EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
among
KABLE FULFILLMENT SERVICES, INC.
Buyer,
and
ELECTRONIC DATA SYSTEMS CORPORATION,
EDS RESOURCE MANAGEMENT CORPORATION,
and
EDS INFORMATION SERVICES LLC,
Sellers
Dated as of Xxxxx 00, 0000
XXXXX PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of March 31, 2003, by and among Kable Fulfillment Services, Inc., a Delaware
corporation ("Buyer"), and Electronic Data Systems Corporation, a Delaware
corporation ("EDS"), EDS Information Services LLC, a Delaware limited liability
company ("EIS"), and EDS Resource Management Corporation, a Delaware corporation
("ERMC").
WHEREAS, EDS, EIS and ERMC (each a "Seller" and together "Sellers") are
engaged in the business of providing information technology services, including
the Business (as defined in Section 1.3); and
WHEREAS, Buyer desires to purchase, and Sellers desire to sell, the
Business, all on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration described herein, Sellers, jointly
and severally, and Buyer agree as follows:
ARTICLE 1
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PURCHASE AND SALE OF ASSETS
---------------------------
1.1 Purchase and Sale of Assets
---------------------------
Subject to the terms and conditions of this Agreement, at the Closing (as
defined in Section 4.1), Sellers shall sell, transfer, convey, assign, license
and deliver (or will cause to be sold, transferred, conveyed, assigned, licensed
and delivered) to Buyer, and Buyer shall purchase, acquire and accept (or cause
to be purchased, acquired and accepted) from Sellers, free and clear of any and
all Liens other than Permitted Liens, all of the right, title and interest of
Sellers in and to those assets, rights, properties, contracts and businesses of
Sellers described in paragraphs (a) through (g) below ("Transferred Assets") and
the right to conduct the Business with the Transferred Assets:
(a) The following Fixed Assets (as defined in Section 13.10) owned by
Sellers (whether or not carried on Sellers' books), including all
warranties and guarantees, if any, expressed or implied existing for
the benefit of Sellers in connection therewith: (i) Fixed Assets owned
by the Sellers located at the Real Property Site, other than as
described in Schedule 1.1(a)(i) and (ii) Fixed Assets owned by the
Sellers used in the Business described on Schedule 1.1(a)(ii), in each
case, other than Fixed Assets classified as fixtures that cannot be
transferred or assigned without a third party's consent.
(b) (i) the assets and property listed on Schedule 1.1(b) of Sellers
Disclosure Schedule; (ii) any and all other Trademarks (including any
and all rights in and to the name "Neodata" and any variant thereof
and all related trademark and service xxxx rights) used exclusively in
the Business; (iii) any and all Copyrights (including any and all
rights in and to the Software referred to in the following clause (iv)
and any variant of such Software) used exclusively in the Business;
(iv) any and all Software used exclusively in the Business; and (v)
any and all Miscellaneous Intellectual Property Rights used
exclusively in the Business at any time (all of the foregoing in
clauses (i) through (v) collectively, the "Transferred Intellectual
Property Rights");
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(c) All Contracts with customers listed in Schedule 1.1(c) of Sellers
Disclosure Schedule (the "Transferred Customer Contracts"), but
excluding all Customer Accounts Receivable;
(d) All Contracts (other than the Transferred Customer Contracts) pursuant
to which any of Sellers obtains goods or services from a third party
(including Software, raw materials, equipment, supplies, finished
products and lease facility support) set forth in Schedule 1.1(d) of
Sellers Disclosure Schedule and any other Contract for such goods or
services used exclusively in the Business (collectively, the
"Transferred Vendor Contracts"), (collectively with the Transferred
Customer Contracts, the "Transferred Contracts");
(e) All rights of Sellers in respect of prepayments and deposits
("Transferred Prepaids") (other than security deposits) made by
Sellers and refund entitlements pursuant to the Transferred Vendor
Contracts with respect to goods to be delivered or services to be
rendered after the Closing Date and rights of Sellers in respect of
Customer Deposits for services to be performed for Customers after the
Closing Date, and amounts prepaid by Sellers as of the Closing Date
for postage and shipping exclusively for the Business, including
credit balances in postage meters, postage stamps on hand and the
credit balance in the postage deposit account maintained by Ascom
Xxxxxx Mailing Systems, Inc., but excluding any postage which is to be
billed as part of a Customer Accounts Receivable (such latter amounts,
"Postage Prepaids");
(f) All books and records of Sellers, including manuals, operating
guidelines and practices, sales and promotional data, advertising
materials, customer lists, historical cost and pricing information,
supplier lists, and other similar property relating exclusively to the
Business and the Transferred Assets (collectively, the "Transferred
Books and Records"); and
(g) To the extent transferable, all licenses, permits, certificates of
authority, development rights, authorizations, approvals,
registrations, franchises and any Consent, granted or issued by a
governmental or regulatory authority (collectively, "Permits")
relating exclusively to the Business (the "Transferred Permits").
1.2 Retained Assets
---------------
Notwithstanding anything in the Transaction Documents or any other writing
to the contrary, Buyer is purchasing only the Transferred Assets and Buyer
expressly understands and agrees that all other assets and properties of Sellers
shall be excluded from the Transferred Assets (such excluded assets, the
"Retained Assets"), including, without limitation the following:
(a) All Customer Accounts Receivable and cash and cash equivalents of
Sellers, including securities, deposits (other than Customer Deposits
and Transferred Prepaids), investments in money market funds,
commercial paper, certificates of deposit, treasury bills and accrued
interest thereon;
(b) All rights of Sellers in all Intellectual Property Rights owned or
controlled by Sellers pursuant to license or otherwise and whether or
not used in the Business, other than the Transferred Intellectual
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Property Rights and the Intellectual Property Rights granted to Buyer
under the Technology License Agreement and the Transition Services
Agreement;
(c) All rights under all Contracts of Sellers that are not Transferred
Contracts;
(d) All books and records of Sellers that are not Transferred Books and
Records;
(e) (i) Any refunds, credits or other assets or rights (including interest
thereon or claims therefor) with respect to any Taxes (as defined
below) which are Retained Liabilities (as defined below) of Sellers,
and (ii) all of Sellers' Tax Returns relating to the Business for all
periods prior to the Closing and any notes, worksheets, files and
documents relating thereto except the Transferred Books and Records;
(f) Any rights (including rights of Sellers to indemnification and any
policy of insurance) and claims and recoveries under litigation of
Sellers against third parties arising out of or relating to events
occurring on or prior to the Closing Date;
(g) Any asset of Sellers transferred or otherwise disposed of by Sellers
in the ordinary course of the Business on or prior to the Closing
Date; and
(h) All assets of Sellers relating to the ERISA Plans (as defined below).
1.3 The Business
------------
The "Business" shall mean the provision of Subscription Fulfillment
Services (as defined below) and the provision of membership list fulfillment
services pursuant to the Master Services Agreement between Sierra Club and
Neodata Services, Inc. dated December 1, 1997, as amended as conducted by
Sellers. The "Subscription Fulfillment Services" are the following services when
provided to publishers and associations in relation to periodicals: (a)
conversion and verification of subscriber information (order, statistical,
financial, name and address); (b) core processing of subscription information
(including mail cage operation, data entry, subscription master file
maintenance, hard-copy customer service, label preparation, renewal promotion
addressing, accounts receivable operation, gift processing, ABC/BPA audits); (c)
report generation (including statistical, sales & circulation, file balance, ABC
and BPA, circulation analysis, NDIS, and lettershop/warehouse); (d) lettershop
and warehouse services (including mailing, presorting, warehouse and inventory
tracking, document (i.e., labels, invoices) printing and postage tracking); (e)
list order fulfillment services, including list management and tracking, name
selection, data overlays and shipping and filing transfer files; and (f) back
issue fulfillment services. For purposes of clarification, Subscription
Fulfillment Services shall not include call center services.
ARTICLE 2
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ASSUMPTION OF LIABILITIES
-------------------------
2.1 Assumption of Assumed Liabilities
---------------------------------
Subject to the terms and conditions of this Agreement, at the Closing, as
part of the consideration for the sale of the Business and the related transfer
of the Transferred Assets to Buyer under this Agreement, Buyer shall assume and
agree to pay, perform and discharge, when due, only the following debts,
liabilities and obligations of Sellers as related to the Business (the "Assumed
Liabilities"):
(a) All liabilities of any kind relating to, or arising under or in
respect of the Transferred Assets to the extent arising from
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circumstances, activities, acts, events, omissions or conditions that
occur after, but not on or before, the Closing Date (or, in the case
of Deferred Transferred Assets, prior to their transfer to Buyer), and
not resulting from any action or inaction of Sellers or any other
Person on or prior to the Closing Date (or, in the case of Deferred
Transferred Assets, prior to their transfer to Buyer), including
obligations under written warranties in the Transferred Customer
Contracts for work performed after the Closing Date (or, in the case
of Deferred Transferred Assets, prior to their transfer to Buyer);
(b) Obligations arising under Transferred Customer Contracts and first due
after transfer to Buyer in respect of Customer Deposits, including
obligations to refund;
(c) Any and all Transfer Taxes (as defined in Section 3.3); and
(d) Trade payables and purchase money indebtedness of the Business due and
payable for goods to be delivered and services to be rendered after
the Closing Date to the extent such obligations were incurred by the
Business in the ordinary course of the Business.
2.2 Retained Liabilities
--------------------
Buyer shall not be required to assume, pay or discharge any liability or
obligation of Sellers related to the Business, or otherwise, unless, and only to
the extent, specifically provided for in Section 2.1 of this Agreement (the
"Retained Liabilities"). Without limiting the foregoing, Buyer shall not assume,
and Sellers shall retain, pay and discharge as and when due, any and all
liabilities and obligations of Sellers, relating to:
(a) Any warranty and product liability claims to the extent arising out of
work performed by the Business on or prior to the Closing Date;
(b) All other liabilities relating to the Business to the extent arising
prior to or on the Closing Date, except for liabilities described in
Sections 2.1 (c) and (d);
(c) Any liability relating to the Business that arises after the Closing
Date to the extent that such liability arises out of or relates to any
occurrence, action or failure of action on or prior to the Closing
Date, except liabilities described in Sections 2.1 (c) and (d);
(d) All trade payables and purchase money indebtedness of any of Sellers,
other than those liabilities described in Section 2.1(d);
(e) Any and all Taxes attributable to or incurred in connection with the
operations of the Business or the Transferred Assets prior to or on
the Closing Date and any Taxes arising as a result of the sale of the
Business and the related transfer of Transferred Assets to the Buyer,
and any transferee or secondary liability of Sellers in respect of any
Tax or any liability of Sellers for any Tax of any Person other than
Sellers, imposed by Law, Contract or otherwise (specifically excluding
all Transfer Taxes, as defined in and which shall be dealt with as
provided in Section 3.3) whether or not due or assessed until after
the Closing Date, it being agreed that Taxes assessed and payable for
periods both before and after the Closing Date shall be determined as
of the Closing Date so that Sellers shall retain liability for such
Taxes attributable to any period prior to and including the Closing
Date and Buyer shall be liable for such Taxes for any period beginning
after the Closing Date;
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(f) Any liability related to any office, warehouse or other facility and
any and all real property that was owned, leased or operated by
Sellers at any time on or prior to the Closing Date, to the extent
such liability relates to acts or omissions that occurred on, at or
appurtenant to such facilities and real property on or prior to the
Closing Date;
(g) Any obligation to or in respect of any employee or former employee of
Sellers existing as of the Closing Date for unpaid wages or salary,
severance pay and unpaid or unused vacation, sick leave and other
paid-time-off benefits, or other compensation and any claim of an
unfair labor practice, or any claim under any state unemployment
compensation or worker's compensation law or regulation or under any
federal or state employment discrimination law or regulation to the
extent such claim is based upon or alleged to be based upon acts or
omissions which occurred on or prior to the Closing Date.
(h) Any and all obligations and liabilities of Sellers, whenever accrued,
with respect to any of the ERISA Plans, and any and all liabilities
and obligations payable with respect to any other employee benefit
plan, program, agreement, policy or arrangement maintained by Sellers,
whenever accrued;
(i) All liabilities associated with the Retained Assets; and
(j) All liabilities of any of Sellers related to litigation commenced on
or prior to the Closing Date or commenced after the Closing Date to
the extent arising out of occurrences, actions or inactions on or
prior to the Closing Date.
ARTICLE 3
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CONSIDERATION - OTHER PAYMENTS
------------------------------
3.1 Consideration
-------------
(a) The aggregate consideration for the Transferred Assets shall be (i)
(A) $10,000,000, (B) plus the absolute value of the Net Customer
Postage Deposit Amount (as defined in Section 3.2(a) below), if
negative, or minus the absolute value of the Net Customer Postage
Deposit Amount, if positive, (C) plus the absolute value of the
Inventory Differential (as defined in Section 3.2(a) below), if
positive, or minus the absolute value of the Inventory Differential,
if negative, (such result, the "Purchase Price"), and (D) minus the
Customer Postage Deposit Amounts paid to Buyer pursuant to Section
3.2(f), and (ii) the assumption by Buyer of the Assumed Liabilities
(collectively, the "Consideration"). The Net Customer Postage Deposit
Amount and the Inventory Differential shall be calculated pursuant to
Section 3.2 below.
(b) On the Closing Date, Buyer will deliver or cause to be delivered to or
on behalf of Sellers, by wire transfer of immediately available
federal funds to such bank account or accounts as shall be designated
in writing by Sellers to Buyer at least two business days prior to the
Closing, (i) $10,000,000, (ii) plus the absolute value of the
Estimated Net Customer Postage Deposit Amount (as defined below), if
negative, or minus the absolute value of the Estimated Net Customer
Postage Deposit Amount, if positive, (iii) plus the absolute value of
the Estimated Inventory Differential (as defined below), if positive,
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or minus the absolute value of the Estimated Inventory Differential,
if negative, (iv) minus $300,000 (the "Additional Payment"). A sample
calculation of the Purchase Price is attached hereto as Exhibit
3.1(b).
(c) The Additional Payment shall be due and payable by wire transfer of
immediately available federal funds in the event that, on or prior to
fifteen months after the Closing Date, Buyer or any of its Affiliates
enters into a Contract or Contracts (or add-on or extension or renewal
to any existing Contract or Contracts) to provide Subscription
Fulfillment Services to Primedia, Inc. or (emap) Xxxxxxxx Publishing
Company or any of their respective Affiliates pursuant to which Buyer
or any of its Affiliates will service one million or more active
subscriber names on file in relation to periodicals or publications
for which the Business provided Subscription Fulfillment Services on
or prior to the Closing Date (the "Primedia Contract"). Such
Additional Payment shall be payable promptly, but not later than five
business days after execution of the Primedia Contract. For purposes
of clarification, in the event Buyer or any of its Affiliates does not
enter into any such Contract or Contracts (or add-ons, extension or
renewals thereof) within fifteen months after the Closing Date, Buyer
shall have no further obligation to make the Additional Payment.
3.2 Adjustment Amount
-----------------
(a) At least two business days prior to the Closing, Sellers shall deliver
to Buyer a statement setting forth Sellers' estimate of (i) the amount
by which the aggregate amount of Customer Postage Deposits determined
as of the close of business on the Closing Date will exceed (a
positive result) or will be less than (a negative result) the
aggregate amount of Postage Prepaids determined as of the close of
business on the Closing Date (the "Net Customer Postage Deposit
Amount") (such estimate the "Estimated Net Customer Postage Deposit
Amount") and (ii) the amount by which the Inventory of the Business
(as defined below) determined as of the close of business on the
Closing Date will exceed (a positive result) or will be less than (a
negative result) $276,000 (the "Inventory Differential")(such estimate
the "Estimated Inventory Differential"). Schedule 3.2 of Sellers
Disclosure Schedule sets forth Sellers' projection of the Net Customer
Postage Deposit Amount, including Customer Postage Deposits by
Customer as of the Closing Date. For purposes of this Section 3.2, the
"Inventory" means the amount which would be classified as inventory on
a balance sheet of the Business as of the Closing Date prepared
consistently with the preparation of the Estimated Inventory
Differential, to be determined by sample physical count valued at the
lower of cost or market value as of the Closing Date.
(b) Within 30 days after the Closing Date, Buyer shall prepare and
promptly deliver to Sellers a statement (the "Closing Date
Statement"), prepared in a manner consistent with the preparation of
the statement provided to Buyer pursuant to Section 3.2(a), of (i) the
Net Customer Postage Deposit Amount as of the close of business on the
Closing Date and (ii) the Inventory Differential as of the close of
business on the Closing Date. Buyer shall also provide summary
supporting documentation of the valuation of Inventory.
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(c) As soon as practicable after delivery of the Closing Date Statement
and in any event within 30 days after receipt, Buyer and Sellers shall
confer and attempt to reconcile any objections Sellers may have to the
calculation of the Net Customer Postage Deposit Amount and the
Inventory Differential. Buyer shall provide Sellers reasonable access
to all financial accounting records of Buyer required for the purpose
of reviewing the Closing Date Statement and verifying the accuracy and
completeness thereof. The amounts comprising the Net Customer Postage
Deposit Amount and the Inventory Differential in the Closing Date
Statement shall be adjusted in accordance with the reconciliation of
any such objections between Buyer and Sellers. If there are no such
objections or all objections shall be reconciled, the Net Customer
Deposit Postage Amount and/or the Inventory Differential shall be
finalized in accordance with the parties' written agreement thereto
which shall be conclusive and binding on them.
(d) If, at the end of the 60 day period after the Closing Date, Buyer and
Sellers fail to reach agreement with respect to the Net Customer
Postage Deposit Amount and/or the Inventory Differential, then the
parties will jointly engage PricewaterhouseCoopers, an independent,
nationally recognized accounting firm, (the "Accounting Firm"), to
review only such matters as to which agreement has not been reached.
In such event, the Accounting Firm shall be requested to resolve all
outstanding disputes within 30 days after being retained by the
parties. The parties shall cooperate fully with the Accounting Firm
and the Accounting Firm shall make its determination within the range
of amounts claimed by Buyer and Sellers. The fees and expenses of the
Accounting Firm shall be borne equally by Buyer on the one hand and
Sellers on the other hand. The Net Customer Postage Deposit Amount
and/or the Actual Inventory Differential shall immediately become
finalized and conclusive and binding on the parties upon the final
written determination of the Accounting Firm.
(e) (i) Within five business days after the Net Customer Postage Deposit
Amount is finalized pursuant to Section 3.2(c) or (d) (as the
case may be), on a dollar for dollar basis (A) Buyer shall pay to
Sellers the amount by which the Estimated Net Customer Postage
Deposit Amount exceeds the Net Customer Postage Deposit Amount,
or (B) Sellers shall pay to Buyer, the amount by which the Net
Customer Postage Deposit Amount exceeds the Estimated Net
Customer Postage Deposit Amount; provided that, no amount shall
be due and payable under this Section 3.2(e)(i) unless the
difference between the Net Customer Postage Deposit Amount and
the Estimated Net Customer Postage Deposit Amount exceeds $5,000.
(ii) Within five business days after the Inventory Differential is
finalized pursuant to Section 3.2(c) or (d) (as the case may be)
on a dollar for dollar basis (A) Sellers shall pay to Buyer the
amount by which the Estimated Inventory Differential exceeds the
Inventory Differential, or (B) Buyer shall pay to Sellers the
amount by which the Inventory Differential exceeds the Estimated
Inventory Differential provided that, no amount shall be due and
payable under this Section 3.2(e)(ii) unless the difference
between the Inventory Differential and the Estimated Inventory
Differential exceeds $5,000.
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(f) For each Transferred Customer Contract that is a Deferred Transferred
Asset (as defined in Section 4.3), the Customer Postage Deposit Amount
attributable to such Deferred Transferred Asset shall not be included
in the calculations of the Net Customer Postage Deposit Amounts or the
Estimated Net Customer Postage Deposit Amounts as of the Closing Date
and the corresponding liability shall not be assumed by Buyer. Sellers
shall periodically inform Buyer (but no less than weekly) regarding
the status of obtaining Consent to transfer such Deferred Transferred
Assets. Upon receipt of the requisite Consent to transfer any such
Transferred Customer Contract that is a Deferred Transferred Asset,
the associated Customer Postage Deposit shall become a Transferred
Asset, and the corresponding liability shall be assumed by Buyer. Such
Customer Postage Deposits shall be payable in the aggregate monthly,
at the end of each month.
3.3 Transfer and Other Taxes
------------------------
(a) Buyer shall be responsible for, shall indemnify Sellers against and
shall timely pay all sales, use, value-added, stamp, duty, transfer or
other similar tax arising out of or in connection with the sale of the
Transferred Assets to Buyer pursuant to this Agreement ("Transfer
Taxes"). For the avoidance of doubt, it is understood that in no event
shall Transfer Taxes include income or gross receipts taxes. The party
that has the primary responsibility under Law for the collection and
remittance of any particular Transfer Tax shall (i) prepare and timely
file the relevant Tax Return and, if the Sellers, collect the proper
Tax from the Buyer, provided that, prior to filing, any such Tax
Return prepared by Buyer shall be subject to the approval of Sellers,
and any such Tax Return prepared by any Seller shall be subject to the
approval of Buyer, which approvals shall not unreasonably be withheld,
conditioned or delayed and (ii) pay the Transfer Taxes shown on such
Tax Return. Upon notification from Sellers of the proper Tax amount
owed in respect of any Tax Return to be filed by Sellers, Buyer shall
remit payment to Sellers in immediately available funds within ten
days after receipt of such notice. The parties shall cooperate with
each other to the extent reasonably necessary to file all relevant Tax
Returns.
(b) With respect to any tangible personal property included in the
Transferred Assets that will be held for resale by Buyer, Buyer shall
furnish Sellers at Closing with valid and proper exemption
certificates and Sellers shall accept such certificates with respect
to any such tangible personal property. Upon Sellers' request, Buyer
shall also furnish Sellers with certain other exemption certificates,
letter rulings, notifications or similar documents furnished to Buyer
from the appropriate state taxing authority with respect to sales and
use Tax.
(c) Each party hereto shall notify the other party in writing of any claim
or demand for any Transfer Taxes promptly after obtaining knowledge
thereof. Neither Sellers nor Buyer shall initiate any claim or
proceeding for a refund of any Transfer Taxes without the prior
written consent of the other party (which consent shall not
unreasonably be withheld, conditioned or delayed). The Buyer may
handle any such claim or proceeding where it is the responsible person
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for such Transfer Tax. Sellers and Buyer shall cooperate in good faith
in the defense, prosecution, compromise or settlement of any claim,
demand or proceeding (a "Contest"), except that neither party shall
have the right to agree to a settlement or compromise of a Contest
without the prior written consent of the other (which consent shall
not unreasonably be withheld, conditioned or delayed). The parties'
obligations under this Section 3.3(c) shall remain notwithstanding any
other provisions of this Agreement.
(d) For the avoidance of doubt, it is understood that as provided in
Section 1.2(e) and Section 2.2(e), Sellers shall be liable for (and
shall be entitled to any refunds of) any and all Taxes attributable to
or incurred in connection with the ownership of the Business or
Transferred Assets on or prior to the Closing Date and any other Taxes
which are Retained Liabilities, and as provided in Section 2.2(e),
Buyer shall be liable for any and all Taxes attributable to or
incurred in connection with the ownership of the Business or
Transferred Assets after the Closing Date or arising out of the
transactions contemplated hereby which are not Retained Liabilities.
(e) In the case of an audit or administrative or judicial proceeding that
relates to a period ending on or before the Closing Date, Sellers
shall have the sole right, at their expense, to control the conduct of
such audit or proceeding; provided, however, that Sellers shall not,
without the written consent of Buyer (which consent may not be
unreasonably withheld, conditioned or delayed), consent to or
otherwise concede any proposed adjustment which may have a materially
adverse effect on the Taxes of Buyer for taxable periods ending after
the Closing Date. Buyer shall control the defense and settlement of
any contest relating to taxable periods or portions thereof that begin
on or after the Closing Date, provided, however, that Buyer shall not,
without the written consent of Sellers (which consent shall not be
unreasonably withheld, conditioned or delayed) consent or otherwise
concede any proposed adjustment may have a materially adverse effect
on the Taxes of a Seller for taxable periods beginning before the
Closing Date.
3.4 Allocation of Consideration
---------------------------
Sellers and Buyer agree that, to the extent required to be capitalized for
Tax purposes, they will allocate (i) the Consideration other than the Assumed
Liabilities referred to in Section 2.1(a) plus (ii) the Additional Payment among
the Transferred Assets for all Tax purposes (including in preparing all relevant
Tax Returns, information reports, and other Tax documents and forms) in
accordance with an allocation to be mutually agreed to as soon as practicable
after the Closing Date. Each party hereto agrees that it will adopt and utilize
the allocation so agreed to for purposes of all Tax Returns filed by Buyer and
Sellers. Each of Buyer and Sellers agrees to prepare and timely file all
applicable Internal Revenue Service and applicable State Tax forms relating to
such Consideration allocation, to cooperate with the other in the preparation of
such forms, and to furnish the other with a copy of such forms prepared in
draft, within a reasonable period before the filing due date thereof. Neither
Buyer nor Sellers will assert that such Consideration allocation was not
separately bargained for at arm's-length and in good faith. Each party hereto
recognizes that the Consideration does not include Buyer's acquisition expenses
and that Buyer will allocate such expenses appropriately. If, within a
reasonable period of time after the Closing Date, Sellers and Buyer are unable,
in good faith, to reach an agreement as to the allocation of the Consideration,
Sellers and Buyer may respectively use their own respective allocation
methodologies and statements for purposes of the Tax Returns and proceedings
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contemplated by this Section 3.4. Sellers also agree that in any event the
application of the adjustments provided for in Section 3.2(e), the payments
provided for in Section 3.2(f) or the Additional Payment will not be reported
for Tax purposes as a payment to Buyer or an amount deductible by Sellers.
ARTICLE 4
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CLOSING
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4.1 Closing Date
------------
Subject to the terms and conditions of this Agreement, the closing of the
purchase and sale of the Transferred Assets and the assumption of the Assumed
Liabilities (the "Closing") shall be at 10:00 A.M. local time at such location
as the parties may agree, on the last business day of the month in which all of
the conditions to all parties' obligations hereunder have been satisfied, unless
waived by the appropriate party, or on such earlier or later date as shall be
agreed upon by the parties, but in no event later than the Outside Termination
Date (as defined in Section 12.1) (the "Closing Date").
4.2 Deliveries at the Closing
-------------------------
(a) At the Closing, Sellers will deliver or cause to be delivered to
Buyer, duly executed by Sellers:
(i) a sublease substantially in the form attached as Exhibit
4.2(a)(i) for the Real Property Site accompanied by a consent to
such sublease in form and substance reasonably acceptable to
Buyer and Sellers duly executed by the sublessor's landlord,
(together with appropriate schedules and exhibits, the "Buyer
Lease Agreement");
(ii) a xxxx of sale and assignment and assumption agreement,
substantially in the form attached as Exhibit 4.2(a)(ii), for the
Transferred Assets and Assumed Liabilities (the "Xxxx of Sale and
Assignment and Assumption Agreement");
(iii)a technology license agreement substantially in the form
attached as Exhibit 4.2(a)(iii) (together with appropriate
schedules and exhibits, the "Technology License Agreement"),
pursuant to which Sellers shall grant to Buyer a license to use
certain Intellectual Property Rights as set forth therein;
(iv) a services agreement substantially in the form attached as
Exhibit 4.2(a)(iv) (together with appropriate schedules and
exhibits, the "Transition Services Agreement"), pursuant to which
Buyer and Sellers shall provide to each other certain services as
set forth therein;
(v) an assignment substantially in the form attached as Exhibit
4.2(a)(v) for certain of the Trademarks included in the
Transferred Intellectual Property Rights (together with
appropriate schedules and exhibits, the "Trademark Assignment");
(vi) a services agreement substantially in the form attached as
Exhibit 4.2(a)(vi) (together with appropriate schedules and
exhibits, the "Call Center Agreement"), pursuant to which Sellers
shall provide call center and other services to Buyer;
10
(vii)all such other endorsements, assignments and other instruments as
are reasonably necessary to transfer to Buyer good and marketable
title to the Transferred Assets (the "Other Conveyance
Documents"); and
(viii) the certificates referred to in Section 10.5.
(b) At the Closing, Buyer will deliver or cause to be delivered to or on
behalf of Sellers, duly executed as appropriate by Buyer:
(i) the Cash Purchase Price pursuant to the terms of Section 3.1(b);
(ii) the Xxxx of Sale and Assignment and Assumption Agreement;
(iii)the Buyer Lease Agreement accompanied by the guaranty of such
sub-lease substantially in the form of Exhibit B to Exhibit
4.2(a)(i) hereto duly executed by the guarantor named therein;
(iv) the Technology License Agreement;
(v) the Transition Services Agreement;
(vi) the Call Center Agreement;
(vii)certificates required by all relevant taxing authorities that
are necessary to support any exemption from the imposition of any
sales or similar tax on the transfer of the Transferred Assets or
Business, including valid resale certificates, letter rulings,
notifications or similar documents furnished to Buyer from the
appropriate taxing authority; and
(viii) the certificates referred to in Section 9.5.
Reference is made to the Guaranty, executed contemporaneously herewith,
which is a material inducement to Sellers to enter into this Agreement and the
other Transaction Documents.
4.3 Certain Consents; No Unlawful Transfers
---------------------------------------
(a) Notwithstanding anything to the contrary contained in this Agreement,
to the extent that the actual or attempted transfer or assignment to
Buyer of any of the Transferred Assets or Assumed Liabilities is
prohibited by any applicable Law or would require any Consent, and any
such Consent is not obtained prior to the Closing Date, this Agreement
shall not constitute an actual or attempted sale, assignment,
transfer, conveyance or delivery thereof.
(b) (i) If, on the Closing Date, (A) Sellers have not obtained any
Consent necessary to transfer, or assign any of Sellers' right,
title or interest in or to any of the Transferred Assets after
having used commercially reasonable efforts to obtain such
Consent, (B) the conditions precedent to the Closing set forth in
Article 9 and Article 10 otherwise have been satisfied and (C)
the failure to transfer or assign such asset either individually
or in the aggregate, is not reasonably likely to have a Seller
Material Adverse Effect (as defined below), then such Transferred
Assets shall not be transferred to Buyer at the Closing, shall
constitute deferred Transferred Assets ("Deferred Transferred
11
Assets") and shall not be Transferred Assets unless and until
transferred to Buyer as provided below.
(ii) After the Closing, (A) Sellers will continue to use commercially
reasonable efforts to obtain the Consent and/or to remove any
other impediments to the transfer, assignment, or license of each
Deferred Transferred Asset and will transfer, assign, or license
each Deferred Transferred Asset to Buyer as soon as practicable
after the receipt of such Consent and/or removal of such
impediment, (B) until the transfer or assignment, or license with
respect to any Deferred Transferred Asset is accomplished, the
parties shall cooperate in any lawful arrangement that is not
unduly economically burdensome (including, to the extent
permitted, subcontracting, sublicensing or performance by a
Seller as agent) to provide that Buyer shall receive the benefits
of such Deferred Transferred Asset, and such that the Buyer shall
perform Sellers' obligations under the Assumed Liabilities or
such Deferred Transferred Asset, to the same extent as if the
Deferred Transferred Asset were transferred, assigned or
subleased to Buyer at Closing and (C) until the transfer,
assignment, or license with respect to any Deferred Transferred
Asset is accomplished, at the request and for the account of
Buyer, Sellers will enforce, at Buyer's expense (which shall be
considered an expense resulting from the operation of the
Business or the Transferred Assets by Buyer after the Closing
within the scope of Section 11.2(b)(iii)), any of Sellers' rights
thereto or interests therein against any other parties thereto
(including the right to terminate any such Deferred Transferred
Asset in accordance with its terms, provided that Buyer pays any
cancellation or other fee due upon such termination). Buyer will
act with reasonable diligence and use commercially reasonable
efforts to assist, and cooperate with, Sellers in obtaining such
Consents and removing any such impediments to the transfer or
assignment of the Deferred Transferred Assets.
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
Sellers represent and warrant to Buyer, as a material inducement to Buyer's
executing and delivering this Agreement, as follows:
5.1 Organization; Existence and Qualification
-----------------------------------------
Each Seller is an entity duly organized, validly existing and in good
standing under the Laws of the jurisdiction in which such Seller is organized.
Each Seller is duly qualified or licensed to do business and is in good standing
in each jurisdiction where such qualification is required to conduct the
Business, except where the failure to be so qualified would not have a Seller
Material Adverse Effect.
5.2 Power; Authority; Enforceable Obligations
-----------------------------------------
The execution and delivery of this Agreement and the other Transaction
Documents to which any of them is a party by Sellers and the consummation by
Sellers of the transactions contemplated hereby and thereby, have been, or will
be by the Closing Date, duly authorized by all requisite corporate or limited
12
liability company action, as the case may be, on the part of Sellers. This
Agreement is, and each of such other Transaction Documents when executed and
delivered by Sellers at Closing will be, a valid and binding agreement of
Sellers party thereto, enforceable against such Sellers in accordance with its
terms, except as such validity, binding effect or enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, fraudulent transfer, moratorium (whether general or specific)
or other Law now or hereafter in effect affecting the enforceability of
creditors rights generally, and except that the availability of equitable
remedies, such as specific performance or injunctive relief, are subject to the
discretion of the court before which any proceeding may be brought.
5.3 No Conflicts or Violations
--------------------------
Except as provided in Schedule 5.3 of Sellers Disclosure Schedule, no
Consent of any Person under any Law, Permit or Transferred Contract is required
for the execution or delivery by any Seller of this Agreement or any other
Transaction Document to which it is a party, or the performance of its
respective obligations hereunder or thereunder, other than a violation of Law
which would not have a Seller Material Adverse Effect. Neither the execution,
delivery or performance by any Seller of this Agreement or any other Transaction
Document to which it is a party nor the consummation of the transactions
contemplated hereby or thereby, nor compliance by Sellers with any of the
provisions hereof or thereof, will (a) violate or conflict with any provision of
the Certificate of Incorporation or By-Laws or similar organizational document
of any Seller, (b) subject to obtaining the Consents identified in Schedule 5.3
of Sellers Disclosure Schedule, violate, conflict with, or result in or
constitute a Default under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, any of the terms, conditions or provisions of any Transferred Contract or
any Transferred Permit, except as would not individually or in the aggregate
have a Seller Material Adverse Effect, (c) violate any Law or court order other
than any violation which would not have a Seller Material Adverse Effect, or (d)
impose any Lien on the Transferred Assets or the Business other than a Permitted
Lien.
5.4 Financial Statements
--------------------
Sellers have delivered to Buyer the following financial information (the
"Financial Statements") for the Business: Unaudited Financial Statements
(including Results of Operations for the year ended December 31, 2002 and
Statement of Net Assets as of December 31, 2002) attached as Schedule 5.4 of
Sellers Disclosure Schedule. The Financial Statements fairly present, in all
material respects, the results of operations of the Business for the period set
forth therein and the assets and liabilities of the Business as of the date
thereof in accordance with EDS accounting policies, which are in conformity with
GAAP, in each case subject to the qualifications set forth below and in Schedule
5.4. All of the Financial Statements are subject to the qualification that the
Business does not and has not operated as a separate "stand-alone" entity. As a
result, the Business received certain allocated charges and credits as described
in Schedule 5.4 of Sellers Disclosure Schedule. Such charges and credits, while
believed by Sellers to be reasonable, do not necessarily reflect the amounts
which would have resulted from arm's-length transactions. In addition, in order
to present the stand-alone Financial Statements for the Business, a number of
significant assumptions have been made by Sellers, all of which are believed by
Sellers to be reasonable and are described in Schedule 5.4.
13
5.5 Absence of Changes
------------------
Since the date of the Financial Statements, except as disclosed in Schedule
5.5 of Sellers Disclosure Schedule, except for the matters required to be
performed by Sellers pursuant to Article 7 and 8 of this Agreement:
(a) there has not been any change in the condition (financial or
otherwise) of the Business or the Transferred Assets other than
changes which individually or in the aggregate do not have a Seller
Material Adverse Effect;
(b) Sellers have not permitted or allowed any of the Transferred Assets to
be subjected to any Liens other than (i) Liens for current taxes or
assessments not delinquent, (ii) builder, mechanic, warehousemen,
materialmen, contractor, workmen, repairmen, carrier Liens or other
similar Liens arising in the ordinary course of business for
obligations which are not delinquent, (iii) other similar Liens which
do not materially affect the value of the Transferred Assets so
subject or the right to use or the usefulness thereof, and (iv) the
Liens identified in Schedule 5.5(b) of Sellers Disclosure Schedule
(collectively the "Permitted Liens");
(c) Sellers have not transferred or otherwise disposed of any of the
assets of the Business, except in the ordinary course of business;
(d) Sellers have not granted any material increase in the compensation of
the Designated Employees engaged in the Business (including any such
increase pursuant to any bonus, pension, profit sharing or other plan
or commitment);
(e) Sellers have not paid, discharged or satisfied any claims, liabilities
or obligations relating exclusively to the Business (absolute,
accrued, contingent or otherwise) other than the payment, discharge or
satisfaction of any claims, liabilities or obligations made in the
ordinary course of business;
(f) Sellers have not changed any of their business practices as they
relate to the Business, including, without limitation, advertising,
marketing, pricing, purchasing, sales, and warranty except in the
ordinary course of business;
(g) Sellers have not amended any Transferred Customer Contract or any
other Transferred Contract which is material to the Business in any
material respect or waived, released or canceled any material claim,
debt or right thereunder except as agreed by Buyer or in the ordinary
course of business;
(h) Sellers have not issued any credits to Customers or commitments to
Customers for rework which remain unapplied or unperformed in any
material respect except in the ordinary course of business;
(i) Sellers have conducted, or caused to be conducted, the Business
consistent in all material respects with the ordinary course of
business;
(j) Sellers have not agreed, whether in writing or otherwise, to take any
action described in the foregoing clauses (b) through (h) or the
taking of which would result in a violation of clause (i) of this
Section 5.5; and
(k) Sellers have not received notice of any intention by a Customer to
terminate or not renew or to renegotiate any material term of its
Transferred Customer Contract or by any other party to terminate any
other Transferred Contract which is material to the Business except as
would not individually or in the aggregate have a Seller Material
Adverse Effect.
14
5.6 Title to Assets
---------------
Subject to receipt of the Consents identified in Schedule 5.3 of Sellers
Disclosure Schedule:
(a) each Seller has or will have at the Closing good title to, or the
right to license, sublicense, sublease, assign or transfer, all
property and contractual rights, if any, that it is required to
license, sublicense, sublease, assign or transfer to Buyer under the
Transaction Documents; and
(b) at Closing, none of the Transferred Assets will be subject to any
Liens, other than Permitted Liens.
5.7 Lease
-----
(a) A true, correct and complete copy of the lease to Sellers (the
"Louisville Master Lease") of the premises (the "Louisville Facility")
to be leased to Buyer pursuant to the Buyer Lease Agreement has been
provided to Buyer. The Louisville Master Lease is valid, binding and
enforceable in accordance with its terms, and, to the knowledge of
Sellers, in full force and effect, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
receivership, conservatorship, fraudulent transfer, moratorium
(whether general or specific) or other Law now or hereafter in effect
affecting the enforceability of creditors rights generally, and except
that the availability of equitable remedies, such as specific
performance or injunctive relief, are subject to the discretion of the
court before which any proceeding may be brought.
(b) Except as set forth on Schedule 5.7 of Sellers Disclosure Schedule:
(i) all rent and other amounts due and payable by Sellers under the
Louisville Master Lease on or prior to the Closing Date will have
been paid prior to the Closing Date;
(ii) Sellers have neither given nor received notice of any, and, to
Sellers' knowledge, there is no dispute, claim, event of default
or other event which constitutes a default by Sellers or the
landlord under the Louisville Master Lease which would give the
landlord thereunder the right to terminate the same;
(iii)Sellers have received no notice of any material violation, or
claimed material violation, of any covenant, condition or other
restriction, mineral right, reservation or agreement, royalty
agreement, mortgage, security interest, right of way, license,
easement, or other agreement to which the Louisville Facility is
subject, other than violations that would not have a Seller
Material Adverse Effect;
(iv) Sellers have received no notice of any special assessments or
other assessments for public improvements against the Louisville
Facility any periodic payment of which would become due after the
15
Closing Date, including without limitation, those for
construction of sewer, water, gas and electrical lines and mains,
streets, roads, sidewalks and curbs, except assessments that
would not have a Seller Material Adverse Effect;
(v) To Seller's knowledge, all certificates of occupancy, and Permits
relating to electrical, plumbing, HVAC or other licensed or
regulated work, zoning, building, housing, safety, health, fire,
environmental protection, and other Permits, licenses and
approvals which Sellers are required to obtain with respect to
the Louisville Facility to conduct the Business in the ordinary
course have been obtained and to the extent transferable will at
Closing be transferred to Buyer, other than those the absence of
which would not have a Seller Material Adverse Effect; and
(vi) no Persons other than Sellers, Fiserv DC, Inc. and Primedia Inc.
occupy any part of the Louisville Facility and other than the
license with Fiserv DC, Inc. and the sublease with Primedia, Inc,
true, correct and complete copies of which have been provided to
Buyer, there are no leases, subleases, concessions, or other
agreements granting to any Person other than Sellers the right of
use or occupancy of any portion of the Louisville Facility
property.
For purposes of this Section 5.7, to Sellers' knowledge, shall mean to the
actual, conscious belief of the persons listed in Schedule 5.19(b), without any
obligation to have conducted any independent investigation.
5.8 Condition of Fixed Assets
-------------------------
All Fixed Assets to be transferred to Buyer by Sellers pursuant to this
Agreement, whether owned or leased, are being transferred "as is," "where is,"
and "with all faults." To Sellers' knowledge, there are no material inaccuracies
in the maintenance logs kept by or on behalf of the Business for the Fixed
Assets except as would not have a Seller Material Adverse Effect. EXCEPT FOR THE
EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE 5, SELLERS MAKE NO
WARRANTY WITH RESPECT TO THE VALUE, CONDITION OR USE OF ANY OF THE FIXED ASSETS
INCLUDED IN THE TRANSFERRED ASSETS, WHETHER EXPRESSED OR IMPLIED, INCLUDING ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
5.9 Transferred Contracts
---------------------
Schedule 5.9 of Sellers Disclosure Schedule contains a list of (x) all
Transferred Customer Contracts, and (y) all other Transferred Contracts (i)
involving at least $10,000 of future consideration, or (ii) having a remaining
duration of at least six months, or (iii) otherwise material to the Business.
Other than as set forth in Schedule 5.9 of Sellers Disclosure Schedule, there
are no employment agreements with any Designated Employees other than Sellers'
standard form employment, non-disclosure and confidentiality agreements. Other
than as set forth on Schedule 5.9 of Sellers Disclosure Schedule, neither
Sellers nor, to Sellers' knowledge, any other party to any Contract that is, or
with the receipt of any Consent would be, a Transferred Customer Contract or is
otherwise required to be listed on Schedule 5.9 (the "Material Contracts") is in
Default under such Material Contract; each Material Contract is, to Sellers'
knowledge, valid and binding and in full force and effect, except as such
16
validity, binding effect or enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
fraudulent transfer, moratorium (whether general or specific) or other Law now
or hereafter in effect affecting the enforceability of creditors rights
generally, and except that the availability of equitable remedies, such as
specific performance or injunctive relief, are subject to the discretion of the
court before which any proceeding may be brought, and there exists no actual,
or, to Sellers' knowledge, no threatened termination, cancellation, or material
modification (x) to any Transferred Customer Contract, or (y) to any other
Material Contract, in the latter case, which individually or in the aggregate
would have a Seller Material Adverse Effect. Sellers have made available to
Buyer true and correct copies of all of the Contracts listed on Schedule 5.9
which are written and true and correct written statements of the terms of any of
them that are oral. To the knowledge of Sellers, the obligations of Sellers in
respect of which Sellers are holding a Customer Deposit which is not a Postage
Deposit under any Transferred Customer Contract are performable by the Business
in the customary and usual course at a cost not in excess of 110% of the amount
of the related Customer Deposit. None of the Transferred Contracts are between
Sellers and any third party of which a Seller is an Affiliate.
5.10 Litigation
----------
Except as disclosed in Schedule 5.10, there is no Legal Proceeding pending
or, to the knowledge of Sellers, threatened against, or involving or arising in
connection with, the Transferred Assets or the Business, or which questions or
challenges the validity of this Agreement or of the other Transaction Documents
or any action taken or to be taken by Sellers pursuant hereto or thereto or in
connection with the transactions contemplated hereby or thereby.
5.11 Environmental Matters
---------------------
(a) Sellers have not received any notice that the property subject to the
Buyer Lease Agreements is in violation of any applicable Law, order,
decree, Permit, license or other governmental requirements and
Contracts relating to pollution, the protection of human health and
the environment and the discharge or release of, or exposure to
materials.
(b) Sellers have not transported, used, stored, maintained, generated,
manufactured, handled, disposed of, released, or discharged any
Hazardous Material (as defined below) upon or about the Sublease
Premises or the Building (as such terms are defined in the Buyer Lease
Agreement), nor permitted Sellers' employees, agents, contractors and
other occupants of the Sublease Premises to engage in such activities
upon or about the Sublease Premises or the Building, except for the
transportation to and from, and use, storage, maintenance, and
handling within, the Sublease Premises or the Building of substances
customarily used in similar buildings and which were used and
maintained only in such quantities as were reasonably necessary for
Sellers' use of the Sublease Premises to conduct the Business,
strictly in accordance with any and all applicable Laws and the
manufacturers' instructions therefore, except as would not have a
Seller Material Adverse Effect. The disposal, release or discharge of
such substances and their transport to and from the Sublease Premises
were in compliance with all applicable Laws except actions and
omissions that would not have a Seller Material Adverse Effect.
17
(c) The term "Hazardous Material" shall mean any chemical, mineral,
substance, material, or waste, or component thereof, whether in a
solid, liquid or gaseous state, (x) which is now listed, defined, or
regulated as a hazardous or toxic chemical, mineral, substance,
material, or waste, or component thereof by any federal, state, or
local governing or regulatory body having jurisdiction, or (y) the
presence of which would trigger any employee or community
"right-to-know" requirements adopted by any such governing or
regulatory body, or for which any such governing or regulatory body
has adopted any requirements for the preparation or distribution of
any material safety data sheet issued by the manufacturer therefor
concerning the removal, transportation and disposal of the same, or
(z) which is otherwise subject to regulation under any Law concerning
hazardous or toxic chemicals, minerals, substances, materials or
wastes or components thereof, including, without limitation, (i) the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. 6901 et
seq, (ii) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. 9601 et seq, (iii) the Federal
Water Pollution Control Act/Clean Water Act, 33 U.S.C. 1251 et seq.;
(iv) the Clean Air Act, 42 U.S.C. 7901 et seq., (v) the Toxic
Substances Control Act, 15 U.S.C. 2601 et seq., and (vi) the
Hazardous Materials Transportation Act, 49 U.S.C. 1801 et seq., and
the regulations adopted and publications promulgated pursuant to said
Laws, and any amended, revised or successor Law thereto.
5.12 Taxes
-----
(a) Sellers have filed or will file with the appropriate taxing
authorities all Tax Returns required to be filed with respect to or
attributable to the Business or the Transferred Assets within the time
prescribed by Law (including extensions of time approved by such
taxing authorities). Such Tax Returns accurately and completely set
forth or will accurately and completely set forth in all material
respects all liabilities for Taxes with respect to the Business or
Transferred Assets required under applicable Law to be reflected or
included in such Tax Returns.
(b) Sellers have or will have timely paid or caused to be paid in full all
Taxes shown to be due on such Tax Returns and, with respect to the
Business and the Transferred Assets, complied in all material respects
with all applicable Laws, rules and regulations relating to the
withholding of Taxes and the payment of withheld Taxes, except those
Taxes or withholdings that are being disputed in good faith.
(c) There are no Liens for Taxes upon the Business or the Transferred
Assets except Liens for Taxes not yet due.
5.13 Labor Matters
-------------
There is no collective bargaining or other labor contract which involves
the Designated Employees. There is no labor strike, dispute, slowdown or work
stoppage or lockout or labor union organization effort pending or, to the
knowledge of Sellers, threatened against or affecting the Business. Except as
set forth in Schedule 5.13 of Sellers Disclosure Schedule, there is no Legal
Proceeding pending or, to Sellers' knowledge, any Legal Proceeding threatened,
by or involving any employee or former employee of the Business in connection
with employment in the Business. Within ninety (90) days prior to the execution
of this Agreement, Sellers have not terminated 50 or more persons employed by
the Business at a work location in Colorado.
18
5.14 Employee Benefits
-----------------
(a) All contributions with respect to all ERISA Plans of Sellers or any
ERISA Affiliate that are subject to Code Section 412 or ERISA Section
302 have been or will be timely made and there is no lien under Code
Section 412(n).
(b) Neither Sellers nor any ERISA Affiliate contribute to or are required
to contribute to a "multiemployer plan," as such term is defined in
ERISA Section 3(37).
(c) Except as required by Section 4980B of the Code, no ERISA Plan or
other arrangement provides medical or death benefits (whether or not
insured) with respect to Designated Employees beyond their retirement
or other termination of employment. Any continuation coverage provided
under any welfare benefits plans complies with Section 4980B of the
Code and is at the expense of the participant or beneficiary.
5.15 Compliance With Laws
--------------------
Except for environmental matters (for which the only representations and
warranties made by Sellers are contained in Section 5.11), the Business is being
conducted in compliance with all applicable Law, except for such instances of
noncompliance as could not reasonably be expected, individually or in the
aggregate, have a Seller Material Adverse Effect.
5.16 Intellectual Property
---------------------
Except as set forth in Schedule 5.16 of Sellers Disclosure Schedule, there
is no Legal Proceeding pending, or to Sellers' knowledge, threatened, involving
a claim of infringement by any Person of any Transferred Intellectual Property
Right. From time to time, Sellers receive invitations to license various
technologies. To Sellers' knowledge, no outstanding invitations to license
currently constitute a notice of infringement of any Intellectual Property
Rights of any Person. No Transferred Intellectual Property Right is subject to
any outstanding order, judgment, formal decree or stipulation restricting the
use thereof by Sellers or restricting the licensing or other transfer thereof by
Sellers to any Person. To Sellers' knowledge, the use of the Transferred
Intellectual Property by the Business does not conflict with, infringe upon, or
violate any Intellectual Property Right of any Person.
5.17 Brokers and Finders
-------------------
Sellers have not employed any broker, finder, advisor or intermediary in
connection with the transactions contemplated by this Agreement that would be
entitled to a broker's, finder's or similar fee or commission in connection
therewith or upon the consummation thereof.
5.18 Sufficiency of Assets
---------------------
The Transferred Assets, in conjunction with the rights, goods and services
granted, transferred or to be performed by Sellers to or for Buyer pursuant to
the Transition Services Agreement, the Buyer Lease Agreement, the Technology
License Agreement and the Call Center Agreement comprise substantially all of
the assets, rights, goods and services currently used or held for use by Sellers
in order for Sellers to perform, in all material respects, Sellers' obligations
under the Transferred Customer Contracts, other than services that are not
Subscription Fulfillment Services, and otherwise to conduct the Business in the
manner such obligations are being performed and such business is being conducted
by Sellers on the date of this Agreement.
19
5.19 No Other Representations or Warranties
--------------------------------------
(a) Except for the representations and warranties contained in this
Article 5, neither Sellers nor any other Person makes any express or
implied representation or warranty on behalf of Sellers, and Sellers
hereby disclaim any such representation or warranty whether by Sellers
or any of their respective Affiliates, officers, directors, employees,
agents or representatives or any other Person. Buyer acknowledges that
except for the representations and warranties contained in this
Article 5 with respect to prospective Seller Material Adverse Effects,
Sellers have not made any and make no representation or warranty
hereunder with respect to any projections, estimates, budgets or other
predictions, including of future revenues, future results of
operations (or any component thereof), future cash flows or future
financial condition (or any component thereof) of the Business or the
future business and operations of the Business, or any data, financial
information offering materials, memoranda or presentations, delivered
to or made available to Buyer, and Buyer acknowledges that it is not
relying on any such items.
(b) As to each representation or warranty made by Sellers herein that is
made "to Sellers' knowledge" or like term, Sellers shall be deemed to
have knowledge of a fact or other matter if it is a fact or matter
within the knowledge of any of the Persons listed on Schedule 5.19(b)
of Sellers Disclosure Schedule, which knowledge shall be deemed to
include the knowledge that a reasonably prudent person knew or should
have known in the course of conducting a reasonably comprehensive
investigation of the representation and warranty.
ARTICLE 6
---------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Sellers, as a material inducement to
Sellers' executing and delivering this Agreement, as follows:
6.1 Organization; Existence and Qualification
-----------------------------------------
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized. Buyer is
(i) duly qualified or licensed to do business as a foreign corporation and (ii)
in good standing in each jurisdiction in which such qualification is required,
except where failure to be so qualified does not have, individually or in the
aggregate, a Buyer Material Adverse Effect.
6.2 Power; Authority; Enforceable Obligations
-----------------------------------------
The execution and delivery of this Agreement and the other Transaction
Documents to which it is a party by Buyer and the consummation by Buyer of the
transactions contemplated hereby and thereby, have been, or will be by the
Closing Date, duly authorized by all requisite corporate action on the part of
Buyer. This Agreement is, and each of such other Transaction Documents when
executed and delivered by Buyer at Closing will be, a valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
except as such validity, binding effect or enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership,
20
conservatorship, fraudulent transfer, moratorium (whether general or specific)
or other Law now or hereafter in effect affecting the enforceability of
creditors rights generally, and except that the availability of equitable
remedies, such as specific performance or injunctive relief, are subject to the
discretion of the court before which any proceeding may be brought.
6.3 No Conflicts or Violations
--------------------------
Except as provided in Schedule 6.3 of the Buyer Disclosure Schedule, no
Consent of any Person under any Law, Permit or Contract is required for the
execution or delivery by Buyer of this Agreement or any other Transaction
Document to which it is a party, or the performance of its respective
obligations hereunder or thereunder, other than a violation of Law which would
not have a Buyer Material Adverse Effect. Neither the execution, delivery or
performance of this Agreement by Buyer of this Agreement or any other
Transaction Document to which it is a party, nor the consummation of the
transactions contemplated hereby or thereby, nor compliance by Buyer with any of
the provisions hereof or thereof will (a) violate or conflict with any provision
of the Articles of Incorporation or By-Laws of Buyer, (b) subject to obtaining
the Consents identified in Schedule 6.3 of the Buyer Disclosure Schedule,
violate, conflict with, or result in or constitute a Default under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, any of the terms, conditions or
provisions of any Contract to which it is a party or by which its property or
assets are bound other than which would not have a Buyer Material Adverse
Effect, (c) violate any Law or court order other than any violation which would
not have a Buyer Material Adverse Effect or (d) impose any Lien on Buyer's
assets other than as would not have a Buyer Material Adverse Effect.
6.4 Litigation
----------
There is no Legal Proceeding pending or, to the knowledge of Buyer,
threatened against Buyer which questions or challenges the validity of this
Agreement or of the other Transaction Documents or any action taken or to be
taken by Buyer, pursuant hereto or thereto or in connection with the
transactions contemplated hereby or thereby.
6.5 Brokers and Finders
-------------------
Buyer has not employed any broker, finder, advisor or intermediary in
connection with the transactions contemplated by this Agreement that would be
entitled to a broker's, finder's or similar fee or commission in connection
therewith or upon the consummation thereof.
6.6 Availability of Funds
---------------------
Buyer has, and will maintain until the Closing Date, sufficient funds or
lines of credit available to it to enable it to consummate the transactions
contemplated by this Agreement, and the transactions contemplated by the other
Transaction Documents to be performed on or before the Closing Date.
6.7 Buyer's Investigation
---------------------
(a) Buyer is in the process of conducting a due diligence investigation of
the Business and the assets being sold to Buyer and the liabilities
being assumed by Buyer pursuant to this Agreement under the
supervision of Xxxxx X. Pizza, Xxxxx Xxxxxxxx and Xxxxxxx Xxxxxxxxx,
who are Buyer's principal representatives (the "Representatives") for
the purpose of conducting such investigation.
21
(b) In the conduct of such due diligence investigation, Buyer has
requested of Sellers such information as it has deemed necessary
through the date of this Agreement for its evaluation of its
acquisition of the Business pursuant to this Agreement and in
proceeding with the execution and delivery of this Agreement Buyer has
assumed that the information provided to it to the date of this
Agreement is true, complete and correct. Nothing herein contained
shall be viewed as an indication by Buyer that its due diligence
investigation has been completed, and Buyer expects to continue to
review the information made available to date and additional
information it may receive through the Closing Date. Buyer
acknowledges there is no special relationship of trust between Buyer
and Sellers.
(c) The Representatives have reviewed Sellers' representations and
warranties in this Agreement, and each of the Representatives has
informed Buyer that as of the date of this Agreement he has no actual
conscious belief that any of such representations and warranties is
untrue in any material respect.
6.8 No Other Representations or Warranties
--------------------------------------
Except for the representations and warranties contained in this Article 6,
neither Buyer nor any other Person makes any express or implied representation
or warranty on behalf of Buyer, and Buyer hereby disclaims any such
representation or warranty whether by Buyer or any of its Affiliates, directors,
officers, employees, agents or representatives or any other Person.
ARTICLE 7
---------
COVENANTS OF THE PARTIES
------------------------
7.1 Conduct of Business
-------------------
Sellers agree that from the date of this Agreement until the Closing Date,
except as otherwise contemplated by this Agreement or approved in writing by
Buyer, Sellers shall cause the Business to be conducted in all material respects
in the ordinary and usual course consistent with past practice and will not
engage in any action which would violate any of clauses (b) through (k) of
Section 5.5. The parties agree that Buyer shall be obligated to notify Sellers
in writing of any breach of this Section 7.1 promptly upon the discovery by
Buyer of such breach, and that there shall be no liability for any such breach
unless such notification is given on or before the second anniversary of the
Closing Date.
7.2 Buyer's Investigation; Full Access
----------------------------------
Following execution of this Agreement until the Closing Date, during
Sellers' normal business hours and as permitted by Law, Sellers shall permit
Buyer and its authorized representatives reasonable access to all books and
records, financial, operating and similar information, and the Real Property
Site and any other location where the Business maintains a facility (accompanied
by Sellers' authorized representative); provided that Buyer's investigation of
these items shall be conducted so as not to unreasonably interfere with Sellers'
or the Business' operations and further provided that all requests for
information shall be provided under the terms of the Confidentiality Agreement
between EDS and Buyer's parent, AMREP Corporation, effective October 4, 2002.
Notwithstanding any other provision to the contrary in this Section 7.2, Sellers
are under no obligation to provide Buyer with any information which is
restricted, as of the date of this Agreement, by any confidentiality agreement
22
with a third party; provided that, to the extent reasonably requested by Buyer,
Sellers will request any Consents necessary to provide Buyer with such
information. In such event, Buyer agrees to keep such information confidential.
7.3 Books and Records; Furnishing Information; Audit Cooperation
------------------------------------------------------------
Buyer will retain all books, records and other documents pertaining to the
Business in existence on the Closing Date delivered to it hereunder and Sellers
will retain any of their other books, records and other documents containing
information pertaining to the Business in existence on the Closing Date, in each
case, until the seventh anniversary of the Closing Date and, on request of the
other, Buyer and Sellers agree to make the same available for inspection and
copying by the requesting party or its authorized representatives at the
requesting party's expense during normal business hours, upon reasonable request
and upon reasonable notice. Neither Buyer nor Sellers shall destroy such books,
records or documents after the seventh and before the tenth anniversary of the
Closing Date without first advising the other in writing and giving the other a
reasonable opportunity to obtain possession thereof. Without limiting the
generality of the foregoing, Buyer, at Sellers' expense, will provide Sellers
and their authorized representatives with access to all such books, records and
other documents of Sellers received hereunder Sellers reasonably deem necessary
or desirable to prepare their financial statements and conduct any audits in
connection therewith, and Sellers, at Buyer's expense, will provide Buyer and
its authorized representatives with access to all such books, records and other
documents of Sellers that Buyer reasonably deems necessary or desirable to
prepare financial statements of the Business and conduct any audits in
connection therewith. The parties acknowledge that Buyer has informed Sellers
that Buyer needs to have an audit of the Business conducted in compliance with
GAAP for periods prior to the Closing Date at Buyer's cost. Buyer shall solicit
bids from KPMG and McGladrey & Xxxxxx, LLP and select one of them for such
purpose. Sellers shall reasonably cooperate with Buyer and the auditors to
facilitate the timely completion of such audit in such manner as Buyer shall
reasonably require, including providing Buyer and the auditors, at Buyer's cost,
with access to books, records and other documents and financial personnel of
Sellers and with such representation letters and other documents as are called
for by generally accepted auditing standards and that Buyer or the auditors
reasonably deem necessary or desirable to complete such audit.
7.4 Consummation of Transactions; Consents
--------------------------------------
(a) Subject to the terms and conditions hereof, Sellers and Buyer agree to
use all commercially reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
(b) Each of Sellers and Buyer shall notify and keep the other advised as
to (i) any Legal Proceeding pending, or to its knowledge threatened,
which challenges the transactions contemplated hereby or by the other
Transaction Documents and (ii) any event or circumstance which would
constitute a breach of their respective representations and warranties
in this Agreement; provided, however, that the failure of Sellers or
Buyer to comply with clause (ii) shall not subject Sellers or Buyer to
any liability hereunder except as and to the extent Sellers or Buyer
would be responsible for a breach of such representation and warranty
pursuant to Article 11 (including the limitations on recovery and the
time periods for bringing claims thereunder). Subject to the
provisions of Article 12, Sellers and Buyer shall not take any action
23
inconsistent with their obligations under this Agreement or which
would materially hinder or delay the consummation of the transactions
contemplated by this Agreement.
(c) As promptly as practicable after the execution of this Agreement,
Sellers and Buyer shall (i) file all reports, notifications,
applications and other documents that may be required to be filed with
any and all governmental, administrative or regulatory authorities
having proper jurisdiction over Sellers and Buyer in connection with
this Agreement, the purchase by Buyer of the Transferred Assets and
the Business, and any other transactions contemplated hereby or by any
other Transaction Document; (ii) cooperate with each other in
connection with such filings or responses to requests for additional
information; and (iii) use reasonable best efforts to resolve any
objections raised by any of such authorities. To the extent permitted
by Law, the parties will furnish to each other such necessary
information and reasonable assistance as each may request in
connection with their preparation of necessary filings with such
authorities.
7.5 Agreements Regarding Confidentiality
------------------------------------
(a) Each of Sellers, on the one hand, and Buyer, on the other hand,
covenants that, from and after the date of this Agreement (including
after the Closing), it will not, without the prior written consent of
the other, disclose to any Person confidential information relating to
or concerning the Transferred Assets, the Business, or Buyer, in the
case of Sellers, or the Retained Assets, and any businesses of Sellers
other than the Business, in the case of Buyer, obtained by or in the
possession of Sellers or Buyer, as the case may be, prior to the
Closing Date (the "Confidential Information"), except to its officers,
directors, employees and representatives who need to know such
information for purposes of the transactions contemplated by this
Agreement and the other Transaction Documents, Taxes, accounting,
litigation and in the case of Sellers other matters necessary in
respect of Sellers' ownership, prior to the Closing, of the
Transferred Assets or the Business, unless, upon the advice of the
disclosing party's counsel, disclosure is required to be made under
the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, other Law or the rules of the New York Stock
Exchange or any other relevant securities exchange. In the event that
a party is requested or required by documents subpoena, civil
investigative demand, interrogatories, requests for information, or
other similar process to disclose any Confidential Information which
otherwise may not be disclosed except as set forth in the preceding
sentence, such party will provide the other parties with prompt notice
of such request or demand or other similar process so that the party
seeking to prevent disclosure may seek an appropriate protective order
or, if such request, demand or other similar process is mandatory,
waive the disclosing party's compliance with the provisions of this
Section 7.5, as appropriate. The term "Confidential Information" does
not include information which (i) becomes generally available to the
public other than as a result of disclosure by Sellers or Buyer, as
the case may be; (ii) was available on a non-confidential basis prior
to its coming into the disclosing party's possession; or (iii) becomes
available to the disclosing party on a non-confidential basis from a
source other than the other party, provided that such source is not
bound by a confidentiality agreement with the other party or its
representatives.
24
(b) For purposes of this Section 7.5, Sellers shall include Sellers, their
respective subsidiaries and Affiliates, and any of their respective
directors, officers, employees and representatives, and Buyer shall
include Buyer, its subsidiaries and Affiliates, and any of their
respective directors, officers, employees and representatives.
(c) It is the intent of the parties that the Proposed Transaction would
not be a "reportable transaction" for purposes of Internal Revenue
Service regulations intended to eliminate abusive tax shelters.
Accordingly, the parties agree that this Agreement shall not prohibit
the disclosure of the tax treatment or tax structure of the
transactions contemplated herein, provided that the party disclosing
any such information shall consult with the other party as far in
advance as practicable regarding the timing and content of any such
disclosure.
7.6 Public Disclosures
------------------
In connection with the execution of this Agreement and in connection with
the Closing, Sellers and Buyer jointly will plan, coordinate and release any
related press release and other public announcements, statements or
communications. Prior to the Closing Date, no party to this Agreement will issue
any press release or make any other public disclosures, announcements,
statements or communications concerning this transaction or the contents of this
Agreement without the prior written consent of the other party. Notwithstanding
the above, nothing in this Section will preclude any party from making any
disclosures required by Law or applicable stock exchange rules, or necessary and
proper in conjunction with the filing of any Tax Return or other document
required to be filed with any governmental body, authority or agency; provided,
however, that the party required to make the release or statement shall allow
the other party reasonable time to comment on such release or statement in
advance of such issuance.
7.7 Payments Received
-----------------
From and after the Closing, each of Sellers and Buyer agrees that it will
hold and promptly transfer and deliver to the other, from time to time, as and
when received by such party any payments or property which properly belongs to
the other party, and will account for the other party all such receipts. When a
payment is received by a party to which it is partially entitled, such party may
deduct its portion from such payment and deliver the balance of the payment to
the other party.
7.8 Further Assurances
------------------
From time to time after the Closing Date, each of Sellers and Buyer shall,
at its sole expense, at the reasonable request of the other, execute and deliver
such other and further instruments of sale, assignment, assumption, transfer and
conveyance and take such other and further action as may be reasonably requested
by the other party in order to vest in Buyer and put Buyer in possession of the
Transferred Assets, and to give effect to Buyer's assumption of the Assumed
Liabilities. Buyer also agrees to make available to Sellers any and all records,
documents or personnel to the extent reasonably related to Sellers' ability to
defend or assert any and all claims relating to events or omissions prior to the
Closing Date.
7.9 Service Marks
-------------
(a) After the Closing, the Business shall discontinue the use, directly or
indirectly, in any manner or form, of the names "Electronic Data
25
Systems Corporation" and "EDS", and any derivatives thereof, or the
corresponding logo; provided that Buyer shall be permitted to
distribute sales, promotional material and forms transferred hereunder
containing such names or logo for up to six months after the Closing
Date; and further provided that Buyer shall inform third parties
receiving such materials that the Business is no longer owned by
Sellers.
(b) After the Closing, Sellers shall discontinue the use, directly or
indirectly, in any manner or form of the name "Neodata", and any
derivatives thereof, or the corresponding logo.
7.10 Sellers' Accounts Receivable
----------------------------
(a) As soon as practicable after the Closing Date, Sellers shall use
reasonable efforts to furnish Buyer with a listing of the Customer
Accounts Receivable as of the close of business on the Closing Date
which have been outstanding for no more than 90 days prior to the
Closing Date other than any accounts receivable in respect of RHC
Media, Inc., Red Xxxxxxx and Worth Media and any accounts receivable
that EDS' accounting policies required be fully reserved for (the
"Excluded Receivables") (such accounts receivable and the accounts
receivable in respect of the invoices issued pursuant to Section
7.10(b) collectively, the "Collectible Accounts Receivable") and a
listing of all older Customer Accounts Receivable and the Excluded
Receivables (the "Stale Accounts Receivable"); provided that Sellers'
inadvertent, unintentional or negligent failure to provide a complete
or accurate list of such Customer Accounts Receivable at any time
shall not subject Sellers to any liability hereunder.
(b) As soon as practicable after the Closing Date, Buyer, with Sellers'
assistance, will prepare and issue in the name of Sellers' designee,
invoices to the Customers under the Transferred Customer Contracts
(with copies to Sellers) covering all services for the period from the
most recent invoice dates through and including the Closing Date. Each
such invoice shall contain the same payment instructions as were
contained in the most recent invoice to the Customer issued by
Sellers, shall be prepared on a consistent basis with that invoice and
shall contain charges only for services that were completed and
billable as of the Closing Date as determined under the customary
billing practices employed by the Business, except that if the Closing
Date is on a day other than the last day of a regular billing period,
the invoice amount for the data base maintenance fee and other fees
which are customarily billed monthly shall be the fraction of the fee
for the full regular billing period in which the Closing occurs
(combining the operations of Sellers and Buyer), the numerator of
which is the number of business days in such regular monthly billing
period through the Closing Date and the denominator of which is the
total number of business days in such regular monthly billing period.
The amounts due from Customers under the foregoing invoices shall
constitute part of the Collectible Accounts Receivable. For purposes
of clarification, as a general principle, Sellers shall be entitled to
payment for services performed on or prior to the Closing Date and
Buyer shall be entitled to payment for services performed after the
Closing Date, and for all work eligible to be billed upon completion
that is in process on the Closing Date, the parties shall equitably
pro-rate invoices issuable in respect thereof.
26
(c) For a period of 120 days following the Closing Date (the "Collection
Assistance Period"), Buyer shall use its reasonable efforts consistent
with the customary business practices of the Business to assist
Sellers in the collection of the Collectible Accounts Receivable,
provided that in providing such assistance Buyer shall not be required
to cease, or threaten to cease to provide services to, or continue to
provide services to any Customer.
(d) It is understood that Customers who are indebted to Sellers under
Customer Accounts Receivable may also become indebted to Buyer under
the Transferred Customer Contracts after the Closing Date ("New
Receivables"; a Customer Account Receivable or a New Receivable, a
"Receivable"). It is agreed that any payment from a Customer which
identifies the Receivable to which it applies shall be applied to the
identified Receivable and that absent such identification the
receiving party shall inquire of the Customer and apply the payment in
accordance with the Customer's response to such inquiry. If either
Sellers or Buyer shall receive a payment from a Customer applicable to
the other party's Receivables, in accordance with Section 7.7 it shall
promptly notify and forward the same to the other party.
(e) (i) As a fee for Buyer's assistance pursuant to this Section 7.10
with collection of the Collectible Accounts Receivable, Sellers
shall pay to Buyer $400,000 (the "Collectible Accounts Receivable
Collection Fee"), contingent upon Sellers' actual collection of
80% of the aggregate amount of the Collectible Accounts
Receivable within 120 days after the Closing Date. $240,000 of
the Collectible Accounts Receivable Collection Fee (the "Early
Collectible Accounts Receivable Collection Fee")(each of the
Collectible Accounts Receivable Collection Fee and the Early
Collectible Accounts Receivable Collection Fee, a "Collection
Fee") shall be payable contingent upon Sellers' actual collection
of 70% of the aggregate amount of the Collectible Accounts
Receivable within 60 days after the Closing Date. In the event
the Early Collectible Accounts Receivable Collection Fee is paid
pursuant to this Section 7.10(e)(i), Sellers shall pay to Buyer
the additional $160,000 of the Collectible Accounts Receivable
Collection Fee contingent upon Sellers' actual collection of an
additional 10% of the aggregate amount of Collectible Accounts
Receivable within 120 days after the Closing Date (so that the
total amount of Collectible Accounts Receivable collected within
120 days after the Closing Date is at least 80% of the aggregate
amount of Collectible Accounts Receivable).
(ii) The applicable Collection Fee shall be paid within ten (10)
business days after the close of the calendar month in which
Sellers' actual collected funds exceeds 80% (in the case of the
Collectible Accounts Receivable Collection Fee) or 70% (in the
case of the Early Collectible Accounts Receivable Collection Fee)
or 10% (in the case of payment of the Collectible Accounts
Receivable Collection Fee following prior payment of the Early
Collectible Accounts Receivable Collection Fee) of the amount of
the Collectible Accounts Receivable.
27
(iii)Buyer will apply $150,000 of the Collection Fee paid, less
deduction of withholding taxes and other related payroll costs,
to the payment of additional compensation to Transferred
Employees then employed by Buyer assisting in the collection
efforts as set forth in Schedule 7.10(e) of Sellers Disclosure
Schedule and distribute the payments to such Transferred
Employees then employed by Buyer in the first regular paycheck
cycle occurring no sooner than two weeks after receipt of the
applicable Collection Fee; in no event will such amounts be used
for any other purpose. Buyer shall be free to use the remaining
$250,000 of the Collection Fee paid for any lawful purpose.
(iv) The parties acknowledge and agree that Sellers shall have no
obligation to pay any portion of the Collectible Accounts
Receivable Collection Fee unless and until at least 70% of the
amount of outstanding Collectible Accounts Receivable is actually
collected within 60 days after the Closing Date, or, if 70% of
the outstanding Collectible Accounts Receivable is not collected
within 60 days, unless and until at least 80% of the amount of
outstanding Collectible Accounts Receivable is actually collected
within 120 days after the Closing Date. Sellers will not be
obligated to pay to Buyer the portion of a Collection Fee
distributable to a Transferred Employee indicated in Schedule
7.10(e) who is no longer employed by Buyer at the time of payment
of the Collection Fee. Buyer shall be obligated to notify Sellers
of the termination of employment of any Transferred Employee
listed on Schedule 7.10(e), prior to the date a Collection Fee is
payable to Buyer as provided above.
(f) (i) As a fee for Buyer's assistance pursuant to this Section 7.10
with collection of the Stale Accounts Receivable, Sellers shall
pay to Buyer a fee (the "Stale Accounts Receivable Collection
Fee"), calculated as follows:
o 20% of first $200,000 actually collected;
o 30% of second $200,000 actually collected;
o 40% of third $200,000 actually collected; and
o 50% of amounts actually collected over $600,000;
contingent upon Sellers' actual collection of the above-stated
percentage of the aggregate amount of the Stale Accounts
Receivable within 60 days after the Closing Date.
(ii) The Stale Collection Fee shall be paid within ten (10) business
days after the close of the calendar month in which Sellers'
actual collected funds exceeds the percentage of the aggregate
Stale Accounts Receivable stated above.
28
(iii)The parties acknowledge and agree that Sellers shall have no
obligation to pay any portion of the Stale Accounts Receivable
Collection Fee unless and until at least 20% of the amount of
outstanding Stale Accounts Receivable is actually collected
within 60 days after the Closing Date.
7.11 Non-competition
---------------
(a) Each Seller covenants and agrees that, during the Non-Competition
Period (as hereinafter defined) it will not directly or indirectly
own, manage, operate, control or participate in the ownership,
management, operation, or control, or otherwise engage in any business
which provides any Subscription Fulfillment Services anywhere within
the United States. Each Seller further agrees that for a period of
twelve (12) months following the Closing Date, (or, for Designated
Employees performing IT services and transitioning to Buyer after the
Closing Date pursuant to the Transition Services Agreement, twenty
(20) months after the Closing Date) neither it nor any of its
Affiliates will employ or solicit for employment by it or any other
Person any employee of the Business who became a Transferred Employee;
provided however, that the foregoing shall not preclude Sellers from
hiring any person who (i) initiates discussions regarding employment
without any direct solicitation by Sellers, (ii) responds to any
general public advertisement by Sellers that is not directed towards
any such employee or group of employees, or (iii) has been terminated
by Buyer. Notwithstanding the foregoing, nothing shall prohibit any
executive search or similar business controlled by Sellers or any of
its Affiliates from engaging in its business in the ordinary course in
a manner consistent with past practices on behalf of clients other
than Sellers.
(b) For purposes of this Section 7.11, the "Non-Competition Period" shall
be two (2) years from the Closing Date.
(c) Notwithstanding the foregoing, it is expressly understood and agreed
that the provision of products or services other than Subscription
Fulfillment Services to current customers of a Seller or its
Affiliates shall not constitute a breach or violation of this Section
7.11; provided that Sellers shall be permitted to continue to provide
the Subscription Fulfillment Services described in Section 1.3(d) and
(e) to the Customers listed on Schedule 7.11; further provided that
Sellers shall be permitted to provide membership list order
fulfillment services without restriction.
(d) In addition, it is expressly understood and agreed that the following
activities by a Seller shall not constitute a breach or violation of
this Section 7.11 but that such activities remain subject to any
restrictions provided in any other Section of this Agreement and in
any other Transaction Document:
(i) owning an interest (which may include the designation of less
than a majority of directors to such organization's board or
equivalent governing body), of not more than five percent (5%) in
the aggregate of any class of equity interest of any business
organization that engages in the business of providing
Subscription Fulfillment Services if such equity interest is
publicly traded and listed on any national or regional stock
exchange or on the NASDAQ market system;
29
(ii) owning not more than 50% of the equity interests of any customer
of a Seller or its Affiliates acquired as part of the marketing
and sale of services to such customer;
(iii)entering into services agreements with any unaffiliated third
party that engages in or attempts to engage in the business of
providing Subscription Fulfillment Services;
(iv) acquiring any Person engaged in the business of providing
Subscription Fulfillment Services if (A) the principal purpose of
such acquisition is not for such Seller to engage in the business
of providing Subscription Fulfillment Services, and (B) the
principal business of such Person is not the business of
providing Subscription Fulfillment Services;
(v) licensing, marketing, transferring or otherwise selling any
Retained Asset;
(vi) making proposals to or at the request of any Person or responding
to any request or solicitation for proposal from any Person for
any types of products or services other than for the business of
providing Subscription Fulfillment Services;
(vii)any of Sellers' outside directors' serving in any capacity in
respect of a business organization which is engaged in the
business of providing Subscription Fulfillment Services;
(viii) involvement by a Seller in any venture capital arrangement
(whether incorporated or unincorporated) in the Information
Technology Services sector, provided that any such involvement
does not involve the Seller's taking or sharing of any direct or
indirect role in the management or operation of any entity in
which the fund invests or any direct role in the appointment of
the directors or officers of such an entity;
(ix) providing lettershop and warehouse services (including mailing,
presorting, warehouse and inventory tracking, document (i.e.,
labels, invoices), printing and postage tracking) and/or back
issue fulfillment services as ancillary services to product
fulfillment services provided to publishers and associations; or
(x) providing warehouse and/or back issue fulfillment services to
publishers and associations.
It is the intent and understanding of each party hereto that if, in any
action before any court or agency legally empowered to enforce this Section
7.11, any term, restriction, covenant or promise in this Section 7.11 is found
to be unreasonable and for that reason unenforceable, then such term,
restriction, covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency.
7.12 Fixed Assets Storage-Longmont
-----------------------------
(a) Certain Fixed Assets included in the Transferred Assets are currently
in storage at Sellers' warehouse located at 0000 Xxxxxx Xx., Xxxxxxxx,
Xxxxxxxx (the "Longmont Warehouse"). Through June 30, 2003, Sellers
30
shall permit Buyer to continue to store such Fixed Assets at the
Longmont Warehouse without charge (the "Longmont Removal Period").
(b) During the Longmont Removal Period, Sellers shall permit Buyer and
Buyer's representatives access to the Longmont Warehouse from time to
time during normal business hours for the purpose of inspection and
removal of all or any portion of the Fixed Assets, provided Sellers or
Sellers' representatives accompany Buyer or Buyer's representatives at
all times. If Buyer fails to remove such Fixed Assets within the
Longmont Removal Period, Buyer will have been deemed to abandon the
Fixed Assets remaining in the Longmont Warehouse and Sellers will then
have the right to dispose of such remaining Fixed Assets as Sellers
deem appropriate and any monies obtained from such disposal shall
remain Sellers' property. Buyer shall not use the Longmont Warehouse
for any other purpose, nor shall Buyer store there any items in the
Longmont Warehouse other than the Fixed Assets located there at
Closing.
(c) All risk of damage or loss to such Fixed Assets (or damage to the
Longmont Warehouse or injury to Sellers' employees due to Buyer's
access or removal) shall be borne by Buyer except for any such loss or
damage attributable to Sellers' willful misconduct or gross
negligence. All costs of removal of the Fixed Assets from the Longmont
Warehouse shall be borne by Buyer. Nothing in this Section 7.12 shall
be deemed to create in Buyer any occupancy or other right with respect
to such storage location other than as expressly set forth herein or
to create any landlord-tenant relationship between Sellers and Buyer
with respect thereto.
(d) For so long as the Fixed Assets are located at the Longmont Warehouse,
Buyer shall maintain commercial general liability insurance, including
blanket contractual liability coverage, with limits of not less than
$5,000,000.00 combined single limit for personal injury and property
damage. All policies shall include Sellers and any landlord and or
applicable mortgagee as additional insureds, as their respective
interests may appear. The liability insurance shall be a primary
policy and not excess or contributing with or secondary to any other
insurance as may be available to the additional insureds.
7.13 Knoxville Facility
------------------
(a) The Business maintains a leased facility at 000 Xxxxx Xxxx, Xxxxxxxxx,
Xxxx (the "Knoxville Facility") at which certain services for
Customers are provided. Sellers' leasehold interest in the Knoxville
Facility is not a Transferred Asset; however, the Fixed Assets located
at the Knoxville Facility are included in the Transferred Assets.
(b) For a period of thirty (30) days after the Closing Date, (the
"Knoxville Transition Period"), Sellers shall, at Buyer's expense, use
reasonable efforts to keep open the Knoxville Facility and shall
provide, to the extent within their reasonable control, the services
of such of Sellers' employees employed at the Knoxville Facility
identified on Schedule 7.13(b) (each such employee, a "Knoxville
Employee") for the Knoxville Transition Period. Buyer shall bear all
direct costs associated with such arrangement, including, without
limitation, payroll, benefits and utilities, but excluding EDS
corporate overhead charges.
31
(c) During the Knoxville Transition Period, each Knoxville Employee shall
continue to be designated an employee of Sellers and while providing
services for Buyer shall continue as Sellers' employee on Sellers'
payroll system and other applicable employee benefit systems to the
same extent as other similarly situated employees of Sellers. Buyer
shall reimburse Sellers for all compensation and employer's
contributions to benefit plans incurred by Seller with respect to each
Knoxville Employee, but shall not include any reimbursement for
severance at any time.
(d) Sellers shall be solely responsible for any WARN Obligations in
respect of the Knoxville Employees and shall indemnify Buyer from and
against the same.
(e) During the Knoxville Transition Period, Sellers shall permit Buyer and
Buyer's representatives access to the Knoxville Facility from time to
time during normal business hours for the purpose of supervising the
services being provided there and inspection and removal of all or any
portion of the Fixed Assets. If Buyer fails to remove such Fixed
Assets within the Knoxville Transition Period, Buyer will have been
deemed to abandon the Fixed Assets remaining in the Knoxville Facility
and Sellers will then have the right to dispose of such remaining
Fixed Assets as Sellers deem appropriate and any monies obtained from
such disposal shall remain Sellers' property. Buyer shall not use the
Knoxville Facility for any other purposes, nor shall Buyer store any
items there other than the Fixed Assets located there at Closing.
(f) All risk of damage or loss to such Fixed Assets (or damage to the
Knoxville Facility or injury to Sellers' employees due to Buyer's
access or removal of Fixed Assets) shall be borne by Buyer except for
any such loss or damage attributable to Sellers' willful misconduct or
gross negligence. All costs of removal of the Fixed Assets from the
Knoxville Facility shall be borne by Buyer. Nothing in this Section
7.13 shall be deemed to create in Buyer any occupancy or other right
with respect to the Knoxville Facility other than as expressly set
forth herein or to create any landlord-tenant relationship between
Sellers and Buyer with respect thereto.
(g) For so long as the Fixed Assets are located at the Knoxville Facility,
Buyer shall maintain commercial general liability insurance, including
blanket contractual liability coverage, with limits of not less than
$5,000,000.00 combined single limit for personal injury and property
damage. All policies shall include Sellers and any landlord and or
applicable mortgagee as additional insureds, as their respective
interests may appear. The liability insurance shall be a primary
policy and not excess or contributing with or secondary to any other
insurance as may be available to the additional insureds.
7.14 Out-converting Customer Fees
----------------------------
Certain Customers of the Business that have served notice of termination of
their Contracts with Sellers and are in the process of out-conversion have
prepaid to Sellers amounts in respect of work to be performed during the
out-conversion. In the event such out-conversions are not completed prior to the
Closing Date, Buyer shall be entitled to receive the portion of the prepayment
32
received by Sellers attributable to work performed by Buyer after the Closing
Date for out-conversion for such Customers, which portion shall be determined by
reference to the prepayment provisions and charges for such work in the
applicable Customer Contract.
ARTICLE 8
---------
EMPLOYEE MATTERS
----------------
8.1 Employment Offers to Current Seller Employees
---------------------------------------------
(a) Prior to the Closing Date, the Buyer shall make offers of regular
employment, effective as of the Closing Date, to Sellers' employees
who are not on an approved EDS leave (e.g., not on personal, short or
long-term disability or military leave) as of the Closing Date and
whose names are set forth in Schedule 8.1(a) of Sellers Disclosure
Schedule (each such employee, a "Designated Employee"). Sellers'
employees providing IT services to the Business pursuant to the
Transition Services Agreement shall not be Designated Employees
hereunder. All Designated Employees who accept employment with the
Buyer pursuant to this Agreement, upon commencement of employment with
Buyer, are referred to herein as "Transferred Employees". Prior to the
Closing Date, Sellers shall not, without prior notification to, and
agreement by, Buyer, terminate, or substantially alter the duties,
compensation or other of the terms and conditions of employment of any
Designated or Transferred Employee.
(b) All Sellers' Designated Employees on an approved leave shall be
identified on Schedule 8.1(a) of Sellers Disclosure Schedule.
(c) The Designated Employees who are on an approved leave on the Closing
Date will be transitioned to employment with the Buyer when they are
again actively at work, if they resume such status within the time
their approved leave is over pursuant to Sellers' policies existing on
the date of this Agreement, but in no event longer than six months
after the Closing Date. All such Designated Employees who transition
to the Buyer pursuant to this Agreement, upon commencement of
employment with Buyer, are hereinafter referred to as "Transferred
Employees". Prior to the transition to the Buyer, all employees on an
approved leave will be considered employees of Sellers for all
purposes.
(d) In addition to any license under the Technology License Agreement for
Buyer to use relevant EDS General IP (as defined in the Technology
License Agreement) and residual knowledge, Sellers will, upon the
Closing, waive all provisions of each Transferred Employee's
employment agreement with Sellers regarding non-competition and/or use
of Sellers' confidential information to the limited extent necessary
to enable each such Transferred Employee to perform work in the
Subscription Fulfillment Services business for Buyer, its Affiliates
and their respective successors and assigns.
8.2 Terms of Employment--Compensation and Benefits
----------------------------------------------
(a) Buyer shall offer each Designated Employee (i) a base pay amount no
less than each such employee's base pay as of the date of this
33
Agreement and (ii) benefits, including vacation, severance, retirement
plan, 401(k) plan, sick leave, and insurance (collectively "Buyer's
Benefits") according to Buyer's existing policies as of the Closing
Date, except with regard to health insurance which will be governed by
the provisions as set forth in Section 8.2(c) below.
(b) Except as specifically provided in this Article 8, for purposes of
calculating eligibility and vesting under any of the Buyer's Benefits,
and for calculating entitlement for leave and vacation time, the
Transferred Employees shall be credited with service for their length
of employment with Sellers or Sellers' predecessor and which length of
time Sellers have heretofore used for such purposes, all as appearing
on the records kept by Sellers (collectively, "Past Service"). A
schedule reflecting the Past Service of Designated Employees is
attached hereto as Schedule 8.2(b) of Sellers Disclosure Schedule. For
purposes of clarification, Sellers will process any eligible claim for
benefits incurred by a Transferred Employee prior to the Closing Date
pursuant to Sellers' plans at Sellers' cost, and Buyer will process
any eligible claim for benefits incurred by a Transferred Employee on
or after the commencement of such employee's employment with Buyer
pursuant to Buyer's plans at Buyer's cost, except with regard to
health insurance claims which will be governed by the provisions as
set forth in Section 8.2(c) below. Notwithstanding anything to the
contrary in this Article 8, the Transferred Employees shall be
entitled to employee benefits that are no less favorable than those
offered to other Buyer employees who are similarly situated.
(c) Notwithstanding anything to the contrary in this Article 8, the
Transferred Employees shall be entitled to their benefits under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") from
Sellers. Transferred Employees who properly elect benefits under COBRA
will pay their respective health insurance premiums as billed by
Sellers under COBRA and Buyer will reimburse each Transferred Employee
by direct payment, or by such other method which Buyer determines, for
an amount which approximates the difference between the amount of
actual COBRA premium paid by such Transferred Employee on a monthly
basis, and the amount of the regular employee health insurance premium
contribution previously paid per month by such Transferred Employee
under the Sellers' health insurance plan in which such Transferred
Employee was enrolled at the time of Closing. Such reimbursement by
Buyer shall only be for a time equal to the period of such Transferred
Employee's COBRA coverage under Sellers' health insurance plan, but in
no event beyond the time a Transferred Employee would be eligible to
commence coverage under Buyer's health insurance plan. Buyer shall
reimburse each eligible Transferred Employees for these expenses
within 14 days of such Transferred Employee providing proof of payment
of COBRA premiums. Buyer will offer health insurance to the
Transferred Employees commencing May 1, 2003, for which open
enrollment will commence during April 2003. Subject to any limitations
or exceptions mandated pursuant to any applicable law or rules and/or
to the terms of Buyer's health plan which may provide limitations or
exceptions, all of which shall govern, Buyer's health plan shall
provide that any Transferred Employee is not subject to any
pre-existing condition limitations or exclusions. After enrollment in
Buyer's health plan, and provided sufficient documentation is provided
to Buyer, Buyer's health plan will credit each Transferred Employee's
34
deductible account for deductibles paid by each respective Transferred
Employee in calendar year 2003 pursuant to Sellers' health plan.
(d) Notwithstanding anything herein to the contrary, Sellers shall be
solely responsible for, and Buyer shall not assume, any of Sellers'
ERISA Plans and all obligations and liabilities thereunder. Sellers
shall remain liable for, and Sellers shall hold Buyer, its Affiliates
and their respective employees, officers, directors, shareholders and
assigns harmless from and against, any and all obligations to
employees (whether or not named in Schedule 8.1(a) of Sellers
Disclosure Schedule and whether or not employed by Sellers) relating
to their employment in connection with the operation of the Business
on or prior to the Closing Date, including, without limitation, wages
and salary; severance pay; unemployment, FICA and FUTA taxes; vacation
pay); retirement benefits; health and disability benefits and any and
all other employee benefits to which such employees may be entitled.
Sellers shall take all necessary and appropriate action, if any, to
comply on or prior to the Closing Date with any state and federal laws
regarding the termination of employees.
8.3 401(k) Plan
-----------
As soon as practicable after the Closing Date, Sellers shall permit the
Transferred Employees to take distributions from the EDS 401(k) Plan in
accordance with the EDS 401(k) Plan and applicable law. Buyer shall accept
rollovers and direct transfers pursuant to Code section 401(a)(31) of pre-tax
account balances and outstanding loan balances into the Buyer Plan in accordance
with the terms of such Plan and applicable law. The Buyer's 401(k) Plan shall
(a) provide that Transferred Employees shall be eligible to participate therein
as of their respective dates of commencement of employment with Buyer, and (b)
shall take into account the Transferred Employees' Past Service with Sellers for
purposes of eligibility and vesting. Nothing contained herein shall be construed
to require Transferred Employees to be eligible to participate in Buyer's 401(k)
Plan, if after crediting such Transferred Employees with Past Service, any such
Transferred Employees do not meet Buyer's 401(k) Plan's requirements.
8.4 Sellers' Employee Benefits
--------------------------
Sellers shall be responsible for any benefit, including without limitation,
vacation, short and long term sick leave and sick days, earned or accrued by any
Transferred Employee prior to the commencement of employment with Buyer. Sellers
shall either pay such value to the Transferred Employees or any such benefit
shall be lost (except for any Transferred Employee's rights under COBRA), i.e.,
no Transferred Employee will be credited by Buyer with any unused or accrued
benefit resulting from any employment with Sellers. Consistent with its business
needs and in its sole discretion, Buyer shall attempt to accommodate any request
by a Transferred Employee for time off after the Closing Date which was
scheduled by a Transferred Employee prior to the Closing Date.
8.5 No Third-Party Rights of Enforcement
------------------------------------
The provisions of this Article 8 are intended for the benefit of Sellers
and Buyer only and are not intended in any way to be enforced by or relied upon
by any person or entity who is not a signatory to this Agreement, including any
Designated Employee or Transferred Employee, and are otherwise subject to the
terms of Section 13.13.
35
8.6 WARN Act
--------
To the extent that any WARN Obligations arise as a consequence of a
transaction contemplated by this Agreement, it is agreed that Sellers shall be
responsible for any WARN Obligations arising as a result of any employment
losses occurring on or prior to the Closing Date, and Buyer shall be responsible
for any WARN Obligations arising as a result of any employment losses occurring
following the Closing Date but only with respect to Transferred Employees.
Sellers shall be responsible for any WARN Obligations to employees employed at
the Knoxville Facility and shall indemnify and hold Buyer and its Affiliates and
their respective employees, officers, directors, shareholders, successors and
assigns harmless in respect thereof.
ARTICLE 9
---------
CONDITIONS TO SELLERS' OBLIGATIONS
----------------------------------
The obligation of Sellers to consummate the sale of the Transferred Assets
pursuant to this Agreement shall be subject to the satisfaction, at or prior to
the Closing, of each of the following conditions, unless waived in writing by
Sellers:
9.1 Representations and Warranties True
-----------------------------------
The representations and warranties contained in Article 6 shall be true and
correct at and as of the Closing Date (except for representations and warranties
made as of a specified date, which shall be measured only as of such specified
date), except where the failure of such representations and warranties to be so
true and correct does not have and is not reasonably likely to have a Buyer
Material Adverse Effect, and except for changes expressly contemplated by the
terms of this Agreement.
9.2 Performance
-----------
Buyer shall have performed and complied in all material respects with all
agreements, obligations and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing.
9.3 Absence of Litigation
---------------------
On the Closing Date, there shall be no injunction, writ, preliminary
restraining order or any order of any nature issued by a court of competent
jurisdiction directing that the transactions provided for herein or in any other
Transaction Document not be consummated as so provided.
9.4 Governmental Consents
---------------------
All governmental Consents identified in Section 9.4 of the Seller
Disclosure Schedule (the "Required Governmental Consents") shall have been
obtained and remain in full force and effect.
9.5 Certificates
------------
Buyer shall have furnished Sellers with (a) a certificate of Buyer
substantially in the form of Exhibit 9.5(a), and (b) such other certificates of
its officers and others to evidence compliance with the conditions set forth in
this Article 9 and Buyer's authority to enter into this Agreement and the other
Transaction Documents as may be reasonably requested by Sellers.
9.6 Deliveries
----------
Sellers shall have received from or on behalf of Buyer delivery of all the
documents listed in Section 4.2(b).
36
ARTICLE 10
----------
CONDITIONS TO OBLIGATION OF BUYER
---------------------------------
The obligation of Buyer to consummate the purchase of the Transferred
Assets and to assume the Assumed Liabilities pursuant to this Agreement shall be
subject to the satisfaction, at or prior to Closing, of each of the following
conditions, unless waived in writing by Buyer:
10.1 Representations and Warranties True
-----------------------------------
The representations and warranties contained in Article 5 shall be true and
correct at and as of the Closing Date (except for representations and warranties
made as of a specified date, which shall be measured only as of such specified
date), except where the failure of such representations and warranties to be so
true and correct does not have and is not reasonably likely to have a Seller
Material Adverse Effect, and except for changes expressly contemplated by the
terms of this Agreement.
10.2 Performance
-----------
Sellers shall have performed and complied in all material respects with all
agreements, obligations and conditions required by this Agreement to be
performed or complied with by them at or prior to the Closing.
10.3 Absence of Litigation
---------------------
On the Closing Date, there shall be no injunction, writ, preliminary
restraining order or any order of any nature issued by a court of competent
jurisdiction directing that the transactions provided for herein or in any other
Transaction Document not be consummated as so provided.
10.4 Consents
--------
(a) All Required Governmental Consents shall have been obtained and remain
in full force and effect.
(b) Customer consents in form and substance reasonably satisfactory to
Sellers and Buyer to the assignment of (i) the Transferred Customer
Contracts listed on Schedule 10.4(b)(i) and (ii) the Transferred
Customer Contracts meeting the criteria set forth on Schedule
10.4(b)(ii) shall have been obtained.
10.5 Certificates
------------
Sellers shall have furnished Buyer with such certificates of their officers
and others to evidence compliance with the conditions set forth in this Article
10 and Sellers' authority to enter into this Agreement and the other Transaction
Documents as may be reasonably requested by Buyer.
10.6 Deliveries
----------
Buyer shall have received from or on behalf of Sellers delivery of all the
documents listed in Section 4.2(a).
10.7 Absence of Liens
----------------
37
(a) Sellers shall have delivered to Buyer to be effective upon the Closing
the following, all of which shall be acceptable in form and substance
to U.S. Bank National Association: (i) a duly executed release of the
security interest in the Fixed Assets included in the Transferred
Assets evidenced by the UCC Financing Statement filed in Delaware
September 25, 2001 (File No. 1109254 8) naming EIS as Debtor and
Citicorp North America, Inc., as Administrative Agent as Secured
Party, (ii) a UCC Financing Statement Amendment in form for filing in
Delaware eliminating the Fixed Assets included in the Transferred
Assets from the collateral covered by the Financing Statement referred
to in clause (i), (iii) a written authorization from the Secured Party
identifying the Person(s) who are authorized to file the UCC Financing
Statement Amendment referred to in clause (ii) in the appropriate
filing office in Delaware, and (iv) the written undertaking of such
Person(s) to file such Financing Statement Amendment concurrently with
the payment by Buyer to Sellers at the Closing, or by such later time
as shall be acceptable to U.S. Bank National Association.
(b) Sellers shall have delivered to Buyer written evidence in form and
substance satisfactory to U.S. Bank National Association signed or
countersigned by Citicorp North America, Inc., as Agent, to the effect
that (i) the notice (including a listing of the Transferred Customer
Contracts) pursuant to clause (B) of the definition of Contracts in
Section 1.01 of the Receivables Purchase Agreement dated as of
December 27, 2002 among Legacy Receivables LLC as the Seller and
Xxxxxx X.X. and Corporate Asset Funding Company, Inc. as the Investors
and Citibank, N.A. as a Bank and Citicorp North America, Inc. as the
Agent and EDS and EIS as the Collection Agent and the Originator that
upon the Closing the Transferred Customer Contracts are excluded from
such definition of Contracts has been given to said Agent at least
three business days prior to the Closing Date, and (ii) upon the
Closing, the Transferred Customer Contracts are excluded from the
definition of Contracts in such Receivables Purchase Agreement.
10.8 Waiver
------
Sellers shall have obtained from the Landlord a written waiver of the
Landlord's right to terminate the Louisville Master Lease resulting from
Sellers' non-compliance with the deductible requirement of Section 16(a)(i)
thereof, and the reaffirmation of Sellers' representations and warranties called
for by Section 10.1 of this Agreement shall specifically exclude the exception
in Schedule 5.7.
ARTICLE 11
----------
SURVIVAL; INDEMNIFICATION
-------------------------
11.1 Survival of Representations and Warranties
------------------------------------------
Subject to the limitations and other provisions of this Agreement, the
representations and warranties of the parties hereto contained herein shall
survive the Closing and shall remain in full force and effect until the second
38
anniversary of the Closing Date. Any right of indemnification pursuant to this
Article 11 with respect to a claimed breach of (a) a representation or warranty
shall expire on the second anniversary of the Closing Date, other than any
representation or warranty contained in Section 5.5 or 5.9 regarding Transferred
Customer Contracts and Customer Deposits which shall expire on the nine month
anniversary of the Closing Date, and (b) a covenant or agreement (other than
with respect to any Retained Liability or Assumed Liability) shall expire upon
the second anniversary of the date by which such covenant or agreement was
required to be performed, or if there is no such expiration date of performance,
upon the expiration of the statute of limitations period applicable to the
breach of such covenant or agreement (in each case, the "Termination Date"),
unless on or prior to the Termination Date a Claim (as defined below) has been
made to the party from whom indemnification is sought. Provided that a Claim is
timely made, it may continue to be asserted beyond the Termination Date of the
representation, warranty, covenant or agreement to which such Claim relates. A
"Claim" means a written notice asserting a breach of a representation, warranty,
covenant, agreement or obligation specified in this Agreement, which shall
reasonably set forth, in light of the information then known to the party giving
such notice, a reasonably detailed description of and estimate (if then
reasonable to make) of the amount involved in such breach.
11.2 Indemnification
---------------
(a) After the Closing Date, Sellers hereby agree to defend, indemnify and
hold harmless Buyer, its Affiliates and their respective employees,
officers, directors, shareholders, successors and assigns
(collectively, the "Buyer Group"), as the case may be, from and
against all past, present and future demands, claims, suits, actions
or causes of action, assessments, losses, damages, liabilities, costs
and expenses, including interest, penalties and reasonable attorneys'
fees, disbursements and expenses (collectively, "Damages") asserted
against, imposed upon or incurred by any member of Buyer Group by
reason of or resulting from (i) a breach of any representation,
warranty, covenant or agreement of Sellers contained in this Agreement
or any other Transaction Document other than the Buyer Lease
Agreement, the Technology License Agreement, the Transition Services
Agreement and the Call Center Agreement, or (ii) the Retained
Liabilities.
(b) After the Closing Date, Buyer hereby agrees to defend, indemnify and
hold harmless Sellers, their respective Affiliates and their
respective employees, officers, directors, shareholders, successors
and assigns (collectively, the "Seller Group") from and against all
Damages asserted against, imposed upon or incurred by any member of
the Seller Group by reason of or resulting from (i) a breach of any
representation, warranty, covenant or agreement of Buyer contained in
this Agreement or any other Transaction Document other than the Buyer
Lease Agreement, the Technology License Agreement, the Transition
Services Agreement and the Call Center Agreement ; (ii) the Assumed
Liabilities; (iii) the operation of the Business or the Transferred
Assets by Buyer and the activities of the Knoxville Employees in
relation to the Business after the Closing except to the extent
resulting from a fact, circumstance or condition which would give rise
to a claim by Buyer under Section 11.2(a); (iv) Buyer or Buyer's
representatives' access to and activities in the Longmont Warehouse
and Knoxville Facility, including inspection and removal; (v) the
Claim of any Transferred Employee to the extent arising out of or
relating to any aspect of the employment relationship with Buyer after
the Closing Date, including, without limitation, claims, actions,
39
damages, liabilities, costs and expenses relating to the breach of an
express or implied contract of employment or of federal, state or
other laws or regulations for the protection of persons who are
members of a protected class or category of persons, any alteration of
an employee's duties or terms and conditions of employment, or any
employee termination, but excluding a Claim involving any termination
or alleged termination by Sellers, and (vi) a Claim of any Knoxville
Employee to the extent arising out of or relating to any aspect of
Buyer's conduct in the employment relationship of the Knoxville
Employees after the Closing Date, including, without limit, claims,
actions, damages, liabilities, costs, and expenses relating to the
breach of an express or implied contract of employment or of federal,
state or other laws for the protection of persons of a protected
class, any alteration of an employee's duties or terms and conditions
of employment but excluding any claim in respect of termination.
(c) Buyer and Sellers agree (i) that there are other Articles in this
Agreement which set forth certain covenants, agreements and
obligations expressly requiring the payment of money or certain
reimbursements, and (ii) that in the event of a Claim arising from an
alleged failure to make such payments and/or reimbursements, the
remedy for such Claim provided by this Agreement shall be exclusive
except in the event of fraud; provided, however, that there shall not
be any duplication of payment with respect to any such matter.
11.3 Third Party Claims
------------------
(a) For purposes hereof, ("Indemnified Party") means the Person entitled
to indemnification hereunder and ("Indemnifying Party") means any
Person required to provide indemnification hereunder. In the event a
claim or Legal Proceeding is instituted against an Indemnified Party
by a Person other than a member of Buyer Group or the Seller Group
which, if prosecuted successfully, would result in any Damages for
which a Person is indemnified under this Agreement (a "Third Party
Claim"), the Indemnified Party shall deliver a notice to the
Indemnifying Party describing in reasonable detail the nature of the
Third Party Claim to the extent then known to the indemnified party (a
"Third Party Claim Notice").
(b) Upon receipt of any Third Party Claim Notice, the Indemnifying Party
may undertake the defense, compromise and settlement thereof by
representatives of its own choosing reasonably acceptable to the
Indemnified Party. The failure of the Indemnified Party to notify the
Indemnifying Party of any Third Party Claim shall not relieve the
Indemnifying Party of any obligation that it may have with respect to
such claim except to the extent the Indemnifying Party's ability to
defend such claim has been materially prejudiced by such failure. The
assumption of the defense, compromise and settlement of any such Third
Party Claim by the Indemnifying Party will not be an acknowledgment of
the obligation of the Indemnifying Party to indemnify the Indemnified
Party with respect to such claim. If the Indemnified Party desires to
participate in, but not control, any such defense, compromise and
settlement, it may do so at its sole cost and expense. If, however,
the Indemnifying Party fails or refuses to undertake the defense of
such Third Party Claim within twenty business days after notice of
such Third Party Claim has been given to the Indemnifying Party, the
40
Indemnified Party will have the right to undertake the defense,
compromise and settlement of such claim with counsel of its own
choosing. In the circumstances described in the immediately preceding
sentence, the Indemnified Party shall, upon undertaking the defense of
such claim, provide notice thereof to the Indemnifying Party, which
shall be deemed a claim for indemnification that is not a Third Party
Claim for the purposes of the procedures set forth herein.
(c) No settlement of a Third Party Claim involving the asserted liability
of the Indemnifying Party under this Article 11 shall be made without
the prior written consent by or on behalf of the Indemnifying Party,
which consent shall not unreasonably be withheld, conditioned or
delayed. If the Indemnifying Party assumes the defense of a Third
Party Claim, (i) no compromise or settlement thereof may be effected
by the Indemnifying Party without the Indemnified Party's prior
written consent (which consent shall not unreasonably be withheld,
conditioned or delayed) unless (A) there is no finding or admission of
any violation of law by or on behalf of the Indemnified Party, (B) the
sole relief provided is monetary damages that are paid in full by the
Indemnifying Party and (C) the compromise or settlement includes, as
an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnified Party of a release, from all liability in
respect of such Third Party Claim, and (ii) the Indemnified Party
shall have no liability with respect to any compromise or settlement
thereof affected without its consent.
(d) Each of the Indemnifying Party and the Indemnified Party will provide
the other with access to all records, documents and personnel in the
other's possession or control to the extent reasonably related to any
Third Party Claim. The Indemnified Party will provide the Indemnifying
Party with access to all records, documents and personnel of the
Indemnified Party to the extent reasonably related to any Third Party
Claim.
(e) Notwithstanding the foregoing, if the Third Party Claim is a claim
related to any performance or failure of performance under any
Transferred Customer Contract or any claim of an error in an invoice
rendered to a Customer by or on behalf of Sellers on or prior to the
Closing Date, as part of efforts to settle such Third Party Claim
pursuant to this Article 11, Sellers and Buyer shall have the option
to cooperate in good faith promptly to offer to the Customer a remedy
for such claim which satisfies the requirements of the related
Transferred Customer Contract, with the reasonable, actual costs of
providing such remedy to be borne by Sellers, provided that Sellers
approve such remedy; and (ii) if Sellers and Buyer are unable to reach
agreement on the provision of a remedy acceptable to the Customer,
Buyer may, but need not, deal with the Customer independently of
Sellers to provide to the Customer a remedy for such claim which
satisfies the requirements of the related Transferred Customer
Contract. Buyer shall be entitled to receive as Damages from Sellers
the actual costs associated with providing such remedy, subject to the
limits of the Transferred Customer Contract to the extent such costs
are either approved by Sellers or are no more than the reasonable
costs of providing such remedies determined in accordance with
industry standards.
41
11.4 Limitation of Liability
-----------------------
(a) Sellers shall not be required to make any indemnification under this
Article 11 in respect of Damages for matters arising in respect of any
matter other than for (i) breaches of covenants and agreements, (ii)
Retained Liabilities, and (iii) under Sections 5.6 and 5.12 unless the
aggregate amount of such Damages exceeds $500,000 and, upon such
amount being exceeded, Sellers shall make such indemnification for the
entire amount of Damages. The aggregate liability of Sellers for
indemnification under this Article 11 for breach of representations
and warranties shall not exceed $5,000,000 and for covenants and
agreements shall not exceed $10,000,000; provided, however, that this
limit on liability shall not apply to indemnification in respect of
breach of the representations and warranties in Sections 5.6 and 5.12,
the covenant in Section 7.11 or any Retained Liability.
(b) Buyer shall not be required to make any indemnification under this
Article 11 in respect of Damages for matters arising in respect of any
matter other than for (i) breaches of covenants and agreements and
(ii) matters to be indemnified pursuant to Section 11.2(b)(ii)-(vi),
unless the aggregate amount of Damages indemnified against under such
Article exceeds $500,000 and, upon such amount being exceeded, Buyer
shall make such indemnification for the entire amount of the Damages.
The aggregate liability of Buyer for indemnification under this
Article 11 for breach of representations and warranties shall not
exceed $5,000,000 and for covenants and agreements shall not exceed
$10,000,000; provided, however, that this limit on liability shall not
apply to indemnification in respect of any matter to be indemnified
pursuant to Section 11.2(b)(ii)-(vi).
(c) No Damages shall be recoverable by any of the Buyer Group pursuant to
the provisions of this Article 11 for breach of representation or
warranty, and no Claim thereof shall be asserted for such purpose to
the extent that such Claim is based upon facts, circumstances or
conditions that would render untrue the statements contained in
Section 6.7 hereunder or Buyer's due diligence certificate attached
hereto as Exhibit 9.5(a).
11.5 Limitation of Damages
---------------------
In calculating any amount payable by Sellers pursuant to Section 11.2(a) or
payable by the Buyer pursuant to Section 11.2(b), the Indemnifying Party shall
receive credit for any reimbursements credited or received by the Indemnified
Party with respect to the matter giving rise to the Claim for indemnification.
In addition, notwithstanding anything to the contrary in this Agreement, the
liability of any Indemnifying Party under this Agreement shall not exceed the
actual damages of the Indemnified Party entitled to indemnification and shall
not otherwise include special, consequential, punitive, incidental, indirect,
exemplary or other similar damages of the Indemnified Party.
11.6 No Set-Off Rights
-----------------
Notwithstanding anything to the contrary in this Agreement, in no event
shall any party who is entitled to indemnification under this Article 11 (or who
is asserting rights to indemnification under this Article 11) have the right to
set off amounts owed (or asserted to be owed) to such party under this Article
42
11 against any payment obligation that such party may have to the party from
whom indemnification is sought, and any and all such set off rights that may
exist under common law, by statute or otherwise are hereby unconditionally
waived.
11.7 Subrogation
-----------
Upon payment in full of any Claim for indemnification pursuant to this
Article 11 or the payment of any judgment or settlement with respect to a Third
Party Claim, the Indemnifying Party shall be subrogated to the extent of such
payment to the rights of the Indemnified Party against any Person with respect
to the subject matter of such Claim or Third Party Claim.
11.8 Exclusive Remedy
----------------
If the Closing occurs, except for Claims relating to fraud and Excluded
Disputes (as defined below), the remedies provided in this Agreement constitute
the sole and exclusive remedies between the parties for Damages or any other
Claims arising under this Agreement or under any other Transaction Document
(other than the Buyer Lease Agreement, the Technology License Agreement, the
Transition Services Agreement, and the Call Center Agreement).
11.9 Dispute Escalation and Arbitration
----------------------------------
(a) Dispute Escalation. In the event of any dispute, controversy or claim
of any kind or nature arising under or in connection with this
Agreement (including disputes as to the creation, validity,
interpretation, breach or termination of this Agreement) (a "Dispute")
other than (i) a Claim for a preliminary injunction to prevent any
breach hereof, (ii) a Dispute to the extent arising out of or relating
to Sections 7.3, 7.5, 7.6, 7.8, 7.9 and 7.11 hereunder for which the
complaining party is seeking injunctive relief (including specific
performance) and (iii) a Dispute involving claims which applicable Law
requires be submitted to the tribunal conducting such equitable
proceeding (each, an "Excluded Dispute"), then upon the written
request of either Party, each of the Parties will appoint a designated
senior business executive whose task it will be to meet for the
purpose of endeavoring to resolve the Dispute. The designated
executives will meet as often as the Parties reasonably deem necessary
in order to gather and furnish to the other all information with
respect to the matter in issue which the Parties believe to be
appropriate and germane in connection with its resolution. Such
executives will discuss the Dispute and will negotiate in good faith
in an effort to resolve the Dispute without the necessity of any
formal proceeding relating thereto. The specific format for such
discussions will be left to the discretion of the designated
executives. No formal proceedings for the resolution of the Dispute
under Section 11.9(b) may be commenced until the earlier to occur of
(a) a good faith mutual conclusion by the designated executives that
amicable resolution through continued negotiation of the matter in
issue does not appear likely or (b) the 30th day after the initial
request to negotiate the Dispute.
(b) Arbitration. Any Dispute other than an Excluded Dispute that the
Parties are unable to resolve through dispute escalation processes
pursuant to Section 11.9(a) will be submitted to arbitration in
accordance with the following procedures:
(i) Demand for Arbitration; Location. Either Party may demand
arbitration by giving the other Party written notice to such
effect, which notice will describe, in reasonable detail, the
facts and legal grounds forming the basis for the filing Party's
43
request for relief and will include a statement of the total
amount of damages claimed, if any, and any other remedy sought by
that Party. The arbitration will be held in Chicago, Illinois.
The number of arbitrators shall be determined in accordance with
the Rules.
(ii) Identification of Arbitrator. Within 30 days after the other
Party's receipt of such demand, the Parties will mutually
determine who the arbitrator(s) will be. If the Parties are
unable to agree on the arbitrator(s) within that time period, the
arbitrator(s) will be selected by the AAA. In any event, the
arbitrator(s) will have a background in, and knowledge of, the
information technology services industry and will be an
appropriate person based on the nature of the Dispute. If a
person with such industry experience is not available, the
arbitrator(s) will be chosen from the large and complex case
panel or, if an appropriate person is not available from such
panel, the retired federal judges pool.
(iii)Conduct of Arbitration. The arbitration will be governed by the
Commercial Arbitration Rules of the AAA (the "Rules"), except as
expressly provided in this Section 11.9. However, the arbitration
will be administered by any organization mutually agreed to in
writing by the Parties. If the Parties are unable to agree on the
organization to administer the arbitration, it will be
administered by the AAA under its procedures for large and
complex cases.
(iv) Scope of Discovery. Discovery will be limited to the request for
and production of documents, depositions and interrogatories.
Interrogatories will be allowed only as follows: a Party may
request the other Party to identify by name, last known address
and telephone number (i) all persons having knowledge of facts
relevant to the Dispute and a brief description of that person's
knowledge, (ii) any experts who may be called as an expert
witness, the subject matter about which the expert is expected to
testify, the mental impressions and opinions held by the expert
and the facts known by the expert (regardless of when the factual
information was acquired) which relate to or form the basis for
the mental impressions and opinions held by the expert and (iii)
any experts who have been used for consultation, but who are not
expected to be called as an expert witness, if such consulting
expert's opinions or impressions have been reviewed by an expert
witness. All discovery will be guided by the Federal Rules of
Civil Procedure. All issues concerning discovery upon which the
Parties cannot agree will be submitted to the arbitrator for
determination.
(v) Authority of Arbitrator. The arbitrator will determine the rights
and obligations of the Parties according to the laws of the State
of Delaware. The arbitrator will not have authority to award
damages in excess of the amount or other than the types allowed
by Article 11 and may not, in any event, make any ruling, finding
or award that does not conform to the terms and conditions of
this Agreement.
(vi) Joinder of Parties. Each of Sellers and Buyer agree that it will
use commercially reasonable efforts to join (and will allow the
other Party to join) any third party that the Parties have agreed
44
is indispensable to the arbitration. If any such third party does
not agree to be joined, the arbitration will proceed nonetheless.
(vii)Award. The decision of, and award rendered by, the arbitrator
will be final and binding on the Parties. Upon the request of a
Party, the arbitrator's award will include written findings of
fact and conclusions of law. Judgment on the award may be entered
in and enforced by any court of competent jurisdiction. Each
Party will bear its own costs and expenses (including filing
fees) with respect to the arbitration, including one-half of the
fees and expenses of the arbitrator.
(viii) Exclusive Remedy. Other than those matters involving injunctive
or other extraordinary relief or any action necessary to enforce
the award of the arbitrator, the Parties agree that the
provisions of this Section 11.9 are a complete defense to any
suit, action or other proceeding instituted in any court or
before any administrative tribunal with respect to any Dispute
other than an Excluded Dispute.
11.10 Enforcement of Agreement
------------------------
The parties hereto agree that irreparable damage would occur in the event
that the provisions contained in this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce with specific performance the terms
and provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
11.11 Tax Treatment
-------------
Any payment to Buyer under this Article 11 shall be treated by the parties
for Tax purposes as an adjustment to the Purchase Price.
ARTICLE 12
----------
TERMINATION
-----------
12.1 Methods of Termination
----------------------
The transactions contemplated herein may be terminated at any time prior to
the Closing:
(a) by mutual agreement of Sellers and Buyer; or
(b) by either party in the event the Closing shall not have occurred on or
before April 30, 2003 (the "Outside Termination Date"); or
(c) by either Sellers or Buyer, by giving written notice of such
termination to the other, if any governmental or regulatory authority
of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law (whether temporary, preliminary or
permanent) that is in effect and permanently enjoins or otherwise
prohibits consummation of all of the transactions, taken as a whole,
contemplated by this Agreement; or
45
(d) By either Buyer or Sellers, if there shall have occurred a breach in
any material respect of any representation, warranty, covenant or
agreement contained in this Agreement that would give rise to the
failure of the conditions to the obligations of the parties set forth
in Sections 9.1 or Section 9.2, in the case of Sellers, or Sections
10.1 or 10.2, in the case of Buyer, and such breach shall not have
been cured within 30 days after the giving of written notice thereof
or has not been waived by the other party,provided, in each case, that
the failure to consummate the transactions contemplated hereby on or
before such date is not caused by any material breach of any covenant
or other agreement in this Agreement by the party electing to
terminate pursuant to this Section 12.1.
12.2 Procedure Upon Termination
--------------------------
In the event of termination of this Agreement pursuant to Section 12.1,
written notice thereof shall forthwith be given to the other party and the
transactions contemplated by this Agreement shall be terminated and abandoned,
without further action by the parties hereto. If the transactions contemplated
by this Agreement are terminated and/or abandoned as provided herein:
(a) If and to the extent requested, each party will redeliver to the party
furnishing the same all documents, work papers and other material of
any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof;
(b) Notwithstanding any such termination, Sections 7.5 and 7.6, Article
13, and this Section 12.2 shall remain in full force and effect; and
(c) Each party hereto, their respective Affiliates or their respective
employees, officers, directors or shareholders shall have no liability
or further obligation to any other party to this Agreement or its
Affiliates or their respective employees, officers, directors or
shareholders except as stated in subparagraphs (a) and (b) of this
Section 12.2.
12.3 Exclusive Remedies Prior to Closing
-----------------------------------
Subject to the parenthetical in the following sentence, prior to Closing,
each party agrees that their sole remedies against the other for breach of any
representation, warranty, covenant or agreement contained in this Agreement
(other than a covenant or agreement contained in Sections 7.5 and 7.6) shall be
to elect to (i) terminate this Agreement in accordance with Section 12.1 or (ii)
xxx for specific performance or other appropriate equitable remedies. In no
event shall either party be entitled to monetary damages prior to Closing for
the breach by the other of any representation, warranty, covenant or agreement
contained in this Agreement (other than a covenant or agreement contained in
Sections 7.5 and 7.6.
ARTICLE 13
----------
MISCELLANEOUS PROVISIONS
------------------------
13.1 Expenses
--------
Each party shall pay and discharge all liabilities and expenses that it
incurred or that were incurred on its behalf in connection with this Agreement
and all related documents, including, but not limited to, all fees and expenses
46
of agents, representatives, counsel, and accountants, and all amounts payable
with respect to any claim for fees or commissions (if any) with respect to the
transactions contemplated by this Agreement.
13.2 Waiver of Compliance With Bulk Sales Laws
-----------------------------------------
Buyer hereby waives compliance with the "bulk sales" provisions of Article
6 of the Uniform Commercial Code as it is in effect in the states where Sellers
own assets to be conveyed to Buyer hereunder and Sellers shall indemnify Buyer
with respect to any noncompliance with such bulk sales provisions. Nothing in
this paragraph will estop or prevent Buyer or any Seller from asserting as a bar
or defense to any action or proceeding brought under applicable bulk sales law
that it does not apply to the transfer of the Transferred Assets contemplated
under this Agreement.
13.3 Notices
-------
All notices, requests, demands and other communications which are required
or may be given pursuant to the terms of this Agreement shall be in writing and
shall be deemed given when delivered by hand, by facsimile transmission (with a
confirmatory copy sent within one business day by courier or overnight carrier),
or by courier or overnight carrier, as follows:
If to Buyer: Kable Fulfillment Services, Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, President
Telephone: (000) 000-0000
Fax: (000) 000-0000
With a copy to: Xxxxxx Xxxxxxxxx & Xxxxxx
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
If to Sellers: EDS, EIS and ERMC
0000 Xxxxxx Xxxxx
Xxxxxxxx X0-0X-00
Xxxxx, Xxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Fax: (000) 000-0000
or to such other address as any party shall have designated by notice in writing
to the other parties.
13.4 Waivers
-------
(a) Prior to or at the Closing, either Buyer, on the one hand, or Sellers,
on the other hand, shall have the right to waive any Default in the
performance of any term of this Agreement by the other, to waive or
extend the time for the compliance or fulfillment by the other of any
and all of its obligations under this Agreement, and to waive any or
all of the conditions precedent to the obligations of the other under
47
this Agreement, except any condition which, if not satisfied, would
result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of Buyer or
Sellers, as the case may be.
(b) The failure of any party at any time or times to require performance
of any provision hereof shall in no manner affect the right of such
party at a later time to enforce the same or any other provision of
this Agreement. No waiver of any condition or of the breach of any
term contained in this Agreement in one or more instances shall be
deemed to be or construed as a further or continuing waiver of such
condition or breach or a waiver of any other condition or of the
breach of any other term of this Agreement.
13.5 Amendment
---------
This Agreement may be modified, supplemented or amended only by a written
instrument executed by all of the parties hereto.
13.6 Entire Agreement
----------------
This Agreement (including the exhibits, Sellers Disclosure Schedule and the
Buyer Disclosure Schedule) and the other Transaction Documents constitute the
complete and exhaustive statement of the agreement of the parties with respect
to the subject matter hereof and thereof, and supersede all prior statements,
representations, warranties, agreements and understandings of the parties, oral
and written, with respect to the subject matter hereof and thereof.
13.7 Applicable Law; Jurisdiction and Venue
--------------------------------------
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without giving effect to any of the
conflict of law rules thereof.
(b) In the event that a dispute hereunder is subject to legal or equitable
action, that action shall be brought in a court of appropriate
jurisdiction sitting in Wilmington, New Castle County, Delaware. Buyer
and each of Sellers (i) hereby irrevocably submits itself to the
jurisdiction of a court of appropriate jurisdiction in that locations,
and (ii) to the extent permitted by applicable Law, hereby waives, and
agrees not to assert, by way of motion, as a defense or otherwise, in
any such suit, action or proceeding, the defense that the suit, action
or proceeding is brought in an inconvenient forum, that the venue of
the suit, action or proceeding is improper, or that this Agreement or
other Transaction Documents, or the subject matter thereof, may not be
enforced in or by such courts. Without limiting the foregoing, each of
the parties consents to process being served on it in any such suit,
action or proceeding at the address of such party set forth in Section
13.3, and agrees that it would generally prefer any suit action or
claim under this Section 13.7 to be heard in federal, not state, court
and shall use commercially reasonable efforts to do so if there is
applicable jurisdiction.
13.8 Interpretation
--------------
As used in this Agreement, the term "Agreement" is intended to refer to
this Agreement and the Buyer Disclosure Schedule and Sellers Disclosure Schedule
but not the exhibits to this Agreement. The headings in this Agreement are for
convenience of reference only and do not define, limit or describe the scope of
48
this Agreement or the intent of its provisions. Each party to this Agreement has
been represented by counsel and this Agreement is to be interpreted as if it
were drafted by all and not any one or more of the parties. As used in this
Agreement, words are intended to have their ordinary meaning unless capitalized,
in which case they are intended to have the meanings specifically given to them
in this Agreement or any related agreements. The words "include" and "including"
mean "including without limitation." Examples are given without any intention of
limitation to the specifics of the example. References to the singular include
the plural. References to he, she or it refer to all genders and objects. As
used in this Agreement and the other Transaction Documents, accounting terms not
otherwise defined, or only partially defined, shall have the meanings given to
them under GAAP. To the extent that the definitions of accounting terms in the
Transaction Documents are inconsistent with the meanings of such terms under
GAAP, the definitions contained in the Transaction Documents shall control.
13.9 Severability
------------
Any provision of this Agreement that is invalid or unenforceable in any
jurisdiction shall be ineffective to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
13.10 Certain Definitions
-------------------
For purposes of this Agreement, the following terms will have the meanings
ascribed to them in this Section 13.10:
"Accounting Firm" shall have the meaning assigned in Section 3.2(d).
"Additional Payment" shall have the meaning assigned in Section 3.1(c).
"Affiliate" of a Person shall mean any other Person directly, or indirectly
through one or more intermediaries, controlling, controlled by or under
common control with such Person.
"Assumed Liabilities" shall have the meaning assigned in Section 2.1.
"Business" shall have the meaning assigned in Section 1.3.
"Buyer Disclosure Schedule" shall mean the written information entitled
"Buyer Disclosure Schedule to Asset Purchase Agreement" delivered by Buyer
to Sellers prior to the execution of this Agreement describing the matters
contained therein.
"Buyer Lease Agreement" shall have the meaning assigned in Section
4.2(a)(i).
"Buyer Material Adverse Effect" shall mean a material adverse effect on the
assets, business, financial condition, or results of operations of Buyer,
or on the ability of Buyer to consummate the transactions contemplated by
this Agreement or the other Transaction Documents; provided, however, that
Buyer Material Adverse Effect shall not be deemed to include the impact of
(i) the public announcement of the transactions contemplated by this
Agreement, (ii) changes affecting as a whole any industry in which Buyer
operates, (iii) any change in the trading prices or volumes of the capital
stock of Buyer, (iv) the implementation of changes in GAAP, (v) changes in
Laws of general applicability or interpretations thereof by courts or
governmental authorities, (vi) actions or omissions of Buyer or any of its
Affiliates or their respective employees, officers, directors or
shareholders taken or permitted with the prior written consent of Sellers,
(vii) the direct effects of compliance with the terms of this Agreement,
including expenses incurred by Buyer and its Affiliates or their respective
49
employees, officers, directors or shareholders in consummating the
transactions contemplated by this Agreement, (viii) the effects of
conditions or events resulting from general financial, political, economic
or market conditions (including the suspension of trading in securities on
the New York Stock Exchange); or (ix) the effects of conditions or events
resulting from an outbreak or escalation of hostilities involving the
United States or the declaration by the United States of a national
emergency or war or the occurrence of any other calamity or crisis,
including the occurrence of a terrorist attack.
"Buyer's Benefits" shall have the meaning assigned in Section 8.2(a).
"Closing" shall have the meaning assigned in Section 4.1.
"Closing Date" shall have the meaning assigned in Section 4.1.
"Closing Date Statement" shall have the meaning assigned in Section 3.2(b).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collectible Accounts Receivable" shall have the meaning assigned in
Section 7.10(e).
"Collectible Accounts Receivable Collection Fee" shall have the meaning
assigned in Section 7.10(e).
"Collection Assistance Period" shall have the meaning assigned in Section
7.10(c).
"Collection Fee" shall have the meaning assigned in section 7.10(e).
"Confidential Information" shall have the meaning assigned in Section 7.5.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption or similar affirmation.
"Consideration" shall have the meaning assigned in Section 3.1(a).
"Contest" shall have the meaning assigned in Section 3.3(c).
"Contract" shall mean any agreement or contract.
"Customer" shall mean a customer that is a party to a Transferred Customer
Contract.
"Customer Accounts Receivable" shall mean all accounts receivable, notes,
bonds and other evidence of indebtedness and other rights to receive
payments to the extent arising out of Sellers' performance of the
Transferred Customer Contracts on or before the Closing Date.
"Customer Deposits" shall mean the Customer Postage Deposits and amounts
paid on deposit by Customers in respect of services to be rendered after
the Closing Date pursuant to a Transferred Customer Contract.
"Customer Postage Deposits" shall mean amounts paid on deposit by Customers
in respect of postage pursuant to a Transferred Customer Contract.
"Default" shall mean (i) any breach or violation of or default under any
Contract, Law, or Permit, or (ii) any occurrence of any event that would
give rise to a right to terminate or revoke, adversely change the current
terms of, or renegotiate, or to accelerate, increase, or impose any
liability under, any contract, Law, or Permit, where, in any such event,
such Default is reasonably likely to have, individually or in the
aggregate, a Seller Material Adverse Effect or Buyer Material Adverse
Effect, as applicable.
"Deferred Transferred Asset" shall have the meaning assigned in Section
4.3(b).
50
"Designated Employees" shall have the meaning assigned in Section 8.1(a).
"Early Collectible Accounts Receivable Collection Fee" shall have the
meaning assigned in Section 7.10(e)(i).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity shall mean any other entity that, together
with such entity would be treated as a single employer under Section 414 of
the Code.
"ERISA Plans" shall mean "employee benefit plan" as such term is defined in
Section 3(3) of ERISA.
"Estimated Net Customer Postage Deposit Amount" shall have the meaning
assigned in Section 3.2(a).
"Estimated Inventory Differential" shall have the meaning assigned in
Section 3.2(a).
"Excluded Receivables" shall have the meaning assigned in Section 7.10.
"Fixed Assets" shall mean machinery, equipment, including computer hardware
and firmware, telecommunications equipment and other office equipment,
vehicles, supplies, materials, tools and other items of tangible personal
property and all maintenance and other records related thereto.
"Financial Statements" shall have the meaning assigned in Section 5.4.
"GAAP" shall mean U.S. generally accepted accounting principles
consistently applied.
"Guaranty" shall mean that certain Guaranty executed by Kable News Company,
Inc., an Illinois corporation, in favor of Sellers as of even date
herewith.
"Intellectual Property Rights" shall mean rights in and to (i) U.S. and
foreign trademarks and trademark registrations, trade names and trade name
registrations, service marks and service xxxx registrations, logos and any
applications or pending applications related to any of the foregoing, and
common law trademarks and service marks (collectively "Trademarks"); (ii)
U.S. and foreign copyright registrations and any applications or pending
applications related to any of the foregoing, and any unregistered and
common law copyrights (including any and all rights in and to "Software"
defined in the following clause (iii)) (collectively "Copyrights"); (iii)
computer software and database software including, but not limited to,
applications and programs and all representations thereof (collectively,
"Software"); and (iv) know-how, trade secrets and confidential information,
internet web sites and domain names (collectively, "Miscellaneous
Intellectual Property Rights").
"Inventory Differential" shall have the meaning assigned in Section 3.2(a).
"Knoxville Employee" shall have the meaning assigned in Section 7.13(b).
"Knoxville Facility" shall have the meaning assigned in Section 7.13(a).
"Knoxville Transition Period" shall have the meaning assigned in Section
7.13(b).
"Laws" shall mean any law (including common law), statute, code, rule,
regulation, reporting licensing or permitting requirement, ordinance and
other pronouncement having the effect of law of the United States, any
foreign country or any domestic or foreign state, county, city or other
51
political subdivision, including those promulgated, interpreted or enforced
by any governmental or regulatory authority.
"Legal Proceeding" means any action, suit, inquiry, proceeding or
investigation by or before any United States, federal, state or local or
foreign court or governmental or other regulatory or administrative agency
or commission or arbitral body.
"Lien" shall mean any lien, encumbrance, mortgage, pledge, hypothecation,
security interest, conditional sale agreement, title reservation, title
restriction, or title retention or other security arrangement.
"Longmont Removal Period" shall have the meaning assigned in Section
7.12(a).
"Longmont Warehouse" shall have the meaning assigned in Section 7.12(a).
"Louisville Facility" shall have the meaning assigned in Section 5.7.
"Louisville Master Lease" shall have the meaning assigned in Section 5.7.
"Material Contracts" shall have the meaning assigned in Section 5.9.
"Net Customer Postage Deposit Amount" shall have the meaning assigned in
Section 3.2(a).
"New Receivable" shall have the meaning assigned in Section 7.10(d).
"Past Service" shall have the meaning assigned in Section 8.2(b).
"Permit" shall have the meaning assigned in Section 1.1(g).
"Permitted Liens" shall have the meaning assigned in Section 5.5.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, including a corporation, general partnership, joint
venture, limited partnership, limited liability company, trust, business
association, group acting in concert, or any person acting in a
representative capacity.
"Postage Prepaids" shall have the meaning set forth in Section 1.1(e).
"Primedia Contract" shall have the meaning assigned in Section 3.1(c).
"Purchase Price" shall have the meaning assigned in Section 3.1(a).
"Real Property Site" shall mean the real property at 333 and 000 Xxxxxxxxxx
Xxxx., Xxxxxxxxxx, Xxxxxxxx to be subleased to Buyer pursuant to the Buyer
Lease Agreement.
"Representative" shall have the meaning assigned in Section 6.7(a).
"Retained Assets" shall have the meaning assigned in Section 1.2.
"Retained Liabilities" shall have the meaning assigned in Section 2.2.
"Seller Group" shall have the meaning assigned in Section 11.2(b).
"Sellers Disclosure Schedule" shall mean the written information entitled
"Sellers Disclosure Schedule to Asset Purchase Agreement" delivered by
Sellers to Buyer prior to the execution of this Agreement describing the
matters contained therein.
52
"Seller Material Adverse Effect" shall mean a material adverse effect on
the assets, business, financial condition, or results of operations of the
Business, or on the ability of Sellers to consummate the transactions
contemplated by this Agreement or the other Transaction Documents;
provided, however, that Seller Material Adverse Effect shall not be deemed
to include the impact of (i) the public announcement of the transactions
contemplated by this Agreement, (ii) changes affecting as a whole the
industry in which the Business or any Seller operates, (iii) any change in
the trading prices or volumes of the capital stock of EDS, (iv) the
implementation of changes in GAAP, (v) changes in laws of general
applicability or interpretations thereof by courts or governmental
authorities, (vi) actions or omissions of Sellers or any of their
Affiliates or their respective employees, officers, directors or
shareholders taken or permitted with the prior written consent of Buyer,
(vii) the direct effects of compliance with the terms of this Agreement,
including expenses incurred by Sellers and their Affiliates or their
respective employees, officers, directors or shareholders in consummating
the transactions contemplated by this Agreement, (viii) the effects of
conditions or events resulting from general financial, political, economic
or market conditions (including the suspension of trading in securities on
the New York Stock Exchange); or (ix) the effects of conditions or events
resulting from an outbreak or escalation of hostilities involving the
United States or the declaration by the United States of a national
emergency or war or the occurrence of any other calamity or crisis,
including the occurrence of a terrorist attack.
"Software" shall have the meaning assigned in Section 1.1(b).
"Stale Accounts Receivable" shall have the meaning assigned in Section
7.10(a).
"Subscription Fulfillment Services" shall have the meaning assigned in
Section 1.3.
"Tax" or "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including all income, gross receipts, sales, use, value added,
ad valorem, real estate transfer, documentary stamp, gains, bulk sales,
profits, license, withholding, payroll, employment, social security,
unemployment, excise, severance, property or other similar taxes, duties,
fees, assessments or charges of any kind whatsoever, including any
interest, penalties or additional amounts attributable thereto imposed by
any United States federal, state, local or foreign governmental authority.
"Tax Return" shall mean any return, report, information return, statement,
declaration or other document (including any related or supporting
information) filed or required to be filed with any United States federal,
state, local or foreign governmental authority in connection with any
determination, assessment or collection of any Tax or other administration
of any Laws, regulations or administrative requirements.
"Transaction Documents" shall mean, collectively, this Agreement, the Buyer
Lease Agreement, the Xxxx of Sale and Assignment and Assumption Agreement,
the Technology License Agreement, the Transition Services Agreement, the
Call Center Agreement, the Other Conveyance Documents, the IP Assignment,
the Guaranty and all other agreements contemplated by this Agreement or
otherwise executed in connection with this Agreement or the Closing,
including all exhibits and schedules hereto and thereto, and all
certificates delivered in connection herewith and therewith.
"Transfer Taxes" shall have the meaning assigned in Section 3.3(a).
"Transferred Assets" shall have the meaning assigned in Section 1.1.
"Transferred Books and Records" shall have the meaning assigned in Section
1.1(f).
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"Transferred Contracts" shall have the meaning assigned in Section 1.1(c).
"Transferred Customer Contracts" shall have the meaning assigned in Section
1.1(c).
"Transferred Employees" shall have the meaning assigned in Section 8.1(a).
"Transferred Intellectual Property Rights" shall have the meaning assigned
in Section 1.1(b).
"Transferred Permits" shall have the meaning assigned in Section 1.1(g).
"Transferred Prepaids" shall have the meaning assigned in Section 1.1(e).
"Transferred Vendor Contracts" shall have the meaning assigned in Section
1.1(d).
"WARN Obligations" means the obligations of an employer to employees
pursuant to the federal Worker Adjustment and Retraining Notification Act
or any similar state or local law
13.11 Relationship of the Parties
---------------------------
The relationship between Sellers and Buyer established by this Agreement is
solely that of vendor and vendee and nothing contained herein shall be deemed to
create a joint venture among Buyer and Sellers. No party, its agents or
employees shall be deemed the agent or servant of another party and no party
shall have the right or authority to enter into any contract or commitment, in
the name of or on behalf of the other party, or purport to bind the other party
in any manner whatsoever.
13.12 Assignments
-----------
Except as otherwise expressly provided in this Agreement, this Agreement
may not be assigned (whether by operation of law or otherwise) by any party
hereto without the prior written consent of the other party; provided, however,
that either any Seller or Buyer has the right, without the consent of Buyer or
Sellers, respectively, to assign or delegate to any direct or indirect
subsidiary of such party any or all rights or obligations under this Agreement;
provided further that such assignment or delegation shall not relieve the
assignor from responsibility for performance of its obligations under this
Agreement.
13.13 Binding Effect; Benefits
------------------------
This Agreement shall inure to the benefit of, and be binding upon, the
parties to it and their respective successors and permitted assigns. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
Person other than the parties to it and their respective successors, permitted
assigns and other transferees, any rights or remedies under or by reason of this
Agreement. Sellers agree to cause their respective successors and permitted
assigns to agree in writing to perform all of its covenants and agreements
contained in this Agreement upon a sale of all or substantially all of the
assets of Sellers.
13.14 Counterparts
------------
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed by duly authorized
officers of each of the parties as of the date first above written.
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KABLE FULFILLMENT SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------
Name: Xxxxxxx X. Xxxxx
Title: President
ELECTRONIC DATA SYSTEMS
CORPORATION
By: /s/ Xxxxx Xxxxxx
-----------------------
Name: Xxxxx Xxxxxx
Title: President, CRM
EDS INFORMATION SERVICES LLC
By: /s/ Xxxxx Xxxxxx
-----------------------
Name: Xxxxx Xxxxxx
Title: President, CRM
EDS RESOURCE MANAGEMENT
CORPORATION
By: /s/ Xxxxx Xxxxxx
-----------------------
Name: Xxxxx Xxxxxx
Title: President, CRM
55
