor Agreement in
substantially one of the forms annexed to Schedule 3.17.
36
Section 3.18 Employees.
(a) Schedule 3.18(a) sets forth a list that is correct and complete,
as of January 31, 2004, of all of the employees of the Company and of the Seller
and their Affiliates engaged in any respect in the Business and any employees of
the Company and of the Seller and their Affiliates engaged in any respect in the
Business who were hired after January 31, 2004 and who will receive annual
salary in excess of $50,000, and with respect to each such employee the
following information: (i) the name of such employee, (ii) the employee's
location of employment, (iii) the title of such employee, and (iv) compensation
and bonuses, for calendar year 2003 and for the period from January 1, 2004 to
January 31, 2004. All of the employees listed on Schedule 3.18 other than Xxxxxx
Xxxxxx are employed by the Company.
(b) Except as set forth on Schedule 3.18(b), the Company does not have
any obligations to make any material payments pursuant to any non-compete
agreements or similar arrangements with any employee.
Section 3.19 Broker Affiliates.
(a) Schedule 3.19(a) sets forth, to the knowledge of the Seller, a
complete and accurate list, with respect to each Broker Affiliate Agreement,
containing the following information: (i) the parties to such agreement (except
to the extent the Broker Affiliate's name may have changed) and (ii) if
available, the date such Broker Affiliate Agreement was executed. Other than the
Broker Affiliate Agreements listed on Schedule 3.19(a), there are no Broker
Affiliate Agreements or other agreements creating relationships between the
Seller (with respect to the Business) or the Company and any Person similar to
those set forth in the Broker Affiliate Agreements. Except as set forth on
Schedule 3.19(a), each of the Broker Affiliate Agreements may be terminated at
will by the Company, without any payment or penalty, upon notice given not more
than 180 days prior to any anniversary date of such Broker Affiliate Agreement,
except to the extent a longer notice period may be required by applicable state
law.
(b) Other than as set forth in the Broker Affiliate Agreements set
forth on Schedule 3.19(a), none of the Business, the Seller (with respect to the
Business) or the Company is subject to any geographic limitations or covenants
not to compete or similar obligation in their business, in each case other than
limitations or covenants that are not material to the Business. During the three
years prior to Closing, the Seller has not received any written notice of
material dispute from any Broker Affiliate or delivered any written notice of
material dispute to any Broker Affiliate, in each case other than in the
ordinary course of business.
(c) Except as set forth on Schedule 3.19(a), to the knowledge of the
Seller, true and correct copies of all Broker Affiliate Agreements in effect on
the date hereof under which the Company conducts the Business (or in the case of
oral Broker Affiliate Agreements, summaries of the material terms thereof) have
been provided to the Purchaser. To the knowledge of the Seller, there are no
oral or written modifications of any such Broker Affiliate Agreements that are
currently in effect and no oral or written commitments (other than those
commitments expressly set forth in the Broker Affiliates Agreements, or
summaries thereof,
37
provided to the Purchaser) have been made by Seller or its Affiliates (including
the Company) with respect thereto.
Section 3.20 Client Trust Funds. Schedule 3.20 sets forth, as of December
31, 2003, a list that is correct and complete in all material respects of any
and all Client Trust Funds held by the Company, indicating the name of the
depository, the account number, the date of the deposit, and the amount thereof
and, as of the date of this Agreement, such list continues to be correct and
complete in all material respects except for such changes since that date
resulting from the conduct of the Business in the ordinary course consistent
with past practices. The Company has held, disbursed and paid to depositors
monies from its Client Trust Funds in material compliance with all applicable
Laws. To the knowledge of the Seller, since January 1, 2003, there has been no
improper co-mingling of its Client Trust Funds and no shortages exist, nor have
any shortages ever existed, in such funds. Neither the Company nor the Seller
(with respect to the Business) is providing any title or escrow services and
neither the Company nor the Seller (with respect to the Business) are holding
any funds for the benefit of third parties in connection with any title or
escrow services or in connection with mortgage loans to be disbursed.
Section 3.21 Brokers, Finders, etc. In connection with the transactions
contemplated by this Agreement and the Related Agreements, no broker, finder or
investment bank has acted for the Seller or its Affiliates, and none of them has
incurred any obligation to pay a brokerage, finder's or other fee or commission
to any Person, in either case, for which the Purchaser will be liable or the
Company will be liable.
Section 3.22 Certain Reorganization Matters. Prior to or effective upon the
execution, delivery and closing of this Agreement, (i) the Company has
distributed to Seller all of the issued and outstanding shares of capital stock,
membership interests and other equity interests held by it in each of the
Excluded Companies, (ii) the Seller has caused the Service Xxxx License and
Trading Name Agreement dated January 1, 1996 between SPTC, Inc. and SIR to be
terminated, and (iii) Seller and the Company have given notice of termination of
the Mortgage LLC Operating Agreement (the transactions referred to in clauses
(i), (ii) and (iii) are referred to collectively as the "Reorganization"). The
Reorganization has not given rise to, nor will it give rise to, any third party
right of termination, cancellation or acceleration or any other third party
right with respect to any asset, property or right (including any agreement)
used or held for use in the Business. The Reorganization has been validly and
duly authorized by the Company and any appropriate Affiliate involved.
38
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser and the Purchaser Guarantor each hereby represents and
warrants to the Seller as follows:
Section 4.1 Authority; Validity. Each of the Purchaser and the Purchaser
Guarantor is a company validly existing and in good standing under the laws of
the state of its incorporation. The Purchaser has the corporate power and
authority to execute and deliver this Agreement and the Transition Services
Agreement and to consummate the transactions contemplated hereunder and
thereunder, and the Purchaser Guarantor has the corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereunder. The execution, delivery and performance of this
Agreement and the Transition Services Agreement by the Purchaser and the
consummation by the Purchaser of the transactions contemplated hereunder and
thereunder, have been duly and validly authorized by the Purchaser, and no other
corporate proceedings on the part of the Purchaser are necessary to authorize
this Agreement or the Transition Services Agreement or the consummation of the
transactions contemplated hereunder or thereunder. The execution, delivery and
performance of this Agreement by the Purchaser Guarantor and the consummation by
the Purchaser Guarantor of the transactions contemplated hereunder and
thereunder, have been duly and validly authorized by the Purchaser Guarantor,
and no other corporate proceedings on the part of the Purchaser Guarantor are
necessary to authorize this Agreement or the consummation of the transactions
contemplated hereunder. This Agreement and the Transition Services Agreement
have been duly executed and delivered by the Purchaser and this Agreement has
been duly executed and delivered by the Purchaser Guarantor, and, assuming due
execution and delivery by the Seller, constitute valid and binding obligation of
the Purchaser and the Purchase Guarantor, as the case may be, enforceable
against such Person in accordance with their terms, except as may be limited by
any bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting the enforcement of creditors' rights generally or by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Section 4.2 Organization
(a) Each of the Purchaser and the Purchaser Guarantor has the
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as it is now being conducted.
(b) Complete and correct copies of the Organizational Documents of the
Purchaser and the Purchaser Guarantor, each as in effect on the date hereof,
have been delivered or made available to the Seller.
39
Section 4.3 No Conflict; Governmental Consents.
(a) The execution, delivery or performance by the Purchaser of this
Agreement and the Transition Services Agreement and the consummation of the
transactions contemplated hereby or thereby and compliance by the Purchaser with
any of the provisions hereof and thereof, and the execution, delivery or
performance by the Purchaser Guarantor of this Agreement and the consummation of
the transactions contemplated hereby and compliance by the Purchaser Guarantor
with any of the provisions hereof, in each case will not: (i) violate any
provision of any Organizational Document of the Purchaser or the Purchaser
Guarantor, (ii) require any consent, approval or notice under, violate or result
in the violation of, conflict with or result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time or both,
could reasonably be expected to constitute a default) under, result in the
termination of, accelerate the performance required by or result in a right of
termination or acceleration, result in the loss of a material benefit under any
of the terms, conditions or provisions of any material contractual obligation of
the Purchaser or the Purchaser Guarantor (other than such consents as have
already been obtained), (iii) result in the creation of any Lien, other than any
Permitted Liens, upon any of the properties or assets of any of the Purchaser or
the Purchaser Guarantor, or (iv) violate any Law applicable to the Purchaser or
the Purchaser Guarantor, except, in the case of clauses (ii) and (iii) above,
for violations, breaches, defaults, terminations, accelerations, loss of
benefits or creations of Liens that, individually or in the aggregate, could not
reasonably be expected to have a Purchaser Material Adverse Effect.
(b) No consent, order or authorization of, or registration,
declaration or filing with, any Governmental Authority is required to be
obtained or made by the Purchaser or the Purchaser Guarantor in connection with
the execution, delivery and performance of this Agreement or the Transition
Services Agreement or the consummation of the transactions contemplated hereby
or thereby that has not been obtained or made, as applicable except (i) where
the failure to obtain or make any such consent, order, authorization,
registration, declaration or filing, individually or in the aggregate, could not
reasonably be expected to have a Purchaser Material Adverse Effect and (ii) for
any consent, order or authorization of, or registration, declaration or filing
with, any Governmental Authority that would otherwise not be required to be
obtained or made but for the specific regulatory status of the Seller or its
Affiliates.
Section 4.4 Financing. The Purchaser has sufficient cash to enable it to
make payment of the Purchase Price and any other amounts to be paid by it
hereunder.
Section 4.5 Litigation. There is no litigation, legal action, arbitration,
proceeding, demand, claim or known investigation brought by or against the
Purchaser or any of its Affiliates or any of their respective assets or
businesses pending or, to the knowledge of the Purchaser, threatened against the
Purchaser or any of its Affiliates which (i) if adversely determined could
reasonably be expected to have a Purchaser Material Adverse Effect, (ii) seeks
to prevent consummation of the transactions contemplated hereby or which seeks
damages in connection with the transactions contemplated hereby or (iii) was
required by applicable Law to be
40
described in Parent Guarantor's most recent Annual Report on Form 10-K filed
with the Securities Exchange Commission or in any registration statement,
report, schedule, form, statement or other document filed by Parent Guarantor
with the Securities Exchange Commission since the filing of such Form 10-K, and
was not so described therein.
Section 4.6 Investment Representation. The Purchaser acknowledges that the
Shares are not registered under the securities laws of any jurisdiction and that
it is acquiring the Shares for its own account, and not with a view to the
distribution thereof. The Purchaser is a sophisticated investor with knowledge
and experience in financial matters and has received information from the Seller
concerning the Company, and the Business (including the Excluded Assets) and has
had the opportunity to obtain additional information in order to evaluate the
purchase contemplated hereby.
Section 4.7 Brokers, Finders, etc. In connection with the transactions
contemplated by this Agreement and the Related Agreements, no broker, finder or
investment bank has acted for the Purchaser or its Affiliates, and none of them
has incurred any obligation to pay a brokerage, finder's or other fee or
commission to any Person, in either case, for which the Seller or any of its
Affiliates will be liable.
ARTICLE V
COVENANTS
Section 5.1 Reasonable Best Efforts; Further Assurances.
(a) From and after the Closing, upon the terms of this Agreement and
subject to applicable law, each of the parties shall act in good faith and shall
cooperate with each other and use their commercially reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, to the extent
such actions have not been taken or completed prior to Closing, all things
reasonably necessary to consummate and make effective the transactions
contemplated by this Agreement as soon as practicable.
(b) Without limiting the foregoing Section 5.1(a), the Seller shall
consult and cooperate in good faith with the Purchaser without payment of any
consideration therefor by Seller, in obtaining all necessary consents,
approvals, waivers, licenses, permits, authorizations, registrations,
qualifications or other permission or action by, and giving all necessary
notices to and making all necessary filings with and applications and
submissions to, any Governmental Authority or other Person (including without
limitation any landlord under any Lease or Sublease), as soon as reasonably
practicable after execution of this Agreement.
(c) Following the Closing, the Purchaser shall provide the Seller with
reasonable access to the books and records and employees, directors and officers
of, and other information relating to, the Company (and its successors and
assigns) (i) in connection with the performance by the Seller of its obligations
hereunder, (ii) as may be required by Law or (iii) as may
41
otherwise be reasonably requested by the Seller in connection with any
accounting or reporting requirement applicable to the Seller or its Affiliates.
(d) The Purchaser intends, after the Closing, to review the earn-out
or similar contingent purchase amounts payable pursuant to the Xxxxxxx Hole
Agreement. The Purchaser may, in that connection, request that the Seller
participate in a discussion with certain parties to the Xxxxxxx Hole Agreement
(other than the Company) regarding the Purchaser's proposed changes to the
provisions of the Xxxxxxx Hole Agreement with respect to such earn-out or
similar contingent purchase amounts, as between such parties to the Xxxxxxx Hole
Agreement and the Purchaser or the Company, and the Seller shall join such
discussion if so requested. The Seller shall not have any obligation to assist
in determining or achieving any such changes or any liability with respect to
such matters whatsoever. None of such matters shall diminish the Company's and
the Purchaser's retention of the obligation with respect to such earn-out or
similar contingent purchase amounts and the Seller not having any responsibility
therefor.
Section 5.2 Public Disclosure; Confidentiality. The parties have agreed on
the forms of their respective press releases covering the transactions
contemplated hereby as set forth on Schedule 5.2. Except as may be required to
comply with any applicable Law or stock exchange rule, the Purchaser and the
Seller shall not (and shall use their commercially reasonable efforts to cause
its Affiliates not to) issue any press release or make any other public
announcement concerning the terms of this Agreement, the Related Agreements or
the transactions contemplated hereby or thereby. Notwithstanding the foregoing,
the parties may disclose the terms of this Agreement to their respective
officers, employees, accountants, attorneys, financial advisors and lenders as
may be necessary or reasonably desirable in connection with such party's
business and the performance of such Person's duties in connection therewith.
From and after the Closing Date until October 17, 2005, the Seller shall, and
shall use its commercially reasonable efforts to cause its Affiliates and other
representatives to, not disclose and to keep confidential all confidential and
proprietary information relating to the Company and the Business (other than
information which is generally available to the public or thereafter becomes
generally available to the public (other than as a result of disclosure by
Seller or its Affiliates)); provided, however, that the Seller and any of its
Affiliates may disclose confidential and proprietary information relating to the
Company and the Business to the extent such disclosure is required by applicable
Law or stock market rule, subject (other than in the case of disclosure pursuant
to applicable corporation or securities Laws or regulations of any securities
exchange) to prior written notice to the Purchaser and cooperation with the
Purchaser to obtain a protective order or similar confidentiality arrangement,
if available.
Section 5.3 Employee Plans.
(a) The Seller shall assume and retain the Indemnified Benefits
Liabilities. "Indemnified Benefits Liabilities" shall mean any and all
liabilities relating to, arising out of, or resulting from (i) all Plans
(including but not limited to the Sotheby's, Inc. 1998 benefit equalization
plan) other than the Company Plans, (ii) the Company Plans to the extent
incurred prior to the Closing, (iii) noncompliance with or violation of COBRA to
the extent incurred prior
42
to the Closing, (iv) to the extent not covered under the applicable Plans at the
Closing, the continuation coverage requirements of Section 4980B of the Code
with respect to employees of the Company who have incurred a "qualifying event"
(as defined in Section 4980B(f)(3) of the Code) and their qualified
beneficiaries, (v) noncompliance with or violation of any of the provisions of
ERISA to the extent incurred or related to periods prior to the Closing, and
(vi) claims by employees, independent contractors or directors of the Company to
the extent arising from or relating to their employment with or services to the
Company prior to the Closing (including termination of such employment or
service prior to the Closing).
(b) The Seller has taken any and all actions necessary to cause each
employee and independent contractor of the Company, immediately prior to the
Closing who has a benefit or account in any employee pension benefit plan (as
defined in Section 3(2) of ERISA) which is sponsored by the Seller or any of its
ERISA Affiliates to become fully vested in such benefit or account effective
immediately prior to the Closing.
(c) On and after the Closing Date, the Purchaser shall provide, or
cause to be provided, to each Employee under each Plan maintained by the Company
and each other employee benefit plan (within the meaning of Section 3(3) of
ERISA) maintained or contributed to by the Purchaser, Purchaser Guarantor or
their respective Subsidiaries or Affiliates (collectively, the "Purchaser
Plans"), credit, for purposes of eligibility to participate, vesting and accrual
of benefits, for full and partial years of service with the Company, the Seller
or their respective Subsidiaries or Affiliates performed at any time prior to
the Closing Date to the extent credited by the Company, the Seller, or their
respective Subsidiaries or Affiliates under the applicable Plan or any employee
benefits plan of Seller, except where such crediting results in the duplication
of benefits.
(d) The Purchaser shall, or shall cause the Company or any of its
Affiliates to, (i) waive all limitations as to pre-existing conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to all Employees under any welfare benefit plan
established to replace any welfare benefit plan (as defined in Section 3(1) of
ERISA) covering Employees at the Closing Date, other than limitations or waiting
periods that are already in effect with respect to any such Employee and that
have not been satisfied as of the Closing Date under the welfare benefit plan
maintained for such Employees immediately prior to the Closing Date, and (ii)
provide each such Employee with credit for co-payments and deductibles paid
prior to the Closing Date in satisfying any co-payment, deductible, or
out-of-pocket requirements under any welfare benefit plans that such Employees
are eligible to participate in after the Closing Date.
(e) The Purchaser shall recognize accrued but unused paid vacation,
earned time off, and sick leave accrued by an Employee as of the Closing Date to
the extent that such benefits are reflected on the Balance Sheet. Following the
Closing Date, the Seller shall confirm in writing to the Purchaser and to each
Employee the amount of such accrued and unpaid days of vacation, earned time
off, and sick leave applicable to such Employee. No leave transferred pursuant
to this paragraph shall be forfeited by an Employee or included in determining
whether
43
an Employee has accrued the maximum amount of time off that can be carried over
from one year to the next under the Purchaser's plan.
(f) The Seller, the Purchaser and the Company shall cooperate, subject
to applicable law, in (i) making all appropriate filings required under the Code
or ERISA and any applicable securities Laws with respect to the Plans, (ii)
implementing all appropriate communications with participants under the Plans,
(iii) maintaining and transferring appropriate records, and (iv) taking all such
other actions as may be necessary and appropriate to implement the provisions of
Section 3.14. The Seller, the Purchaser and the Company shall cooperate fully
with one another in providing records regarding the employment of, and benefits
provided to, all individuals who are or were Employees.
(g) The Company shall continue to sponsor the Company Plans identified
as such on Schedule 3.13(a) as of the Closing. However, nothing in the Section
5.3(g) is intended to impair the Company's ability to terminate the Company
Plans, at any time.
Section 5.4 Change of Control Payments.
(a) The Seller shall be responsible for any and all severance and
change of control payments under existing employment, independent contractor or
other similar arrangements with any of the Seller or the Company or any of their
Affiliates, if and to the extent such payments are resulting solely from either
(i) events which occur prior to Closing, or (ii) the occurrence of the Closing
(but not as a result of any termination or other action taken thereafter to the
extent that the amount payable upon such termination or other action taken
thereafter is not, as a result of the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, greater than the
amount payable if termination were to occur in the absence of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby), to the extent such payments are not covered by the definition of
"Indebtedness" herein.
(b) The Purchaser shall be responsible for any and all severance or
change of control payments to the Employees, other than those for which the
Seller is responsible pursuant to Section 5.4(a) and those included on Schedule
5.4(b).
Section 5.5 Employees. The Purchaser shall (i) cause the Company to
continue the employment of the Company's employees, (ii) offer employment to
Xxxxxx X. Xxxxxx (the employees referred to in clauses (i) and (ii) of this
sentence, collectively, the "Employees") and (iii) provide each Employee with
coverage and benefits pursuant to employee benefit plans, programs, policies,
and arrangements maintained by the Purchaser consistent with what the Purchaser
provides to its other similar situated employees. The Purchaser shall pay the
Employees at least the full amount of any unpaid bonuses or commissions earned
pursuant to bonus and commission plans of the Seller that are accrued and
reflected on the Closing Date Balance Sheet. The Purchaser shall provide the
Employees with a qualified defined contribution pension plan that will accept a
direct rollover of each Employee's account balance in Seller's qualified defined
contribution pension plan, other than any portion of such account balance
44
which includes outstanding loan balances or after tax contributions. Any
Employee terminated during the one year period immediately following the Closing
Date (the "Continuation Period") shall receive from the Purchaser severance
benefits equal to those that such terminated Employee would have been entitled
to receive under the applicable severance plan of the Seller if such Employee
had continued to be employed by the Seller until his or her employment
termination date. Following the expiration of the Continuation Period, the
Employees shall participate in a severance plan of the Purchaser, on the same
terms and conditions which are generally applicable to employees of the
Purchaser (except that the Purchaser shall provide each such Employee credit for
full and partial years of service with the Company, the Seller or their
respective Subsidiaries or Affiliates performed at any time prior to the
expiration of the Continuation Period), provided that the Employees set forth on
Schedule 5.5 shall be entitled to receive severance benefits equal to at least
100% of his then-current base salary plus 100% of his most recent annual bonus
if he is terminated without cause during the one-year period immediately
following the Continuation Period. Subject to the foregoing, all terms and
conditions of the employment of any person hired by the Purchaser are matters
within the Purchaser's sole discretion, it being expressly understood that the
Purchaser reserves full right (among others) to terminate the employment of any
Employee at any time, as well as to amend or terminate any employee benefit
plans or programs at any time. As of the Closing Date, the Purchaser shall bear
all costs and expenses, including accrued vacation pay arising out of the
termination of any Employee after the Closing Date. The Seller shall cause to be
paid, at the Closing Date, to Xxxxxx X. Xxxxxx an amount of $670,000 pursuant to
the termination agreement entered into between Seller or one of its Affiliates
and Xxxxxx X. Xxxxxx.
Section 5.6 Insurance. The Purchaser acknowledges that the Seller's and the
Company's insurance coverage for the Company and the Business shall terminate as
of the Closing.
Section 5.7 Closing Date Transactions. In the event that the Purchaser
causes the Company to take or the Company takes any action outside the ordinary
course of business on the Closing Date after the Closing which affects any item
included in the calculation of Indebtedness or Working Capital pursuant to
Section 2.5 except as expressly contemplated by this Agreement, such
calculations of Indebtedness and Working Capital shall be appropriately adjusted
to exclude the effect of any such actions.
Section 5.8 Certain Services and Benefits Provided by Affiliates. The
Purchaser acknowledges that the Company and the Business currently receive from
the Seller and its Affiliates certain Support Services. The Seller and Purchaser
acknowledge that all such Support Services shall cease at the Closing, and any
agreement in respect thereof shall terminate with respect to the Company and the
Business, in each case as of the Closing Date, with no further obligation of the
Company.
Section 5.9 Pendings. Following the Closing, Purchaser shall cause the
Company to (i) use commercially reasonable efforts (which shall not include any
obligation to commence or pursue any litigation, arbitration or similar
proceedings) to promptly collect any amounts due
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to the Company or its Affiliates in connection with the closing of any real
estate transactions and sales contracts pending as of the date of this
Agreement, including under real estate listing agreements listed on Schedule 5.9
("Pendings"), and (ii) pay to the Seller, within five (5) Business Days
following the end of any calendar month in which any such proceeds are received,
any and all proceeds received by the Company or any of its Affiliates, less,
with respect to the closing of any such Pendings, any fees or commissions
payable to any employees, sales associates and co-brokers, in accordance with
the applicable commission splitting agreement or arrangement with such foregoing
parties. Any commission splitting changes made by the Purchaser or the Company
following the Closing shall not apply to the Pendings. Seller shall be permitted
for a period of three years following the Closing, no more than twice in any
twelve-month period, to inspect and conduct an audit of the books and records of
the Company relating to the Pendings solely for purposes of verifying the amount
and accuracy of any proceeds to which the Seller is entitled to with respect to
such Pendings under this Section 5.9. Any such audit or inspection shall be
conducted during normal business hours, upon reasonable advance notice and shall
not unreasonably interfere with the conduct of the Company's or the Purchaser's
business. The Seller shall provide Purchaser not less than 20 days' advance
written notice of any inspection and audit pursuant to this Section 5.9.
Section 5.10 Mortgage LLC.
(a) Following the Closing, to the extent that the Company shall have
the right to take any action or exercise any right in each case under the
Mortgage LLC Operating Agreement and the Mortgage LLC Contracts, the Purchaser
shall cause the Company to (i) promptly take any such action and exercise any
such right of the Company solely as directed in writing by Seller (other than
any action or any exercise of right that is not permitted by Mortgage LLC
Operating Agreement and the Mortgage LLC Contracts or under applicable Law),
(ii) not take any other action or exercise any other right of the Company in
each case under the Mortgage LLC Operating Agreement and the Mortgage LLC
Contracts other than as required by applicable Law and except to the extent
required by the Mortgage LLC Contracts and (iii) promptly provide to the Seller
copies of all written notices and a summary of all other communications received
by the Company or its Affiliates from the Mortgage LLC Partner.
(b) Following the Closing, Purchaser shall cause the Company to pay or
transfer to the Seller, within five (5) Business Days after receipt thereof, (i)
any assets of the Mortgage LLC distributed to the Company and (ii) any other
proceeds received by the Company with respect to the Mortgage LLC Contracts.
(c) Except as otherwise required by applicable law, for Tax reporting
purposes, the parties shall treat the Company as having transferred to the
Seller beneficial ownership of the interests in Mortgage LLC held by the Company
immediately prior to Closing.
Section 5.11 Lease Matters. Schedule 5.11 identifies all Leases in respect
of which letters of credit or guarantees for the obligations of the Lessees
under such Leases have been provided (the "Lease Security"). Within 60 days
after the Closing Date, Purchaser shall
46
use commercially reasonable efforts to deliver to the landlord under each such
Lease a replacement letter of credit or guarantee from Purchaser or Parent
Guarantor (if needed), as applicable, in the amount, form and substance required
under the respective Lease and shall use commercially reasonable efforts to
cause the landlord under any such Lease to deliver to the Seller the current
Lease Security, together with evidence, in form and substance reasonably
acceptable to the Seller, that the Seller has no further obligations or
liabilities under or with respect to any of the Lease Security. In connection
with the foregoing, the Purchaser shall use commercially reasonable efforts to
enter into such amendments to such Leases as may be commercially reasonable to
give effect to the foregoing. Notwithstanding the foregoing, commercially
reasonable efforts shall not require the Purchaser to pay any consideration to
replace the Lease Security other than offering the replacement letter of credit
or guarantee referred to above. Upon demand, Purchaser shall reimburse the
Seller for all costs, claims and expenses incurred by the Seller under or in
respect of any Lease Security (including any payment by Seller or any of its
Affiliates under any such guarantee or in respect of reimbursement of any
drawing of any such letters of credit) after the Closing Date.
Section 5.12 Litigation.
(a) Following the Closing the Seller (or any of its designated
Affiliates) shall have the right to assume the prosecution of any Litigation set
forth on Schedule 3.11(a) in which the Company is the plaintiff at its own cost
and expense with counsel selected by the Seller or its designated Affiliate by
giving written notice to the Purchaser of its intention to assume such
prosecution; provided, however, that the Seller (or any of its designated
Affiliates) shall not, in prosecution of such Litigation, be permitted to admit
to any liability with respect to, or consent to the entry of any judgment or
enter into any settlement with respect to, any such Litigation without the prior
written consent of the Purchaser (which consent shall not be unreasonably
withheld or delayed), and the Purchaser or any of its Affiliates will not be
subject to any liability for any such admission, settlement, compromise,
discharge or consent to judgment made by the Seller (or any of its designated
Affiliates) without such prior written consent of the Purchaser. The Company may
participate in (but not control) any prosecution assumed by the Seller (or any
of its designated Affiliates) pursuant to this Section 5.12, and the Company
will bear its own costs and expenses with respect to such participation. The
Purchaser shall cause the Company and its Affiliates to cooperate reasonably
with the Seller (or any of its designated Affiliates) in all aspects of any
investigation, prosecution, pre-trial activities, trial compromise, settlement
or discharge of any such Litigation, including, without limitation, by providing
the Seller (or any of its designated Affiliates) with reasonable access to
employees, directors and officers (as witnesses) and other information.
(b) The Purchaser shall cause the Company and, if applicable, its
Affiliates to pay or transfer to the Seller, within five (5) Business Days after
receipt thereof, any proceeds received by the Company or its Affiliates in
connection with the settlement, compromise or final determination of any
Litigation referred to in Section 5.12(a).
47
Section 5.13 2004 Capital Plan. The Purchaser acknowledges and agrees that
the Company's capital expenditures for the period from the Balance Sheet Date
until the Closing as contemplated by the 2004 Capital Plan are adequate for the
operation of the Business.
ARTICLE VI
CERTAIN TAX MATTERS
Section 6.1 Preparation and Filing of Tax Returns; Payment of Taxes.
(a) The Seller shall prepare (or cause to be prepared) all Tax Returns
required to be filed by the Company for all Pre-Closing Periods that end on or
prior to the Closing Date (such Tax Returns, the "Pre-Closing Period Tax
Returns") (provided that the Seller shall submit a draft of any such Tax Return
required to be filed by the Company on a stand-alone basis to the Purchaser for
its review at least five (5) Business Days prior to the due date of such Tax
Return). All such Pre-Closing Period Tax Returns, to the extent they relate to
the Company, shall be prepared in a manner that is consistent with the prior
practice of the Company, except as required by applicable Law. The Seller shall
file all such Pre-Closing Period Tax Returns, provided, however, if any
Pre-Closing Period Tax Return is due after the Closing and the Seller is not
authorized to file such Pre-Closing Period Tax Return by Law, the Purchaser and
its Affiliates shall file (or cause to be filed) such Pre-Closing Period Tax
Return as prepared by Seller (in accordance with this Section 6.1(a)) with the
appropriate Tax authorities. The Seller shall pay all Taxes due and payable in
respect of all Pre-Closing Period Taxes and Tax Returns; provided, however, that
if any Pre-Closing Period Tax Return is due after the Closing and is to be filed
(or caused to be filed) by the Purchaser, the Seller shall pay (in immediately
available funds) all Taxes due and payable in respect of such Tax Return to the
Purchaser no later than three (3) days prior to the due date of such Tax Return.
The Purchaser shall cooperate with Seller in the filing of such Pre-Closing
Period Tax Return.
(b) The Purchaser shall prepare and timely file, or cause the Company
to prepare and timely file, all Tax Returns required to be filed by the Company
for all Straddle Periods (such Tax Returns, the "Straddle Period Tax Returns").
All Straddle Period Tax Returns shall be prepared and filed in a manner that is
consistent with the prior practice of the Company, except as required by
applicable Law. The Purchaser shall deliver or cause to be delivered drafts of
all Straddle Period Tax Returns to the Seller for its review at least thirty
(30) days prior to the due date of any such Straddle Period Tax Return (taking
into account valid extensions) and shall notify the Seller of the Purchaser's
calculation of the Seller's share of the Taxes of the Company for any such
Straddle Periods (determined in accordance with Section 6.3(c)); provided,
however, that such drafts of any such Straddle Period Tax Returns and such
calculations of the Seller's share of the Tax liability for such Straddle Period
(determined in accordance with Section 6.3(c)) shall be subject to the Seller's
review and approval, which approval shall not be unreasonably withheld or
delayed. If the Seller disputes any item on such Straddle Period Tax Return, it
shall notify the Purchaser (by written notice within fifteen (15) Business Days
of receipt of the Purchaser's calculation) of such disputed item (or items) and
the basis for its
48
objection. If the Seller does not object by written notice within such period,
the Purchaser's calculation of the Seller's share of the Taxes for such Straddle
Period shall be deemed to have been accepted and agreed upon, and final and
conclusive, for all purposes hereof. The Purchaser and the Seller shall act in
good faith to resolve any such dispute prior to the date on which the Tax Return
is required to be filed. If the Purchaser and the Seller cannot resolve any
disputed item, the item in question shall be resolved by an independent auditor
mutually acceptable to the Purchaser and the Seller as promptly as practicable.
The fees and expenses of the independent auditor shall be paid fifty percent
(50%) by the Purchaser and fifty percent (50%) by the Seller. No later than
three (3) days prior to the filing of such Straddle Period Tax Return, the
Seller shall pay to the Purchaser in immediately available funds the amount of
the Seller's share of the Tax liability for the Straddle Period determined
pursuant to this Section 6.1(b) and in accordance with the principles of Section
6.3(c). Subject to the preceding sentence and Section 6.3(a), the Purchaser
shall pay or cause to be paid all Taxes due and payable in respect of all such
Straddle Period Tax Returns.
Section 6.2 Section 338(h)(10) Election.
(a) The Purchaser, the Seller and their respective Affiliates shall
jointly make a timely and effective election provided for by Section 338(h)(10)
of the Code and Section 1.338(h)(10)-1 of the Treasury Regulations and any
comparable election under state, local or foreign Tax Law with respect to the
purchase of the capital stock of the Company (each, an "Election" and
collectively, the "Elections"). The Purchaser, the Seller and their respective
Affiliates shall cooperate with each other to take all actions necessary and
appropriate, including filing such additional forms, returns, elections,
schedules and other documents as may be required to effect and preserve timely
Elections in accordance with the provisions of Section 338(h)(10) of the Code
and Section 1.338(h)(10)-1 of the Treasury Regulations (and any comparable
provisions of state, local or foreign Tax Law) or any successor provisions.
Specifically, the Seller and the Purchaser shall, within five (5) days prior to
the date such forms are required to be filed under applicable law, exchange
completed and executed copies of the Internal Revenue Service Forms 8023 and
8883, required schedules thereto, and any similar state, local or foreign forms.
If changes are required in any of these forms as a result of information which
is first available after the date on which any such form is completed and
executed pursuant to the preceding sentence, the parties will act in good faith
to agree on such changes. The Seller, the Purchaser and their respective
Affiliates shall report the purchase by the Purchaser of the Shares of the
Company consistent with the Election and shall take no position inconsistent
therewith in any Tax Return, any proceeding before any Tax authority or
otherwise.
(b) In connection with the Elections, within ninety (90) days after
the Closing, the Purchaser (or its Affiliate) shall provide to the Seller the
proposed manner in which the "aggregate deemed sales price," as defined in
Treasury Regulation Section 1.338-4, with respect to the Company shall be
allocated among its assets, which allocations shall be made in accordance with
Section 338(b) of the Code and any applicable Treasury Regulations and shall
reflect the Share Purchase Price. Within fifteen (15) Business Days following
the receipt of such proposed allocations, the Seller shall have the right to
object to such allocations (by written
49
notice to the Purchaser), and if the Seller objects, it shall notify the
Purchaser (in such written notice) of such disputed item (or items) and the
basis for its objection and the Purchaser and the Seller shall act in good faith
to resolve any such dispute for the thirty (30) day period thereafter. If the
Seller does not object by written notice within such period, such proposed
allocations shall be deemed to have been accepted and agreed upon, and final and
conclusive, for all purposes of this Agreement; provided, however, that such
proposed allocation shall be subject to adjustment upon and as a result of the
final determination of the Share Purchase Price (taking into account any
adjustments pursuant to Section 2.4 hereof). If, within thirty (30) days of the
Seller's delivery of a notice of objection, the parties have not reached an
agreement regarding such allocations, the dispute shall be presented to an
independent accounting firm mutually agreed upon by the Seller and the
Purchaser, whose determination shall be binding on both parties. The parties
shall endeavor to cause the accounting firm to make a determination within
thirty (30) days but in no event later than five (5) days prior to the date the
Internal Revenue Service Forms 8023 and 8883 are required to be filed under
applicable law. The fees and expenses of such accounting firm shall be paid
fifty percent (50%) by the Seller and fifty percent (50%) by the Purchaser (or
their Affiliate). As promptly as practicable after the final determination of
the adjustments pursuant to Section 2.4 of the Agreement, the Purchaser (or its
Affiliate) shall provide Seller with any adjustments to the proposed allocation
previously determined and finalized pursuant to Section 6.2 of this Agreement
and any such adjustments resulting from Section 2.4 of this Agreement shall be
determined in accordance with the principles of this Section 6.2(b). The Seller,
the Purchaser and their respective affiliates shall (i) be bound by any such
allocation for purposes of determining any Taxes, (ii) prepare and file their
Tax Returns on a basis consistent with such determination of the aggregate
deemed sales price and such allocations and (iii) take no position inconsistent
with such determination and allocations on any applicable Tax Return, in any
proceeding before any Tax authority or otherwise. In the event that any of the
allocations are disputed by any Tax authority, the party receiving notice of the
dispute shall promptly notify the other party concerning resolution of the
dispute.
Section 6.3 Tax Indemnification.
(a) Subject to Section 6.5, the Seller shall indemnify, defend, and
hold harmless the Purchaser Indemnified Parties from and against (without
duplication of any amounts paid pursuant to Section 7.2 or this Section 6.3):
(i) all liabilities for Taxes of or imposed on the Seller or any
of its Affiliates (not including, solely for purposes of this Section 6.3(a)(i),
the Company);
(ii) all liabilities for Transfer Taxes required to be paid by
the Seller pursuant to Section 6.6 of this Agreement;
(iii) all liabilities for Taxes imposed upon the Company with
respect to any taxable period ending on or before the Closing Date ("Pre-Closing
Periods"), and for any taxable period beginning on or before the Closing Date
and ending after the Closing Date ("Straddle Periods") but only with respect to
the portion of such Straddle Period ending on the
50
Closing Date and as determined in the manner provided in Section 6.3(c) of this
Agreement (including, without limitation, all Taxes related to any Election and
the transactions contemplated pursuant to Section 3.22 of this Agreement but
excluding any Taxes resulting from any transaction that is not in the ordinary
course of business that occurs on the Closing Date but after the Closing and is
not contemplated by this Agreement);
(iv) all liabilities for Taxes imposed on the Company under
section 1.1502-6 of the Treasury Regulations (and corresponding provisions of
state, local, or foreign Law) as a result of having been a member of any
federal, state, local or foreign consolidated, unitary, combined or similar
group for any taxable period ending on or before, or that includes, the Closing
Date;
(v) all liabilities for Taxes imposed on or related or
attributable to the Excluded Companies, Listing Exchange, LLC or Mortgage LLC;
(vi) all liabilities (including reasonable out-of-pocket
expenses) arising from any breach by the Seller or its Affiliates of any of the
covenants and obligations contained in this Article VI;
(vii) all liabilities (including reasonable out-of-pocket
expenses) arising from the breach or inaccuracy of the representation and
warranty set forth in Section 3.12(e) of this Agreement; and
(viii) all liabilities relating to net Tax liabilities imposed on
the Company as a result of the transactions or any action contemplated pursuant
to Section 5.10 hereof.
(b) The Purchaser shall indemnify, defend and hold harmless the Seller
Indemnified Parties from and against (without duplication of any amounts paid
pursuant to Section 7.3): (i) all liabilities for Taxes of or imposed on the
Purchaser and its Affiliates (not including, for purposes of this Section
6.3(b)(i), the Company), (ii) all liabilities for Taxes of the Company for any
taxable period beginning after the Closing Date ("Post-Closing Periods"), (iii)
all liabilities for Taxes of the Company for any Straddle Period but only with
respect to the portion of such Straddle Period beginning after the Closing Date,
as determined in the manner provided in Section 6.3(c) of this Agreement, (iv)
all liabilities (including reasonable out-of-pocket expenses) arising from any
breach by the Purchaser or its Affiliates (including, after the Closing, the
Company) of any of the covenants and obligations contained in this Article VI,
and (v) all liabilities for Transfer Taxes required to be paid by the Purchaser
pursuant to Section 6.6.
(c) For purposes of this Section 6.3, in order to apportion
appropriately any Taxes relating to a Straddle Period, the parties hereto shall,
to the extent required or permitted under applicable Law, treat the Closing Date
as the last day of the taxable year or period of the Company for all Tax
purposes. In any case where applicable Law does not permit the Company to treat
the Closing Date as the last day of the taxable year or period, the portion of
any Taxes that are allocable to the portion of the Straddle Period ending on the
Closing Date shall be:
51
(i) in the case of Taxes that are imposed on a periodic basis
(such as real property taxes), deemed to be the amount of such Taxes for the
entire period (or, in the case of such Taxes determined on an arrears basis, the
amount of such Taxes for the immediately preceding period) multiplied by a
fraction the numerator of which is the number of calendar days in the Straddle
Period ending on (and including) the Closing Date and the denominator of which
is the number of calendar days in the entire relevant Straddle Period; and
(ii) in the case of Taxes not described in (i) (such as (x) taxes
that are based upon or measured by income or receipts or imposed in connection
with any sale or other transfer or assignment of property (real or personal,
tangible or intangible) and (y) payroll and similar Taxes), deemed equal to the
amount that would be payable if the taxable year or period ended on the Closing
Date.
(d) All amounts payable or to be paid under this Section 6.3 (the "Tax
Indemnity Payments") shall be paid in immediately available funds within five
(5) Business Days after the later of (i) the receipt of a written request from
the Indemnified Party entitled to such Tax Indemnity Payment and (ii) the date
payment of the amount that is the subject of the Tax Indemnity Payment by the
Indemnified Party entitled to receive the Tax Indemnity Payment is due to the
relevant Taxing Authority. Notwithstanding the foregoing, in the case of a Tax
that is contested with a Tax authority in accordance with Section 6.5 of this
Agreement, the day of payment will not be earlier than three (3) days after the
date a "determination" (as defined in Section 1313(a) of the Code) has occurred.
Any amounts that are not paid within such required period shall accrue interest
at an annual rate of three percent (3%) per year.
(e) In connection with this Article VI, the Seller hereby (i) waives
any right of contribution or indemnification or similar right it may have
against the Company for any amounts paid by the Seller hereunder, and (ii)
waives any defense based on fault of the Company.
(f) Any amounts payable pursuant to this Section 6.3 shall be subject
to the provisions of Section 7.5(d) of this Agreement.
Section 6.4 Tax Refunds. The Purchaser shall pay to the Seller (a) all
refunds or credits of Taxes (including any interest in respect thereof) received
by the Purchaser or the Company after the Closing Date and attributable to Taxes
paid by the Company with respect to a Pre-Closing Period and (b) a portion of
all refunds or credits of Taxes (including any interest in respect thereof)
received by the Purchaser or the Company after the Closing Date and attributable
to Taxes paid by the Company with respect to any Straddle Period (such portion
to be allocated consistent with the principles set forth in Section 6.3(c)), in
each case, net of any Taxes imposed on the portion of such refund treated as
interest income arising in a Post-Closing Period; provided, however, that the
Seller shall not be entitled to any refund attributable to a carryback to a
Pre-Closing Period or Straddle Period of a Tax attribute of the Company that
arises in a period or portion thereof beginning after the Closing Date. Any such
refunds or credits required to be paid by the Purchaser to the Seller shall be
paid within five (5) Business
52
Days of the receipt of any such refunds or credits by Purchaser, the Company, or
any of their Affiliates. Upon Seller's reasonable request, the Purchaser shall
cooperate with the Seller to amend any Tax Return of the Company relating to a
Pre-Closing Period (including in the preparation and filing of such amended Tax
Return) if such amendment would entitle the Seller to a refund or credit for
such Pre-Closing Period (and the Seller shall reimburse Purchaser for any
reasonable out-of-pocket expenses incurred by Purchaser or its Affiliates in
connection with the Purchaser's (or its Affiliates') cooperation in the
preparation and filing of such Tax Return); provided, however, that (i) any such
amended Tax Return must be prepared and filed in accordance with applicable law,
(ii) Seller shall submit a draft of any amended Tax Return to be filed by the
Company on a stand-alone basis to the Purchaser for its review at least five (5)
Business Days prior to the filing of such amended Tax Return, and (iii) such
amendment shall not have any adverse effect upon any Taxes or Tax Returns of the
Purchaser or any of its Affiliates (including the Company) for any taxable
period for which the Seller is not required to indemnify the Purchaser pursuant
to this Agreement. Notwithstanding the preceding sentence, the Purchaser agrees
to cooperate with Seller (and shall cause its Affiliates (including the Company)
to cooperate with Seller) in the event that Seller elects to pursue a
redetermination of New York State franchise and/or income Taxes of the Company
for any Pre-Closing Tax Period on a combined unitary basis with the Seller and
certain of its Affiliates, and Purchaser acknowledges that such redetermination
will not have an adverse effect on Purchaser or its Affiliates (including the
Company) in a Post-Closing Tax Period. The Seller shall keep the Purchaser
reasonably informed of developments with respect to any such pursuit of a
redetermination; provided that nothing herein shall require the Seller to
provide the Purchaser with copies of Tax Returns of the Seller or any
affiliated, combined or unitary group of which Seller or any of its Affiliates
are a member, even if such combined, affiliated or unitary group includes the
Company. For purposes of this Section 6.4, a credit shall be treated as having
been received not prior to the time such credit has been applied to reduce Taxes
that would otherwise have been required to be paid.
Section 6.5 Tax Indemnification Procedures.
(a) If a notice of deficiency, proposed adjustment, adjustment,
assessment, audit, examination or other administrative or court proceeding,
suit, dispute or other claim (a "Tax Claim") shall be delivered or sent to or
commenced or initiated against the Company by any Tax authority with respect to
Taxes for which a Purchaser Indemnified Party is entitled to indemnification
from the Seller, the Purchaser Indemnified Party shall promptly notify the
Seller in writing of the Tax Claim, and shall include a copy of the relevant Tax
Claim notice; provided, that the failure by a Purchaser Indemnified Party to
promptly notify the Seller of any such notice shall not release the Seller from
its obligations under this Article VI in whole or in part except to the extent
that the Seller is materially and adversely prejudiced as a consequence of such
failure.
(b) With respect to Tax Claims of or relating to Taxes of the Company
for any Pre-Closing Period, the Seller may, upon written notice to the Purchaser
(such written notice to be provided within thirty (30) days after notice of the
Tax Claim has been given to the Seller), assume and control the defense of such
Tax Claim at its own cost and expense and with its own
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counsel and, subject to the provisions below, may (i) pursue or forego any and
all administrative appeals, proceedings, hearings and conferences with any Tax
authority, (ii) either pay the Tax claimed and xxx for a refund where applicable
Law permits such refund suits or (iii) contest, settle or compromise the Tax
Claim in any permissible manner, and the Purchaser and its Affiliates agree to
cooperate with the Seller in pursuing such contest. If the Seller elects to
assume the defense of any such Tax Claim, notwithstanding anything to the
contrary contained herein, (i) the Seller shall not enter into any settlement
with respect to any such Tax Claim without the Purchaser's (or its Affiliate's)
prior written consent, which consent shall not be unreasonably withheld or
delayed, if such settlement could reasonably be expected to increase the Tax
liability of the Purchaser (or any of its Affiliates) for any taxable period for
which the Seller has not indemnified the Purchaser pursuant to Section 6.3; (ii)
the Seller shall keep the Purchaser reasonably informed of all material
developments and events relating to such Tax Claim (including reasonably
promptly forwarding copies to the Purchaser of any related correspondence and
shall use reasonable efforts to provide the Purchaser with an opportunity to
review and comment on any material correspondence before the Seller sends such
correspondence to any Tax Authority); and (iii) at its own cost and expense, the
Purchaser (or its Affiliate) shall have the right to participate in (but not to
control) the defense of such Tax Claim.
(c) In connection with the contest of any Tax Claim that relates to
(i) any taxable Period beginning after the Closing Date and (ii) any Tax Claim
that the Seller has the ability to control but does not timely elect to control
pursuant to Section 6.5(b), such contest shall be controlled by the Purchaser
(and the Seller shall reimburse Purchaser and its Affiliates for reasonable
out-of-pocket expenses incurred by Purchaser or its Affiliates relating to a Tax
Claim described in clause (ii)), and the Seller agrees to cooperate fully with
the Purchaser and its Affiliates in pursuing such contest; provided, however,
that none of the Purchaser, the Company nor any of their Affiliates shall enter
into any settlement with respect to a Tax Claim relating to a Pre-Closing Period
or Straddle Period without the prior written consent of the Seller, which
consent shall not be unreasonably withheld or delayed. In connection with any
contest that relates to Section 6.5(c)(ii) hereof, the Purchaser or its
Affiliate shall keep the Seller informed of all material developments and the
Seller, at its own cost and expense, shall have the right to participate
(including participation in any relevant meetings) in (but not control) the
defense of such Tax Claim. Nothing contained herein shall be construed as
limiting the Purchaser's (or any the Purchaser Indemnified Party's) right to
indemnification under this Article VI.
(d) The Purchaser and Seller shall jointly control (at each party's
own cost) all proceedings in connection with any Tax Claim relating solely to a
Straddle Period. The parties agree to cooperate with each other in pursuing any
such contest and neither Purchaser nor Seller shall (or shall permit any of
their Affiliates to) settle a Tax Claim relating solely to a Straddle Period
without the other party's prior written consent, which consent shall not be
unreasonably withheld or delayed.
(e) Notwithstanding anything to the contrary in this Agreement, the
procedure for indemnification claims with regard to Taxes of or relating to the
Company shall be governed exclusively by this Section 6.5.
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Section 6.6 Transfer and Similar Taxes. Notwithstanding any provision of
this Agreement to the contrary, the Seller and the Purchaser shall each pay
one-half of all sales, value added, use, privilege, transfer, documentary,
gains, stamp, duties, recording and similar Taxes and fees (including any
penalties, interest or additions) imposed upon any party incurred as a result of
the sale of the Shares (collectively, the "Transfer Taxes"), and the Seller and
the Purchaser agree to jointly prepare and timely file all necessary Tax Returns
and other documentation with respect to, any Transfer Tax.
Section 6.7 Termination of Tax Indemnification Agreements. The Seller
hereby agrees and covenants that any and all Tax Indemnification Agreements that
may have been entered into by the Seller or its Affiliates and the Company shall
be terminated on or before the Closing Date, and no payments to or from the
Company pursuant to any such Tax Indemnification Agreement shall be made after
such termination. Except for powers of attorney listed on Schedule 3.12(a)(ix),
the Seller hereby agrees and covenants that any and all powers of attorney
granted by the Company shall be terminated on or before the Closing Date.
Section 6.8 Conflicts; Survival. Notwithstanding anything to the contrary
contained in this Agreement, each of the provisions set forth in this Article VI
shall survive (30) days after the expiration of applicable statute of
limitations (taking into account all valid extensions) for the applicable Taxes
or Tax Return to which the provision relates, provided, however, in the event
notice of any claim for indemnification under Section 6.3 of this Agreement
shall have been given within the applicable survival period, the provisions that
are the subject of the indemnification claim shall survive with respect to such
claims until such time as such claim is finally resolved. In the event of a
conflict between this Article VI and any other provision of this Agreement, this
Article VI shall govern and control. In the event of a conflict between this
Article VI and Section 5.5 of the License Agreement, Section 5.5 of the License
Agreement shall govern and control.
Section 6.9 Tax Treatment. The parties hereto agree to treat any payment
made pursuant to this Article VI and Article VII as an adjustment to the
Purchase Price for all Tax purposes, except as required under applicable law.
Section 6.10 Assistance and Cooperation. After the Closing, the Seller and
the Purchaser shall, subject to the other provisions of this Article VI:
(a) assist (and cause their respective Affiliates to assist) the other
party in preparing any Tax Returns (including extensions thereof and executing
powers of attorney with respect thereto) which such other party is responsible
for preparing and filing in accordance with this Article VI;
(b) cooperate fully in preparing for any audits of, or disputes with
Tax authorities regarding, any Tax Returns with respect to the Company;
55
(c) promptly make available to each other and to any Tax authority,
upon either party's reasonable request, all information, records, and documents
relating to the Taxes of the Company;
(d) provide timely notice to the other in writing of any pending or
threatened tax audits or assessments with respect to the Company for which the
other may have a liability under this Article VI;
(e) furnish the other with copies of all material correspondence
received from any Tax authority in connection with any Tax audit or information
request with respect to any taxable period for which the other may have a
liability under this Article VI; and
(f) The Purchaser, the Seller, the Company and their Affiliates shall
retain (or cause to be retained) all books and records with respect to Tax
matters pertinent to the Company relating to any Pre-Closing Period or Straddle
Period until the expiration of the relevant statutory period of limitations for
the assessment of Tax. Purchaser shall notify Seller in writing prior to
disposing of any such books and records and, at Seller's request, shall provide
Seller with copies of any such documents.
Section 6.11 Limitations on Actions that Can Increase Pre-Closing Period or
Straddle Period Taxes. Neither the Purchaser nor any of its Affiliates
(including, after the Closing, the Company) shall (i) make or change any Tax
election applicable to any Pre-Closing Period or Straddle Period, provided,
however that the Purchaser and its Affiliates shall be entitled to make an
Election with respect to the Company, (ii) amend or file any Tax Return relating
to a Pre-Closing Period or Straddle Period except as contemplated by this
Article VI, and (iii) except as contemplated pursuant to this Article VI, take
any action relating to a Pre-Closing Period or Straddle Period that results in
any increased Tax liability (including, without limitation, a reduction in a
refund) or reduction of any Tax asset of Seller or the Company in respect of a
Pre-Closing Tax Period or the portion of any Straddle Period ending on the
Closing Date.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
Section 7.1 Survival of Representations and Warranties. Each of the
representations and warranties made by the parties in this Agreement shall
terminate on March 31, 2006; provided, however, that (i) the representations and
warranties contained in Sections 3.5(j), 3.12 and 3.13 (but only with respect to
compliance by the Company and the Seller (with respect to the Business) with
ERISA) shall survive the Closing until thirty (30) days following the expiration
of the applicable statute of limitations (taking into account all valid
extensions), (ii) the representations and warranties contained in Section 3.19,
which shall survive until three years after the Closing Date, and (iii) the
representations and warranties contained in Sections 3.1, 3.2, 3.10(c), 3.21,
4.1, 4.2, 4.6, 4.7 and the third sentence of Section 3.6(a) (with respect to
title to assets) shall survive the Closing and remain in full force and effect
without termination. In the event notice of any claim for indemnification under
Sections 7.2(i) or 7.3(i)
56
of this Agreement shall have been given (within the meaning of Section 9.1)
within the applicable survival period, the representations and warranties that
are the subject of such indemnification claim shall survive with respect to such
claims until such time as such claim is finally resolved. The covenants and
agreements of the parties set forth in this Agreement and the indemnification
obligations of the parties hereunder shall survive indefinitely until their
final fulfillment except as expressly provided herein.
Section 7.2 Indemnification by the Seller.
Subject to the other provisions of this Article VII, the Seller shall
indemnify, defend and hold harmless the Purchaser, the Company, and their
respective Affiliates, the representatives and agents thereof, and each of the
successors and assigns of any of the foregoing (collectively, the "Purchaser
Indemnified Parties") from and against any and all costs, expenses, losses,
damages and liabilities other than costs, expenses, losses, damages and
liabilities relating to Taxes which shall be governed solely by Section 6.3 (but
including reasonable attorneys' fees and expenses) ("Damages") suffered by any
of the Purchaser Indemnified Parties, to the extent resulting from or arising
out of, relating to or incurred with respect to (without duplication of any
amounts paid pursuant to Article VI hereof or Article XIII of the License
Agreement):
(i) without duplication of any amounts paid pursuant to clauses
(iii), (iv) or (v) of Section 7.2, any breach of any representation or warranty
of the Seller contained in this Agreement (other than with respect to any
representation or warranty set forth in Section 3.5(e) (relating solely to
Taxes), Section 3.5(j) or Section 3.12);
(ii) any breach of any covenant or agreement of the Seller
contained in this Agreement other than any covenant or agreement contained in
Article VI;
(iii) without duplication of any amounts paid pursuant to clause
(i) of Section 7.2 or Section 6.3, any liabilities to the extent arising out of
or resulting from the Mortgage LLC, the Mortgage LLC Contracts or the
termination thereof, except for any liabilities to the extent arising out of any
action taken or omitted to be taken by the Purchaser Indemnified Parties or any
of their Affiliates not in compliance with the provisions of Section 5.10(a);
(iv) without duplication of any amounts paid pursuant to clauses
(i) or (v) of Section 7.2, any Indemnified Benefits Liabilities and the Plans;
(v) without duplication of any amounts paid pursuant to clauses
(i), (iii) or (iv) of Section 7.2 and subject to Schedule 7.2(v), any
liabilities with respect to any litigation, legal action, arbitration,
proceeding, demand or claim or known investigation arising out of or resulting
from the conduct of the Business or any other action or failure to act by the
Company at or prior to the Closing, excluding any such liabilities (A) included
in the final calculation of the Closing Date Indebtedness or the Closing Date
Working Capital or (B) arising out (1) the failure of the Company or Seller to
obtain any consent or approval or provide notice under any agreement or Permit
to which the Company or the Business is a party or by which any of the
57
Company's assets are bound or (2) the loss of a benefit under any agreement or
Permit to which the Company or the Business is a party or by which any of the
Company's assets are bound, in each case in connection with the consummation of
the transactions contemplated hereby or compliance by the Seller with any of the
provisions hereof (none of which liabilities under clause (B) of this clause
(v), whether or not related to Litigation, shall be indemnifiable by Seller
under this clause (v));
(vi) the Excluded Business; and
(vii) without duplication of any amounts paid pursuant to clauses
(i) or (v) of Section 7.2 or Section 6.3, the Excluded Companies.
Notwithstanding anything in this Agreement to the contrary, it is
hereby understood that for purposes of this Section 7.2, (i) all Seller Material
Adverse Effect exceptions and qualifications set forth in any representation or
warranty (except Section 3.5(a)) of the Seller in this Agreement and (ii) the
knowledge qualifications included in (A) the second sentence of Section 3.6(a),
(B) the first sentence of Section 3.10(a) and (C) Section 3.19 and (iii) the
exception contained in Section 3.19(c) for information included in Schedule
3.19(a), shall be disregarded.
Section 7.3 Indemnification by the Purchaser.
Subject to the other provisions of this Article VII, the Purchaser
shall indemnify, defend and hold harmless the Seller and its Affiliates, the
representatives and agents thereof, and each of the successors and assigns of
any of the foregoing (collectively, the "Seller Indemnified Parties"), from and
against any Damages suffered by the Seller Indemnified Parties resulting from,
arising out of, relating to or incurred with respect to (without duplication of
any amounts paid pursuant to Article VI of this Agreement or Article XIII of the
License Agreement):
(i) any breach of any representation or warranty of the Purchaser
contained in this Agreement;
(ii) any breach of any covenant or agreement of the Purchaser
contained in this Agreement other than any covenant or agreement contained in
Article VI; and
(iii) subject to Schedule 7.3(iii), the conduct of the Purchaser
Business after the Closing or any action, omission or condition existing with
respect thereto at any time after the Closing (except to the extent that the
Purchaser Indemnified Parties are entitled to indemnification therefor under
Section 7.2 without giving effect to the limitations included in Section 7.4,
and except to the extent Seller is responsible for any such Damages under the
Transition Services Agreement).
Notwithstanding anything in this Agreement to the contrary, it is hereby
understood that for purposes of this Section 7.3, all Purchaser Material Adverse
Effect exceptions and qualifications
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set forth in any representation or warranty of the Purchaser in this Agreement
shall be disregarded.
Section 7.4 Limitations on Indemnification. Anything contained in this
Agreement to the contrary notwithstanding:
(a) in no event shall the Seller be liable for, or required to make
any payment:
(i) pursuant to clause (i) of Section 7.2 (other than with
respect to any breach of any of the representations and warranties of Seller set
forth in Sections 3.1, 3.2, 3.10(c), 3.19, 3.21 and 3.22, which shall not be
subject to the Seller Deductible Amount (as defined below)) for any
indemnifiable Damages suffered by the Purchaser Indemnified Parties unless and
until the aggregate dollar amount of all such Damages, taken together with the
aggregate dollar amount of all indemnifiable Damages suffered by the Licensee
Indemnified Parties (as such term is defined in the License Agreement) under
Section 13.2(i) with respect to breaches of representation or warranties of the
License Agreement, exceeds $1,000,000 (the "Seller Deductible Amount"), and then
only to the extent of such excess, provided that Damages indemnified hereunder
in respect of claims made by the Purchaser Indemnified Parties with respect to
breaches of any of the representations and warranties set forth in set forth in
Sections 3.1, 3.2, 3.10(c), 3.19, 3.21 and 3.22 and in Section 8.1(a) of the
License Agreement shall be disregarded for purposes of determining whether the
aggregate Damages exceed the Seller Deductible Amount as described above.
(ii) pursuant to clause (i) of Section 7.2 (other than with
respect to breaches of any of the representations and warranties set forth in
Section 3.1, 3.2, 3.21 and 3.22, which shall not be subject to the limitation
set forth in this Section 7.4(a)(ii)) for any indemnifiable Damages suffered by
the Purchaser Indemnified Parties in excess of $30,000,000 (the "Seller Cap
Amount");
(iii) pursuant to clause (i) of Section 7.2 for any indemnifiable
Damages suffered by the Purchaser Indemnified Parties to the extent such Damages
are also indemnifiable under any of clauses (iii), (iv), (v) and (vi) of Section
7.2;
(iv) with respect to any item or amount to the extent a reduction
in the Share Purchase Price was made because such item or amount was included in
the definition of "Indebtedness" for purposes of calculating the Estimated
Indebtedness or the Closing Date Indebtedness or was included in the definition
of "Current Liabilities" for purposes of calculating the Estimated Working
Capital or the Closing Date Working Capital, and any such items or amounts shall
be excluded in determining whether the aggregate Damages exceed the Seller
Deductible Amount pursuant to Section 7.4(a)(i) or the Seller Cap Amount for
purposes of Section 7.4(a)(ii);
(v) pursuant to clause (i) of Section 7.2 with respect to any
breach of any representation or warranty of the Sellers contained in Sections
3.1, 3.2, 3.21 and 3.22 for any
59
indemnifiable Damages suffered by the Purchaser Indemnified Parties in excess of
one hundred percent (100%) of the Share Purchase Price;
(vi) pursuant to Section 7.2 for any indemnifiable Damages
suffered by the Purchaser Indemnified Parties (A) to the extent arising out of
any indemnifiable matter unless a claim therefor is asserted specifying in good
faith, in reasonable detail and in writing by the applicable Purchaser
Indemnified Parties within the time period that such indemnifiable matter
survives in accordance with Section 7.1, failing which such claim shall be
waived and extinguished, (B) to the extent arising out of any legislation not in
force at Closing or any change of Law or administrative practice, which takes
effect retroactively to periods prior to the Closing, (C) which are merely
estimates of Damages and not actual Damages or (D) to the extent that the
indemnifiable Damages have been incurred as a result of any failure by the
Purchaser Indemnified Parties to mitigate such Damages as required by applicable
law;
(b) in no event shall the Purchaser be liable for, or required to make
any payment pursuant to,
(i) clause (i) of Section 7.3 (other than with respect to any
breach any of the representations and warranties of the Purchaser set forth in
Section 4.1, 4.2, 4.6 and 4.7 which shall not be subject to the Purchaser
Deductible Amount (as defined below)) for any indemnifiable Damages suffered by
the Seller Indemnified Parties unless and until the aggregate dollar amount of
all such Damages, taken together with the aggregate dollar amount of all
indemnifiable Damages suffered by the Licensor Indemnified Parties (as such term
is defined in the License Agreement) under Section 13.1(i) with respect to
breaches of representation or warranties of the License Agreement, exceeds
$1,000,000 (the "Purchaser Deductible Amount"), and then only to the extent of
such excess, provided that Damages indemnified hereunder in respect of claims
made by the Seller Indemnified Parties with respect to breaches of any of the
representations or warranties set forth in Section 4.1, 4.2, 4.6 and 4.7, and in
Section 8.2(a) of the License Agreement shall be disregarded for purposes of
determining whether the aggregate Damages exceed the Purchaser Deductible Amount
as described above; and
(ii) clause (i) of Section 7.3 (other than with respect to
breaches of any of the representations and warranties set forth in Section 4.1,
4.2, 4.6 and 4.7, which shall not be subject to the limitation set forth in this
Section 7.4(b)(ii)) for any indemnifiable Damages suffered by the Seller
Indemnified Parties in excess of $30,000,000.
(iii) pursuant to clause (i) of Section 7.3 with respect to any
breach of any representation or warranty of the Sellers contained in Sections
4.1, 4.2, 4.6 and 4.7 for any indemnifiable Damages suffered by the Seller
Indemnified Parties in excess of one hundred percent (100%) of the Share
Purchase Price;
(iv) pursuant to Section 7.3 for any indemnifiable Damages
suffered by the Seller Indemnified Parties (A) which are merely estimates of
Damages and not actual Damages or (B) to the extent that the indemnifiable
Damages have been incurred as a result of
60
any failure by the Purchaser Indemnified Parties to mitigate such Damages as
required by applicable law;
(c) In connection with this Section 7.4, the Seller hereby (i) waives
any right of contribution or indemnification or similar right they may have
against the Company any amounts paid by the Seller hereunder and (ii) waives any
defense based on fault of the Company, in each case solely to the extent arising
out of or resulting from events, circumstances, actions or failures to act
occurring or existing prior to the Closing.
Section 7.5 Notice and Resolution of Claim
(a) The Seller Indemnified Parties or the Purchaser Indemnified
Parties to be indemnified hereunder (each, an "Indemnified Party"), as the case
may be, shall promptly give written notice to the indemnifying party (the
"Indemnifying Party") after obtaining knowledge of any third party claim against
the Indemnified Party (including, in the case of the Purchaser, any such claim
against the Company of the type generally covered by errors and omissions
insurance policies) as to which recovery may be sought against the Indemnifying
Party because of the indemnities set forth in Sections 7.2 or 7.3, specifying in
good faith and in reasonable detail the third party claim including, to the
extent reasonably practicable, an estimate of Damages claimed, and the basis for
indemnification; provided, that the failure of an Indemnified Party promptly to
notify the Indemnifying Party of any such matter shall not release the
Indemnifying Party, in whole or in part, from its obligations under this Article
VII except to the extent the Indemnified Party's failure to so notify in breach
of this Section 7.5 actually prejudices the Indemnifying Party. The Indemnifying
Party shall have the right to assume the defense of any such third party claim
at its own cost and expense with counsel selected by the Indemnifying Party (as
to which the Indemnified Party has not promptly and reasonably objected) by
giving written notice to the Indemnified Party of its intention to assume such
defense within the lesser of (i) thirty (30) days after notice thereof has been
given to the Indemnifying Party, and (ii) five (5) Business Days prior to the
date required to answer or respond to any such claim (the "Election Period").
Commencing on the beginning of and during the Election Period, the Indemnified
Party agrees to make available to the Indemnifying Party and its authorized
representatives the information relied upon by the Indemnified Party to
substantiate the third party claim, as well as any other information bearing
thereon reasonably requested by the Indemnifying Party. If the Indemnifying
Party fails to notify the Indemnified Party of its election to assume the
defense of any such third party claim within the Election Period, then the
Indemnified Party shall defend or settle such third party claim in a diligent
and commercially reasonable manner and in good faith and may settle such third
party claim on such terms as the Indemnified Party may deem appropriate;
provided, however, that such Indemnified Party shall not, in defense of such a
third party claim, be permitted to admit any liability with respect to, or
consent to the entry of any judgment or enter into any settlement with respect
to, any such third party claim without the prior written consent of the
Indemnifying Party (which consent shall not be unreasonably withheld or
delayed), and the Indemnifying Party will not be subject to any liability for
any such admission, settlement, compromise, discharge or consent to judgment
made by an Indemnified Party without such prior written consent of the
Indemnifying Party. An
61
Indemnifying Party may participate in (but not control) any defense assumed by
an Indemnified Party pursuant to this Section 7.5(a), and an Indemnifying Party
will bear its own costs and expenses with respect to such participation.
Notwithstanding the foregoing, an Indemnifying Party shall have the right to
assume the defense of such third party claim at any time prior to settlement,
compromise or final determination thereof; provided, however, that an
Indemnifying Party shall pay all fees and expenses incurred by an Indemnified
Party prior to such Indemnifying Party's assumption of such defense.
(b) If the Indemnifying Party assumes the defense of any such third
party claim, the obligations of the Indemnifying Party under this Article VII
shall include taking all steps deemed necessary by the Indemnifying Party,
acting in good faith, in the investigation, defense or settlement of such third
party claim (including the retention of legal counsel) and the Indemnifying
Party shall, as a condition to assuming such defense, acknowledge that it will
hold the Indemnified Party harmless from and against any and all Damages caused
by or arising out of any settlement approved by the Indemnifying Party or any
judgment in such claim (subject to the applicable deductibles, caps and
limitations set forth in Section 7.4). The Indemnifying Party shall notify the
Indemnified Party as to the existence of any offers to settle such third party
claim, and the Indemnifying Party shall not settle a third party claim if to the
knowledge of the Indemnifying Party (after notifying and consulting with the
Indemnified Party) such action would reasonably be expected to have a materially
adverse impact on the Indemnified Party or the Business; otherwise the
Indemnifying Party shall have full control of such defense and settlement,
including any compromise or settlement thereof; provided, however, that such
Indemnifying Party shall permit the Indemnified Party to participate in (but not
control) such defense or settlement through separate counsel chosen by such
Indemnified Party, with the fees and expenses of such participation and separate
counsel borne solely by such Indemnified Party. The Indemnifying Party shall
not, in the defense of a third party claim, make any payment of any of such
claims, consent to the entry of any judgment or enter into any settlement with
respect to any third party claim without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld or delayed)
unless the judgment or proposed settlement (i) involves only the payment of
money damages and does not involve any finding or admission of any violation of
law, (ii) includes, as an unconditional term thereof, a release of such
Indemnified Party given by the claimant or the plaintiff from any liabilities
arising from such third party claim, and (iii) does not impose an injunction or
other equitable relief, directly or indirectly, upon such Indemnified Party or
result in an admission of any wrongdoing by the Indemnified Party. The
Indemnified Party shall cooperate with the Indemnifying Party in the defense or
settlement thereof, and the Indemnifying Party shall reimburse the Indemnified
Party for all its reasonable out-of-pocket expenses in connection therewith.
(c) Indemnified Parties and Indemnifying Parties shall cooperate
reasonably in all aspects of any investigation, defense, pre-trial activities,
trial compromise, settlement or discharge of any third party claim, including,
without limitation, by providing the other party with reasonable access to
employees, directors and officers (as witnesses) and other information.
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(d) With respect to any Damages as to which an Indemnified Party has
the right to receive Recoveries, the Indemnified Party shall at its option
either: (i) use commercially reasonable efforts to collect, at the Indemnifying
Party's expense, any such Recoveries or (ii) assign any such right to receive
Recoveries to the Indemnifying Party, to the extent any such claim is capable of
assignment and without making any representation as to or bearing any
responsibility for the effectiveness of such assignment. To the extent the
Indemnified Party collects any Recoveries with respect to Damages, the amount of
Damages to be paid by the Indemnifying Party shall be reduced by the amount of
Recoveries so collected. In the event that the Indemnified Party collects any
Recoveries with respect to Damages as to which the Indemnified Party previously
received payments from the Indemnifying Party pursuant to this Article VII, the
Indemnified Party shall transfer to the Indemnifying Party the amount of such
Recoveries collected, up to the amount of Damages paid in connection therewith
by the Indemnifying Party.
(e) Notwithstanding anything to the contrary in this Agreement,
Section 6.5 shall apply exclusively to all third party claims with regard to
Taxes of or relating to the Company.
Section 7.6 Indemnity Payments. All indemnity payments owed under this
Article VII ("Indemnity Payments"), shall be paid in immediately available funds
within ten (10) Business Days after final determination (which is final in the
sense that it is no longer subject to appeal) and written request therefor by
the Indemnified Party. All such Indemnity Payments shall be made to the accounts
and in the manner specified in writing by the party entitled to such Indemnity
Payments. Any amounts that are not paid within such ten day period shall accrue
interest at an annual rate of three percent (3%).
Section 7.7 Exclusive Remedy. Subject to Article VI, except to the extent
arising from any fraud, the indemnification provided by this Article VII shall
be the sole and exclusive remedy in respect of (i) any breach of any
representation, warranty, agreement or covenant contained in this Agreement and
(ii) the transactions contemplated by this Agreement (other than the License
Agreement and the transactions contemplated thereby). The forgoing shall not
limit the parties' right to obtain specific performance in accordance with
Section 9.10 hereof with respect to breaches of agreement or covenant contained
in this Agreement. In furtherance of the foregoing, each party hereby waives, to
the fullest extent permissible under applicable Law, and agrees in any case not
to assert in any action or proceeding of any kind, any and all rights, claims
and causes of action it may now or hereafter have (including any such rights,
claims or causes of action arising under or based upon common law or other Law)
against any Indemnifying Party for any matter described in the previous sentence
other than claims for indemnification asserted as permitted by and in accordance
with the provisions set forth in this Article VI and Article VII.
ARTICLE VIII
GUARANTEE
Section 8.1 Guarantee. Purchaser Guarantor hereby unconditionally and
absolutely guarantees (this "Guarantee"), as a primary obligor and not merely as
surety, the full and punctual payment and performance of all debts, obligations
and liabilities, whether such
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obligations are direct or indirect, absolute or contingent, now existing or
subsequently arising, primary or secondary, now due or hereafter falling due,
monetary or otherwise, of Purchaser or any Permitted Assignee under this
Agreement, together with all costs of collection, compromise or enforcement,
including reasonable attorneys' fees, incurred with respect to any such debt,
obligations or liabilities, or with respect to this or any other guaranty of any
of them, or with respect to a proceeding under the federal bankruptcy laws or
any moratorium, insolvency, receivership, arrangement or reorganization law or
an assignment for the benefit of creditors concerning Purchaser Guarantor,
Purchaser or any Permitted Assignee, together with interest on all such costs of
collection, compromise or enforcement from the date arising (collectively, the
"Obligations"). Purchaser Guarantor further agrees that its liability under this
Guarantee shall not be discharged, impaired, diminished or otherwise affected by
any (i) extension, settlement, modification, compromise, waiver, release or
renewal of any Obligation, in whole or in part or (ii) any modification or
amendment or supplement to this Agreement. This Guarantee is a continuing
guarantee, which shall apply to all Obligations which now exist or subsequently
arise, whether or not notice of such Obligations is given to Purchaser
Guarantor, whether or not any or all prior Obligations had been fully paid,
performed and observed before any such Obligation arose, and notwithstanding
Purchaser Guarantor's dissolution
Section 8.2 Waiver of Notices, Etc. Purchaser Guarantor agrees that Seller
shall not be required to give Purchaser Guarantor any notice pursuant to this
Guarantee, and that no failure to give any notice shall discharge, impair,
diminish or otherwise affect the liability which Purchaser Guarantor would have
had under this Guarantee if notice had been given. Purchaser Guarantor waives:
(i) notice of acceptance of this Guarantee, (ii) notice of the incurring of
additional or increased Obligations, (iii) notice of the application of any
payment, transfer or recovery from security, (iv) presentment, demand and
protest of any instrument, and notice thereof, (v) notice of nonpayment or other
default under this Guarantee or under any Obligation, (vi) any right to demand
public foreclosure sale of any security, (vii) notice of foreclosure, (viii)
notice of any release, discharge, modification or failure to obtain any security
for any of the Obligations, (ix) notice of any waiver by Seller of any of the
terms, covenants or conditions of any of the Obligations, (x) notice of the
granting of any indulgence or extension of time to Purchaser or any Permitted
Assignee, (xi) notice of any modification, supplement or extension of any of the
Obligations, (xii) notice of any agreement or arrangement with Purchaser, any
Permitted Assignee or any other Person, (xiii) any right to exoneration or to
require election of remedies, (xiv) all suretyship defenses and (xv) any other
defenses or notice requirements which may exist at law or in equity. The
obligations of Purchaser Guarantor under this Article VIII shall not be affected
by (A) the failure of Seller to assert any claim or demand or to enforce any
right or remedy against Purchaser or any Permitted Assignee under the provisions
of this Agreement or (B) any rescission, waiver, amendment or modification of
any of the terms or provisions of this Agreement. Purchaser Guarantor further
agrees that this Guarantee constitutes a guarantee of payment and performance
when due and not of collection and waives any right to require that any resort
be had by Seller to any other guarantee or any security held for payment or
performance of the Obligations.
64
Section 8.3 Reinstatement. Purchaser Guarantor agrees that this Guarantee
shall continue to be effective or be reinstated, as the case may be, if at any
time payment or performance, or any part thereof, on any Obligation (including
any payment pursuant to this Guarantee) is rescinded or must otherwise be
restored by Seller upon the bankruptcy or reorganization of Purchaser or any
Permitted Assignee or otherwise.
Section 8.4 Waiver of Subrogation; Subordination. Purchaser Guarantor shall
have no right of subrogation, reimbursement or indemnity whatsoever, nor any
right of recourse to security for the Obligations, except when and so long as
all of the Obligations have been fully paid, performed and observed, and have
not been reinstated by reason of the avoidance of any transfer, the return of
any payment, or otherwise. All present and future debts, obligations and
liabilities of Purchaser or any Permitted Assignee to Purchaser Guarantor are
hereby waived and postponed in favor of and subordinated to the full payment,
performance and observance of the Obligations, and Purchaser Guarantor agrees to
assign and deliver to Seller on request, as security for this Guarantee, (a) any
such debts, obligations or liabilities, (b) any instruments or documents
evidencing the same, (c) any security therefor and (d) any payments or transfers
with respect thereto, or recoveries on security therefor, received by Purchaser
Guarantor after default under any of the Obligations.
Section 8.5 Successors and Assigns. The benefit of this Guarantee shall run
to Seller and its heirs, personal representatives, successors and assigns. The
burden of this Guarantee shall bind Purchaser Guarantor and its heirs, personal
representatives, successors and assigns. This Guarantee shall apply to the
Obligations of Purchaser and any Permitted Assignee and of such Person's heirs,
personal representatives, successors and assigns, including the successor to any
such Person upon any merger, consolidation, liquidation or dissolution of such
Person and, including any transferee of all or substantially all of the assets
of Purchaser or any Permitted Assignee to any Person which carries on the
business of Purchaser or any such Permitted Assignee.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices or other communications hereunder shall be
deemed to have been duly given and made if in writing and if served by personal
delivery upon the party for whom it is intended, if delivered by registered or
certified mail, return receipt requested, or by a national courier service, or
if sent by facsimile. Any such notice shall be deemed delivered (a) on the date
delivered if by personal delivery, (b) on the date upon which receipt is signed
or delivery is made, (c) on the date upon which the return receipt is signed or
delivery is refused or the notice is designated by the postal authorities as not
deliverable, as the case may be, if mailed by registered or certified mail, (d)
on the next succeeding Business Day if sent by national courier service, or (e)
on the date sent by facsimile if the appropriate facsimile confirmation is
received by the sender.
65
To the Seller:
Sotheby's Holdings, Inc.
0000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxxxx & Xxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: X.X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To the Purchaser or Purchaser Guarantor:
Cendant Corporation
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
NRT Incorporated
000 Xxxxxxxxx Xxxx
X.X. Xxx 000
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
66
With a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxx, Esq.
Xxxxxx X. Xxxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
Section 9.2 Amendment; Waiver. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Purchaser and the Seller or in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
Section 9.3 Assignment. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other parties; provided that the either party may assign any of its rights
and obligations hereunder (other than the right to purchase any of the Shares),
in whole or in part, to any Subsidiary for so long as it remains a Subsidiary,
without obtaining the consent of the other party, and any such assignment shall
not relieve the assigning party of its obligations hereunder; provided, further,
that any such assignment shall not increase the indemnifiable Damages to which
such assignee may seek indemnifications or otherwise increase any obligations
hereunder of the non-assigning party.
Section 9.4 Entire Agreement. This Agreement (including all Exhibits and
Disclosure Schedules which are an integral part hereof), the Related Agreements
and the other agreements, documents and instruments delivered in connection
herewith contain the entire agreement between the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters.
Section 9.5 Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties and their respective successors and permitted
assigns. Nothing in this Agreement, express or implied, is intended to confer
upon any Person other than the Purchaser, the Purchaser Indemnified Parties, the
Seller, the Seller Indemnified Parties, or their successors or permitted
assigns, any rights or remedies under or by reason of this Agreement.
Section 9.6 Expenses. All costs and expenses incurred by the Purchaser in
connection with this Agreement and the transactions contemplated hereby shall be
borne by the Purchaser, and all costs and expenses incurred by the Seller shall
be borne by the Seller. Notwithstanding the foregoing, the filing costs incurred
in connection with any filing under the
67
HSR Act and any other required antitrust filings with any Governmental Authority
shall be shared equally between the Purchaser and the Seller.
Section 9.7 Governing Law; Jurisdiction; Service of Process. THIS AGREEMENT
HAS BEEN NEGOTIATED, EXECUTED AND DELIVERED IN THE STATE OF NEW YORK AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN SECTIONS
5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW). EACH PARTY HEREBY
IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MUST BE
BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX LOCATED IN NEW YORK CITY OR OF
THE UNITED STATE OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY
EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE
PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM
THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS BY NOTICE
IN THE MANNER SPECIFIED IN SECTION 9.1. EACH PARTY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY SUCH ACTION
OR PROCEEDING.
Section 9.8 Limitations of Remedies. None of the parties hereto shall be
liable to any other party for indirect, special, incidental, consequential,
exemplary or punitive damages, or for lost profits, unrealized expectations or
other similar terms, claimed by such other party resulting from such first
party's breach of its obligations, agreements, representations or warranties
hereunder, provided that nothing in this Section 9.8 shall preclude any recovery
by an Indemnified Party against an Indemnifying Party for third party claims.
Section 9.9 No Implied Warranties. In connection with the transactions
contemplated hereby, except as expressly provided in Article III, THE SELLER
MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED OR
STATUTORY, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE.
The Seller shall not be liable in respect of the accuracy or completeness of any
information provided to the Purchaser or its Affiliates in connection with this
Agreement. Without limiting the foregoing, the Purchaser acknowledges that the
Purchaser or its Affiliates, together with their advisors, have made their own
investigation of the Company and the Business (including the Excluded Assets)
and are not relying on any representation or warranty whatsoever as to the
prospects (financial or otherwise), or the viability or likelihood of success,
of the Business, or upon any projections provided or represented by the Seller
or any of the information furnished in any "data room" assembled by or on behalf
of the Seller or in any management presentation or interview or in any other
materials
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provided by or on behalf of the Seller, except in each case as expressly
provided in this Agreement.
Section 9.10 Specific Performance. The parties agree that if any of the
provisions of this Agreement are not performed in accordance with their specific
terms or are otherwise breached, irreparable damage could reasonably be expected
to occur, no adequate remedy at Law would exist and damages would be difficult
to determine, and that the parties shall be entitled to specific performance of
the terms of this Agreement.
Section 9.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same agreement.
Section 9.12 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
unless the provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions hereof.
Section 9.13 Headings. The heading references herein and in the table of
contents hereto are for convenience purposes only, do not constitute a part of
this Agreement, and shall not be deemed to limit or affect any of the provisions
of this Agreement.
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IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the date first written above.
NRT INCORPORATED
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
CENDANT CORPORATION
By: /s/ X. Xxxxxxxxx Xxxxxxxx, IV
-----------------------------------
Name: X. Xxxxxxxxx Xxxxxxxx, IV
Title: Senior Vice President
SOTHEBY'S HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President and
Chief Financial Officer
