EXHIBIT 10.14
EXECUTION VERSION
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ASSET PURCHASE AGREEMENT
BY AND AMONG
SANTA ACQUISITION CORPORATION,
AUTOMOTIVE LEASE GUIDE (ALG), LLC,
AUTOMOTIVE LEASE GUIDE (ALG) CANADA, INC.,
XXXXXXX X. XXXXX,
XXXX X. XXXXX,
AND
XXX XXXXXXXX
Dated as of May 25, 2005
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TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS ................................................... 1
1.01. Definitions ...................................................... 1
ARTICLE II - PURCHASE AND SALE ............................................ 9
2.01. Purchase and Sale ................................................ 9
2.02. Excluded Assets .................................................. 10
2.03. Assumption of Liabilities ........................................ 11
2.04. Excluded Liabilities ............................................. 11
2.05. Assignment of Contracts and Rights ............................... 12
2.06. Purchase Price ................................................... 13
2.07. Closing .......................................................... 16
2.08. Allocation of Purchase Price ..................................... 18
2.09. Closing Statement; Working Capital Adjustment .................... 18
2.10. 2004 EBITDA Calculation .......................................... 19
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLER
PARTIES ................................................................ 20
3.01. Corporate Existence and Power .................................... 20
3.02. Corporate Authorization .......................................... 20
3.03. Capital Stock and Securities ..................................... 21
3.04. Governmental Authorization; Consents ............................. 21
3.05. Non-Contravention ................................................ 21
3.06. Financial Statements ............................................. 22
3.07. Absence of Certain Changes ....................................... 22
3.08. Personal Property ................................................ 24
3.09. Real Property .................................................... 25
3.10. Sufficiency of Purchased Assets .................................. 25
3.11. Title to Purchased Assets ........................................ 25
3.12. No Undisclosed Liabilities ....................................... 25
3.13. Litigation ....................................................... 26
3.14. Material Contracts ............................................... 26
3.15. Technology and Intellectual Property ............................. 27
3.16. Insurance Coverage ............................................... 29
3.17. Compliance with Laws ............................................. 29
3.18. Employees ........................................................ 30
3.19. Environmental Compliance ......................................... 33
3.20. Customers ........................................................ 33
3.21. Products Warranties; Defects; Liabilities ........................ 34
3.22. Transactions with Affiliates; Intercompany Arrangements .......... 34
3.23. Books and Records ................................................ 34
3.23. Finders' Fees .................................................... 35
3.24. Representations Complete ......................................... 35
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ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER ...................... 35
4.01. Organization and Existence ....................................... 35
4.02. Corporate Authorization .......................................... 35
4.03. Governmental Authorization ....................................... 35
4.04. Non-Contravention ................................................ 36
4.05. Litigation ....................................................... 36
4.06. Representations Complete ......................................... 36
ARTICLE V - COVENANTS OF THE SELLER PARTIES ............................... 36
5.01. Confidentiality .................................................. 36
5.02. Trademarks; Tradenames ........................................... 36
5.03. Noncompete ....................................................... 36
5.04. Non-Solicitation ................................................. 37
5.05. Audit Assistance ................................................. 38
5.06. Assignment and Novation of Consent Pending Contracts ............. 38
ARTICLE VI - COVENANTS OF BUYER ........................................... 39
6.02. Access ........................................................... 39
6.02. Confidentiality .................................................. 39
ARTICLE VII - COVENANTS OF BOTH PARTIES ................................... 39
7.01. Further Assurances ............................................... 39
7.02. Certain Filings .................................................. 40
7.03. Public Announcements ............................................. 40
ARTICLE VIII - TAX MATTERS ................................................ 40
8.01. Tax Matters ...................................................... 40
8.02. Tax Cooperation; Allocation of Taxes ............................. 41
ARTICLE IX - EMPLOYEE MATTERS ............................................. 43
9.01. Employees ........................................................ 43
9.02. Employee Obligations ............................................. 43
9.03. COBRA ............................................................ 44
9.04. Vesting .......................................................... 44
9.05. No Third Party Beneficiaries ..................................... 44
9.06. Plant Closing Laws ............................................... 44
9.07. Unemployment Insurance ........................................... 44
ARTICLE X - SURVIVAL; INDEMNIFICATION; SET-OFF ............................ 44
10.01. Survival ........................................................ 44
10.02. Indemnification by the Seller Parties ........................... 45
10.03. Buyer Indemnification Obligations ............................... 46
10.04. Indemnification Procedures ...................................... 46
10.05. Methods of Payment; Limitations ................................. 47
10.06. Buyer Set-Off Right ............................................. 48
10.07. Treatment ....................................................... 49
10.08. Seller Party Representative; Power of Attorney .................. 49
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ARTICLE XI - MISCELLANEOUS ................................................ 49
11.01. Notices ......................................................... 49
11.02. Amendments; No Waivers .......................................... 51
11.03. Expenses ........................................................ 51
11.04. Assignability; Successors and Assigns ........................... 51
11.05. Governing Law; Jurisdiction ..................................... 52
11.06. Counterparts; Effectiveness ..................................... 52
11.07. Entire Agreement ................................................ 52
11.08. Captions ........................................................ 52
11.09. Rules of Construction; Etc. ..................................... 52
11.10. Time. ........................................................... 53
EXHIBITS
Exhibit A - Form of Aiken Consulting Agreement
Exhibit B - Form of Aiken Unfair Competition and Nonsolicitation Agreement
Exhibit C - Form of Xxxxx Employment Agreement
Exhibit D - Form of Xxxxx Unfair Competition and Nonsolicitation Agreement
Exhibit E - Form of Sundaram Employment Agreement
Exhibit F - Form of Sundaram Unfair Competition and Nonsolicitation Agreement
Exhibit G - Form of Note
Exhibit H - Form of Xxxx of Sale, Assignment and Assumption Agreement
Exhibit I - Form of Domain Name Assignment
Exhibit J - Form of Trademark Rights Assignment
Exhibit K - Form of Copyright Assignment
Exhibit L - Form of Subcontract Agreement
Exhibit M - Form of Guaranty
SCHEDULES
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Schedule 2.02(f) Consent Pending Contracts
Schedule 2.02(i) Other Excluded Assets
Schedule 3.03(a) Capital Stock and Equity Securities
Schedule 3.03(b) Outstanding Obligations
Schedule 3.03(c) Subsidiaries
Schedule 3.04(b) Required Consents
Schedule 3.06(a) Financial Statements
Schedule 3.06(b) Internal Controls
Schedule 3.07 Absence of Certain Changes
Schedule 3.09(b) Leases
Schedule 3.12 Undisclosed Liabilities
Schedule 3.13 Litigation
Schedule 3.14 Material Contracts
Schedule 3.15 Business's Intellectual Property
Schedule 3.16 Insurance
Schedule 3.17(e) Permits
Schedule 3.18(a) Employees
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Schedule 3.18(b) Consultants
Schedule 3.18(d) Employee Manuals and Handbooks
Schedule 3.18(e) Termination
Schedule 3.18(f) Severance
Schedule 3.18(j) Seller Entity Employee Plans
Schedule 3.18(l) Terminated Employees and Contingent Workers
Schedule 3.22 Transactions with Affiliates; Intercompany Arrangements
Schedule 8.01(c) Tax Liability
Schedule 9.01 Transferred Employees
[Remainder of Page Intentionally Left Blank]
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of May 25, 2005,
is by and among Santa Acquisition Corporation, a Delaware corporation ("Buyer"),
Automotive Lease Guide (alg), LLC, a California limited liability company ("ALG,
LLC"), Automotive Lease Guide (alg) Canada, Inc., a California corporation
("ALG, Inc." and together with ALG, LLC, the "Seller Entities"), Xxxxxxx X.
Xxxxx ("Xxxxx"), Xxxx X. Xxxxx ("Xxxxx") and Xxx Xxxxxxxx ("Sundaram," and
together with Aiken and Xxxxx, the "Principals"). The Principals and the Seller
Entities are referred to herein together as the "Seller Parties." Buyer and
Seller Parties are referred to herein together as the "Parties."
RECITALS:
WHEREAS, the Seller Entities are engaged in the Business (as defined
herein);
WHEREAS, the Seller Parties desire to sell, and Buyer desires to purchase,
certain assets used in the Business on the terms and conditions set forth in
this Agreement; and
WHEREAS, capitalized terms used and not otherwise defined herein shall
have the meanings set forth in Article I hereof.
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants, agreements, terms and conditions
contained herein, the Parties hereto do hereby agree as follows:
DEFINITIONS
ARTICLE I
1.01. DEFINITIONS. (a) As used in this Agreement and the Exhibits and
Schedules delivered pursuant to this Agreement, the following definitions shall
apply:
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person.
"Action" means any action, complaint, petition, investigation, suit or
other proceeding, whether civil or criminal, in Law or equity, or before any
arbitrator or Governmental Entity.
"Aiken Consulting Agreement" means the Consulting Agreement, in the form
attached hereto as Exhibit A, between Aiken and Buyer dated the date hereof.
"Aiken Unfair Competition and Nonsolicitation Agreement" means the Unfair
Competition and Nonsolicitation Agreement, in the form attached hereto as
Exhibit B, executed by Aiken dated the date hereof.
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"ALG/Chrome Revenue Base" means the combined 2004 revenue of Chrome (the
"2004 Chrome Revenue") and the 2004 combined revenue of the Seller Entities (the
"2004 Seller Revenue") obtained from the audited financial statements of Chrome
and the combined audited financial statements of the Seller Entities for the
year ended December 31, 2004.
"ALG/Chrome Revenues" means the revenues derived from the sales and/or
licensing of (i) ALG Products and Chrome Products by Buyer and all Affiliates of
Buyer and (ii) any New Product(s), in each case, as determined in accordance
with GAAP.
"ALG Products" means Santa LLC's residual value data for new and used
leased automobiles and guidebooks and consulting services related thereto.
"Ancillary Agreements" means the Aiken Consulting Agreement, the Aiken
Unfair Competition and Nonsolicitation Agreement, the Xxxxx Employment
Agreement, the Xxxxx Unfair Competition and Nonsolicitation Agreement, the
Sundaram Employment Agreement, the Sundaram Unfair Competition and
Nonsolicitation Agreement, the Subcontract Agreement, the Guaranty and any other
additional agreements to be entered into simultaneously with this Agreement.
"Applicable Percentage" means 10% until such time, if ever, as Buyer sells
to a third party acquirer the Chrome Product line as contemplated in Section
2.06(c)(ii)(C), and thereafter shall be 15%.
"Balance Sheet" means the unaudited combined balance sheet of the Seller
Entities as of March 31, 2005 found on Schedule 3.06.
"Balance Sheet Date" means March 31, 2005.
"Xxxxx Employment Agreement" means the Employment Agreement, in the form
attached hereto as Exhibit C, between Xxxxx and Buyer dated the date hereof.
"Xxxxx Unfair Competition and Nonsolicitation Agreement" means the Unfair
Competition and Nonsolicitation Agreement, in the form attached hereto as
Exhibit D, executed by Xxxxx dated the date hereof.
"Business" means the business conducted by the Seller Entities as of the
Closing Date, including the provision of residual values for leased automobiles,
analytical data products and consultation with respect to residual values for
leased automobiles throughout the United States (including each county in the
State of California) and in Canada through, inter alia, the provision of
residual guides, portfolio risk analysis, portfolio securitization valuations,
consulting and special studies, development and provision of data analysis
products and providing basis for residual value insurance.
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"Business's Intellectual Property" means all Intellectual Property that is
owned or held by or on behalf of the Seller Entities for use, or that is being,
and/or has been, used, or is currently under development for use, in the
Business as it has been or is currently conducted.
"Buyer Business" means an Internet-based, business-to-business, e-commerce
system, which enables (a) Dealers to do one or more of the following: (i)
directly route/transmit credit application data with respect to a retail
installment sales contract or lease to one or more Lenders and receive credit
decisions with respect to such credit application data, (ii) obtain Contract
status, pay-off quotes, prospecting reports, rates, programs and other
information related to the items set forth in this clause (ii) from one or more
Lenders, (iii) filter and route credit applications to one or more Lenders,
and/or (iv) obtain other information on products and services one or more
Lenders offer to Dealers; (b) the eContracting Service; (c) DeskLink; (d)
Dealers to directly receive and/or generate reports from one or more Lenders
related to any of the foregoing; (e) one or more Lenders to pass credit
applications with respect to Vehicles between and/or among themselves; (f) the
aggregation of data derived from one or more Lenders and Dealers and the sale
and distribution of such data to third parties; and/or (g) the sale of menu
products and related items to Dealers.
"Chrome" means Chrome Systems Corporation.
"Chrome Products" means the products and services offered by Chrome
relating to the collection and dissemination of vehicle configuration to the
automotive industry.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any agreement, arrangement, bond, commitment, franchise,
indemnity, indenture, instrument, lease, license, insurance policy or
understanding, whether or not in writing.
"Dealer" means a Vehicle dealer in the United States.
"Designated Account" means the bank account of a Seller Entity to be
designated by the Seller Party Representative, by written notice to Buyer not
later than two (2) business days prior to the Closing Date, and thereafter, the
applicable Post-Closing Payment Date.
"DeskLink" means a product or service (a) which enables a Dealer, a Lender
or consumer to compare with respect to Vehicles available retail, lease and
balloon programs from Multiple Lenders; and/or (b) through which Multiple
Lenders residual value data, rates, and/or program data are licensed or
subscribed to with respect to Vehicles.
"2004 EBITDA" means (a) the net income as reflected in the audited
combined financial statements of the Seller Entities for the year ended December
31, 2004, excluding any income, expense or other items of or relating to Xxxx &
Fess Forecasts GmbH or ALG, LLC's interest
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therein, plus (b) an amount equal to the sum of the interest expense, income
taxes, depreciation, amortization and guaranteed payments/bonuses to members (in
excess of $450,000) as reflected in such audited combined financial statements.
"eContracting Service" means an Internet-based, business-to-business,
e-commerce system, which enables one or more (a) Lenders to allow Dealers to
access, process, complete and source certain electronic Vehicle retail and lease
Contracts and ancillary documents related thereto on-line and transmit such
Contracts and documents to one or more Lenders, (b) Lenders to receive
electronic "authoritative" copies (as such term is used in Section 9-105 of the
New York Uniform Commercial Code (the "NY UCC") or any successor provision
thereto or any substantially similar provision under applicable Law) of Vehicle
retail and lease Contracts, and/or (c) Persons or entities which control
electronic "authoritative copies" (as such term is used in Section 9-105 of the
NY UCC or any successor provision thereto) of Vehicle retail and lease Contracts
for one or more Lenders to access, view, store, add, delete, replace, track,
pool, control, transfer, convert to a legally binding paper copy, print and/or
restore such electronic "authoritative" copies of Vehicle retail and lease
Contracts in a controlled system.
"Employment Agreements" means the Aiken Consulting Agreement, the Aiken
Unfair Competition and Nonsolicitation Agreement, the Xxxxx Employment
Agreement, the Xxxxx Unfair Competition and Nonsolicitation Agreement, the
Sundaram Employment Agreement and the Sundaram Unfair Competition and
Nonsolicitation Agreement.
"Equity Securities" means any capital stock or other equity interest or
any securities convertible into or exchangeable for capital stock or any other
rights, warrants or options to acquire any of the foregoing securities.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Final Order" means a determination by a court or arbitrator that is final
and unappealable.
"GAAP" means generally accepted accounting principles in effect in the
United States as of the date hereof.
"Governmental Entity" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government, whether federal, state or local,
domestic or foreign.
"Guaranty" means the Guaranty, in the form attached hereto as Exhibit M.
by DealerTrack Holdings, Inc. in favor of the Seller Parties dated of even date
herewith.
"Income Tax" means any Federal, state, local or foreign income, franchise
or similar Tax and in each instance any interest, penalties or additions to tax
attributable to such Tax.
"Income Tax Return" means any Tax Return relating to Income Taxes.
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"Indebtedness" means the outstanding principal balance of, and any accrued
and unpaid interest, fees and other amounts (including any prepayment penalties)
payable by the Seller Entities to any bank or other financial institution or
other unaffiliated lender (including any lessor on a capital lease), with
respect to any borrowings of a Seller Entity (including bank overdrafts) as of
the date hereof (not including any trade payables), the outstanding principal
balance of, and any accrued and unpaid interest, fees and other amounts payable
on, any Seller Entity's notes payable and any other obligations to any member,
former member, shareholder, former shareholder or any Affiliate of a Seller
Entity as of the date hereof, and either Seller Entity's obligations, contingent
or otherwise, under factoring arrangements entered into by either Seller Entity.
"Intellectual Property" means all proprietary rights in and to all
tangible or intangible information and materials, including:
(a) (i) all inventions (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereon, and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, divisions, revisions, extensions and
re-examinations thereof, (ii) all trademarks, services marks, trade dress,
logos, trade names, domain names, and corporate names, together with all
translations, adaptations, derivations and combinations thereof and including
all goodwill associated therewith, and all applications, registrations and
renewals in connection therewith, (iii) all copyrights and all applications,
registrations and renewals in connection therewith, (iv) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production process and
techniques, methods, schematics, technology, technical data, designs, drawings,
flowcharts, block diagrams, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals), and (v)
all software and firmware (including data, databases and related documentation);
(b) all documents, records and files relating to design, end user
documentation, manufacturing, quality control, sales, marketing or customer
support for, and tangible embodiments of, all intellectual property described
herein; and
(c) all licenses, agreements and other rights in any third party product
or any third party intellectual property described in (a) and (b) above other
than any "off-the-shelf third party software or related intellectual property.
"Law" means any constitutional provision, statute or other law, rule,
regulation, ordinance or interpretation of any Governmental Entity and any
Order.
"Leased Real Property" means all Real Property that is leased or subleased
by the Seller Entities.
"Lender" means a financial institution or other financing source and
"Multiple Lenders" means two (2) or more unaffiliated Lenders.
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"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, restriction or encumbrance of any kind in respect of
such asset.
"Material Adverse Change" means a material adverse change in the business,
assets, financial condition, results of operations or prospects of the Seller
Entities or the Business taken as a whole. None of the following shall be deemed
to constitute, and none of the following shall be taken into account in
determining whether there has been a Material Adverse Change or any event,
occurrence, development or state of circumstances or facts which could
reasonably be expected to result in a Material Adverse Change: any change,
event, occurrence, development, circumstance or fact arising primarily from or
relating primarily to (i) changes attributable to the industry in which the
Seller Entities compete generally but which do not affect the Business in a
materially different manner than others in the same industry, (ii) general
economic conditions or (iii) national or international political hostilities.
"Material Adverse Effect" means a material adverse effect on the business,
assets, financial condition, results of operations or prospects of the Seller
Entities or the Business taken as a whole.
"New Product Additional Revenue" means, with respect to a New Product(s),
the New Product Annual Revenue multiplied by a fraction equal to the number of
days remaining in such Performance Year divided by 365.
"New Product Annual Revenue" means, with respect to New Product(s), the
New Product Seller's total revenue earned from the sale of such New Product(s)
during the 12 full calendar months immediately preceding the calendar month
during which Buyer (or its Affiliate) acquires the New Product(s).
"Order" means any decree, injunction, judgment, order, ruling, assessment
or writ of any Governmental Entity.
"Person" means an individual, corporation, partnership, association, trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
"Post-Closing Tax Period" means any Tax period (or portion thereof)
beginning after the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion thereof) ending
on or before the Closing Date.
"to the Seller Parties' Knowledge" and words of similar import means the
knowledge of each of the Principals and the knowledge of each of the Seller
Entities' respective officers, directors or members.
"Seller Party Representative" means Xxxxx, subject to the provisions of
Section 10.08.
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"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company or other organization, whether
incorporated or unincorporated, of which such Person or any other subsidiary of
such Person beneficially owns a majority of the voting or Equity Securities.
"Sundaram Employment Agreement" means the Employment Agreement, in the
form attached hereto as Exhibit E, between Sundaram and Buyer dated the date
hereof.
"Sundaram Unfair Competition and Nonsolicitation Agreement" means the
Unfair Competition and Nonsolicitation Agreement, in the form attached hereto as
Exhibit F, executed by Sundaram dated the date hereof.
"Tax" means any Federal, state, local or foreign net income, alternative
or add-on minimum, gross income, gross receipts, sales, use, value-added, ad
valorem, franchise, capital, paid-up capital, profits, lease, service, transfer,
greenmail, license, withholding, estimated, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, customs duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever (including liability for Taxes imposed on
another Person, whether incurred or borne as a transferee or successor or by
contract or otherwise), together with any interest or any penalty, addition to
tax or additional amount imposed by any governmental authority (domestic or
foreign) responsible for the imposition of any such tax.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Transfer Taxes" means all federal, state, local and foreign sales, use,
transfer, recording, stamp duty, value-added or similar Taxes that may be
imposed in connection with the transfer of the Purchased Assets or assumption of
the Assumed Liabilities, together with any interest, additions to Tax or
penalties with respect thereto and any interest in respect of such additions to
Tax or penalties.
"Vehicle" means an automobile, truck, snowmobile, recreational vehicle,
motorcycle, boat or other watercraft or commercial vehicle.
"Working Capital" means, in the aggregate with respect to the Seller
Entities, the total combined current assets included in the Purchased Assets
less the total current liabilities included in the Assumed Liabilities.
[Remainder of Page Intentionally Left Blank]
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(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Accounting Arbiter 2.06
Accounting Judge 2.10
Accounting Referee 2.09
Additional New Product 2.06
Revenue Amount
Agreement Preamble
Aiken Preamble
Aggregate Indemnification 10.05
Amount
ALG, Inc. Preamble
ALG, LLC Preamble
Apportioned Obligation 8.02
Assignment and Assumption 2.07
Agreement
Assumed Contracts 2.01
Assumed Liabilities 2.03
Xxxx of Sale and Assignment 2.07
Xxxxx Preamble
Buyer Preamble
Bundled Products 2.06
Buyer Group 10.01
Buyer's Calculation 2.06
Closing 2.07
Closing Date 2.07
Closing Statement 2.09
Closing Statement Objection 2.09
Notice
Confidentiality Agreement 5.01
Consent Pending Contracts 2.02
Contingent Worker 3.18
2004 EBITDA Statement 2.10
2004 EBITDA Statement 2.10
Objection Notice
Employee Plan 3.18
Environmental Laws 3.19
Environmental Liabilities 3.19
ERISA 3.18
Excluded Assets 2.02
Excluded Liabilities 2.04
Expiration Date 10.01
Final Assignment Date 5.06
Final Order 5.03
Financial Statements 3.06
Hazardous Materials 3.19
IRS 8.02
Indemnified Party 10.04
Indemnitors 10.02
Interested Person 3.22
Leases 3.09
Losses 10.02
New Product 2.06
New Product Seller 2.06
Non-ALG/Chrome Product 2.06
Note 2.06
Notice of Claim 10.04
Objection Notice 2.06
Parties Preamble
Performance Amount 2.06
Performance Payments 2.06
Performance Payment Term 2.06
Performance Payment Year 2.06
Permits 3.17
Permitted Liens 3.08
Permitted Real Estate Liens 3.08
Personal Property 3.08
Plant Closing Law 3.18
Post-Closing Payment Dates 2.06
Post-Closing Tax Period 8.01
Pre-Closing Tax Period 8.01
Principals Preamble
Publicly Available Software 3.15
Purchased Assets 2.01
Purchase Price 2.06
Real Property 2.01
Required Consent 3.04
Seller Entities Preamble
Seller Entity Employee Plan 3.18
Seller Parties Preamble
Subcontract Agreement 5.06
Sufficient Net Worth 2.06
Sundaram Preamble
Threshold Amount 10.05
Transferred Employee 9.01
WARN Act 3.18
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ARTICLE II
PURCHASE AND SALE
2.01. PURCHASE AND SALE. Upon the terms and subject to the conditions of
this Agreement, Buyer agrees to purchase (or to cause its designated Affiliate
or Affiliates to purchase) from the Seller Entities, and the Seller Entities
agree to sell, transfer, assign and deliver, or cause to be sold, transferred,
assigned and delivered, to Buyer (or its designated Affiliate or Affiliates) at
Closing all of their right, title and interest in, to and under the assets,
properties and business, other than the Excluded Assets, of every kind and
description, wherever located, real, personal or mixed, tangible or intangible,
owned, held or used in the conduct of the Business by the Seller Parties as the
same shall exist on the Closing Date, including all assets shown on the Balance
Sheet and not disposed of in the ordinary course of business since the Balance
Sheet Date, and all assets of the Business acquired by the Seller Entities
between the Balance Sheet Date and the Closing Date (the "Purchased Assets"),
and including all right, title and interest of the Seller Entities in, to and
under such of the foregoing as are more specifically described below:
(a) all transferable licenses, permits or other governmental
authorizations affecting, or relating in any way to, the Business;
(b) all personal property and interests therein used by the Seller
Entities or held by the Seller Entities for use in connection with the Business,
including machinery, equipment, furniture, office equipment, communications
equipment, vehicles, storage tanks, spare and replacement parts, fuel and other
tangible property;
(c) all leases and subleases of real property used by the Seller
Entities or held by the Seller Entities for use in connection with the Business,
in each case, together with all buildings, fixtures, and improvements erected
thereon, including those properties listed on Schedule 3.09(b) (the "Real
Property");
(d) all rights under all contracts, agreements, leases, licenses,
commitments, sales and purchase orders and other instruments to which either of
the Seller Entities is a party or by which either of the Seller Entities is
bound in connection with the Business except for the Consent Pending Contracts,
including the items listed on Schedule 3.14 (collectively, the "Assumed
Contracts");
(e) all prepaid expenses and deposits used by the Seller Entities or
held by the Seller Entities for use in connection with the Business, including
ad valorem taxes, leases and rentals;
(f) all of the Seller Entities' rights, claims, credits, causes of
action or rights of set-off against third parties relating to the Business,
including unliquidated rights under manufacturers' and vendors' warranties;
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(g) all proceeds received by any of the Seller Entities (including
judgments, indemnity payments, amounts received in settlement and payments under
any insurance policies) in respect of any Action relating to the Business to
which any Seller Entity is a party in any capacity that is based upon or arises
out of any event, dispute or other occurrence prior to the Closing Date;
(h) all of the Business's Intellectual Property, including the items
listed on Schedule 3.15:
(i) all books, records, files and papers, whether in hard copy or
computer format used by the Seller Entities or held by the Seller Entities for
use in connection with the Business and all rights related thereto, including
engineering information, sales and promotional literature, manuals and data,
sales and purchase correspondence, lists of present and former suppliers, lists
of present and former customers, mailing lists, marketing materials, advertising
matter, personnel and employment records, and all information relating to Taxes
imposed on or with respect to the Business;
(j) all goodwill associated with the Business or the Purchased
Assets, together with the right to represent to third parties that Buyer is the
successor to the Business; and
(k) the Seller Entities' cash and all other assets relating to the
Business, which for the avoidance of doubt cash shall not be less than zero and
shall exclude checks written in excess of available cash balance, which shall be
deemed Excluded Liabilities.
2.02. EXCLUDED ASSETS. Buyer expressly understands and agrees that the
following assets and properties of the Seller Entities (the "Excluded Assets")
shall be excluded from the Purchased Assets:
(a) the Purchase Price and the Seller Parties' rights under this
Agreement;
(b) the Seller Entities' articles of incorporation, articles of
organization, operating agreement, corporate seals, minute books, stock books
and other corporate or comparable organizational records having to do with the
organization and capitalization of the Seller Entities and all Income Tax
Returns and other records; provided, however, that copies of such Tax Returns
shall be provided to Buyer at the Closing, if such copies have not been
previously provided to Buyer, and copies of such other materials shall be
provided to Buyer upon request;
(c) any Equity Securities held by any Seller Entity of (i) Buyer or
its Affiliates, including all shares of DealerTrack Holdings, Inc.'s Series A-l
Preferred Stock and Series C Preferred Stock and all shares of DealerTrack
Holdings, Inc.'s Common Stock into which such shares are convertible, and (ii)
Xxxx & Fess Forecasts GmbH;
(d) all of the Seller Entities' insurance policies, contracts,
credits, reserves and other sources of funding with respect to any Seller Entity
Employee Plans; and
10
(e) all employment agreements to which either Seller Entity is a
party;
(f) all rights under the contracts, agreements, leases, licenses,
commitments, sales and purchase orders and other instruments to which either of
the Seller Entities is a party or by which either of the Seller Entities is
bound in connection with the Business and listed on Schedule 2.02(f) (the
"Consent Pending Contracts"):
(g) all rights, claims, causes of action and demands of any nature
available to the Seller Entities and all proceeds received by any of the Seller
Entities (including judgments, indemnity payments, amounts received in
settlement and payments under any insurance policies) in respect of any Excluded
Assets or Excluded Liabilities;
(h) all accounts, notes and other receivables used by the Seller
Entities or held by the Seller Entities for use in connection with the Business;
and
(i) those items set forth on Schedule 2.02(i).
2.03. ASSUMPTION OF LIABILITIES. Upon the terms and subject to the
conditions of this Agreement, Buyer agrees, effective at the Closing, to assume
the following liabilities (the "Assumed Liabilities"):
(a) all current liabilities accrued on the Balance Sheet and not
discharged as of the Closing Date;
(b) all current liabilities arising out of or relating primarily to
the Business and incurred in the ordinary course of business since the Balance
Sheet Date and reflected on the Closing Statement, including accrued warranty
claims and expenses, trade and other payables and payroll and other accrued
expenses;
(c) all liabilities and obligations of the Seller Entities arising
under the Assumed Contracts (other than liabilities or obligations attributable
to any failure by the applicable Seller Entity to comply with the terms thereof
or otherwise incurred by the Seller Entities other than in the ordinary course
of business of the Business prior to the Closing Date); and
(d) Each Seller Entity's obligations to provide vacation time, sick
time, vacation pay and sick pay to the Transferred Employees, but only to the
extent incurred in the ordinary course of business of the Business and reflected
on the Closing Statement.
2.04. EXCLUDED LIABILITIES. Notwithstanding any provision in this
Agreement or any other writing to the contrary, Buyer is assuming only the
Assumed Liabilities and is not assuming any other liability or obligation of the
Seller Parties or any Affiliate of the Seller Parties (or any predecessor owner
of all or part of their respective business and assets) of whatever nature
whether presently in existence or arising or asserted hereafter. All such other
liabilities and obligations shall be retained by and remain obligations and
liabilities of the Seller Parties or their respective Affiliates (all such
liabilities and obligations not being assumed being
11
herein referred to as the "Excluded Liabilities"). Without limiting the
foregoing, none of the following shall be Assumed Liabilities for the purposes
of this Agreement:
(a) any and all liabilities and obligations of the Seller Parties
for Taxes (including any Taxes that arise as a result of the transactions
contemplated by this Agreement);
(b) except to the extent provided in Section 2.03(b) and (e) and
Article IX, any liabilities or obligations relating to employee benefits or
compensation arrangements existing as of the end of the day on the day
immediately preceding the Closing Date, including any liabilities or obligations
under any of Seller Entity Employee Plans listed on Schedule 3.18(j):
(c) any Environmental Liabilities;
(d) any liability or obligation relating to an Excluded Asset;
(e) any liability or obligation not incurred in the ordinary course
of the Business;
(f) all Indebtedness of the Seller Entities; and
(g) all liabilities of the Seller Entities resulting from Actions
and Orders arising out of or related to the conduct of the Business prior to the
Closing Date.
2.05. ASSIGNMENT OF CONTRACTS AND RIGHTS. Anything in this Agreement to
the contrary notwithstanding, this Agreement shall not constitute an agreement
to assign any Purchased Asset or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment thereof, without
consent of a third party thereto, would constitute a breach or other
contravention thereof or in any way adversely affect the rights of Buyer or the
Seller Parties party thereto thereunder. The Seller Parties and Buyer will use
their best efforts (but without any required payment of money to such third
parties by either the Seller Parties or Buyer) to obtain the consent of the
other parties to any such Purchased Asset or claim or right or any benefit
arising thereunder for the assignment thereof to Buyer as Buyer may request. If
such consent is not obtained, or if an attempted assignment thereof would be
ineffective or would adversely affect the rights of the Seller Parties
thereunder so that Buyer would not in fact receive all such rights, the Seller
Parties and Buyer will cooperate in a mutually agreeable arrangement under which
Buyer would obtain the benefits and assume the obligations thereunder in
accordance with this Agreement, including subcontracting, sub-licensing, or
subleasing to Buyer, or under which the Seller Parties would enforce for the
benefit of Buyer, with Buyer assuming such Seller Parties' obligations, any and
all rights of the Seller Parties against a third party thereto. Each Seller
Entity will promptly pay to Buyer when received all monies received by such
Seller Entity under any Purchased Asset or any claim or right or any benefit
arising thereunder, except to the extent the same represents an Excluded Asset.
Notwithstanding the foregoing, each Seller Entity will promptly pay to Buyer all
payments received by such Seller Entity in accordance with the Subcontract
Agreement.
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2.06. PURCHASE PRICE. (a) Subject to the terms and conditions set forth in
this Agreement, Buyer agrees to acquire the Purchased Assets from the Seller
Entities in exchange for (i) $39,222,623, (ii) the Performance Payments and
(iii) the assumption of the Assumed Liabilities. (The items described in (i),
(ii) and (iii) above, in the aggregate, the "Purchase Price").
(b) The Purchase Price shall be payable as follows:
(i) $33,000,000 shall be payable at the Closing by means of
Buyer's deposit of a cash payment in such amount in the Designated Account;
(ii) $750,000 (in each case, as such amount may be adjusted
pursuant to Section 10.06) shall be payable within 10 days following each of the
first, second, third, fourth and fifth anniversaries of the Closing Date (each,
a "Post-Closing Payment Date"). Each such payment shall be made by means of
Buyer's deposit of a cash payment in the required amount into the Designated
Account no later than the applicable Post-Closing Payment Date;
(iii) $672,623 in cash shall be payable on the earlier to
occur of (A) an initial public offering of the common stock of DealerTrack
Holdings, Inc. or any of its Affiliates and (B) December 31, 2005;
(iv) a promissory note (the "Note") in the principal amount of
$1.8 million, substantially in the form of Exhibit G;
(v) Performance Payment(s), if any, shall be payable in cash
by means of Buyer's deposit of a cash payment in the Designated Account in such
amount(s) and at such time(s) as set forth in Section 2.06(c) below; and
(vi) as of the Closing Date, Buyer shall assume the Assumed
Liabilities.
(c) The Seller Entities shall be eligible to receive additional
payments (the "Performance Payments") as follows:
(i) Buyer shall pay the Seller Entities the Applicable
Percentage of the ALG Chrome Revenues in excess of the ALG/Chrome Revenue Base
for each calendar year ending December 31, 2005, 2006, 2007, 2008 and 2009 (each
such year, a "Performance Payment Year"); provided, however, that cumulative
Performance Payments under this Section 2.06(c) shall not exceed $11,250,000.
For purposes of this Section 2.06(c), the period commencing on the day
immediately following the Closing Date and ending on December 31, 2009 shall be
referred to as the "Performance Payment Term."
(ii) (A) If during the Performance Payment Term, Buyer or any
Affiliate of Buyer acquires new data products that are managed by the entity
which controls the sale of ALG Products or Chrome Products (each, a "New
Product") from a third party (a "New
13
Product Seller") then the ALG/Chrome Revenue Base (x) for the then current
Performance Payment Year shall be increased by New Product Additional Revenue,
and (y) for each subsequent Performance Payment Year during the Performance
Payment Term, shall be increased by the New Product Annual Revenue.
(B) If during the Performance Payment Term, a customer
acquires a product which is included in ALG/Chrome Revenues (an "ALG/Chrome
Product") (i) without a corresponding contractual obligation to pay Buyer
specifically for such product or at a price which is less than Buyer's
then-current customary price for such product and (ii) the customer acquires
such product as part of a bundle of products or contingent upon or in connection
with the purchase of other products offered by Buyer or its Affiliates ("Bundled
Products") which are not included in ALG/Chrome Revenues (a "Non-ALG/Chrome
Product"), then the following shall apply: For purposes of calculating
ALG/Chrome Revenues, ALG/Chrome Revenues shall be deemed to include the
percentage of revenue from the sale of Bundled Products equal to the product of
(x) the price of the ALG/Chrome Product on a stand-alone basis divided by the
sum of the price of the (1) Non-ALG Chrome Product on a stand-alone basis and
(2) ALG/Chrome Product on a stand-alone basis multiplied by (y) the price of the
Bundled Product.
(C) If during the Performance Payment Term, Buyer or any
Affiliate of Buyer disposes of the Chrome Products and/or the New Product(s), if
any, then, from the effective date of the consummation of such disposition
through the end of the Performance Payment Term, the ALG/Chrome Revenue Base
shall be reduced as follows:
(1) With respect to the Performance Payment Year
in which the sale of such product has occurred, the ALG/Chrome Revenue Base
shall be reduced by the product of (x) 2004 Chrome Revenue (in case of a sale of
Chrome Products) and New Product Annual Revenue (in case of a sale of a New
Product) multiplied by (y) a fraction equal to the number of days remaining in
the Performance Payment Year divided by 365;
(2) For each subsequent Performance Payment Year,
the ALG/Chrome Revenue Base shall be reduced for the full amount described in
(x), as applicable based on which product has been disposed of; and
(3) The Applicable Percentage shall be 10% for
that part of the Performance Year prior to such disposition and 15% thereafter.
(D) If during the Performance Payment Term, Buyer or any
Affiliate of Buyer sells or otherwise disposes of all or substantially all of
the ALG Products, and the purchaser thereof (or its ultimate parent if such
parent is responsible for such obligation) has a stockholder's equity
(calculated at the time of the consummation of such sale) equal to or greater
than that of Buyer ("Sufficient Net Worth") and agrees to assume the obligations
of Buyer pursuant to this Section 2.06(c), then Buyer shall, upon the effective
date of the consummation of such sale or other disposition, have no further
obligations to Seller Entities pursuant to this Section 2.06(c). If such
purchaser does not have Sufficient Net Worth but agrees to assume the
obligations of Buyer pursuant to this Section 2.06(c), Buyer agrees to indemnify
14
Seller Entities to the extent that such purchaser fails to pay any required
Performance Payment within 60 days of a Final Order requiring such payment. If
such purchaser does not agree to assume the obligations of Buyer pursuant to
this Section 2.06(c), Buyer shall, within 90 days of the date of consummation of
such sale or other disposition, deliver to Seller Entities a payment in an
amount equal to $11,250,000, less the aggregate amount of all Performance
Amounts paid pursuant to this Section 2.06(c) prior to such date.
(iii) Within 90 days following each of the calendar years
ending December 31, 2005, 2006, 2007, 2008 and 2009, Buyer shall deliver to the
Seller Party Representative Buyer's calculation (the "Buyer's Calculation") of
the amount due based on the ALG/Chrome Revenues (each, a "Performance Amount")
for the preceding calendar year. Buyer shall provide Seller Party Representative
with such information reasonably related to the determination of the ALG/Chrome
Revenues and the calculation of the Performance Amount as the Seller Party
Representative may reasonably request.
(iv) If the Seller Party Representative disagrees with Buyer's
Calculation, the Seller Party Representative may, within 30 days after delivery
of Buyer's Calculation, deliver a notice to Buyer disagreeing with any portion
of Buyer's Calculation for such year (the "Objection Notice"). The Objection
Notice shall specify in reasonable detail those items or amounts as to which
Seller Party Representative disagrees. If Seller Party Representative does not
deliver an Objection Notice during such time period or Seller Party
Representative indicates agreement with Buyer's Calculation, then Buyer's
Calculation shall be the agreed upon amounts for the Performance Amount for such
applicable period.
(v) If the Seller Party Representative shall have delivered
the Objection Notice within the 30 day period referred to in clause (ii) above,
then (a) within 10 days thereafter Buyer shall pay the undisputed portion of the
applicable Performance Amount, if any, by means of a deposit of a cash payment
in such amount in the Designated Account, and (b) Buyer and the Seller Party
Representative shall, during the 30 day period following such delivery, use
their good faith efforts to reach agreement on the disputed items or amounts in
order to determine the remainder of the Performance Amount. If Buyer and the
Seller Party Representative are unable to reach agreement during such period,
they shall promptly thereafter cause a mutually acceptable independent public
accounting firm (the "Accounting Arbiter") to review the disputed items or
amounts for the purpose of calculating the portion of the Performance Amount in
dispute. In making such calculation, the Accounting Arbiter shall consider only
those items or amounts in Buyer's Calculation as to which the Seller Party
Representative has disagreed and which are specifically identified in reasonable
detail in the Objection Notice. The Parties shall provide the Accounting Arbiter
with such information reasonably related to the determination of the ALG/Chrome
Revenues and the calculation of the Performance Amount as is necessary to allow
the Accounting Arbiter to make a determination. The Accounting Arbiter shall
deliver to Buyer and the Seller Party Representative, as promptly as
practicable, a written report setting forth its calculation of the items or
amounts in dispute. Such report shall be final and binding upon the Parties,
absent manifest error or willful misconduct. The cost of such review and report
shall be borne (x) by the Seller Parties, if Buyer's calculation of the portion
of the Performance Amount in dispute is closer to the Accounting Arbiter's
determination than the Seller Party Representative's calculation thereof,
15
(y) by Buyer, if the reverse is true and (z) except as provided in (x) or (y)
above, equally by the Seller Parties and Buyer.
(vi) Within 10 days of the final determination of the
remainder of the applicable Performance Amount, Buyer shall pay such amount, if
any, by means of a deposit of a cash payment in such amount in the Designated
Account.
2.07. CLOSING. (a) Subject to the terms and conditions set forth in this
Agreement, the closing (the "Closing") of the purchase and sale of the Purchased
Assets and the assumption of the Assumed Liabilities hereunder shall take place
at the offices of Xxxxxxx Procter LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 on the date hereof (the "Closing Date"), or at such other time or place as
Buyer and the Seller Parties may agree.
(b) Contemporaneously with the execution and delivery of this
Agreement, Seller Parties shall deliver or cause to be delivered to Buyer the
following:
(i) this Agreement, duly executed in one or more counterparts
by each of the Seller Parties;
(ii) a xxxx of sale, assignment and assumption agreement, in
the form of Exhibit H (the "Xxxx of Sale, Assignment and Assumption Agreement"),
duly executed in one or more counterparts by the Seller Entities, further
evidencing the conveyance to Buyer of the Purchased Assets and effectuating the
assignment of the Assumed Contracts;
(iii) for any of the Business's Intellectual Property, the
assignment of which is required or permitted to be recorded in the U.S. Patent
and Trademark Office, the U.S. Copyright Office or otherwise, duly executed
assignments of such Business's Intellectual Property in recordable form in the
form of Exhibit I, Exhibit J and Exhibit K;
(iv) The Subcontract Agreement, in the form of Exhibit L, duly
executed in one or more counterparts by each of the Seller Entities;
(v) such other instruments of transfer reasonably requested by
Buyer to transfer to and vest in Buyer all right, title and interest in and to
the Purchased Assets;
(vi) copies of resolutions duly adopted by the Board of
Directors or the Person or Persons exercising similar authority and the members
or shareholders of each of the Seller Entities, authorizing and approving the
Seller Entities' respective performance of the transactions contemplated hereby
and the execution and delivery of this Agreement and the Ancillary Documents,
certified as true and of full force;
(vii) a legal opinion of Seed Xxxxxxx LLP, counsel to the
Seller Entities, in form reasonably acceptable to Buyer;
(viii) the Aiken Consulting Agreement and the Aiken Unfair
Competition and Nonsolicitation Agreement, in each case, duly executed by Aiken;
16
(ix) the Xxxxx Employment Agreement and the Xxxxx Unfair
Competition and Nonsolicitation Agreement, in each case, duly executed by Xxxxx;
(x) the Sundaram Employment Agreement and the Sundaram Unfair
Competition and Nonsolicitation Agreement, in each case, duly executed by
Sundaram; and
(xi) such other documents and instruments as are required
pursuant to this Agreement or as may reasonably be requested by Buyer or its
counsel.
(c) Contemporaneously with the execution and delivery of this
Agreement, Buyer shall deliver or cause to be delivered to Seller Parties the
following:
(i) the cash payment described in Section 2.06(b)(i);
(ii) the Note, duly executed by Buyer;
(iii) this Agreement, duly executed by Buyer;
(iv) the Xxxx of Sale, Assignment and Assumption Agreement,
duly executed by Buyer, further evidencing the assumption of the Assumed
Liabilities by Buyer;
(v) the Subcontract Agreement, duly executed by Buyer;
(vi) the Guaranty, duly executed by DealerTrack Holdings, Inc.
(vii) a legal opinion of Xxxxxxx Procter LLP, counsel to
Buyer, in form reasonably acceptable to the Seller Parties;
(viii) the Aiken Consulting Agreement, duly executed by Buyer
(or its designated Affiliate or Affiliates);
(ix) the Xxxxx Employment Agreement, duly executed by Buyer
(or its designated Affiliate or Affiliates);
(x) the Sundaram Employment Agreement, duly executed by Buyer
(or its designated Affiliate or Affiliates);
(xi) the Subcontract Agreement, duly executed by Buyer;
(xii) copies of resolutions duly adopted by the Board of
Directors of Buyer, authorizing and approving Buyer's performance of the
transactions contemplated hereby and the execution and delivery of this
Agreement and the documents described herein, certified as true and of full
force, together with copies of resolutions duly adopted by the Board of
Directors of DealerTrack Holdings, Inc. authorizing and approving DealerTrack
Holdings, Inc.'s execution, delivery and performance of the Guaranty, certified
as true and of full force; and
17
(xiii) such other documents and instruments as are required
pursuant to this Agreement or as may be reasonably requested by the Seller
Parties or their counsel.
(d) to the extent not actually delivered on the date hereof, the
Seller Entities shall effect physical delivery of the tangible assets included
in the Purchased Assets to Buyer by providing Buyer with physical access to the
locations of such Purchased Assets.
2.08. ALLOCATION OF PURCHASE PRICE. As promptly as practicable after the
Closing Date and in no event later than December 31, 2005, Buyer shall deliver
the allocation of the Purchase Price and the Assumed Liabilities among the
Purchased Assets and the covenants not to compete (i) of the Seller Entities set
forth in Section 5.03 and (ii) contained in each of the Aiken Unfair Competition
and Nonsolicitation Agreement, the Xxxxx Unfair Competition and Nonsolicitation
Agreement and the Sundaram Unfair Competition and Nonsolicitation Agreement.
Buyer and the Seller Parties agree (a) that the allocations will be made in
accordance with the Code, (b) to treat and report for Income Tax purposes the
transactions contemplated by this Agreement in a manner consistent with such
allocation and (c) not to take any action for Income Tax purposes inconsistent
with such allocation. The Parties acknowledge and agree that the allocations
made pursuant to this Section 2.08 are solely for Income Tax purposes.
2.09. CLOSING STATEMENT; WORKING CAPITAL ADJUSTMENT.
(a) As promptly as practicable after the Closing Date and in no
event later than 30 days after the Closing Date, the Seller Parties shall
deliver to Buyer a closing statement of the Working Capital of the Business as
of the Closing Date (the "Closing Statement"), and a certificate of an officer
of each Seller Entity based on such Closing Statement, setting forth the
calculation of the Working Capital of the Business as of the Closing Date. The
Working Capital of the Business shall be determined in accordance with GAAP. If
the Working Capital is greater than or equal to zero, Buyer shall deliver such
amount in immediately available funds to the Designated Account within 30 days
of a final determination of such amount in accordance with this Section 2.09. If
the Working Capital is less than zero, the Seller Party Representative shall
cause the Seller Entities to deliver such amount in immediately available funds
to Buyer's account as designated by Buyer within 30 days of a final
determination of such amount in accordance with this Section 2.09.
(b) If Buyer disagrees with the calculation of the Closing
Statement, Buyer may, within 15 days after delivery of the Closing Statement,
deliver a notice to the Seller Parties disagreeing with such calculation and
setting forth Buyer's calculation of such amounts (the "Closing Statement
Objection Notice"). The Closing Statement Objection Notice shall specify in
reasonable detail those items or amounts as to which Buyer disagrees, and Buyer
shall be deemed to have agreed with all other items and amounts contained in the
Closing Statement.
(c) If Buyer shall have delivered the Closing Statement Objection
Notice within the 15 day period referred to in Section 2.09(b) above, then Buyer
and the Seller Party Representative shall, during the 30 day period following
such delivery, use their good faith efforts to reach agreement on the disputed
items or amounts, which amount shall not be more than the amount thereof shown
in the calculation delivered pursuant to Section 2.09(a) nor less than the
amount thereof shown in the calculation delivered pursuant to Section 2.09(b).
If Buyer
18
and the Seller Party Representative are unable to reach agreement during such
period, they shall promptly thereafter cause a mutually acceptable independent
public accounting firm (the "Accounting Referee") to review this Agreement and
the disputed items or amounts for the purpose of calculating the Working
Capital. In making such calculation, the Accounting Referee shall consider only
those items or amounts in the Closing Statement as to which Buyer has disagreed
and which are specifically stated in reasonable detail in the Closing Statement
Objection Notice. The Accounting Referee shall deliver to Buyer and the Seller
Party Representative, as promptly as practicable (but in any case no later than
30 days from the date of engagement of the Accounting Referee), a written report
setting forth its calculation of the items or amounts in dispute. Such report
shall be final and binding upon the Parties, absent manifest error or willful
misconduct. The cost of such review and report shall be borne (x) by Buyer, if
the Seller Parties' calculation of the Working Capital is closer to the
Accounting Referee's determination than Buyer's calculation thereof, (y) by the
Seller Parties, if the reverse is true and (z) except as provided in (x) or (y)
above, equally by Buyer and the Seller Parties.
2.10. 2004 EBITDA CALCULATION.
(a) Within 10 days of receipt of the audited combined financial statements
of the Seller Entities from PricewaterhouseCoopers, Buyer shall prepare a
statement reflecting 2004 EBITDA ( the "2004 EBITDA Statement") and deliver it
to the Seller Party Representative. If the 2004 EBITDA is greater than or equal
to $3,000,000, there will be no adjustment to the Purchase Price. If the 2004
EBITDA is less than $3,000,000, the Purchase Price shall be reduced by an amount
obtained by multiplying (A) 11 by (B) the amount by which 2004 EBITDA is less
than $3,000,000. The Seller Party Representative shall cause the Seller Entities
to deliver such amount in immediately available funds to Buyer's account as
designated by Buyer within 30 days of a final determination of such amount in
accordance with this Section 2.10.
(b) If Seller Party Representative disagrees with the calculation of the
2004 EBITDA Statement, Seller Party Representative may, within 30 days after
delivery of the 0000 XXXXXX Xxxxxxxxx, deliver a notice to Buyer disagreeing
with such calculation and setting forth Seller Party Representative's
calculation of such amounts (the "2004 EBITDA Statement Objection Notice"). The
2004 EBITDA Statement Objection Notice shall specify in reasonable detail those
items or amounts as to which Seller Party Representative disagrees, and Seller
Party Representative shall be deemed to have agreed with all other items and
amounts contained in the 2004 EBITDA Statement.
(c) If Seller Party Representative shall have delivered the 2004 EBITDA
Statement Objection Notice within the 30 day period referred to in Section
2.10(b) above, then Buyer and the Seller Party Representative shall, during the
30 day period following such delivery, use their good faith efforts to reach
agreement on the disputed items or amounts, which amount shall not be more than
the amount thereof shown in the calculation delivered pursuant to Section
2.10(a) nor less than the amount thereof shown in the calculation delivered
pursuant to Section 2.10(b). If Buyer and the Seller Party Representative are
unable to reach agreement during such period, they shall promptly thereafter
cause a mutually acceptable independent public accounting firm (the "Accounting
Judge") to review this Agreement and the disputed items or amounts for the
purpose of calculating the 2004 EBITDA. In making such calculation, the
Accounting Judge shall consider only those items or amounts in the 2004 EBITDA
Statement
19
as to which Seller Party Representative has disagreed and which are specifically
stated in reasonable detail in the 2004 EBITDA Statement Objection Notice. The
Accounting Judge shall deliver to Buyer and the Seller Party Representative, as
promptly as practicable (but in any case no later than 30 days from the date of
engagement of the Accounting Judge), a written report setting forth its
calculation of the items or amounts in dispute. Such report shall be final and
binding upon the Parties, absent manifest error or willful misconduct. The cost
of such review and report shall be borne (x) by Buyer, if the Seller Parties'
calculation of the 2004 EBITDA is closer to the Accounting Judge's determination
than Buyer's calculation thereof, (y) by the Seller Entities, if the reverse is
true and (z) except as provided in (x) or (y) above, equally by Buyer and the
Seller Entities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES
Except as set forth in the schedules to this Agreement (disclosures in one
such schedule being deemed disclosures in each other schedule provided it is
reasonably apparent on its face that the matter is responsive to the
representation to which such other schedule relates), the Seller Parties make
the representations and warranties set forth in this Article III to Buyer as of
the date hereof. The foregoing notwithstanding, none of the Principals makes any
representations or warranties regarding any other Principal or the respective
interests, circumstances or agreements of any other Principal.
3.01. CORPORATE EXISTENCE AND POWER. ALG, LLC is a limited liability
company duly formed and validly existing under the Laws of the State of
California. ALG, Inc. is a corporation duly organized, validly existing and in
good standing under the Laws of the State of California. Each Seller Entity has
all limited liability company or corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on the Business as now
conducted by it. The Seller Entities are not qualified to do business in any
jurisdiction other than the State of California, and the character of the
property owned or leased by them and the nature of their activities does not
make such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect. True, correct and complete copies of the charter
documents of each of the Seller Entities as in effect on the date hereof have
been delivered to Buyer.
3.02. CORPORATE AUTHORIZATION. The execution, delivery and performance by
each of the Seller Parties of this Agreement and each of the Ancillary
Agreements to which each such Seller Party is a party, and the consummation by
the Seller Parties of the transactions contemplated hereby and thereby are
within, (i) with respect to each Seller Entity, each such Seller Entity's
respective corporate powers and have been duly authorized by all necessary
corporate action on the part of each Seller Entity, and (ii) with respect to
each Principal, each such Principal's respective power and authority. Each of
this Agreement and each Ancillary Agreement to which each Seller Party,
respectively, is a party has been duly executed and delivered by such Seller
Party and constitutes a valid and binding agreement of each such Seller Party,
enforceable in accordance with its terms.
20
3.03. EQUITY SECURITIES. (a) Schedule 3.03(a) sets forth the number and
class of each of the authorized, issued and outstanding Equity Securities of
each Seller Entity and a list of the holders of all such Equity Securities. All
of such outstanding Equity Securities are validly issued, fully paid and
non-assessable, were issued in conformity with applicable Law, and are owned of
record and beneficially by the Persons listed on Schedule 3.03(a).
(b) No Seller Entity has any outstanding commitments to issue or
sell any Equity Securities, and no securities or obligations evidencing any such
right are outstanding. Except as set forth on Schedule 3.03(b), there are no
outstanding obligations, written or otherwise, of any member or shareholder of
any Seller Entity to repurchase, redeem or otherwise acquire any Equity
Securities and there are no preemptive rights in respect of any Equity
Securities of any Seller Entity. Any Equity Securities which were issued and
reacquired by any Seller Entity were so reacquired (and, if reissued, so
reissued) in compliance with all applicable Laws, and no Seller Entity has any
outstanding obligation or liability with respect thereto.
(c) No Seller Entity has any Subsidiaries, and no Seller Entity
holds any Equity Securities of any other Person that owns or controls any of the
Purchased Assets or through which such Seller Entity conducts any portion of the
Business and (ii) the Purchased Assets do not include any Indebtedness or Equity
Securities of any Person.
3.04. GOVERNMENTAL AUTHORIZATION; CONSENTS. (a) The execution, delivery
and performance by each Seller Party of this Agreement and each of the Ancillary
Agreements to which it is a party requires no action by or in respect of, or
filing with, any Governmental Entity.
(b) Except as set forth on Schedule 3.04(b), no consent, approval,
waiver or other action (a "Required Consent") by any Person under any contract,
agreement, indenture, lease, instrument or other document to which any Seller
Party is a party or is bound is required or necessary for the execution,
delivery and performance by each of the Seller Parties of this Agreement and
each Ancillary Agreement or for the consummation of the transactions
contemplated hereby or thereby. The Required Consents have not been obtained as
of the date hereof.
(c) Except for the Required Consents and with respect to the
transfer of each of the Consent Pending Contracts prior to the Final Assignment
Date for each such Consent Pending Contract, the consent of each of the
Principals is sufficient to authorize the Seller Entities to engage in the
transactions contemplated by this Agreement and no other approval is required by
the applicable constituent documents, applicable Law or otherwise which governs
the Seller Entities or the Principals.
3.05. NON-CONTRAVENTION. The execution, delivery and performance by each
of the Seller Parties of this Agreement and each Ancillary Agreement and the
consummation of the transactions contemplated hereby and thereby, do not and
will not (i) contravene or conflict with the constituent documents of either
Seller Entity, (ii) contravene or conflict with any provision of any Law or
Permit binding upon or applicable to any Seller Entity or the Business; (iii)
assuming the receipt of all Required Consents, constitute a default (with or
without notice or lapse of time, or both) under or give rise to any right of
termination, cancellation or acceleration
21
of any right or obligation of any Seller Party, or to a loss of any benefit,
relating to the Business to which either Seller Entity is entitled under any
provision of any agreement, contract or other instrument binding upon such
Seller Entity or (iv) result in the creation or imposition of any Lien on any
Purchased Asset.
3.06. FINANCIAL STATEMENTS.
(a) Attached as Schedule 3.06 are true and complete copies of:
(i) the unaudited combined balance sheet as of December 31,
2003 and December 31, 2004, and the related unaudited combined statements of
operations and cash flows for the years then ended for the Seller Entities; and
(ii) the Balance Sheet and the related unaudited combined
statements of income and cash flows of the Seller Entities for the three months
ended March 31, 2005 ((i) and (ii), collectively, the "Financial Statements").
(b) (i) The Financial Statements have been prepared in
accordance with GAAP applied on a basis consistent throughout the periods
indicated and consistent with each other, except for the absence of footnotes.
The Financial Statements fairly presented, in all material respects, the
financial condition, results of operations and cash flows of the Seller Entities
as of the dates and during the periods indicated therein, subject to normal
year-end adjustments, which were not material in amount or significance.
(ii) To the Seller Parties' Knowledge, there have been no
instances of fraud, whether or not material, that occurred during any period
covered by the Financial Statements involving the management of the Seller
Entities or other employees of the Seller Entities who have a significant role
in the Seller Entities' internal control over financial reporting.
3.07. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date, except as
reflected in the unaudited Financial Statements, on Schedule 3.07 or as
otherwise contemplated by this Agreement, each of the Seller Entities has
conducted the Business in the ordinary course consistent with past practices,
and there has not been any:
(a) Material Adverse Change, or any event, occurrence, development
or state of circumstances or facts which could reasonably be expected to result
in a Material Adverse Change, or any condition, event or occurrence which,
individually or in the aggregate, could reasonably be expected to prevent or
materially delay any Seller Party's ability to consummate the transactions
contemplated by this Agreement or perform its obligations hereunder or under the
Ancillary Agreements;
(b) payment or grant of any right relating to the Business by any
Seller Party to any Interested Person, or any charge by any Interested Person to
any Seller Entity relating to the Business, or other transaction between any
Seller Entity relating to the Business and any
22
Interested Person, except in any such case for distributions or employee
compensation payments to the Principals;
(c) incurrence, assumption or guarantee by any Seller Entity of any
Indebtedness for borrowed money with respect to the Business other than in the
ordinary course of business and in amounts and on terms consistent with past
practices not exceeding $50,000, in the aggregate;
(d) creation or assumption by any Seller Entity of any Lien on any
Purchased Asset;
(e) damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the Business or any Purchased Asset in an amount
greater than $50,000, in the aggregate;
(f) transaction or commitment made, or any contract or agreement
entered into, by any Seller Entity relating to the Business or any Purchased
Asset (including the acquisition or disposition of any assets) or any
relinquishment by any Seller Entity of any contract or other right, in either
case, material to the Business, other than transactions and commitments in the
ordinary course of business consistent with past practices and those
contemplated by this Agreement;
(g) change in any method of Tax or financial accounting or
accounting practice or any making of a Tax election or change of an existing
election by any Seller Entity with respect to the Business, other than as
reflected in the Financial Statements;
(h) (i) grant of any severance or termination pay to any employee of
the Business, (ii) entering into of any employment, deferred compensation or
other similar agreement (or any amendment to any such existing agreement) with
any employee of the Business, (iii) change in benefits payable under existing
severance or termination pay policies of either Seller Entity relating to the
Business or employment agreements to which any employee of the Business is a
party or (iv) change in compensation, bonus or other benefits payable to
employees of the Business, other than in the ordinary course of business
consistent with past practice;
(i) labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union, representative thereof or any other
Person to organize any employees of the Business, or any lockouts, strikes,
slowdowns, work stoppages, picketing or threats thereof by or with respect to
such employees;
(j) employee terminations and/or layoffs, and the Seller Entities
have preserved intact and kept available the services of present employees, in
each case in accordance with past practice;
(k) capital expenditure, or commitment for a capital expenditure,
for additions or improvements to property, plant and equipment in an amount
greater than $50,000, in the aggregate;
23
(l) Commencement or notice or, to the Seller Parties' Knowledge,
threat of commencement of any lawsuit or proceeding against, or investigation
of, either Seller Entity or their respective affairs, or the commencement or
settlement of any litigation by either Seller Entity;
(m) (i) transfer or sale by either Seller Entity of any rights to
the Business's Intellectual Property or the entering into of any license
agreement (other than non-exclusive customer agreements or end-user license
agreements entered into by the Seller Entities in the ordinary course of
business consistent with past practices that do not include any rights with
respect to source code), distribution agreement, reseller agreement, security
agreement, assignment or other conveyance or option for the foregoing, with
respect to the Business's Intellectual Property, with any Person; (ii) the
purchase or other acquisition of any Intellectual Property or the entering into
of any license agreement, distribution agreement, reseller agreement, security
agreement, assignment or other conveyance or option for the foregoing, with
respect to the Intellectual Property of any Person other than in-bound "shrink
wrap" end-user licenses; (iii) change in pricing or royalties set or charged by
the Seller Entities to their respective customers or licensees or in pricing or
royalties set or charged by Persons who have licensed Intellectual Property to
the Seller Entities; or (iv) entering into or amendment of any agreement with
respect to the development of any Intellectual Property, in each instance
described in clauses (i)-(iv), other than in the ordinary course of business;
(n) failure by the Seller Entities to pay when due any amounts owing
to any Person, and neither Seller Entity has withheld any payments owing to any
vendor of products or services;
(o) dispute or disagreement between one or both of the Seller
Entities, on the one hand, and any vendor of products or services to such Seller
Entity or Seller Entities, on the other hand;
(p) release or delivery to any Person of all or any portion of
source code included in the Business's Intellectual Property that may be held in
escrow, nor has any Person requested any such release; or
(q) agreement, undertaking or commitment to do any of the foregoing.
3.08. PERSONAL PROPERTY, (a) The Seller Entities have good and marketable
title to, or in the case of leased personal property have valid leasehold
interests in, all personal property (including machinery and equipment,
inventory, receivables and furniture) (whether tangible or intangible) used in
the Business and reflected on the Balance Sheet or acquired after the Balance
Sheet Date (the "Personal Property"). None of such Personal Property is subject
to any Liens, other than the following ("Permitted Liens"):
(i) Liens disclosed on the Balance Sheet;
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(ii) Liens for Taxes not yet due and payable (and for which
adequate accruals or reserves have been established on the Balance Sheet);
(iii) The lessor's interests, with respect to any Personal
Property held pursuant to a lease; or
(iv) Liens that do not materially detract from the value of
the Personal Property as now used, or materially interfere with any present or
intended use of the Personal Property.
(b) The Personal Property is in good operating condition and repair
(ordinary wear and tear excepted), and is generally adequate for the uses to
which it is being put.
3.09. REAL PROPERTY. (a) None of the Real Property is owned by any Seller
Entity. All of the Real Property is leased by one or more of the Seller Entities
as lessee or sublessee.
(b) Schedule 3.09(b) sets forth all leases and subleases of Real
Property (the "Leases").
(c) The Leases are in good standing and are valid, binding and
enforceable in accordance with their respective terms, and there does not exist
under any such Lease any default by any Seller Entity or, to the Seller Parties'
Knowledge, by any other Person, or any event that, with notice or lapse of time
or both, would constitute a default by any Seller Entity or, to the Seller
Parties' Knowledge, by any other Person. The Seller Parties have delivered to
Buyer complete and accurate copies of all Leases, including all amendments and
agreements related thereto. All rent and other charges currently due and payable
under the Leases have been paid.
(d) One or both of the Seller Entities is the holder of the lessee's
interest under the Leases and has neither assigned the Leases nor subleased all
or any portion of the premises leased thereunder. None of the Seller Entities
has made any alterations, additions or improvements to the premises leased under
the Leases that are required to be removed (or of which lessor could require
removal) at the termination of the respective Lease terms.
3.10 SUFFICIENCY OF PURCHASED ASSETS. As of the date of this Agreement,
the Purchased Assets and the Excluded Assets constitute all of the assets or
property used or held for use in the Business and are sufficient for the conduct
of the Business as it has been and is currently conducted by the Seller
Entities.
3.11. TITLE TO PURCHASED ASSETS. Upon consummation of the transactions
contemplated hereby, Buyer will have acquired good and marketable title in and
to, or a valid leasehold interest in, each of the Purchased Assets, free and
clear of all Liens, except for Permitted Liens. The representation in this
Section 3.11 shall not apply to the Business's Intellectual Property, which is
governed by Section 3.15 below.
3.12. NO UNDISCLOSED LIABILITIES. Except as (i) disclosed in the Financial
Statements, (ii) incurred in the ordinary course of business consistent with
past practices since the Balance
25
Sheet Date, or (iii) set forth on Schedule 3.12, there are no liabilities of the
Business of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise.
3.13. LITIGATION. There is no claim, action, suit, investigation or
proceeding (or, to the Seller Parties' Knowledge, any basis therefor) pending
against, or to the Seller Parties' Knowledge, threatened against or affecting,
the Business or any Purchased Asset, or the transactions contemplated hereby
before any Governmental Entity; and no Seller Entity is subject to any Order,
and to the Seller Parties' Knowledge, there are no Orders threatened to be
imposed on any Seller Entity in respect of the Business or any Purchased Asset.
3.14. MATERIAL CONTRACTS. (a) Except for the Assumed Contracts disclosed
on Schedule 3.14 and the Consent Pending Contracts identified on Schedule 2.02,
as of the date of this Agreement, with respect to the Business, no Seller Entity
is a party to or subject to any:
(i) lease providing for annual rentals of $50,000 or more;
(ii) contract for the purchase of materials, supplies, goods,
services, equipment or other assets providing for annual payments by such Seller
Entity of, or pursuant to which in the last year such Seller Entity paid, in the
aggregate, $50,000 or more;
(iii) sales, distribution or other similar agreement providing
for the sale by any Seller Entity of materials, supplies, goods, services,
equipment or other assets that provide for annual payments to any Seller Entity
of, or pursuant to which in the last year any Seller Entity received, in the
aggregate, $50,000 or more;
(iv) partnership, joint venture or other similar contract
arrangement or agreement;
(v) contract relating to Indebtedness for borrowed money or
the deferred purchase price of property (whether incurred, assumed, guaranteed
or secured by any asset), except contracts relating to Indebtedness incurred in
the ordinary course of business in an amount not exceeding $50,000, in the
aggregate;
(vi) employment or consulting agreement, or other contract in
respect of the provision of services for the day to day operation of the
Business (e.g., with a temporary services agency);
(vii) license, technology transfer, franchise or other
agreement in respect of any Business's Intellectual Property;
(viii) material agreement in respect of any property owned or
used by the Seller Entities;
(ix) agency, dealer, sales representative or other similar
agreement;
26
(x) contract or other document that limits the freedom of any
Seller Entity to compete in any line of business or with any Person or in any
area to own, operate, sell, transfer, pledge or otherwise dispose of or encumber
any Purchased Asset and that would so limit the freedom of Buyer after the
Closing Date;
(xi) contract or commitment with or for the benefit of any
Interested Person; or
(xii) other contract or commitment not made in the ordinary
course of business that is material to the Business taken as a whole.
(b) Each Assumed Contract disclosed on Schedule 3.14(a) to this
Agreement or required to be disclosed pursuant to Section 3.14(a) and each
Consent Pending Contract is a valid and binding agreement of the applicable
Seller Entity or Seller Entities and is in full force and effect, and none of
the Seller Entities nor, to the Seller Parties' Knowledge, any other party
thereto is in default in any material respect under the terms of any such
contract, nor, to the Seller Parties' Knowledge, has any event or circumstance
occurred that, with notice or lapse of time or both, would constitute an event
of default thereunder.
3.15. TECHNOLOGY AND INTELLECTUAL PROPERTY.
(a) Schedule 3.15 lists: (i) all registered trademarks, service
marks, copyrights, logos, tradenames, domain names and corporate names, and any
applications and renewals for any of the foregoing owned by or on behalf of
either of the Seller Entities or their respective Affiliates for the benefit of
the Business; (ii) all software that is currently sold, published, offered, or
under development by either of the Seller Entities or their respective
Affiliates for the benefit of the Business; and (iii) all licenses (in and out),
sublicenses and other agreements to which either of the Seller Entities or their
respective Affiliates is a party and pursuant to which either of the Seller
Entities or any other person is authorized to use any of the Business's
Intellectual Property or exercise any other right with regard thereto. Neither
of the Seller Entities or their respective Affiliates possesses any patents or
currently sells, publishes, offers or has under development for the benefit of
the Business any hardware products and tools or firmware products, tools and
services.
(b) Each item of the Business's Intellectual Property listed on
Schedule 3.15 is either: (i) owned solely by one of the Seller Entities or their
respective Affiliates free and clear of any Liens (other than Permitted Liens);
or (ii) rightfully used and authorized for use by one of the Seller Entities or
their respective Affiliates pursuant to a valid and enforceable written license
or other agreement. All of the Business's Intellectual Property that is used by
one of the Seller Entities pursuant to a license or other grant of a right by a
third party to use its proprietary information will be separately identified as
such on Schedule 3.15. The Seller Entities have all rights in the Business's
Intellectual Property necessary to conduct the Business as conducted during the
six (6) year-period ending on the Closing Date, including (except as noted on
Schedule 3.15) rights to modify, adapt, create derivative works based on,
translate and license the Business's software as described in Section
3.15(a)(ii) above.
27
(c) Neither of the Seller Entities is in violation of any license,
sublicense or other agreement to which it is a party or otherwise bound relating
to any of the Business's Intellectual Property. Neither of the Seller Entities
nor any of their respective Affiliates is obligated to provide any consideration
(whether financial or otherwise) to any third party, nor is any third party
otherwise entitled to any consideration, with respect to any exercise of rights
by either Seller Entity in the Business's Intellectual Property, except pursuant
to the license agreements listed on Schedule 3.15 and separately identified
thereon.
(d) The use of the Business's Intellectual Property by the Seller
Entities as currently used does not infringe any other person's copyright, trade
secret rights, right of privacy, right in personal data, moral right or other
intellectual property right. The use by the Seller Entities of the Business's
Intellectual Property as currently used does not infringe any other person's
patent, registered trademark, registered service xxxx, trade name, logo or trade
dress. No claims (i) challenging the validity, enforceability, effectiveness or
ownership by the Seller Entities of any of the Business's Intellectual Property
or (ii) to the effect that the use, reproduction, modification, manufacture,
distribution, licensing, sublicensing, sale, or any other exercise of rights in
any of the Business's Intellectual Property by either of the Seller Entities,
infringes or will infringe on any intellectual property or other proprietary or
personal right of any person are pending or have been asserted against either of
the Seller Entities during the five-year period ending on the Closing Date or,
to the Seller Parties' Knowledge, were asserted against either of the Seller
Entities more than five (5) years prior to the Closing Date or are threatened by
any person nor does there exist any valid basis for such a claim. There are no
legal or governmental proceedings, including interference, re-examination,
reissue, opposition, nullity, or cancellation proceedings pending that relate to
any of the Business's Intellectual Property, and no Seller Party is aware of any
information indicating that such proceedings are threatened or contemplated by
any Governmental Entity or any other Person. All registered trademarks and
service marks, and all copyright registrations owned by the Seller Parties are
valid and enforceable. To the Seller Parties' Knowledge, there is no
unauthorized use, infringement, or misappropriation of any of the Business's
Intellectual Property by any third party, employee or former employee.
(e) Schedule 3.15 separately lists all parties (other than employees) who
have created any portion of, or otherwise have any rights in or to, the
Business's Intellectual Property. The Seller Entities have secured from all
parties (including employees) who have created any portion of, or otherwise have
any rights in or to, the Business's Intellectual Property valid and enforceable
written assignments of any such work, invention, improvement or other rights to
the Seller Entities and have provided true and complete copies of such
assignments to Buyer.
(f) The transactions contemplated under this Agreement shall not alter,
impair or otherwise affect any rights in any of the Business's Intellectual
Property being sold to Buyer.
(g) The Seller Entities have taken commercially reasonable measures to
protect the proprietary nature of the Business's Intellectual Property and to
maintain in confidence all trade secrets and confidential information owned or
used by the Seller Entities in the Business.
28
(h) The Business's Intellectual Property does not include any Publicly
Available Software and neither of the Seller Entities has used Publicly
Available Software in whole or in part in the development of any part of the
Business's Intellectual Property in a manner that may subject the Business's
Intellectual Property in whole or in part, to all or part of the license
obligations of any Publicly Available Software. "Publicly Available Software"
means each of (i) any software that contains, or is derived in any manner (in
whole or in part) from, any software that is distributed as free software, open
source software (e.g. Linux), or similar licensing and distribution models; and
(ii) any software that requires as a condition of use, modification, and/or
distribution of such software that such software or other software incorporated
into, derived from, or distributed with such software (x) be disclosed or
distributed in source code form; (y) be licensed for the purpose of making
derivative works; or (z) be redistributable at no or minimal charge. Publicly
Available Software includes software licensed or distributed under any of the
following licenses or distribution models similar to any of the following: (i)
GNU General Public License (GPL) or Lesser/Library GPL (LGPL), (ii) the Artistic
License (e.g. PERL), (iii) the Mozilla Public License, (iv) the Netscape Public
License, (v) the Sun Community Source License (SCSL), the Sun Industry Source
License (SISL), and the Apache Server License.
(i) Anything in this Agreement to the contrary notwithstanding, none of
the Seller Parties makes any representation or warranty with respect to the
Business's Intellectual Property rights in any jurisdiction other than the
United States of America and Canada.
3.16. INSURANCE COVERAGE. Schedule 3.16 lists all of the insurance
policies and fidelity bonds covering the Purchased Assets, the business and
operations of the Business and its employees. The Seller Entities have furnished
to Buyer true and complete copies of all insurance policies and fidelity bonds
listed on Schedule 3.16. There is no claim by any Seller Entity pending under
any of such policies or bonds as to which coverage has been questioned, denied
or disputed by the underwriters of such policies or bonds. All premiums payable
under all such policies and bonds have been paid and the Seller Entities are
otherwise in full compliance with the terms and conditions of all such policies
and bonds. Such policies of insurance and bonds (or other policies and bonds
providing substantially similar insurance coverage) have been effect since
January 1, 2002 and remain in full force and effect. Such policies of insurance
and bonds are of the type and in amounts customarily carried by Persons
conducting businesses similar to the Business. No Seller Party knows of any
threatened termination of, or premium increase with respect to, any of such
policies or bonds.
3.17. COMPLIANCE WITH LAWS. (a) No Seller Entity is in violation of, nor
has violated, any applicable provisions of any Laws, except for violations that
have not had and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect, and to the Seller Parties' Knowledge,
no Seller Entity is under investigation with respect to and has not been
threatened to be charged with or given notice of any violation of, any Law
applicable to the Purchased Assets or the conduct of the Business, except for
violations that have not had and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) Neither Seller Entity has sold, transferred, disclosed, made
available to the public or otherwise released for distribution any of their
respective customer files and other customer information relating to their
current and former customers (the "Seller Entity Customer
29
Information"). Except for information as provided to sales representatives
(which information is subject to a customary non-disclosure agreement), no
Person other than the Seller Entity possesses any claims or rights with respect
to use of the Seller Entity Customer Information.
(c) Schedule 3.17(c) correctly describes each governmental license,
permit, concession or franchise (a "Permit") material to the Business, together
with the name of the Governmental Entity issuing such Permit. Such Permits are
valid and in full force and effect. None of such Permits are transferable to
Buyer.
(d) No Seller Entity is in default under, and no condition exists
that with notice or lapse of time or both would constitute a default by a Seller
Entity under, any Order of any Governmental Entity.
3.18. EMPLOYEES. (a) Schedule 3.18 sets forth, with respect to each
employee of each Seller Entity, respectively (including any such employee of
such Seller Entity who is on a leave of absence or on layoff status subject to
recall) (i) the name of such employee and the date as of which such employee was
originally hired by such Seller Entity, and whether the employee is on an active
or inactive status; (ii) such employee's title; (iii) such employee's annualized
compensation as of the date of this Agreement, including base salary, vacation
and/or paid time off accrual amounts, bonus and/or commission potential, and
(iv) any authorization of any Governmental Entity that is held by such employee
and that is used in connection with the Business. Except as disclosed on
Schedule 3.18(a). the employment of each of the employees of the Business is
terminable by the applicable Seller Entity at will.
(b) Schedule 3.18(b) lists all Persons who are currently performing
services for the Business who are classified other than as employees of the
Seller Entities, such as "consultants," "independent contractors," or "temps"
(collectively, "Contingent Workers") the compensation or fee arrangements of or
for each such Contingent Worker and whether any Seller Entity is party to an
agreement with or in respect of the provision of services by any such Contingent
Worker (whether or not in writing). Any such agreements are listed on Schedule
3.14 and have been delivered (or, in the case of agreements that are not in
writing, a summary thereof has been delivered) to Buyer. All Persons engaged
directly or through another entity by any Seller Party for the benefit of the
Business as Contingent Workers rather than employees, have been properly
classified as such and have been engaged in accordance with all applicable Laws
and all Seller Entity Employee Plans.
(c) Neither Seller Entity is or has ever been a party to or bound by
any union contract, collective bargaining agreement or similar contract. There
has never been any slowdown, work stoppage, labor dispute or union organizing
activity, or any similar activity or dispute, affecting the Seller Entities or
any of their respective employees or Contingent Workers.
(d) Schedule 3.18(d) lists all current employee manuals and
handbooks, employment policy statements, employment agreements, and other
materials relating to the employment of the current employees of the Business.
The Seller Entities have delivered to Buyer complete copies of all such
documents.
30
(e) None of the employees of the Business have notified or otherwise
indicated to any Seller Party that he or she intends to terminate his or her
employment with either Seller Entity, or, in the case of a Transferred Employee,
not to accept employment with Buyer; (ii) neither Seller Entity has a present
intention to terminate the employment of any employee of the Business; (iii) all
employees of the Business have executed the respective Seller Entity's form
employee confidentiality policy; (iv) to the Seller Parties' Knowledge, no
employee of the Business is a party to or is bound by any employment contract,
patent disclosure agreement, noncompetition agreement or other restrictive
covenant or other contract with any third party that would be likely to
materially affect (A) the performance by such employee of any of his or her
duties or responsibilities as an employee, or (B) the business or operations of
the Business; (v) to the Seller Parties' Knowledge, no employee of the Business
is in violation of any term of any employment contract, patent disclosure
agreement, noncompetition agreement, or any other restrictive covenant with any
third party relating to the right of any such employee to be employed by any
Seller Party; and (vi) no Seller Party is or ever has been engaged in any
dispute or litigation with an employee of the Business or former employee of the
Business regarding Intellectual Property matters.
(f) Except as disclosed on Schedule 3.18(f), (i) neither Seller
Entity has a severance pay practice or policy; (ii) no employee of the Business
is entitled, pursuant to any existing policy of either Seller Entity, to any
severance pay, bonus compensation, acceleration of payment or vesting of any
equity interest, or other payment from any Seller Entity or Buyer (other than
accrued salary, vacation, or other paid time off in accordance with the policies
of the Seller Entities) as a result of or in connection with the transactions
contemplated hereby or as a result of any termination by the Business on or
after the Closing of any Person employed by either Seller Entity on or prior to
the Closing Date.
(g) Neither of the Seller Entities is engaged, and to the Seller
Parties' Knowledge, neither of the Seller Entities has ever engaged, in any
unfair labor practice of any nature. The employees and Contingent Workers of the
Business have been, and currently are, properly classified under the Fair Labor
Standards Act of 1938, as amended, and under any applicable state Law. Neither
Seller Entity has failed to pay, any of its employees or Contingent Workers for
any wages (including overtime), salaries, commissions, bonuses, benefits or
other direct compensation for any services performed by them to the date hereof
or amounts required to be reimbursed to such individuals.
(h) Each of the Seller Entities, and each employee of the Business,
is in compliance with all applicable visa and work permit requirements, and no
visa or work permit held by an employee of the Business will expire during the
six (6) month period following the date of this Agreement.
(i) No Seller Party has taken any action, directly or indirectly, to
prevent or discourage any employee of the Business from being employed by Buyer
as of the Closing Date.
(j) Each Employee Plan (as defined below) maintained by any Seller
Entity or any entity that is considered one employer with either of the Seller
Entities under Section 414 of the Code or Section 4001 of ERISA which covers
active, former, or retired employees of the
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Seller Entities is listed on Schedule 3.18(j) (each, a "Seller Entity Employee
Plan"). "Employee Plan" means any employee benefit plan as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), any employment, severance or similar contract, arrangement or
policy, and each plan or arrangement providing for insurance coverage (including
any self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, pension or retirement
benefits or for deferred compensation, profit-sharing, bonuses, phantom stock,
stock options, stock appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits. Each Seller
Entity has made available to Buyer a copy of each Seller Entity Employee Plan,
and where applicable, any related trust agreement, summary plan description,
annuity, or insurance contract. All annual reports (Form 5500) required to be
filed with the IRS have been properly filed on a timely basis, and each Seller
Entity has provided copies of the three most recently filed Forms 5500 for each
applicable Seller Entity Employee Plan. Any Seller Entity Employee Plan intended
to be qualified under Section 401 (a) of the Code has been determined by the IRS
to be so qualified and has remained tax-qualified to this date and its related
trust is tax-exempt and has been so since its creation. No Seller Entity
Employee Plan is covered by Title IV of ERISA, or Section 412 of the Code. No
Seller Entity Employee Plan is a "nonqualified deferred compensation plan"
within the meaning of Section 409A(d)(1) of the Code. No "prohibited
transaction," as defined in ERISA Section 406 or Code Section 4975 has occurred
with respect to any Seller Entity Employee Plan, unless such a transaction was
exempt from such rules. Each Seller Entity Employee Plan has been maintained and
administered in material compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including but
not limited to ERISA and the Code, which are applicable to such Seller Entity
Employee Plans. There are no pending or anticipated claims against or otherwise
involving any of the Seller Entity Employee Plans and no suit, action, or other
litigation (excluding claims for benefits incurred in the ordinary course of
Seller Entity Employee Plan activities) has been brought against or with respect
to any Seller Entity Employee Plan. All contributions, reserves, or premium
payments to the Seller Entity Employee Plan, accrued to the date hereof have
been made or provided for. Neither the Seller Entities nor any entity which is
considered one employer with either of the Seller Entities under Section 414 of
the Code or Section 4001 of ERISA has ever maintained or contributed to or
incurred or expects to incur liability with respect to any Seller Entity
Employee Plan subject to Title IV of ERISA or any "multi-employer plan" within
the meaning of Section 4001(a)(3) of ERISA. There are no restrictions on the
rights of the Seller Entities to amend or terminate any Seller Entity Employee
Plan without incurring any liability thereunder. Neither Seller Entity has
engaged in or is a successor or parent corporation to an entity that has engaged
in a transaction described in ERISA Section 4069. There have been no amendments
to, written interpretation of, or announcement (whether or not written) relating
to, or change in employee participation or coverage under, any Seller Entity
Employee Plan. Neither the Seller Entities nor any of their respective ERISA
affiliates have any current or projected liability in respect of post-employment
or post-retirement welfare benefits for retired or former employees of the
Seller Entities other than health care continuation benefits required to be
provided under applicable Law. No Tax under Section 4980B or 4980D of the Code
has been incurred in respect of any Seller Entity Employee Plan that is a group
health plan, as defined in Section 5000(b)(1) of the Code.
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(k) Except as contemplated by this Agreement, neither the execution
and delivery of this Agreement and all other agreements contemplated hereby, nor
the consummation of the transactions contemplated hereby will: (i) result in any
payment by either Seller Entity (including severance, unemployment compensation,
parachute payment, bonus or otherwise) becoming due to any director, employee,
or independent contractor of either Seller Entity under any Seller Entity
Employee Plan, (ii) increase any benefits otherwise payable under any Seller
Entity Employee Plan or (iii) result in the acceleration of the time of payment
or vesting of any such benefits.
(l) No notice is required under the Federal Workers Adjustment and
Retraining Notification Act ("WARN Act") or similar state Law (collectively,
"Plant Closing Laws") of the Seller Entities to its employees or former
employees by reason of its acts on or prior to the Closing Date, or by reason of
the transactions consummated hereby. Seller is not currently and has not been
within the preceding three (3) years an "employer" within the meaning of the
WARN Act or any comparable state or local Law.
(m) Neither Seller Entity is a government contractor under Executive
Order 11246, or otherwise has any affirmative action or prevailing wage
obligations under the Law of any Governmental Entity.
3.19. ENVIRONMENTAL COMPLIANCE. The Seller Entities have complied with all
Laws (including case law, rules, regulations, orders, judgments, decrees,
permits, licenses and governmental approvals) which are intended to protect the
environment and/or human health or safety (collectively, "Environmental Laws");
neither of the Seller Entities has handled, generated, used, stored, transported
or disposed of any material, substance or waste which is regulated by
Environmental Laws ("Hazardous Materials"), except for reasonable amounts of
ordinary office and/or office-cleaning supplies which have been used in
compliance with Environmental Laws; (iii) neither Seller Entity has conducted,
nor is either Seller Entity aware of, any environmental investigations, studies,
audits, tests, reviews or analyses, the purpose of which was to discover,
identify, or otherwise characterize the condition of the soil, groundwater, air
or the presence of Hazardous Materials at any real property owned, operated or
leased by either of the Seller Entities; and (iv) there are no "Environmental
Liabilities". For purposes of this Agreement, "Environmental Liabilities" are
any claims, demands, or liabilities under Environmental Laws which (i) arise out
of or in any way relate to the Seller Entities' operations or activities, or any
real property at any time owned, operated or leased by either Seller Entity, or
any member's or stockholder's, as the case may be, use or ownership thereof,
whether vested or unvested, contingent or fixed, actual or potential, and (ii)
arise from or relate to actions occurring (including any failure to act) or
conditions existing on or before the Closing Date.
3.20. CUSTOMERS. No Seller Entity has received notice from or is otherwise
aware that any customer (or group of customers under common ownership or
control) that accounted for a material percentage of the aggregate products and
services sold or furnished by the Business during the past 18 months has stopped
or intends to stop purchasing the products or services of the Business. Anything
in this Agreement to the contrary notwithstanding, no Seller Party makes any
representation or warranty with respect to any customer's purchase, following
the Closing
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Date, of products or services of the Business with respect to which such
customer has no current or future obligation to purchase from the Seller
Entities as of the Closing Date.
3.21. PRODUCTS WARRANTIES; DEFECTS; LIABILITIES. Each product of the
Business (including any software product) manufactured, sold, licensed, leased
or delivered by the Seller Entities (the "Business Products") has been in all
material respects in conformity with all applicable contractual commitments and
all applicable express and implied warranties. Neither Seller Entity has any
liability or obligation (and to the Seller Parties' Knowledge, there is no basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand against the Seller Entities giving rise to
any liability or obligation) for replacement or repair thereof or other damages
in connection therewith except liabilities or obligations incurred in the
ordinary course of business consistent with past practice. No Business Product
is subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale, license or lease or beyond that implied
or imposed by applicable Law. The Seller Entities have provided Buyer with a
copy of all of the standard terms and conditions of sale, license, or lease for
each of the Business Products and copies of the Seller Entities' standard form
of professional services agreements.
3.22. TRANSACTIONS WITH AFFILIATES; INTERCOMPANY ARRANGEMENTS. Except as
set forth on Schedule 3.22, there are no agreements, loans, leases, royalty
agreements or other continuing transactions between any Seller Entity and (i)
any officer, director, member or stockholder of either of the Seller Entities or
any of their Affiliates or (ii) any member of any officer, director, member or
stockholder of any Seller Entity's family or any of their Affiliates
("Interested Person"). To the Seller Parties' Knowledge, no Interested Person
(x) has any material direct or indirect interest in any entity that does
business with either of the Seller Entities or (y) has any direct or indirect
interest in any property, asset or right that is used by the Seller Entities in
the conduct of the Business. No Interested Person has any contractual
relationship (including that of creditor or debtor) with any Seller Party other
than such relationships as result solely from being an officer, director, member
or stockholder of the Seller Entities.
3.23. BOOKS AND RECORDS. (a) The books, records and accounts of each of
the Seller Entities (i) are accurate and complete in all material respects and
have been maintained in accordance with good business practices on a basis
consistent with prior years; (ii) are stated in reasonable detail and accurately
and fairly reflect the transactions and dispositions of the respective assets of
each of the Seller Entities; and (iii) accurately and fairly reflect the basis
for the Financial Statements.
(b) The corporate minute books of each of the Seller Entities made
available to Buyer are the only minute books of the Seller Entities and contain
complete and accurate records of all actions taken, and summaries of all
meetings held, by the members, stockholders and the board of directors, as the
case may be, of each of the Seller Entities (and any committees thereof) since
time of organization or incorporation, as the case may be, of each of the Seller
Entities.
(c) The Seller Entities have provided Buyer with all copies all books,
records, files and papers, whether in hard copy or computer format, referred to
in Section 2.01 (j).
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3.24. FINDERS' FEES. No agent, broker, finder or investment or commercial
banker, or other Person or firm engaged by or acting on behalf of any of the
Seller Parties or their respective Affiliates in connection with the
negotiation, execution or performance of this Agreement or the transactions
contemplated by this Agreement, is or will be entitled to any broker's or
finder's or similar fees or other commissions as a result of this Agreement or
such transactions.
3.25. REPRESENTATIONS COMPLETE. None of the representations or warranties
made by the Seller Parties in this Agreement or any Ancillary Agreement, nor any
statement made in any Schedule or certificate furnished by the Seller Parties
pursuant to this Agreement or any Ancillary Agreement, when taken together as a
whole, contains any untrue statement of a material fact, or omits to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Seller Parties that:
4.01. ORGANIZATION AND EXISTENCE. Buyer is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware
and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted. Buyer is a subsidiary of DealerTrack Holdings, Inc.
4.02. CORPORATE AUTHORIZATION. The execution, delivery and performance by
Buyer of this Agreement, each of the Ancillary Agreements and the consummation
by Buyer of the transactions contemplated hereby and thereby are within the
corporate powers of Buyer and have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement and each of the Ancillary
Agreements to which any of the Seller Parties is a party have been duly executed
and delivered by Buyer and constitute valid and binding agreements of Buyer.
4.03. GOVERNMENTAL AUTHORIZATION; CONSENTS. (a) The execution, delivery
and performance by Buyer of this Agreement and each of the Ancillary Agreements
require no action by or in respect of, or filing with, any Governmental Entity.
(b) No consent, approval, waiver or other action by any Person
(including any lender) under any contract, agreement, indenture, lease,
instrument or other document to which Buyer or any of its Affiliates is a party
or is bound is required or necessary for the execution, delivery and performance
by Buyer of this Agreement and each Ancillary Agreement or for the consummation
of the transactions contemplated hereby or thereby (including any future
payments set forth in or contemplated by Section 2.06).
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4.04. NON-CONTRAVENTION. The execution, delivery and performance by Buyer
of this Agreement and each of the Ancillary Agreements and the consummation by
Buyer of the transactions contemplated hereby and thereby do not and will not
(i) contravene or conflict with the corporate charter or bylaws of Buyer or (ii)
contravene or conflict with any provision of any Law binding upon or applicable
to Buyer.
4.05. LITIGATION. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of Buyer threatened against or affecting,
Buyer before any Governmental Entity which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated hereby
or which could reasonably be expected to have a material adverse effect on
Buyer's ability to perform its obligations under this Agreement or the Ancillary
Agreements.
4.06. REPRESENTATIONS COMPLETE. None of the representations or warranties
made by Buyer in this Agreement or any Ancillary Agreement, nor any statement
made in any certificate furnished by Buyer pursuant to this Agreement or any
Ancillary Agreement, when taken together as a whole, contains any untrue
statement of a material fact, or omits to state any material fact necessary in
order to make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading.
ARTICLE V
COVENANTS OF THE SELLER PARTIES
The Seller Parties agree that:
5.01. CONFIDENTIALITY. The Seller Parties acknowledge that they are bound
by a previously executed Confidentiality Agreement dated as of March 18, 2005
(the "Confidentiality Agreement"), among the Seller Parties and DealerTrack
Holdings, Inc., which Confidentiality Agreement will continue in full force and
effect in accordance with its terms.
5.02. TRADEMARKS; TRADENAMES. As soon as practicable after the Closing
Date, the Seller Entities shall eliminate the use of all of the trademarks,
tradenames, service marks and service names used in the Business, in any of
their forms or spellings, on all advertising, stationery, business cards,
checks, purchase orders and acknowledgments, customer agreements and other
contracts and business documents. Each Seller Entity shall change the corporate
name of such Seller Entity so as to bear no resemblance to the current name of
such Seller Entity.
5.03. NONCOMPETE. (a) As a material inducement to Buyer's willingness to
enter into and perform this Agreement and to purchase the Purchased Assets and
for the consideration to be paid or provided to the Seller Parties in connection
with such purchase, each Seller Entity agrees that it and its controlled
Affiliates will not Compete (as defined below), at any time for 10 years after
the Closing Date anywhere in the United States and Canada (such period, the
"Non- Competition Period"). For purposes hereof "Compete" means directly or
indirectly, for its own benefit or as agent for another, carry on activities or
participate in the ownership of (except as the
36
passive holder of less than 1% of the outstanding shares of any class of a
corporation whose stock is listed on any national or regional securities
exchange or quoted in the Nasdaq Stock Market or any successor thereto), or
management or control of or participation in the ownership of, or the financing
of, or be employed by, or consult for or otherwise render services to, or allow
its name or reputation to be used in or by, any present or future business
enterprise that competes with the Business or the Buyer Business as the same may
be conducted by Buyer and its Affiliates as of the Closing Date, and shall
include but not be limited to, directly or indirectly, diverting to or
soliciting or accepting for any such business enterprise the business of any
Person who, on the date of the execution and delivery of this Agreement, was a
customer of or, was being pursued as a customer by DealerTrack Holdings, Inc.,
its Affiliates, or any Seller Party.
(b) In consideration of the serious and irreparable injury that
Buyer will suffer in the event a Seller Entity Competes during the
Non-Competition Period, and to ensure that Buyer receives the full value of the
Purchased Assets and the Business, including its goodwill, in consideration of
the Purchase Price paid by Buyer hereunder, the Seller Parties acknowledge that
a breach by any Seller Entity of this Section 5.03 will cause irreparable injury
and damage to Buyer, the exact amount of which would be difficult to ascertain,
and that the remedies at Law for any such breach would be inadequate.
Accordingly, if any Seller Entity breaches this Section 5.03, Buyer shall be
entitled to injunctive relief without posting bond or other security and no
Seller Entity shall object thereto on the grounds that money damages would be
adequate; provided, however, that Buyer may elect, at its option, to seek
damages instead of injunctive relief by virtue of such breach.
(c) In the event that, despite the express agreement of Buyer and
the Seller Entities, any provision of this Section 5.03 shall be determined by
any court or other tribunal of competent jurisdiction to be unenforceable for
any reason whatsoever, the Parties agree that this Section 5.03 shall be
interpreted to extend only over the maximum period of time for which it may be
enforceable, and/or over the maximum geographical areas as to which it may be
enforceable, and/or over the broadest competitive activities as to which it may
be enforceable, and/or to the maximum extent in any and all other respects as to
which it may be enforceable, all as determined by such court or tribunal.
(d) If there is a Final Order determining that Buyer has defaulted
in its obligations to pay any amount payable to a Seller Entity under Section
2.06 of this Agreement and Buyer fails to pay the amounts due to the Seller
Entities within 30 days of such Final Order, the obligations of such Seller
Entity under this Section 5.03 shall be terminated. For the avoidance of doubt,
neither the withholding or the set-off of any amounts pursuant to and in
accordance with Section 10.06 of this Agreement nor the contesting of any
payments pursuant to and in accordance with Sections 2.06 and 2.09 shall be
considered a default for the purposes of this Section 5.03(d).
5.04. NON-SOLICITATION. The Seller Entities agree, for a period of five
(5) years from the Closing Date, that no Seller Entity or any of their
respective controlled Affiliates shall directly or indirectly, solicit, engage
or hire any current or former officer, employee or consultant of Buyer, its
Affiliates or any Seller Party to work in any other business or entity.
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5.05. AUDIT ASSISTANCE. From and after the date of the execution and
delivery of this Agreement, to the extent requested by Buyer in connection with
(a) any audit of Buyer's consolidated financial statements, (b) any separate
presentation to be prepared by Buyer of the financial statements of the Business
(including any such separate presentation of the Business as a "significant
subsidiary" or a "business acquired" within the meaning of the accounting rules
of the Securities and Exchange Commission), or (c) any presentation to be
prepared by Buyer of the pro forma effects of Buyer's acquisition of the
Business, the Seller Parties shall, and shall cause their Affiliates and
accountants to, (i) cooperate fully in the preparation of such financial
statements or pro forma presentation, and (ii) provide, or cause to be provided,
any records or other information requested by Buyer in connection therewith, as
well as access to, and the cooperation of, the accountants and work papers
relating to the Seller Parties, at the cost and expense of Buyer.
5.06 ASSIGNMENT AND NOVATION OF CONSENT PENDING CONTRACTS. (a) Each
Consent Pending Contract will automatically be assigned by the applicable Seller
Entity to Buyer on the date (the "Final Assignment Date") on which the necessary
consent, approval or novation is obtained and the rights and obligations of the
applicable Seller Entity and Buyer with respect to such Consent Pending Contract
during the period that commences on the Closing Date and ends on the applicable
Final Assignment Date shall be governed by the Subcontract Agreement (as defined
below). The Seller Entities and Buyer will cooperate fully with each other and
will use their respective best efforts to obtain, as soon as reasonably
practicable, consents to the assignment, or the novation, of all Consent Pending
Contracts.
(b) With respect to any Consent Pending Contract, the performance
obligations of the applicable Seller Entity thereunder shall, unless prohibited
by such Consent Pending Contract, be subcontracted or delegated to Buyer
pursuant to the terms of a Subcontract Agreement (the "Subcontract Agreement").
(c) If, after the Closing Date, the applicable Seller Entity and
Buyer obtain the necessary consent or approval for the assignment or novation of
a Consent Pending Contract for which an assignment or novation is required, then
such Consent Pending Contract shall be deemed to be assigned and transferred to
Buyer promptly after such Seller Entity and Buyer obtain such consent or
approval or effect such a novation and such Consent Pending Contract shall
immediately thereafter be deemed a Purchased Asset for all purposes under this
Agreement. On the applicable Final Assignment Date, with respect to any Consent
Pending Contract, Buyer and such Seller Entity shall execute and deliver to one
another such instrument of assignment and assumption necessary to effect the
assignment and assumption contemplated hereby.
(d) Each of the Seller Entities covenants not to dissolve, liquidate
or otherwise wind-up or merge or consolidate with or into another entity until
the later of (i) the date on which final payments pursuant to Section 2.06 have
been made by Buyer to the Seller Entities pursuant to this Agreement and (ii)
the expiration or termination in accordance with the terms thereof of all
Consent Pending Contracts and/or the receipt by Buyer of irrevocable written
consents (in form and substance reasonably satisfactory to Buyer) with respect
to such contracts. For the avoidance of doubt, nothing in this subsection (d)
shall be construed to impair the ability of the Seller Entities to make property
distributions to the Principals.
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ARTICLE VI
COVENANTS OF BUYER
Buyer agrees that:
6.01. ACCESS. Buyer, on and after the Closing Date, will afford, at the
expense of the Seller Parties, promptly to the Seller Parties and their
respective agents reasonable access to its properties, books and records
included in the Purchased Assets and Transferred Employees (to the extent such
access does not disrupt the performance by such Transferred Employees of their
obligations to Buyer) to the extent reasonably necessary to permit any Seller
Party to determine any matter relating to its obligations to pay Taxes
(including in connection with the preparation of a Tax Return), or relating to
the Excluded Liabilities.
6.02. CONFIDENTIALITY. Buyer acknowledges that it is bound by the
Confidentiality Agreement, which Confidentiality Agreement will continue in full
force and effect in accordance with its terms.
ARTICLE VII
COVENANTS OF THE PARTIES
The Parties hereto agree that:
7.01. FURTHER ASSURANCES. (a) Subject to the terms and conditions of this
Agreement, each Party will use its commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable under applicable Laws to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements. The Parties agree
to execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement.
(b) Each of the Seller Entities hereby constitutes and appoints, effective
as of the Closing Date, Buyer and its successors and assigns as the true and
lawful attorney of each Seller Entity with full power of substitution in the
name of Buyer or in the name of each such Seller Entity, but for the benefit of
Buyer (i) to collect for the account of Buyer any items of Purchased Assets and
(ii) to institute and prosecute all proceedings which Buyer may in its
reasonable discretion deem proper in order to assert or enforce any right, title
or interest in, to or under the Purchased Assets, and to defend or compromise
any and all actions, suits or proceedings in respect of the Purchased Assets.
Buyer shall be entitled to retain for its account any amounts collected pursuant
to the foregoing powers, including any amounts payable as interest in respect
thereof.
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7.02. CERTAIN FILINGS. The Parties shall cooperate with each other (a) in
determining whether any action by or in respect of, or filing with, any
Governmental Entity is required, or any actions, consents, approvals or waivers
are required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements and (b) in taking such actions or making
any such filings, furnishing information required in connection therewith and
seeking timely to obtain any such actions, consents, approvals or waivers.
7.03. PUBLIC ANNOUNCEMENTS. The Parties agree to consult with each other
before issuing any press release or making any public statement with respect to
this Agreement or the transactions contemplated hereby, including with respect
to the content of any communication to any Governmental Entity and, except as
may be required by applicable Law, will not issue any such press release or make
any such public statement prior to such consultation.
ARTICLE VIII
TAX MATTERS
8.01. TAX MATTERS. Except as set forth in the schedules to this Agreement
(disclosures in one such schedule being deemed disclosures in each other
schedule provided it is reasonably apparent on its face that the matter is
responsive to the representation to which such other schedule relates), the
Seller Parties make the representations and warranties set forth in this Article
VIII to Buyer as of the date hereof. The foregoing notwithstanding, none of the
Principals makes any representations or warranties regarding any other Principal
or the respective interests, circumstances or agreements of any other Principal.
(a) The Seller Entities have timely filed all Tax Returns required to be
filed and have timely paid all Taxes due (whether or not shown or required to be
shown on such Tax Returns), in each case to the extent such Taxes and Tax
Returns related to the Purchased Assets or the operation of the Business. All
such Tax Returns were complete and correct in all respects. No portion of any
Tax Return that relates to the Purchased Assets or the operation of the Business
has been the subject of any audit, action, suit, proceeding, claim or
examination by any Governmental Entity, and no such audit, action, suit,
proceeding, claim, deficiency or assessment is pending or, to the Seller
Parties' Knowledge, threatened. Neither Seller Entity is currently the
beneficiary of any extension of time within which to file any such Tax Return,
and neither Seller Entity has waived any statute of limitation with respect to
any such Tax or agreed to any extension of time with respect to a Tax assessment
or deficiency. No claim has ever been made by a Tax authority in a jurisdiction
where a Seller Entity does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction in connection with the Business or the Purchased
Assets. There are no Liens for Taxes upon the Purchased Assets other than for
property Taxes not yet due. Neither Seller Entity has, or has had, a permanent
establishment or other taxable presence in any foreign country in connection
with the operation of the Business or the acquisition, use, or holding of the
Purchased Assets, as determined under the Laws of such country or any applicable
Tax treaty or convention between the United States and such foreign country.
Neither Seller Entity has any liability for the Taxes of any Person (other than
such Seller Entity) under Treasury Regulation Section 1.1502-6 (or any
corresponding provision of
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state, local or foreign Tax Law), or as a transferee or successor, or by
contract, or otherwise. No portion of the Purchase Price is subject to any Tax
withholding provision of Law.
(b) The Seller Entities have withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
member, stockholder, independent contractor, creditor, or other third party and
relating to the Business or the Purchased Assets. None of the Assumed
Liabilities is an obligation to make a payment that will not be deductible under
Section 280G of the Code.
(c) The Purchased Assets do not include any capital stock or other Equity
Securities in any foreign or domestic corporations, partnerships, joint
ventures, limited liability companies, business trusts, or other entities.
(d) Each of the Seller Entities has timely paid all Taxes, and all
interest and penalties due thereon and payable by it, for the Pre-Closing Tax
Period which will have been required to be paid on or prior to the Closing Date,
the non-payment of which would result in a Lien on any Purchased Asset, would
otherwise adversely affect the Business or would result in Buyer becoming liable
or responsible therefor.
(e) The Seller Entities have established, in accordance with GAAP
principles applied on a basis consistent with that of preceding periods,
adequate reserves for the payment of, and will timely pay, all Taxes which arise
from or with respect to the Purchased Assets or the operation of the Business
and are incurred in or attributable to the Pre-Closing Tax Period, the
non-payment of which would result in a Lien on any Purchased Asset, would
otherwise adversely affect the Business or would result in Buyer becoming liable
or responsible therefor.
(f) Each Seller Entity that is a limited liability company has been taxed
as a partnership for U.S. Federal Income Tax purposes for all periods since the
time of its formation, and has never been a "publicly traded partnership" within
the meaning of Section 7704 of the Code. Each Seller Entity that is a
corporation has at all times since its inception had in effect a valid election
to be treated as an "S corporation" within the meaning of Section 1361 of the
Code (and has had a similar election in effect during such period for purposes
of comparable state and local Income Tax laws in every jurisdiction in which
such Seller Entity is required to file Income Tax Returns or where such election
may be relevant) and no Tax will be imposed under Section 1374 of the Code as a
result of the transactions contemplated by this Agreement.
8.02. TAX COOPERATION; ALLOCATION OF TAXES, (a) Each of Buyer and the
Seller Entities agrees to furnish or cause to be furnished to the other, upon
request, as promptly as practicable, such information and assistance relating to
the Purchased Assets and the Business as is reasonably necessary for the filing
of all Tax Returns and making of any election related to Taxes, the preparation
for any audit by any Governmental Entity, and the prosecution or defense of any
claim, suit or proceeding relating to any Tax Return. Buyer and the Seller
Entities shall cooperate with each other in the conduct of any audit or other
proceeding related to Taxes involving the Business or the Purchased Assets and
each shall execute and deliver such powers of attorney and other documents as
are necessary to carry out the intent of this Section 8.02(a). In addition,
Buyer and the Seller Entities each agree to maintain or arrange for the
maintenance of all records necessary to comply with this Section 8.02 for a
period of seven (7) years from the
41
Closing Date (or such longer period as may be reasonably requested in writing by
Buyer or the Seller Entities) and each such party agrees to afford the other
reasonable access to such records during normal business hours.
(b) All real property Taxes, personal property Taxes and similar ad
valorem obligations levied with respect to the Purchased Assets for a taxable
period which includes (but does not end on) the Closing Date (collectively, the
"Apportioned Obligations") shall be apportioned between the Seller Entities and
Buyer as of the Closing Date based on the number of days of such taxable period
included in the Pre-Closing Tax Period and the number of days of such taxable
period included in the Post-Closing Tax Period, equitably adjusted if necessary
to reflect changes in taxable assets as between the Pre-Closing Period and
Post-Closing Period or portions thereof. The Seller Entities shall be liable for
the proportionate amount of such Taxes that is attributable to the Pre-Closing
Tax Period. Within 90 days after the Closing, each of Buyer and the Seller
Entities shall present a statement to the other setting forth the amount of
reimbursement to which Buyer and each of the Seller Entities, respectively, is
entitled under this Section 8.02(b), together with such supporting evidence as
is reasonably necessary to calculate such amount to be reimbursed. Such amount
shall be paid by the party owing it to the other within 10 days after delivery
of such statement. Thereafter, the Seller Entities shall notify Buyer upon
receipt by the Seller Entities of any xxxx for real or personal property Taxes
relating to the Purchased Assets, part or all of which are attributable to the
Post-Closing Tax Period, and shall promptly deliver such xxxx to Buyer who shall
pay the same to the appropriate Governmental Entity; provided that if such xxxx
covers the Pre-Closing Tax Period, the Seller Entities shall also remit prior to
the due date of assessment to Buyer payment for the proportionate amount of such
xxxx that is attributable to the Pre-Closing Tax Period. If either of the Seller
Entities or Buyer shall thereafter make a payment for which it is entitled to
reimbursement under this Section 8.02(b), the applicable Seller Entity or Buyer,
as the case may be, shall make such reimbursement promptly but in no event later
than 30 days after the presentation of a statement setting forth the amount of
reimbursement to which the presenting party is entitled along with such
supporting evidence as is reasonably necessary to calculate the amount of
reimbursement. Any payment required under this Section 8.02 and not made within
10 days of delivery of the statement shall bear interest at the rate per annum
determined, from time to time, under the provisions of Section 6621(a)(2) of the
Code for each day until paid.
(c) Buyer and the Seller Entities agree to file all Tax Returns consistent
with Schedule 2.08 and shall not make any inconsistent written statements or
take any inconsistent position on any Tax Return, in any refund claim, during
the course of any U.S. Internal Revenue Service ("IRS") audit or other Tax
audit, for any financial or regulatory purpose, in any litigation or
investigation or otherwise. Each of Buyer and the Seller Entities shall notify
the other parties if it receives notice that the IRS or other Governmental
Entity proposes any allocation different than that set forth in Schedule 2.08.
No later than 10 days prior to the filing of their respective IRS Forms 8594
relating to this transaction, Buyer shall deliver to the Seller Party
Representative, and Seller Party Representative shall deliver to Buyer, a copy
of Buyer's and each Seller Party's, respectively, IRS Form 8594.
(d) The Seller Entities shall (i) be responsible for any and all
liabilities for Transfer Taxes, regardless of the Person responsible for such
Transfer Taxes under applicable Law and
42
(ii) timely file or cause to be filed all necessary documents (including all Tax
Returns) with respect to Transfer Taxes.
(e) Each of the Seller Entities shall obtain, as soon as reasonably
practicable, (A) a clearance certificate from the California Board of
Equalization and any related certificates that Buyer may reasonably request as
evidence that all sales and use Tax liabilities of such Seller Entity accruing
before the Closing Date have been fully satisfied or provided for; (B) a
Certificate of Release from the California Employment Development Department
stating that, as of the Closing Date, no contributions, interest, or penalties
are due to the Employment Development Department from such Seller Entity; (C) a
Tax good standing certificate as of the Closing Date of the California Franchise
Tax Board for such Seller Entity; and (D) any other clearance certificate or
similar document(s) which may be required by any Governmental Entity in order to
relieve Buyer of (x) any obligation to withhold any portion of the Purchase
Price and (y) any liability for Taxes (determined without regard to the
provisions of this Agreement assigning responsibility therefor) for which relief
is available by reason of the filing of an appropriate certificate.
ARTICLE IX
EMPLOYEE MATTERS
9.01. EMPLOYEES. As of the Closing Date, Buyer will offer employment to
the employees of the Business who are listed on Schedule 9.01 (all such
employees, the "Transferred Employees") on such reasonable terms and conditions
as Buyer, in its sole discretion, shall determine. The Seller Parties shall not
make any representations, promises or guarantees to any employee concerning
whether such individual shall be selected by Buyer as a Transferred Employee and
the terms or conditions of employment with Buyer.
9.02. EMPLOYEE OBLIGATIONS. As of the Closing Date, each Seller Entity has
satisfied all obligations for compensation, wages and bonuses for the
Transferred Employees attributable to periods on or before the Closing Date.
With respect to the Transferred Employees who accept employment with Buyer,
Buyer will be responsible for (i) compensation, wages and bonuses for such
employees only to the extent attributable to services performed for Buyer after
the Closing Date and (ii) vacation time and vacation pay, pay in lieu of
vacation, sick time and sick pay and employee benefits, provided that Buyer
shall only be responsible for any item referred to in clause (ii) attributable
to services performed by the relevant employee prior to the Closing Date to the
extent covered by 2.03(e). Notwithstanding the obligations of Buyer in the
preceding sentence, no Transferred Employee will receive duplicate benefits from
either Seller Entity and Buyer. The Seller Entities shall also retain all
liabilities to their employees under all Employee Plans. Buyer agrees that any
Transferred Employee who accepts employment with Buyer will be entitled to
participate in Buyer's employee benefit plans to the extent that similarly
situated employees of Buyer are entitled to participate in such plans. To the
extent consistent with applicable Law, each such Transferred Employee shall
receive credit for his or her term of service with a Seller Entity for all
purposes under such plans, including for vesting and any period of service
requires for commencement of participation. For the avoidance of doubt, Buyer
shall have no obligation to extend such term of service credit to any stock
option plan of Buyer. The Seller Entities shall retain liability for all claims
which are incurred under any Seller
43
Entity Employer Plan and Buyer shall have no responsibility or liability for the
payment of such benefits. The liabilities retained by the Seller Entities
include (a) all benefits of any kind for former or current employees of the
Seller Entities who do not become employees of Buyer and their dependents,
spouses and beneficiaries; (b) incurred but unpaid life insurance claims; (c)
long term disability claims incurred before the Closing Date and not yet
reported or claims made and not paid; (d) life insurance waiver of premium
claims incurred before the Closing Date and not yet reported or claims made and
not paid; (e) medical and dental claims incurred before the Closing Date and not
yet reported or claims made and not paid; (f) medical coverage (to the extent
provided) for individuals disabled as of the Closing Date.
9.03. COBRA. The Seller Entities will be responsible for providing
continuation coverage and all related notices to the extent required by Law to
any employee of the Seller Entities or qualified beneficiary who incurs or
incurred a qualifying event under COBRA on or before the Closing Date, including
those qualifying events arising in connection with the consummation of the
transactions contemplated by this Agreement.
9.04. VESTING. To the extent not prohibited by applicable Law or the
applicable plan documents, the Seller Entities shall cause those Transferred
Employees who accept employment with Buyer to become fully vested in their
account balances in any defined contribution pension or profit sharing plan
sponsored or maintained by the Seller Entities or their respective Affiliates,
effective as of the Closing Date.
9.05. NO THIRD PARTY BENEFICIARIES. Notwithstanding any possible
inferences to the contrary, none of the Seller Parties nor Buyer intend for this
Article IX to create any rights or obligations except as between the Seller
Parties and Buyer, and no past, present or future employees of either of the
Seller Entities or any dependents or beneficiaries of such employees, shall be
treated as third-party beneficiaries of this Article IX.
9.06. PLANT CLOSING LAWS. The Parties shall cooperate to avoid the
incurrence of liability to any employee under any Plant Closing Law. To the
extent that liability may be incurred, the Seller Parties shall be liable for
and indemnify and hold harmless Buyer with respect to any liability relating to
any employee who is not a Transferred Employee.
9.07. UNEMPLOYMENT INSURANCE. The Seller Parties shall cooperate with
Buyer, at its request and expense, to transfer the Seller Entities' respective
unemployment insurance ratings and experience to Buyer.
ARTICLE X
SURVIVAL; INDEMNIFICATION; SET-OFF
10.01. SURVIVAL. All covenants and agreements set forth in this Agreement,
the Ancillary Agreements or in any writing or certificate delivered pursuant to
or in connection herewith or therewith or the transactions contemplated by this
Agreement shall survive the Closing Date and shall continue until the date set
forth in each such covenant, agreement or obligation and, if no such date is set
forth therein, then for a period of five (5) years after the
44
Closing Date. The representations and warranties of the Seller Parties contained
in this Agreement, any Ancillary Agreements or in any writing or certificate
delivered pursuant to or in connection herewith or therewith shall survive the
Closing Date but shall terminate and expire for all purposes at 5:00 pm, New
York time on the date which is three (3) years after the Closing Date (the
"Expiration Date"), and shall not provide the basis for any claim thereafter,
except (i) as to any matter with respect to which Buyer, or any of its officers,
directors, employees, members, agents and Affiliates (the "Buyer Group") has
made a claim for indemnification in good faith pursuant to the terms of this
Agreement on or prior to such date, in which case such matter shall survive the
expiration of such period until such claim is finally resolved and any
obligations with respect thereto are fully satisfied in accordance with the
terms hereof; and (ii) with respect to the representations and warranties of the
Seller Entities relating to Tax matters (including those set forth in Article
VIII hereof), which shall terminate and expire for all purposes at 5:00 p.m.,
New York time, on the date which is five (5) years after the Closing Date. The
representations and warranties of Buyer contained in this Agreement, any
Ancillary Agreement or in any writing or certificate delivered pursuant to or in
connection herewith or therewith shall survive the Closing Date but shall
terminate and expire for all purposes at the Expiration Date, and shall not
provide the basis for any claim thereafter, except as to any matter to which any
Seller Party has made a claim for indemnification in good faith pursuant to the
terms of this Agreement on or prior to such date, in which case such matter
shall survive the expiration of such period until such claim is finally resolved
and any obligations with respect thereto are fully satisfied in accordance with
the terms hereof. Any investigation or other examination that may have been made
or may be made at any time by or on behalf of the Party to whom representations
and warranties are made in this Agreement, any Ancillary Agreement or any
writing or certificate delivered pursuant to or in connection herewith or
therewith shall not limit, diminish or in any way affect such representations
and warranties, and the Parties may rely on such representations, warranties and
covenants irrespective of any information obtained by them by any investigation,
examination or otherwise.
10.02. INDEMNIFICATION BY THE SELLER PARTIES As a material inducement to
Buyer's willingness to enter into and perform this Agreement and the Subcontract
Agreement and to purchase the Purchased Assets and for the Purchase Price to be
paid or provided to the Seller Parties in connection with such purchase, each
Seller Entity shall, subject to the limitations set forth in this Article X,
indemnify, defend and hold harmless the Buyer Group against any and all claims,
losses, liabilities, damages, deficiencies, interest and penalties, costs and
expenses, including reasonable attorneys' fees and expenses, and expenses of
investigation and defense (hereinafter individually a "Loss" and collectively
"Losses") incurred or suffered by any member of the Buyer Group, directly or
indirectly, as a result of or arising from:
(a) any misrepresentation or breach of a representation or warranty
of any Seller Party set forth herein;
(b) any breach or nonperformance of any covenants or agreements made
by the Seller Parties in this Agreement
(c) any breach or nonperformance of any covenants or agreements made
by the Seller Parties in the Subcontract Agreement;
45
(d) any Excluded Liability; or
(e) any claim for payment of fees and/or expenses as a broker or
finder in connection with the origin, negotiation or execution of this Agreement
or the Ancillary Agreements or the consummation of the transactions contemplated
hereby based upon any alleged agreement, arrangement or understanding between
the claimant and a Seller Party or any of their agents or representatives.
Except as provided in Section 10.05(e), the Seller Parties other than the Seller
Entities shall have no obligation to indemnify, defend or hold harmless the
Buyer Group pursuant to this Article X. A misrepresentation in or breach of the
representations or warranties set forth in Section 3.06 shall be deemed not to
have resulted in any Losses to the Buyer Group if such misrepresentation or
breach (i) results in an adjustment of the Purchase Price pursuant to Section
2.10, or (ii) results in 2004 EBITDA being less than it would have been if
calculated based on the Financial Statements but does not result in an
adjustment of the Purchase Price pursuant to Section 2.10.
10.03. BUYER INDEMNIFICATION OBLIGATIONS. As a material inducement to the
Seller Parties' willingness to enter into and perform this Agreement and the
Subcontract Agreement, subject to the limitations set forth in this Article X,
Buyer agrees to indemnify, defend and hold harmless the Seller Parties for any
and all Losses sustained, suffered or incurred by any Seller Party, directly or
indirectly, as a result of or arising from:
(a) any misrepresentation or breach of a representation or warranty
of Buyer set forth herein;
(b) any breach or nonperformance of any covenants or agreements made
by Buyer in this Agreement, including any breach of Buyer's obligations to pay
the Purchase Price in accordance with Section 2.06;
(c) any breach or nonperformance of any covenants or agreements made
by Buyer in the Subcontract Agreement; or
(d) any Assumed Liability.
10.04. INDEMNIFICATION PROCEDURES (a) Any party seeking indemnification
under Section 10.02 or 10.03 (each, an "Indemnified Party") shall give prompt
written notice (the "Notice of Claim") to the other party (the "Indemnifying
Party") of any Loss in respect of which the Indemnified Party has a duty to
indemnify such Indemnified Party under this Agreement, and the Notice of Claim
shall specify in reasonable detail the nature of the Loss for which
indemnification is sought, the section or sections of this Agreement to which
the Notice of Claim relates and the amount of the Loss involved (or, if not
determinable, a reasonable good faith estimate of the amount of the Loss
involved); provided, however, that no delay or failure on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party of any liability or obligation hereunder, except to the
extent that the Indemnifying Party clearly demonstrates that the defense of any
third party suit, action or proceeding has been materially prejudiced by the
Indemnified Party's failure to give such notice.
46
(b) If such Notice of Claim relates to any claim, suit, action,
cause of action suit or proceeding by a third party, the Indemnifying Party may
upon written notice given to the Indemnified Party within 20 days of the receipt
by the Indemnifying Party of such Notice of Claim, assume control of the defense
of such action, suit or proceeding with counsel reasonably satisfactory to the
Indemnified Party. If the Indemnifying Party does not so assume control of such
defense, the Indemnified Party shall have the right to control such defense. The
Party not controlling such defense may participate therein at its own expense;
provided that, if the Indemnifying Party assumes control of such defense and the
Indemnified Party reasonably demonstrates that a conflict of interest exists
between the interests of the Indemnifying Party, on the one hand, and those of
the Indemnified Party, on the other hand, with respect to such claim, the
Indemnified Party may retain counsel satisfactory to it and the reasonable fees
and expenses of counsel to the Indemnified Party shall be considered Losses for
purposes of this Agreement. Notwithstanding anything to the contrary contained
herein, in the event that the Indemnified Party determines in its reasonable
judgment that there is a probability that a claim, suit, action or proceeding
may materially adversely affect (it being understood by the Parties hereto that
any action relating to Taxes and Intellectual Property shall be deemed to
"materially adversely affect") it or its rights under this Agreement other than
as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, then the Indemnified Party may, by written
notice to the Indemnifying Party, assume the exclusive right to defend,
compromise, or settle such claim and the reasonable fees and expenses of counsel
shall be considered Losses for purposes of this Agreement. The Party controlling
such defense shall keep the other Party advised of the status of such action,
suit or proceeding and the defense thereof and shall consider in good faith
recommendations made by the other Party with respect thereto.
(c) Neither the Indemnifying Party nor any Indemnified Party shall
agree to any settlement of any claim, suit, action, cause of action suit or
proceeding without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed. For purposes hereof, a Party's
withholding of its consent to any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the other
Party of a complete irrevocable release from all liability in respect to such
claim or litigation or which requires action (or limits action) other than the
payment of money that would be considered to be Losses under this Agreement
shall be deemed to be reasonable.
(d) In accordance with Section 10.08, the Seller Party
Representative shall act on behalf of the Seller Parties in connection with the
matters set forth in this Section 10.04.
10.05. METHODS OF PAYMENT; LIMITATIONS.
(a) Any claims by members of the Buyer Group for indemnification
pursuant to this Article X shall be satisfied solely by set-off from payments to
be made by Buyer pursuant to Section 2.06(b)(ii) and (v), in accordance with the
set-off mechanism set forth in Section 10.06.
(b) The Seller Entities shall have no obligation to indemnify the
Buyer Group under Section 10.2(a) and (b) until the aggregate of all Losses
suffered or incurred by the Buyer Group with respect thereto exceeds $250,000
("Threshold Amount") and once the Threshold Amount has been reached, the Seller
Entities shall indemnify the Buyer Group for all Losses
47
relating to claims under Section 10.02(a) and (b), including those Losses below
the Threshold Amount, but only up to the extent that amounts are payable
pursuant to Section 2.06(b)(ii) and (v). The total aggregate liability of the
Seller Entities under this Agreement shall not exceed $ 15,000,000 (the
"Aggregate Indemnification Amount").
(c) Buyer shall have no obligation to indemnify any Seller Party
under Section 10.03(a) and 10.03(b) (other than Buyer's obligation to pay the
Purchase Price), until the aggregate of all Losses suffered or incurred by the
Seller Parties with respect thereto exceeds the Threshold Amount and once the
Threshold Amount has been reached, Buyer shall indemnify the Seller Parties for
all Losses, including those Losses below the Threshold Amount, but only to the
extent that amounts are payable pursuant to Section 2.06(b)(ii) and (v);
provided, however, that for purposes of determining such amounts payable
pursuant to Section 2.06(b)(ii) and (v), any amounts set off by Buyer pursuant
to Section 10.06 shall not be taken into account. The total liability of the
Buyer under this Agreement (other than Buyer's obligation to pay the Purchase
Price and pursuant to Section 10.02(c)) shall not exceed the Aggregate
Indemnification Amount.
(d) For purposes of determining whether a Party has breached any
representation or warranty in this Agreement and for calculating the Threshold
Amount, any qualification or limitation of a representation by reference to
materiality of matters stated therein or as to matters having or not having a
"Material Adverse Effect" or words of similar effect, shall be disregarded.
(e) The indemnification provisions provided in this Article X, as
limited by this Section 10.05, shall be the exclusive remedy available to the
Parties hereto with respect to any breach of the representations, warranties,
covenants or agreements of the Parties to this Agreement; provided, however,
that notwithstanding the foregoing, nothing in this Agreement shall limit (i)
any right or remedy for fraud, intentional misrepresentation or willful breach
or misconduct, (ii) any equitable remedy, including a preliminary or permanent
injunction or specific performance for such breaches, including with respect to
breaches of Article V of this Agreement, or (iii) subject to Buyer's rights
under Section 10.06, the right of the Seller Entities to xxx Buyer directly for
failure to pay any amount due under Section 2.06(b)(i)-(iv) or the right of the
Seller Entities to seek enforcement of any final decision by the Accounting
Arbiter pursuant to Section 2.06(c) or the Accounting Referee pursuant to
Section 2.09(c).
10.06. BUYER SET-OFF RIGHT. If a Notice of Claim has been asserted in good
faith by Buyer against the Seller Entities prior to the due date of any required
payment from Buyer to the Seller Entities pursuant to Section 2.06(b)(ii) or
(v), then Buyer shall be entitled to withhold from such payment Buyer's
reasonable estimate of the Losses incurred by Buyer as set forth in such Notice
of Claim, notwithstanding that such amount may be contingent or not reduced to
judgment, until such matter is resolved. If it is finally determined (by an
agreement between the Seller Party Representative and Buyer, or by Final Order)
that the Seller Entities are (i) not required to indemnify the Buyer for the
claimed Losses under this Article X, or (ii) required to indemnify the Buyer in
an amount less than the claimed Losses under this Article X, then the amount of
any such Losses (as so determined) shall be set off against the retained
payments, and the remainder, if any, shall be delivered to the Seller Entities,
together with interest on such remainder payable from the date such payment was
first withheld by Buyer until paid, at the rate per annum equal to the rate
quoted in The Wall Street Journal on the date of such agreement or
48
Final Order as the "base rate on corporate loans posted by at least 75% of the
nation's largest banks" in the United States, plus one percent (1.00%) per
annum, but in no event greater than 7%, within 10 days by delivery of such
payment to the Designated Account.
10.7. TREATMENT. All indemnification payments made under this Agreement
shall be treated as adjustments to the Purchase Price for Income Tax purposes.
The amount of any Losses for which indemnification is provided under this
Article X shall be net of any amounts recovered by the Indemnified Party under
insurance policies with respect to such Losses.
10.8. SELLER PARTY REPRESENTATIVE; POWER OF ATTORNEY.
(a) Each Seller Party hereby initially appoints, as of the date of
this Agreement, Seller Party Representative, as his or its true and lawful agent
and attorney-in-fact to: (i) give and receive notices and communications to or
from Buyer relating to this Agreement or any of the transactions and other
matters contemplated hereby (except to the extent that this Agreement expressly
contemplates that any such notice or communication shall be given or received by
such Seller Party individually); (ii) authorize the satisfaction of claims
asserted by any Indemnified Party pursuant to this Agreement; (iii) object to
such claims pursuant to the terms hereof; (iv) consent or agree to, negotiate,
enter into settlements and compromises of, and agree to arbitration and comply
with orders of courts and awards of arbitrators with respect to, such claims;
(v) assert, negotiate, enter into settlements and compromises of, and agree to
arbitration and comply with orders of courts and awards of arbitrators with
respect to, any other claim by any Indemnified Party, against any Seller Entity
or by any such Seller Entity against any Indemnified Party or any dispute
between any Indemnified Party and any such Seller Entity, in each case, relating
to this Agreement or the transactions contemplated hereby or thereby; (vi)
defend any indemnification claims under this Agreement; and (vii) take all
actions necessary or appropriate in the judgment of the Seller Party
Representative for the accomplishment of the foregoing, in each case without
having to seek or obtain the consent of any Person under any circumstance. The
person serving as the Seller Party Representative may be replaced from time to
time by Xxxxxxx Xxxxx upon not less than five (5) days' prior written notice to
Buyer.
ARTICLE XI
MISCELLANEOUS
11.01. NOTICES. All notices, requests, demands or other communications
that are required or may be given pursuant to the terms of this Agreement shall
be in writing and shall be deemed to have been duly given: (i) on the date of
delivery, if personally delivered by hand, (ii) upon the third day after such
notice is deposited in the United States mail, if mailed by registered or
certified mail, postage prepaid, return receipt requested, (iii) upon the date
scheduled for delivery after such notice is sent by a nationally recognized
overnight express courier or (iv) by fax upon written confirmation (including
the automatic confirmation that is received from the recipient's fax machine) of
receipt by the recipient of such notice:
49
if to Buyer, to:
Santa Acquisition Corporation
c/o DealerTrack Holdings, Inc.
0000 Xxxxxx Xxxxxx
Xxxx Xxxxxxx, XX 00000
Attn: General Counsel
Telephone: (000)000-0000
Facsimile: (000)000-0000
with a copy to:
Xxxxxxx Procter LLP
Exchange Place
Boston, MA 02109
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000)000-0000
Facsimile: (000)000-0000
E-mail: xxxxxxx@xxxxxxxxxxxxxx.xxx
if to the Seller Entities, to:
Automotive Lease Guide (alg), LLC
0000 Xxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail: 0xxxxxx@xxx.xxx
with a copy to:
Seed Xxxxxxx LLP
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail: xxxxxxxx@xxxxxxxxxxx.xxx
50
if to the Seller Entity Representative, to:
Xxxx X. Xxxxx
000 Xxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail: xxxxxx@xxx.xxx
with a copy to:
Seed Xxxxxxx LLP
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail: xxxxxxxx@xxxxxxxxxxx.xxx
Any Party may change its address for the delivery of notices pursuant to this
Section 11.01 upon written notice to the other Parties delivered in accordance
with this Section 11.01.
11.02. AMENDMENTS; WAIVERS. This Agreement may be amended only if such
amendment is in writing and signed by Buyer and each Seller Party.
(b) Any provision of this Agreement may be waived by a Party if the
waiver is in writing and signed by the Party to be bound.
(c) No failure or delay by any Party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
11.3. EXPENSES. All costs and expenses incurred in connection with this
Agreement shall be paid by the Party incurring such cost or expense. Should any
action or proceeding be brought to construe or enforce the terms and conditions
of this Agreement or the rights of the parties hereunder, the losing party shall
pay to the prevailing party all court costs and reasonable attorneys' fees and
costs (at the prevailing party's attorneys then-current rates) incurred in such
action or proceeding.
11.4. ASSIGNABILITY; SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be binding upon and inure to the benefit of the Parties hereto
and their respective successors and assigns. Neither this Agreement nor any
rights or obligations hereunder may be assigned or delegated by any Party
without the prior written consent of the other Parties; provided, however, that
Buyer may assign this Agreement or any of its rights hereunder to any Affiliate
of Buyer
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without the prior written consent of any other Party so long as Buyer remains
responsible for the obligations of Buyer (including such assignee).
11.5. GOVERNING LAW; JURISDICTION. This Agreement and the Ancillary
Agreements (other than the Employment Agreements) shall be governed by, and
construed in accordance with, the internal Laws of the State of New York without
giving effect to the principles of conflicts of Laws thereof. For the purposes
of establishing the Parties' rights hereunder, each Party hereto hereby
irrevocably and unconditionally consents to submit to the jurisdiction of the
courts of the State of New York located in the City of New York, the courts of
the State of California located in the City of Los Angeles and the courts of the
United States of America located in the City of New York and the City of Los
Angeles in connection with any actions, suits or proceedings arising out of or
relating to this Agreement and the transactions contemplated hereby, other than
pursuant to the Employment Agreements (and each Party hereto agrees not to
commence any action, suit or proceeding relating thereto except in such courts).
Each Party hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in accordance with the
foregoing sentence, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
11.6. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each Party hereto shall have received a
counterpart hereof signed by the other Parties hereto. The facsimile
transmission of any original signed counterpart of this Agreement (or any
amendment hereto or any other document delivered pursuant hereto), and the
retransmission of any signed facsimile transmission, shall be treated for all
purposes as the delivery of an original signed counterpart.
11.7. ENTIRE AGREEMENT. This Agreement and the Ancillary Agreements
constitute the entire agreement between the Parties with respect to the subject
matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, between the Parties with respect to the
subject matter hereof. No representation, inducement, promise, understanding,
condition or warranty not set forth herein has been made or relied upon by
either Party hereto. None of the provisions of this Agreement and the Ancillary
Agreements is intended to confer upon any Person other than the Parties hereto
any rights or remedies hereunder.
11.8. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
11.9. RULES OF CONSTRUCTION; ETC. The Parties agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and the Ancillary Agreements and, therefore, waive the application of any Law or
rule of construction providing that ambiguities in an agreement or other
document will be construed against the Party drafting such agreement or
document. Unless the context of this Agreement otherwise requires, (i) words of
52
any gender include each other gender; (ii) words using the singular or plural
number also include the plural or singular number, respectively; (iii) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to this
entire Agreement; (iv) the terms "Article" or "Section" refer to the specified
Article or Section of this Agreement; (v) the word "including" shall mean
"including, without limitation;" (vi) the word "or" shall be disjunctive but not
exclusive; (vii) the word "agreement" shall mean any contract, commitment or
other agreement, whether oral or written, that is legally binding; and (viii)
the headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. References to agreements and other documents shall be deemed to
include all subsequent amendments and other modifications thereto. References to
statutes shall include all regulations promulgated thereunder and references to
statutes or regulations shall be construed as including all statutory and
regulatory provisions consolidating, amending or replacing the statute or
regulation. The schedules and exhibits to this Agreement are a material part
hereof and shall be treated as if fully incorporated into the body of the
Agreement. Whenever this Agreement refers to a number of days, such number shall
refer to calendar days unless otherwise provided, and shall be counted from the
day immediately following the date from which such number of days are to be
counted. All accounting terms used herein and not expressly defined herein shall
have the meanings given to them under GAAP.
11.10. TIME. Time is of the essence in the performance of and compliance
with each of the provisions and conditions of this Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Parties hereto here caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
SANTA ACQUISITION CORPORATION, AUTOMOTIVE LEASE GUIDE (ALG), LLC
a Delaware corporation a California limited liability company
By: By:
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AUTOMOTIVE LEASE GUIDE (ALG)
CANADA, INC.
a California corporation
By:
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Chairman and Chief Financial Officer
XXXXXXX X. XXXXX
By:
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XXXX X. XXXXX
By:
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XXX XXXXXXXX
By:
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