EXHIBIT 2.1
-----------
ASSET PURCHASE AGREEMENT
Between
XXXXXXX INFORMATION, LLC
and
THE BUREAU OF NATIONAL AFFAIRS, INC.
Dated as of November 3, 2000
Table of Contents
ARTICLE I. PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES.....1
Section 1.1. Sale and Transfer of Assets................................1
Section 1.2. Excluded Assets............................................2
Section 1.3. Assumption of Liabilities..................................2
Section 1.4. Excluded Liabilities.......................................2
ARTICLE II. PURCHASE PRICE.............................................3
Section 2.1. Purchase Price.............................................3
Section 2.2. Balance Sheets; Cash Transfers at Closing;
Post-Closing Adjustments...................................4
Section 2.3. Purchase Price Allocation..................................8
ARTICLE III. CLOSING....................................................8
Section 3.1. General....................................................8
Section 3.2. Deliveries by Seller at the Closing........................9
Section 3.3. Deliveries by Buyer at the Closing.........................10
Section 3.4. Escrow Agreement...........................................11
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER...................11
Section 4.1. Due Formation and Authority of Seller......................11
Section 4.2. Authority to Execute and Perform Agreements................11
Section 4.3. Capitalization; Subsidiaries...............................11
Section 4.4. No Conflict................................................12
Section 4.5. Financial Statements.......................................12
Section 4.6. Title and Liens............................................13
Section 4.7. Acquired Assets; Title to the Acquired Assets..............13
Section 4.8. Brokers' or Finders' Fee...................................13
Section 4.9. Agreements and Contracts...................................13
Section 4.10. Consent and Approvals......................................14
Section 4.11. Absence of Litigation......................................14
Section 4.12. Intellectual Property Assets...............................14
(a) Intellectual Property Assets..........................14
(b) Intellectual Property Assets Necessary
for the Business......................................15
(c) Patents .............................................15
(d) Marks .............................................15
(e) Copyrights............................................15
(f) Trade Secrets.........................................16
(g) Proprietary Software..................................16
Section 4.13. No Libelous, Obscene or Injurious Material.................16
Section 4.14. Compliance.................................................16
Section 4.15. Exclusivity of Representations.............................17
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER....................17
Section 5.1. Due Incorporation and Authority of Buyer...................17
Section 5.2. Authority to Execute and Perform Agreements................17
Section 5.3. No Conflict................................................17
Section 5.4. Consents and Approvals.....................................18
Section 5.5. Absence of Litigation......................................18
Section 5.6. Financial Ability..........................................18
Section 5.7. Brokers....................................................18
ARTICLE VI. CONDITIONS TO CLOSING......................................18
Section 6.1. Conditions to Buyer's Obligations..........................18
(a) Representations and Warranties........................18
(b) Covenants.............................................18
(c) Material Adverse Change...............................19
(d) Consents..............................................19
(e) No Proceeding or Litigation...........................19
(f) Certificates; Documents...............................19
(g) Employment Agreements.................................19
(h) Transition Services Agreement.........................19
(i) Author Agreement......................................19
Section 6.2. Conditions to Seller's Obligations.........................19
(a) Representations and Warranties........................19
(b) Covenants.............................................19
(c) Consents..............................................19
(d) No Proceeding or Litigation...........................20
(e) Certificates; Documents; Payment......................20
(f) Transition Services Agreement.........................20
Section 6.3. Waiver of Conditions.......................................20
ARTICLE VII. COVENANTS..................................................20
Section 7.1. Conduct of Business........................................20
Section 7.2. Confidentiality of Seller..................................21
Section 7.3. Confidentiality of Buyer...................................21
Section 7.4. Maintenance of, and Access to, Records.....................21
Section 7.5. Agreement to Comply........................................21
Section 7.6. Access Prior to the Closing Date...........................22
Section 7.7. Accounts Receivable........................................22
Section 7.8. Name Change Filings........................................22
Section 7.9. Further Assurances.........................................22
Section 7.10. Expenses; Transfer Taxes...................................23
Section 7.11. Bulk Transfer Laws.........................................23
Section 7.12. Press Releases and Disclosure..............................23
Section 7.13. Cooperation in the Defense of Claims.......................24
Section 7.14. Regulatory Approvals.......................................24
Section 7.15. Employee Matters...........................................24
(a) Offer to Hire.........................................24
(b) Transferred Employees.................................25
(c) Terms of Employment...................................25
(d) Assumed Plans.........................................25
(e) ERISA.................................................26
(f) COBRA.................................................27
(g) Vacation and Sick Leave...............................27
(h) Effect of Transaction.................................27
Section 7.16. Seller's Non-Competition and Non-Solicitation..............27
(a) Non-Competition...................................27
(b) Non-Solicitation..................................28
ARTICLE VIII. INDEMNIFICATION............................................28
Section 8.1. Indemnification by Buyer...................................28
Section 8.2. Indemnification by Seller..................................29
Section 8.3. Notification of Claims.....................................29
Section 8.4. Exclusive Remedies.........................................30
Section 8.5. Survival...................................................31
ARTICLE IX. TERMINATION................................................31
Section 9.1. Termination................................................31
(a) Mutual Consent....................................31
(b) Closing Date......................................31
(c) Seller Misrepresentation or Breach................31
(d) Buyer Misrepresentation or Breach.................31
(e) Court Order.......................................31
Section 9.2. Effect of Termination......................................31
ARTICLE X. MISCELLANEOUS..............................................32
Section 10.1. Amendments.................................................32
Section 10.2. Entire Agreement...........................................32
Section 10.3. Governing Law..............................................32
Section 10.4. Notices....................................................32
Section 10.5. Counterparts...............................................33
Section 10.6. Assignment.................................................33
Section 10.7. Waivers....................................................33
Section 10.8. Survival of Covenants......................................34
Section 10.9. Schedules, Addenda and Exhibits............................34
Section 10.10. Headings...................................................34
Section 10.11. Gender and Number..........................................34
Section 10.12. Equitable Remedies.........................................34
Section 10.13. Seller's Knowledge.........................................34
INDEX OF EXHIBITS
Exhibit A - Xxxx of Sale
Exhibit B - Opinion of Counsel to Seller
Exhibit C-1 - Xxxxx X. Xxxxxx Employment Agreement
Exhibit C-2 - Xxxxxxxx Xxxxxx Employment Agreement
Exhibit D - Opinion of Counsel to Buyer
Exhibit E - Closing Balance Sheet
Exhibit F - Hypothetical Calculations of GEBT
Exhibit G - Agreed Allocation of Purchase Price and Assumed Liabilities
Exhibit H - Escrow Agreement
Exhibit I - Seller's and Escrow Agent's Wire Transfer Instructions
Exhibit J - Transition Services Agreement
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of November
3, 2000, is between The Bureau of National Affairs, Inc., a Delaware corporation
("Buyer"), and Xxxxxxx Information, LLC, a New Hampshire limited liability
company ("Seller").
W I T N E S S E T H:
WHEREAS, Seller currently conducts, directly and through Xxxxxxx
Professional Publishing, LLC, a New York limited liability company ("KPP-NY"),
the business of publishing, producing, selling, marketing, arranging, and
promoting professional and industry-targeted newsletters and magazines,
tradeshows, expositions, conferences, seminars, market studies and information,
advisory and research services, electronic/internet products and other similar
activities for and about the management consulting, investor relations and
executive recruiting industries (collectively, the "Business") and desires to
sell substantially all of its assets, properties, rights and interests and all
of the outstanding membership interests of KPP-NY; and
WHEREAS, Buyer desires to purchase and acquire from Seller, upon the
terms and subject to the conditions hereinafter set forth, such assets,
properties, rights and interests, in consideration of a purchase price to be
paid by Buyer and the assumption by Buyer of certain liabilities and obligations
of Seller as hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Buyer and Seller, Buyer and
Seller agree as follows:
ARTICLE I.
PURCHASE AND SALE OF ASSETS;
ASSUMPTION OF LIABILITIES
Section 1.1. Sale and Transfer of Assets.
(a) On the terms and subject to the conditions set forth in this Agreement,
at the Closing and effective as of the Closing Date as hereinafter defined,
except with respect to the Excluded Assets (as defined below), Buyer shall
purchase and acquire from Seller, and Seller shall sell, transfer, convey,
assign and deliver to Buyer, all of Seller's right, title and interest of every
nature (absolute, contingent, fee, leasehold, statutory, contractual or
otherwise) in and to all of its assets, properties and businesses of every kind,
character, type or description, whether real, personal, mixed, tangible or
intangible and wherever situated, as such assets shall exist on the Closing Date
(as defined below) including but not limited to: the Intellectual Property
Assets (as defined in Section 4.12); furniture, fixtures and equipment
(including office furniture, machinery, equipment, computer hardware and
software systems); libraries, plates, films, mechanicals, logos, proofs, masters
and other artwork and graphic material; rights under existing agreements
(including consulting and employment agreements, publications contracts and
conference contracts); leasehold rights; supplies and inventories; books and
records; promotional materials; licenses and permits; electronic/internet
products and rights; works in process; accounts receivable; prepaid expenses;
all of the outstanding membership interests of KPP-NY; and all other assets used
in the operation of the Business (collectively, the "Acquired Assets").
2
(b) Nothing contained in this Agreement shall be construed as an attempt to
agree to assign any contract, lease, agreement, license or permit which is at
law non-assignable without the consent of any other party thereto, unless such
consent shall have been given. The parties shall use all commercially reasonable
efforts to obtain all such necessary consents. In order, however, that the full
value of every such contract, lease or agreement that is included within the
Acquired Assets may be realized, Buyer shall be entitled to the benefits
accruing after the Closing Date of any such non-assigned contract, lease or
agreement. Buyer, at its sole expense, shall perform all of Seller's obligations
due to be performed under any such non-assigned contract, lease or agreement to
the extent (i) Buyer can perform such obligations without violating the terms of
such non-assigned contract, lease or agreement and (ii) Buyer is being provided
the benefits of such non-assigned contract, lease or agreement. Seller shall
remit any monies received under any such non-assigned contract, lease or
agreement to Buyer within seven (7) business days of collection. Nothing in this
Section 1.1(b) shall be deemed to require Buyer to (i) make any payment, other
than payments arising out of performance after the Closing Date in accordance
with the terms of such non-assigned contract, lease or agreement, to any
counterparty to any such non-assigned contract, lease or agreement or (ii) agree
to any change in the terms of any such non-assigned contract, lease or
agreement.
Section 1.2. Excluded Assets. Anything in Section 1.1 hereofto the contrary
notwithstanding, Seller shall retain the assets set forth in Section 1.2 of
Seller's Disclosure Schedule entitled "Excluded Assets" (collectively, the
"Excluded Assets"), and Buyer shall in no way be deemed to have purchased or
acquired (or to be obligated to purchase or to acquire) any interest whatsoever
in any such Excluded Assets.
Section 1.3. Assumption of Liabilities. On the terms and subject to the
conditions set forth in this Agreement, at the Closing and effective as of the
Closing Date, Buyer shall assume and thereafter as and when due pay, perform and
discharge (a) any and all accounts payable and accrued expenses related to the
Business, and (b) any and all debts, obligations and liabilities arising after,
and relating to acts, omissions, events or occurrences after, the Closing Date
with respect to the Acquired Assets or the Business conducted by Buyer
(collectively, the "Assumed Liabilities").
Section 1.4. Excluded Liabilities. Anything in Section 1.3 hereof to the
contrary notwithstanding, Buyer shall not assume or in any way become liable for
(a) the debts, obligations and liabilities relating to acts, omissions, events
or occurrences prior to the Closing Date with respect to the Acquired Assets or
the Business conducted by Seller, regardless of when arising, except to the
extent accounts payable and accrued expenses are reflected or reserved against
on the Final Closing Balance Sheet, or (b) any of Seller's liabilities set forth
in Section 1.4 of Seller's Disclosure Schedule entitled "Excluded Liabilities"
(collectively, the "Excluded Liabilities").
3
ARTICLE II.
PURCHASE PRICE
Section 2.1. Purchase Price. The purchase price for the Acquired Assets
(the "Purchase Price") shall be the sum of (i) Forty-Five Million Dollars
($45,000,000) (the "Cash Payment"), payable in the manner specified in Section
2.2, (ii) an amount equal to 25% of the Seller's "Deferred Subscription Income"
liability as of 11:59 P.M. (Eastern time) on the day immediately preceding the
Closing Date, as that amount is computed using the Quickfill program utilized by
the Seller, which shall be initially equal to the amount specified in Section
2.2(b)(3), subject to adjustment as described in Section 2.2(c) and (d) and
(iii) a contingent amount equal to the Earn-Out Payments and Additional Earn-Out
Payment (both as defined below) .
"Earn-Out Payments" shall be equal to one-third of the amount (if any) by
which actual GEBT (as defined below) of the Business exceeds $5.8 million, $6.4
million, and $7.1 million (each individually a "Target GEBT Level") in each of
the calendar years 2001, 2002, and 2003, respectively. Any Earn-Out Payments due
with respect to calendar years 2001 and 2002 shall be paid to Seller no later
than January 31, 2004. Any Earn-Out Payments due with respect to calendar year
2003 shall be paid to Seller no later than March 15, 2004. Each Earn-Out Payment
shall be accompanied by an explanation of how GEBT was calculated and supporting
documentation. If actual GEBT in 2001, 2002 or 2003 fails to exceed the
corresponding Target GEBT Level, at the joint option of Xxxxx Xxxxxx and
Xxxxxxxx Xxxxxx, the Employment Agreements of Xxxxx Xxxxxx and Xxxxxxxx Xxxxxx
shall automatically be extended for one year and the Seller shall be entitled to
receive an "Additional Earn-Out Payment" equal to one-third of the amount (if
any) by which actual GEBT of the Business exceeds $7.8 million in calendar year
2004. Any Additional Earn-Out Payment shall be paid to Seller no later than
March 15, 2005, accompanied by an explanation of how GEBT was calculated and
supporting documentation.
"GEBT" of the Business shall mean its aggregate net earnings from
operations, calculated as if it were being operated as a separate and
independent corporation, after deduction of all appropriate expenses, charges
and reserves, but before adjustment for federal, state and local income or
franchise taxes, determined in accordance with generally accepted accounting
principles ("GAAP"), but (i) excluding amortization of intangible assets related
to the transaction contemplated herein, (ii) including interest income or
expense, at the market-based rate applicable under Buyer's inter-affiliate cash
pooling agreement, on the cumulative net balance of cash transferred to Buyer
from the operation of the Business and by Buyer to the operation of the Business
and inter-affiliate credits and charges during the relevant periods (for greater
clarity, cash transferred to Buyer from the operation of the Business would
exclude cash transferred and inter-affiliate credits as the result of tax
savings associated with the amortization of intangible assets related to the
transaction contemplated herein), (iii) including the financial results of any
subsequent acquisitions made by the Business, inclusive of related revenues,
expenses, and amortization of intangible assets, (iv) excluding interest related
to financing of the transaction contemplated herein or of any subsequent
acquisitions made by the Business and (v) including the total amounts of
deferred revenue items identified in Sections 2.2(b)(2) and 2.2(b)(3) to the
extent that they were excluded from the calculation of Business revenues as a
result of the transaction contemplated by the Agreement. For illustrative
purposes only, certain hypothetical calculations of GEBT are set forth on
Exhibit F attached hereto. Seller shall have a right to review Buyer's
calculation of GEBT and supporting documentation and comment thereon for a
period of sixty (60) days following the payment of any Earn-Out Payments and
Additional Earn-Out Payments. In the event that Buyer and Seller disagree on the
calculation of GEBT for purposes of this Section 2.1, then any differences shall
be resolved pursuant to the procedures described in Section 2.2(c) below.
4
Section 2.2. Balance Sheets; Cash Transfers at Closing; Post-Closing
Adjustments.
(a) Seller hereby delivers to Buyer the pro forma statement of the Business
attached as Exhibit E hereto (the "Closing Balance Sheet") and hereby certifies
that all balances appearing on the Closing Balance Sheet: (i) represent Seller's
good faith estimate as of 11:59 P.M. (Eastern Time) on the day that is four (4)
business days after the date hereof; and (ii) based upon the books and records
of Seller. The Closing Balance Sheet reflects, among other things, the assets
and liabilities that will be transferred to, and assumed by, Buyer.
(b)(1) Buyer will pay to Seller, by wire transfer to the account or
accounts designated by Seller and specified in Exhibit I, at the Closing, an
aggregate amount equal to (i) Forty-Five Million Dollars ($45,000,000), plus
(ii) $499,969 (representing Seller's good faith estimate, based on data
available as of the date hereof, of 25% of Seller's "Deferred Subscription
Income" liability as of 11:59 P.M. (Eastern time) on the day that is four (4)
business days after the date hereof, as that amount is computed using the
Quickfill program utilized by the Seller), plus (iii) the amount of accounts
receivable (net of reserves) and prepaid expenses reflected on the Closing
Balance Sheet (or $2,151,622), minus (iv) the amount of accounts payable and
accrued expenses reflected on the Closing Balance Sheet (or $449,977)
(collectively, the "Closing Balance Sheet Payment").
(b)(2) Seller will pay to Buyer, at the Closing, in consideration for Buyer
assuming all of Seller's obligations to pay, perform and discharge all Seller's
obligations under deferred revenue items, but not deferred subscription items,
an amount equal to $567,042. Payment of this amount will be made by offset
against the payment made by Buyer pursuant to section 2.2(b)(1). This amount
represents Seller's good faith estimate, based on data available as of the date
hereof, of the sum of:
(i) an amount equal to the difference of (a) one-half the amount of cash
Seller has received as payment for the Conferences (as defined below) subsequent
to September 17, 2000 but prior to the Closing Date minus (b) one-half of the
amount of cash Buyer has received or expects to receive for the Conferences on
or subsequent to the Closing Date;
(ii) an amount equal to the difference of (a) all incremental costs, except
payroll-related payments made by Buyer pursuant to the Transition Services
Agreement, incurred or to be incurred by Buyer in connection with the
Conferences minus (b) the sum of (y) one-half the amount of cash Seller has
received as payment for the Conferences (as defined below) subsequent to
September 17, 2000 but prior to the Closing Date plus (z) one-half of the amount
of cash Buyer has received or expects to receive for the Conferences on or
subsequent to the Closing Date; provided, however, if such difference is less
than zero, then such amount shall be equal to zero;
5
(iii) 5% of Seller's deferred advertising income as of 11:59 P.M. (Eastern
time) on the day immediately preceding the Closing Date; and
(iv) 66 2/3% of Seller's deferred advisory services revenue as of 11:59
P.M. (Eastern time) on the day immediately preceding the Closing Date.
For purposes of this section 2.2(b)(2) only, "Conferences" shall mean the
conferences to take place on November 7-8, 2000 (the "E-Services Conference")
and November 16-17, 2000 (the "E-Recruiting and Staffing Conference and Expo"),
only to the extent the E-Services Conference or the E-Recruiting and Staffing
Conference and Expo occur after the Closing Date.
(b)(3) Seller will pay to Buyer, at the Closing, in consideration for Buyer
assuming all of Seller's obligations to pay, perform and discharge all Seller's
obligations for deferred subscription items, an amount equal to $499,969.
Payment of this amount will be made by offset against the payment made by Buyer
pursuant to Section 2.2(b)(1). This amount represents Seller's good faith
estimate, based on data available as of the date hereof, of 25% of Seller's
"Deferred Subscription Income" liability as of 11:59 P.M. (Eastern time) on the
day immediately preceding the Closing Date, as that amount is computed using the
Quickfill program utilized by the Seller.
(c)(1) Seller shall, on or before the date that is ninety (90) calendar
days after the Closing Date, deliver to Buyer: (i) a pro forma statement of the
Business as of 11:59 P.M. (Eastern Time) on the day immediately preceding the
Closing Date (the "Revised Closing Balance Sheet"), in the same format as the
Closing Balance Sheet; (ii) a calculation of the actual values of the amounts
previously estimated by Seller pursuant to Section 2.2(b)(2) and (b)(3)
(collectively, the "Specified Deferred Revenue Calculations"); and (iii) a
certification of the president of Seller that all amounts appearing on the
Revised Closing Balance Sheet and the Specified Deferred Revenue Calculations
were (y) based upon the books and records of Seller and (z) calculated in a
manner consistent with GAAP. Seller agrees to supply Buyer with a copy of all
computer runs, work papers and supporting data used in preparing the Revised
Closing Balance Sheet and the Specified Deferred Revenue Calculations. Buyer
shall have the right to review the Revised Closing Balance Sheet and the
Specified Deferred Revenue Calculations and comment thereon for a period of
ninety (90) calendar days after receipt thereof. Any changes in the Revised
Closing Balance Sheet and Specified Deferred Revenue Calculations that are
agreed to by Buyer and Seller within such 90-day period shall be incorporated
into a final balance sheet of the Business as of 11:59 P.M. (Eastern Time) on
the day immediately preceding the Closing Date (the "Final Closing Balance
Sheet") and a final calculation of the actual values of the amounts previously
estimated by Seller pursuant to Section 2.2(b)(2) and (b)(3) (the "Final
Specified Deferred Revenue Calculations"). In the event Buyer and Seller are
unable to agree on the manner in which any item or items should be treated in
the Final Closing Balance Sheet and the Final Specified Deferred Revenue
Calculations within such 90-day period, Seller and Buyer shall prepare separate
written reports of such item or items and refer such reports to a qualified
third party accountant mutually acceptable to Buyer and Seller (the "Third Party
Accountant") within ten (10) business days after the expiration of such 90-day
period. The Third Party Accountant shall determine within ten (10) business days
the manner in which such item or items shall be treated in the Final Closing
Balance Sheet and the Final Specified Deferred Revenue Calculations; provided,
however, that the dollar amount of each item in dispute shall be determined
within the range of dollar amounts proposed by Seller, on the one hand, and
Buyer, on the other hand. The determinations by the Third Party Accountant as to
the items in dispute shall be in writing and shall be Final and Binding on the
parties and shall be so reflected in the Final Closing Balance Sheet and the
Final Specified Deferred Revenue Calculations. For purposes of this Agreement,
"Final and Binding" shall mean that the aforesaid determinations shall have the
same preclusive effect for all purposes as if such determinations had been
embodied in a final judgment, no longer subject to appeal, entered by a court of
competent jurisdiction. The fees, costs and expenses of retaining the Third
Party Accountant shall be borne equally between the parties. Following the
resolution of all disputed items (or, if there is no dispute, promptly after the
parties reach agreement on the Final Closing Balance Sheet and the Final
Specified Deferred Revenue Calculations), Seller shall prepare the Final Closing
Balance Sheet and the Final Specified Deferred Revenue Calculations and shall
deliver copies thereof to Buyer.
6
(c)(2) Buyer shall, on or before the date that is seventy-five (75)
calendar days after the Closing Date, deliver to Seller a calculation of the
actual values of the amounts previously estimated by Seller pursuant to Section
2.2(b)(ii). Buyer agrees to supply Seller with a copy of all computer runs, work
papers and supporting data used in preparing the calculation. Seller shall have
the right to review the calculation and comment thereon for a period of ninety
(90) calendar days after receipt thereof. Any changes in the calculation that
are agreed to by Buyer and Seller within such 90-day period shall be
incorporated into the Final Specified Deferred Revenue Calculations. In the
event Buyer and Seller are unable to agree on the manner in which any item or
items should be treated, then the procedures described in paragraph (c)(1) shall
be utilized to resolve all differences.
(d) The amount of the payment pursuant to Section 2.2(b)(1) will be
recalculated using the Final Closing Balance Sheet instead of the Closing
Balance Sheet. This recalculated payment amount shall be known as the "Final
Closing Balance Sheet Payment." The aggregate amount of the payments that would
have been required pursuant to Section 2.2(b)(2) and (b)(3) using the Final
Specified Deferred Revenue Calculations instead of the amounts previously
estimated by Seller shall be known as the "Final Specified Deferred Revenue
Payment."
In the event that the Closing Balance Sheet Payment is less than the Final
Closing Balance Sheet Payment, the Buyer shall pay to Seller, by wire transfer
to an account or accounts designated by Seller, the amount of such difference,
together with interest thereon from and including the Closing Date to, but not
including, the date of such payment computed at 0.0260271% per day.
7
In the event that Closing Balance Sheet Payment is greater than the amount
of the Final Closing Balance Sheet Payment the Seller shall pay to Buyer, by
wire transfer to an account or accounts designated by Buyer, the amount of such
difference, together with interest thereon from and including the Closing Date
to, but not including, the date of such payment computed at 0.0260271% per day.
In the event that the aggregate amount of the payments made by Seller at
Closing pursuant to Section 2.2(b)(2) and (b)(3) is less than the amount of the
Final Specified Deferred Revenue Payment, the Seller shall pay to Buyer, by wire
transfer to an account or accounts designated by Buyer, the amount of such
difference, together with interest thereon from and including the Closing Date
to, but not including, the date of such payment computed at 0.0260271% per day.
In the event that the aggregate amount of the payments made by Seller at
Closing pursuant to Section 2.2(b)(2) and (b)(3) is greater than the amount of
the Final Specified Deferred Revenue Payment, the Buyer shall pay to Seller, by
wire transfer to an account or accounts designated by Seller, the amount of such
difference, together with interest thereon from and including the Closing Date
to, but not including, the date of such payment computed at 0.0260271% per day.
Amounts required to be transferred on a given date from one party to
another party pursuant to any provision of this Section 2.2(d) shall be netted
against one another so that only a single net transfer shall be required on such
date between such parties. Any transfer of cash required under this Section
2.2(d) shall be made within ten (10) business days of the date of the delivery
of the Final Closing Balance Sheet and the Final Specified Deferred Revenue
Calculations (including, if applicable, the determinations of the Third Party
Accountant) to Buyer.
For purposes of all amounts determined pursuant to Section 2.2(a), (b)(1),
(b)(2), (b)(3), (c) and (d), the November/December issue of Consulting magazine
shall be deemed to have been published on the day immediately preceding the
Closing Date, and therefore (among other things), all revenue and expenses
attributable to that issue (excluding, without limitation, the $10,000 in
revenue for the advertising insert for Larstan) will be reflected on the Closing
Balance Sheet and the Revised Closing Balance Sheet. Buyer will therefore be
able to book and receive the advertising revenue for the $10,000 Larstan insert.
(e) As soon as practicable following the date that is 180 days after the
Closing Date, Buyer shall deliver to Seller a statement of all accounts
receivable (net of reserves) that were included in the Acquired Assets but that
have not yet been collected as of such 180th day (the "Uncollected Accounts
Receivable Statement"). Within three (3) business days of receipt of the
Uncollected Accounts Receivable Statement, Seller shall pay to Buyer, by wire
transfer to an account or accounts designated by Buyer, the aggregate amount of
the uncollected accounts receivable shown on such statement, and Seller shall
thereafter be entitled to receive, and Buyer shall promptly pay over to Seller,
any amounts subsequently collected (or subsequently shown to have been
previously collected) with respect to the uncollected accounts receivable shown
on such statement. In the event Seller disputes the calculation of any item or
items in the Uncollected Accounts Receivable Statement, and Seller and Buyer are
unable to resolve the disputed items by mutual agreement, Seller and Buyer shall
prepare separate written reports of such item or items and refer such reports to
a Third Party Accountant within ten (10) business days after the delivery of
such statement by Buyer. The disputed item or items shall be resolved by such
Third Party Accountant in the manner specified in Section 2.2(c) hereof;
provided, however, that the prevailing party shall be entitled to interest on
any amounts paid as a result of such Third Party Accountant's determination from
and including the date of delivery of the Uncollected Accounts Receivable
Statement to, but not including, the date of payment computed at 0.0260271% per
day. In the event that subsequent data or calculations require revision of the
Uncollected Accounts Receivable Statement (including the determination of any
Third Party Accountant engaged to resolve disputed items with respect thereto),
the requisite revisions and appropriate payments thereunder shall be made, by
wire transfer to an account or accounts designated by the party receiving
payment, within ten (10) business days after the parties mutually agree on (or
such Third Party Accountant determines) the requisite revisions.
8
Section 2.3. Purchase Price Allocation.
The Purchase Price (other than the Earn-Out Payments and Additional
Earn-Out Payment) and Assumed Liabilities shall preliminarily be allocated among
the Acquired Assets in accordance with their respective fair market values and
in accordance with the terms of Exhibit G attached hereto, entitled "Agreed
Allocation of Purchase Price and Assumed Liabilities." No later than 210 days
after the Closing Date, Buyer and Seller shall jointly prepare a schedule
allocating the Purchase Price (other than the Earn-Out Payments and Additional
Earn-Out Payment) and Assumed Liabilities among the Acquired Assets in
accordance with their respective fair market values and with section 1060 of the
Code (as defined in Section 7.15(d) below) and the regulations thereunder. Buyer
and Seller shall report the purchase and sale of the Acquired Assets on all tax
returns, including timely filed Internal Revenue Service Forms 8594, in
accordance with the allocation shown on such schedule. Adjustments to such
allocation shall be made as appropriate to reflect payment of the Earn-Out
Payments (if any) and Additional Earn-Out Payment (if any) and any other
relevant payments made under the Agreement, in accordance with section 1060 of
the Code and the regulations thereunder.
ARTICLE III.
CLOSING
Section 3.1. General.
The "Closing" means the time when the Acquired Assets are transferred by
Seller to Buyer. The Closing shall take place at the offices of The Jordan,
Xxxxxxxx Group, Inc., 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000
at 10:00 a.m. on the date that is the earlier to occur of (i) five business days
following the day on which the last of the conditions to the Closing set forth
in Article VI are satisfied or (ii) at such time and place and on such other day
as is mutually agreed upon in writing by the parties hereto (the "Closing
Date"). Legal title, equitable title and risk of loss with respect to the
Acquired Assets shall pass to Buyer at the Closing, which transfer shall be
deemed effective for tax, accounting and other computational purposes as of
12:01 A.M. (Eastern Time) on the Closing Date.
9
Section 3.2. Deliveries by Seller at the Closing.
At the Closing, Seller shall deliver to Buyer the following; provided,
however, that Buyer may waive delivery of any of the following:
(a) The Xxxx of Sale attached hereto as Exhibit A (the "Xxxx of Sale"),
transferring the Acquired Assets to Buyer, free and clear of liens, claims,
prior assignments, mortgages, charges, security interests, pledges, conditional
sales contracts, collateral security arrangements and other title retention
arrangements, restrictions or encumbrances ("Liens") except for Permitted Liens.
"Permitted Liens" means the following Liens: (a) Liens for taxes, assessments or
other governmental charges or levies that are not yet due or payable or that are
being contested in good faith by appropriate proceedings; (b) statutory Liens of
landlords and Liens of carriers, warehousemen, mechanics, materialmen, repairmen
and other Liens imposed by law for amounts not yet due; (c) Liens incurred or
deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; and (d)
Liens incurred in the ordinary course of business securing obligations or
liabilities which are not individually or in the aggregate material to the
relevant asset.
(b) Instruments of assignment to Buyer, in a form acceptable to Buyer, of
all Intellectual Property Assets, the recording costs of which will be borne by
Buyer;
(c) Such other deeds, bills of sale, endorsements, assignments, affidavits,
and other good and sufficient instruments of sale, assignment, conveyance and
transfer as are reasonably requested by Buyer prior to the Closing as are
required to vest in Buyer title in and to all of the Acquired Assets, free and
clear of Liens except Permitted Liens;
(d) Copies of all consents set forth on Section 3.2(d) of Seller's
Disclosure Schedule entitled "Consents Required for Closing";
(e) Receipt for payment of the Closing Balance Sheet Payment, reflecting
the offsets contemplated by Section 2.2(b)(2) and (b)(3);
(f) Short-form good standing certificate for Seller from the Secretary of
State of New Hampshire, dated not more than fifteen (15) business days prior to
the Closing Date;
(g) Short-form good standing certificate for KPP-NY from the Secretary of
State of New York, dated not more than fifteen (15) business days prior to the
Closing Date;
(h) A Certificate of Seller's Secretary or an Assistant Secretary or
similar officer, dated the Closing Date, (a) certifying the incumbency of the
officers or agents signing this Agreement and the transactions contemplated
herein; and (b) certifying Seller's organizational documents to be true,
complete and in full force and effect and unmodified as of the Closing Date;
10
(i) A certificate signed by the President of Seller to the effect that the
conditions specified in Section 6.1(a), (b), (c) and (e) have been satisfied;
(j) Certified copies of resolutions adopted by the Board of Managers of
Seller authorizing the execution and delivery of this Agreement and the other
documents referred to herein or related hereto and the consummation of the
transactions contemplated hereby, including the transfer of the Acquired Assets
provided for hereunder;
(k) An opinion, dated as of the Closing Date, of Xxxxxxx, Carton & Xxxxxxx,
counsel to Seller, addressed to Buyer, and expressly providing for reliance by
The Prudential Insurance Company of America and its affiliates (collectively
"Prudential"), in substantially the form attached hereto as Exhibit B; and
(l) Evidence of Seller's compliance with its obligations under the proviso
in Section 4.12(e)(iv).
Section 3.3. Deliveries by Buyer at the Closing. At the Closing, Buyer
shall deliver to Seller the following; provided, however, that Seller may waive
delivery of any of the following:
(a) Evidence of payment of the Closing Balance Sheet Payment (including the
Cash Payment) less the Escrow Amount (as defined below);
(b) Copies of all the consents set forth in Section 3.3(b) of Buyer's
Disclosure Schedule entitled "Consents Required for Closing;"
(c) The Employment Agreements, in substantially the form attached hereto as
Exhibit C, with Messrs. Xxxxx X. Xxxxxx and Xxxxxxxx Xxxxxx;
(d) Short-form good standing certificate for Buyer from the Secretary of
State of Delaware, dated not more than fifteen (15) business days prior to the
Closing Date;
(e) A Certificate of Buyer's Secretary or an Assistant Secretary, dated the
Closing Date, (a) certifying the incumbency of the officers signing this
Agreement and the transactions contemplated herein to be executed and delivered
by Buyer; and (b) certifying Buyer's organizational documents to be true,
complete and in full force and effect and unmodified as of the Closing Date;
(f) A certificate signed by the President or any Vice President of Buyer to
the effect that the conditions specified in Section 6.2(a), (b) and (d) have
been satisfied;
(g) Certified copies of resolutions adopted by the Board of Directors of
Buyer authorizing the execution and delivery by Buyer of this Agreement, the
assumption of the Assumed Liabilities, and all other documents referred to
herein or related hereto, the payment of the Purchase Price, and the
consummation of the transactions contemplated hereby by Buyer; and
11
(h) An opinion, dated as of the Closing Date, of Xxxxxxxxxx Xxxxxx &
Xxxxxxx LLP counsel to Buyer, addressed to Seller, and expressly providing for
reliance by Prudential, in substantially the form attached hereto as Exhibit D.
Section 3.4. Escrow Agreement. At the Closing, Buyer and Seller will enter
into an escrow agreement in the form attached hereto as Exhibit H (the "Escrow
Agreement") with Xxxxxx & Xxxxxxx LLP (the "Escrow Agent"). In satisfaction of
Seller's obligation to fund the escrow account under the Escrow Agreement, Buyer
shall pay, by wire transfer to an account designated by the Escrow Agent and
specified in Exhibit I, at the Closing, $2,250,000 (the "Escrow Amount"), and
Buyer shall deduct such amount from the payment made by Buyer pursuant to
Section 2.2(b)(1).
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer:
Section 4.1. Due Formation and Authority of Seller. Seller is a limited
liability company duly formed, validly existing, and in good standing under the
laws of the State of New Hampshire and has all necessary power and authority to
own its assets, properties and rights and to carry on its business as now being
conducted. Seller is duly qualified to do business as a foreign limited
liability company and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where the failure to
be so qualified would not, individually or in the aggregate, have a material
adverse effect on the liabilities, results of operations, financial condition or
prospects of the Business considered as a whole (a "Material Adverse Effect on
the Business").
Section 4.2. Authority to Execute and Perform Agreements. Seller has all
necessary power, authority and approval to enter into this Agreement to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery by Seller of this Agreement, the performance
by Seller of its obligations hereunder and the consummation by Seller of the
transactions contemplated hereby have been duly authorized by all requisite
action on the part of Seller and its members, and no member or other equity
holder of Seller is entitled to exercise any dissenters', appraisal or similar
rights with respect thereto. This Agreement has been duly executed and delivered
by Seller, and assuming the due authorization, execution and delivery of this
Agreement by Buyer, this Agreement constitutes the legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its terms.
Section 4.3. Capitalization; Subsidiaries. Each of Xxxxx X. Xxxxxx,
Xxxxxxxx Xxxxxx and Xxxxx Xxxxxxxx owns one-third of the membership interests in
Seller, and no other membership interests, equity securities or other securities
of Seller are issued and outstanding. Except as set forth in Section 4.3 of
Seller's Disclosure Schedule, there are no agreements relating to the issuance,
sale or transfer of any membership interests, equity securities or other
securities of Seller. Except as set forth in Section 4.3 of Seller's Disclosure
Schedule, Seller does not own, or have any agreement to acquire, any membership
interests, equity securities or other securities of any entity or any direct or
indirect equity or ownership interest in any other business. Seller owns all of
the membership interests in KPP-NY, and no other membership interests, equity
securities or other securities of KPP-NY are issued and outstanding. There are
no agreements relating to the issuance, sale or transfer of any membership
interests, equity securities or other securities of KPP-NY.
12
Section 4.4. No Conflict. Assuming all consents, approvals, authorizations
and other actions described in Section 4.10 have been obtained, and except as
may result from any facts or circumstances relating solely to Buyer, the
execution, delivery and performance by Seller of this Agreement, do not and will
not: (i) violate or conflict with Seller's Certificate of Formation or Operating
Agreement; (ii) violate any material law, statute, rule or regulation to which
Seller is subject or any material writ, injunction, judgment or decree
applicable to Seller; or (iii) result in any breach of, or constitute a default
(or event which with the giving of notice or lapse of time, or both, would
become a default) under, or give to any person any rights of termination,
amendment, acceleration or cancellation of, or result in the creation or
imposition of (or the obligation to create or impose) any lien, security
interest, charge or encumbrance upon any of the Acquired Assets, pursuant to any
contract, license or other instrument to which Seller is a party or by which any
of such Acquired Assets is bound or affected, except in any such case in (ii) or
(iii) above as would not have a Material Adverse Effect on the Business.
Section 4.5. Financial Statements. Seller has heretofore delivered to Buyer
the following financial statements which relate to Seller and its subsidiary on
a consolidated basis (collectively, together with the notes thereto, the
"Financial Statements"): (i) the pro forma financial statements with respect to
the investor relations Business (the "Investor Relations Pro Forma Statements"),
and (ii) the audited Balance Sheets of Seller and its subsidiaries as of
December 31, 1999 and December 31, 1998, the audited Statements of Income for
the years ended December 31, 1999 and December 31, 1998, and the audited
Statements of Cash Flows for the years ended December 31, 1999 and December 31,
1998, together with the footnotes thereto and the reports thereon by Seller's
certified public accountants.
Each of the Financial Statements is true, complete and correct in all
material respects, was prepared from the books and records kept by Seller and
its subsidiary for the Business, and fairly presents the financial position of
Seller and its subsidiaries as of its date, and the results of Seller's and its
subsidiaries' operations and Seller's and its subsidiary's cash flows for the
periods then ended in accordance with GAAP consistently applied, except for the
Investor Relations Pro Forma Statements which are not in accordance with GAAP
and are treated differently for presentation purposes.
Since December 31, 1999, there has been no material adverse change in the
liabilities, results of operations, financial condition or prospects of the
Business considered as a whole, nor has there been any event or condition of any
character which is reasonably likely to have a Material Adverse Effect on the
Business.
13
Since December 31, 1999, Seller has operated the Business in the ordinary
course consistent with past practice. Without limiting the generality of the
immediately preceding sentence, since December 31, 1999, except as set forth in
Section 4.5 of Seller's Disclosure Schedule entitled "Financial Statements;
Material Adverse Change; Conduct of Business," Seller has not, with respect to
the Business: (i) increased the rate of compensation of, or paid any bonus to,
any of the employees, or amended, created or otherwise established any plan,
program or arrangement providing benefits to employees, directors, or
independent contractors of, or consultants to, the Business except in the
ordinary course consistent with past practice, (ii) entered into any employment
contract with any employee not terminable at will or any management, consulting,
deferred compensation, severance or other similar contract or agreement relating
to the Business, (iii) entered into any contract or commitment relating to the
Business except as contemplated by this Agreement except in the ordinary course
consistent with past practice, (iv) incurred any debt, liability or obligation
relating to the Business that would constitute an Assumed Liability except in
the ordinary course consistent with past practice, (v) mortgaged, pledged or
subjected to lien, charge or any other encumbrance any of the Acquired Assets
except for Permitted Liens, (vi) sold, disposed of or discontinued any material
assets, (vii) entered into any commitments with suppliers, advertisers or others
except in the ordinary course consistent with past practice, (viii) incurred
commitments for capital expenditures except in the ordinary course consistent
with past practice, (ix) settled any lawsuits, (x) settled any claims except in
the ordinary course consistent with past practice, (xi) waived any rights of
substantial value under the contracts that are to be assigned to Buyer pursuant
to the terms of this Agreement, (xii) materially changed the sales, marketing or
business practices utilized by Seller, KPP-NY or their employees, including
without limitation any early subscription renewal offers, acceleration of
subscription renewals, discount subscription programs or similar transactions
which have resulted or are reasonably likely to result in the acceleration or
deferral of cash receipts or disbursements by Seller, or (xiii) agreed to do any
of the foregoing.
Section 4.6. Title and Liens. As of the Closing, Seller shall own outright
and have good and valid title to the assets, properties and rights included in
the Acquired Assets, in each case free and clear of any lien or other
encumbrance, other than Permitted Liens.
Section 4.7. Acquired Assets; Title to the Acquired Assets. Other than the
Excluded Assets, the Acquired Assets are the only material assets, properties,
rights and interests used by Seller in connection with the Business. Other than
the Excluded Assets, the Acquired Assets to be conveyed to Buyer under this
Agreement constitute all of the material assets, properties, rights and
interests necessary to conduct the Business in substantially the same manner as
conducted by Seller prior to the date of this Agreement. All of the Acquired
Assets used in connection with the operation of the Business are in good
operating condition and repair, subject to normal wear and tear consistent with
the age of the properties or assets, and are suitable for the uses to which they
are put in the Business. To Seller's knowledge, none of the Acquired Assets has
any material defects or is in need of maintenance or repair, except for
ordinary, routine maintenance and repairs, which are not material in nature or
cost.
Section 4.8. Brokers' or Finders' Fee. Except for fees, commissions and
expenses which shall be paid to Jordan, Xxxxxxxx Group, Inc. by Seller, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Seller.
Section 4.9. Agreements and Contracts. Set forth in Section 4.9 of Seller's
Disclosure Schedule entitled "Assigned Contracts" is a list, as of the date
hereof, of contracts (whether or not in writing) by which Seller is bound or to
which Seller is a party under the terms of which Seller (assuming the Closing
did not occur) would be required to pay or otherwise give consideration of more
than $5,000 during the calendar year ended December 31, 2000 or more than
$20,000 in the aggregate over the remaining term of such contract,
(collectively, "Assigned Contracts"). Except as specified in Section 4.9 of
Seller's Disclosure Schedules, each Assigned Contract is valid, binding and in
full force and effect according to its terms as against Seller and, to the
Knowledge of Seller, the other party or parties thereto. Except as specified in
Section 4.9 of Seller's Disclosure Schedules, neither Seller nor, to the
Knowledge of Seller, any other party to such contract is in violation, breach or
default, of any such contract, except for such violations, breaches or defaults
that would not, individually or in the aggregate, have a Material Adverse Effect
on the Business.
14
Section 4.10. Consent and Approvals. Other than where failure to obtain
such consent, approval, authorization or action or to make such filing or
notification would not prevent Seller from performing any of its material
obligations under this Agreement or any other agreement or instrument to be
executed or delivered by Seller hereunder, or as may be necessary as a result of
any facts or circumstances relating solely to Buyer, no order, permission,
consent, approval, license, authorization, registration or validation of, or
filing with, or exemption by, any governmental agency, commission, board or
public authority is required to authorize, or is required in connection with,
the execution, delivery and performance by Seller of this Agreement, or any
other agreement or instrument to be executed or delivered by Seller hereunder.
Section 4.11. Absence of Litigation. There is no litigation or judicial,
administrative or arbitration proceeding pending or, to the Knowledge of Seller,
threatened against or affecting Seller with respect to the Acquired Assets.
Section 4.12. Intellectual Property.
(a) The term "Intellectual Property Assets" means:
(i) the name "Xxxxxxx Information, LLC," all fictional business names,
trading names, registered and unregistered trademarks, registered and
unregistered service marks, domain names and applications therefore owned, used
or licensed by Seller as licensor or licensee (collectively, "Marks");
(ii) all patents and patent applications (collectively, "Patents");
(iii) all copyrights in both published works and unpublished works owned by
Seller (collectively, "Copyrights");
(iv) Seller's rights in mask works;
(v) all proprietary software owned or licensed by Seller; and
(vi) all know-how, trade secrets, confidential information, and customer
lists, (collectively, "Trade Secrets") owned, used, or licensed by Seller as
licensee or licensor.
15
(b) The Intellectual Property Assets are all those necessary for the
operation of Seller's Business as it is currently conducted. As provided below,
Seller is the owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all Liens, and has the right to
use and to transfer to Buyer, in each case without payment to a third party, all
of the Intellectual Property Assets.
(c) Patents. Seller does not own or license any Patents. None of the
products or services manufactured or created, and sold or provided, nor any
process or know-how used, by Seller infringes or is alleged to infringe any
patent or other proprietary right of any other Person.
(d) Marks.
(i) Section 4.12(d)(i) of Seller's Disclosure Schedule contains a complete
and accurate list of all Marks to the Knowledge of Seller. Seller is the owner
of all right, title, and interest in and to each of the Marks as used by Seller
for Seller's operation of the Business, free and clear of all Liens.
(ii) All Marks that have been registered with the United States Patent and
Trademark Office and have the status of registered as of October 1, 2000 are
currently in compliance with all formal legal requirements (including the timely
post-registration filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and are not subject to any maintenance
fees or taxes or actions falling due within ninety days after the Closing Date.
(iii) No Xxxx has been or is now involved in any opposition, invalidation,
or cancellation and, to the Knowledge of Seller, no such action is threatened
with respect to any of the Marks.
(iv) There is no infringing or potentially interfering trademark or
trademark application of any third party with regard to any Xxxx.
(v) None of the Marks used by Seller infringes or is alleged to infringe
any domain name, trade name, trademark, or service xxxx of any third party.
(e) Copyrights.
(i) Section 4.12(e)(i) of Seller's Disclosure Schedule contains a complete
and accurate list of all Copyrights which are material to the operations of
Seller. Seller is the owner of all right, title, and interest in and to each of
the Copyrights, free and clear of all Liens.
(ii) Except as set forth in Section 4.12(e)(ii) of Seller's Disclosure
Schedule, no Copyright is infringed by any third party. No Copyright has been or
is now involved in any challenge and, to the Knowledge of Seller, no such action
is threatened with respect to any of the Copyrights. Except as set forth in
Section 4.12(e)(ii) of Seller's Disclosure Schedule, none of the content of any
of Seller's publications infringes or is alleged to infringe any copyright of
any third party or is a derivative work based on the work of a third party.
16
(iii) To the Knowledge of Seller, Section 4.12(e)(iii) contains a complete
and accurate list of the primary persons (other than employees of Seller) who
have contributed at any time since January 1, 1997, or are expected to
contribute, works to any of Seller's publications.
(iv) All Copyrights that have been registered and have the status of
registered as of October 1, 2000 are currently in compliance with formal legal
requirements, are valid and enforceable, and are not subject to any maintenance
fees or taxes or actions falling due within ninety days after the Closing Date;
provided that, that prior to Closing, Seller will take all actions necessary to
register in the name of Seller each of those registered copyrighted works shown
on Section 4.12(e)(i) of Seller's Disclosure Schedule as being registered in a
name other than Seller's name. All works encompassed by the Copyrights and
published prior to March 1, 1989 have been marked with the proper copyright
notice.
(f) Trade Secrets.
(i) Seller has taken commercially reasonable precautions to protect the
secrecy, confidentiality, and value of its Trade Secrets.
(ii) Seller has good title and right to use the Trade Secrets. To the
Knowledge of Seller, the Trade Secrets are not part of the public knowledge or
literature, and have not been used, divulged, or appropriated either for the
benefit of any person (other than Seller) or to the detriment of Seller. No
Trade Secret is subject to any adverse claim, no, to the Knowledge of Seller, is
any adverse claim threatened.
(iii) To the Knowledge of Seller, with respect to each Trade Secret, if
applicable and necessary for the protection and use of the Trade Secret, the
documentation relating to such Trade Secret is current, accurate, and sufficient
in detail and content to identify and explain it and to allow its full and
proper use without reliance on the knowledge or memory of any individual.
(g) Propriety Software. To the Knowledge of Seller, Section 4.12(g) of
Seller's Disclosure Schedule contains a complete and accurate list of all
proprietary software owned or licensed by Seller.
Section 4.13. No Libelous, Obscene or Injurious Material. None of the
materials used in the Business contains any libelous, obscene or injurious
material.
Section 4.14. Compliance. Seller has complied in all material respects,
with all federal, state, county, local and foreign laws, ordinances,
regulations, orders, judgments, injunctions, awards or decrees applicable to the
Acquired Assets and has not received any notice of violation of any of the
foregoing.
17
Section 4.15. Exclusivity of Representations. THE REPRESENTATIONS AND
WARRANTIES MADE BY SELLER IN THIS AGREEMENT ARE IN LIEU OF AND ARE EXCLUSIVE OF
ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY
IMPLIED WARRANTIES. SELLER HEREBY DISCLAIMS ANY SUCH OTHER OR IMPLIED
REPRESENTATIONS OR WARRANTIES, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO
BUYER OR ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OF ANY
DOCUMENTATION OR OTHER INFORMATION (INCLUDING ANY FINANCIAL PREDICTIONS OR
SUPPLEMENTAL DATA).
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller:
Section 5.1. Due Incorporation and Authority of Buyer. Buyer is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all necessary corporate power and
authority to own its assets, properties and rights and to carry on its business
as now being conducted. Buyer is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where the failure to
be so qualified would not, individually or in the aggregate, have a material
adverse effect on the ability of Buyer to consummate the transaction.
18
Section 5.2. Authority to Execute and Perform Agreements. Buyer has all
necessary power, authority and approval to enter into this Agreement, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Buyer, the performance
by Buyer of its obligations hereunder and the consummation by Buyer of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of Buyer. This Agreement has been duly executed and
delivered by Buyer, and (assuming due authorization, execution and delivery by
Seller) this Agreement constitutes legal, valid and binding obligations of Buyer
enforceable against Buyer in accordance with their terms.
Section 5.3. No Conflict. Assuming all consents, approvals, authorization
and other actions described in Section 5.4 have been obtained, and except as may
result from any facts or circumstances related solely to Seller, the execution,
delivery and performance of this Agreement by Buyer does not and will not: (i)
violate or conflict with the certificate of incorporation, other constitutive
documents or Bylaws (or other similar applicable documents) of Buyer, (ii)
violate any material law, statute, rule or regulation to which Buyer is subject
or any material writ, injunction, judgment or decree applicable to Buyer; or
(iii) result in any breach of, or constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under, or
give to any person any rights of termination, amendment, acceleration or
cancellation of, or result in the creation or imposition of (or the obligation
to create or impose) any lien, security interest, charge or encumbrance upon any
of the material assets of Buyer pursuant to, any contract, license or other
instrument to which Buyer is a party or by which any of such assets is bound or
affected, except in any such case in (ii) or (iii) above as would not materially
impair the ability of Buyer to consummate the transactions contemplated by this
Agreement.
Section 5.4. Consents and Approvals. Other than where failure to obtain
such consent, approval, authorization or action or to make such filing or
notification would not prevent Buyer from performing any of its material
obligations under this Agreement or any other agreement or instrument to be
executed or delivered by Buyer hereunder, or as may be necessary as a result of
any facts or circumstances relating solely to Seller, no order, permission,
consent, approval, license, authorization, registration or validation of, or
filing with, or exemption by, any governmental agency, commission, board or
public authority is required to authorize, or is required in connection with,
the execution, delivery and performance by Buyer of this Agreement, or any other
agreement or instrument to be executed or delivered by Buyer hereunder.
Section 5.5. Absence of Litigation. No action, litigation, claim or
proceeding is pending or, to the knowledge of Buyer, threatened before any
governmental authority which seeks to delay or prevent or which would materially
impair the ability of Buyer to consummate the transactions contemplated by this
Agreement.
Section 5.6. Financial Ability. Buyer has cash or has existing borrowing
facilities or unconditional, binding firm commitments that are sufficient to
enable it to consummate the transaction contemplated by this Agreement. The
financing required to consummate the transaction contemplated by this Agreement
is referred to as the "Financing." The conditions to the Financing have each
been satisfied and the Financing will be available on a timely basis to enable
Buyer to consummate the transaction contemplated by this Agreement. There are no
agreements with respect to the Financing that would limit Buyer's ability to
perform its obligations hereunder.
Section 5.7. Brokers. Except for fees and commissions which will be paid by
Buyer, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transaction
contemplated by this Agreement based upon arrangements made by or on behalf of
Buyer.
ARTICLE VI.
CONDITIONS TO CLOSING
Section 6.1. Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions provided for by this Agreement is subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Buyer except for conditions relating
to consents of governmental authorities.
(a). Representations and Warranties. Each of the representations and
warranties of Seller made in Article IV and Article VII of this Agreement shall
be true and correct in all material respects as of the Closing Date.
(b). Covenants. Seller shall have performed and complied in all material
respects with all covenants and agreements required to be performed or complied
with by it at or prior to the Closing Date.
19
(c). Material Adverse Change. Since the date of this Agreement, there shall
have occurred no material adverse change in the liabilities, results of
operations, financial condition or prospects of the Business considered as a
whole, nor shall there have occurred any event or condition of any character
which is reasonably likely to have a Material Adverse Effect on the Business.
(d). Consents. All consents of third parties described in Section 3.2(d)
and Section 3.3(b) hereof and all consents of governmental authorities necessary
to consummate the transactions contemplated hereunder shall have been obtained
and satisfied.
(e). No proceeding or litigation. No litigation, action, suit,
investigation, claim or proceeding challenging the legality of, or seeking to
restrain, prohibit or materially modify, the transactions provided for in this
Agreement shall have been instituted and not settled or otherwise terminated.
(f). Certificates; Documents. Seller shall have delivered the certificates,
opinion of counsel and the other documents required by Section 3.2.
(g). Employment Agreements. Messrs. Xxxxx X. Xxxxxx and Xxxxxxxx Xxxxxx
shall have entered into Employment Agreements in substantially the forms
attached hereto as Exhibit C-1 and Exhibit C-2, respectively, with Buyer,
effective January 1, 2001 (the "Effective Date of Employment").
(h). Transition Services Agreement. Seller shall have entered into a
Transition Services Agreement in substantially the form attached hereto as
Exhibit J (the "Transition Service Agreement").
(i). Author Agreement. Seller shall have entered into work-for-hire
agreements and assignments of prior works, each in a form reasonably acceptable
to Buyer, with each of the persons listed on Section 6.1(i) of Seller's
Disclosure Schedule.
Section 6.2. Conditions to Seller's Obligations. The obligations of Seller
to consummate the transactions provided for by this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Seller except for conditions relating
to consents of governmental authorities.
(a). Representations and Warranties. Each of the representations and
warranties of Buyer made in Article V of this Agreement shall be true and
correct in all material respects as of the Closing Date.
(b). Covenants. Buyer shall have performed and complied in all material
respects with all covenants and agreements required to be performed or complied
with by it at or prior to the Closing Date.
(c). Consents. All consents of third parties described in Sections 3.2(d)
and 3.3(b) hereof and all consents of governmental authorities necessary to
consummate the transactions contemplated hereunder shall have been obtained.
20
(d). No Proceeding or Litigation. No litigation, action, suit,
investigation, claim or proceeding challenging the legality of, or seeking to
restrain, prohibit or materially modify, the transactions provided for in this
Agreement shall have been instituted and not settled or otherwise terminated.
(e). Certificates; Documents; Payment. Buyer shall have delivered the
certificates, opinion of counsel and the other documents required by Section 3.3
and the payment contemplated by Section 3.3(a).
(f). Transition Services Agreement. Buyer shall have entered into the
Transition Services Agreement.
Section 6.3. Waiver of Conditions. Consummation of the transactions
contemplated in this Agreement will constitute a waiver by Seller and Buyer of
all conditions to the Closing benefiting such party.
ARTICLE VII.
COVENANTS
Section 7.1. Conduct of Business. Seller covenants and agrees that it shall
conduct the Business in the ordinary course consistent with past practice,
including using commercially reasonable efforts to collect accounts receivable
and to preserve beneficial relationships with third parties including, but not
limited to distributors, brokers, lessors, suppliers, employees and customers in
connection with the Business, during the period from the date hereof until the
Closing Date, except as otherwise agreed to by Buyer. Without limiting the
generality of the foregoing, from the date hereof and up to the Closing Date,
without the prior consent of Buyer, Seller shall not, with respect to the
Business: (i) increase the rate of compensation of, or pay any bonus to, any of
the employees, or amend, create or otherwise establish any plan, program or
arrangement providing benefits to employees, directors, or independent
contractors of, or consultants to, the Business, (ii) enter into any employment
contract with any employee not terminable at will or any management, consulting,
deferred compensation, severance or other similar contract or agreement relating
to the Business, (iii) enter into any contract or commitment relating to the
Business except as contemplated by this Agreement except in the ordinary course
consistent with past practice, (iv) incur any debt, liability or obligation
relating to the Business that would constitute an Assumed Liability except in
the ordinary course consistent with past practice, (v) mortgage, pledge or
subject to lien, charge or any other encumbrance any of the Acquired Assets
except for Permitted Liens, (vi) sell, dispose of or discontinue any material
assets, (vii) enter into any commitments with suppliers, advertisers or others
except in the ordinary course consistent with past practice, (viii) incur
commitments for capital expenditures except in the ordinary course consistent
with past practice, (ix) settle any lawsuits, (x) settle any claims except in
the ordinary course consistent with past practice, (xi) waive any rights of
substantial value under the contracts that are to be assigned to Buyer pursuant
to the terms of this Agreement, (xii) take any action that would have been, or
resulted in, a breach of the representation and warranty set forth herein had
such action been taken prior to the date of this agreement, (xiii) materially
change the sales, marketing or business practices utilized by Seller, KPP-NY or
their employees, including without limitation any early subscription renewal
offers, acceleration of subscription renewals, discount subscription programs or
similar transactions which have resulted or are reasonably likely to result in
the acceleration or deferral of cash receipts or disbursements by Seller, or
(xiv) agree to do any of the foregoing.
21
Section 7.2. Confidentiality of Seller. Seller shall hold in confidence and
not use any confidential information that remains after the Closing in the
possession of Seller concerning the Business, the Acquired Assets and the
Assumed Liabilities. Seller shall not release or disclose any such information
to any person other than Buyer and its authorized representatives.
Notwithstanding the foregoing, the confidentiality obligations of this Section
7.2 shall not apply to information:
(a) which Seller is compelled to disclose by judicial or administrative
process, or, in the opinion of counsel, by other mandatory requirements of law;
(b) which can be shown to have been generally available to the public other
than as a result of a breach of this Section 7.2; or
(c) which can be shown to have been provided to Seller by a third party who
obtained such information other than from Seller or other than as a result of a
breach of this Section 7.2.
Section 7.3. Confidentiality of Buyer. Buyer shall hold in confidence and
not use any confidential information that is in the possession of Buyer
concerning the Excluded Assets. Buyer shall not release or disclose any such
information to any person other than Seller and its authorized representatives.
Notwithstanding the foregoing, the confidentiality obligations of this Section
7.3 will not apply to information:
(a) which Buyer is compelled to disclose by judicial or administrative
process, or, in the opinion of counsel, by other mandatory requirements of law;
(b) which can be shown to have been generally available to the public other
than as a result of a breach of this Section 7.3; or
(c) which can be shown to have been provided to Buyer by a third party who
obtained such information other than from Buyer or other than as a result of a
breach of this Section 7.3.
Section 7.4. Maintenance of, and Access to, Records. After the Closing
Date, each party shall provide the other party with access (with an opportunity
to make copies), during normal business hours, and upon reasonable notice, to
any records relating to the Business that are in such party's possession or
control. Each party shall preserve and maintain any books and records relating
to the Business in such party's possession or control pursuant to this Agreement
for at least seven years after the Closing Date.
Section 7.5. Agreement to Comply. No party shall take any action or fail to
take any action that will make any of its representations and warranties not
true and correct in all material respects on the Closing Date. Each party shall
use its commercially reasonable efforts to satisfy or cause to be satisfied all
of the conditions precedent to the other party's obligations hereunder,
provided, however, that no party's obligations under this sentence shall require
such party to expend funds or incur debt beyond those expended or incurred
customarily or in accordance with past practices. Each party shall give the
other parties prompt written notice of any material change in any of the
information contained in the representations and warranties made herein that
occur prior to the Closing Date; provided, however, that any change in the
information contained in the representations and warranties or schedules shall
not relieve such party of any obligations hereunder if such changes result in a
breach of the representations and warranties contained in this Agreement.
22
Section 7.6. Access Prior to the Closing Date. Prior to the Closing Date,
Seller shall, upon reasonable notice and request, (i) give Buyer and its
authorized representatives and advisors (collectively, "Representatives")
reasonable access during normal business hours to all properties and other
facilities and books and records of the Business; (ii) permit Buyer and its
Representatives to make such inspections thereof during normal business hours as
Buyer may reasonably require, including, to the extent required to provide for
the transition in handling of administrative functions, an internal control
review and systems review by Buyer or its Representatives; and (iii) cause its
employees and advisors to furnish Buyer and its Representatives on a timely
basis such information with respect to the Business as Buyer or its
Representatives may from time to time reasonably request. In the event that as a
result of any such investigation any of the Representatives receives notice of
material facts which, based on information actually known to them, they and
Buyer shall reasonably determine would be required to be disclosed in the
Schedules and are not so disclosed, Buyer shall use commercially reasonable
efforts promptly to inform Seller of such facts.
Section 7.7. Accounts Receivable. In the event that Seller receives any
payment relating to any account receivable relating to the Acquired Assets
outstanding on or after the Closing Date, such payment shall be the property of,
and shall be immediately forwarded and remitted to, Buyer. Seller shall promptly
endorse and deliver to Buyer any cash, checks or other documents received by it
on account of any such accounts receivable.
Section 7.8. Name Change Filings. Seller shall, within five (5) business
days following January 1, 2001, deliver to Buyer evidence of filing with the
Secretary of State of New Hampshire of an amendment to Seller's Articles of
Formation to change its name from "Xxxxxxx Information, LLC" to a name
dissimilar to "Xxxxxxx Information" or "KI", it being understood that, effective
upon the Closing, from the Closing Date to December 31, 2000, Seller shall have
a temporary, nonexclusive, nontransferable license to use the name "Xxxxxxx
Information, LLC" as its company name. Buyer and Seller shall, within sixty (60)
days after the Closing, take such actions and file such documents as may be
necessary to (a) reflect such name changes in all States in which Seller is
qualified to do business as a foreign company and will deliver to Buyer copies
of such documents evidencing such name change filings, (b) change the trademarks
and trade names associated with any products or services available through
Seller to discontinue the use of the trademark and trade name "Xxxxxxx
Information, LLC," and any confusingly similar trademarks and trade names and
(c) otherwise discontinue the use of such trademarks and trade names in
connection with Seller's business operations.
23
Section 7.9. Further Assurances.
(a) Seller shall use its commercially reasonable efforts to implement the
provisions of this Agreement, and for such purpose Seller, at the request of
Buyer, at or after the Closing Date, shall promptly execute and deliver, or
cause to be executed and delivered, to Buyer such deeds, assignments, bills of
sale and other instruments in addition to those required by this Agreement, in
form and substance reasonably satisfactory to Buyer, and take all such other
actions, as may be reasonably necessary or desirable to implement any provision
of this Agreement or to more effectively transfer, convey and assign to Buyer
good and marketable title to, and to put Buyer in actual possession and
operating control of, all of the Acquired Assets, free and clear of all Liens
except for Permitted Liens. Buyer shall use its commercially reasonable efforts
to implement the provisions of this Agreement, and for such purpose Buyer, at
the request of Seller, at or after the Closing Date, shall take all such other
actions as may be reasonably necessary or desirable to implement any provision
of this Agreement.
(b) Each party has obtained or shall continue to use its commercially
reasonable efforts to take, or cause to be taken by others, all necessary
actions required to obtain or satisfy, at the earliest practicable date after
the Closing, all consents from any person necessary to authorize, approve or
permit the full and complete sale, conveyance, assignment, sublease or transfer
of the Acquired Assets, as applicable, and to consummate and make effective the
transactions contemplated by this Agreement to facilitate the full and
expeditious transfer of legal title, or the sublease, as the case may be, of the
Acquired Assets.
Section 7.10. Expenses; Transfer Taxes. Each party shall bear the legal,
accounting and other expenses incurred by such party in connection with the
negotiation, preparation and execution of this Agreement and the transactions
contemplated hereby. All transfer, documentary, sales, use, registration,
value-added and other similar taxes (including all applicable real estate
transfer taxes) and related fees (including any penalties, interest and
additions to tax) (collectively, "Transfer Taxes") incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by Buyer.
Seller and Buyer shall cooperate in timely making all filings, returns, reports
and forms as may be required to comply with the provisions of such transfer tax
laws. To the extent legally able to do so, Buyer shall deliver to Seller
exemption certificates satisfactory in form and substance to Seller with respect
to Transfer Taxes if such delivery would reduce the amount of Transfer Taxes
that would otherwise be imposed.
Section 7.11. Bulk Transfer Laws. Buyer hereby waives compliance by Seller
with the laws of any jurisdiction relating to bulk transfers which may be
applicable in connection with the transfer of the Acquired Assets to Buyer, and
Seller agrees to indemnify Buyer against any liabilities arising from such
noncompliance.
Section 7.12. Press Releases and Disclosure. The parties agree that neither
Seller nor Buyer shall issue or cause publication of any press release or other
announcement or public communication with respect to this Agreement or the
transactions contemplated hereby or otherwise disclose this Agreement or the
transactions contemplated hereby to any third party (other than attorneys,
advisors and accountants to Seller or Buyer) without the consent of the other
party, which consent shall not be unreasonably withheld; provided, however, that
nothing herein shall prohibit any party from issuing or causing publication of
any press release, announcement or public communication to the extent that such
party deems such action to be required by law or stock exchange; provided,
further, that such party shall, whenever practicable, consult with the other
party concerning the timing and content of such press release, announcement or
communication before the same is issued or published.
24
Section 7.13. Cooperation in the Defense of Claims. If a claim is asserted
against Buyer with respect to events or conditions occurring or existing in
connection with, or arising out of, the operation of the Business prior to the
Closing, or the ownership, possession, use or sale of the Acquired Assets prior
to the Closing, Seller shall cooperate with Buyer in the defense of any such
claim. If a claim is asserted against Seller with respect to events or
conditions occurring or existing in connection with, or arising out of, the
operation of the Business after the Closing, or the ownership, possession or use
of the Acquired Assets after the Closing, Buyer shall cooperate with Seller in
the defense of any such claim.
Section 7.14. Regulatory Approvals.
(a) To the extent not already obtained, Buyer and Seller shall take, or
cause to be taken by others, all commercially reasonable steps to obtain or
satisfy at the earliest practicable date, all consents from any individual,
partnership, corporation, association, joint stock company, trust, joint
venture, limited liability company or any governmental authority necessary to
authorize, approve or permit the full and complete transfer of the Acquired
Assets, and to consummate and make effective the transactions contemplated by
this Agreement.
(b) To the extent not already obtained, Seller and Buyer shall use their
commercially reasonable efforts to obtain any authorizations, consents, orders
and approvals of any governmental authority necessary for the performance of its
respective obligations pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby, and shall cooperate with each
other in all reasonable respects in promptly seeking to obtain such
authorizations, consents, orders and approvals. Neither Buyer nor Seller shall
take any action that shall have the effect of delaying, impairing or impeding
the receipt of any required regulatory approvals.
(c) Each of the parties acknowledges that it is not aware of any
circumstances that would require the parties to make a filing under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, with respect
to the transactions contemplated by this Agreement.
Section 7.15. Employee Matters.
25
(a). Offer to Hire. As of the Effective Date of Employment, Buyer shall
offer to hire, in a comparable position and at the same rate of pay, each active
employee of the Business who is involved in the conduct of the Business on the
day immediately prior to the Closing Date, and all those inactive employees of
the Business who are on approved leave on the Closing Date because of jury duty,
family or medical leave, sick leave, vacation or military duty or who are on
long term disability under Seller's long term disability policy (collectively,
the "Business Employees"). Each Business Employee who accepts Buyer's offer of
employment shall become an employee of Buyer as of the Effective Date of
Employment; each such employee shall be employed by Buyer as an at will employee
unless Buyer has entered into an employment agreement with the employee that
specifically provides otherwise. Buyer shall be responsible for any obligations
or liabilities to the Business Employees under the Worker Adjustment and
Retraining Notification Act and any similar state or local "plant closing" law
("WARN") to the extent WARN thresholds are exceeded as a result of action taken
by Buyer on or after the Closing Date with respect to the Business Employees.
Seller shall be responsible for any obligations or liabilities to the Business
Employees under WARN as a result of actions taken by Seller prior to the Closing
Date.
During the period between the Closing Date and the Effective Date of
Employment, the Business Employees shall remain employees of Seller. In the
event that Seller terminates a Business Employee or any Business Employee's
employment terminates prior to the Effective Date of Employment for any other
reason and Seller replaces any such Business Employee in accordance with the
terms of the Transition Services Agreement, such replacement employee shall be
deemed to be a Business Employee for purposes of this Agreement and Buyer shall
offer to hire each such Business Employee as of the Effective Date of Employment
in the same manner as described for each other Business Employee in this Section
7.15(a).
(b). Transferred Employees. The Business Employees who accept employment
with Buyer shall be referred to herein as "Transferred Employees." Buyer's
obligation with respect to Transferred Employees, as such, shall commence as of
the Effective Date of Employment. Upon request of Buyer, Seller shall provide
Buyer reasonable access to and copies of data regarding ages, dates of hire,
compensation, job description and, subject to applicable law, such other
personnel records as Buyer may reasonably request in respect of the Business
Employees.
(c). Terms of Employment. For the period beginning on the Effective Date of
Employment and ending on the third anniversary of the Closing Date, Buyer shall
provide Transferred Employees with benefits which are the same or substantially
equivalent to those provided to such employees pursuant to the ERISA Plans set
forth in Section 7.15 of Seller's Disclosure Schedule entitled "Employee Plans."
Employment with Seller prior to the Effective Date of Employment shall be
treated as service with the Buyer for purposes of eligibility and entitlement to
benefits under any plans providing the same or substantially equivalent benefits
as the ERISA Plans, other than for purposes of the accrual of benefits under any
retirement plan under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
(d). Assumed Plans. As of the Effective Date of Employment, Buyer may
assume and become the sponsoring employer under any of the plans set forth in
Section 7.15 of Seller's Disclosure Schedule entitled "Employee Plans"
(collectively, the "Assumed Plans"); provided, that Seller shall indemnify Buyer
for any and all liabilities relating to acts, omissions, events or occurrences
prior to the Closing Date with respect to any Assumed Plan. Seller shall take
all actions as may be necessary or appropriate in order to establish Buyer as a
successor to Seller to all authority, rights and duties under or with respect to
the Assumed Plans, including the Seller's authority, rights and duties under or
with respect to any and all annuity, insurance, administrative services or
similar contracts or agreements and/or trust agreements or other funding
vehicles that may form a part of such plan or be related thereto, together with
all plan assets. In connection therewith, Seller shall execute, or cause to be
executed, all instruments and documents (including company resolutions and any
amendments to any Assumed Plans and related trust agreements, insurance,
annuity, administrative services or similar contracts) which, in the reasonable
opinion of Buyer and Seller, are necessary or desirable to effect the terms of
this Section 7.15(d).
26
(e). ERISA
(i) Section 7.15 on Seller's Disclosure Schedule entitled "Employee Plans"
sets forth a complete and correct list of all employee benefit plans (as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and referred to herein as "ERISA Plans") of Seller that
Seller has maintained or made contributions to during the last six (6) years and
each other deferred compensation, stock option, stock bonus, incentive
compensation, bonus, fringe benefit or other plan, program or agreement to
provide benefits other than salary or wages to Business Employees (collectively,
the "Employee Plans").
(ii) Except as set forth in Section 7.15 on Seller's Disclosure Schedule,
Seller has neither maintained nor contributed to any Employee Plan subject to
Title IV of ERISA. Except as set forth in Section 7.15 on Seller's Disclosure
Schedule, to the knowledge of Seller, Seller has no material liability on
account of any Employee Plan, including without limitation for (A) contributions
accruing or required to be paid under the terms of any such Employee Plan prior
to the date hereof, (B) fiduciary breaches by Seller, any employee of Seller or
any other person under ERISA or any other applicable law, (C) income taxes by
reason of non-qualification of any such Employee Plan, or (D) a partial or
complete withdrawal within the meaning of Section 4201 of ERISA.
(iii) Except with respect to amendments the Internal Revenue Service may
require as a condition of issuing a favorable determination letter and that can
be adopted retroactively without an increase in the benefits payable, each of
the Employee Plans which is intended to qualify under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code") does so qualify and is
exempt from taxation pursuant to Section 501(a) of the Code, and the Seller
maintaining such Employee Plan has received favorable and unrevoked
determination letters from the Internal Revenue Service to that effect. To the
Knowledge of Seller, Seller has complied in all material respects with all
requirements under Section 4980(B) of the Code and any proposed or final
regulations promulgated thereunder. To Seller's Knowledge, with respect to each
Employee Plan, Seller is in compliance in all material respects with the
requirements prescribed by all laws applicable to the Employee Plans, and there
is no proceeding (other than routine claims for benefits) pending or, to the
Knowledge of Seller threatened, with respect to any Employee Plan or against the
assets of any Employee Plan.
27
(f). COBRA. Buyer shall have sole responsibility for "continuation
coverage" benefits provided after the Effective Date of Employment under group
health plans to all Business Employees, and "qualified beneficiaries" of
Business Employees. The terms "continuation coverage," "qualified beneficiaries"
and "qualifying event" shall have the meaning ascribed to them under Section
4980B of the Code and Sections 601-608 of ERISA.
(g). Vacation anSick Leave. Each Transferred Employee shall be credited by
Buyer with any unused vacation and sick leave earned as of the Effective Date of
Employment under the vacation and sick leave policy, or policies, of Seller
applicable to such Transferred Employee, and Seller shall have no liability
therefor following the Effective Date of Employment; provided that, any unused
vacation and any vested sick leave as of the day immediately preceding the
Closing Date is accrued as a liability on the Closing Balance Sheet. Buyer shall
recognize service by each Transferred Employee with Seller for purposes of
determining entitlement to vacation and sick leave following the Effective Date
of Employment under the vacation and sick leave policy, or policies, applicable
to the Transferred Employees to the extent that the crediting of such service
does not result in the duplication of benefits provided under the preceding
sentence.
(h). Effect of Transaction. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
(either alone or in conjunction with any other event) (A) result in, cause the
accelerated vesting or delivery of, or increase the amount or value of, any
payment or benefit to any employee, director, or former employee of Seller
(other than any such payments or benefits to be paid or provided by Seller), (B)
result in or cause the payment of an amount constituting an "excess parachute
payment" (as such term is defined in section 280G(b)(1) of the Code), or (C)
result in a violation of fiduciary duties imposed by section 404 of ERISA, the
prohibited transaction rules of section 406 of ERISA or section 4975 of the
Code, or other applicable law.
Section 7.16. Seller's Non-Competition and Non-Solicitation.
(a). Non-Competition. Except as contemplated by the Transition Service
Agreement with respect to the period from the Closing Date through December 31,
2000, from the Closing Date through the seventh anniversary of the Closing Date,
neither Seller nor any individual or entity directly or indirectly controlling,
controlled by or under common control with Seller (its "Affiliates") shall
engage, directly or indirectly, in any business that competes with the Business.
Notwithstanding the foregoing, this Section 7.16(a) shall not prevent Xxxxx X.
Xxxxxx, Xxxxxxxx Xxxxxx or Xxxxx Xxxxxxxx from owning up to a maximum of 1% of
the outstanding shares of any class or series of publicly traded securities of a
company that competes with the Business.
28
Buyer and Seller consider the Buyer's acquisition of the Acquired Assets
and the Assumed Liabilities to be the sale of Seller's Business. Seller conducts
a substantial part of the Business through the Internet, and accordingly, Buyer
and Seller consider geographic scope to be irrelevant to the Business of Seller
for purposes of this covenant. Seller agrees that this covenant is reasonable
with respect to its time and scope. Seller agrees that this covenant does not
place an unreasonable burden on Seller or any member of Seller. The parties
acknowledge that this covenant is reasonable and necessary to Buyer for the
protection of its legitimate interest in the enjoyment of the Acquired Assets.
(b). Non-Solicitation. Except as contemplated by the Transition Service
Agreement with respect to the period from the Closing Date through December 31,
2000, from the Closing Date through the seventh anniversary of the Closing Date,
Seller shall not, and shall not permit any of its Affiliates to, directly or
indirectly, employ or retain as a consultant any individual who was an employee
of the Business, (other than Xxxxx X. Xxxxxx or Xxxxxxxx Xxxxxx) in the 12-month
period immediately prior to offering employment or a consulting position to such
person.
ARTICLE VIII.
INDEMNIFICATION
Section 8.1. Indemnification by Buyer.
(a) Subject to the limitations on survivability set forth in Section 8.5
and to the other limitations set forth in this Article VIII, Buyer shall
indemnify, defend and hold harmless Seller and its respective employees,
officers, agents, managers, members and directors (collectively, the "Seller
Indemnified Parties") against and reimburse any Seller Indemnified Party for,
any and all losses, damages, costs, expenses, liabilities, obligations and
claims of any kind (including any action brought by an governmental authority or
other person) including reasonable attorneys' and consultants' fees and expenses
and other legal costs and expenses reasonably incurred in prosecution,
investigation, remediation, defense or settlement (collectively, "Losses"), that
such Seller Indemnified Party may at any time suffer or incur, or become subject
to, as a result of or in connection with:
(i) any inaccuracy in or breach of any representations and warranties made
by Buyer in either this Agreement or in the documents and instruments delivered
pursuant hereto;
(ii) any breach, non-fulfillment or default by Buyer in the performance of
any of its covenants or agreements under this Agreement and in the documents and
instruments delivered pursuant hereto;
(iii)any Assumed Liability; and
(iv) any enforcement of this indemnity.
(b) In no event shall Buyer be liable under Section 8.1 or otherwise under
this Agreement in an amount aggregating in excess of $5 Million Dollars (the
"Buyer Cap").
29
(c) Buyer shall not be required to indemnify, defend or hold Seller
harmless from and against any Losses under Section 8.1(a) unless and until the
amount of such Losses equals $500,000 in the aggregate (the "Buyer Basket
Amount"), in which event Buyer shall be obligated to indemnify Seller, and
Seller may assert its right to indemnification hereunder to the full extent of
all Losses up to the Buyer Cap, but only for Losses in excess of the Buyer
Basket Amount.
Section 8.2. Indemnification by Seller.
(a) Subject to the limitations on survivability set forth in Section 8.5
and to the other limitations set forth in this Article VIII, Seller shall
indemnify, defend and hold harmless Buyer, its respective employees, officers,
agents and directors (collectively, "Buyer Indemnified Parties") against, and
reimburse any Buyer Indemnified Party for, any and all Losses that such Buyer
Indemnified Party may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(i) the inaccuracy in or breach of any representations and warranties made
by Seller in either this Agreement or in the documents and instruments delivered
pursuant hereto; or
(ii) any breach, non-fulfillment or default by Seller in the performance of
any of its covenants or agreements under this Agreement and in the documents and
instruments delivered pursuant hereto;
(iii) any Excluded Liability; and
(iv) any enforcement of this indemnity.
(b) In no event shall Seller be liable under Section 8.2 or otherwise under
this Agreement in an amount aggregating in excess of $5 Million Dollars (the
"Seller Cap").
(c) Seller shall not be required to indemnify, defend or hold Buyer
harmless from and against any Losses under Section 8.2(a) unless and until the
amount of such Losses equals $500,000 in the aggregate (the "Seller Basket
Amount"), in which event Seller shall be obligated to indemnify Buyer, and Buyer
may assert its right to indemnification hereunder to the full extent of all
Losses up to the Seller Cap, but only for Losses in excess of the Seller Basket
Amount.
Section 8.3. Notification of Claims.
(a) A party that may be entitled to be indemnified pursuant to Section 8.1
or 8.2 (the "Indemnified Party') shall promptly notify the party liable for such
indemnification (the "Indemnifying Party") in writing of any pending or
threatened claim or demand which the Indemnified Party has determined has given
or could give rise to a right of indemnification under this Agreement (including
a pending or threatened claim or demand asserted by a third party against the
Indemnified Party), describing in reasonable detail the facts and circumstances
with respect to the subject matter of such claim or demand; provided, however,
that the failure to provide such notice shall not release the Indemnifying Party
from any of its obligations under this Article VIII except and only to the
extent that the Indemnifying Party is materially prejudiced by such failure.
Subject to the Indemnifying Party's right to defend in good faith third party
claims as hereinafter provided, the Indemnifying Party shall satisfy its
obligations under this Article VIII within 45 days after the receipt of written
notice thereof from the Indemnified Party.
30
(b) If the Indemnified Party shall notify the Indemnifying Party of any
claim or demand pursuant to this Article, and if such claim or demand relates to
a pending or threatened claim or demand asserted by a third party against the
Indemnified Party which the Indemnifying Party acknowledges to the Indemnified
Party is a claim or demand for which it must indemnify, defend and hold harmless
the Indemnified Party against or reimburse the Indemnified Party hereunder, then
the Indemnifying Party shall have the right to defend such claim or demand and
if it elects to defend such claim or demand, it shall employ counsel reasonably
acceptable to the Indemnified Party to defend such claim or demand that has been
asserted against the Indemnified Party. The Indemnified Party and the
Indemnifying Party shall each have the right to participate in the defense of
any claim or demand for which it is not controlling the defense, at its own
expense. The Indemnifying Party shall notify the Indemnified Party in writing,
as promptly as possible (but in any case before the due date for the answer or
response to a claim) after the date of the notice of claim given by the
Indemnified Party to the Indemnifying Party hereunder of its election to defend
in good faith any such third party claim or demand. So long as the Indemnifying
Party is defending in good faith any such claim or demand asserted by a third
party against the Indemnified Party, the Indemnified Party shall not settle or
compromise such claim or demand. The Indemnified Party shall make available to
the Indemnifying Party or its agents all records and other materials in the
Indemnified Party's possession reasonably required by the Indemnifying party for
its use in defending any third party claim or demand. Whether or not the
Indemnifying Party elects to defend any such claim or demand, the Indemnified
Party shall have no obligations to do so. The Indemnifying Party shall not
settle or compromise any such claim or demand, unless the Indemnified Party is
given a full and complete release of any and all liability by all relevant
parties relating thereto. In addition, the Indemnifying Party may not consent to
entry of any judgment or settle any such proceeding which judgment or settlement
obligates the Indemnified Party to pay any money, to perform obligations, to
comply with any material conditions or to admit liability without the consent of
the Indemnified Party, such consent not to be unreasonably withheld.
(c) Buyer may give notice of a claim under the Escrow Agreement in any
amount to which it may become entitled under this Article VIII.
Section 8.4. Exclusive Remedies. Seller and Buyer acknowledge and agree
that the indemnification provisions of Sections 8.1 and 8.2 shall be the sole
and exclusive remedies of Seller and Buyer, respectively, for any breach of the
representations or warranties herein by the other party; provided that a party
may seek equitable remedies as provided in Section 10.12.
31
Section 8.5. Survival.
(a) All representations and warranties of the parties set forth herein and
in the documents and instruments delivered pursuant hereto and all covenants,
undertakings and agreements contained in this Agreement and in the documents and
instruments delivered pursuant hereto be performed or complied with at or prior
to the Closing Date shall survive the Closing for a period of two (2) years and,
upon the expiration of such two (2)-year period, such representations and
warranties shall be deemed to have terminated and been extinguished and shall
cease to be of any force or effect, except with respect to matters as to which a
claims notice shall have been given conforming to the requirements of this
Article VIII by a party hereto prior to such expiration date.
(b) The covenants, undertakings and agreements of the parties contained in
this Agreement and in the documents and instruments delivered pursuant hereto to
be performed or complied with after the Closing shall survive without limitation
as to time except as may otherwise be provided under the terms of this Agreement
or any documents and instruments delivered pursuant hereto.
ARTICLE IX.
TERMINATION
Section 9.1. Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing:
(a). Mutual Consent. By mutual written consent of Seller and Buyer;
(b). Closing Date. By Seller or Buyer if the Closing shall not have
occurred on or before November 30, 2000 (the "Termination Date");
(c). Seller Misreprentation or Breach. By Buyer, if there has been a
material breach by Seller of any of its representations, warranties, covenants,
obligations or agreements set forth in this Agreement or in any writing
delivered pursuant hereto by Seller;
(d). Buyer Misrepresentation or Breach. By Seller, if there has been a
material breach by Buyer of any of its representations, warranties, covenants,
obligations or agreements set forth in this Agreement or in any writing
delivered pursuant hereto by Buyer; and
(e). Court Order. By Seller or Buyer if consummation of the transactions
contemplated hereby shall violate any non-appealable final order, decree or
judgment of any court or Governmental Authority having competent jurisdiction.
Section 9.2. Effect of Termination. If this Agreement is terminated
pursuant to Section 9.1, written notice thereof shall forthwith be given to the
other party and this Agreement shall thereafter become void and have no further
force and effect and all further obligations of Seller and Buyer under this
Agreement shall terminate without further liability of Seller or Buyer, except
that (a) each party will return all documents, workpapers and other material of
any other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the same,
and all confidential information received by any party hereto with respect to
the business of any other party shall be treated in accordance with Section 7.2
or Section 7.3, as applicable; and (b) such termination (except pursuant to
Section 9.1(a)) shall not constitute a waiver by any party of any claim it may
have for damages caused by reason of, or relieve any party from liability for,
any breach of this Agreement prior to termination under Section 9.1.
32
ARTICLE X.
MISCELLANEOUS
Section 10.1. Amendments. This Agreement may be amended only by a writing
executed by all of the parties hereto.
Section 10.2. Entire Agreement. This Agreement and the other agreements
expressly provided for herein set forth the entire understanding of the parties
hereto with respect to the subject matter hereof, and supersede all prior
contracts, agreements, arrangements, communications, discussions,
representations and warranties, whether oral or written, between the parties.
Section 10.3. Governing Law. This Agreement will in all respects be
governed by and construed in accordance with the laws of the State of New York,
without regard to its conflicts of law doctrine. Each party hereby agrees to
submit to the personal jurisdiction of the state or federal courts located in
the State of New York. Notwithstanding the foregoing, any party may initiate and
prosecute any legal proceeding or seek enforcement of any judgment in any proper
court having jurisdiction in the United States or elsewhere.
Section 10.4. Notices. Any notice, request or other communication required
or permitted hereunder will be in writing and will be deemed to have been duly
given (a) when received if personally delivered, (b) on the third business day
after being sent by registered or certified mail, return receipt requested,
postage prepaid or (c) as of the date sent by telecopy, with confirmed answer
back, to the parties at their respective addresses set forth below.
To Seller: Xxxxxxx Information, LLC
Xxx Xxxxxxx Xxxxx
Xxxxx 00 Xxxxx
Xxxxxxxxxxx, Xxx Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, CEO and President
With a copy to: Xxxxxxx, Carton & Xxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx
33
To Buyer: The Bureau of National Affairs, Inc.
0000 Xxxxxx-Xxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Vice President
With a copy to: The Bureau of National Affairs, Inc.
0000 Xxxxxx-Xxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx, General Counsel
Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP
0000 Xxxxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
Any party by written notice to the others given in accordance with this
Section 10.4 may change the address or the persons to whom notices or copies
thereof will be directed.
Section 10.5. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original, and all of which
together will constitute one and the same instrument. Each counterpart may
consist of a number of copies hereof each signed by less than all, but together
signed by all, the parties hereto.
Section 10.6. Assignment. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of each of the parties, but no rights,
obligations or liabilities hereunder shall be assignable by any party without
the prior written consent of the other parties, except as expressly provided in
this Section 10.6. Buyer and Seller hereby acknowledge that Seller has the right
to assign its right to receive the Purchase Price as directed in writing by
Seller to Buyer. Buyer and Seller hereby further acknowledge that Buyer has the
right to assign its rights, obligations and liabilities under this Agreement and
the other Agreements expressly provided for herein to KI Holdings, Inc., a
Delaware corporation, or any other wholly owned (directly or indirectly)
subsidiary of Buyer; provided, that no such assignment shall relieve Buyer of
any of its obligations or liabilities to Seller under any such agreement in the
event of non-performance by Buyer's assignee. No provision of this Agreement is
intended to confer upon any individual or entity other than the parties hereto
any rights or remedies hereunder.
Section 10.7. Waivers. Except as otherwise provided herein, Buyer or Seller
may waive in writing compliance by any of the other parties hereto (to the
extent such compliance is for the benefit of the party giving such waiver) with
any of the terms, covenants or conditions contained in this Agreement (except
such as may be imposed by law). Any waiver by any party of any violation of,
breach of, or default under, any provision of this Agreement, by any other party
will not be construed as, or constitute, a continuing waiver of such provision,
or waiver of any other violation of, breach of or default under any other
provision of this Agreement.
34
Section 10.8. Survival of Covenants. Each of the covenants and obligations
contained in this Agreement will survive in accordance with their terms.
Section 10.9. Schedules, Addenda and Exhibits. The Schedules and Exhibits
attached to this Agreement are incorporated herein and shall be part of this
Agreement for all purposes.
Section 10.10. Headings. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
Section 10.11. Gender and Number. The masculine, feminine or neuter gender
and the singular or plural number will each be deemed to include the others
whenever the context so indicates.
Section 10.12. Equitable Remedies. Nothing in this Agreement shall limit
either party's right to seek any equitable remedies in any court of competent
jurisdiction. Without limiting the foregoing, the parties expressly recognize
the importance of the obligations set forth in Article VII and agree that each
party shall be entitled to seek specific performance of such Sections through
injunction or otherwise to avoid or eliminate any actual or threatened violation
thereof.
If any of the covenants set forth in Section 7.16 are held to be not
reasonable and necessary to Buyer for the protection of its legitimate interest
in the enjoyment of the Acquired Assets, to impose an unreasonable burden on a
member, to be against public policy, or to be otherwise unreasonable, such
covenants will be considered subject to reform by a court of competent
jurisdiction to conform its terms to the reasonable intent of the parties with
respect to scope, time and geographic area, and in such lesser scope, time or
geographic area, will be effective, binding and enforceable against each member
of Seller.
Section 10.13. Seller's Knowledge. References in this Agreement to the
"Knowledge of Seller" or to "Seller's Knowledge" shall be deemed to mean the
actual knowledge of Xxxxx X. Xxxxxx, Xxxxxxxx Xxxxxx or Xxxxx Xxxxxxxx, and
matters which Xxxxx X. Xxxxxx, Xxxxxxxx Xxxxxx or Xxxxx Xxxxxxxx should
reasonably have known in the discharge of their duties as managers of Seller.
35
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
XXXXXXX INFORMATION, LLC
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Name: Xxxxx X. Xxxxxx
Title: CEO and President
THE BUREAU OF NATIONAL AFFAIRS, INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President for Strategic Development
THE UNDERSIGNED, constituting all of the members of Seller, hereby
confirm that Seller is authorized to enter into the foregoing Asset Purchase
Agreement and that none of the undersigned is entitled to exercise any
dissenters', appraisal or similar rights with respect thereto, and each of the
undersigned hereby agrees to be bound by the terms of Section 7.16
(Non-Competition and Non-Solicitation) as if he was both a party thereto and the
"Seller" named therein.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand
as of the date first above written.
/s/ Xxxxx X. Xxxxxx
--------------------
Xxxxx X. Xxxxxx
/s/ Xxxxxxxx Xxxxxx
--------------------
Xxxxxxxx Xxxxxx
/s/ Xxxxx Xxxxxxxx
--------------------
Xxxxx Xxxxxxxx
