Exhibit 10.1
STOCK PURCHASE AGREEMENT
between
PHH VEHICLE MANAGEMENT SERVICES, LLC
and
xxxxxxxxxxxxx.xxx Corp.
and
xxxxxxxxxxxxx.xxx FS Corp.
Dated as of October 29, 2001
COMPANY DISCLOSURE SCHEDULES
Section:
2.4 Consents and Approval
2.6 Undisclosed Liabilities
2.7 Absence of Certain Changes
2.8 Litigation
2.9 Compliance with Law (Permits)
2.10 Employee Benefit Plans
2.11 Labor and Employment Matters
2.12 Taxes
2.13 Contracts
2.14 Real Property
2.15 Intellectual Property
2.17 Environmental Compliance
2.18 Affiliate and Non-Arm's Length Transactions
2.19 Guarantees
2.20 Customers
2.24 Property/Assets/Liabilities
2.29 Bank Accounts
4.1 Conduct of Business of the Seller
5.3(d) List of "Company Employees"
i
EXHIBITS
Exhibit A Certificate of Designation Term Sheet
Exhibit B Preferred Stock Purchase Agreement
Exhibit C Escrow Agreement
Exhibit D Voting Agreement
Exhibit E driversshield Logo
Exhibit F Trademark License Agreement
Exhibit G Transition Services Agreement
Exhibit H Proprietary Software Licenses Agreement
Exhibit I Acknowledgment
Exhibit J Joint Contracts
ii
STOCK PURCHASE AGREEMENT, dated as of October 29, 2001 (this "Agreement"),
by and among PHH Vehicle Management Services, LLC, a Delaware limited liability
(the "Buyer"), and xxxxxxxxxxxxx.xxx Corp., a New York corporation (the
"Seller"), and xxxxxxxxxxxxx.xxx FS Corp., a New York corporation (the
"Company").
WHEREAS, the Seller is the record and beneficial owner of all of the
outstanding shares of capital stock of (the Company);
WHEREAS, the Company's principal business is to provide vehicle accident
repair and management services to self-insured corporate and government fleets
(the "Business");
WHEREAS, the Seller desires to sell to the Buyer, and the Buyer desires to
purchase from the Seller, all of the issued and outstanding shares of the
capital stock of the Company; and
WHEREAS, the Seller desires to issue and sell to the Buyer, and the Buyer
desires to purchase from the Seller, an aggregate of 1,000 shares (the
"Preferred Shares") of the Series A Convertible Preferred Stock, par value $.01,
of the Seller, as described in the Certificate of Designation Term Sheet
attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and subject to the terms and conditions hereof, the parties
intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
Section 1.1 Purchase and Sale of Stock. On the Closing Date, upon the
terms and subject to the conditions of this Agreement, the Seller shall sell to
the Buyer, and the Buyer shall purchase from the Seller, the Company Shares.
Additionally, on the Closing Date, upon the terms and subject to the conditions
of the Preferred Stock Purchase Agreement attached hereto as Exhibit B, the
Seller shall sell to the Buyer, and the Buyer shall purchase from the Seller,
the Preferred Shares. For the purposes of this Agreement, the term "the "Company
Shares" shall
-4-
mean all of the outstanding shares of the common stock, par value $____ per
share, of the Company.
Section 1.2 Purchase Price. Subject to the terms of this Agreement and the
Preferred Stock Purchase Agreement, Buyer agrees to pay to the Seller Seven
Million Three Hundred Thousand Dollars ($7,300,000) (the "Closing Payment") for
the Company Shares and the Preferred Shares. At the Closing, the Buyer shall pay
One Hundred Seventy-Five Thousand Dollars ($175,000) of the Closing Payment into
an escrow account held by Buyer's outside counsel pursuant to the Escrow
Agreement attached hereto as Exhibit C (the "Escrow Agreement"). The balance of
the Closing Payment shall be paid by wire transfer of immediately available
funds to an account designated by Seller in writing.
Section 1.3 Time and Place of Closing. Upon the terms and subject to the
conditions of this Agreement , the closing of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of Seller at 00
Xxxx Xxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000 within three (3) business days
after all of the conditions to each party's obligations specified in Article V
hereof have been satisfied or waived by the party entitled to waive the
applicable condition,, or at such other date, place or time as the parties may
agree in writing. The date on which the Closing occurs and the transactions
contemplated hereby become effective is referred to herein as the "Closing
Date".
Section 1.4 Voting Agreement. Simultaneously with the execution and
delivery of this Agreement, Xxxxx Xxxxxx and Xxxx Xxxxxx shall execute and
deliver to Buyer a Voting Agreement (the "Voting Agreement") in the form
attached hereto as Exhibit D.
Section 1.5 Deliveries by the Seller. Subject to the terms and conditions
hereof, at the Closing, the Seller will deliver the following to the Buyer:
(a) stock certificates representing the Company Shares, duly endorsed (or
accompanied by duly executed stock powers) for transfer to the Buyer and
registered on the stock books of the Company in the name of the Buyer;
(b) the officer's certificate provided for in Section 5.3(h) of this Agreement;
(c) the officer's certificate provided for in Section 4.21 of this Agreement;
(d) the officer's certificate provided for in Section 4.23 of this Agreement;
5
(e) a certificate of the Secretary of the Seller reasonably satisfactory in form
and substance to the Buyer setting forth (i) resolutions of the Board of
Directors, (ii) minutes of the proceedings of the shareholders of the Seller
authorizing the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and certifying that such
resolutions/authorization have been duly made and have not been rescinded or
amended as of the Closing Date, and (iii) the number of shares of common stock
of the Company issued and outstanding as of the Closing Date
(f) all of the books and records of the Seller relating primarily to the Company
or the Business, including, without limitation, all minute books and stock
ledgers relating to the Company;
() (g) letters of resignation and releases reasonably satisfactory to the Buyer
effective as of the Closing Date from each director and officer of the Company;
(h) the FIRPTA Certificate provided for in Section 4.6(j) of this Agreement; and
(i) all other documents, instruments and writings required to be delivered by
the Seller at or prior to the Closing Date pursuant to this Agreement.
Section 1.6 Deliveries by the Buyer.. Subject to the terms and conditions
hereof, at the Closing, the Buyer will deliver the following to the Seller:
(a) the officer's certificate provided for in Section 5.2(c) of this Agreement;
(b) a certificate of the Assistant Secretary of the Buyer reasonably
satisfactory in form and substance to the Seller setting forth resolutions of
the Board of Directors of the Buyer authorizing the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby and
certifying that such resolutions have been duly made and have not been rescinded
or amended as of the Closing Date; and
(c) all other documents, instruments and writings required to be delivered by
the Buyer at or prior to the Closing Date pursuant to this Agreement.
Section 1.7 Deliveries by the Buyer and Seller Subject to the terms and
conditions hereof, at the Closing, the Buyer and Seller will execute and
deliver, one to the other, the following:
6
(a) the Trademark License Agreement provided for in Section 4.13 of this
Agreement;
(b) the Transition Services Agreement provided for in Section 4.14 of this
Agreement;
(c) the Escrow Agreement provided for in Section 1.2 of this Agreement;
(d) the Preferred Stock Purchase Agreement provided for in Section 1.1 of this
Agreement;
(e) the Proprietary Software License Agreement provided for in Section 4.19 of
this Agreement; and
(f) the Web Site Linking Agreement provided for in Section 4.20 of this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller and the Company hereby represent and warrant, jointly and
severally, to the Buyer as follows:
Section 2.1 Organization; Etc.. The Seller and the Company (i) are
corporations validly existing and in good standing under the laws of their
respective jurisdictions of incorporation, (ii) have all requisite corporate
power and authority to own, lease and operate their respective properties and
assets and to carry on their respective businesses as they are now being
conducted, and (iii) are duly qualified and in good standing to do business in
each jurisdiction in which the nature of their respective businesses or the
ownership, operation or leasing of their respective properties makes such
qualification necessary. The Seller has previously delivered or made available
to the Buyer true and complete copies of the organizational documents or
comparable governing instruments (including all amendments to each of the
foregoing) of the Company as in effect on the date hereof.
Section 2.2 Authority Relative to this Agreement. Each of the Seller and
the Company has all necessary corporate power and authority to execute and
deliver
7
this Agreement, the Trademark License Agreement, the Transition Services
Agreement, and the Escrow Agreement (collectively, the "Transaction Documents"),
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the other
Transaction Documents by the Seller and the Company and the consummation by the
Seller and the Company of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Seller or the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
and thereby (other than, the approval of this Agreement by the holders of
two-thirds of the outstanding shares of the Seller's Common Stock (the
"Shareholder Approval"), and any filing or recordation required by the New York
Business Corporation Law). The only vote of the holders of any class or series
of capital stock of the Seller or the Company necessary to approve this
Agreement and the transactions contemplated hereby is the Shareholder Approval.
This Agreement and the other Transaction Documents have been or will be duly
executed and delivered by each of the Seller and the Company and, assuming the
due authorization, execution and delivery by the other parties hereto, each such
agreement constitutes a legal, valid and binding obligations of such party,
enforceable against such party in accordance with its terms, subject to the
effect of any applicable bankruptcy, moratorium, insolvency, reorganization or
other similar law affecting the enforceability of creditors' rights generally
and to the effect of general principles of equity which may limit the
availability of remedies (whether in a proceeding at law or in equity) (the
"Bankruptcy Exception").
8
Section 2.3 Capitalization.
(a) The authorized capital stock of the Company consists of 30,000,000 shares of
common stock, par value $.015 per share. As of the date hereof there are
10,696,988 of such shares issued and outstanding, not including treasury shares.
At the Closing, Seller shall provide a Certificate of Secretary setting forth
the number of shares of common stock of the Company issued and outstanding as of
the Closing Date. The Company Shares have been duly authorized and validly
issued and are fully paid and non-assessable. Except as set forth in this
Section 2.3 and except for the Company Shares, there are no outstanding (i)
shares of capital stock or voting securities of the Company, (ii) securities of
the Company convertible into or exchangeable for shares of capital stock or
voting securities of the Company, (iii) options or other rights or agreements,
either directly or indirectly, to acquire from the Company, or other obligation
of the Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company or (iv) additional classes of capital stock or other ownership interests
in the Company. There are no preemptive rights, options, warrants, stock
appreciation rights (or other securities that have their value tied to any other
securities of the Company), or other rights, agreements, arrangements or
commitments of any character to which the Seller or the Company is a party or by
which the Seller or the Company is bound relating to the issued or unissued
capital stock of the Company or obligating the Company to issue or sell any
shares of capital stock of, or other equity interests in, the Company.
(b) The Seller is the record and beneficial owner of the Company Shares, free
and clear of any Liens other than Permitted Liens and any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such shares) and such shares constitute 100% of the issued and
outstanding shares of the Company. The Seller will transfer and deliver to the
Buyer at the Closing valid title to the Company Shares free and clear of any
Liens other than Permitted Liens) and any such limitation or restriction. The
Company does not own, directly or indirectly, any equity or voting interest in,
or otherwise control, any Person, and has no agreement or commitment to acquire
any such equity or voting interest. For the Purposes of this Agreement, "Person"
shall mean a natural person, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Entity or other entity or organization.
"Liens" shall mean any lien, security interest, mortgage, pledge,
hypothecation, charge, preemptive right, voting trust, imposition, covenant,
9
condition, right of first refusal, easement or conditional sale or other title
retention agreement or other restriction; provided, however, that Liens shall
not include any Permitted Lien.
"Permitted Lien" shall mean, (a) Liens imposed by any Governmental Entity
for Taxes, assessments or charges not yet due and payable or which are being
contested in good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on the books of the Company in accordance with
GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or
other like Liens arising in the ordinary course of business which are not
overdue for a period of more than thirty (30) days or which are being contested
in good faith and by appropriate proceedings, if adequate reserves with respect
thereto are maintained on the books of the Company in accordance with GAAP; (c)
pledges or deposits in connection with worker's compensation, unemployment
insurance and other social security legislation; or (d) deposits to secure the
performance of any or all of the following: bids, trade contracts (other than
for borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business.
Section 2.4 Consents and Approvals; No Violations. Except as set forth in
Section 2.4 of the Company Disclosure Schedule, neither the execution and
delivery of this Agreement by the Seller or the Company, nor the consummation by
the Seller or the Company of the transactions contemplated hereby will (a)
conflict with or result in any breach of any provision of the certificate or
articles of incorporation, as the case may be, or by-laws of the Seller or the
Company, (b) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or require any consent under,
any indenture, license, contract, agreement or other instrument or obligation to
which the Seller or the Company is a party or by which either of them or any of
their respective properties or assets are bound, (c) violate any order, writ,
injunction, decree or award rendered by any Governmental Entity (as hereinafter
defined) or any statute, rule or regulation (collectively, "Laws" and,
individually, a "Law") applicable to the Seller or the Company or any of their
respective properties or assets, or (d) require any filing with, or the
obtaining of any permit, authorization, consent or approval of, any domestic or
foreign, federal, state or local governmental or regulatory authority, (a
"Governmental Entity") or (e) result in the creation of a Lien on any property
or asset of the Company pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation. The execution and delivery of this Agreement by the Seller and the
Company do not, and the performance by the Seller and the Company of its
obligations hereunder and the consummation of the
10
transactions contemplated hereby will not, require any consent, approval,
authorization or permit of, or filing by the Seller or the Company with or
notification to, any Governmental Entity, except pursuant to those applicable
requirements of the Exchange Act, the Securities Act, state securities or "blue
sky" laws, the rules and regulations of The Nasdaq SmallCap Market ("Nasdaq"),
state takeover laws, and any filing or recordation required by the New York
Business Corporation Law as set forth in Section 2.4 of the Company Disclosure
Schedule.
Section 2.5 SEC Reports; Financial Statements.
(a) The Seller has timely filed all forms, reports, statements and documents
required to be filed by it pursuant to the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended, and other applicable
Securities and Exchange Commission ("SEC") and Nasdaq rules and regulations (A)
with the SEC and Nasdaq since December 31, 1999 (collectively, together with any
such forms, reports, statements and documents the Seller may file subsequent to
the date hereof until the Closing, the "Seller Reports") and (B) with any other
Governmental Entities. Each Seller Report (i) was prepared in all respects in
accordance with the requirements of the Securities Act, the Exchange Act, or the
respective rules and regulations promulgated thereunder, or the rules and
regulations of Nasdaq, as the case may be, and (ii) did not at the time it was
filed (or, in the case of registration statements filed under the Securities
Act, at the time of effectiveness) contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each form, report, statement and
document referred to in clause (B) of this paragraph was prepared in all
material respects in accordance with the requirements of applicable Law.
(b) Each of the financial statements (including, in each case, any notes
thereto) contained in the Seller Reports was prepared in accordance with GAAP
(except as may be permitted by Form 10-Q under the Exchange Act) applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each presented fairly, in all material respects, the
financial position of the Seller as at the respective dates thereof and its
results of operations, shareholders' equity and cash flows for the respective
periods indicated therein, except as otherwise noted therein (subject, in the
case of unaudited statements, to normal and recurring immaterial year-end
adjustments).
(c) Except as and to the extent set forth or reserved against on the balance
sheet
11
of the Seller as reported in the Seller Reports, including the notes thereto,
the Seller has no liabilities or obligations of any nature (whether direct,
indirect, known, unknown, accrued, unaccrued, absolute, contingent or otherwise)
that would be required to be reflected on a balance sheet or in notes thereto
prepared in accordance with GAAP, except for immaterial liabilities or
obligations incurred in the ordinary course of business consistent with past
practice since December 31, 2000.
(d) The Seller previously has delivered to the Buyer true and complete copies of
the unaudited balance sheets of the Company as of December 31, 2000 and trial
balance sheets as of June 30, 2001 (the "Balance Sheets"), together with an
unaudited statement of income for the twelve (12) months ended June 30, 2001
(collectively the "Financial Statements"). The Financial Statements have been
prepared from, are in accordance with and accurately reflect, the books and
records of the Company, comply in all material respects with applicable
accounting requirements, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved and fairly present, in all material
respects, the financial position and the results of operations of the Company as
of the times and for the periods referred to therein. For the purposes of this
Agreement, "GAAP" shall mean United States generally accepted accounting
principles. The parties acknowledge that the Seller does not allocate certain
corporate expenses to the unaudited statements of its subsidiaries.
(e) The Financial Statements have all been prepared from the books and records
of the Company in accordance with GAAP applied consistently throughout the
periods involved. The books and accounts of the Company are complete and correct
and fully and fairly reflect all of the transactions of the Company. The parties
acknowledge that the Seller does not allocate certain corporate expenses to the
unaudited statements of its subsidiaries.
Section 2.6 Absence of Undisclosed Liabilities of the Company Except as
and to the extent set forth or reserved against on the Financial Statements,
including the notes thereto, the Company has no liabilities or obligations of
any nature (whether direct, indirect, known, unknown, accrued, unaccrued,
absolute, contingent or otherwise) that would be required to be reflected on a
balance sheet or in notes thereto prepared in accordance with GAAP, except for
immaterial liabilities or obligations incurred in the ordinary course of
business consistent with past practice since December 31, 2000.
Section 2.7 Absence of Certain Changes. Except as set forth in Section 2.7
of the Company Disclosure Schedule or as otherwise contemplated by
12
this Agreement, since June 30, 2001, (a) there has not been any development or
event that has had or, with respect to clause (ii) of this Section 2.7, could
reasonably be expected to have, individually or in the aggregate, a Business
Material Adverse Effect and (b) the Company has conducted its business in the
ordinary course consistent with past practice and used reasonable efforts to
preserve intact its business organizations and relationships with any Person and
keep available the services of its present management and key employees. As used
in this Agreement, the term "Business Material Adverse Effect" shall mean a
material adverse change in, or effect on, (i) the business, prospects, financial
condition or results of operations of the Company or (ii) the ability of either
the Seller or the Company to perform its obligations under this Agreement.
Notwithstanding the foregoing, a Business Material Adverse Effect shall not have
occurred with respect to the financial condition or results of operations of the
Company if (x) the Company has made at least $465,000 in Gross Profits, as
hereinafter defined, for the three month period ending December 31, 2001 (the
"Gross Profits Test") and (y) clients of the Company representing an aggregate
amount of at least eighty-five percent (85%) of the Revenues of the Company for
the nine month period ended September 30, 2001, have continued, as of the
Closing Date, to actively assign accident claims to the Company and have not
expressed their intention to cease assigning such claims to the Company (the
"Client Test"). In the event that the Company has not made at least $465,000 in
Gross Profits for the three month period ending December 31, 2001, the Closing
Date will be delayed in accordance with the provisions of Section 6.1(b). In the
event of such delay in the Closing Date, a Business Material Adverse Effect
shall not be deemed to have occurred with respect to the financial condition or
results of operations of the Company if (x) the Company has made at least
$465,000 in Gross Profits for the three month period ending January 31, 2002 and
(y) clients of the Company representing an aggregate amount of at least
eighty-five percent (85%) of the Revenues of the Company for the nine month
period ended September 30, 2001, have continued, as of the Closing Date (as
delayed in accordance with the provisions hereof and of Section 6.1(b)), to
actively assign accident claims to the Company and have not expressed their
intention to cease assigning such claims to the Company.
The term "Gross Profits" shall mean the amount of gross xxxxxxxx to the
Company's clients including fees paid by clients to the Company, less payments
made by the Company to suppliers from such gross xxxxxxxx, plus net subrogation
revenue (which shall be calculated as the difference between the amount
collected on behalf of Company clients from a third party with respect to
subrogation claims, less the amount actually credited or remitted to clients
with respect to such claims). The term "Revenues" shall mean the amount of gross
xxxxxxxx to the Company's clients
13
including fees paid by clients to the Company plus subrogation revenue (which
shall be calculated as the amount collected on behalf of Company clients from a
third party with respect to subrogation claims). The Seller may substitute five
percent (5%) of the Revenues of the Company for Revenues lost from departing
clients for the purpose of meeting the requirements of the Client Test provided
Buyer is satisfied that CARQUEST Corporation has entered into a written contract
with the Company pursuant to which CARQUEST has engaged the Company to provide
accident management and subrogation services for its full fleet of approximately
10,000 vehicles.
Section 2.8 Litigation. Except as set forth in Section 2.8 of the Company
Disclosure Schedule, there is no action, suit, proceeding or governmental
investigation (each, a "Legal Proceeding") pending or, to the knowledge of the
Seller or the Company, threatened against either of the Seller or the Company in
respect of the Company (or in respect of the Seller, if such Legal Proceeding
could reasonably be expected to effect Seller's ability to enter into this
Agreement) by or before any court or Governmental Entity. There is no Legal
Proceeding pending or, to the knowledge of the Seller or the Company,
threatened, against either of the Seller or the Company in respect of the
Company that questions the validity of this Agreement or any action taken or to
be taken by the Seller or the Company in connection with the consummation of the
transactions contemplated hereby. Except as set forth in Section 2.8 of the
Company Disclosure Schedule, there is not outstanding or, to the knowledge of
the Seller or the Company, threatened, any orders, judgments, decrees or
injunctions issued by any Governmental Entity against, affecting or naming the
Company (or the Seller, if it could reasonably be expected to effect Seller's
ability to enter into this Agreement).
Section 2.9 Compliance with Law. The Company is in compliance with all
Applicable Laws, and neither the Seller nor the Company has notice or a
reasonable basis to believe that the Company has in any material respect
violated any such Applicable Law. The Company has all permits, licenses, and
other governmental authorizations, consents, and approvals necessary to conduct
its business as currently conducted (collectively, the "Permits"). All of the
Permits are identified in Section 2.9 of the Company Disclosure Schedule. The
Company is not in violation of the terms of any Permit, nor has the Company
engaged in any activity that is reasonably likely to cause revocation or
suspension of any such Permit and no action or proceeding looking to or
contemplating the revocation or suspension of any such Permit is pending or, to
the Seller's knowledge, threatened. For the purposes of this Agreement, the term
"Applicable Law" shall mean any domestic or foreign federal, state or local
statute, law (including common law), ordinance, rule, administrative
14
interpretation, regulation, order, judgment, award, injunction, writ or decree
applicable to the parties or the provisions of this Agreement.
Except as set forth in Section 2.9 of the Company Disclosure Schedule, the
Company and, to the knowledge of the Seller, each Person acting as an agent of
the Company has, since January 1, 1998, complied in all material respects with
Applicable Laws, having the purpose or effect of prohibiting unlawful
discrimination against customers or potential customers and, to the knowledge of
the Seller, the Company has not received any complaints from any Person or
Governmental Entity that the Company or any Person acting as an agent of the
Company has engaged in any unlawful discrimination.
Section 2.10 Employee Benefit Plans.
(a) Section 2.10(a) of the Company Disclosure Schedule sets forth a correct and
complete list of all 401(k), equity compensation, incentive compensation, stock
incentive plans, vacation, bonus or other incentive plans, all other employee
programs, arrangements or agreements (including, without limitation, all
employment, termination or severance agreements), all medical, vision, dental or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, in each case, that is maintained, sponsored
or contributed to or required to be contributed to by Seller or the Company or
any trade or business, whether or not incorporated (an "ERISA Affiliate"), that
together with Seller or the Company would be deemed a "single employer" within
the meaning of Section 4001(b) of ERISA, or to which Seller or the Company or an
ERISA Affiliate is a party, whether written or oral, (collectively, the "Seller
Benefit Plans"). Except as set forth in Section 2.10(a) of the Company
Disclosure Schedule, neither Seller nor the Company sponsors or contributes to
any other employee plans (including employee benefit plans) or programs
including pension, retirement, profit sharing, deferred compensation, employee
stock ownership, or severance plans or programs, and neither the Seller nor the
Company has made any commitment to establish any new plan or program or modify
any existing plan or program.
(b) Except as disclosed in Section 2.10(b) of the Company Disclosure Schedule,
all the Seller Benefit Plans and the related trusts comply with and have been
administered in all material respects in compliance with, their terms, ERISA,
the Code, and Applicable Laws. Seller has not received any written notice from
any Governmental Entity questioning or challenging such compliance or
administration.
15
(c) Except as disclosed in Section 2.10(c) of the Company Disclosure Schedule,
there are no unresolved claims or disputes under the terms of, or in connection
with, a Seller Benefit Plan other than routine claims for benefits which are
payable in the ordinary course, and no material litigation or proceeding has
been commenced or is expected to be commenced with respect to any Seller Benefit
Plan.
(d) No Seller Benefit Plan is subject to Title IV of ERISA. No material
liability under Title IV or Section 302 of ERISA has been incurred by the
Seller, the Company or any ERISA Affiliate that has not been satisfied in full,
and no condition exists that presents a material risk to the Seller, the Company
or any ERISA Affiliate of incurring any such liability.
(e) Each Seller Benefit Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code is so qualified and the trusts maintained thereunder
are exempt from taxation under Section 501(a) of the Code and, to the Seller's
knowledge, no condition exists that would reasonably be likely to adversely
affect such qualification.
(f) Except as disclosed in Section 2.10(f) of the Company Disclosure Schedule,
no Seller Benefit Plan provides medical, surgical, hospitalization, death or
similar benefits (whether or not insured) for Employees or former employees of
the Company for periods extending beyond their retirement or other termination
of service, other than coverage mandated by Applicable Law.
(g) Except as disclosed in Section 2.10(g) of the Company Disclosure Schedule,
the consummation of the transactions contemplated by this Agreement will not,
either alone or in combination with another event, (i) entitle any current or
former employee of the Company to severance pay, unemployment compensation or
any other payment, including without limitation any payment under any employment
contract between any Employee and Seller or the Company, except as expressly
provided in this Agreement, (ii) accelerate the time of payment or vesting, or
increase the amount of compensation or awards due any such Employee or former
employee or (iii) cause any compensation or payment to any Employee to not be
deductible for federal income tax purposes by virtue of Sections 280G or 4999 of
the Code.
(h) Neither Seller nor any ERISA Affiliate has contributed to or been obligated
to contribute to a "multi-employer plan" (within the meaning of Section 3(37) of
ERISA).
16
Section 2.11 Labor and Employment Matters.
(a) Schedule 2.11(a) contains a correct and complete list of all employees of
the Company ("Company Employees") and, as separately designated on Schedule
2.11(a), employees of Seller or Seller's Affiliates, who perform essential
services for the Company ("Service Employees") as of the date of this Agreement,
specifying for each person his or her job title and rate of annual base salary
and target annual bonus opportunity (Company Employees and Service Employees
collectively, "Employees"). Except as disclosed in Section 2.11(a) of the
Company Disclosure Schedule or otherwise provided pursuant to this Agreement,
the employment of all Company Employees is terminable at will by the Company
without any penalty or severance obligation of such employer entity. Except as
set forth in Section 2.11(a) of the Company Disclosure Schedule, (i) neither the
Company nor the Seller is a party to any union agreement or collective
bargaining agreement or work rules or practices agreed to with any labor
organization or employee association and, to the knowledge of the Seller and the
Company, no attempt to organize any of the Employees or any employees of Seller
has been made or is pending, (ii) since January 1, 1998, the Company and the
Seller have not had any Equal Employment Opportunity Commission charges or other
claims of employment discrimination made against it, (iii) since January 1,
1998, no state wage and hour department investigations have been made of the
Company or the Seller, (iv) since January 1, 1998, there has been no labor
strike, dispute, slowdown, stoppage or lockout against or affecting the Company
or the Seller, (v) no unfair labor practice charge or complaint against the
Company or the Seller is pending before the National Labor Relations Board or
any similar Governmental Entity, and (vi) there are no written personnel
policies, rules or procedures applicable to any Employees of the Company, other
than those set forth in Section 2.11(a) of the Company Disclosure Schedule, true
and correct copies of which have heretofore been delivered to the Buyer. Except
as set forth in Section 2.11 (a) of the Company Disclosure Schedule, there are
no employment contracts or severance agreements with any Employees or
independent contractors of the Company.
(b) Since the enactment of the Worker Adjustment and Retraining Notification
("WARN") Act, there has not been (i) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of the Company or the Seller; or
(ii) a "mass layoff" (as defined in the WARN Act) affecting any site of
employment or facility of the Company or the Seller; nor has the Company or the
Seller been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state or
local law. Except
17
as set forth in Section 2.11(b) of the Company Disclosure Schedule, the Company
or the Seller has not suffered an "employment loss" (as defined in the WARN Act)
since 3 months prior to the date of this Agreement.
Section 2.12 Taxes.
(a) Except as set forth in Section 2.12 of the Company Disclosure Schedule:
(i) The Company (i) has timely filed (or caused to be filed when due) with
the appropriate taxing authorities all material Tax Returns (as
hereinafter defined) required to be filed by it and all such Tax Returns
are true, correct and complete, (ii) has paid all Taxes (as hereinafter
defined) due and payable by it, and (iii) is a "C" corporation for federal
tax purposes, and (iv) established in the most recent Financial Statements
reserves that are adequate for the payment of any Taxes not yet due and
payable;
(ii) The Seller has prior to the date hereof provided to the Buyer copies
of all Tax Returns applicable to the Company;
(iii) There are no outstanding agreements extending or waiving the
statutory period of limitation applicable to any claim for, or the period
for the collection or assessment of, Taxes due for any taxable period with
respect to any Tax for which the Company may be subject or liable;
(iv) There is not now pending, nor to the knowledge of each the Seller and
the Company is there any threat of an audit, assessment, collection, suit,
action, administrative proceeding, investigation or other proceeding by
any Governmental Entity relating to (i) any Taxes due from or with respect
to the Company, or (ii) any Tax Return of or with respect to the Company;
(v) There are no Liens for Taxes upon the assets or properties of the
Company, except for statutory Liens for current Taxes not yet due;
(vi) The Company (i) is not a party to, bound by, or obligated under any
agreement relating to the sharing or allocation of Taxes or
indemnification agreement with respect to Taxes or any similar contract or
arrangement and (ii) has no potential liability or obligation to any
Person as a result of, or pursuant to, any such agreement, contract or
arrangement;
(vii) The Company has not agreed, nor is it required to make, any
18
adjustment under Sections 446(e) or 481(a) of the Code (or any similar
provision of state, local or foreign law) by reason of a change in
accounting method or otherwise for any Tax period for which the applicable
federal statute of limitations has not expired;
(viii) The Company has not received a ruling from any Tax authority, nor
has it entered into any closing agreement pursuant to Section 7121 of the
Code (or any similar provision of state, local or foreign law) or any
other agreement with similar Tax purposes;
(ix) The Company has complied with all applicable laws relating to the
withholding of Taxes and has timely withheld and paid over to the relevant
Tax authority all amounts required to be so withheld and paid over for all
periods under all applicable laws, including withholding in connection
with payments to employees, independent contractors, creditors, partners,
stockholders or other third parties;
(x) The Company has not been a member of any federal, state, local or
foreign consolidated, unitary, combined or similar group other than the
group in which Seller (or its Affiliates) is the common parent;
(xi) The Company has not filed a consent pursuant to Section 341(f) of the
Code (or any predecessor provision) or agreed to have Section 341(f)(2) of
the Code apply to the disposition of a subsection (f) asset (as such term
is defined in Section 341(f)(4) of the Code) owned by the Company;
(xii) No jurisdiction where the Company does not file a Tax Return has
made a Claim that the Company is required to file a Tax Return for such
jurisdiction;
(xiii) and the deduction of any amount payable or benefit provided
pursuant to the terms of any plan, agreement or arrangement, whether
written or oral, of the Company will not be subject to disallowance under
Section 162(a)(1), 162(m) or 280G of the Code;
(xiv) No person is entitled to receive any "gross-up" payment from the
Company in the event that the excise tax of Section 4999(a) is imposed on
such Person;
(xv) Since the date of the Financial Statements, the Company has not
19
incurred any liability for Taxes other than in the ordinary course of
business; and
(xvi) No power of attorney is currently in force with respect to any
matter relating to Taxes of the Company.
(b) For the purpose of this Agreement, (i) the term "Tax" or "Taxes" shall mean
(x) any taxes, customs, duties, levies, fees or other like assessment or charge
of any kind whatsoever imposed by any Governmental Entity (including, but not
limited to, any taxes on or with respect to net or gross income, gross receipts,
franchise, profits, capital, sales, use, ad valorem, value added, transfer, real
property transfer, transfer gains, inventory, capital stock, license,
withholding, payroll, employment, social security, unemployment, excise,
severance, stamp, occupation, real or personal property, gains, estimated taxes,
rent, excise, occupancy, recordation, bulk transfer, intangibles, alternative or
added minimum, real property, doing business, or any disability insurance
contributions, unemployment insurance contributions or workers' compensation
contributions), together with any interest thereon, penalties, fines, fees,
additions to tax or additional amounts with respect thereto, imposed by the
United States (federal, state or local) or other applicable jurisdiction; (y)
any liability for the payment of any amounts described in (x) as a result of
being a member of an affiliated, consolidated, combined, unitary or similar
group or as a result of transferor or successor liability and (z) any liability
for the payments of any amounts as a result of being a party to any tax sharing
agreement or as a result of any express or implied obligation to indemnify any
other Person with respect to the payment of any amounts of the type described in
clause (x) or (y). (ii) "Tax Return" shall mean all returns, reports,
statements, declarations, estimates and forms or other documents (including any
related or supporting information) required to be filed by, or on behalf of the
Company with respect to Taxes; and (iii) the term "Code" shall mean the Internal
Revenue Code of 1986, as amended.
Section 2.13 Contracts.
(a) Except with respect to body shop agreements, a list of which will be
provided by Seller to Buyer as soon as practicable after the execution and
delivery of this Agreement in accordance with the terms of Section 4.21 hereof,
Section 2.13(a) of the Company Disclosure Schedule contains a correct and
complete list of all Contracts pursuant to which the Company is a party to or
bound by; and
(i) have a duration of three months or more and are not terminable without
penalty upon 60 days or less prior written notice by any party;
20
(ii) require or could reasonably be expected to require any party thereto
to pay $15,000 or more in any twelve month period, or $50,000 or more in
the aggregate;
(iii) require or could require any severance or retention payments to
Employees after the Closing Date;
(iv) contain any restrictive covenant, confidentiality or non-competition
agreement;
(v) constitute a lease or license of any Intellectual Property from any
third party;
(vi) regard the employment, services, consulting, termination or severance
from employment of any director, officer, Employee, Company Employee, or
other Person;
(vii) constitute a trust indenture, mortgage, promissory note, loan
agreement or other Contract for the borrowing of money or a leasing
transaction of the type required to be capitalized in accordance with
GAAP;
(viii) constitute an agreement of guarantee, support, indemnification,
assumption or endorsement of, or any other similar commitment with respect
to, the obligations, liabilities (whether accrued, absolute, contingent or
otherwise) or indebtedness of any other Person (except for checks endorsed
for collection);
(ix) any contract with non-standard payment terms, in each case;
(x) limit the freedom of the Company to engage in any line of business or
to compete with any other corporation, partnership, limited liability
company, trust, individual or other entity, or any confidentiality,
secrecy or non-disclosure Contract or any Contract that may be terminable
as a result of the Buyer's status as a competitor of any party to such
Contract;
(xi) are with an Affiliate or are between the Company and an Affiliate(s)
(including the Seller), on one hand, and a third party, on the other hand
(the "Joint Contracts");
(xii) provide for a joint venture or partnership with any other Person;
21
(xiii) are not in writing, true and correct summaries of which have been
provided to Buyer;
(xiv) constitute a contract entered into by the Company other than in the
ordinary course consistent with past practice; or
(xv) has granted or been granted forgiveness or waived or been granted a
waiver of any rights or obligations under such Contract.
(b) Except as set forth in Section 2.13(b) of the Company Disclosure Schedule:
(i) all of the Contracts are valid and binding and are in full force and effect,
the Company is not in default under, and no event has occurred which, with the
passage of time or giving of notice or both, would result in the Company being
in default under, any of the terms of the Contracts, (ii) none of the Contracts
requires the consent of any other party thereto in connection with the
transactions contemplated by this Agreement, (iii) none of the Contracts
contains a change of control provision that would either prohibit the
transactions contemplated by this Agreement or require the consent of any third
party; (iv) the Company is a party to a written agreement with all suppliers of
goods and services to the Company and (v) there exists no default or event of
default or event, occurrence, condition or act, with respect to the other
contracting party, which, with the giving of notice, the lapse of the time or
the happening of any other event or conditions, would become a default or event
of default under any Contract. True, correct and complete copies of all
Contracts have been delivered to the Seller.
(c) For the purpose of this Agreement the term "Contract" means any written or
oral agreement, arrangement, commitment, contract, indenture, instrument, lease
or obligation of any kind or character to which the Company is a party or that
is binding on the Company or its assets or business.
Section 2.14 Real Property. Section 2.14 of the Company Disclosure
Schedule sets forth a list of all real property leased or subleased by or on
behalf of the Company along with all documentation and amendments related
thereto (the "Real Property Lease") and includes the expiration date of any Real
Property Lease. The Company does not own any real property.
Section 2.15 Intellectual Property.
(a) As used herein, the term "Intellectual Property" means (i) all trade names,
22
trademarks, service marks, product designations, trade dress, logos, slogans,
and designs and general intangibles of a like nature together with goodwill, all
registrations and applications related to the foregoing (collectively,
"Trademarks") set forth in Section 2.15(a) of the Company Disclosure Schedule;
(ii) the Internet domain names set forth in Section 2.15(a) of the Company
Disclosure Schedule; (iii) the patents, patent applications, disclosures of
inventions and the patents issued upon patent applications or based upon such
invention disclosures (collectively, "Patents") set forth in Section 2.15(a) of
the Company Disclosure Schedule; (iv) the copyrights, copyright registrations
and copyright applications (collectively, "Copyrights") set forth in Section
2.15(a) of the Company Disclosure Schedule; (v) all copies of computer programs,
including any and all software implementations of algorithms, models and
methodologies whether in source code or object code form, databases and
compilations, including any and all data and collections of data, all
documentation, including user manuals and training materials, related to any of
the foregoing and the content and information contained on any Web site other
than mass market software licensed to the Company that is available in consumer
retail stores or otherwise commercially available and subject to "shrink-wrap",
"click-through" or other standard form license agreements (collectively,
"Software") and (vi) the confidential information, technology, know-how,
inventions, processes, formulae, algorithms, models and methodologies (such
confidential items collectively, "Trade Secrets"), in the case of each of (i)
through (vi) of this paragraph, held for use or used in or related to the
business of the Company as conducted as of the Closing Date (including all
documentation relating thereto) or as contemplated to be conducted and any
licenses to use any of the foregoing.
(b) Section 2.15(b) of the Company Disclosure Schedule sets forth, for all
Intellectual Property owned directly or indirectly, or licensed, leased or
otherwise used, by the Company, a complete and accurate list, of all U.S. and
foreign: (i) patents and patent applications; (ii) trademark and service xxxx
registrations (including Internet domain name registrations owned directly or
indirectly by either the Company), trademark and service xxxx applications and
material unregistered trademarks and service marks; and (iii) copyright
registrations, copyright applications and material unregistered copyrights.
(c) Section 2.15(c) of the Company Disclosure Schedule lists all contracts for
material Software which is licensed, leased or otherwise used by the Company,
and all Software which is owned by the Company ("Proprietary Software"), and
identifies which Software is owned, licensed, leased, or otherwise used, as the
case may be.
23
(d) Section 2.15(d) of the Company Disclosure Schedule sets forth a complete and
accurate list of all material agreements granting or obtaining any right to use
or practice any rights under any Intellectual Property, to which the Company is
a party or otherwise bound, as licensee or licensor thereunder, including,
without limitation, license agreements, settlement agreements and covenants not
to xxx (collectively, the "License Agreements").
(e) Except as set forth in Section 2.15(e) of the Company Disclosure Schedule or
as would not individually or in the aggregate have a Business Material Adverse
Effect on the Company:
(i) The Company owns or has the right to use all Intellectual Property,
free and clear of all Liens other than Permitted Liens;
(ii) Any Intellectual Property owned by the Company, the Seller or any of
their respective Affiliates and used by the Company, has been duly
maintained, is valid and subsisting, in full force and effect and has not
been cancelled, expired or abandoned;
(iii) Any Intellectual Property used by the Company but not owned by the
Company, the Seller or any of their respective Affiliates has been duly
maintained, is valid and subsisting, in full force and effect and has not
been cancelled, expired or abandoned;
(iv) Neither the Seller nor the Company has received written notice from
any third party regarding any actual or potential infringement by the
Company of any intellectual property of such third party, and the Company
has no knowledge of any basis for such a claim against the Company;
(v) Neither the Seller nor the Company has received written notice from
any third party regarding any assertion or claim challenging the validity
of any Intellectual Property owned or used by the Company or any
subsidiary of the Company and the Company has no knowledge of any basis
for such a claim;
(vi) The Company has not licensed or sublicensed its rights in any
Intellectual Property, or received or been granted any such rights, other
than pursuant to the License Agreements;
(vii) No third party is misappropriating, infringing, diluting or
violating
24
any Intellectual Property owned or used by the Company;
(viii) The License Agreements are valid and binding obligations of the
Company, enforceable in accordance with their terms, except that such
enforcement may be subject to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws, now or hereafter in effect,
relating to or limiting creditors' rights generally;
(ix) The Company takes reasonable measures to protect the confidentiality
of Trade Secrets including requiring third parties having access thereto
to execute written nondisclosure agreements. No Trade Secret of the
Company has been disclosed or authorized to be disclosed to any third
party other than pursuant to a written nondisclosure agreement that the
Company and the Seller reasonably believe adequately protects the
Company's proprietary interests in and to such Trade Secrets;
(x) The consummation of the transactions contemplated hereby will not
result in the loss or impairment of the Company's rights to own or use any
of the Intellectual Property, nor will such consummation require the
consent of any third party in respect of any Intellectual Property; and
(xi) All Proprietary Software set forth in Section 2.15(c) of the Company
Disclosure Schedule, was either developed (a) by employees of the Company
within the scope of their employment; or (b) by independent contractors
who have assigned all of their rights to the Company pursuant to written
agreement.
(f) Except as set forth in Section 2.15(f) of the Company Disclosure Schedule,
neither the Seller nor the Company:
(i) has granted to any third party any exclusive rights of any kind
(including, without limitation, exclusivity with regard to categories of
advertisers on any World Wide Web site, territorial exclusivity or
exclusivity with respect to particular versions, implementations or
translations of any of the Intellectual Property), nor has the Seller or
the Company granted any third party any right to market any of the
Intellectual Property under any private label or "OEM" arrangements;
(ii) has any outstanding sales or advertising contract, commitment or
proposal (including, without limitation, insertion orders, slotting
agreements
25
or other agreements under which the Seller or the Company has allowed
third parties to advertise on or otherwise be included in a World Wide Web
site) that the Company currently expects to result in any material loss to
the Company upon completion or performance thereof;
(iii) has any oral contracts or arrangements for the sale of advertising
or any other product or service; or
(iv) employs any employee, contractor or consultant who, to the Company's
knowledge, is in violation of any material term of any written employment
contract, patent disclosure agreement or any other written contract or
agreement relating to the relationship of any such employee, consultant or
contractor with the Company or, to the Seller's or the Company's
knowledge, any other party because of the nature of the Business.
Section 2.16 Year 2000 Compliance. The Company has not experienced any
Year 2000 Compliance problems with respect to the Proprietary Software. As used
herein, "Year 2000 Compliance", means for all dates and times, including,
without limitation, dates and times after December 31, 1999 and in the
multi-century scenario, when used on a stand-alone system or in combination with
other software or systems: (i) the application system functions and receives and
processes dates and times correctly without abnormal results; (ii) all date
related calculations are correct (including, without limitation, age
calculations, duration calculations and scheduling calculations); (iii) all
manipulations and comparisons of date-related data produce correct results for
all valid date values within the scope of the application; (iv) there is no
century ambiguity; (v) all reports and displays are sorted correctly; and (vi)
leap years are accounted for and correctly identified (including, without
limitation, that 2000 is recognized as a leap year).
Section 2.17 Environmental Compliance. Except as would not individually or
in the aggregate have a Seller Material Adverse Effect: (a) the Company is in
compliance with all applicable Environmental Laws; (b) the Company has all
material Permits required under any applicable Environmental Laws and are in
compliance with their respective requirements; and (c) there are no pending or,
to Seller's knowledge, threatened claims under Environmental Laws against the
Company. For the purposes of this Agreement, the term "Environmental Laws" shall
mean each federal, state, local and foreign law and regulation relating to
pollution, protection or preservation of human health or the environment
including ambient air, surface water, ground water, land surface or subsurface
strata, and natural resources, and including each law and regulation relating to
emissions,
26
discharges, releases or threatened releases of materials of environmental
concern, or otherwise relating to the manufacturing, processing, distribution,
use, treatment, generation, storage, containment (whether above ground or
underground), disposal, transport or handling of materials of environmental
concern, or the preservation of the environment or mitigation of adverse effects
thereon and each law and regulation with regard to record keeping, notification,
disclosure and reporting requirements respecting materials of environmental
concern.
Section 2.18 Affiliate and Non-Arm's Length Transactions. Since January 1,
1999, the Company has not made any payment or loan to, or borrowed any moneys
from or is otherwise indebted to, any officer, director, Employee, Company
Employee, shareholder, Affiliate of the Company or any other Person not dealing
at arm's length with the Company, except as disclosed in Section 2.18 of the
Company Disclosure Schedule and except for usual employee reimbursements and
compensation paid in the ordinary course. Except as described in Section 2.18 of
the Company Disclosure Schedule and except for Contracts of employment, the
Company is not a party to any Contract with any officer, director, Employee,
shareholder or Affiliate of the Company or any other Person not dealing at arm's
length with the Company. Except as described in Section 2.18 of the Company
Disclosure Schedule, neither Seller nor any officer, director or shareholder of
the Company and no entity which is an Affiliate of one or more of such
individuals: (a) owns, directly or indirectly, any interest in (except for
shares representing less than 1% of the outstanding shares of any class or
series of any publicly traded company), or is an officer, director, employee or
consultant of, any Person which is, or is engaged in business as, a competitor
of the Company or a lessor, lessee, supplier, distributor, sales agent or
customer of the Company; (b) owns, directly or indirectly, in whole or in part,
any property used in the operation of the business of the Company; or (c) has to
the knowledge of the Seller or the Company any cause of action or other claim
whatsoever against, or owes any amount to, the Company, except for any claims in
the ordinary course such as for accrued vacation pay and accrued benefits under
any employee plans. Section 2.18 of the Company Disclosure Schedule contains a
complete and correct list as of the date hereof of all Contracts, transfers of
assets or liabilities or commitments or transactions, whether or not entered
into in the ordinary course, to or by which the Company, on the one hand, and
the Seller, an Affiliate of the Seller or any officer, director, employee or
shareholder of the Seller, an Affiliate of the Seller or the Company, on the
other hand, are a party or are otherwise bound or affected that (i) are
currently pending or in effect or (ii) involve continuing liabilities and
obligations. For the purposes of this Agreement, the term "Affiliate" shall have
the meaning set forth in Rule 12b-2 of the Exchange Act.
27
Section 2.19 Guarantees. Except as set forth in Section 2.19 of the
Company Disclosure Schedule, neither the Seller nor any other third party
(including any Affiliate) has guaranteed the duties, performance, or obligations
(financial or otherwise) of the Company for the benefit of any Person. Except as
set forth in Section 2.19 of the Company Disclosure Schedule, the Company has
not guaranteed the duties, performance or obligations (financial or otherwise)
of any Person.
Section 2.20 Customers. Section 2.20 of the Seller's Disclosure Schedule
sets forth the twenty (20) largest customers (each a "Material Customer") of the
Company as of the date hereof, based on gross revenues received from each such
customer during such period. Neither Seller nor the Company has received written
notice, or to Seller's knowledge any oral notice, from any Material Customer
that such Material Customer is canceling or otherwise substantially reducing its
usage or purchase of the products and services of the Company. Except as set
forth in Section 2.20 of the Company Disclosure Schedule, the Company has a
written agreement with each Material Customer.
Section 2.21 Brokers; Finders and Fees. The Seller has not employed any
investment banker, broker or finder or incurred any liability for any investment
banking fees, brokerage fees, commissions or finders' fees in connection with
this Agreement or the transactions contemplated hereby.
Section 2.22 Accounts Receivable. All information set forth in the June
30, 2001 balance sheet with respect to accounts receivable of the Company is
true, accurate and complete as June 30, 2001, and since that date up to and
including the Closing Date there has been no material adverse change with
respect to the amount, validity, or collectibility of accounts receivable of the
Company, except for increases or decreases in the amount of accounts receivable
due to the continued operation of the Company in its ordinary course of
business. Such accounts receivables are, and at the Closing Date, to the extent
not theretofore collected, will be, valid and existing evidence of monies due
for services performed or goods sold.
Section 2.23 Insurance. The Company is presently insured, and since its
inception has been insured, against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured. The policies of fire, theft, liability and other insurance maintained
with respect to the assets or businesses of the Company, in the Company's
reasonable estimation, provide adequate coverage against loss. The Company has
furnished to the Buyer a complete and correct list as of the date hereof of all
insurance policies maintained by
28
the Company, and has made available to the Buyer complete and correct copies of
all such policies, together with all riders and amendments thereto. All such
policies are in full force and effect and all premiums due thereon have been
paid to the date hereof. The Company has complied in all material respects with
the terms of such policies.
Section 2.24 Properties/Assets/Liabilities. The Company has good and
marketable title, free and clear of all Liens to all of its properties and
assets, whether tangible or intangible, real, personal or mixed, reflected in
the Financial Statements as being owned by Company as of the date thereof, other
than (i) any properties or assets that have been sold or otherwise disposed of
in the ordinary course of business since the date of the Financial Statements,
(ii) Liens disclosed in the notes to the Financial Statements, and (iii) Liens
arising in the ordinary course of business after the date of the Financial
Statements. All buildings, and all fixtures, equipment and other property and
assets that are material to its business, held under leases or sub-leases by
Company are held under valid instruments enforceable in accordance with their
respective terms, subject to the Bankruptcy Exception. All of Company's
equipment in regular use which is needed for the operation of Company has been
reasonably maintained and is in serviceable condition, reasonable wear and tear
excepted. The Company has good and marketable title, free and clear of all Liens
to all assets necessary to conduct the Business as such are being conducted on
the date of this Agreement and proposed to be conducted, and such assets are not
owned or held by any other Person. A list of all such assets having a value in
excess of $1,000 is set forth on Section 2.24 of the Company Disclosure
Schedule. A list of all Assets and Liabilities of the Company that are to be
transferred from the Company to the Seller and/or a Seller's subsidiary is set
forth in Section 2.24 of the Company Disclosures Schedule and labeled
"Transferred Assets/Liabilities".
Section 2.25 Certain Business Practices. None of the Company, the Seller
or any of their respective directors, officers, agents or employees (in their
capacities as such) has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
Section 2.26 New York Business Corporation Law. The board of directors of
the Seller has approved this Agreement and the Voting Agreements, and such
approval is sufficient to render inapplicable to this Agreement and the Voting
Agreements and the transactions contemplated by this Agreement and the Voting
29
Agreements, the provisions of Sections 909 and 912 of the New York Business
Corporation Law. To the Knowledge of the Seller and the Company, no other state
takeover statute or similar statute or regulation applies or purports to apply
to this Agreement, the Voting Agreements or the transactions contemplated by
this Agreement and the Voting Agreements. The Seller's shareholder rights plan
("poison pill") has been rendered inapplicable to the transactions contemplated
by this Agreement and the Voting Agreements. No other "control share
acquisition," "fair price," "moratorium" or other antitakeover laws or
regulations enacted under U.S. state or federal laws apply to this Agreement or
the Voting Agreements.
Section 2.27 Business Activity Restriction. There is no non-competition or
other similar agreement, commitment, order of any Governmental Entity to which
the Seller or the Company is a party or subject to that has or could reasonably
be expected to have the effect of prohibiting or impairing the conduct of the
Business by the Company before or after the Closing. The Company has not entered
into any agreement under which the Company is restricted from selling, licensing
or otherwise distributing any of its technology or products to, or providing
services to, customers or potential customers or any class of customers, in any
geographic area, during any period of time or in any segment of the market or
line of business.
Section 2.28 Privacy. The Company is, and has always been, in compliance
with its then-current privacy policy, including those posted on the Company's
Web site(s). The Company has conducted its business and maintained its data at
all times in accordance with all applicable Federal, state and other laws,
including, but not limited to, those relating to the use of information
collected from or about consumers. The Company is, and has always been, in
compliance with its customers' privacy policies, when required to do so by
contract.
Section 2.29 Bank Accounts. Section 2.29 of the Company Disclosure
Schedule sets forth a complete list of all bank accounts, savings deposits,
money-market accounts, certificates of deposit, safety deposit boxes, and
similar investment accounts with banks or other financial institutions
maintained by or on behalf of the Company showing the depository bank or
institution address, appropriate bank contact personnel, account number and
names of signatories.
Section 2.30 Disclosure. No representation or warranty by the Seller or
the Company in this Agreement and no statement contained in any document or
other writing furnished or to be furnished to the Buyer or its representatives
pursuant to the provisions hereof contains or will contain any untrue statement
of material fact or omits or will omit to state any material fact necessary in
order to make the statements
30
made herein or therein not misleading. There has been no event or transaction
(other than the transactions contemplated hereby and the matters related
thereto) which has occurred or information which has come to the attention of
the Seller or the Company (other than events or information relating to economic
conditions of general public knowledge) which could reasonably be expected to
have a Material Adverse Effect or which could reasonably be expected to prevent
or impair the ability of the Company, after the Closing, to carry on the
Business in the same manner as it is presently being conducted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
Section 3.1 Organization; Etc. The Buyer is (i) a limited liability
company validly existing and in good standing under the laws of Delaware, (ii)
has all requisite corporate power and authority to own, lease and operate its
respective properties and assets and to carry on its business as it is now being
conducted, and (iii) is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership,
operation or leasing of its properties makes such qualification necessary.
Section 3.2 Authority Relative to this Agreement. The Buyer has all
necessary corporate power and authority to execute and deliver the Transaction
Documents, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the other Transaction Documents by the Buyer and the consummation by the
Buyer of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of the Buyer are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby and thereby. This
Agreement and the other Transaction Documents have been or will be duly executed
and delivered by the Buyer and, assuming the due authorization, execution and
delivery by the other parties hereto, each such agreement constitutes a legal,
valid and binding obligations of such party, enforceable against such party in
accordance with its terms, subject to the Bankruptcy Exception.
Section 3.3 Consents and Approvals; No Violations. Neither the
31
execution and delivery of this Agreement by the Buyer making the Closing Payment
nor the consummation by the Buyer of the transactions contemplated hereby and
thereby will (a) conflict with or result in any breach of any provision of the
limited liability company agreement or by-laws of the Buyer, (b) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, or require any consent under, any indenture, license,
contract, agreement or other instrument or obligation to which the Buyer is a
party or by which it or any of its properties or assets may be bound, (c)
violate any order, writ, injunction, decree or award rendered by any
Governmental Entity or Laws applicable to the Buyer, any of their respective
subsidiaries or any of their respective properties or assets, or (d) require any
filing with, or the obtaining of any permit, authorization, consent or approval
of, any Governmental Entity.
Section 3.4 Brokers; Finders and Fees. Neither the Buyer nor any of its
Affiliates has employed any investment banker, broker or finder or incurred any
liability for any investment banking, financial advisory or brokerage fees,
commissions or finders' fees in connection with this Agreement or the
transactions contemplated hereby.
Section 3.5 Investment Representations. The Buyer understands that as of
the Closing Date, the Company Shares will not have been registered under the
Securities Act. The Buyer also understands that the Company Shares are being
offered and sold pursuant to an exemption from registration contained in the
Securities Act based in part upon the Buyer's representations contained in the
Agreement. The Buyer hereby represents and warrants that it is an "accredited
investor" within the meaning of the Securities Act of 1933 and the rules and
regulations promulgated thereunder (the "Securities Act").
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.1 Conduct of Business of the Seller. During the period from the
date of this Agreement to the Closing Date, except (x) as otherwise contemplated
by this Agreement or the transactions contemplated hereby, (y) for those matters
set forth in Section 4.1 of the Company Disclosure Schedule, or (z) consented to
by the Buyer in writing, the Company shall, and Seller shall cause the Company
to, conduct the business of the Company as follows:
32
(a) The business of the Company shall be conducted in the same manner as
heretofore conducted and only in the ordinary course, and Seller shall cause the
Company to use its commercially reasonable best efforts to preserve the business
organization of the Company intact, keep available the services of the current
officers and employees of the Company and maintain the existing relations with
customers, suppliers, creditors, business partners, landlords, employees and
others having business dealings with the Company. The Company shall not
institute any new methods of purchase, sale, lease, management, accounting or
operation or engage in any transaction or activity other than minor changes in
the ordinary course of business and consistent with past practice;
(b) The Company shall not: (i) amend its articles of incorporation or by-laws or
similar organizational documents, (ii) issue, sell, transfer, pledge, dispose of
or encumber any shares of any class or series of its capital stock, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of any class or series
of its capital stock, (iii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to any shares of
any class or series of its capital stock; (iv) split, combine or reclassify any
shares of any class or series of its stock; or (v) redeem, purchase or otherwise
acquire directly or indirectly any shares of any class or series of its capital
stock, or any instrument or security which consists of or includes a right to
acquire such shares;
(c) The Company shall not organize any new subsidiary or acquire any capital
stock or other equity securities, or equity or ownership interest in the
business, of any other Person;
(d) The Company shall not modify, amend or terminate any of the Contracts or
waive, release or assign any material rights or claims, except in the ordinary
course of business and consistent with past practice;
(e) The Company shall not: incur or assume any long-term debt, or except in the
ordinary course of business, incur or assume short-term indebtedness from the
date hereof until the Closing; pay, repay, discharge, purchase, repurchase or
satisfy any indebtedness issued or guaranteed by the Company, except as required
by the terms thereof; modify the terms of any indebtedness or other liability;
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other Person;
make any loans, advances or capital contributions to, or investments in, any
other Person; enter into any material
33
commitment or transaction (including any capital expenditure or purchase, sale
or lease of assets or real estate); write down the value of any inventory or
write off as uncollectible any notes or accounts receivable except in the
ordinary course of business consistent with past practice, dispose of or permit
to lapse any rights to any Intellectual Property or change any of the banking or
safe deposit arrangements described or referred to in the Company Disclosure
Schedules;
(f) The Company shall not lease, license, mortgage, pledge or encumber any
assets other than in the ordinary course of business and consistent with the
past practice or transfer, sell or dispose of any assets other than in the
ordinary course of business and consistent with past practice or dispose of or
permit to lapse any rights to any Intellectual Property;
(g) The Company shall not make any change in the compensation payable or to
become payable to any of its officers, directors, employees, agents or
consultants (other than normal recurring increases in the ordinary course of
business of wages payable to employees who are not officers or directors or
Affiliates of the Company) or to Persons providing management services, or enter
into or amend any employment, severance, consulting, termination or other
agreement with, or employee benefit plan for, or make any loan or advance to,
any of its officers, directors, employees, Affiliates, agents or consultants or
make any change in its existing borrowing or lending arrangements for or on
behalf of any of such Persons pursuant to an employee benefit plan or otherwise;
(h) The Company shall not (i) pay or make any accrual or arrangement for payment
of any pension, retirement allowance or other employee benefit pursuant to any
existing plan, agreement or arrangement to any officer, director, employee or
Affiliate or pay or agree to pay or make any accrual or arrangement for payment
to any officer, director, employee or Affiliate of any amount relating to unused
vacation days, except to the extent the Company is unconditionally obligated to
do so on the date hereof, (ii) adopt or pay, grant, issue, accelerate or accrue
salary or other payments or benefits pursuant to any pension, profit-sharing,
bonus, extra compensation, incentive, deferred compensation, stock purchase,
stock option, stock appreciation right, group insurance, severance pay,
retirement or other employee benefit plan, agreement or arrangement, or any
employment or consulting agreement with or for the benefit of any director,
officer, employee, agent or consultant, whether past or present, except to the
extent the Company is unconditionally obligated to do so on the date hereof, or
(iii) amend in any material respect any such existing plan, agreement or
arrangement or any Seller Benefit Plan in a manner inconsistent with the
foregoing;
34
(i) The Company shall not permit any insurance policy naming it as a beneficiary
or a loss payable payee to be cancelled or terminated without notice and consent
of Purchaser;
(j) The Company shall not enter into any contract or transaction relating to the
purchase of assets other than in the ordinary course of business consistent with
past practices;
(k) The Company shall not pay, repurchase, discharge or satisfy any of its
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business and consistent with past practice, of claims,
liabilities or obligations reflected or reserved against in, or contemplated by,
the Financial Statements or incurred since the Balance Sheet date in the
ordinary course of business;
(l) The Company shall not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company;
(m) The Company shall not (i) change any of the accounting methods used by it
unless required by GAAP or (ii) make any election relating to Taxes, change any
election relating to Taxes already made, adopt any accounting method relating to
Taxes, change any accounting method relating to Taxes unless required by GAAP,
enter into any closing agreement relating to Taxes, settle, compromise or agree
to any adjustment of any Tax attribute or any claim or assessment relating to
any Taxes, Tax Return or Tax Claim, surrender any right to claim a refund of
Taxes, file any amended Tax Return, or consent to any waiver of the statute of
limitations for any such claim or assessment;
(n) The Company shall not take, or agree to or commit to take, any action that
would or is reasonably likely to result in any of the conditions to the Closing
set forth in Article V not being satisfied, or would make any representation or
warranty of the Seller contained herein inaccurate in any respect at, or as of
any time prior to, the Closing Date, or that would materially impair the ability
of the Company, the Buyer, or the Seller to consummate the Closing in accordance
with the terms hereof or materially delay such consummation;
(o) The Company shall not enter into any agreement, contract, commitment or
35
arrangement to do any of the foregoing, or authorize, recommend, propose or
announce an intention to do, any of the foregoing; and
(p) The Company shall provide such standard periodic reports (produced by Seller
or the Company in the ordinary course of their business) to Buyer as reasonably
requested by Buyer and permit site visits by Buyer's representatives for
purposes of ongoing due diligence and for verifying compliance with the
provisions of this Section 4.1.
Section 4.2 Access to Information for the Buyer. From the date of this
Agreement to the Closing, the Seller shall (i) give the Buyer and its authorized
representatives reasonable access to all books, records, documents, personnel,
offices and other facilities and properties of the Company, its attorneys, and
its accountants, (ii) permit the Buyer to make such copies and inspections
thereof as the Buyer may reasonably request and (iii) cause the officers of the
Company to furnish the Buyer with such financial and operating data and other
information with respect to the business and properties of the Company as the
Buyer may from time to time reasonably request; provided, however, that any such
access shall be conducted at the Buyer's expense, during normal business hours,
under the supervision of the personnel of the Company and in such a manner as to
maintain the confidentiality of this Agreement and the transactions contemplated
hereby and not to interfere unreasonably with the normal operation of the
business of the Company.
Section 4.3 Consents; Cooperation. Each of the parties shall cooperate and
use its commercially reasonable efforts to make all filings and obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities and other third parties necessary to consummate
the transactions contemplated by this Agreement.
Section 4.4 Commercially Reasonable Efforts. Each of the parties shall
cooperate and 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, proper
or advisable under Applicable Laws and regulations to consummate and make
effective the transactions contemplated by this Agreement.
Section 4.5 Public Announcements. Prior to the Closing, except as
otherwise agreed to by the parties, the parties shall not issue any report,
statement or press release or otherwise make any public statements with respect
to this Agreement or the Preferred Stock Purchase Agreement and the transactions
contemplated thereby, except as in the reasonable judgment of a party may be
required by law or in
36
connection with its obligations as a publicly-held, exchange-listed company, in
which case the parties will use their best efforts to reach mutual agreement as
to the language of any such report, statement or press release. Upon the
Closing, the parties will consult with each other with respect to the issuance
of a joint report, statement or press release with respect to this Agreement and
the transactions contemplated hereby.
Section 4.6 Tax Matters.
(a) Tax Treatment
(i) The Buyer, or its Affiliate, and the Seller, if so instructed by the
Buyer, shall jointly make a timely election under Section 338(h)(10) of
the Code (and any comparable elections under state and local income tax
law) with respect to the sale and acquisition of the Company pursuant to
this Agreement (individually, any such election referred to herein as an
"Election" and collectively, such elections referred to herein as the
"Election").
In connection with the Elections, as promptly as practicable following the
Closing Date, the Buyer shall provide the Seller a proposed determination of the
amount of the "Aggregate Deemed Sales Price" and the "Adjusted Grossed Up Basis"
(each, as defined under applicable Treasury Regulations) with respect to the
Company and (ii) a proposed allocation of each such Aggregate Deemed Sales Price
and Adjusted Grossed Up Basis among the assets of the Company, which allocations
shall be made in accordance with Sections 338 of the Code and any applicable
Treasury Regulations (the "Allocation Statement"). Within 30 days following such
provision, the Seller shall have the right to object to the Allocation Statement
and if it so objects, it shall notify the Buyer (in such written notice) of such
disputed item or items and the basis for its objection. If the Seller does not
object by written notice within such period, the Allocation Statement shall be
deemed to have been accepted and agreed upon, and final and conclusive for all
purposes of this Agreement. The parties hereto shall act in good faith to
resolve any such dispute prior to the date on which the Elections are required
to be filed with the appropriate Taxing authority. If the parties hereto cannot
resolve any disputed item, the item in question shall be resolved by an
independent accounting firm mutually acceptable to the Buyer and the Seller (the
"Accounting Firm") as promptly as practicable. The fees and expenses of the
Accounting Firm shall be borne equally by the Seller and the Buyer. The Seller
and the Buyer, and its Affiliates, (1) shall be bound by the determinations and
the Allocation Statement determined pursuant to this paragraph consistently
37
therewith for purposes of determining any Taxes; (2) shall prepare and file all
Tax Returns to be filed with any Tax authority in a manner consistent with the
Allocation Statement; and (3) shall take no position inconsistent with the
Allocation Statement in any Tax Return, any proceeding before any Tax authority
or otherwise. In the event that the Allocation Statement is disputed by any Tax
authority, the party receiving notice of such dispute shall promptly notify and
consult with the other party hereto concerning resolution of such dispute.
(ii) The Seller and the Buyer, and its Affiliates shall cooperate in the
preparation and timely filing of (1) Forms 8023 with respect to the
Elections (as defined above) and any comparable state or local forms or
reports, and (2) to the extent permissible by or required by law, any
corrections, amendments, or supplements thereto. To the extent necessary
for the valid filing of any such corrections, amendments, supplements,
forms or reports, the Seller and the Buyer shall cooperate in the timely
execution thereof. Neither the Seller nor the Buyer shall, or shall permit
any of their Affiliates (including the Company) to, take any action to
modify any of the forms or reports (including any corrections, amendments,
or supplements thereto) that are required for the making of the Elections
or any comparable elections under state or local tax law after their
execution or to modify or revoke any of the Elections following the filing
of the Forms 8023 by the Seller without the written consent of the Seller
and the Buyer, as the case may be.
(b) Tax Returns
(i) The Seller shall prepare and timely file (or cause to be filed when
due) all Tax Returns that are required to be filed by or with respect to
the Company for taxable years or periods ending on or before the Closing
Date and the Seller shall pay (or cause to be paid) any and all Taxes due
and payable in respect to such Tax Returns. All Tax Returns shall be
prepared and filed in a manner that is consistent with the prior practice
of the Company, except as required by applicable law.
(ii) During the period from the date hereof to the Closing Date, the
Seller shall cause the Company to: (i) timely file all Tax Returns
required to be filed by it ("Post-Signing Tax Returns") and such
Post-Signing Tax Returns shall be prepared in a manner consistent with
past practice, (ii) timely pay all Taxes due and payable and (iii)
promptly notify the Buyer of any federal or state income or franchise (or
other material) Tax Claim, investigation or audit pending against or with
respect to the Company in respect of any Tax
38
matters (or any significant developments with respect to any ongoing Tax
matters), including material Tax liabilities and material Tax refund
claims. The Buyer shall file or cause to be filed when due all Tax Returns
that are required to be filed by or with respect to the Company for
taxable periods ending after the Closing Date and, subject to Sections
4.6(b)(iii) and 4.6(c), the Buyer shall pay (or cause to be paid) any
Taxes due in respect of such Tax Returns.
(iii) With respect to any Tax Return required to be filed by the Buyer for
or on behalf of Company for or relating to any taxable year or period
beginning on or before and ending after the Closing Date (a "Straddle
Period"), the Buyer shall provide the Seller with a copy of such Tax
Return and a statement specifying the amount of Tax shown on such Tax
Return that is allocable to the Seller pursuant to Section 4.6(c) and (d)
(the "Straddle Period Statement"), together with appropriate supporting
information, at least forty-five (45) days prior to the due date
(including any extension thereof) for the filing of such Tax Return. Such
Tax Return shall be prepared in accordance with the past practice of the
Company, if any, to the extent permissible under Applicable Law. The
Seller shall pay the Buyer, in immediately available funds, the amount of
Tax set forth on the Straddle Period Statement for which Seller is liable
pursuant to Section 4.6(c) and (d) no later than 3 days prior to the due
date of any such Tax Return.
(iv) Seller shall not amend any Tax Return of or relating to the Company
for any taxable year ending on or before the Closing Date or with respect
to any Straddle Period without the consent of the Buyer, which consent
shall not be unreasonably delayed or withheld.
(c) Indemnification
(i) From and after the Closing Date, the Seller shall indemnify, defend
and hold the Buyer, Buyer Indemnitees (as defined herein) and the Company
harmless from and against all Buyer Damages (as defined herein) asserted
against and will reimburse the Buyer, Buyer Indemnitees and the Company
for any and all Buyer Damages incurred or suffered to the extent such
Buyer Damages arise out of or are attributable or related to (without
duplication):
(1) all Taxes imposed on the Company relating or attributable to
taxable periods ending on or prior to the Closing Date ("Pre-Closing
Period") and, with respect to any period that begins on or before
and
39
that ends after the Closing Date (in each case, a "Straddle
Period"), the portion of such Straddle Period deemed to end on and
include the Closing Date (in the manner determined pursuant to
Section 4.6(d));
(2) all Taxes imposed on the Company under Section 1.1502-6 of the
Treasury Regulations (and corresponding provisions of state, local
or foreign law) as a result of being a member of any federal, state,
local or foreign consolidated, unitary, combined or similar group
for any tax period ending on or before, or that includes, the
Closing Date;
(3) all Taxes imposed on the Seller (or any or its Affiliates), and
the Company relating or attributable to any election under Section
338 of the Code and any similar election under state or local law;
(4) all Transfer Taxes for which Seller is liable pursuant to
Section 4.6(f) of this Agreement;
(5) the inaccuracy of any representation or warranty of the Seller
contained in Section 2.12 of this Agreement;
(6) the breach of any representation or warranty contained in
Section 2.12 of this Agreement; and
(7) the breach by Seller or failure of Seller to perform (or cause
to have performed) any of the covenants made by it contained in
Section 4.1(m) and this Section 4.6.
(ii) From and after the Closing date, the Buyer shall indemnify, defend
and hold the Seller and Seller Indemnitees (as defined herein) harmless
from and against all Seller Damages (as defined herein) asserted against
and will reimburse the Seller and Seller Indemnitees for any and all
Seller Damages incurred or suffered to the extent such Buyer Damages arise
out of or are attributable or related to Taxes imposed on the Company with
respect to taxable periods beginning after the Closing Date and, with
respect to any Straddle Period, the portion of such Straddle Period
beginning after the Closing Date (as determined pursuant to Section
4.6(d));
(d) Computation of Tax Liabilities. For purposes of Section 4.6(c), in order to
apportion appropriately any Taxes relating to a Straddle Period, the parties
hereto shall, to the extent permitted under applicable law, elect with the
relevant Tax
40
authority to treat for all Tax purposes the Closing Date as the last day of the
taxable year or period of the Company. In any case where applicable law does not
permit the Company to treat the Closing Date as the last day of the taxable year
or period, the portion of any Taxes that are allocable to the portion of the
Straddle Period ending on the Closing Date shall be:
(i) in the case of Taxes that are either (A) based upon or related to
income or receipts, or (B) imposed in connection with any sale or other
transfer or assignment of property (real or personal, tangible or
intangible), deemed equal to the amount that would be payable if the
taxable year or period ended on the Closing Date; and
(ii) in the case of Taxes not described in Section 4.6(d)(i) that are
imposed on a periodic basis and measured by the amount, value or level of
any item (such as personal property taxes and real estate taxes), such
Taxes shall be deemed to be the amount of such Taxes for the entire period
(or, in the case of such Taxes determined on an arrears basis, the amount
of such Taxes for the immediately preceding period) multiplied by a
fraction, the numerator of which is the number of calendar days in the
Straddle Period ending on (and including) the Closing Date and the
denominator of which is the number of calendar days in the entire relevant
Straddle Period.
(e) Contest Provisions
(i) After the Closing, each of the Buyer and the Company, on the one hand,
and the Seller, on the other hand, (the "Recipient") shall promptly notify
the chief tax officer (or other officer if no such position exists) of the
other party in writing (including by telecopier) of the receipt by the
Recipient of any written notice of any pending or threatened audits,
notice of deficiency, proposed adjustment, assessment, examination or
other administrative or court proceeding, suit, dispute or other similar
claim (a "Tax Claim") received by Recipient from any Tax authority or any
other party with respect to Taxes which, if determined adversely, could be
grounds for indemnification under this Section 4.6; provided however, that
a failure by the Buyer to give such notice shall not affect the Buyer's or
Company's rights to indemnification under Section 4.6 unless and to the
extent the Seller is materially and adversely prejudiced as a consequence
of such failure.
(ii) The Seller may elect to control the conduct, through counsel of the
Seller's own choosing and at the Seller's own expense and with the
41
participation of the Buyer, or any Tax Claim involving any asserted
liability with respect to or relating to any Pre-Closing Period. If the
Seller desires to elect to control any such Tax Claim, the Seller shall
within 10 calendar days of receipt of the notice of asserted Tax liability
notify Buyer in writing of its intent to do so. If the Seller properly
elects to control such Tax Claim, then the Seller shall have all rights to
settle, compromise and/or concede such asserted liability and the Buyer
shall reasonably cooperate and shall cause the Company to reasonably
cooperate at the expense of the Seller, in each phase of such Tax Claim;
provided however, that the Seller shall not settle, compromise and/or
concede such asserted liability if such settlement, compromise or
concession could increase the Tax liability of any of the Buyer (or any of
its Affiliates) or the Company for any other taxable period without the
consent of the Buyer. If the Seller does not elect to control a Tax Claim
for a Pre-Closing Period pursuant to this Section 4.6(e) (or, after
assuming control, the Seller fails to reasonably defend against such Tax
Claim), the Buyer or the Company may without affecting its or any other
indemnified party's rights to indemnification under this Section 4.6,
assume and control the defense of such Tax Claim with participation by the
Seller (at Seller's expense); provided, however, that the Buyer may not
settle or compromise such Tax Claim without the consent of the Seller,
which consent shall not be unreasonably withheld.
(f) Transfer Taxes. The Seller will pay or cause to be paid any sales, use, real
property transfer, real property gains, transfer, stamp, registration,
documentary, recording or similar Taxes together with any interest thereon,
penalties, fines, fees, additions to tax or additional amounts with respect
thereto (collectively, "Transfer Taxes") incurred in connection with the
transactions contemplated by this Agreement. The Seller will be responsible for
preparing and timely filing (and the Buyer will cooperate with the Seller at the
Seller's expense in preparing and filing) any Tax Returns required with respect
to any such Transfer Taxes. The Seller will provide to the Buyer a true copy of
each such Tax Return as filed and evidence of timely filing thereof.
(g) Termination of Tax Sharing Agreements. As of the Closing, all Tax sharing
agreements or similar agreements, written or unwritten, with respect to or
involving the Company shall be terminated and, after the Closing Date, the
Company shall not have any further rights or obligations under any such
agreement.
(h) Accounting and Tax Records. The Buyer acknowledges that the Seller, from
time to time after the Closing Date, require access to certain accounting and
Tax
42
records and information held by the Company to the extent such records and
information pertain to events occurring on or prior to the Closing Date;
therefore, from and after the Closing Date, the Buyer and the Company shall (I)
use its reasonable best efforts to properly retain and maintain such records for
seven (7) years after the Closing Date and subject to sub-Sections (2) and (3)
of 4.6(h) may thereafter destroy, abandon or dispose of all or a portion of such
records in its sole discretion, (ii) upon written notice by the Seller to the
Buyer (within 90 days prior to the end of the 7 year period following the
Closing Date) that Seller requests all or a portion of such records, Buyer shall
transfer such records (or copies of such records) to the Seller at Seller's
expense and (iii) allow the Seller and their respective agents and
representatives, at times and dates reasonably and mutually acceptable to the
parties, from time to time, to inspect, review and make copies of such records
as the Seller may deem necessary or appropriate; provided, however, that in all
cases, such activities are to be conducted by the Seller during normal business
hours and at the Seller's expense. The Seller shall reimburse the Buyer for its
reasonable out-of-pocket costs and expenses incurred in conjunction with such
efforts. The Buyer shall not be required by this Section 4.6(h) to take any
action that would unreasonably interfere with the conduct of its business or
unreasonably disrupt its normal operations.
(i) Tax Assistance and Cooperation.
(i) The Seller and Buyer agree to furnish or cause to be furnished to each
other, upon request, as promptly as practicable, such information
(including access to books and records) and assistance relating to the
Company is reasonably requested for the filing of any Tax Returns, for the
preparation of any audit and for the prosecution or defense of any Tax
Claim, suit or proceeding related to any proposed adjustment. Any
information obtained under this Section 4.6(i) shall be kept confidential
except (1) as may be otherwise necessary in connection with the filing of
Tax Returns or Tax Claims for refund or in conducting an audit or other
proceeding or (2) with the consent of the Seller or the Buyer, as the case
may be.
(ii) Subject to 4.6(e), the Buyer shall not permit the Company (1) to take
any action (other than actions in the ordinary course of business or with
respect to any election) on the Closing Date that will increase the
Seller's liability for Taxes, without consent of the Seller or (2) make or
change any Tax election (other than the making of any Election) or amend
any Tax Return (other than with respect to the carryback of the Tax
attribute form a period ending after the Closing Date), with respect to or
relating to
43
Pre-Closing Periods of the Company, as the case may be without the consent
of the Seller or (3) waive or extend any statute of limitations with
respect or relating to Pre-Closing Periods of the Company without the
consent of the Seller, not to be unreasonably withheld.
(iii) Notwithstanding anything to the contrary contained in this
Agreement, the Seller shall not, and the Buyer shall not be required by
the Seller to, amend any Tax Return of or relating to the Company.
(j) Tax Audits
(i) After the Closing, each of the Buyer, on the one hand, and the Seller,
on the other hand ("Recipient"), will promptly notify the other party in
writing upon receipt by the Recipient or any of its Affiliates (including
in the case of the Buyer, the Company) of any written notice of any
pending or threatened audit or assessment, suit, proposed adjustment,
deficiency, dispute, administrative or judicial proceeding or other
similar claim ("Tax Claim") received by the Recipient form any Tax
authority or any other party with respect to Taxes for which the Seller is
liable pursuant to Section 4.6(c), provided, however, that a failure by
the Buyer to give such notice will not affect the Buyer's or the Company's
rights to indemnification under Section 4.6(c) unless and to the extent
such failure materially and adversely affects the Seller's rights to
participate in and defend such Tax Claim. Such notice shall contain
factual information (to the extent known) describing the asserted Tax
liability in reasonable detail and shall include copies of any notice or
other document received from any Tax authority in respect of any such
asserted Tax liability.
(ii) The Seller may elect to control the conduct, through counsel of the
Seller's own choosing and at the Seller's own expense and with the
participation of the Buyer, of any Tax claim involving any asserted
liability with respect to or relating to any Pre-Closing Period only. If
the Seller elects to control any such Tax Claim, the Seller shall within
30 calendar days of receipt of the notice of asserted Tax liability notify
the Buyer in writing of its intent to do so. If the Seller properly elects
to control such a Tax Claim, then the Seller shall have all rights to
settle, compromise and/or concede such asserted liability and the Buyer
shall cooperate and shall cause the Company or any of their successors to
reasonably cooperate, at the expense of the Seller, in each phase of such
Tax Claim; provided, however, that the Seller shall not settle, compromise
and/or concede such asserted liability if such
44
settlement, compromise or concession could increase the Tax liability of
the Company for any other taxable period without the consent of the Buyer.
If the Seller does not elect to control a Tax Claim for a Pre-Closing
Period, the Buyer or the Company may, without affecting its or any other
indemnified party's rights to indemnification under Section 4.6, assume
and control the defense of such Tax Claim with participation by the Seller
(at its own expense); provided, however, that the Buyer may not settle or
compromise such Tax Claim without the consent of the Seller, which consent
shall not be unreasonably withheld.
(iii) With respect to any Tax Claim that involves any Straddle Period, the
Buyer shall control the conduct of any such Tax Claim, through counsel of
the Buyer's own choosing.
(k) FIRPTA Certificate. The Seller shall furnish to the Buyer on or before the
Closing Date a duly executed certificate of the Seller's non-foreign status in
the form and manner that complies with Section 1445 of the Code and the Treasury
Regulations thereunder (the "FIRPTA Certificate") Notwithstanding anything to
the contrary contained herein, if the Seller fails to deliver the FIRPTA
Certificate and the Buyer elects to proceed with the Closing, the Buyer shall be
entitled to withhold the amount required to be withheld pursuant to Section 1445
of the Code from the Purchase Price payable to the Seller.
(l) Payments. Except as otherwise provided in this Section 4.6, any amounts owed
by any party to any other party under this Section 4.6 shall be paid within ten
days of notice from such other party. Any amounts that are not paid within such
ten-day period (or as otherwise set forth herein) shall accrue interest at the
rate of eight percent per year, compounded daily.
(m) Tax Refunds. The Buyer shall pay to the Seller all refunds or credits of
Taxes received by the Buyer or the Company after the Closing Date and
attributable to Taxes paid by the Company (or any predecessor of the Company)
with respect to a Pre-Closing Period, net of any Taxes imposed on such refund
amount, provided, however, that the Buyer shall not be entitled to any refund or
credit of the Company relating to a carryback of a Tax attribute relating to any
period ending after the Closing Date.
(n) Conflicts; Survival. Notwithstanding any other provision of this Agreement
to the contrary: the obligations of the parties hereto set forth in this Section
4.6 shall: (i) be unconditional and absolute, and (ii) remain in
45
full force and effect indefinitely, provided, however, that the representations
and warranties contained in Section 2.12 shall survive the Closing until 180
days following the expiration of the applicable statute of limitations (taking
into account all extensions); provided; further; in the event notice for
indemnification shall have been given within the applicable survival period, the
representation or warranty that is the subject of such indemnification claim
shall survive until such time as such claim is finally resolved. In the event of
a conflict between Section 4.6 and any other provision of this Agreement, this
Section 4.6 shall govern and control.
(o) Tax Treatment of Indemnification Payment. The parties hereto agree to treat
any Indemnity Payment made pursuant to this Section 4.6 as an adjustment to the
Purchase Price for all Tax purposes.
Section 4.7 Employees; Employee Benefits; Stock Options.
(a) On and after the Closing, until the first anniversary of the Closing Date,
Buyer shall cause the Company to provide Company Employees (as defined in
Section 5.3(d)) with salaries and benefit plans, programs and arrangements
substantially comparable in the aggregate (without consideration given to
defined benefit pension plans) as those provided by Seller as of the date
hereof.
(b) Commencing at the time of the Closing, each Company Employee shall be
eligible to participate in the employee benefit plans, programs, policies and
arrangements of the Buyer (or Buyer's parent as the case may be) generally
provided to similarly situated employees of the Buyer (such plans, "Buyer
Benefit Plans") in accordance with the terms governing such plans. For purposes
of the Buyer Benefit Plans, the Buyer shall treat the prior service of such
employees with the Company as service rendered to the Buyer for purposes of all
eligibility periods and vesting.
(c) On the Closing Date, the Buyer and the Seller shall jointly give notice to
the Company Employees that the active participation of employees in the Seller
Benefit Plans shall terminate as of such date and that such employees shall be
immediately eligible to participate in the Buyer Benefit Plans in accordance
with the terms thereof. In no event shall any Company Employee be entitled to
accrue any benefits under, or continue participation in, the Seller Benefit
Plans after the Closing Date, and the Company shall terminate its participation
in all Seller Benefit Plans as of that date.
46
(d) The Buyer shall waive any waiting periods or pre-existing condition
limitations under any benefit plan sponsored by the Buyer (to the extent waived
under the Seller's corresponding plan).
(e) The Seller shall retain responsibility for all life insurance and long term
disability expenses and benefits in respect of claims covered by the applicable
Seller Benefit Plan that are incurred in respect of an Employee prior to the
Closing Date.
(f) It is expressly agreed that the provisions of this Section 4.7 are not
intended to be for the benefit of or otherwise be enforceable by any third
party, including, without limitation, any Employee, Company Employee or employee
organization.
(g) The Seller shall cause each Company Employee to vest, to the extent not yet
vested, in his or her accrued benefit under each Seller Benefit Plan, as
applicable.
(h) From and after the Closing Date, the Seller shall indemnify and hold
harmless the Buyer Indemnitees (as defined in Section 7.2(a) from and against
all Buyer Damages (as defined in Section 7.2(a)) asserted against or incurred by
any Buyer Indemnitee arising out of any Seller Benefit Plan.
(i) Effective at Closing, the Seller will cause all stock options held by the
Company Employees to fully vest.
Section 4.8 Maintenance of Books and Records. Each of the parties hereto
shall preserve, until at least the fifth anniversary of the Closing Date, all
pre-Closing Date records possessed or to be possessed by such party relating to
the Company except to the extent with respect to Tax records of or relating to
the Company (which shall be governed by Section 4.6(h) of this Agreement. After
the Closing Date and up until at least the third anniversary of the Closing
Date, upon any reasonable request from a party hereto or its representatives,
the party holding such records shall, subject to the confidentiality provisions
of Section 4.11, (x) provide to the requesting party or its representatives
reasonable access to such records during normal business hours and (y) permit
the requesting party or its representatives to make copies of such records, in
each case at no cost to the requesting party or its representatives (other than
for reasonable out-of-pocket expenses). Such records may be sought under this
Section 4.8 for any reasonable purpose, including, without limitation, to the
extent reasonably required in connection with the audit, accounting, tax,
litigation, federal securities disclosure or other similar needs of the party
seeking such records. Notwithstanding anything to the contrary contained herein,
the maintenance of all books and records with respect to Tax matters pertinent
to the
47
Company relating to any taxable period beginning on or before, or including, the
Closing Date, shall be governed by Section 4.6(h).
Section 4.9 Proxy Statement; Shareholders' Meeting.
(a) As promptly as practicable after the execution of this Agreement, the Seller
shall prepare and provide to the Buyer for its comments a document or documents
that will constitute the proxy statement with respect to this Agreement relating
to the Shareholders' Meeting (together with any amendments thereto, the "Proxy
Statement"). After the Buyer has been afforded a reasonable opportunity to
review and comment on the Proxy Statement, the Seller shall file the Proxy
Statement with the SEC. Copies of the Proxy Statement shall be provided to
Nasdaq in accordance with its rules. The Seller shall notify the Buyer of the
receipt of any comments from the SEC on the Proxy Statement and of any requests
by the SEC for any amendments or supplements thereto or for additional
information and shall provide to each other promptly copies of all
correspondence between the Seller or any of their representatives and advisors
and the SEC. The Seller shall cause the Proxy Statement to comply as to form and
substance with the applicable requirements of (i) the Securities Exchange Act of
1934, (ii) the Securities Act (iii) the rules and regulations of Nasdaq and (iv)
New York Business Corporation Law.
(b) The Proxy Statement shall include, with respect to the Seller and its
shareholders, the approval and adoption of this Agreement and the transactions
contemplated hereby and the recommendation of the board of directors of the
Seller to the Seller's shareholders that they vote in favor of approval of this
Agreement and the transactions contemplated hereby.
(c) No amendment or supplement to the Proxy Statement shall be made without the
Buyer being afforded a reasonable opportunity to review and comment on the
amendments and/or supplements to the Proxy Statement. Each of the parties hereto
shall advise the other parties hereto, promptly after it receives notice
thereof, of any request by the SEC for amendment of the Proxy Statement or
comments thereon and responses thereto or requests by the SEC for additional
information.
(d) None of the information supplied by the Seller or the Company for inclusion
or incorporation by reference in the Proxy Statement, at the respective times
filed with the SEC or other regulatory agency and, in addition, in the case of
the Proxy Statement, at the date it or any amendments or supplements thereto are
mailed to shareholders of the Seller, at the time of the Shareholders' Meeting
and at the Closing, shall contain any untrue statement of a material fact or
omit to state any
48
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Closing Date any event or circumstance
relating to the Seller or the Company, or their respective officers or
directors, should be discovered that should be set forth in an amendment or a
supplement to the Proxy Statement, the Seller shall promptly inform the Buyer.
(e) The Seller shall call and hold the Shareholders' Meeting as promptly as
practicable after the date hereof for the purpose of voting upon the approval of
this Agreement and transactions contemplated hereby pursuant to the Proxy
Statement, and the Seller shall use all reasonable efforts to hold the
Shareholders' Meeting as soon as practicable. Subject to Section 4.18, the board
of directors of the Seller shall recommend to the Seller's stockholders the
approval and adoption of this Agreement and the transactions contemplated hereby
(the "Recommendations"). The Seller shall take all other action necessary or
advisable to promptly and expeditiously secure any vote or consent of
shareholders required by applicable Law and Seller's certificate of
incorporation and bylaws to effect the transactions contemplated by this
Agreement. The Seller shall use all reasonable efforts to solicit from its
shareholders proxies in favor of the approval and adoption of this Agreement
pursuant to the Proxy Statement and shall take all other action necessary or
advisable to secure the vote or consent of shareholders required by the New York
Business Corporation Law or applicable other requirements of Nasdaq to obtain
such approval, including any necessary adjournments in order to obtain the
requisite number of proxies. Subject to the right of the Seller to terminate
this Agreement set forth in Sections 6.1 and 4.18 hereof, the Seller shall call
and hold the Shareholders' Meeting for the purpose of voting upon the approval
and adoption of this Agreement whether or not the Seller's board of directors at
any time subsequent to the date hereof determines that this Agreement is no
longer advisable or recommends that Seller's shareholders reject it.
Section 4.10 Non-Competition; Non-Solicitation.
(a) None of the Seller, its Affiliates (including without limitation
xxxxxxxxxxxxx.xxx CRM Corp. ("CRM") and xxxxxxxxxxxxx.xxx ADS Corp.), or Xxxxx
Xxxxxx shall, at any time during the five year period immediately following the
Closing Date, except for Xxxxx Xxxxxx whose period shall be limited to three (3)
years following the Closing Date, directly or indirectly, own, operate or become
an Affiliate (and in the case of Xxxxx Xxxxxx, an employee) of any Person
engaged in the business of providing vehicle repair or accident management
services for corporate or government fleets, or itself (or himself in the case
of Xxxxx Xxxxxx) engage in any
49
such activity; provided that the foregoing shall not prohibit (i) Xxxxx Xxxxxx,
the Seller or its Affiliates from owning, in the aggregate, as a passive
investment less than 5% of the equity of any publicly-traded entity or (ii) the
Seller, its Affiliates, or Xxxxx Xxxxxx from engaging in the business of being a
provider of collision repair management services directly to the insurance
industry only, as conducted by CRM as of the date of this Agreement.
Notwithstanding the above, nothing herein shall preclude the Seller or its
Affiliates from marketing its programs to the Company's customers and/or clients
as long as such programs do not involve providing vehicle repair or accident
management services to corporate or government fleets.
(b) Xxxxx Xxxxxx and the Seller, for itself and its Affiliates, agree that
neither will directly or indirectly, for a period of three years after the
Closing Date, (i) seek to employ, or solicit for employment, any Employee or
employee of Buyer (a "Buyer Employee") or (ii) employ any Buyer Employee or
Company Employee whose name is set forth in Section 5.3(d) of the Company
Disclosure Schedule unless such Company Employee or Buyer Employee has been
separated from employment by the Company or Buyer as the case may be for a
period of not less than six (6) months immediately prior to the date of such
solicitation (in the case of paragraph (b)(i)) or employment in the case of
paragraph (b)(ii). Notwithstanding the above, should the Company Employee be
terminated or never employed by the Company, or the Buyer Employee be terminated
by the Buyer, then this Section 4.10(b)(ii) shall not apply with respect to such
Company Employee or Buyer Employee as the case may be.
(c) If at any time during the four (4) years (or such longer period that may be
agreed to between the parties in the Strategic Alliance Agreement or any other
agreement) immediately following the Closing Date any Person requests that the
Seller assist such Person in procuring vehicle repair or accident management
services for a corporate or government fleet, the Seller shall promptly refer
such Person to the Buyer or the Company.
Section 4.11 Post-Closing Confidentiality. For a period of five years
after the Closing, the Seller and Xxxxx Xxxxxx agree to, and to cause each of
their Affiliates to, maintain the confidentiality of all confidential or
proprietary information of and with respect to the Company existing as of the
Closing Date including, without limitation, Trade Secrets (collectively,
"Confidential Information") and shall not disclose any Confidential Information
except (i) where specifically required by Law or legal process pursuant to the
reasonable advice of legal counsel to the Seller or Xxxxx Xxxxxx (and in such
case only after providing the Buyer, where practicable, with sufficient notice
to enable them to move for a protective order), (ii) to the extent such
information becomes generally available to the public other than as a result of
a
50
disclosure by the Seller, Xxxxx Xxxxxx, or any of their Affiliates in violation
of this Section 4.11, (iii) to the extent such information becomes available to
the Seller, Xxxxx Xxxxxx, or their Affiliates on a non-confidential basis from a
source other than the Buyer, provided that, to the knowledge of Seller, or Xxxxx
Xxxxxx, as the case may be, such source is not prohibited from disclosing such
information by a contractual, legal or fiduciary obligation (whether or not in
writing) or (iv) to the extent independently developed by the Seller, or any of
its Affiliates, without use of or inclusion of any Confidential Information.
Notwithstanding the foregoing, the provisions of this Section 4.11 shall not
apply to any Confidential Information that was utilized jointly by both the
Seller and the Company prior to the Closing Date provided that both parties
treat such Confidential Information in accordance with applicable law and any
confidentiality agreements that they are bound by with respect to such
Confidential Information.
Section 4.12 Non-contravention. The Buyer shall not take, nor agree to
commit to take, any action that would or is reasonably likely to result in any
of the conditions to the Closing set forth in Article V not being satisfied, or
would make any representation or warranty of the Buyer contained herein
inaccurate in any respect at, or as of any time prior to, the Closing Date, or
that would materially impair the ability of the Company, the Buyer, or the
Seller to consummate the Closing in accordance with the terms hereof or
materially delay such consummation.
Section 4.13 Trademark License Agreement. It is understood and agreed that
Buyer shall not acquire direct or indirect ownership of the "driversshield"
xxxx, domain name or the logo and design (as depicted in Exhibit E) currently in
use by Seller and the Company (the "Retained Intellectual Property"). At the
Closing, Seller on the one hand, and Buyer and the Company, on the other hand,
shall enter into a license agreement substantially in the form of Exhibit F
hereto (the "Trademark License Agreement") with respect to the Retained
Intellectual Property. Among other things, the Seller shall grant the Buyer and
the Company a non-exclusive, worldwide, royalty free, transferable (to any
Affiliate), perpetual license to the Retained Intellectual Property in the
Trademark License Agreement.
Section 4.14 Transition Services Agreement. At the Closing, Seller, on one
hand, and Buyer and the Company, on the other hand, shall enter into a
transition services agreement substantially in the form of Exhibit G hereto (the
"Transition Services Agreement").
Section 4.15 Strategic Alliance Agreement. At the Closing or as shortly
thereafter as reasonably practicable, the Seller and Buyer shall use
commercially
51
reasonable efforts to enter into one or more multi-year agreements (with
mutually satisfactory terms) that represent a strategic alliance (the "Strategic
Alliance Agreement(s)"). The parties agree that the provisions of the Strategic
Alliance Agreement may include some or all of the following (all at fees/rates
to be negotiated between Buyer and Seller) (i) Buyer to perform IT software and
systems development for Seller; (ii) Buyer's assistance in the marketing of
Seller's insurance industry web based customer relationship management ("CRM")
services to its base of insurance clients; (iii) Seller turning over certain CRM
call center functions to Buyer; (iv) Seller moving certain CRM application
software to Buyer's or its Affiliate's data center hosting; (v) Seller turning
over the "Mechanics Hotline" function of its Automotive Discounts and Services
call center to Buyer; (vi) Buyer and Seller undertaking joint efforts to combine
and manage networks; and (vii) Buyer and Seller undertaking joint efforts with
respect to network management application development so as to facilitate the
assignment of claims to a network location, the processing of claims through
network members, and payment of the network member.
Section 4.16 Post-Closing Cooperation. In case at any time after the
Closing Date any further action is necessary, proper or advisable to carry out
the purposes of this Agreement, as soon as reasonably practicable, each party
hereto shall take, or cause its proper officers or directors to take, all such
necessary, proper or advisable actions.
Section 4.17 Subsequent Actions. If at any time during the six months
immediately following the Closing the Buyer will consider or be advised that any
deeds, bills of sale, instruments of conveyance, assignments, assurances or any
other actions or things are necessary or desirable (i) to vest, perfect or
confirm ownership (of record or otherwise) in the Buyer, its right, title or
interest in, to or under any or all of the Company Shares, (ii) to vest, perfect
or confirm ownership (of record or otherwise) in the Company of any of its
rights, properties or assets or any assets of the Seller or any of its
Affiliates primarily related to the Company, (iii) to run the business of the
Company as presently conducted, or (iv) otherwise to carry out this Agreement,
the Seller shall execute and deliver all deeds, bills of sale, instruments of
conveyance, powers of attorney, assignments and assurances and take and do all
such other actions and things as may be requested by the Buyer in order to vest,
perfect or confirm any and all right, title and interest in, to and under such
rights, properties or assets in the Buyer or the Company or otherwise to carry
out this Agreement and the Buyer shall reimburse the Seller for such services at
the Seller's actual cost, which shall be calculated in a manner consistent with
past practice.
52
Section 4.18 No Solicitation by the Company. (a) Except as otherwise
provided in this Section 4.18, until the earlier of the Closing Date and the
date of termination of the Agreement, neither the Seller, the Company, nor any
of their subsidiaries nor any of the officers, directors, stockholders, agents,
representatives or affiliates of the Seller, the Company or their subsidiaries
(including any investment banker, attorney or accountant retained by it or any
of its subsidiaries) shall (i) solicit, initiate or encourage (including by way
of furnishing information), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes a Takeover Proposal
(as defined below), (ii) participate in any discussions or negotiations
regarding any Takeover Proposal, (iii) enter into any agreement regarding any
Takeover Proposal or (iv) make or authorize any statement, recommendation or
solicitation in support of an Takeover Proposal. If and only to the extent that
(i) the Meeting shall have not occurred, (ii) the board of directors of the
Seller determines in good faith, after consultation with outside counsel, that
it is necessary to do so in order to act in a manner consistent with its
fiduciary duties to the Seller's stockholders under applicable law, (iii) the
Seller's board of directors concludes in good faith that such Takeover Proposal
constitutes a Superior Proposal (as defined below), (iv) such Takeover Proposal
was not solicited by it and did not otherwise result from a breach of this
Section 4.18(a), and (v) the Seller provides prior written notice to Buyer of
its decision to take such action, the Seller shall be permitted to (A) furnish
information with respect to the Company and any of its subsidiaries to such
person pursuant to a customary confidentiality agreement, (B) participate in
discussions and negotiations with such person, (C) subject to first making
payment of the Termination Fee pursuant to Section 6.3(a)(ii) hereof, enter into
an Acquisition Agreement and (D) effect a Change in Recommendation (as defined
below); provided, that at least three business days prior to taking any actions
set forth in clause (C) or (D) above, the Seller's board of directors provides
Buyer written notice advising Buyer that the Seller's board of directors is
prepared to conclude that such Takeover Proposal constitutes a Superior Proposal
and during such three business day period the Seller and its advisors shall have
negotiated in good faith with Buyer to make adjustments in the terms and
conditions of this Agreement such that such Takeover Proposal would no longer
constitute a Superior Proposal and the Seller's board of directors concludes in
good faith that such Takeover Proposal is reasonably likely to result in a
Superior Proposal. The Seller, the Company, and their representatives
immediately shall cease and cause to be terminated any existing activities,
discussions or negotiations with any parties with respect to any Takeover
Proposal.
For purposes of this Agreement, "Takeover Proposal" means any inquiry,
proposal or offer from any person relating to any direct or indirect acquisition
or
53
purchase of a business that constitutes 20% or more of the net revenues, net
income or assets of the Seller and its subsidiaries, taken as a whole, or 20% or
more of any class of equity securities of the Seller, any tender offer or
exchange offer that is consummated would result in any person beneficially
owning 20% or more of any class of any equity securities of the Seller, or any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Seller (or any subsidiary of
the Seller whose business constitutes 20% or more of the net revenues, net
income or assets of the Seller and its subsidiaries, taken as a whole), other
than the transactions contemplated by this Agreement or any securitization or
financing transactions consistent with past practice. For purposes of this
Agreement, a "Superior Proposal" means any proposal made by a third party (A) to
acquire, directly or indirectly, including pursuant to a tender offer, exchange
offer, merger, consolidation, business combination, recapitalization,
liquidation, sale, lease, exchange, transfer or other disposition (including a
contribution to a joint venture, dissolution or similar transaction, for
consideration consisting of cash and/or securities, 100% of the combined voting
power of the shares of either the Seller's or the Company's capital stock then
outstanding or 100% of the net revenues, net income or assets of the Seller and
its subsidiaries, taken as a whole and (B) which is otherwise on terms which the
board of directors of the Seller determines in its good faith judgment (after
consultation with outside counsel), taking into account, among other things, all
legal, financial, regulatory and other aspects of the proposal and the person
making the proposal, that the proposal, (i) if consummated would result in a
transaction that is more favorable to the Seller's stockholders from a financial
point of view than the transaction to be consummated pursuant hereto and the
other transactions contemplated hereby and (ii) is reasonably capable of being
completed, including to the extent required, financing which is then committed
or which, in the good faith judgment of the board of directors of the Seller, is
reasonably capable of being obtained by such third party.
(b) Except as expressly permitted by this Section 4.18, neither the board
of directors of the Seller nor any committee thereof shall (i) withdraw, modify
or qualify, or propose publicly to withdraw, modify or qualify, in a manner
adverse to Buyer, the approval of the Agreement, or the Recommendation (as
defined in Section 4.9) or take any action or make any statement in connection
with the Shareholders Meeting inconsistent with such approval or Recommendation
(collectively, a "Change in the Recommendation"), (ii) approve or recommend, or
propose publicly to approve or recommend, any Takeover Proposal, or (iii) cause
the Seller to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, an "Acquisition
Agreement") related to any Takeover Proposal. For purposes of this Agreement, a
Change in the
54
Recommendation shall include any approval or recommendation (or public proposal
to approve or recommend), by the board of directors a Takeover Proposal, or any
failure by the board of directors of the Seller to recommend against a Takeover
Proposal. Notwithstanding the foregoing, the board of directors of the Seller,
to the extent that it determines in good faith, after consultation with outside
counsel, that in light of a Superior Proposal it is necessary to do so in order
to act in a manner consistent with its fiduciary duties to the Seller's
stockholders under applicable law, may terminate this Agreement solely in order
to concurrently enter into a Acquisition Agreement with respect to any Superior
Proposal, but only at a time that is after the third business day following
Buyer's receipt of written notice advising Buyer that the board of directors of
the Seller is prepared to accept a Superior Proposal, specifying the material
terms and conditions of such Superior Proposal and identifying the person making
such Superior Proposal.
(c) In addition to the obligations of the Seller set forth in paragraphs
(a) and (b) of this Section 4.18, the Seller shall immediately advise Buyer
orally and in writing of any request for information or of any Takeover
Proposal, the material terms and conditions of such request or Takeover Proposal
and the identity of the person making such request or Takeover Proposal. The
Seller will keep Buyer informed of the status and details (including amendments
or proposed amendments) of any such request or Takeover Proposal.
(d) Nothing contained in this Section 4.18 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure if, in
the good faith judgment of the board of directors of the Seller, after
consultation with outside counsel, failure so to disclose would be inconsistent
with its obligations under applicable law; provided, however, any such
disclosure related to a Takeover Proposal shall be deemed to be a Change in the
Recommendation unless the board of directors of the Seller reaffirms the
Recommendation in such disclosure.
Section 4.19 Proprietary Software License Agreement. It is understood and
agreed that Buyer shall not acquire direct or indirect ownership of the
proprietary software as listed in Section 2.15(c) of the Company Disclosure
Schedule currently in use by Seller and the Company (the "Retained Proprietary
Software"). At the Closing, Seller on the one hand, and Buyer and the Company,
on the other hand, shall enter into a license agreement substantially in the
form of Exhibit H hereto (the "Proprietary Software License Agreement") with
respect to the retained Proprietary Software. Among other things, the Seller
shall grant the Buyer and the Company a non-exclusive, worldwide, royalty-free,
transferable (to any Affiliate),
55
perpetual license to the retained Proprietary Software in the Proprietary
Software License Agreement.
Section 4.20 Web Site Linking Agreement. At the Closing, Seller, on the
one hand, and Buyer and the Company, on the other hand, shall enter into a Web
Site Linking Agreement (the "Web Site Linking Agreement") pursuant to which
Seller will place on its web site a hypertext link to Buyer's web site for the
Company in a format defined by Buyer.
Section 4.21 Joint Contracts. On or before the Closing Date, Seller shall
have obtained from at least 70% of the counterparties to those Joint Contracts
that are listed in Exhibit J hereto, either (a) a duly executed acknowledgment
substantially in the form of Exhibit I hereto, the ("Acknowledgment") or (b)
terminated such Joint Contracts and caused the execution and delivery of new
contracts (with the same or better terms and conditions) between the same
counterparties whose Joint Contracts were terminated and Buyer and the Company
(and its Affiliates), respectively. For purposes hereof, the Joint Contracts
identified in Exhibit J shall be referred to as the "Active Group". For those
Joint Contracts from the Active Group for which (a) or (b) above has not been
satisfied, such Joint Contracts must be terminated on or prior to the Closing
Date in a joint notice from both Seller and the Company in accordance with the
cancellation provisions of the relevant Joint Contracts. The number of
terminated Joint Contracts from the Active Group cannot be greater than or equal
to thirty (30) percent of the number of Joint Contracts in the Active Group.
For those Joint Contracts that are not included in the Active Group (the
"Inactive Group"), Seller will use best efforts to ensure that either (a) an
Acknowledgment has been executed and delivered for each such Joint Contract or
(b) new contracts (with the same or better terms and conditions) will be
executed and delivered between the same counterparties whose Joint Contracts
were terminated and the Buyer and the Company (and its Affiliates),
respectively. If Seller is not successful in accomplishing either (a) or (b) of
the paragraph, such Joint Contracts from the Inactive Group must be jointly
terminated by Seller, the Company, and any other affiliate of Seller that is a
party to such contract, in accordance with the termination provisions of such
Joint Contracts on or prior to the Closing Date.
Promptly upon the execution and delivery of this Agreement, Seller will
give Buyer access to a complete list of Seller's body shop network including
locations and commissions/discounts. Buyer will utilize the body shop network
list for the purpose of contracting directly with all or some of the members of
such
56
network. To the extent that (i) Buyer successfully contracts with Active Group
members from the network list prior to Closing or (ii) an Active Group member is
already a member of Buyer's body shop network at the time of Closing, then such
contracts will be included in and credited toward the 70% of Active Group
requirements as set forth above. Notwithstanding the foregoing, such Joint
Contracts with Active Group members must be jointly terminated by Seller, the
Company, and any other affiliate of Seller that is a party to such contract, in
accordance with the termination provisions of such Joint Contracts on or prior
to the Closing Date.
In the event that the transactions contemplated by this Agreement are not
consummated in accordance with the terms hereof, then Buyer will provide Seller
with its body shop network list. At the Cosing, Seller shall provide Buyer with
the original, duly executed Acknowledgments along with an officer's certificate
in a form reasonably satisfactory to Buyer indicating that the conditions set
forth in this Section 4.21 have been met with respect to all Joint Contracts.
Section 4.22 Toll Free Telephone Number. It is understood between Buyer
and Seller that on and after the Closing Date the Company will continue to use,
and have exclusive rights to, the toll free telephone number or numbers used by
the Company's customers, prospects and suppliers as of the date of this
Agreement.
Section 4.23 Client Test and Gross Profits Test. As soon as practicable
after the execution and delivery of this Agreement, Seller shall compile, and
Buyer and Seller shall agree, on a list of clients and applicable percentages of
Revenues that will be used as the basis for the Client Test. As soon as
practicable after December 31, 2001 (but no earlier than January 18, 2002), the
Seller shall give the Buyer full access to its premises and the books, records,
financial statements, and related documents of the Company for both the year and
quarter ending December 31, 2001 for purposes of determining whether the Gross
Profits Test and the Client Test have been met. In the event that the Closing
Date is delayed beyond January 31, 2002 as a result of the Company's failure to
meet the requirements of the Gross Profits Test as set forth in Section 2.7
hereof, and as soon as practicable after January 31, 2002 (but no earlier than
February 18, 2002), the Seller shall again give the Buyer access to its premises
and the books, records, financial statements, and related documents of the
Company with respect to the three month period ending January 31, 2002, for
purposes of determining whether the Gross Profits Test requirements have been
met with respect to such period. At the Closing, Seller shall deliver an
officer's certificate in a form satisfactory to Buyer indicating that there has
been no event or events that resulted in a Business Material Adverse Effect
between the date hereof and the Closing Date.
57
Section 4.24 Transferred Assets/Liabilities. Notwithstanding anything
herein to the contrary the parties acknowledge that prior to Closing, the
Company shall transfer those assets and liabilities of the Company listed on
Section 2.24 of the Company Disclosure Schedule, that are labeled "Transferred
Assets/Liabilities", to the Seller and/or a Seller's subsidiary.
Section 4.25 Amendment to Stock Option Plan. Prior to Closing, Seller
shall amend its stock option plan to permit the assignment of the options
referred to in Section 4.6 of the Preferred Stock Purchase Agreement, in
accordance with the terms of such plan and Applicable Law.
ARTICLE V
CONDITIONS TO CONSUMMATION OF THE STOCK PURCHASE
Section 5.1 Conditions to Each Party's Obligations to Consummate the Stock
Purchase. The respective obligations of each party to consummate the
transactions contemplated hereby is subject to the satisfaction at or prior to
the Closing Date of the following conditions:
(a) No statute, rule, regulation, executive order, decree, or injunction shall
have been enacted, entered, promulgated or enforced by any court or Governmental
Entity that remains in force and prohibits the consummation of the transactions
described herein.
(b) No action or proceeding before a court or any other Governmental Entity or
body shall have been instituted or threatened to restrain or prohibit the
transactions contemplated by this Agreement and no Governmental Entity or body
shall have taken any other action or made any request of the Buyer as a result
of which the management of the Buyer deems it inadvisable to proceed with the
transactions hereunder.
Section 5.2 Further Conditions to the Seller's Obligations. The obligation
of the Seller to consummate the transactions contemplated hereby are further
subject to satisfaction or waiver by the Seller of the following conditions:
(a) The representations and warranties of the Buyer contained in this Agreement
shall be true and correct in all material respects (other than representations
and
58
warranties subject to "materiality" or "Material Adverse Effect" qualifiers,
which shall be true, complete and correct as stated) at and as of the Closing
Date as though such representations and warranties were made at and as of such
date (except to the extent expressly made as of an earlier date, in which case,
as of such date);
(b) The Buyer shall have performed and complied in all material respects with
all agreements, obligations and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing;
(c) The Buyer shall have delivered to the Seller an officer's certificate
reasonably satisfactory in form and substance to the Seller to the effect that
each of the conditions specified above in Sections 5.2(a) and (b) is satisfied
in all respects; and
(d) The Seller shall have received the deliveries set forth in Section 1.6 and
1.7.
Section 5.3 Further Conditions to the Buyer's Obligations. The obligation
of the Buyer to consummate the transactions contemplated hereby are further
subject to the satisfaction or waiver by the Buyer at or prior to the Closing
Date of the following conditions:
(a) The representations and warranties of the Seller and the Company contained
in this Agreement shall be true and correct in all material respects (other than
representations and warranties subject to "materiality" or "Material Adverse
Effect" qualifiers, which shall be true, complete and correct as stated) at and
as of the Closing Date as though such representations and warranties were made
at and as of such date (except to the extent expressly made as of an earlier
date, in which case, as of such date);
(b) The Seller shall have performed and complied in all material respects with
all agreements, obligations and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing;
(c) The Buyer shall have received the deliveries set forth in Section 1.5 and
1.7;
(d) Effective as of the Closing, the Seller and the Company will have taken such
actions as are necessary to ensure that as of the Closing, only those persons
listed on Section 5.3(d) of the Company Disclosure Schedule are Employees of the
Company (the "Company Employees"). Seller acknowledges that all other Employees
shall have their employment transferred to the Seller, as appropriate, effective
as of the
59
time of Closing;
(e) The Seller shall have obtained approval of this Agreement and the
transactions contemplated herein by a majority of its shareholders (or such
higher percentage as may be required by law or the Seller's charter or bylaws)
and such other approval as may be necessary under New York corporation law, the
Exchange Act, the Securities Act, and the rules and regulations of Nasdaq;
(f) There shall exist no state of facts or condition which (except as may have
occurred in the ordinary course of business) materially and adversely affects
the business, assets or financial condition of the Company, which is not
disclosed in the June 30, 2001 balance sheet or income statement of the Company
or this Agreement, and there shall have occurred no event or events that
resulted in a Business Material Adverse Effect between the date hereof and the
Closing Date;
(g) The Company shall have repaid all of its outstanding indebtedness for
borrowed money and there shall be no indebtedness as between the Company, on the
one hand, and the Seller and its Affiliates, on the other hand; and
(h) The Seller shall have delivered to the Buyer an officer's certificate
reasonably satisfactory in form and substance to the Buyer to the effect that
each of the conditions specified above in Sections 5.3(a), (b), (d), (e), (f)
and (g) is satisfied in all respects.
ARTICLE VI
TERMINATION AND ABANDONMENT
Section 6.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date:
(a) by mutual written consent of the Seller and the Buyer;
(b) by the Seller or the Buyer at any time after February 20, 2002, if the
Closing shall not have occurred by such date; provided, however, that the right
to terminate this Agreement under this Section 6.1(b) shall not be available to
(i) the Seller, if the Seller has breached any of its representations,
warranties or covenants hereunder in any material respect and such breach has
been the cause of or resulted in the failure
60
of the Closing to occur on or before such date, (ii) the Buyer, if the Buyer has
breached any of its representations, warranties or covenants hereunder in any
material respect and such breach has been the cause of or resulted in the
failure of the Closing to occur on or before such date, or (iii) either party if
the Closing is delayed beyond February 20, 2002, due to the failure of the
Company to meet the requirements of the Gross Profits Test for the three month
period ending December 31, 2001, as described in Section 2.7 hereof, in which
case the Closing Date shall be as soon thereafter as possible (but no later than
March 20, 2002) provided that (i) all of the conditions to each party's
obligations specified in Article V hereof have been satisfied or waived by the
party entitled to waive the applicable condition and (ii) the Company has passed
both the Gross Profits Test and the Client Test for the period ending January
31, 2002;
(c) by the Seller, on the one hand, or the Buyer, on the other hand, if one of
the others shall have breached or failed to perform in any material respect any
of its respective representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform (i) would give
rise to the failure of a condition set forth in Section 5.2(a) or (b) or 5.3(a)
(b), (d) (e), (f), or (g), as applicable, and (ii) cannot be or has not been
cured within 30 days after the giving of written notice to the Seller or the
Buyer, as applicable;
(d) by the Buyer if there shall have occurred an event that resulted in a
Business Material Adverse Effect in the business, assets, or financial condition
of the Company between the date hereof and the Closing Date including without
limitation the failure of the Company to meet the requirements of the Gross
Profits Test for the three month period ending January 31, 2002, as described in
Section 2.7 hereof and the Buyer shall have provided the Seller written notice
that it has elected to terminate this Agreement pursuant to the Section 6.1(d)
within ten (10) days of the Buyer receiving sufficient financial information to
determine that the Company has passed or failed the Gross Profits Test for the
three-month period ending January 31, 2002;
(e) by Buyer, if the Seller shall have failed to make the Recommendation in the
Proxy Statement, or effected a change in Recommendation, or stockholder approval
shall not have been obtained; or
(f) by the Seller in accordance with Section 4.18(b); provided however that in
order for the termination to this Agreement pursuant to this paragraph 6.1(f) to
be deemed effective, the Seller shall have complied with all provisions of
Section 4.18, including the notice provisions therein, and with applicable
requirements, including simultaneously with such termination making payment of
the Termination Fee
61
pursuant to Section 6.3(a)(ii).
Section 6.2 Procedure for and Effect of Termination. In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby by the parties hereto pursuant to Section 6.1 hereof, written notice
thereof shall be given by a party so terminating to the other party and this
Agreement shall forthwith terminate and shall become null and void (except as
provided in Section 6.2(c) below) and of no further effect, and the transactions
contemplated hereby shall be abandoned without further action by the Seller or
the Buyer. If this Agreement is terminated pursuant to Section 6.1 hereof:
(a) Each party shall redeliver all documents, work papers and other materials of
the other parties relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the same,
and all confidential information received by any party hereto with respect to
the other party shall be treated in accordance with Section 4.11 hereof (in the
case of the Buyer as if made by the Buyer);
(b) All filings, applications and other submissions made pursuant hereto, if
any, shall, to the extent practicable, be withdrawn from the agency or other
person to which made; and
(c) There shall be no liability or obligation hereunder on the part of the
Seller or the Company, on one hand, or the Buyer, on the other hand, or any of
their respective directors, officers, employees, Affiliates, controlling
persons, agents or representatives, except that the Seller or the Company, on
one hand, or the Buyer, as the case may be, may have liability to the other
party/parties if the basis of termination is a material breach by the Seller,
the Company or the Buyer, as the case may be, of one or more of the provisions
of this Agreement, and except that the obligations provided for in Sections
4.11, 4.18, 6.3 and 8.8 hereof shall survive any such termination.
Section 6.3 Termination Fee; Expenses.
(a) In the event that (i) the Buyer shall terminate this Agreement due to a
breach of any representation, warranty or covenant or agreement of the Seller or
the Company contained in this Agreement or (ii) this Agreement shall be
terminated as a result of the failure to obtain the requisite approval of the
Seller's shareholders, then, in the case of (i) or (ii), promptly after such
termination, or in the case of termination pursuant to [Section 4.18] of this
Agreement, immediately before the execution and
62
delivery of such agreement, the Seller shall pay to the Buyer (the "Termination
Fee") a sum equal to Two Hundred Fifty Thousand Dollars($250,000).
(b) The Seller and the Company agree that the agreements contained in this
Section are an integral part of the transaction contemplated by this Agreement
and constitute liquidated damages and not a penalty. Accordingly, if the Seller
fails to pay to the Buyer any amounts due under this Section, the Seller shall
pay the cash and expenses (including legal fees and expenses) in connection with
any action, including the filing of any lawsuit of other legal action, taken to
collect payment, together with interest thereon.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
Section 7.1 Survival Periods. The representations and warranties made by
the parties in this Agreement shall survive the Closing and shall continue in
full force and effect without limitation after the Closing except that, subject
to the provisions of the next sentence, neither the Buyer, on the one hand, nor
the Seller or the Company, on the other, shall have any liability with respect
to any matter if notice of a claim has not been provided on or prior to the
third anniversary of the Closing Date. Notwithstanding the foregoing, (a) any
indemnification obligations of any sort relating to (i) Section 2.12 (Taxes), or
(ii) Section 2.10 (ERISA) shall continue in full force and effect without
limitation, unless the Buyer shall not have given notice of a claim on or prior
to the expiration of the statute of limitations applicable to such matters, in
which case such indemnification obligations shall terminate, (b) the
representations and warranties contained in Sections 2.1 through and including
2.4 and Sections 3.1 through and including 3.3 and any indemnification
obligations in connection therewith shall continue in full force and effect
without any limitation and (c) any claims, actions or suits the Buyer may have
which arise from any fraud on the part of any the Seller or the Company, or any
representative of either, shall continue in full force and effect without
limitation.
Section 7.2 The Seller's Agreement to Indemnify
(a) Subject to the terms and conditions set forth herein, from and after the
Closing, the Seller shall indemnify and hold harmless the Buyer, its Affiliates
(including the Company after the Closing), and their respective directors,
officers, employees, controlling persons, agents and representatives and their
successors and
63
assigns (collectively, the "Buyer Indemnitees") from and against all liability,
demands, claims, actions or causes of action, assessments, losses, damages,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses) (collectively, the "Buyer Damages") either (i) arising out of any
act or omission (including without limitation negligence or breach of contract)
of Seller or the Company on or before the Closing, (ii) asserted against or
incurred by any Buyer Indemnitee as a result of or arising out of (w) a breach
of any representation or warranty of the Seller contained in this Agreement, (x)
a breach of any covenant or agreement on the part of the Seller under this
Agreement (y) the enforcement or defense of any Intellectual Property or
Retained Intellectual Property, or (z) any obligations of Seller or any
Affiliate (including without limitation the Company with respect to any
obligations arising before the Closing) under the Joint Contracts (as defined in
Section 2.13(a)).
(b) The Seller shall be obligated to indemnify the Buyer Indemnitees pursuant to
clause (i) of Section 7.2(a) only for those claims giving rise to Buyer Damages
as to which the Buyer Indemnitees have given the Seller notice thereof no later
than forty-five (45) days after the end of any applicable survival period (as
provided for in Section 7.1). Any written notice delivered by a Buyer Indemnitee
to the Seller with respect to Buyer Damages shall set forth with as much
specificity as reasonably practicable the basis of the claim for Buyer Damages
and, to the extent reasonably practicable, a reasonable estimate of the amount
thereof.
Section 7.3 The Buyer's Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein, from and after the
Closing, the Buyer (the "Buyer Indemnitors") shall indemnify and hold harmless
the Seller, its Affiliates, and their respective directors, officers, employees,
controlling persons, agents and representatives and their successors and assigns
(collectively, the "Seller Indemnitees") from and against all liability,
demands, claims, actions or causes of action, assessments, losses, damages,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses) (collectively, "Seller Damages") asserted against or incurred by
any Seller Indemnitee as a result of or arising out of (i) a breach of any
representation or warranty of the Buyer contained in this Agreement, (ii) a
breach of any covenant or agreement on the part of the Buyer under this
Agreement, or (iii) any obligation of the Company or any Affiliate with respect
to the Joint Contracts incurred after the Closing.
(b) The Buyer Indemnitors shall be obligated to indemnify the Seller Indemnitees
pursuant to clause (i) of Section 7.3(a) only for those claims giving rise
64
to Seller Damages as to which the Seller Indemnitees have given the Buyer
Indemnitors written notice thereof no later than forty-five (45) days of the end
of any applicable survival period (as provided for in Section 7.1). Any written
notice delivered by a Seller Indemnitee to the Buyer Indemnitors with respect to
Seller Damages shall set forth with as much specificity as is reasonably
practicable the basis of the claim for Seller Damages and, to the extent
reasonably practicable, a reasonable estimate of the amount thereof.
Section 7.4 Third-Party Indemnification. The obligations of the Seller to
indemnify the Buyer Indemnitees under Section 7.2 hereof with respect to Buyer
Damages and the obligations of the Buyer Indemnitors to indemnify the Seller
Indemnitees under Section 7.3 with respect to Seller Damages, in either case
resulting from the assertion of liability by third parties (each, as the case
may be, a "Claim"), will be subject to the following terms and conditions:
(a) Any party against whom any Claim is asserted will give the indemnifying
party written notice of any such Claim promptly after learning of such Claim,
and the indemnifying party may at its option undertake the defense thereof by
representatives of its own choosing. Failure to give prompt notice of a Claim
hereunder shall not affect the indemnifying party's obligations under this
Article VII, except to the extent the indemnifying party is materially
prejudiced by such failure to give prompt notice. If the indemnifying party,
within 30 days after notice of any such Claim, or such shorter period as is
reasonably required, fails to assume the defense of such Claim, the Buyer
Indemnitee or the Seller Indemnitee, as the case may be, against whom such Claim
has been made will (upon further notice to the indemnifying party) have the
right to undertake the defense, compromise or settlement (subject to the terms
of Section 7.4(c)) of such claim on behalf of and for the account and risk, and
at the expense, of the indemnifying party, subject to the right of the
indemnifying party to assume the defense of such Claim at any time prior to
settlement, compromise or final determination thereof.
(b) So long as the indemnifying party has assumed the defense of any Claim in
the manner set forth above, the indemnifying party shall have the exclusive
right to contest, defend and litigate such Claim and, except as expressly
provided in Section 7.4(c), shall have the exclusive right, in its sole
discretion, to settle any such claim, either before or after the initiation of
litigation at such time and on such terms as the indemnifying party deems
appropriate. If the indemnifying party elects not to assume the defense of any
such Claim (which shall be without prejudice to its right at any time to assume
subsequently such defense), the indemnifying party will nonetheless be entitled,
at its own expense, to participate in such defense. The
65
indemnified party shall have the right to participate, with separate counsel
(which counsel shall act in an advisory capacity only), in any such contest,
defense, litigation or settlement conducted by the indemnifying party. After
notice from the indemnifying party to such indemnified party of the indemnifying
party's election to assume the defense of such Claim, the indemnifying party
will not be liable to such indemnified party for any expenses of the indemnified
party's counsel that are subsequently incurred in connection with the defense
thereof; provided, however, that the expense of such indemnified party's counsel
shall be paid by the indemnifying party if (i) the indemnifying party requested
such separate counsel to participate or (ii) in the reasonable opinion of
counsel to the indemnified party, a significant conflict of interest exists
between the indemnifying party, on the one hand, and the indemnified party, on
the other hand, that would make such separate representation clearly advisable.
(c) Without the prior written consent of the indemnified party (which consent
shall not be unreasonably withheld or delayed), the indemnifying party shall not
admit any liability with respect to, or settle, compromise or discharge, any
Claim or consent to the entry of any judgment with respect thereto, except in
the case of any settlement that includes as an unconditional term thereof the
delivery by the claimant or plaintiff to the indemnified party of a written
release from all liability in respect of such Claim. In addition, whether or not
the indemnifying party shall have assumed the defense of the Claim, the
indemnified party shall not admit any liability with respect to, or settle,
compromise or discharge, any Claim or consent to the entry of any judgment with
respect thereto, without the prior written consent of the indemnifying party
(which consent shall not be unreasonably withheld or delayed), and the
indemnifying party will not be subject to any liability for any such admission,
settlement, compromise, discharge or consent to judgment made by an indemnified
party without such prior written consent of the indemnifying party.
(d) The indemnifying party and the indemnified party shall cooperate fully in
all aspects of any investigation, defense, pre-trial activities, trial,
compromise, settlement or discharge of any claim in respect of which indemnity
is sought pursuant to this Article VII, including, but not limited to, by
providing the other party with reasonable access to employees and officers
(including as witnesses) and other information.
Section 7.5 No Duplication; Sole Remedy.
(a) Any liability for indemnification hereunder shall be determined without
duplication of recovery by reason of the state of facts giving rise to such
liability
66
constituting a breach of more than one representation, warranty, covenant or
agreement.
(b) The Buyer's on the one hand, and the Seller's, on the other hand, respective
rights to indemnification as provided for in Sections 7.2 and 7.3, as
applicable, shall be the exclusive remedy for any Buyer Damages or Seller
Damages, respectively, for which indemnification is provided hereunder;
provided, however, that nothing contained herein shall prevent an indemnified
party from pursuing remedies as may be available to such party under applicable
law in the event of (i) fraud or willful misconduct, (ii) only equitable relief
would be suitable to address the injury or possible injury, or (iii) an
indemnifying party's failure to comply with its indemnification obligations
hereunder.
Section 7.6 Indemnification Matters Governed by this Article VII.
Notwithstanding anything contained herein to the contrary, except as provided in
Section 4.6(m), Article VII shall have no application with respect to any matter
that is governed by Section 4.6.
Section 7.7 Escrow. Any obligation of the Seller to make any payment under
this Article VII or otherwise under this Agreement shall be first satisfied out
of the escrow established under the Escrow Agreement. After exhaustion of such
escrow account, the Buyer may look directly to the Seller for payment. The
parties acknowledge and agree that such escrow account is the non-exclusive
source for recovery of any such claims.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1 Entire Agreement. This Agreement (including the Company
Disclosure Schedule and any other schedules or exhibits to this Agreement)
constitutes the entire agreement of the parties relating to the subject matter
hereof and supersede other prior agreements and understandings between the
parties both oral and written regarding such subject matter.
Section 8.2 Severability. It is the desire and intent of the parties to
this Agreement that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provisions or
portion of this
67
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid or unenforceable, this Agreement shall be deemed amended to delete
therefrom such provision or portion adjudicated to be invalid or unenforceable,
such amendment to apply only with respect to the operation of such Agreement in
the particular jurisdiction in which such adjudication is made.
Section 8.3 Notices. Any notice required or permitted by this Agreement
must be in writing and must be sent by facsimile, by nationally recognized
commercial overnight courier, or mailed by United States registered or certified
mail, addressed to the other party at the address below or to such other address
for notice (or facsimile number, in the case of a notice by facsimile) as a
party gives the other party written notice of in accordance with this Section
8.3. Any such notice will be effective as of the date of receipt:
(a) if to the Buyer, to
PHH Vehicle Management Services, LLC
000 Xxxxxxxxxxxxx Xxxxxx
Mail Code "CP"
Xxxx Xxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: General Counsel
with a copy to:
Cendant Corporation
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxx
Senior Vice President and Secretary
(b) if to the Seller, to
xxxxxxxxxxxxx.xxx Corp.
00 X. Xxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxxx, Chief Executive Officer
with a copy to:
68
Xxxxxxxx X. Xxxxx, Esquire
Meritz & Xxxxx XXX
Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Section 8.4 Governing Law; Jurisdiction, Waiver of Jury Trial. THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK OTHER THAN CONFLICT OF LAWS PRINCIPLES THEREOF
DIRECTING THE APPLICATION OF ANY LAW OTHER THAN THAT OF NEW YORK. COURTS WITHIN
THE STATE OF NEW YORK (LOCATED WITHIN THE COUNTY OF NASSAU) OR THE FEDERAL
DISTRICT COURT, EASTERN DISTRICT, WILL HAVE JURISDICTION OVER ALL DISPUTES
BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES HEREBY
CONSENT TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. EACH OF THE
PARTIES HERETO WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH
PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (III)
ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY
OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.
Section 8.5 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and shall in no way be construed to
define, limit, describe, explain, modify, amplify, or add to the interpretation,
construction or meaning of any provision of, or scope or intent of, this
Agreement nor in any way affect this Agreement.
69
Section 8.6 Counterparts. This Agreement may be signed in counterparts and
all signed copies of this Agreement will together constitute one original of
this Agreement. This Agreement shall become effective when each party hereto
shall have received counterparts thereof signed by all the other parties hereto.
Section 8.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
Section 8.8 Fees and Expenses. Whether or not this Agreement and the
transactions contemplated hereby are consummated, and except as otherwise
expressly set forth herein, all costs and expenses (including legal fees and
expenses) incurred in connection with, or in anticipation of, this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses (except that Seller shall pay all of the Company's costs and expenses).
Each of the Seller, on the one hand, and the Buyer, on the other hand, shall
indemnify and hold harmless the other parties from and against any and all
claims or liabilities for financial advisory and finders' fees incurred by
reason of any action taken by such party or otherwise arising out of the
transactions contemplated by this Agreement by any person claiming to have been
engaged by such party.
Section 8.9 Interpretation. Throughout this Agreement, nouns, pronouns and
verbs shall be construed as masculine, feminine, neuter, singular or plural,
whichever shall be applicable. Unless otherwise specified, all references herein
to "Section" shall refer to corresponding provisions of this Agreement or the
Company Disclosure Schedule, as the case may be, whenever the words "include,"
"includes" or "including" are used in this Agreement, they are deemed to be
followed by the words "without limitation." The phrase "to the knowledge of the
Seller" or any similar phrase shall mean such facts and other information that
as of the date hereof are actually known or should have been known, after due
inquiry, to any director, officer, employee, advisor or legal representative of
the Seller or the Company. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
Section 8.10 No Third-Party Beneficiaries. This Agreement shall not
70
benefit or create any right or cause of action in or on behalf of any person
other than the parties hereto; provided, however, that this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and permitted assigns.
Section 8.11 No Waivers; Modification. Any waiver of any right or default
hereunder will be effective only in the instance given and will not operate as
or imply a waiver of any other or similar right or default on any subsequent
occasion. No waiver, modification or amendment of this Agreement or of any
provision hereof will be effective unless in writing and signed by the party
against whom such waiver, modification or amendment is sought to be enforced.
Section 8.12 Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof and immediate injunctive relief, without the necessity of proving the
inadequacy of money damages as a remedy, in addition to any other remedy at law
or equity.
Section 8.13 Construction. With regard to each and every provision of this
Agreement and any and all agreements and instruments subject to the terms
hereof, the parties hereto understand and agree that same have or has been
mutually negotiated, prepared and drafted, and that if, at any time, the need
arises to construe any provision hereof, or any agreement or instrument subject
hereto, that no consideration shall be given to the issue of which party
actually prepared, drafted, requested, or negotiated any provision of this
Agreement or any agreement subject hereto.
71
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to
be duly signed as of the date first above written.
PHH Vehicle Management Services, LLC
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
xxxxxxxxxxxxx.xxx Corp.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
xxxxxxxxxxxxx.xxx FS Corp.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
72
The undersigned, xxxxxxxxxxxxx.xxx CRM Corp. and xxxxxxxxxxxxx.xxx ADS Corp.
hereby enter into this Agreement for the sole purpose of acknowledging and
agreeing to the provisions of Section 4.10 hereof.
xxxxxxxxxxxxx.xxx CRM Corp.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
xxxxxxxxxxxxx.xxx ADS Corp.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
The undersigned, Xxxxx Xxxxxx, Chairman, Chief Executive Officer and
Founder of Seller, hereby enters into this Agreement for the sole purpose of
acknowledging and agreeing to the provisions of Section 4.10 and 4.18.
----------------------------------------
Xxxxx Xxxxxx
73
SCHEDULE 5.3(d)
Company Employees
74
EXHIBIT A
CERTIFICATE OF DESIGNATION
Term Sheet
Issuer: xxxxxxxxxxxxx.xxx ("driversshield")
Purchaser: PHH Vehicle Management Services, LLC
("PHHVMS")
Securities to be Issued: Series A Convertible Preferred Stock of
driversshield, par value $0.01 per share
(the "Series A Preferred")
Amount: $1,000,000 in the aggregate (the purchase
price) for 1,000 shares at $1,000 per
share (the "Initial Value")
Conversion Rights: The holders of the Series A Preferred will
be entitled at any time, at its option, to
convert any or all of the Series A
Preferred into shares of Common Stock of
driversshield at a conversion rate of 500
shares of Common Stock for each share of
Series A Preferred, calculated by dividing
the Initial Value of each share of Series
A Preferred by the Common Stock conversion
rate of $2.00, as adjusted from time to
time for stock splits, recapitizations or
pursuant to anti-dilution protection
provisions (the "Conversion Rate").
Liquidation Preference: Upon liquidation, dissolution or winding
up of the affairs of driversshield,
whether voluntary or involuntary, the
holders of the Series A Preferred will be
entitled to receive, in preference to the
holders of any other equity securities of
driversshield, an amount equal to one
hundred twenty-five percent (125%) of the
Initial Value of the Series A Preferred
(the "Liquidation Preference").
A consolidation, reorganization or merger
of driversshield or a sale of
substantially all of driversshield's
assets shall, at the election of the
holders of the Series A Preferred, be
deemed to be a liquidation or winding up
for purposes of the Liquidation
Preference.
Seniority: The Series A Preferred will rank prior to
any other class or series of capital stock
of driversshield, as to distribution of
assets upon liquidation, dissolution or
winding up of driversshield, whether
voluntary or involuntary. No senior or
parity securities may be issued without
the written consent of holders of the
Series A Preferred.
Voting Rights: The Series A Preferred will vote together
with the Common Stock on all matters on an
as-converted basis at the Conversion Rate.
In addition, the approval of the holders
of the Series A Preferred will be required
for the following actions:
(a) Amendment, alteration or repeal of
any provision of the Certificate of
Incorporation or the By-Laws of
driversshield affecting the rights
of the Preferred Stock
shareholders;
(b) creation of any class or series of
stock on a parity with or having
preference over the existing
Preferred Stock;
(c) payment or declaration of any
dividend or redemption, repurchase
or acquisition of any shares of
capital stock on parity with the
Preferred Stock;
(d) issuance of any equity or debt of
driversshield having a liquidation
preference in excess of the amount
actually paid for such equity or
debt; or
(e) incurring of any indebtedness by or
on behalf of driversshield or any
affiliate or subsidiary of
driversshield in excess of
$5,000,000 in the aggregate.
Board Representation: Provided that PHH Vehicle Management
Services, LLC (or any Affiliate(s)
thereof) (collectively, "PHH VMS"), is the
holder(s) of the Series A Preferred (and
subject to the conditions set forth
herein), such holder(s) shall have the
exclusive right, voting separately as a
class, to elect one director of the
Company (herein referred to as the "Series
A Director"). The Series A Director will
be either the chief
-2-
executive officer or chief operating
officer of PHH VMS or an individual that
is nominated by PHH VMS and consented to
by driversshield. The Series A Director
shall be elected by the affirmative vote
of the holders of record of a majority of
the outstanding Series A Preferred shares
either at meetings of stockholders at
which directors are elected, a special
meeting of holders of the Series A
Preferred shares or by written consent
without a meeting in accordance with
applicable law. The Series A Director so
elected shall serve for a term of one year
and until his successor is elected and
qualified. Any vacancy in the position of
the Series A Director will be filled by
holders of the Series A Preferred shares.
To the extent permitted by Applicable Law,
the Series A Director may, during his or
her term of office, be removed at any
time, with or without cause, by and only
by the affirmative vote, at a special
meeting of holders of the Series A
Preferred shares called for such purpose,
or the written consent, of the holders of
record of a majority of the outstanding
Series A Preferred shares. Any vacancy
created by such removal may also be filled
at such meeting or by such consent. In
addition to the Series A Director, the
holders of the Preferred Shares shall be
entitled to one non-voting observer's seat
on driversshield's board of directors
subject to the same conditions that apply
with respect to PHH VMS's ability to elect
the Series A Director except that such
non-voting observer can be any employee of
PHH VMS or its Affiliates.
Notwithstanding the foregoing or anything
herein to the contrary, the right of PHH
VMS to elect a Series A Director shall
cease at such time that PHH VMS (including
its Affiliates) no longer own(s) at least
five hundred (500) shares of Series A
Preferred as adjusted to give effect to
stock splits, recapitalizations and
similar corporate transactions or events
that may have decreased the number of
shares of Series A Preferred owned by PHH
VMS.
Anti-Dilution Rights: The Conversion Rate for the Series A
Preferred will be subject to full ratchet
adjustments to avoid dilution in the event
that driversshield issues additional
equity, or rights or other
-3-
securities convertible or exercisable into
equity, at a price less than $2.00 per
share (as adjusted for prior dilution
events) at the time of issuance. The
Conversion Rate will also be subject to
proportional adjustment for stock splits,
combinations, stock dividends,
recapitalizations and similar transactions
or events.
Preemptive Rights: The holders of the Series A
Preferred will have the right of first
refusal to purchase a pro rata share of
any offering of new securities, including
debt or equity of driversshield.
Use of Proceeds: The proceeds from the sale of the Series A
Preferred may be used by driversshield in
its discretion for general corporate
purposes; provided, that in no event shall
the proceeds be used by driversshield
without the consent of PHHVMS to: (i) fund
investments in third parties; (ii) repay
indebtedness; or (iii) redeem, repurchase
or acquire any securities of
driversshield.
Information Rights: So long as any of the Series A Preferred
is outstanding, driversshield will deliver
to the holders of the Series A Preferred
on a timely basis annual (audited) and
quarterly financial statements, annual
budgets and such other information
reasonably requested by the holders of the
Series A Preferred.
Registration Rights: The holders of the Series A Preferred will
have the registration rights provided for
in the Preferred Stock Purchase Agreement.
Preferred Stock Purchase Agreement: The Preferred Stock Purchase Agreement
will contain customary covenants,
representations and warranties, and such
other representations and warranties as
may be necessary to address concerns
raised during due diligence.
PHHVMS shall be the only party
participating in the Series A Preferred
round.
Governing Law: The rights and obligations of the parties
pursuant to the purchase documents shall
be governed by and construed in accordance
with the internal laws of the State of New
York.
Closing Date: TBD
-4-
EXHIBIT B
PREFERRED STOCK PURCHASE AGREEMENT, dated as of __________, 2002 (this
"Agreement"), by and among PHH Vehicle Management Services, LLC, a Delaware
limited liability Company (the "Buyer"), and xxxxxxxxxxxxx.xxx Corp., a New York
corporation (the "Seller").
Defined terms that are used but not defined herein shall have the meanings
given them in the Stock Purchase Agreement.
WHEREAS, the Buyer, the Seller and Xxxxx Xxxxxx have entered into a Stock
Purchase Agreement dated as of ___________, 2001 (the "Stock Purchase
Agreement") pursuant to which the Buyer will acquire all of the issued and
outstanding capital stock of xxxxxxxxxxxxx.xxx FS Corp., a New York corporation
and wholly-owned subsidiary of the Seller (the "Company");
WHEREAS, the Seller desires to issue and sell to the Buyer, and the Buyer
desires to purchase from the Seller, an aggregate of 1,000 shares (the
"Preferred Shares") of the Series A Convertible Preferred Stock, par value $.01
of the Seller;
WHEREAS, this Agreement is contingent upon and is being entered into
immediately following the closing of the transactions contemplated by the Stock
Purchase Agreement (the "Closing"), and provides for the issuance of the
Preferred Shares and the closing of the transactions contemplated immediately
after the Closing;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and subject to the terms and conditions hereof, the parties
intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
Section 1.1 Purchase and Sale of Preferred Shares. The Seller has
authorized and created a series of its Preferred Stock consisting of 1,000
shares designated as its "Series A Convertible Preferred Stock." The terms,
limitations and relative rights and preferences of the Series A Convertible
Preferred Stock are set
forth in the Certificate of Designation Term Sheet attached hereto as Exhibit A
(the "Certificate of Designation Term Sheet"). A Certificate of Designation,
which shall be acceptable to Buyer in form and substance and which shall reflect
the terms set forth in the Certificate of Designation Term Sheet, will be filed
by the Seller prior to the Closing Date. On the Closing Date, upon the terms of
this Agreement, the Seller shall sell to the Buyer, and the Buyer shall purchase
from the Seller, the Preferred Shares.
Section 1.2 Closing Payment. Subject to the terms of this Agreement, at
the Closing, Buyer agrees to pay to the Seller the Closing Payment described in
the Stock Purchase Agreement (the "Closing Payment").
Section 1.3 Time and Place of Closing. Upon the terms and subject to the
conditions of this Agreement, the closing of the transactions contemplated by
this Agreement (the "Closing") will take place at the place and time described
in the Stock Purchase Agreement and shall be deemed to have occurred one second
following the closing of the transactions contemplated under the Stock Purchase
Agreement.
Section 1.4 Deliveries by the Seller. Subject to the terms hereof, at the
Closing, the Seller will deliver the following to the Buyer:
(a) stock certificates representing the Preferred Shares, registered on the
stock books of the Seller in the name of the Buyer;
(b) a certificate of the Secretary of the Seller reasonably satisfactory in form
and substance to the Buyer setting forth resolutions of the Board of Directors
authorizing the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and certifying that such
resolutions/authorization have been duly made and have not been rescinded or
amended as of the Closing Date;
(c) the option grant agreement referred to in Section 4.6; and
(d) a Directors' and Officers' liability insurance certificate evidencing the
coverage required pursuant to Section 4.6 hereof.
Section 1.5 Deliveries by the Buyer. Subject to the terms hereof, at the
Closing, the Buyer will deliver to the Seller the Closing Payment, by wire
transfer of immediately available funds.
2
Section 1.6 Defined Terms. Except as set forth herein, capitalized terms
used herein and not defined herein have the meanings ascribed to such terms in
the Stock Purchase Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer as follows (in each
case after giving effect to the sale of the Company to the Buyer as contemplated
under the Stock Purchase Agreement):
Section 2.1 Organization; Etc.. The Seller (i) is a corporation validly
existing and in good standing under the laws of the State of New York, (ii) has
all requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as they are now being
conducted, and (iii) is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership,
operation or leasing of its properties makes such qualification necessary. The
Seller has previously delivered or made available to the Buyer true and complete
copies of the organizational documents or comparable governing instruments
(including all amendments to each of the foregoing) of the Seller as in effect
on the date hereof (the "Charter").
Section 2.2 Authority Relative to this Agreement. The Seller has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Seller
and the consummation by the Seller of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Seller are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Seller and, assuming the due
authorization, execution and delivery by the other parties hereto, constitutes a
legal, valid and binding obligation of such party, enforceable against such
party in accordance with its terms, subject to the Bankruptcy Exception.
Section 2.3 Capitalization. The authorized capital stock of the Seller
consists of thirty million shares of common stock, par value $.015 per share
(the "Common Stock"), and one million shares of Preferred Stock, par value $.01
per
3
share. As of the date hereof there are 10,696,988 shares of Common Stock issued
and outstanding, not including treasury shares, and no shares of Preferred Stock
issued and outstanding. The Preferred Shares have been duly authorized and
validly issued and are fully paid and non-assessable. The shares of Common Stock
issuable upon (i) the granting of the Initial Option and (ii) conversion of the
Preferred Shares have been reserved for issuance by the Seller, have been duly
authorized and upon issuance, in accordance with the terms of the Certificate of
Designation in the case of the Preferred Shares, will be validly issued, fully
paid and non-assessable. All of the issued and outstanding shares of Common
Stock have duly authorized and validly issued and are fully paid and
non-assessable. There are no preemptive rights, options, warrants, stock
appreciation rights (or other securities that have their value tied to any other
securities of the Seller), or other rights, agreements, arrangements or
commitments of any character to which the Seller is a party or by which the
Seller is bound relating to the issued or unissued capital stock of the Seller
or obligating the Seller to issue or sell any shares of capital stock of, or
other equity interests in, the Seller.
Section 2.4 Consents and Approvals; No Violations. Except as set forth in
Section 2.4 of the Seller Disclosure Schedule, neither the execution and
delivery of this Agreement by the Seller, nor the consummation by the Seller of
the transactions contemplated hereby will (a) conflict with or result in any
breach of any provision of the certificate or articles of incorporation, as the
case may be, or by-laws of the Seller, (b) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under,
or require any consent under, any indenture, license, contract, agreement or
other instrument or obligation to which the Seller is a party or by which it or
any of its properties or assets are bound, (c) violate any order, writ,
injunction, decree or award rendered by any Governmental Entity or any Law
applicable to the Seller or any of its properties or assets, or (d) require any
filing with, or the obtaining of any permit, authorization, consent or approval
of, any Governmental Entity or (e) result in the creation of a Lien on any
property or asset of the Seller pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation. The execution and delivery of this Agreement by the
Seller, and the performance by the Seller of its obligations hereunder and the
consummation of the transactions contemplated hereby will not, require any
consent, approval, authorization or permit of, or filing by the Seller with or
notification to, any Governmental Entity.
Section 2.5 SEC Reports; Financial Statements.
4
(a) The Seller has timely filed all forms, reports, statements and documents
required to be filed by it pursuant to the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended, and other applicable
Securities and Exchange Commission ("SEC") and Nasdaq rules and regulations (A)
with the SEC and Nasdaq since December 31, 1999 (collectively, together with any
such forms, reports, statements and documents the Seller may file subsequent to
the date hereof until the Closing, the "Seller Reports") and (B) with any other
Governmental Entities. Each Seller Report (i) was prepared in all respects in
accordance with the requirements of the Securities Act, the Exchange Act, or the
rules and regulations promulgated thereunder, or the rules and regulations of
Nasdaq, as the case may be, and (ii) did not at the time it was filed (or, in
the case of registration statements filed under the Securities Act, at the time
of effectiveness) contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading. Each form, report, statement and document
referred to in clause (B) of this paragraph was prepared in all material
respects in accordance with the requirements of applicable Law.
(b) Each of the financial statements (including, in each case, any notes
thereto) contained in the Seller Reports (the "Financial Statements") was
prepared in accordance with GAAP (except as may be permitted by Form 10-Q under
the Exchange Act) applied on a consistent basis throughout the periods indicated
(except as may be indicated in the notes thereto) and each presented fairly, in
all material respects, the financial position of the Seller as at the respective
dates thereof and its results of operations, shareholders' equity and cash flows
for the respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring
immaterial year-end adjustments).
(c) Except as and to the extent set forth or reserved against on the balance
sheet of the Seller as reported in the Seller Reports, including the notes
thereto, the Seller has no liabilities or obligations of any nature (whether
direct, indirect, known, unknown, accrued, unaccrued, absolute, contingent or
otherwise) that would be required to be reflected on a balance sheet or in notes
thereto prepared in accordance with GAAP, except for immaterial liabilities or
obligations incurred in the ordinary course of business consistent with past
practice since December 31, 2000.
Section 2.6 Absence of Undisclosed Liabilities. Except as and to the
extent set forth or reserved against on the Financial Statements, including the
notes thereto, the Seller has no liabilities or obligations of any nature
(whether direct, indirect, known, unknown, accrued, unaccrued, absolute,
contingent or otherwise) that would
5
be required to be reflected on a balance sheet or in notes thereto prepared in
accordance with GAAP, except for immaterial liabilities or obligations incurred
in the ordinary course of business consistent with past practice since December
31, 2000.
Section 2.7 Absence of Certain Changes. Except as set forth in Section 2.7
of the Seller Disclosure Schedule or as otherwise contemplated by this
Agreement, since June 30, 2001, (a) there has not been any development or event
that has had or could reasonably be expected to have, individually or in the
aggregate, a Seller Material Adverse Effect and (b) the Seller has conducted its
business in the ordinary course consistent with past practice and used
reasonable efforts to preserve intact its business organizations and
relationships with any Person and keep available the services of its present
management and key employees. As used in this Agreement, the term "Seller
Material Adverse Effect" shall mean a material adverse change in, or effect on,
(i) the business, prospects, financial condition or results of operations of the
Seller, or (ii) the ability of the Seller to perform its obligations under this
Agreement which shall exclude the impact that the Company has on the performance
of the Seller.
Section 2.8 Litigation. Except as set forth in Section 2.8 of the Seller
Disclosure Schedule, there is no Legal Proceeding pending or, to the knowledge
of the Seller, threatened against the Seller by or before any court or
Governmental Entity. There is no Legal Proceeding pending or, to the knowledge
of the Seller, threatened, against the Seller that questions the validity of
this Agreement or any action taken or to be taken by the Seller in connection
with the consummation of the transactions contemplated hereby. Except as set
forth in Section 2.of the Seller Disclosure Schedule, there is not outstanding
or, to the knowledge of the Seller, threatened, any orders, judgments, decrees
or injunctions issued by any Government Entity against, affecting or naming the
Seller.
Section 2.9 Compliance with Law. The Seller is in compliance with all
Applicable Laws, and the Seller has received no notice of or a reasonable basis
to believe that the Seller has in any material respect violated any such
Applicable Law. The Seller has all Permits necessary to conduct its business as
currently conducted. All of the Permits are identified in Section 2.9 of the
Seller Disclosure Schedule. The Seller is not in violation of the terms of any
Permit, nor has the Seller engaged in any activity that is reasonably likely to
cause revocation or suspension of any such Permit and no action or proceeding
looking to or contemplating the revocation or suspension of any such Permit is
pending or, to the Seller's knowledge, threatened.
6
Section 2.10 Securities Matters. As of the date hereof, the Seller meets
the requirements for use of Form S-3 for registration of the resale of the
Common Stock underlying the Preferred Shares. The Seller has not granted any
registration rights to any other party. The Seller is not now, and after giving
effect to the transactions contemplated hereby will not be, an "investment
company" as defined in the Investment Company Act of 1940.
Section 2.11 Labor and Employment Matters. Except as set forth in Section
2.11 of the Seller Disclosure Schedule, (i) the Seller is not a party to any
union agreement or collective bargaining agreement or work rules or practices
agreed to with any labor organization or employee association and, to the
knowledge of the Seller, no attempt to organize any of the employees of the
Seller (the "Employees") has been made or is pending, (ii) since January 1,
1998, the Seller has not had any Equal Employment Opportunity Commission charges
or other claims of employment discrimination made against it that have not been
dismissed, (iii) since January 1, 1998, no state wage and hour department
investigations have been made of the Seller, (iv) since January 1, 1998, there
has been no labor strike, dispute, slowdown, stoppage or lockout against or
affecting the Seller, (v) no unfair labor practice charge or complaint against
the Seller is pending before the National Labor Relations Board or any similar
Governmental Entity, and (vi) there are no written personnel policies, rules or
procedures applicable to any Employees, other than those set forth in Section
2.11 of the Seller Disclosure Schedule, true and correct copies of which have
heretofore been delivered to the Buyer. Except as set forth in Section 2.11 of
the Seller Disclosure Schedule, there are no employment contracts or severance
agreements with any Employees or independent contractors of the Seller.
Section 2.12 Taxes. Except as set forth in Section 2.12 of the Seller
Disclosure Schedule:
(a) The Seller (i) has timely filed (or caused to be filed when due) with the
appropriate taxing authorities all material Tax Returns (as hereinafter
defined) required to be filed by it and all such Tax Returns are true,
correct and complete, (ii) has paid all Taxes (as hereinafter defined) due
and payable by it, (iii) is a "C" corporation for federal tax purposes,
and (iv) established in the most recent Financial Statements reserves that
are adequate for the payment of any Taxes not yet due and payable;
(b) The Seller has prior to the date hereof provided to the Buyer copies of
all Tax Returns applicable to the Seller;
7
(c) There are no outstanding agreements extending or waiving the statutory
period of limitation applicable to any claim for, or the period for the
collection or assessment of, Taxes due for any taxable period with respect
to any Tax for which the Seller may be subject or liable;
(d) There is not now pending, nor to the knowledge of the Seller is there any
threat of an audit, assessment, collection, suit, action, administrative
proceeding, investigation or other proceeding by any Governmental Entity
relating to (i) any Taxes due from or with respect to the Seller, or (ii)
any Tax Return of or with respect to the Seller;
(e) There are no Liens for Taxes upon the assets or properties of the Seller,
except for statutory Liens for current Taxes not yet due;
(f) The Seller is not (i) a party to, bound by, or obligated under any
agreement relating to the sharing or allocation of Taxes or
indemnification agreement with respect to Taxes or any similar contract or
arrangement and (ii) has no potential liability or obligation to any
Person as a result of, or pursuant to, any such agreement, contract or
arrangement;
(g) The Seller has not agreed, nor is it required to make, any adjustment
under Sections 446(e) or 481(a) of the Code (or any similar provision of
state, local or foreign law) by reason of a change in accounting method or
otherwise for any Tax period for which the applicable federal statute of
limitations has not expired;
(h) The Seller has not received a ruling from any Tax authority, nor has it
entered into any closing agreement pursuant to Section 7121 of the Code
(or any similar provision of state, local or foreign law) or any other
agreement with similar Tax purposes;
(i) The Seller has complied with all applicable laws relating to the
withholding of Taxes and has timely withheld and paid over to the relevant
Tax authority all amounts required to be so withheld and paid over for all
periods under all applicable laws, including withholding in connection
with payments to employees, independent contractors, creditors, partners,
stockholders or other third parties;
(j) The Seller has not been a member of any federal, state, local or foreign
consolidated, unitary, combined or similar group other than the group in
8
which Seller (or its Affiliates) is the common parent;
(k) The Seller has not filed a consent pursuant to Section 341(f) of the Code
(or any predecessor provision) or agreed to have Section 341(f)(2) of the
Code apply to the disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by the Seller;
(l) No jurisdiction where the Seller does not file a Tax Return has made a
Claim that the Seller is required to file a Tax Return for such
jurisdiction;
(m) The deduction of any amount payable or benefit provided pursuant to the
terms of any plan, agreement or arrangement, whether written or oral, of
the Seller will not be subject to disallowance under Sections 162(a)(1),
162(m) or 280(G) of the Code;
(n) No person is entitled to receive any "gross-up" payment from the Seller in
the event that the excise tax of Section 4999(a) is imposed on such
Person.
(o) No transfer or recordation Tax will be due as a result of the issuance of
the Preferred Shares or the Common Sock issuable upon conversion thereof.
(p) Since the date of the Financial Statements, the Seller has not incurred
any liability for Taxes other than in the ordinary course of business; and
(q) no power of attorney is currently enforced with respect to any matter
relating to taxes of the Company.
Section 2.13 Contracts.
(a) Section 2.13(a) of the Seller Disclosure Schedule contains a correct and
complete list of all Contracts pursuant to which the Seller is a party to or
bound by; and
(i) have a duration of three months or more and are not terminable without
penalty upon 60 days or less prior written notice by any party;
(ii) require or could reasonably be expected to require any party thereto
to pay $15,000 or more in any twelve month period, or $50,000 or more in
the aggregate;
9
(iii) require or could require any severance or retention payments to
Employees after the Closing Date;
(iv) contain any restrictive covenant, confidentiality or non-competition
agreement;
(v) constitute a lease or license of any Intellectual Property from any
third party;
(vi) regard the employment, services, consulting, termination or severance
from employment of any director, officer, Employee, or other Person;
(vii) constitute a trust indenture, mortgage, promissory note, loan
agreement or other Contract for the borrowing of money or a leasing
transaction of the type required to be capitalized in accordance with
GAAP;
(viii) constitute an agreement of guarantee, support, indemnification,
assumption or endorsement of, or any other similar commitment with respect
to, the obligations, liabilities (whether accrued, absolute, contingent or
otherwise) or indebtedness of any other Person (except for checks endorsed
for collection);
(ix) contain non-standard payment terms, in each case;
(x) (other than the Stock Purchase Agreement) limit the freedom of the
Seller to engage in any line of business or to compete with any other
corporation, partnership, limited liability company, trust, individual or
other entity, or any confidentiality, secrecy or non-disclosure contract
or any contract that may be terminable as a result of the Buyer's status
as a competitor of any party to such contract;
(xi) are with an Affiliate;
(xii) provide for a joint venture or partnership with any other Person;
(xiii) are not in writing, true and correct summaries of which have been
provided to the Buyer;
(xiv) constitute a contract entered into by the Seller other than in the
ordinary course consistent with past practice; or
10
(xv) has granted or been granted forgiveness or waived or been granted a
waiver of any rights or obligations under such Contract.
(b) Except as set forth in Section 2.13(b) of the Seller Disclosure Schedule:
(i) all of the Contracts are valid and binding and are in full force and effect,
the Seller is not in default under, and no event has occurred which, with the
passage of time or giving of notice or both, would result in the Seller being in
default under, any of the terms of the Contracts, (ii) none of the Contracts
requires the consent of any other party thereto in connection with the
transactions contemplated by this Agreement, (iii) none of the Contracts
contains a change of control provision that would either prohibit the
transactions contemplated by this Agreement or require the consent of any third
party; (iv) the Seller is a party to a written agreement with all suppliers of
goods and services to the Seller and (v) there exists no default or event of
default or event, occurrence, condition or act, with respect to the other
contracting party, which, with the giving of notice, the lapse of the time or
the happening of any other event or conditions, would become a default or event
of default under any Contract. True, correct and complete copies of all
Contracts have been delivered to the Buyer.
Section 2.14 Real Property. Section 2.14 of the Seller Disclosure Schedule
sets forth a list of all real property leased or subleased by or on behalf of
the Seller along with all documentation and amendments related thereto (the
"Real Property Lease") and includes the expiration date of any Real Property
Lease. The Seller does not own any real property.
Section 2.15 Intellectual Property.
(a) Each item of Intellectual Property of the Seller is set forth in Section
2.15(a) of the Seller Disclosure Schedule.
(b) Section 2.15(b) of the Seller Disclosure Schedule sets forth, for all
Intellectual Property owned directly or indirectly, or licensed, leased or
otherwise used, by the Seller, a complete and accurate list, of all U.S. and
foreign: (i) patents and patent applications; (ii) trademark and service xxxx
registrations (including Internet domain name registrations owned directly or
indirectly by the Seller), trademark and service xxxx applications and material
unregistered trademarks and service marks; and (iii) copyright registrations,
copyright applications and material unregistered copyrights.
(c) Section 2.15(c) of the Seller Disclosure Schedule lists all contracts for
11
material Software which is licensed, leased or otherwise used by the Seller, and
all Proprietary Software, and identifies which Software is owned, licensed,
leased, or otherwise used, as the case may be.
(d) Section 2.15(d) of the Seller Disclosure Schedule sets forth a complete and
accurate list of each License Agreement to which the Seller is a party or
otherwise bound.
(e) Except as set forth in Section 2.15(e) of the Seller Disclosure Schedule or
as would not individually or in the aggregate have a Seller Material Adverse
Effect:
(i) The Seller owns or has the right to use all Intellectual Property,
free and clear of all Liens other than Permitted Liens;
(ii) Any Intellectual Property owned by the Seller or any of its
Affiliates and used by the Seller, has been duly maintained, is valid and
subsisting, in full force and effect and has not been cancelled, expired
or abandoned;
(iii) Any Intellectual Property used by the Seller but not owned by the
Seller or any of its Affiliates has been duly maintained, is valid and
subsisting, in full force and effect and has not been cancelled, expired
or abandoned;
(iv) The Seller has not received written notice from any third party
regarding any actual or potential infringement by the Seller of any
intellectual property of such third party, and the Seller has no knowledge
of any basis for such a claim against the Seller;
(v) The Seller has not received written notice from any third party
regarding any assertion or claim challenging the validity of any
Intellectual Property owned or used by the Seller or any subsidiary of the
Seller and the Seller has no knowledge of any basis for such a claim;
(vi) The Seller has not licensed or sublicensed its rights in any
Intellectual Property, or received or been granted any such rights, other
than pursuant to the License Agreements;
(vii) No third party is misappropriating, infringing, diluting or
violating any Intellectual Property owned or used by the Seller;
12
(viii) The License Agreements are valid and binding obligations of the
Seller, enforceable in accordance with their terms, except that such
enforcement may be subject to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws, now or hereafter in effect,
relating to or limiting creditors' rights generally;
(ix) The Seller takes reasonable measures to protect the confidentiality
of Trade Secrets including requiring third parties having access thereto
to execute written nondisclosure agreements. No Trade Secret of the Seller
has been disclosed or authorized to be disclosed to any third party other
than pursuant to a written nondisclosure agreement that the Seller and the
Seller reasonably believe adequately protects the Seller's proprietary
interests in and to such Trade Secrets;
(x) The consummation of the transactions contemplated hereby will not
result in the loss or impairment of the Seller's rights to own or use any
of the Intellectual Property, nor will such consummation require the
consent of any third party in respect of any Intellectual Property; and
(xii) All Proprietary Software set forth in Section 2.15(c) of the Seller
Disclosure Schedule, was either developed (a) by employees of the Seller
within the scope of their employment; or (b) by independent contractors
who have assigned all of their rights to the Seller pursuant to written
agreement.
(f) Except as set forth in Section 2.15(f) of the Seller Disclosure Schedule,
the Seller has:
(i) not granted to any third party any exclusive rights of any kind
(including, without limitation, exclusivity with regard to categories of
advertisers on any World Wide Web site, territorial exclusivity or
exclusivity with respect to particular versions, implementations or
translations of any of the Intellectual Property), nor has the Seller
granted any third party any right to market any of the Intellectual
Property under any private label or "OEM" arrangements;
(ii) no outstanding sales or advertising contract, commitment or proposal
(including, without limitation, insertion orders, slotting agreements or
other agreements under which the Seller has allowed third parties to
advertise on or otherwise be included in a World Wide Web site) that the
Seller currently expects to result in any material loss to the Seller upon
completion or
13
performance thereof;
(iii) has any oral contracts or arrangements for the sale of advertising
or any other product or service; or
(iv) employs any employee, contractor or consultant who, to the Seller's
knowledge, is in violation of any material term of any written employment
contract, patent disclosure agreement or any other written contract or
agreement relating to the relationship of any such employee, consultant or
contractor with the Seller or, to the Seller's knowledge, any other party
because of the nature of the Seller's business.
Section 2.16 Environmental Compliance. Except as would not individually or
in the aggregate have a Seller Material Adverse Effect: (a) the Seller is in
compliance with all applicable Environmental Laws; (b) the Seller has all
material Permits required under any applicable Environmental Laws and are in
compliance with their respective requirements; and (c) there are no pending or,
to Seller's knowledge, threatened claims under Environmental Laws against the
Seller.
Section 2.17 Affiliate and Non-Arm's Length Transactions. Since January 1,
1999, the Seller has not made any payment or loan to, or borrowed any moneys
from or is otherwise indebted to, any officer, director, Employee, shareholder,
Affiliate of the Seller or any other Person not dealing at arm's length with the
Seller, except as disclosed in Section 2.17 of the Seller Disclosure Schedule
and except for usual employee reimbursements and compensation paid in the
ordinary course. Except as described in Section 2.17 of the Seller Disclosure
Schedule and except for Contracts of employment, the Seller is not a party to
any Contract with any officer, director, Employee, shareholder or Affiliate of
the Seller or any other Person not dealing at arm's length with the Seller.
Section 2.18 Brokers; Finders and Fees. The Seller has not employed any
investment banker, broker or finder or incurred any liability for any investment
banking fees, brokerage fees, commissions or finders' fees in connection with
this Agreement or the transactions contemplated hereby.
Section 2.19 Properties/Assets. The Seller has good and marketable title,
free and clear of all Liens to all of its properties and assets, whether
tangible or intangible, real, personal or mixed, reflected in the Financial
Statements as being owned by the Seller as of the date thereof, other than (i)
any properties or assets that have been sold or otherwise disposed of in the
ordinary course of business since the
14
date of the Financial Statements, (ii) Liens disclosed in the notes to the
Financial Statements, and (iii) Liens arising in the ordinary course of business
after the date of the Financial Statements. All buildings, and all fixtures,
equipment and other property and assets that are material to its business, held
under leases or sub-leases by Seller are held under valid instruments
enforceable in accordance with their respective terms, subject to the Bankruptcy
Exception. All of Seller's equipment in regular use which is needed for the
operation of Seller has been reasonably maintained and is in serviceable
condition, reasonable wear and tear excepted. The Seller has good and marketable
title, free and clear of all Liens to all assets necessary to conduct the
Business as such are being conducted on the date of this Agreement and proposed
to be conducted, and such assets are not owned or held by any other Person.
Section 2.20 Disclosure. No representation or warranty by the Seller in
this Agreement and no statement contained in any document or other writing
furnished or to be furnished to the Buyer or its representatives pursuant to the
provisions hereof contains or will contain any untrue statement of material fact
or omits or will omit to state any material fact necessary in order to make the
statements made herein or therein not misleading. There has been no event or
transaction (other than the transactions contemplated hereby and the matters
related thereto) which has occurred or information which has come to the
attention of the Seller (other than events or information relating to economic
conditions of general public knowledge) which could reasonably be expected to
have a Seller Material Adverse Effect or which could reasonably be expected to
prevent or impair the ability of the Seller, after the Closing, to carry on its
business in the same manner as it is presently being conducted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
Section 3.1 Organization; Etc. The Buyer is (i) a limited liability
company validly existing and in good standing under the laws of Delaware, (ii)
has all requisite corporate power and authority to own, lease and operate its
respective properties and assets and to carry on its business as it is now being
conducted, and (iii) is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership,
operation or leasing of its properties makes such qualification necessary.
15
Section 3.2 Authority Relative to this Agreement. The Buyer has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Buyer and the
consummation by the Buyer of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action, and no
other corporate proceedings on the part of the Buyer are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Buyer and, assuming the
due authorization, execution and delivery by the other parties hereto, each such
agreement constitutes a legal, valid and binding obligations of such party,
enforceable against such party in accordance with its terms, subject to the
Bankruptcy Exception.
Section 3.3 Consents and Approvals; No Violations. Neither the execution
and delivery of this Agreement by the Buyer nor the consummation by the Buyer of
the transactions contemplated hereby and thereby will (a) conflict with or
result in any breach of any provision of the limited liability company agreement
or by-laws of the Buyer, (b) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, or require any
consent under, any indenture, license, contract, agreement or other instrument
or obligation to which the Buyer is a party or by which it or any of its
properties or assets may be bound, (c) violate any order, writ, injunction,
decree or award rendered by any Governmental Entity or Laws applicable to the
Buyer, any of their respective subsidiaries or any of their respective
properties or assets, or (d) require any filing with, or the obtaining of any
permit, authorization, consent or approval of, any Governmental Entity.
Section 3.4 Brokers; Finders and Fees. Neither the Buyer nor any of its
Affiliates has employed any investment banker, broker or finder or incurred any
liability for any investment banking, financial advisory or brokerage fees,
commissions or finders' fees in connection with this Agreement or the
transactions contemplated hereby.
Section 3.5 Investment Representations. The Buyer understands that as of
the Closing Date, the Preferred Shares will not have been registered under the
Securities Act of 1933 and the rules and regulations promulgated thereunder (the
"Securities Act"). The Buyer also understands that the Preferred Shares are
being offered and sold pursuant to an exemption from registration contained in
the Securities Act based in part upon the Buyer's representations contained in
the
16
Agreement. The Buyer hereby represents and warrants that it is an "accredited
investor" within the meaning of the Securities Act.
Section 3.6 Due Diligence. The Buyer acknowledges and agrees that it has
had sufficient opportunity to perform due diligence, including reviewing public
filings and asking questions of Seller's management, with respect to the
transactions contemplated by this Agreement.
ARTICLE IV
POST-CLOSING COVENANTS OF THE PARTIES
Section 4.1 Reservation of Shares. The Seller shall at all times keep
reserved out of its authorized but unissued shares of Common Stock a number of
shares sufficient to permit (i) the conversion of all of the then outstanding
Preferred Shares, and (ii) exercise of all options to acquire shares of Seller's
Common Stock that are then outstanding and held by the Series A Director or such
director's assignee.
Section 4.2 Amendments to Charter. Until the Preferred Shares have been
converted in full, the Seller shall not, without the prior written consent of
the Buyer, alter or amend the Certificate of Designation or alter or amend the
Seller's Charter, or allow an Affiliate to amend its Charter, in a manner that
is adverse to the Buyer.
Section 4.3 Securities Matters. The Seller will take all actions
reasonably necessary to (a) maintain qualification for use of Form S-3 for
registration of the resale of the shares of Common Stock issuable upon
conversion of the Preferred Shares and (b) continue to have its stock quoted on
the Nasdaq SmallCap Market. During the Registration Period, the Seller will not
grant any registration rights superior to those granted in Article VI without
the prior written consent of the Buyer.
Section 4.4 Post-Closing Cooperation. In case at any time after the
Closing Date any further action is necessary, proper or advisable to carry out
the purposes of this Agreement, as soon as reasonably practicable, each party
hereto shall take, or cause its proper officers or directors to take, all such
necessary, proper or advisable actions.
Section 4.5 Public Announcements. Upon the Closing and thereafter, the
parties will consult with each other with respect to the issuance of a joint
report,
17
statement or press release with respect to this Agreement and the transactions
contemplated hereby. The Seller shall not issue any report, statement or press
release with respect to this Agreement or the transactions contemplated hereby
unless such report, statement or press release has been reviewed and agreed to
by Buyer in advance, except as in the reasonable judgment of the Seller and upon
advice of outside counsel, may be required by law or in connection with its
obligations as a publicly-held, exchange-listed company, in which case the
parties will use their best efforts to reach mutual agreement as to the language
of any such report, statement, or press release.
Section 4.6 Election of Series A Director; Grant of [Options/Warrants].
(a) As of the date hereof, the Board of Directors of the Seller (the "Board")
consists of Xxxxx Xxxxxx, Xxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxxx and R. Xxxxx
Xxxx. From and after the date hereof so long as any Preferred Shares are
outstanding, the Seller shall take all action within its power as may be
required to cause the Board to consist of a minimum of five (5) members.
(b) Provided that Buyer or any Affiliate(s) of Buyer is/are the holder(s) of the
Preferred Shares (and subject to the conditions set forth herein), such
holder(s) of the Preferred Shares shall have the exclusive right, voting
separately as a class, to elect one director of the Seller (herein referred to
as the "Series A Director"). The Series A Director will be either the chief
executive officer or chief operating officer of Buyer or an individual that is
nominated by Buyer and consented to by Seller. The Series A Director shall be
elected by the affirmative vote of the holders of record of a majority of the
outstanding Preferred Shares either at meetings of stockholders at which
directors are elected, a special meeting of holders of the Preferred Shares or
by written consent without a meeting in accordance with applicable law. The
Series A Director so elected shall serve for a term of one year and until his
successor is elected and qualified. Any vacancy in the position of the Series A
Director will be filled by holders of the Preferred Shares. To the extent
permitted by Applicable Law, the Series A Director may, during his or her term
of office, be removed at any time, with or without cause, by and only by the
affirmative vote, at a special meeting of holders of the Preferred Shares called
for such purpose, or the written consent, of the holders of record of a majority
of the outstanding Preferred Shares. Any vacancy created by such removal may
also be filled at such meeting or by such consent. Notwithstanding the foregoing
or anything herein to the contrary, the right of Buyer to elect a Series A
Director shall cease at such time that Buyer (including its Affiliates) no
longer own(s) at least five hundred (500) Preferred Shares as adjusted to give
effect to stock splits, recapitalizations and similar corporate transactions or
events that may have decreased the number of Preferred Shares owned by Buyer.
18
(c) The Series A Director shall be covered by an insurance policy or policies
providing directors' and officers' liability insurance, in accordance with its
or their terms, to the maximum extent of the coverage available for any director
or officer of the Seller. In no event shall the amount of such coverage be less
than $3 million in the aggregate. At the Closing, Seller shall provide an
insurance certificate evidencing such policy or policies.
(d) At the Closing, the Seller shall grant the Series A Director a
non-statutory, assignable option (the "Initial Option") to acquire 50,000 shares
of Seller's Common Stock. Such option shall be issued at the closing price of
Seller's Common Stock on the date of the Closing and shall be fully vested and
exercisable. The terms and conditions of the option shall be set forth in an
option grant agreement in the form of Exhibit B attached hereto. Upon each
anniversary of each full year during which a Series A Director served on the
Board, the Seller shall further grant a non-statutory, assignable option to
acquire 50,000 shares of Seller's Common Stock. Such option shall be issued at
the closing price of Seller's Common Stock on the date of each such anniversary
or, if not a date on which the Seller's Common Stock trades, the next such
closing price and shall be fully vested and exercisable. The terms and
conditions of the option shall be set forth in an option grant agreement in the
form of Annex B attached hereto.
(e) In addition to the Series A Director, the holders of the Preferred Shares
shall be entitled to one non-voting observer's seat on Seller's board of
directors subject to the same conditions that apply with respect to Buyer's
ability to elect the Series A director except that such non-voting observer can
be any employee of Buyer or its Affiliates.
ARTICLE V
SURVIVAL AND INDEMNIFICATION
Section 5.1 Survival Periods. The representations and warranties made by
the parties in this Agreement shall survive the Closing and shall continue in
full force and effect without limitation after the Closing except that, subject
to the provisions of the next sentence, neither the Buyer, on the one hand, nor
the Seller, on the other, shall have any liability with respect to any matter if
notice of a claim has not been provided on or prior to the third anniversary of
the Closing Date. Notwithstanding the foregoing, (a) any indemnification
obligations of any sort relating to Section 2.12 shall continue in full force
and effect without limitation, unless the Buyer shall not have given notice of a
claim on or prior to the expiration of the statute of limitations applicable to
such matters, in which case such
19
indemnification obligations shall terminate, (b) any claims, actions or suits
the Buyer may have which arise from any fraud on the part of the Seller, or any
representative of the Seller, shall continue in full force and effect without
limitation (c) any claims arising out of a breach of Article VI of this
Agreement shall continue in full force and effect without limitation, and (d)
the representations and warranties contained in Sections 2.1 through and
including 2.4 and Sections 3.1 through and including 3.3 and any indemnification
obligations in connection therewith shall continue in full force and effect
without any limitation.
Section 5.2 The Seller's Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein, from and after the
Closing, the Seller shall indemnify and hold harmless the Buyer, its Affiliates
(including the Company after the Closing), and their respective directors,
officers, employees, controlling persons, agents and representatives and their
successors and assigns (collectively, the "Buyer Indemnitees") from and against
all liability, demands, claims, actions or causes of action, assessments,
losses, damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) (collectively, the "Buyer Damages") either
asserted against or incurred by any Buyer Indemnitee as a result of or arising
out of (a) a breach of any representation or warranty of the Seller contained in
this Agreement or (b) a breach of any covenant or agreement on the part of the
Seller under this Agreement.
(b) The Seller shall be obligated to indemnify the Buyer Indemnitees pursuant to
clause (i) of Section 5.2(a) only for those claims giving rise to Buyer Damages
as to which the Buyer Indemnitees have given the Seller notice thereof no later
than forty-five (45) days after the end of any applicable survival period (as
provided for in Section 5.1). Any written notice delivered by a Buyer Indemnitee
to the Seller with respect to Buyer Damages shall set forth with as much
specificity as reasonably practicable the basis of the claim for Buyer Damages
and, to the extent reasonably practicable, a reasonable estimate of the amount
thereof.
(c) The total liability of the Seller under this Section shall be limited to the
amount of the Closing Payment.
20
Section 5.3 The Buyer's Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein, from and after the
Closing, the Buyer (the "Buyer Indemnitors") shall indemnify and hold harmless
the Seller, its Affiliates, and their respective directors, officers, employees,
controlling persons, agents and representatives and their successors and assigns
(collectively, the "Seller Indemnitees") from and against all liability,
demands, claims, actions or causes of action, assessments, losses, damages,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses) (collectively, "Seller Damages") asserted against or incurred by
any Seller Indemnitee as a result of or arising out of (i) a breach of any
representation or warranty of the Buyer contained in this Agreement and (ii) a
breach of any covenant or agreement on the part of the Buyer under this
Agreement.
(b) The Buyer Indemnitors shall be obligated to indemnify the Seller Indemnitees
pursuant to clause (i) of Section 5.3(a) only for those claims giving rise to
Seller Damages as to which the Seller Indemnitees have given the Buyer
Indemnitors written notice thereof no later than forty-five (45) days after the
end of any applicable survival period (as provided for in Section 5.1). Any
written notice delivered by a Seller Indemnitee to the Buyer Indemnitors with
respect to Seller Damages shall set forth with as much specificity as is
reasonably practicable the basis of the claim for Seller Damages and, to the
extent reasonably practicable, a reasonable estimate of the amount thereof.
(c) The total liability of the Buyer under this Section shall be limited to the
amount of the Closing Payment.
Section 5.4 Third-Party Indemnification. The obligations of the Seller to
indemnify the Buyer Indemnitees under Section 5.2 hereof with respect to Buyer
Damages and the obligations of the Buyer Indemnitors to indemnify the Seller
Indemnitees under Section 5.3 with respect to Seller Damages, in either case
resulting from the assertion of liability by third parties (each, as the case
may be, a "Claim"), will be subject to the terms and conditions described in
Section 7.4 of the Stock Purchase Agreement.
ARTICLE VI
REGISTRATION RIGHTS
Section 6.1 Registrable Securities. For the purposes of this Agreement,
21
"Registrable Securities" means (a) the shares of Common Stock issuable upon
conversion of the Preferred Shares, and (b) shares of Common Stock issued as a
dividend or other distribution with respect to or in replacement of the
Preferred Shares or the Common Stock referred to above; provided that (i) any
shares of Common Stock will cease to be Registrable Securities, and (ii) the
Seller will not be obligated to maintain the effectiveness of the Shelf
Registration Statement (as defined below) following the date on which the Seller
delivers an opinion of counsel in form and substance reasonably satisfactory to
the Buyer and the Seller's transfer agent that the Buyer may sell in a single
transaction all Registrable Securities then held or issuable to the Buyer on a
registered securities exchange or Nasdaq market under an applicable exemption
from the registration requirements of the Securities Act (pursuant to Rule 144
under the Securities Act or otherwise). The period of time during which the
Seller is required to keep the Shelf Registration Statement effective is
referred to as the "Registration Period."
Section 6.2 Registration. At any time following one year from the Closing
Date, the Seller will as soon as practicable but not later than thirty (30) days
following receipt of written demand notice (the "Demand Notice") from the Buyer
that it is demanding registration of some or all of its Registrable Securities
(the "Filing Period"), file with the Commission a shelf registration statement
on Form X-0, X-0, X-0 or successor form or another form selected by the Seller
that is available to it under the Securities Act (the "Shelf Registration
Statement") to register the resale of all of the Registrable Securities
beneficially owned by Buyer. The Buyer shall have no more than one such right to
demand the filing of a Shelf Registration Statement.
Section 6.3 Piggyback-Registration Rights. In addition to the registration
rights set forth in Section 6.2 hereof, the Seller shall provide and include all
or any part of the Registrable Securities as part of any registration of
securities filed by the Seller (other than on Form S-4, or pursuant to Form S-8
or any equivalent form); provided, however, that if, in the written opinion of
the Seller's managing underwriter or underwriters, if any, for such offering
(the Underwriter), the inclusion of the Registrable Securities, when added to
the securities being registered by the Seller or the selling stockholder(s),
will exceed the maximum amount of the Seller's securities which can be marketed
(a) at a price reasonably related to their then current market value, or (b)
without materially and adversely affecting the entire offering, the Seller shall
nevertheless register all or any portion of the Registrable Securities required
to be so registered but such Registrable Securities shall not be sold by the
holders until 90 days after the registration statement for such offering has
become effective or for such longer period as the Underwriter may
22
require, but not exceeding 180 days; and provided further that, if any
securities are registered for sale on behalf of other stockholders in such
offering and such stockholders have not agreed to defer such sale until the
expiration of such period, the number of securities to be sold by all
stockholders in such public offering during such period shall be apportioned pro
rata among all such selling stockholders, including all holders of the
Registrable Securities, according to the total amount of securities of the
Seller owned by said selling stockholders, including all holders of the
Registrable Securities.
Section 6.4 Registration Procedures. In connection with the registration
of any Registrable Securities under the Securities Act as provided in this
Article VI, the Seller will use its reasonable best efforts:
(a) To cause the Shelf Registration Statement (and any other related state or
federal registrations, qualifications or compliances as may be reasonably
requested and as would permit or facilitate that sale and distribution of all
Registrable Securities until the distribution thereof is complete) to become
effective as soon as practicable following the filing thereof but not later than
one hundred and twenty (120) days after receipt of the Demand Notice (the
"Effectiveness Deadline");
(b) Prepare and file with the Commission the amendments and supplements to the
Shelf Registration Statement and the prospectus used in connection therewith and
take all other actions as may be necessary to comply with the Securities Act and
the rules and regulations promulgated thereunder and keep the Shelf Registration
Statement continuously effective and free from any material misstatement or
omission until the disposition of all securities in accordance with the intended
methods of disposition by the Buyer set forth in the Shelf Registration
Statement will be completed, and to comply with the provisions of the Securities
Act (to the extent applicable to the Buyer) with respect to the dispositions.
The Shelf Registration Statement will not be deemed to have been effected if
after it has become effective under the Securities Act, (A) such registration is
interfered with by any stop order, injunction or other order or requirement of
the Commission or other Governmental Entity or any court proceeding for any
reason; or (B) the Seller voluntarily takes any action that results in the
holders of the Registrable Securities not being able to sell the Registrable
Securities pursuant to applicable securities laws, unless such action is
required under applicable law or court order;
(c) Furnish to the Buyer a reasonable number of copies of the Shelf Registration
Statement and of each amendment and supplement thereto, a number of copies of
the prospectus and all amendments and supplements thereto included in the Shelf
23
Registration Statement (including each preliminary prospectus), in conformity
with the requirements of the Securities Act, and the other documents (including
exhibits to any of the foregoing), as the Buyer may reasonably request, in order
to facilitate the disposition of the Registrable Securities owned by the Buyer;
(d) To register or qualify the Registrable Securities covered by the Shelf
Registration Statement under blue sky laws of the various states as the Buyer
reasonably requests, to keep such registration and qualification effective
during the Registration Period and do any and all other acts and things that may
be reasonably necessary or advisable to enable the Buyer to consummate the
disposition in the states the Registrable Securities owned by the Buyer, except
that the Seller will not be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not, but for the
requirements of this Section 6.3(d) be obligated to be qualified, to subject
itself to taxation in any the jurisdiction, or to consent to general service of
process in any the jurisdiction;
(e) Provide a transfer agent and registrar for the Registrable Securities
covered by the Shelf Registration Statement not later than the effective date of
the Shelf Registration Statement and cooperate with the holders of such
Registrable Securities and promptly provide the transfer agent for the Common
Stock with such instructions and legal opinions from the Seller's counsel as may
be required in order to facilitate the issuance to the purchaser (or such
holder's broker) of new unlegended certificates for such Registrable Securities;
(f) Immediately notify the Buyer (i) at any time when a prospectus, prospectus
supplement or any post-effective amendment relating thereto is filed, proposed
to be filed or required to be delivered under the Securities Act, (ii) of the
happening of any event as a result of which the prospectus included in the Shelf
Registration Statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading, and, at the
request of the Buyer, the Seller shall promptly prepare a supplement or
amendment to the prospectus so that, as thereafter delivered to the purchasers
of Registrable Securities, the prospectus will not contain an untrue statement
of a material fact or omit to state any fact necessary to make the statements
therein not misleading (iii) of any request by the Commission or any other
Governmental Entity for amendments or supplements to the Shelf Registration
Statement or related prospectus or for additional information; (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Shelf Registration Statement or the initiation of any proceeding for that
purpose; or (v) of the receipt by the Seller of any notification with respect to
the suspension of the qualification or exemption from qualification of any
Registrable Securities for
24
sale in any jurisdiction, or the initiation or threatening of any proceeding for
such purpose;
(g) Cause all Registrable Securities to be listed on each securities exchange or
automated over-the-counter trading system on which similar securities issued by
the Seller are then listed;
(h) Enter into customary agreements (including, in the event the Buyer elects to
engage an underwriter in connection with the Shelf Registration Statement, an
underwriting agreement containing customary terms and conditions) and take all
other actions as reasonably required in order to expedite or facilitate the
disposition of Registrable Securities; provided, however, that the Seller will
not be liable for any expenses, including, without limitation, any underwriter's
fees, commissions and discounts;
(i) With a view to making available to the Buyer the benefits of certain rules
and regulations of the Commission that at any time permit the sale of the
Registrable Securities to the public without registration, the Seller agrees to
use its reasonable best efforts to:
(A) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(B) file with the Commission in a timely manner all reports and other
documents required of the Seller under the Exchange Act; and
(C) furnish to the Buyer upon any reasonable request a written statement
by the Seller as to its compliance with the public information
requirements of Rule 144 under the Securities Act, and of the Exchange
Act, a copy of the most recent annual or quarterly report of the Seller,
and the other Commission reports and documents of the Seller as the Buyer
may reasonably request.
(j) The Seller will use commercially reasonable efforts to prevent the issuance
of any stop order or other suspension of effectiveness of the Shelf Registration
Statement and, if such an order is issued, the Seller will obtain the withdrawal
of such order as soon as practicable and will immediately notify each holder of
any Registrable Securities purchased hereunder of the issuance of such order and
the resolution thereof.
25
Section 6.5 Registration and Selling Expenses. All expenses incurred by
the Seller in connection with the Seller's performance of or compliance with
this Article VI, including, without limitation, (i) all Commission registration
and filing fees, (ii) blue sky fees and expenses, (iii) all necessary printing
and duplicating expenses and (iv) all fees and disbursements of counsel and
accountants retained on behalf of the Seller (all expenses being called
"Registration Expenses"), will be paid by the Seller.
Section 6.6 Certain Obligations of the Buyer.
(a) The Buyer agrees that, upon receipt of any written request from the Seller
notifying the Buyer of the happening of any event requiring the preparation of a
supplement or amendment to the Shelf Registration Statement so that, as
thereafter delivered to the Buyer, the prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
requesting that the Buyer discontinue disposition of Registrable Securities
pursuant to the Shelf Registration Statement, the Buyer will forthwith
discontinue disposition of Registrable Securities pursuant to the Shelf
Registration Statement until its receipt of copies of the supplemented or
amended effective prospectus from the Seller and, if so directed by the Seller,
the Buyer will deliver to the Seller all copies, other than permanent file
copies then in the Buyer's possession, of the prospectus covering the
Registrable Securities current at the time of receipt of the notice.
(b) As a condition to the inclusion of its Registrable Securities, the Buyer
will furnish to the Seller the information regarding the Buyer and the intended
method of distribution of the securities as the Seller may from time to time
request or as will be required in connection with any registration,
qualification or compliance referred to in this Section 8.
(c) The rights to cause the Seller to register Registrable Securities granted to
the Buyer by the Seller may be assigned in whole or in part by the Buyer,
provided, that: (i) the transfer may otherwise be effected in accordance with
applicable securities laws, (ii) the transfer involves not less than the lesser
of all of the Buyer's Registrable Securities or 500,000 shares of Common Stock,
(iii) the Buyer gives prior written notice to the Seller, and (iv) the
transferee agrees to comply with the terms and provisions of this Agreement in a
written instrument reasonably satisfactory in form and substance to the Seller
and its counsel.
Section 6.7 Indemnification.
26
(a) The Seller will indemnify, to the extent permitted by law, the Buyer and
each person controlling the Buyer within the meaning of Section 15 of the
Securities Act against all losses, claims, expenses (including reasonable fees,
disbursements and other charges of counsel) damages and liabilities ("Losses"),
including Losses incurred in settlement of any litigation, commenced or
threatened, resulting from or based on any untrue statement or omission or
alleged untrue statement or omission of a material fact contained in the Shelf
Registration Statement or prospectus (or any amendment or supplement thereto) or
any preliminary prospectus prepared in connection with the registration
contemplated by this Article VI; provided, however, that the Seller shall not be
liable pursuant to this Section if the Losses have been caused by (i) any untrue
statement or omission or alleged untrue statement or omission of a material fact
required to be stated in the registration statement or prospectus or any
amendment thereof or supplement thereto or necessary to make the statements
therein not misleading, to the extent the Losses are caused by an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with the written information so furnished by the Buyer
and stated specifically for use in connection with the preparation of the Shelf
Registration Statement or prospectus or (ii) any selling security holder's
failure to deliver a copy of the Shelf Registration Statement or prospectus, or
any amendments or supplements thereto, at or prior to the time the furnishing is
required by the Securities Act.
(b) In connection with the Shelf Registration Statement in which the Buyer is
participating, the Buyer will furnish to the Seller in writing the information
as is reasonably requested by the Seller for use in the Shelf Registration
Statement or prospectus and will, to the extent permitted by law, the Seller,
its directors and officers and each person or entity, if any, who controls the
Seller within the meaning of Section 15 of the Securities Act (the "Seller
Indemnified Parties"), against any Losses resulting from any untrue statement or
omission or alleged untrue statement or omission of a material fact required to
be stated in the Shelf Registration Statement or prospectus or any amendment
thereof or supplement thereto or necessary to make the statements therein not
misleading, but only to the extent the Losses are caused by an untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with the written information so furnished by the Buyer and stated
specifically for use in connection with the preparation of the Shelf
Registration Statement or prospectus; provided that the indemnity will not apply
to the extent that the Losses arise out of or are based upon a violation of this
Agreement by the Seller. Notwithstanding the foregoing or any other provision of
this Agreement, in no event will the Buyer be liable for any the
27
Losses in excess of the net proceeds received by the Buyer in connection with
its disposition of Registrable Securities.
(c) Any indemnification pursuant to this Section shall be conducted in
accordance with the procedures described in Section 7.4 of the Stock Purchase
Agreement.
(d) If the indemnification provided for in Section is held by a court of
competent jurisdiction to be unavailable under applicable law to an indemnified
party in respect of any losses, claims, damages or liabilities referred to
therein, then each applicable indemnifying party, in lieu of indemnifying the
indemnified party, will contribute to the amount paid or payable by the
indemnified party as a result of the losses, claims, damages or liabilities in
the proportion as is appropriate to reflect the relative fault of the Seller on
the one hand and of the indemnified party on the other in connection with the
statements or omissions which resulted in the losses, claims, damages, or
liabilities, as well as any other relevant equitable considerations including
the relative benefits to the parties. The relative fault of the Seller on the
one hand and of the indemnified party on the other will be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the Seller or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent the statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages and liabilities referred to above will be
deemed to include any legal or other fees or expenses reasonably incurred by the
party in connection with investigating or defending any action or claim. No
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
person or entity that is not guilty of fraudulent misrepresentation.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1 Entire Agreement. This Agreement and the Stock Purchase
Agreement (including the Seller Disclosure Schedule and any other schedules or
exhibits to this Agreement or the Stock Purchase Agreement) constitutes the
entire agreement of the parties relating to the subject matter hereof and
supersede other prior agreements and understandings between the parties both
oral and written regarding such subject matter.
28
Section 7.2 Severability. It is the desire and intent of the parties to
this Agreement that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provisions or
portion of this Agreement shall be adjudicated by a court of competent
jurisdiction to be invalid or unenforceable, this Agreement shall be deemed
amended to delete therefrom such provision or portion adjudicated to be invalid
or unenforceable, such amendment to apply only with respect to the operation of
such Agreement in the particular jurisdiction in which such adjudication is
made.
Section 7.3 Notices. Any notice required or permitted by this Agreement
must be in writing and must be sent in the manner described in Section 8.3 of
the Stock Purchase Agreement.
Section 7.4 Governing Law; Jurisdiction, Waiver of Jury Trial . THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK OTHER THAN CONFLICT OF LAWS PRINCIPLES THEREOF
DIRECTING THE APPLICATION OF ANY LAW OTHER THAN THAT OF NEW YORK. COURTS WITHIN
THE STATE OF NEW YORK (LOCATED WITHIN THE COUNTY OF NASSAU) OR THE FEDERAL
DISTRICT COURT, EASTERN DISTRICT, WILL HAVE JURISDICTION OVER ALL DISPUTES
BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES HEREBY
CONSENT TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. EACH OF THE
PARTIES HERETO WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH
PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (III)
ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY
OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION,
29
PERFORMANCE OR ENFORCEMENT HEREOF.
Section 7.5 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and shall in no way be construed to
define, limit, describe, explain, modify, amplify, or add to the interpretation,
construction or meaning of any provision of, or scope or intent of, this
Agreement nor in any way affect this Agreement.
Section 7.6 Counterparts. This Agreement may be signed in counterparts and
all signed copies of this Agreement will together constitute one original of
this Agreement. This Agreement shall become effective when each party hereto
shall have received counterparts thereof signed by all the other parties hereto.
Section 7.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
Section 7.8 Fees and Expenses. Whether or not this Agreement and the
transactions contemplated hereby are consummated, and except as otherwise
expressly set forth herein, all costs and expenses (including legal fees and
expenses) incurred in connection with, or in anticipation of, this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses. Each of the Seller, on the one hand, and the Buyer, on the other hand,
shall indemnify and hold harmless the other parties from and against any and all
claims or liabilities for financial advisory and finders' fees incurred by
reason of any action taken by such party or otherwise arising out of the
transactions contemplated by this Agreement by any person claiming to have been
engaged by such party.
Section 7.9 Interpretation. Throughout this Agreement, nouns, pronouns and
verbs shall be construed as masculine, feminine, neuter, singular or plural,
whichever shall be applicable. Unless otherwise specified, all references herein
to "Section" shall refer to corresponding provisions of this Agreement or the
Seller Disclosure Schedule, as the case may be, whenever the words "include,"
"includes" or "including" are used in this Agreement, they are deemed to be
followed by the words "without limitation." The phrase "to the knowledge of the
Seller" or any similar phrase shall mean such facts and other information that
as of the date hereof are actually known or should have been known, after due
inquiry, to any director,
30
officer, employee, advisor or legal representative of the Seller. In the event
an ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
Section 7.10 No Third-Party Beneficiaries. This Agreement shall not
benefit or create any right or cause of action in or on behalf of any person
other than the parties hereto; provided, however, that this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and permitted assigns.
Section 7.11 No Waivers; Modification. Any waiver of any right or default
hereunder will be effective only in the instance given and will not operate as
or imply a waiver of any other or similar right or default on any subsequent
occasion. No waiver, modification or amendment of this Agreement or of any
provision hereof will be effective unless in writing and signed by the party
against whom such waiver, modification or amendment is sought to be enforced.
Section 7.12 Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof and immediate injunctive relief, without the necessity of proving the
inadequacy of money damages as a remedy, in addition to any other remedy at law
or equity.
Section 7.13 Construction. With regard to each and every provision of this
Agreement and any and all agreements and instruments subject to the terms
hereof, the parties hereto understand and agree that same have or has been
mutually negotiated, prepared and drafted, and that if, at any time, the need
arises to construe any provision hereof, or any agreement or instrument subject
hereto, that no consideration shall be given to the issue of which party
actually prepared, drafted, requested, or negotiated any provision of this
Agreement or any agreement subject hereto.
31
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to
be duly signed as of the date first above written.
PHH Vehicle Management Services, LLC
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
xxxxxxxxxxxxx.xxx Corp.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
32
Exhibit C
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Escrow Agreement") dated as of October __, 2001 by
and between xxxxxxxxxxxxx.xxx Corp. (the "Seller") a New York corporation, PHH
Vehicle Management Services, LLC, a Delaware limited liability company (the
"Buyer"), and Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP, as Escrow Agent (the "Escrow
Agent").
RECITALS
WHEREAS, the Buyer and the Seller (among others) are parties to a Stock
Purchase Agreement dated as of October __, 2001 (the "Stock Purchase
Agreement"), pursuant to which the Buyer is acquiring from the Seller all of the
issued and outstanding shares of the capital stock of driversshield FS Corp., a
New York corporation (the "Company") for a price and upon terms set forth in the
Stock Purchase Agreement. Except as set forth herein, capitalized terms used but
not defined herein shall have the meanings ascribed to such terms in the Stock
Purchase Agreement;
WHEREAS, this Escrow Agreement is being entered into pursuant to the Stock
Purchase Agreement for the purpose of securing the indemnification obligations
of the Seller under the Stock Purchase Agreement including, without limitation,
Article VII and Section 4.6(c) thereof (the "Indemnification Obligations");
WHEREAS, at the Closing (as defined in the Stock Purchase Agreement), the
Buyer is depositing into an escrow account (the "Escrow Account"), by wire
transfer of immediately available funds, a portion of the purchase price (the
"Deposit") equal to One Hundred Seventy-Five Thousand Dollars ($175,000.00); and
WHEREAS, the Escrow Agent is willing to act as escrow agent in respect of
the Escrow Fund (as hereinafter defined) upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and subject to the terms and
conditions hereof, the parties intending to be legally bound, hereby agree as
follows:
1. Appointment of Escrow Agent. The Buyer and the Seller hereby appoint
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP as the Escrow Agent. The Escrow Agent hereby
accepts such appointment, all upon the terms and conditions set forth in this
Escrow Agreement.
2. Deposit in Escrow; Escrow Available for Indemnification Obligations.
-1-
(a) At the Closing (which is taking place concurrently with the
execution of this Escrow Agreement and the other agreements, documents and
instruments deliverable at Closing), the Buyer is depositing the Deposit with
the Escrow Agent. The Deposit, together with any interest and earnings thereon,
are sometimes collectively referred to herein as the "Escrow Fund."
(b) The parties hereto agree that the purpose of this Escrow
Agreement is to secure the Indemnification Obligations.
(c) The Escrow Fund will be held by the Escrow Agreement and will be
available in accordance with the terms hereof to pay any claims by Buyer with
respect to the Indemnification Obligations. Any such obligations shall be first
satisfied out of the Escrow Fund established hereunder. After exhaustion of such
Escrow Fund or in the event that the Escrow Fund has been released to the Seller
prior to the expiration of Seller's Indemnification Obligations under the Stock
Purchase Agreement, Buyer may look directly to Seller for payment of any claims
relating to Seller's Indemnification Obligations. Each of the rights, powers,
and remedies of the Buyer hereunder shall be non-exclusive, cumulative and
concurrent, and shall be in addition to every other right, power, or remedy
provided for hereunder or under the Stock Purchase Agreement or otherwise
existing at law or in equity or by statute or otherwise, and any exercise or
beginning of the exercise by the Buyer of any one or more of such rights,
powers, or remedies shall not preclude the simultaneous or later exercise by the
Buyer of any or all such other rights, powers, and remedies. The parties
acknowledge and agree that the Escrow Fund is the non-exclusive source for
recovery of any such claims that the Buyer may have.
3. Investments.
(a) The Escrow Agent shall invest and reinvest the Escrow Funds only
in investments which are obligations of, or be guaranteed by the U.S. Treasury
or U.S. government agencies or instrumentalities. Investments shall be made
promptly upon receipt of available funds by the Escrow Agent. The Escrow Agent
shall not be responsible for or liable for any loss suffered in connection with
any investments or funds made by it in accordance with this Section 3(a). All
net income realized in respect of the Deposit consisting of interest and capital
gains shall be distributed to the party receiving payment of such funds
(b) The Escrow Agent shall not sell, transfer or in any manner
whatsoever encumber the Escrow Fund except pursuant to the terms and conditions
of this Escrow Agreement.
4. Release of the Escrow Fund. The Escrow Agent will hold the Escrow Fund
in its possession until instructed hereunder to deliver the Escrow Fund or any
specified portion thereof as follows:
(a) The Buyer may, at its option, submit a notice to the Escrow
Agent and the Seller of any claim for which it is entitled to indemnification
pursuant to the Indemnification Obligations of the Stock Purchase Agreement,
specifying in reasonable detail (i) the nature of the
-2-
indemnity claim, (ii) the section or sections of the Stock Purchase Agreement
under which the indemnity claim is being made and (iii) the amount of the
claimed liability in respect of each such indemnity claim. In the event of any
Objection Notice (as defined below) with respect to such claim, the Escrow Agent
shall remit the amount not in dispute and shall only retain in accordance with
Section 4(b) the amount represented by the Disputed Claim (as defined below).
(b) If, within the ten (10) day period following the notification of
the Seller and the Escrow Agent of a claim, each of the Buyer and the Escrow
Agent receive from the Seller a written notice of objection relating to such
claim, specifying the amount of the claim to which the Seller objects and
describing such objection in reasonable detail (an "Objection Notice"), the
portion of the Buyer's claim that is the subject of the Objection Notice shall
become a "Disputed Claim." If the question of whether the Buyer shall be
entitled to delivery of the Disputed Claim shall not have been resolved by joint
written instructions of the Seller and the Buyer to the Escrow Agent within
fifteen (15) days of the Buyer's and the Escrow Agent's receipt of the Objection
Notice, the Escrow Agent shall retain in the Escrow Account amounts then held by
the Escrow Agent (to the extent such funds are available in the Escrow Account)
equal to the amount of the Disputed Claim until question of the entitlement of
the Buyer to delivery of all or a portion of such withheld part of the Escrow
Fund as specified in the Claims Notice shall have been determined (i) by an
agreement in writing executed by the Seller and the Buyer or (ii) by a final
judgment of a court of competent jurisdiction in accordance with Section 5(b),
provided that the Buyer shall deliver to the Escrow Agent and the Seller a full
and executed copy of such agreement or a certified copy of such final judgment
directing the Escrow Agent to deliver such portion of the Disputed Claim
withheld in the Escrow Fund as specified in such agreement or final judgment, as
the case may be.
(c) Promptly upon the expiration of the period ending twelve (12)
months from the date hereof, the Escrow Agent shall release the Escrow Fund to
the Seller, less the aggregate amount of any claim or claims paid to the Buyer
or held by the Escrow Agent as a Disputed Claim pursuant to this Section 4.
5. Disputes.
(a) In the event of a Disputed Claim or any disagreement between the
Buyer and the Seller resulting in adverse claims and demands being made in
connection with or for any property involved herein or affected hereby, the
Escrow Agent shall be entitled to refuse to comply with any such claim or
demand, so long as such disagreement shall continue, and in so doing the Escrow
Agent shall not be or become liable for any damages, losses, liabilities or
interest to any party for its failure or refusal to comply with such conflicting
or adverse demands, except for liabilities resulting from the Escrow Agent's own
fraud, willful misconduct or gross negligence, and the Escrow Agent shall be
entitled to continue so to refrain and refuse so to act until the rights of the
adverse claimants have been determined (i) by an agreement in writing executed
by the Seller and the Buyer or (ii) a final judgment of a court of competent
jurisdiction, provided that the Buyer shall deliver to the Escrow Agent and the
Seller a full and executed copy of such agreement or a certified copy of such
final judgment directing the Escrow Agent to
-3-
deliver such portion of the Disputed Claim withheld in the Escrow Fund as
specified in such agreement or final judgment, as the case may be.
(b) All costs and expenses, including reasonable counsel fees and
expenses, incurred in any action to obtain an award or relief with respect to
the matters contemplated by this Escrow Agreement shall be borne by the party
which is not the prevailing party in such action.
6. The Escrow Agent.
(a) The Escrow Agent shall not receive any fees for its services but
shall be reimbursed for all reasonable expenses, disbursements, and advances
incurred or made by the Escrow Agent in performance of its duties hereunder,
which compensation and expenses shall be paid out of the Escrow Fund.
(b) The Escrow Agent may resign and be discharged from its duties
hereunder at any time by giving written notice of such resignation to the Seller
and the Buyer specifying a date (not less than thirty (30) days after giving of
such notice) when such resignation shall take effect. Upon such notice, the
Buyer and the Seller shall appoint a new Escrow Agent who shall replace the
resigning Escrow Agent hereunder upon the resignation date specified in such
notice. If the Buyer and the Seller are unable to agree upon a successor escrow
agent within thirty (30) days after such notice, the Escrow Agent shall be
entitled to appoint its successor. The Seller and the Buyer shall have the right
at any time upon their mutual consent to substitute a new Escrow Agent by giving
notice thereof to the Escrow Agent then acting.
(c) The Escrow Agent shall have no duties or responsibilities
whatsoever with respect to the Escrow Fund except as are specifically set forth
herein and may conclusively rely, and shall be protected in acting or refraining
from acting, on any written notice, instrument, request, consent, certificate,
document, letter, telegram, order, resolution or signature believed by the
Escrow Agent to be genuine and to have been signed or presented by the proper
party or parties duly authorized to do so. The Escrow Agent shall have no
responsibility for the contents of any such writing contemplated herein and may
rely without any liability upon the contents thereof.
(d) The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized hereby or within
the rights or powers conferred upon it hereunder, nor for action taken or
omitted to be taken by it in good faith, or if taken or omitted to be taken in
accordance with advice of counsel (which counsel may be of the Escrow Agent's
own choosing), and shall not be liable for any mistake of fact or error of
judgment or for any acts or omissions of any kind except for its own fraud,
willful misconduct or gross negligence.
(e) Each of the Seller and the Buyer and their successors and
assigns agree to indemnify the Escrow Agent and hold it harmless against any and
all damages, losses, liabilities
-4-
or expenses (including reasonable attorneys' fees and expenses) incurred by it
hereunder as a consequence of such party's action, and the parties agree jointly
to indemnify the Escrow Agent and hold it harmless against any and all damages,
losses, liabilities or expenses (including reasonable attorneys' fees and
expenses) incurred by it hereunder that are not a consequence of any party's
action, except in either case for damages, losses, liabilities or expenses
incurred by the Escrow Agent resulting from its own fraud, willful misconduct or
gross negligence.
7. Termination of Agreement. This Escrow Agreement shall terminate upon
the final disposition of the Escrow Fund, provided that the rights of the Escrow
Agent pursuant to Section 6(e) hereof shall survive such termination.
8. Miscellaneous.
(a) Execution in Counterpart. This Escrow Agreement may be executed
in any number of counterparts, each of which shall be taken to be an original.
(b) Notices. All notices, approvals or other communications to be
sent or given to the Seller shall be deemed validly and properly given or made
if in writing and delivered by hand or by registered or certified mail return
receipt requested and addressed to Xxxxx Xxxxxx, Chairman and Chief Executive
Officer, xxxxxxxxxxxxx.xxx Corp., 00 Xxxx Xxxxxxxx Xxxx, Xxxxxxxxx, XX 00000
with a copy to Xxxxxxxx X. Xxxxx, Esq., Meritz & Xxxxx, LLP, Xxxxx Xxxxxx Xxxxx,
Xxx Xxxxx, XX 00000.
All notices, approvals or other communications to be sent or given
to the shall be deemed validly and properly given or made if in writing and
delivered by hand or registered or certified mail, return receipt, requested,
and addressed to Xxxxxxx X. Xxxxxx, Xx., Sr. Vice President, PHH Vehicle
Management Services, LLC, 000 Xxxxxxxxxxxxx Xxxxxx, Mail Code AE, Xxxx Xxxxxx,
Xxxxxxxx 00000-0000 with a copy to Xxxxxx X. Xxxxxx, Vice President and General
Counsel, 000 Xxxxxxxxxxxxx Xxxxxx, Mail Code CP, Xxxx Xxxxxx, Xxxxxxxx
00000-0000.
All notices, approvals or other communications to be sent or given
to the Escrow Agent shall be deemed validly and properly given or made if in
writing and delivered by hand or registered or certified mail, return receipt,
requested, and addressed to Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP, 0000 Xxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000-0000, Attn: Wm. Xxxxx Xxxxx.
Any of the parties hereto may give notice to the others at any time
by the methods specified above of a change in the address at which, or the
person to whom, notices addressed to it are to be delivered in the future.
(c) Modification and Waiver. No modification or waiver of any of the
provisions of this Escrow Agreement shall be valid unless such modification or
waiver is in writing and signed by each of the parties to this Escrow Agreement.
-5-
(d) Invalid Provision. The invalidity of unenforceability of any
particular provision of this Escrow Agreement shall not affect the other
provisions of this Escrow Agreement, and this Escrow Agreement shall be
construed as if such invalid or unenforceable provision was omitted. All parties
hereto having participated actively in the negotiation and drafting of this
Escrow Agreement, and each party having been represented by counsel, the terms
of this Escrow Agreement shall not be construed against, nor more favorably to,
any party, regardless of their responsibility for its preparation.
(e) Assignment. This Escrow Agreement shall be binding upon and
inure to the benefit of the parties and their respective heirs, legal
representatives, executors, administrators, successors and assigns.
(f) Entire Agreement. This Escrow Agreement and any documents or
instruments delivered pursuant to this Escrow Agreement constitute the entire
agreement and understanding between the parties and supersede any prior
agreement and understanding relating to the subject matter of this Escrow
Agreement.
(a) Governing Law. THIS ESCROW AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
OTHER THAN CONFLICT OF LAWS PRINCIPLES THEREOF DIRECTING THE APPLICATION OF ANY
LAW OTHER THAN THAT OF NEW YORK. COURTS WITHIN THE STATE OF NEW YORK (LOCATED
WITHIN THE COUNTY OF NASSAU, NEW YORK) WILL HAVE JURISDICTION OVER ALL DISPUTES
BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS ESCROW AGREEMENT
AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES
HEREBY CONSENT TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. EACH
OF THE PARTIES HERETO WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS
NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND
SUCH PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR
(III) ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT
FORUM. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS ESCROW AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED
HEREBY OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.
-6-
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed and delivered on the date first above written.
"SELLER" XXXXXXXXXXXXX.XXX CORP.
By:
--------------------------------------
Name:
------------------------
Title:
-----------------------
Date:
------------------------
"BUYER" PHH VEHICLE MANAGEMENT SERVICES, LLC
By:
--------------------------------------
Name:
------------------------
Title:
-----------------------
Date:
------------------------
"ESCROW AGENT" XXXXX XXXXXXX XXXXXXX & XXXXX LLP
By:
--------------------------------------
Name: Wm. Xxxxx Xxxxx
Title: Partner
Date:
-------------------------
-7-
EXHIBIT D
VOTING AGREEMENT
This VOTING AGREEMENT (this "Agreement") is made and entered into as
of September ___, 2001 by and among PHH Vehicle Management Services, LLC, a
Delaware limited liability company ("Buyer"), and the undersigned shareholders
(individually, a Shareholder and collectively, "Shareholders") of
xxxxxxxxxxxxx.xxx Corp., a New York corporation ("Seller"). Capitalized terms
used and not otherwise defined herein shall have the respective meanings set
forth in the Stock Purchase Agreement described below.
RECITALS
WHEREAS, pursuant to a Stock Purchase Agreement (including the
exhibits and schedules thereto), dated as of the date hereof, between Buyer and
Seller (such agreement as it may be amended is hereinafter referred to as the
"Stock Purchase Agreement"), Buyer has agreed to (i) acquire from Seller all of
the outstanding shares of the capital stock of xxxxxxxxxxxxx.xxx FS Corp., a New
York corporation (the "Company") and wholly-owned subsidiary of Seller and (ii)
invest in the Series A Convertible Preferred Stock of the Seller (the
"Transactions");
WHEREAS, in order to induce Buyer to enter into the Stock Purchase
Agreement and consummate the Transactions, Seller has agreed to cause certain
shareholders of Seller to execute and deliver to Buyer this Voting Agreement;
and
WHEREAS, each Shareholder is the registered and beneficial owner of
such number of shares of the outstanding capital stock of Seller as is indicated
on the signature page of this Agreement under the heading "Total Number of
Shares of Seller Capital Stock owned on the date hereof," and such Shareholder
desires to make the number of shares indicated on the signature page of this
Agreement under the heading "Total Number of Shares of Seller Capital Stock
subject to this Agreement" (the "Shares") subject to the terms of this
Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Ownership of Shares; Transfer. (a)Each Shareholder represents and
warrants to Buyer that such Shareholder is the beneficial owner of (i.e., has
sole or shared voting or investment power with respect to) the Shares. The
Shares are free and clear of any liens, claims, options, charges or other
encumbrances. Such Shareholder's principal residence or place of business is
accurately set forth on the signature page hereto. As used herein, the term
"Expiration Date" shall mean the earlier to occur of (i) the Closing or (ii)
termination of the Stock Purchase Agreement in accordance with the terms
thereof.
(a) Shareholder agrees not to transfer (except as may be
specifically required by court order or by operation of law, in which case any
such transferee shall agree to be bound
hereby), sell, exchange, pledge or otherwise dispose of or encumber any Shares,
or to make any offer or agreement relating thereto, at any time prior to the
Expiration Date.
2. Agreement to Vote Shares. Prior to the Expiration Date, at every
meeting of the shareholders of Seller at which any of the following is
considered or voted upon, and at every adjournment thereof, and on every action
or approval by written resolution of the shareholders of Seller with respect to
any of the following, each Shareholder shall vote, or, using such Shareholder's
best efforts, and to the full extent legally permitted, cause the holder of
record to vote the Shares as to which such Shareholder then has voting control,
in favor of approval and adoption of the Stock Purchase Agreement and of the
Transactions.
Notwithstanding the foregoing, nothing in this Agreement shall limit
or restrict any Shareholder from (i) acting in his or her capacity as a director
or officer of Seller, to the extent applicable, it being understood that this
Agreement shall apply to each Shareholder solely in his or her capacity as a
shareholder of Seller or (ii) voting in his or her sole discretion on any matter
other than those matters referred to in the first paragraph of this Section 2.
3. Proxy. Each Shareholder hereby agrees to timely deliver to Buyer a duly
executed proxy in the form attached hereto as Annex A (the "Proxy"), such Proxy
to cover the Shares in respect of which such Shareholder is entitled to vote at
each meeting of the shareholders of Seller and held by such Shareholder as of
the record date for such meeting (including, without limitation, each written
consent in lieu of a meeting). In the event that any Shareholder is unable to
provide any such Proxy in a timely manner, such Shareholder hereby grants Buyer
a power of attorney to execute and deliver such Proxy for and on behalf of such
Shareholder, such power of attorney, which being coupled with an interest, shall
survive any death, disability, bankruptcy or any other such impediment of such
Shareholder. Upon the execution of this Agreement by each Shareholder, such
Shareholder hereby revokes any and all prior proxies or powers of attorney given
by such Shareholder with respect to the Shares and agrees not to grant any
subsequent proxies or powers of attorney with respect to the Shares until after
the Expiration Date.
4. Representations, Warranties and Covenants of Shareholder. Each
Shareholder hereby represents, warrants and covenants to Buyer as follows:
(a) Each Shareholder has full power, authority and legal capacity to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by such Shareholder and constitutes the valid
and binding obligation of such Shareholder, enforceable against such Shareholder
in accordance with its terms, except as may be limited by (i) any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other laws, now
or hereafter in effect, relating to or limiting creditors' rights generally or
(ii) the rules governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of equity, regardless
of whether considered in a proceeding in equity or at law. The execution and
delivery of this Agreement by such Shareholder does not, and the performance of
such Shareholder's obligations hereunder will not, result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any right to terminate, amend,
accelerate or cancel any right or
-2-
obligation under, or result in the creation of any lien or claim on any Shares
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which such
Shareholder is a party or by which such Shareholder or the Shares are or will be
bound or affected.
(b) Each Shareholder, in the Shareholder's capacity as a
Shareholder, will not (and will use such Shareholder's reasonable best efforts
to cause its affiliates, officers, directors and employees and any investment
banker, attorney, accountant or other agent retained by such Shareholder, not
to): (i) initiate or solicit, directly or indirectly, any proposal, plan or
offer to acquire all or any material part of the business or properties or
capital stock of Seller, whether by merger, purchase of assets, tender offer or
otherwise, or to liquidate Seller or otherwise distribute to the shareholders of
Seller all or any substantial part of the business, properties or capital stock
of Seller (each, an "Acquisition Proposal"); (ii) initiate, directly or
indirectly, any contact with any person in an effort to or with a view towards
soliciting any Acquisition Proposal; (iii) furnish information concerning
Seller's business, properties or assets to any corporation, partnership, person
or other entity or group (other than Buyer, or any associate, agent or
representative of Buyer) under any circumstances that could reasonably be
expected to relate to an actual or potential Acquisition Proposal; or (iv)
negotiate or enter into discussions or an agreement, directly or indirectly,
with any entity or group with respect of any potential Acquisition Proposal. In
the event any Shareholder, in such Shareholder's capacity as a Shareholder,
shall receive or become aware of any Acquisition Proposal subsequent to the date
hereof, such Shareholder shall promptly inform Buyer as to any such matter and
the details thereof to the extent possible without breaching any other agreement
to which such Shareholder is a party or violating its fiduciary duties.
Notwithstanding the foregoing, a Shareholder, acting solely in his capacity as a
director of the Seller, shall be permitted to act in accordance with the
provisions of Section 4.18 of the Stock Purchase Agreement.
(c) Each Shareholder understands and agrees that if any Shareholder
attempts to vote or provide any other person with the authority to vote any of
the Shares held by such Shareholder as of the record date for any meeting at
which such Shares are to be voted other than in compliance with this Agreement,
Seller shall not, and such Shareholder hereby unconditionally and irrevocably
instructs Seller to not record such vote unless and until such Shareholder shall
have complied with the terms of this Agreement.
5. No Limitation on Discretion as Director. If any Shareholder is a
natural person and is a member of the board of directors of Seller, then this
Agreement will apply to the exercise by such Shareholder in his or her
individual capacity of rights attaching to ownership of the Shares, and nothing
herein shall be deemed to apply to, or to limit in any manner the discretion of
such Shareholder with respect to, any action which may be taken or omitted by
him or her acting in his or her fiduciary capacity as a director of Seller.
6. Additional Documents. Each Shareholder hereby covenants and agrees to
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Buyer, to carry out the purpose and intent of this
Agreement.
7. Consent and Waiver. Each Shareholder hereby gives any consents or
waivers that are reasonably required for the consummation of the Transactions
under the terms of any
-3-
agreement to which such Shareholder is a party; provided, however, that such
Shareholder shall not be required by this Section 7 to give any consent or
deliver in his or her capacity as a director or officer of Seller.
8. Termination. This Agreement and the Proxy delivered in connection
herewith shall terminate and shall have no further force or effect as of the
Expiration Date.
9. Confidentiality. Each Shareholder agrees (i) to hold any information
regarding this Agreement and the Transactions in strict confidence, and (ii) not
to divulge any such information to any third person, except to the extent any of
the same is hereafter publicly disclosed by Buyer.
10. Miscellaneous.
10.1 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the Transactions is not affected in any manner materially adverse to any party.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner to the fullest extent
permitted by applicable Law.
10.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without the prior written consent of the other. This Agreement is
intended to bind each Shareholder solely as a securityholder of Seller only with
respect to the specific matters set forth herein.
10.3 Amendment and Modification. This Agreement may not be modified,
amended, altered or supplemented except by the execution and delivery of a
written agreement executed by each of the parties hereto.
10.4 Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Buyer will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
each Shareholder set forth herein. Therefore, it is agreed that, in addition to
any other remedies that may be available to Buyer upon any such violation, Buyer
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Buyer at law
or in equity.
10.5 Notices. All notices, requests, claims, demands or other
communications hereunder 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 (a) when delivered, if delivered by hand, (b) one business day after
transmitted, if transmitted by a nationally recognized overnight courier
service, (c) when telecopied, if telecopied (which is confirmed), or (d) three
business days after
-4-
mailing, if mailed by registered or certified mail (return receipt requested),
to the parties at the following addresses:
(a) If to any Shareholder, at the address set forth below such
Shareholder's signature at the end hereof.
with a copy to:
Xxxxxxxx X. Xxxxx, Esquire
Meritz & Xxxxx XXX
Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
(b) if to Buyer, to:
PHH Vehicle Management Services, LLC
000 Xxxxxxxxxxxxx Xxxxxx
Mail Code "CP"
Xxxx Xxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: General Counsel
with a copy to:
Cendant Corporation
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxx
Senior Vice President and Secretary
or to such other address as any party hereto may designate for itself by notice
given as herein provided.
10.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
OTHER THAN CONFLICT OF LAWS PRINCIPLES THEREOF DIRECTING THE APPLICATION OF ANY
LAW OTHER THAN THAT OF NEW YORK. COURTS WITHIN THE STATE OF NEW YORK (LOCATED
WITHIN THE COUNTY OF NASSAU, NEW YORK) WILL HAVE JURISDICTION OVER ALL DISPUTES
BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES HEREBY
CONSENT TO
-5-
AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. EACH OF THE PARTIES
HERETO WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH
PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (III)
ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY
OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.
10.7 Entire Agreement. This Agreement and the Proxy contain the
entire understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.
10.8 Counterpart. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which together shall
constitute one and the same agreement.
10.9 Headings; Interpretation. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement. The parties
have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
[Remainder of page intentionally left blank.]
-6-
IN WITNESS WHEREOF, the parties have caused this Voting Agreement to
be executed as of the date first above written.
BUYER SHAREHOLDERS
By:
----------------------------------- ---------------------------------------
Name: (Signature)
--------------------------------
Title:
--------------------------------
XXXXX XXXXXX
------------
(Print Name of Shareholder)
----------------------------------------
(Print Street Address)
----------------------------------------
(Print City, State and Zip)
----------------------------------------
(Print Telephone Number)
----------------------------------------
(Print Facsimile Number)
----------------------------------------
(Social Security or Tax I.D. Number)
Total Number of Shares of Seller Capital Stock owned on the date hereof:
Common Stock:
--------------------------------------------
State of Residence:
--------------------------------------------
SIGNATURE PAGE TO VOTING AGREEMENT
SHAREHOLDERS
----------------------------------------
(Signature)
XXXX XXXXXX
-----------
(Print Name of Shareholder)
----------------------------------------
(Print Street Address)
----------------------------------------
(Print City, State and Zip)
----------------------------------------
(Print Telephone Number)
----------------------------------------
(Print Facsimile Number)
----------------------------------------
(Social Security or Tax I.D. Number)
Total Number of Shares of Seller Capital Stock owned on the date hereof:
Common Stock:
--------------------------------------------
State of Residence:
--------------------------------------------
Total Number of Shares of Seller Capital Stock subject to this Agreement:
Common Stock:
--------------------------------------------
-8-
Annex A
PROXY
TO VOTE STOCK OF
XXXXXXXXXXXXX.XXX CORP.
The undersigned shareholder of xxxxxxxxxxxxx.xxx Corp., a New York
corporation ("Seller"), hereby appoints the members of the board of directors of
PHH Vehicle Management Services, LLC, a Delaware limited liability company
("Buyer"), and each of them, or any other designee of Buyer, as the sole and
exclusive attorneys and proxies of the undersigned, with full power of
substitution and resubstitution, to vote and exercise all voting and related
rights (to the full extent that the undersigned is entitled to do so) with
respect to the shares of capital stock of Seller indicated on the signature page
hereto that are beneficially owned by the undersigned (collectively, the
"Shares") in accordance with the terms of this Proxy until the Expiration Date
(as defined below). Upon the undersigned's execution of this Proxy, any and all
prior proxies given by the undersigned with respect to any Shares are hereby
revoked and the undersigned agrees not to grant any subsequent proxies with
respect to the Shares until after the Expiration Date.
The attorneys and proxies named above, and each of them are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting and other rights of the undersigned with respect to the
Shares (including, without limitation, the power to execute and deliver written
consents pursuant to the New York Business Corporation Law), at every annual,
special or adjourned meeting of the shareholders of Seller and in every written
consent in lieu of such meeting, in favor of approval and adoption of the Stock
Purchase Agreement and of the transactions contemplated thereby.
The attorneys and proxies named above may not exercise this Proxy on any
other matter except as provided above. The undersigned shareholder may vote the
Shares on all other matters.
All authority herein conferred shall survive the death or incapacity of
the undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned.
Dated: _______________, _____
-------------------------------------
(Signature of Shareholder)
XXXXX XXXXXX
------------
(Print Name of Shareholder)
Shares subject to this Irrevocable Proxy:
__________ shares of Seller Common Stock
Annex A
PROXY
TO VOTE STOCK OF
XXXXXXXXXXXXX.XXX CORP.
The undersigned shareholder of xxxxxxxxxxxxx.xxx Corp., a New York
corporation ("Seller"), hereby appoints the members of the board of directors of
PHH Vehicle Management Services, LLC, a Delaware limited liability company
("Buyer"), and each of them, or any other designee of Buyer, as the sole and
exclusive attorneys and proxies of the undersigned, with full power of
substitution and resubstitution, to vote and exercise all voting and related
rights (to the full extent that the undersigned is entitled to do so) with
respect to the shares of capital stock of Seller indicated on the signature page
hereto that are beneficially owned by the undersigned (collectively, the
"Shares") in accordance with the terms of this Proxy until the Expiration Date
(as defined below). Upon the undersigned's execution of this Proxy, any and all
prior proxies given by the undersigned with respect to any Shares are hereby
revoked and the undersigned agrees not to grant any subsequent proxies with
respect to the Shares until after the Expiration Date.
The attorneys and proxies named above, and each of them are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting and other rights of the undersigned with respect to the
Shares (including, without limitation, the power to execute and deliver written
consents pursuant to the New York Business Corporation Law), at every annual,
special or adjourned meeting of the shareholders of Seller and in every written
consent in lieu of such meeting, in favor of approval and adoption of the Stock
Purchase Agreement and of the transactions contemplated thereby.
The attorneys and proxies named above may not exercise this Proxy on any
other matter except as provided above. The undersigned shareholder may vote the
Shares on all other matters.
All authority herein conferred shall survive the death or incapacity of
the undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned.
Dated: _______________, _____
-------------------------------------
(Signature of Shareholder)
XXXX XXXXXX
(Print Name of Shareholder)
Shares subject to this Irrevocable Proxy:
__________ shares of Seller Common Stock
H/VOTINGAREEMENT
EXHIBIT F
TRADEMARK LICENSE AGREEMENT
TRADEMARK LICENSE AGREEMENT ("Agreement") made as of the ___ day of
___________, 2001, between xxxxxxxxxxxxx.xxx Corp., a New York corporation
("Licensor") and PHH Vehicle Management Services, LLC, a Delaware limited
liability company ("Licensee").
WITNESSETH:
WHEREAS, Licensor and Licensee entered into a Stock Purchase Agreement,
dated as of September ____, 2001 (the "Stock Purchase"), providing for the
acquisition by Licensee, of all of the issued and outstanding shares of stock of
xxxxxxxxxxxxx.xxx FS Corp. (the "Company");
WHERAS, Licensor is the owner of the trademarks, trade names, domain
names, logos and services marks set forth in Schedule I hereto (the "Licensed
Marks");
WHEREAS, Licensee desires to obtain from Licensor the right and license to
use the Licensed Marks in commerce in connection with the Business (as such term
is defined in the Stock Purchase Agreement); and
WHEREAS, pursuant to the Stock Purchase Agreement, Licensor agreed to
enter into this Agreement to grant to Licensee the right and license to use the
Licensed Marks in connection with the Business.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
1. Definitions. Capitalized terms used and not otherwise defined in this
Agreement shall have the meaning set forth for such terms in the Stock Purchase
Agreement.
1.1 "Claims" shall have the meaning set forth in Section 12(a)
herein.
1.2 "Commencement Date" shall mean the effective date of this
Agreement, as first set forth in the first paragraph of this
Agreement.
1.3 "Licensed Xxxx" shall mean the trade names, trademarks, domain
names, logos and service marks set forth in Schedule I hereto.
1.4 "License Term" shall mean the twenty (20) year period that
shall commence on the Commencement Date and expire twenty (20)
years thereafter.
2. Grant of License.
(a) Licensor hereby grants to Licensee, and to each of it
subsidiaries, worldwide, royalty-free, exclusive right and license to use the
Licensed Marks in connection with the Business and the marketing, promotion and
sale thereof. For the purpose of clarification, the exclusivity granted
hereunder shall be limited to the Business.
(b) The Licensee shall not utilize or associate the Licensed Xxxx
with any other business programs and/or trademarks, excluding the Business, that
directly compete with any business operated by the Licensor or any Affiliate
during the License Term.
3. Duration. This license shall commence as of the Commencement Date and
shall expire twenty (20) years thereafter, unless terminated earlier in
accordance with the provisions of the Agreement ("License Term"). The License
Term shall be renewable by the Licensee providing the Licensor written notice of
its intention to renew this Agreement for additional twenty (20) year terms
within six (6) months prior to the expiration of the License Term. Thereafter,
the new renewed term shall be referred as the License Term herein.
4. Assignment; Sublicensing.
(a) Assignment. The Licensor shall be free to assign any or all of
its rights and obligations hereunder to any Person; provided that such Person
shall be bound by the terms and provisions hereof. Except for assignments to any
Affiliate of Licensee, the Licensee shall be limited to assign any or all of its
rights and obligations hereunder only if and when the Licensee simultaneously
transfers ownership of the Business, (through any form of sale, transfer,
assignment, merger, consolidation, etc.), to the same Person to whom it has
assigned its rights and obligations hereunder. The Licensee shall provide the
Licensor written notification prior to any assignment of any or all of its
rights and obligations hereunder.
(b) Sublicensing. Licensee shall be free to sublicense any of its
rights in the Licensed Marks to any Person, provided that: (i) Licensee shall
impose on such Person obligations with respect to the Licensed Marks that are no
less stringent than those required of Licensee hereunder; (ii) Licensor shall be
a third party beneficiary of the sublicensee's obligations thereunder with
direct rights of enforcement of such obligations; (iii) upon any termination of
this Agreement, any sublicense granted by
Licensee shall terminate immediately and automatically, (iv) the sublicense
shall contain the same restrictions on use as are set forth in Section 2(b)
hereof; and (v) the Licensee shall provide the Licensor written notification
prior to any sublicense of the Licensed Xxxx.
5. Ownership of the Licensed Marks.
(a) Licensee acknowledges that Licensor is the owner of the Licensed
Marks, that use of the Licensed Marks by Licensee shall not create in Licensee's
favor any ownership interest therein, and that all goodwill arising out of the
Licensee's use of the Licensed Marks shall inure to the benefit of the Licensor.
(b) Licensee hereby assigns to Licensor any rights to the Licensed
Marks which may, by operation of law or otherwise, vest in Licensee as a
consequence of Licensee's activities hereunder, and any goodwill arising
therefrom.
6. Quality Control.
(a) Licensee acknowledges that the Licensed Marks have established
goodwill and are well recognized in the minds of the relevant class of
customers, and Licensee agrees that the products distributed and services
performed by Licensee under the Licensed Xxxx shall equal or exceed the level of
quality heretofore established and maintained by Licensor and its affiliates in
the operation of the Business. Licensor acknowledges and agrees that the manner
in which Licensor and its affiliates conducted the operation of the Business
immediately prior to the Commencement Date of this Agreement satisfies this
requisite standard of quality.
(b) Licensee shall, upon Licensor's request, make available to
Licensor for inspection specimens demonstrating Licensee's use of the Licensed
Marks.
(c) If the quality of any products or services offered by Licensee
under the Licensed Marks fails to meet the standard of quality set forth in
Section 6(a) hereof, then Licensor shall so notify Licensee in writing,
specifying, in reasonable detail, the reason for such disapproval. Licensee will
have sixty (60) days to cure the deficiency and, if such deficiency is not cured
with respect to such products and/or services to Licensor's reasonable
satisfaction, Licensee will not sell or deliver such products and/or services
under the Licensed Marks until the deficiency is cured to Licensor's reasonable
satisfaction.
7. Use of Licensed Marks.
(a) Licensee agrees to comply with all laws and regulations relating
to the use of the Licensed Marks. Licensee agrees to apply statutory notice of
trademark registration, where required.
(b) Licensee shall comply with all applicable international,
federal,
state and local laws and regulations pertaining to the publication, sale,
distribution, provision, advertising and promotion of any products and/or
services under the Licensed Marks.
(c) Licensee shall not, by any act or omission, tarnish, disparage,
degrade or injure the reputation of the Licensed Marks or Licensor, and the
goodwill associated therewith. Licensee shall not use any Licensed Marks except
as authorized hereunder.
(d) During the License Term, Licensee agrees to revise the Licensed
Xxxx as the Licensor deems appropriate in its sole discretion and Licensee shall
conform its use to the revised Licensed Xxxx, at its sole cost and expense,
within one hundred and eighty (180) days after receiving written notification of
such revision.
8. Termination.
(a) If either party commits a material breach of its obligations
under this Agreement, the non-defaulting party may terminate this Agreement on
sixty (60) days' written notice; provided that such notice of termination shall
be of no further force or effect if (i) the default is cured by the defaulting
party to the reasonable satisfaction of the non-defaulting party within sixty
(60) days after receipt of such notice, or (ii) the defaulting party is taking
all reasonably feasible steps to cure a default which, by its nature, cannot be
cured within said sixty (60) day period and the default is cured to the
reasonable satisfaction of the non-defaulting party within one-hundred twenty
(120) days or such shorter period as is reasonably necessary to cure such
default.
(b) Licensee may terminate this Agreement at any time on sixty (60)
days' written notice to Licensor.
(c) Licensor may terminate this Agreement on sixty (60) days'
written notice to Licensee in the event that Licensee has failed to use the
Licensed Marks for a continuous period of three years or has confirmed in
writing that it no longer intends to use the Licensed Marks.
9. Effects of Termination.
(a) Upon the termination of this Agreement, Licensee shall (i) cease
all use of the Licensed Marks as of the effective date of the termination,
except as permitted during the Sell-Off Period pursuant to subsection (ii)
below, and (ii) within ninety (90) days of the effective date of termination
("Sell-Off Period"), sell off and/or destroy any products and other materials
bearing the License Marks which are in Licensee's inventory or control. After
the Sell-Off Period, Licensee shall make no further use of any nature of the
Licensed Marks.
(b) Licensee hereby agrees that, upon the termination of this
Agreement, it will be deemed to have assigned to Licensor any right, equity,
goodwill, title or other rights in and to the Licensed Marks which may have been
vested in Licensee
during the term of the Agreement. Licensee agrees to execute any instruments
reasonably requested by Licensor to accomplish the foregoing. Any such
assignment shall be without consideration, other than the mutual covenants and
considerations set forth in this Agreement.
(c) Termination of this Agreement for any reason shall not affect
(i) those obligations which have accrued as of the date of termination and (ii)
those obligations which, from the context thereof, are intended to survive
termination of this Agreement.
10. Infringement.
(a) Licensee shall promptly notify Licensor of any infringement,
unauthorized use, or dilution of the Licensed Marks which may come to Licensee's
attention. Licensor shall have the sole initial right to determine whether or
not any action shall be taken with respect to such infringement, unauthorized
used, dilution, and the nature of the action to be taken. Licensee agrees to
cooperate in any reasonable manner with Licensor in the conduct of such
litigation, at Licensor's expense. Any recovery obtained by Licensor as a result
of any such action brought under this Section 10(a) shall belong to Licensor.
(b) In the event that Licensor determines that litigation or other
legal action should not be commenced or otherwise fails, after a reasonable
period of time, to take reasonable action to stop such infringement,
unauthorized use or dilution, Licensee may commence litigation or take other
legal action on behalf of the Licensor, at the sole cost and expense of the
Licensee and Licensor will cooperate in any reasonable manner with Licensee in
the conduct of such litigation or other legal action. Any recovery obtained by
Licensee as a result of any such action brought under this Section 10(b) shall
belong to Licensee.
(c) In the event that a third party commences an infringement or
other legal action against Licensee as a result of its use of the Licensed
Marks, Licensee shall promptly notify Licensor in writing of such action.
Licensor may, in its sole discretion, join and control the defense of such
action at Licensor's expense, and Licensee shall cooperate in such defense as
requested by Licensor, at Licensor's expense.
(d) Notwithstanding anything to the contrary in this Section 10 or
anywhere else herein, in no event shall Licensor have the right, without the
prior written consent of Licensee, to enter into a settlement with a third party
whereby Licensor grants any right to, or in any way authorizes the use of, the
Licensed Marks in connection with the Business.
11. Representations, Warranties and Covenants of Licensor. Licensor
represents and warrants to Licensee as follows:
(a) Licensor owns the Licensed Marks and has the right and authority
to grant the licenses and rights it grants hereunder upon the terms and
conditions herein;
(b) The use of the Licensed Marks as permitted herein does not
constitute an unauthorized use or misappropriation of any Intellectual Property
Right or any other property or proprietary right of any Person.
(c) Licensor shall use all reasonable efforts to maintain and keep
valid and current such existing and subsequently issued registrations of
Licensed Marks, in such territories as are reasonably requested by Licensee, and
shall not take or omit to take any action which could damage the Licensed Marks
or the goodwill therein; and
(d) At Licensee's reasonable request, Licensor shall (i) at
Licensee's cost and expense, timely file trademark applications for, and
diligently pursue the registration of, the Licensed Marks in those countries in
which the Licensed Marks are not currently registered and in which Licensee
conducts or shall conduct the Business or (ii) permit Licensee, with Licensor's
cooperation and written consent, and at Licensee's cost and expense, to timely
file trademark applications for, and diligently pursue the registration of, the
Licensed Marks in Licensor's name in those countries in which the Licensed Marks
are not currently registered and in which Licensee conducts or shall conduct the
Business, and Licensor shall assist and cooperate with Licensee in such
endeavor.
12. Indemnification.
(a) Licensee shall defend, indemnify, and hold Licensor and its
officers, directors, employees, shareholders and affiliates harmless from and
against any third-party claim, demand, suit, loss, liability, or damage,
including, but not limited to, any amounts paid in settlement thereof and
reasonable attorney fees (collectively, "Claims") arising out of or based upon
the Licensee's conduct, excluding the Licensee's use of the Licensed Marks, as
expressly authorized hereunder, or a material breach of Licensee's
representations, warranties, covenants or obligations hereunder.
(b) Licensor shall defend, indemnify, and hold Licensee and its
officers, directors, employees, shareholders and affiliates harmless from and
against any third-party Claim arising out of or based upon (i) a material breach
of Licensor's representations, warranties or covenants hereunder, and (ii)
Licensee's use of the Licensed Marks, as expressly authorized hereunder.
(c) Each party shall give the other prompt notice of any Claim for
which indemnification is sought; shall provide the indemnifying party with
complete control over the defense of such Claim; and shall provide all
reasonable assistance in connection with the defense of such Claim. Neither
party shall be entitled to indemnification for Claims to the extent attributable
to such party's gross negligence or willful misconduct.
13. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given, upon receipt, if mailed by
registered or certified mail, postage prepaid, return receipt requested,
overnight delivery, or hand delivered, and sent via confirmed facsimile
transmission as follows:
(a) If to Licensor, to:
xxxxxxxxxxxxx.xxx Corp.
00 X. Xxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxxx
Chief Executive Officer
with a copy to:
Xxxxxxxx X. Xxxxx, Esquire
Meritz & Xxxxx XXX
Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
(b) If to Licensee, to
PHH Vehicle Management Services, LLC
000 Xxxxxxxxxxxxx Xxxxxx
Mail Code "CP"
Xxxx Xxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: General Counsel
with a copy to:
Cendant Corporation
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxx
Senior Vice President and Secretary
or to such other address as the party to whom notice is given may have
previously furnished to the other party in writing in accordance herewith.
14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK OTHER THAN
CONFLICT OF LAWS PRINCIPLES THEREOF DIRECTING THE APPLICATION OF ANY LAW OTHER
THAN THAT OF NEW YORK. COURTS WITHIN THE STATE OF NEW YORK (LOCATED
WITHIN THE COUNTY OF NASSAU, NEW YORK) WILL HAVE JURISDICTION OVER ALL DISPUTES
BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES HEREBY
CONSENT TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. EACH OF THE
PARTIES HERETO WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH
PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (III)
ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY
OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.
15. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersede all prior agreements and
understandings, oral or written, between parties hereto with respect to the
subject matter hereof and hereof.
(b) Amendments. This Agreement may not be amended, modified or
supplemented except by written agreement of the parties hereto.
(c) No Waiver. Nothing contained in this Agreement shall cause the
failure of either party to insist upon strict compliance with any covenant,
obligation, condition or agreement contained herein to operate as a waiver of,
or estoppel with respect to, any such covenant, obligation, condition or
agreement by the party entitled to the benefit thereof.
(d) Headings. 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.
(e) Counterparts. This Agreement may be executed in counterparts
each of which shall be deemed to constitute an original and constitute one and
the same instrument.
(f) Severability. If any provisions hereof shall be held invalid or
unenforceable by any court of competent jurisdiction or as a result of future
legislative
action, such holding or action shall be strictly construed and shall not affect
the validity or effect of any other provision hereof; provided, however, that
the parties shall use reasonable efforts, including, but not limited to, the
amendment of this Agreement, to ensure that this Agreement shall reflect as
closely as practicable the intent of the parties hereto.
(g) Specific Performance. Each of the parties hereto acknowledges
and agrees that the other party hereto would be irreparably damaged in the event
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. Accordingly, each of the
parties hereto agrees that they each shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions thereof in any
action instituted in any court of the United States or any state or jurisdiction
having subject matter jurisdiction, in addition to any other remedy to which
such party may be entitled, at law or in equity.
(h) Independent Contractors. Nothing herein contained shall be
construed to place the parties in the relationship of partners or joint
venturers, and neither party shall have any power to obligate or bind the other
in any manner whatsoever, except as otherwise provided for herein.
(i) Schedules. Each of the Schedules attached hereto is fully
incorporated herein and made part hereof.
IN WITNESS WHEREOF, the duly authorized officers of the parties
hereto have executed this Agreement as of the day and year first written above.
Licensor: xxxxxxxxxxxxx.xxx Corp.
By: ____________________________________
Name:
Title:
Licensee: PHH VEHICLE MANAGEMENT SERVICES, LLC
By: _____________________________________
Name:
Title:
SCHEDULE I
driversshield
driversshield Logo
EXHIBIT G
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this "Agreement") is made and entered
into this _________ day of ___________________ 2001, (hereinafter referred to as
"Effective Date") by and between xxxxxxxxxxxxx.xxx Corp. a New York corporation,
with its principal place of business at 00 Xxxx Xxxxxxxx Xxxx, Xxxxxxxxx, Xxx
Xxxx 00000 ("SELLER"), and PHH VEHICLE MANAGEMENT SERVICES, LLC, a Delaware
limited liability company, with offices at 000 Xxxxxxxxxxxxx Xxxxxx, Xxxx
Xxxxxx, Xxxxxxxx 00000-0000 ("BUYER"). SELLER and BUYER are hereinafter referred
to jointly as the "Parties" and individually as "Party".
WITNESSETH:
WHEREAS, BUYER and SELLER have entered into a Stock Purchase Agreement
dated ________________ (the "Purchase Agreement") pursuant to which SELLER is
selling to BUYER and BUYER is purchasing from SELLER all of the issued and
outstanding shares of the capital stock of xxxxxxxxxxxxx.xxx FS Corp, SELLER'S
vehicle accident repair and management services business ("COMPANY"), on such
terms and conditions as are contained in the Purchase Agreement (the
"Purchase"); and
WHEREAS, the Purchase Agreement provides that SELLER and BUYER shall enter
into an agreement relating to certain transition services to be provided by
SELLER to BUYER with respect to COMPANY, and this Agreement is entered into in
order to fulfill that provision.
WHEREAS, the objective of this Agreement is to transition COMPANY's
clients to BUYER's facilities and platform in a smooth and orderly fashion.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and subject to the terms and conditions hereof, the parties
intending to be legally bound, hereby agree as follows:
ARTICLE I
SERVICES
1.01 Provision of Services. Subject to the terms and conditions of this
Agreement, SELLER agrees to provide to BUYER and BUYER agrees to purchase from
SELLER those services described in Exhibit A attached hereto on the terms set
forth on Exhibit B (referred to herein as "Services").
1
1.02 Nature, Volume and Scope of Services.
SELLER will provide Services on terms which are similar in nature, volume
and scope to those which SELLER provided to COMPANY and COMPANY's clients
immediately prior to the Effective Date.
ARTICLE II
TERM AND RENEWAL
2.01 Term of Agreement. Unless otherwise stated in Exhibit A relating to a
specific Service, the term of this Agreement shall commence on the Effective
Date and shall terminate June 30, 2002 (the "Term"), unless earlier terminated
by the Parties as provided herein or extended as mutually agreed to by the
Parties.
ARTICLE III
COMPENSATION
3.01 BUYER shall pay SELLER compensation for Services based on the fees and
expenses set forth in Exhibit B, or any amendments to Exhibit B, for each
Services.
ARTICLE IV
PERSONNEL
4.01 Supervision and Compensation. The Services shall be performed by the
personnel as set forth more particularly in Exhibit C, attached hereto and
incorporated herein by reference (the "Assigned Personnel"). BUYER shall have
general oversight of the Services with a particular focus on the transition of
Company clients to BUYER's platform. SELLER shall employ, pay and supervise
Assigned Personnel. SELLER shall be solely responsible for the payment of all
benefits and any other direct and indirect compensation for Assigned Personnel,
as well as be responsible for their worker's compensation insurance, employment
taxes, and other employer liabilities relating to such personnel as required by
law to be provided. SELLER shall be an independent contractor in connection with
the performance of Services hereunder and none of the Assigned Personnel shall
be deemed employees of BUYER or COMPANY.
4.02 Staffing of Personnel. SELLER shall have sole discretion regarding future
allocation percentages for Assigned Personnel ("Allocation Percentage") and will
make such determinations in good faith, taking into consideration the number of
Company clients transitioned to BUYER's platform. SELLER shall be responsible
for ensuring that the Assigned Personnel perform the Services in a timely,
efficient and workmanlike manner and shall, in good faith, use its best efforts
to maintain the same level of service provided to the COMPANY and COMPANY
clients prior to the Effective Date.
2
ARTICLE V
INGRESS AND EGRESS
5.01 BUYER shall at all times during the term of this Agreement have the right
(a) of ingress to and egress from the facilities and premises of SELLER; and (b)
to maintain BUYER personnel on the premises of SELLER for unlimited on-site
oversight of continuing COMPANY operations; and (c) to have access to the office
space and office equipment, including, without limitation, telephones, facsimile
machines, copy machines and other necessary equipment and supplies presently
utilized by the Company in conducting its operations, to conduct such management
and oversight, for any purposes connected with the delivery of Services
hereunder or the exercise of any right under this Agreement or the performance
of any obligations required by this Agreement, subject to reasonable safety and
security policies and practices implemented by SELLER.
ARTICLE VI
INSURANCE
6.01 During the Term and at all times that SELLER performs Services, SELLER will
maintain in full force and effect, at SELLER's own expense, insurance coverage
as specified in this Section.
6.02 Workers' Compensation
a. Workers' Compensation insurance as required by law or regulation,
having jurisdiction over SELLER's employees.
b. Employer's Liability insurance in amounts not less than
$1,000,000 (One Million dollars).
c. Where permitted by law, and to the extent agreed to by the
insurer, such policies will contain a waiver of the insurer's
subrogation rights against BUYER.
6.03 Comprehensive General Liability or Public Liability policy with limits on
an occurrence basis not less than a combined Single Limit for Bodily Injury and
Property Damage of $1,000,000 (One Million dollars) per occurrence; $1,000,000
(One Million dollars) for Personal Injury Liability; $1,000,000 (One Million
dollars) aggregate for Products and Completed Operations; and $2,000,000 (Two
Million dollars) general aggregate. Except for Products and Completed Operations
coverage, the aggregate limits will apply separately to SELLER's Services under
this Agreement.
6.04 Property. SELLER will carry special form insurance coverage of no less than
$1,000,000 (One Million dollars) per occurrence.
6.05 Fidelity Bond Or Crime Insurance. A Fidelity bond or policy of crime
insurance, with a limit of liability not less than $50,000 (Fifty Thousand
dollars) covering losses caused by a dishonest act on the part of any agent,
servant or employee of SELLER.
6.06 Automobile Liability Insurance. Automobile liability insurance will be
provided for Property Damage, Bodily Injury and Contractual Liability covering
all motor vehicles
3
hired, rented or used by SELLER, and all motor vehicles not owned but used on
behalf of SELLER, with a combined single limit of liability for each accident of
not less than $1,000,000 (One Million dollars).
6.07 Business Interruption Insurance with limits not less than $400,000 (Four
Hundred Thousand dollars).
6.08 Additional Insureds. All policies described in this Agreement will name
BUYER, its officers, directors and employees as additional insureds (to the
extent agreed to by the insurer), and will, to the extent permitted by
applicable law, stipulate that the insurance afforded additional insureds will
apply as primary insurance. Any secondary insurance coverage shall not limit the
obligations and liabilities of the SELLER under this Agreement.
6.09 Certificates of Insurance. Certificates of Insurance evidencing the
required coverage and limits must be furnished to BUYER prior to the
commencement of any Services, and at such other times as requested by BUYER.
Such Certificates of Insurance will provide BUYER thirty (30) days written
notice prior to cancellation of such policies. All insurance policies will be
written by a company authorized to do business in the territory and jurisdiction
where the project is located. SELLER will furnish copies of any endorsements
subsequently issued which amend coverage or limits.
6.10 In no event will the coverage or limits of any insurance maintained by
SELLER under this Agreement, or the lack or unavailability of any other
insurance, limit or diminish in any way SELLER's obligations or liability to
BUYER under this Agreement.
ARTICLE VII
CONFIDENTIALITY
7.01 Confidential Information. As used in this Agreement, SELLER Confidential
Information and BUYER Confidential Information are defined as follows:
(a) "SELLER Confidential Information" means information known by
BUYER on the date of this Agreement and related to SELLER's business
interests, or disclosed confidentially by SELLER to BUYER prior to
or after the Effective Date under the terms and for purposes of this
Agreement except for:
(i) information which is or becomes publicly available through no
act of BUYER, from and after the date of public availability;
(ii) information disclosed to BUYER by a third party, provided (a)
under the circumstances of disclosure BUYER does not have a duty of
non-disclosure owed to such third party, (b) the third party's disclosure is not
violative of a duty on non-disclosure owed to another, including SELLER, and (c)
the disclosure by the third party is not otherwise unlawful;
4
(iii) information developed by BUYER independent of any confidential
SELLER information which is known by BUYER on the Effective Date and/or
disclosed by SELLER under this Agreement; and
(b) information that is developed solely by the COMPANY
independently from the information and knowledge of the Seller and
subsequent to the Effective Date.
(c) "BUYER Confidential Information" means information known by
SELLER on the Effective Date and reasonably understood by SELLER to
be confidential and related to BUYER's present or future business
interests, or disclosed confidentially by BUYER to SELLER under the
terms and for purposes of this Agreement except for:
(i) information which is or becomes publicly available through no
act of SELLER, for and after the date of public availability;
(ii) information disclosed to SELLER by a third party, provided (a)
under the circumstances of disclosure SELLER does not have a duty of
non-disclosure owed to such third party, (b) the third party's disclosure is not
violative of a duty of non-disclosure owed to another, including BUYER, and (c)
the disclosure by the third party is not otherwise unlawful;
(iii) information developed by SELLER independent of any
confidential BUYER information which is known by SELLER on the Effective Date
and/or disclosed by BUYER thereafter;
(iv) information which is inherently disclosed in marketing of a
product by SELLER in the usual course of business and within the scope of the
rights granted; and
(v) information which is developed by a business which remains with
SELLER on the Effective Date.
7.02 SELLER and BUYER each shall not disclose to any other person or use except
for purposes of the Agreement any business information which is BUYER
Confidential Information or SELLER Confidential Information, respectively. The
foregoing restrictions shall survive the termination of this Agreement.
7.03 Each Party shall protect Confidential Information hereunder by using the
same degree of care, but no less than a reasonable degree of care, to prevent
the unauthorized disclosure of the other Party's Confidential Information as the
Party uses to protect its own confidential information of a like nature.
5
ARTICLE VIII
LIMITATION OF LIABILITY
8.01 Limitation of Liability. EXCEPT AS PROVIDED HEREIN, NEITHER PARTY SHALL
UNDER ANY CIRCUMSTANCES BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT,
INCIDENTAL, OR CONSEQUENTAIL DAMAGES (INCLUDING BUT NOT LIMITED TO LOSS OF
PROFITS OR REVENUE) EXCEPT TO EXTENT SUCH DAMAGES RESULT FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH PARTY. THIS LIMITATION APPLIES
REGARDLESS OF WHETHER THE DAMAGES OR OTHER RELIEF ARE SOUGHT BASED ON BREACH OF
WARRANTY, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY IN TORT, OR ANY OTHER
LEGAL OR EQUITABLE THEORY. NOTWITHSTANDING ANYTHING TO THE CONTRARY, THIS
SECTION 8.01 DOES NOT LIMIT EITHER PARTY'S LIABILITY TO THE OTHER FOR DIRECT
DAMAGES WHETHER IN CONTRACT, TORT OR ANY OTHER LEGAL THEORY.
ARTICLE IX
INDEMNIFICATION
9.01 SELLER agrees to indemnify, defend and hold harmless BUYER, its directors,
officers, employees, affiliates, agents and representatives from any and all
third party claims, actions, demands, judgements, losses, costs, expenses,
damages and liabilities (including but not limited to attorney fees and other
expenses of litigation) arising out of or connected with the Services supplied
under this Agreement or in any way related to this Agreement, regardless of the
legal theory asserted; provided, however, that SELLER shall have no obligation
to indemnify pursuant to Section 9.01 to the extent such claim arises out of the
negligence or willful misconduct of BUYER or due to the conduct of SELLER to
extent such conduct is at the sole direction of BUYER. The Parties agree that
the indemnities stated in Section 9.01 and 9.02 should be construed and applied
in favor of indemnification.
9.02 BUYER agrees to indemnify, defend and hold harmless SELLER, its directors,
officers, employees, affiliates, agents and representatives from any and all
third party claims, actions, demands, judgments, losses, costs, expenses,
damages and liabilities (including but not limited to attorney fees and other
expenses of litigation) arising out of or connected with the Services supplied
under this Agreement or in any way related to this Agreement, regardless of the
legal theory asserted; provided, however, that BUYER shall have no obligation to
indemnify pursuant to Section 9.02 to the extent such claim arises out of the
negligence or willful misconduct of SELLER. The Parties agree that the
indemnities stated in Section 9.01 and 9.02 should be construed and applied in
favor of indemnification.
6
ARTICLE X
RECORDS AND INSPECTION RIGHTS
10.01 Records. SELLER agrees to maintain accurate records (i) arising from or
related to any Service(s) provided hereunder, including, without limitation,
client and repair network contracts, accounting records and documentation
produced in connection with the rendering of any Service(s); and (ii) related to
COMPANY organization and operations, including, without limitation, COMPANY
books, records, financial statements and related corporate documents and to
forward to BUYER and/or give BUYER full access to SELLER's premises to review
such records upon BUYER's request.
ARTICLE XI
TERMINATION
11.01 Termination by SELLER . This Agreement, or any Service provided hereunder,
may be terminated by SELLER upon written notice to BUYER if:
(a) BUYER fails to perform or otherwise breaches an obligation under this
Agreement; provided, however, that BUYER shall have two (2) weeks, except for
failure to pay the fees set forth in Exhibit B which shall be five (5) days,
from the date notice of intention to terminate is received to cure the failure
to perform or breach of an obligation, at which time this Agreement or Service
shall terminate if the failure or breach has not been cured to the reasonable
satisfaction of SELLER; or
(b) BUYER makes a general assignment for the benefit of creditors, becomes
insolvent, a receiver is appointed, or a court approves reorganization or
arrangement proceedings.
11.02 Termination by BUYER . This Agreement, or any Service provided hereunder,
may be terminated by BUYER (i) for convenience for any reason without penalty
upon two (2) weeks' written notice to SELLER or (ii) for cause upon written
notice to SELLER if:
(a) SELLER fails to perform or otherwise breaches an obligation under this
Agreement; provided, however, that SELLER shall have two (2) weeks from the date
notice of intention to terminate is received to cure the failure to perform or
breach of an obligation, at which time this Agreement or Service shall terminate
if the failure or breach has not been cured to the reasonable satisfaction of
BUYER; or
(b) There shall be filed by or against SELLER any action under any
provision of any state or federal law relating to insolvency or bankruptcy, and
such action is not dismissed within sixty (60) days of the filing, (iii) a
receiver or trustee shall be appointed for SELLER's property, and such
appointment is not withdrawn within sixty (60) days of the date of appointment,
(iv) SELLER makes an assignment for the benefit of creditors, (v) SELLER shall
be in default in the payment or performance of any other indebtedness
7
or obligation owed by SELLER to BUYER, BUYER's affiliates or subsidiaries, under
any other agreement or instrument.
(c) Performance of this Agreement or any Service to be provided hereunder
has been rendered impossible or impracticable by reason of the occurrence of any
of the events described in Section 12.01 or if any other event occurs, which is
beyond SELLER's control, which can be reasonably determined, in BUYER's sole
opinion, to permanently prevent the performance of this Agreement or any
Service.
11.03 Automatic Termination. This Agreement will automatically terminate if
BUYER reduces the number of full time equivalent resources assigned to perform
the Services to less than four (4).
11.04 Termination Notices. Any termination notice delivered by either Party
shall specify in detail the Service or Services to be terminated and the
effective date of termination.
11.05 Consequences of Termination. In the event this Agreement or any Service is
terminated for any reason:
(a) Upon request, each Party shall return to the other Party all tangible
personal property and records owned by the other Party, or in the case of BUYER,
pertaining to the COMPANY, in their possession as of the termination date.
(b) BUYER shall remain liable for payment to SELLER for Services furnished
by SELLER prior to the effective date of termination and for the Buyer's portion
of the Enhanced Severance as set forth in Exhibit A. Such payments are payable
and due to SELLER by Electronic Funds Transfer or other electronic payment
method within three (3) business days of receipt and approval of such invoice.
ARTICLE XII
MISCELLANEOUS
12.01 Force Majeure. (a) Neither Party shall be responsible for the delay in the
performance of any obligation hereunder due to labor disturbances, accidents,
fires, floods, wars, acts of terrorism, riots, rebellions, blockages, acts of
governments, governmental requirements and regulations, restrictions imposed by
law or any other similar conditions, beyond the reasonable control and without
the fault or negligence of such Party, and the time for performance by such
Party shall be extended by the period of such delay.
(b) SELLER will immediately give notice to BUYER of any delaying cause. In
the event of a delaying cause, BUYER may act in its sole discretion to:
(i) Terminate this Agreement or any part of this Agreement as to
Services not yet performed; or
8
(ii) Suspend this Agreement in whole or in part for the duration of
the delaying cause, contract for similar services elsewhere., and
SELLER shall have no obligation to pay Supplier any sum directly
attributable to such suspended services.
12.02 Specific Performance. The parties hereto agree that if any of the
provisions of this Agreement are not performed in accordance with their specific
terms or were otherwise breached, irreparable damage would occur, no adequate
remedy at law would exist and damages would be difficult to determine, and that
the parties shall be entitled to specific performance of the terms hereof and
immediate injunctive relief, without the necessity of proving the inadequacy of
money damages as a remedy, in addition to any other remedy at law or equity.
12.03 Assignment by SELLER. Except as set forth in Section 1.04, this Agreement
may not be assigned in whole or in part by SELLER without the prior written
consent of BUYER. Any assignment, delegation or transfer of this Agreement or
any interest therein without written consent of BUYER is void and cause for
termination of this Agreement. Nothing in this Agreement shall be construed to
grant any person or entity not a party hereto any rights or powers whatsoever,
and no person or entity shall be a third party beneficiary of this Agreement.
Nothing in this section affects the ability of SELLER to terminate this
Agreement or any Service in accordance with the provisions of this Agreement or
Exhibit A.
12.04 Assignment by BUYER. Except as provided herein, this Agreement may not be
assigned in whole or in part by BUYER without the prior written consent of
SELLER. Any assignment, delegation or transfer of this Agreement or any interest
therein without written consent of SELLER is void and cause for termination of
this Agreement. Nothing in this Agreement shall be construed to grant any person
or entity not a party hereto any rights or powers whatsoever, and no person or
entity shall be a third party beneficiary of this Agreement. Nothing in this
section affects the ability of BUYER to terminate this Agreement or any Service
in accordance with the provisions of this Agreement or Exhibit A.
Notwithstanding the foregoing, BUYER, or its permitted successive assignees or
transferees, may assign or transfer this Agreement or delegate any rights or
obligations hereunder without consent: (1) to any entity controlled by, or under
common control with, BUYER, or its permitted successive assignees or
transferees; or (2) in connection with a merger, reorganization, transfer, sale
of assets or product lines, or change of control or ownership of BUYER, or its
permitted successive assignees or transferees.
12.05 Relationship of the Parties. Neither Party is an agent of the other Party
and neither Party has any authority to bind the other Party, transact any
business in the other Party's name or on its behalf, or make any promises or
representations on behalf of the other party unless provided from in Exhibit A
or agreed to in writing. Each Party will perform all of its respective
obligations under this Agreement as an independent contractor, and no joint
venture, partnership or other relationship shall be created or implied by this
Agreement.
12.06 Governing Law; Jurisdiction, Waiver of Jury Trial.
9
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK OTHER THAN CONFLICT OF LAWS PRINCIPLES
THEREOF DIRECTING THE APPLICATION OF ANY LAW OTHER THAN THAT OF NEW YORK. COURTS
WITHIN THE STATE OF NEW YORK (LOCATED WITHIN THE COUNTY OF NASSAU, NEW YORK) OR
THE FEDERAL DISTRICT COURT, EASTERN DISTRICT, WILL HAVE JURISDICTION OVER ALL
DISPUTES BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT
AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES
HEREBY CONSENT TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. EACH
OF THE PARTIES HERETO WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS
NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND
SUCH PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR
(III) ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT
FORUM. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY
OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.
12.07 Entire Agreement. This Agreement and the Exhibits referred to in this
Agreement, which Exhibits are incorporated and made a part of this Agreement by
reference, constitute the entire agreement between SELLER and BUYER relating to
services to be provided by SELLER to BUYER and, with the exception of the
Purchase Agreement and any related agreements, there are no further agreements
or understandings, written or oral, between the Parties with respect thereto.
12.08 Severability. It is the desire and intent of the parties to this Agreement
that the provisions of this Agreement shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. If any particular provisions or portion of this
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid or unenforceable, this Agreement shall be deemed amended to delete
therefrom such provision or portion adjudicated to be invalid or unenforceable,
such amendment to apply only with respect to the operation of such Agreement in
the particular jurisdiction in which such adjudication is made.
12.09 Notices. Any notices, requests, demands or other communications required
by or made under this Agreement shall be in writing and shall be deemed to have
been duly given i) on the date of service if served personally on the Party to
whom notice is to be given ii) on the day of transmission if sent via facsimile
transmission to the facsimile number given below, and telephonic confirmation or
receipt is obtained promptly after
10
completion of transmission, iii) on the day after delivery to Federal Express or
similar overnight courier or the Express Mail service maintained by the U.S.
Postal Service or iv) on the fifth day after mailing, if mailed to the Party to
whom notice is to be given, by first class mail, registered or certified,
postage prepaid and properly addressed, to the Party as follows:
If to SELLER:
xxxxxxxxxxxxx.xxx Corp.
00 Xxxx Xxxxxxxx Xxxx
Xxxxxxxxx, XX00000
Attn: Xxxxx Xxxxxx, Chief Executive Officer
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxxx X. Xxxxx, Esquire
Meritz & Xxxxx XXX
Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
If to BUYER:
PHH Vehicle Management Services, LLC
000 Xxxxxxxxxxxxx Xxxxxx
Xxxx Xxxxxx, Xxxxxxxx 00000
Attn: Sr. Vice President, Operations
Mail Code TP
Telecopy: (000) 000-0000
With a required copy to:
PHH Vehicle Management Services, LLC
000 Xxxxxxxxxxxxx Xxxxxx
Xxxx Xxxxxx, Xxxxxxxx 00000
Attn: Sr. Vice President and General Counsel
Mail Code CP
Telecopy (000) 000-0000
12.10 Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and shall in no way be construed to define, limit,
describe, explain, modify, amplify, or add to the interpretation, construction
or meaning of any provision of, or scope or intent of, this Agreement nor in any
way affect this Agreement.
11
12.11 Counterparts. This Agreement may be signed in counterparts and all signed
copies of this Agreement will together constitute one original of this
Agreement. This Agreement shall become effective when each party hereto shall
have received counterparts thereof signed by all the other parties hereto.
12.12 Conflicting Provisions. In the event any provision of Exhibit A conflicts
with the provision of this Agreement, the provisions of this Agreement shall be
controlling.
12.13 Survival of Provisions. The representations, warranties and covenants
contained herein shall survive the termination or expiration of this Agreement
to the full extent necessary to protect the Party in whose favor they run.
12.14 Waiver and Modification. No part of this Agreement or any of the Exhibits
may be amended, modified, supplemented or waived in any manner whatsoever
(including course of dealing or of performance) except by a written instrument
signed by authorized officers of the Parties. Any failure or delay by either
party in exercising any right or remedy in one or many instances will not
prohibit a Party from exercising it at a later time or from exercising any other
right or remedy.
12.15 Construction. With regard to each and every provision of this Agreement
and any and all agreements and instruments subject to the terms hereof, the
parties hereto understand and agree that same have or has been mutually
negotiated, prepared and drafted, and that if, at any time, the need arises to
construe any provision hereof, or any agreement or instrument subject hereto,
that no consideration shall be given to the issue of which party actually
prepared, drafted, requested, or negotiated any provision of this Agreement or
any agreement subject hereto.
12
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to
be duly signed as of the date first above written.
PHH Vehicle Management Services, LLC
By:_____________________________
Name:___________________________
Title:__________________________
xxxxxxxxxxxxx.xxx Corp.
By:_____________________________
Name:___________________________
Title:__________________________
13
EXHIBIT A
SERVICES
The Services shall include the following:
Company Operations
1. SELLER will not modify service delivery procedures for any client without
BUYER'S approval.
2. SELLER will continue to provide all necessary resources, including without
limitation, Assigned Personnel, office equipment, office space, and
computer systems for the COMPANY to continue the same level of customer
service to all new and existing clients until the Agreement is terminated
in accordance with Article XI.
3. BUYER shall determine whether new clients of the Company will be placed
onto the PHH Service Delivery Platform or the COMPANY Service Delivery
Platform.
4. SELLER will not modify existing contracts or new contracts for existing
clients or subsidiaries of existing clients of the Company without BUYER's
approval. All COMPANY client contracts entered into as of the Effective
Date shall be in a form approved by and negotiated by BUYER.
5. At BUYER's direction, SELLER will administer, all payments, client
xxxxxxxx, accounts receivable and financial reporting required in the
ordinary course of business to support COMPANY operations..
6. SELLER and BUYER will agree upon a transition date for each COMPANY client
(the "Client Transition Date").
o Beginning from the Client Transition Date, BUYER will manage
all new reports, repairs and subrogation activities.
o Pending subrogation and damage repair claims shall be
transferred by SELLER to BUYER as directed by BUYER; provided,
however, that all subrogation and damage repair claims shall
be transferred to BUYER no later than the termination date of
this Agreement.
1
EXHIBIT A
SERVICES
Information and Documents
In accordance with Article X, SELLER will:
1. Provide to BUYER full and complete access to all COMPANY related data and
records within any system or other repository. SELLER will also provide
assistance as requested by PHH in extracting electronic data.
Information Technology
1. Unless otherwise agreed to by both parties, SELLER will continue to
provide support and maintain all the necessary application systems as
required to maintain and service the COMPANY's existing and new clients.
2. SELLER will provide a royalty free license to BUYER for all software
necessary for COMPANY operations and to otherwise enable SELLER to provide
the Services.
Staffing
1. The Parties agree that the primary responsibility of the Assigned
Personnel, equal to the then current Allocation Percentage, is to focus on
delivering quality service for the COMPANY's business, client retention,
and the transition of COMPANY operations to the PHH Service Delivery
Platform.
2. SELLER will not materially modify the responsibilities of the Assigned
Personnel without BUYER's consent.
3. SELLER will provide a bi-weekly, written report to BUYER reflecting the
actual allocation rate (for those Assigned Personnel not fully allocated
to the Services) and workload of the Assigned Personnel.
4. SELLER will provide a bi-weekly written assessment of employee morale and
any personnel or performance issues.
5. SELLER agrees to maintain pre-determined staffing levels. If SELLER
experiences Assigned Personnel turnover, and staffing levels fall below
then required staffing levels, as determined in BUYER's sole discretion,
SELLER will hire the necessary resources to support the COMPANY's
business.
6. At the request of BUYER, SELLER will promptly remove and replace any
Assigned Personnel whom BUYER or the COMPANY deems as not performing at
the level of service required under this Agreement; to PHH's satisfaction.
7. SELLER agrees to distribute enhanced severance ("Enhanced Severance") to
certain eligible Assigned Personnel as identified in Exhibit C, whose
Allocation Percentage has reached zero and are no longer employed by
SELLER in any capacity. Enhancement Severance amounts shall be determined
by SELLER in accordance with this Section 7.. The Enhanced Severance in
the aggregate shall not exceed One Hundred and Sixty Thousand Dollars
($160,000) with the Buyer contributing no more than One Hundred and
Thirty-five Thousand ($135,000) and the Seller contributing no more than
Twenty-five Thousand Dollars ($25,000). The amount of the Enhanced
Severance distributed to each Assigned Personnel shall be at the sole
discretion of the
2
EXHIBIT A
SERVICES
SELLER. BUYER shall contribute an amount equal to 84.375% of each Enhanced
Severance paid, and SELLER shall contribute an amount equal to 15.625% of
each Enhanced Severance paid. SELLER shall invoice BUYER for BUYER's
contribution on a bi-weekly basis. Company Finance, Accounting and
Collections
1. BUYER will make all finance, accounting, collection and cash management
decisions.
2. The Parties agree to segregate the General Ledger for the COMPANY from
SELLER's other business operations for SELLER to report specifically on
the COMPANY'S performance.
3. The Parties agree that a lockbox service may be implemented in BUYER's or
COMPANY's name, if one does not already exist, with all deposits going to
a BUYER-owned account.
4. SELLER will provide the following reports and schedules to BUYER on a
mutually agreed upon schedule.
o Monthly Trial Balance
o Balance Sheet and Income Statement
o Account Reconciliation as requested
o Monthly Invoice Register
o Accounts Receivable Aging
o Access to a Detailed Ledger (monthly)
o Cash Receipts and Lockbox Registers
o Accounts Payable aging Monthly, detail and summary format
o Check Register
o Payroll Register (currently outsourced)
o Reports of new clients added and clients lost
5. SELLER will develop a limited number of basic, analytical reports as
requested by BUYER. SELLER will assist BUYER in accessing data necessary
for BUYER to develop more complex, analytical reports.
Company Network Management
1. Until SELLER and BUYER finalize a joint network management agreement,
SELLER will, before adding a new body shop or other service provider (the
"Network Provider") to the COMPANY's supplier network, contact BUYER to
determine if BUYER has an existing Network Provider that will meet the
need for the addition of a new Network Provider
2. All COMPANY contracts with new Network Providers will be negotiated and
contracted by BUYER.
3
EXHIBIT A
SERVICES
3. All new COMPANY Network Provider contracts will be retained at BUYER's
facilities. Copies may be made by and retained at SELLER's location as
needed to facilitate the Services.
Service Performance Measures
1. SELLER will provide to BUYER, on a mutually agreed upon frequency, all
performance monitoring resources including, without limitation, average
speed to answer, driver level survey results, average annualized rate for
attempted subrogation activities, subrogation recovery amounts based on
client physical damage expenses on an annualized basis, subrogation
activity log status, average time to close subrogation files, (or other
mutually agreed to metrics, performance measures and activities) used by
SELLER to monitor COMPANY's operations prior to the acquisition. SELLER
shall provide BUYER with SELLER's existing performance standards and
criteria.
4
EXHIBIT B
BILLING, FEES AND EXPENSES
The Parties agree to the following:
1. SELLER will invoice BUYER on a bi-weekly basis for the fees and
expenses which are composed of the following:
o Labor Amount: this amount covers the initial staffing level of
27.2 full time equivalents as set forth in Exhibit C.
o Benefits Fee: this fee covers the cost of benefits burdened at
SELLER's existing standard of 15%.
o Variable Operating Expense Fee: this fee covers the following
operating expenses attributable to the COMPANY. (i) telephone,
facsimile and data lines, (ii) office supplies, (iii) workers
compensation insurance premium, and (iv) office equipment
rentals.
o Management Fee: this fee is equal to 15% of the Fee Subtotal
and compensates SELLER for costs and expenses associated with
the following: (i) additional time and effort to ensure that
COMPANY remains stable, and the Assigned Personnel remain
motivated during the Term of this Agreement; (ii) additional
travel necessary to assist with the Services; (iii) personnel
hiring and training; (iv) temporary personnel; and (v)
unforeseen challenges related to the Services.
o Total Initial Bi-Weekly Fee: this fee is equal to the sum of
the Labor Amount, Benefits Fee, Variable Operating Expense Fee
and Management Fee and is based on the initial allocation of
FTEs as set forth in Exhibit C. ($ 55,152.32)
o Total Bi-Weekly Fee: this fee is calculated by multiplying the
Total Initial Bi-Weekly Fee by the FTE Percentage as set forth
in Exhibit C and modified from time to time.
o The Full Time Equivalent Percentage ("FTE Percentage")
percentage is calculated by dividing the number of full time
equivalent employees allocated to the Agreement during the
related billing period by the initial staffing level of 27.2.
2. SELLER will invoice BUYER on a monthly basis for Fixed Operating
Expenses. This amount covers the cost of rent, utilities and
insurance attributable to the COMPANY as set forth in Exhibit C. ($
14,703.59)
3. SELLER will invoice BUYER a one-time payment for other mutually
agreed upon expenses.
4. With respect to the possible partitioning of the Great Plains
accounting system from SELLER's other accounts, BUYER agrees to
incur the banking and other costs, including but not limited to
consulting fees, associated with separating the cash accounts of
SELLER and COMPANY.
5. Fees and expenses shall be prorated for any partial month.
1
EXHIBIT B
BILLING, FEES AND EXPENSES
6. BUYER agrees to pay SELLER invoices via electronic funds transfer,
or other form as electronic payment, within three (3) business days
of invoice receipt and approval by BUYER.
7. BUYER will determine whether and/or when an FTE allocation
adjustment is necessary, and the Parties shall mutually agree as to
the amount of such adjustment.
2
EXHIBIT H
PROPRIETARY SOFTWARE LICENSE AGREEMENT
PROPRIETARY SOFTWARE LICENSE AGREEMENT ("Agreement") made as of the ___ day of
___________, 2001, between xxxxxxxxxxxxx.xxx Corp., a New York corporation
("Licensor") and PHH Vehicle Management Services, LLC, a Delaware limited
liability company ("Licensee"). Seller and Buyer are hereinafter referred to
jointly as the "Parties" and individually as "Party".
WITNESSETH:
WHEREAS, Licensor and Licensee entered into a Stock Purchase Agreement,
dated as of October ____, 2001 (the "Stock Purchase"), providing for the
acquisition by Licensee, of all of the issued and outstanding shares of stock of
xxxxxxxxxxxxx.xxx FS Corp. (the "Company");
WHERAS, Licensor is the owner of the proprietary software (the "Licensed
Programs") and materials (the "Licensed Materials") as set forth and described
in Schedule I hereto;
WHEREAS, Licensee desires to obtain from Licensor the right and license to
use the Licensed Programs and the Licensed Materials in connection with the
Business (as such term is defined in the Stock Purchase Agreement); and
WHEREAS, pursuant to the Stock Purchase Agreement, Licensor agreed to
enter into this Agreement to grant to Licensee the right and license to use the
Licensed Programs and the Licensed Materials in connection with the Business.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
TERMS AND CONDITIONS
1. LICENSE. Licensor hereby grants to Licensee a non-exclusive, non-transferable
license (the "License") to use the Licensed Programs and Licensed Materials as
listed and set forth on Schedule I, subject to the terms and conditions
contained herein. The term of this license is perpetual, commencing upon
acceptance of this Agreement by Licensor ("Effective Date"). The Licensor shall
deliver to the Licensee the source code and object code for the Licensed
Programs, except as otherwise noted in Schedule I.
(a) The Licensor shall be free to assign any or all of its rights
and obligations hereunder to any Person, except as set forth
below; provided that such Person shall be bound by the terms
and provisions hereof. Except for assignments to any Affiliate
of Licensee, the Licensee shall be limited to assign any or
all of its rights and obligations hereunder only if and when
the Licensee simultaneously transfers ownership of the
Business, (through any form of sale, transfer, assignment,
merger, consolidation, etc.), to the same Person to whom it
has assigned its rights and obligations hereunder.
(b) The Licensee shall provide the Licensor written notification
prior to any assignment of any or all of its rights and
obligations hereunder.
2. USE. Licensor shall be responsible for the delivery of the Licensed
Programs(s) together with the documentation. The Licensee shall be exclusively
responsible for the supervision, management and control of its use of the
Licensed Programs(s), including without limitation; (i) assuring proper machine
configurations, audit controls and operating methods: (ii) establishing adequate
backup plans, based on alternative procedures and access to qualified
programming personnel; and (iii) implementing sufficient recovery procedures and
checkpoints to satisfy its requirements or security and accuracy of input, as
well as, system restart and recovery in the event of a malfunction.
Additionally, the Licensee shall be exclusively responsible for obtaining, at
the Licensee's sole cost and expense, the requisite licenses from third party
software suppliers ("Third Party Licenses") which software is necessary for the
proper operation of the Licensed Programs. A list of the third party software
that is required for the proper operation of the Licensed Programs is set forth
on Schedule II.
The Licensed Programs and Licensed Materials may be used only in the furtherance
of the internal operations of the Business.
The Licensee may not copy or otherwise reproduce the Licensed Programs, or any
part thereof (except such copying, strictly limited in number, as is essential
for system backup, testing, maintenance or recovery purposes). The Licensee may
reproduce the Licensed Materials solely for its own internal use provided that
all titles, trademarks, trade names, copyright notices, and other proprietary
notices of Licensor, Inc. are retained.
The Licensor may not at any time during the five-year period immediately
following the Effective Date license the Licensed Programs and Licensed
Materials to any Person that provides vehicle accident repair and management
services to self-insured corporate and government fleets.
2
3. CONFIDENTIALITY. The ideas and the expressions hereof contained in the
Licensed Programs and Licensed Materials are confidential, proprietary
information and trade secrets that the Licensee will receive in confidence.
Except as provided herein, the Licensee shall not in any manner or form
disclose, provide or otherwise make available, in whole or in part, any Licensed
Programs and/or Licensed Materials to any third parties except for Licensee's
employees and consultants who are bound by appropriate non-disclosures. The
obligations expressed within this Section 3 shall survive termination of this
Agreement.
The Parties acknowledge and agree that all Parties' information that is marked
"Confidential", except as set forth herein, that comes to be known by reason of
work under this Agreement, is confidential to each Party and will not be
disclosed to unauthorized third parties. The Parties will use the same standard
of care, and will bind their employees, agents or representatives to such
standard, to prevent disclosure of such confidential information as each uses to
protect its own confidential information and trade secrets. Information received
by either Party under this Agreement will not be considered confidential if the
information: (a) is not marked "Confidential"; (b) is known to the other Party
or is in the other Party's possession at the time of executing this Agreement;
(c) is in the public domain at the time of disclosure; (d) is independently
developed by the other Party; or (e) is disclosed to the other Party by a third
party with written approval of the first Party.
The obligations expressed within this Section 3 shall survive termination of
this Agreement.
4. WARRANTIES. Licensor warrants that (i) it may lawfully grant the License,
(ii) neither the Licensed Programs or Licensed Materials, or the use thereof
within the scope of the License, infringes a patent or copyright or is claimed
to be a trade secret of any person who has not consented to the granting of the
License, (iii) the versions of the Licensed Programs that are delivered to the
Licensee shall be the same versions that are operating the Business of the
Company on the date thereof; (iv) neither the Licensed Programs nor the Licensed
Materials contain any virus, time bomb mechanism or other software or code that
can disable or adversely affect any and all of the Licensed Programs or the
Licensed Materials or destroy any data or other software; (v) both the Licensed
Programs and the Licensed Materials are Year 2000 Compliant; (vi) the Licensed
Programs shall operate on the Licensee's computer platform with the same level
of functionality (as described in Schedule I) as they operate on the Company's
computer hardware platform located in Plainview, New York (the "Plainview
Platform"), so long as the Licensee duplicates a computer hardware platform that
is identical to the Plainview Platform. . THE FOREGOING WARRANTY IS IN LIEU OF
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR
PURPOSE. No employee or agent of Licensor is authorized to give a greater or
different warranty.
3
5. INDEMNIFICATION. Licensor, at its own expense, will defend and indemnify
against any action brought against the Licensee based on a claim that any
Licensed Programs infringed a United States patent, copyright or trademark
provided that (i) Licensor shall be notified promptly in writing by the Licensee
of any notice of such claim; (ii) The Licensor shall have the sole control of
the defense of any action on such claim and all negotiations for its settlement
or compromise; and (iii) the Licensee shall permit Licensor, at Licensor's
option and expense, either to procure for the Licensee the right to continue
using the Licensed Programs or modify the Licensed Programs so that it becomes
non-infringing. Notwithstanding the above, the Licensor shall not indemnify the
Licensee against any claims to the extent that arise due to the Licensee's
failure to obtain the necessary Third Party Licenses.
6. LIABILITY. Except as provided for in Section 5 above, the Licensor's
liability for damages to the Licensee for any cause whatsoever, and regardless
of the form of action, shall be limited to a maximum of Two Hundred Thousand
Dollars ($200,000). The Licensor shall be liable solely for direct damages
sustained by the Licensee and in no event will Licensor be liable for any lost
profits, goodwill, or other consequential, special or indirect damages suffered
by the Licensee in connection with or arising from the performance of the
Licensed Programs, even if Licensor has been advised of the possibility of such
damages, or for any claim against the Licensee by any other party.
7. MAINTENANCE PLAN. The parties hereby acknowledge that the Licensor shall have
no obligation to maintain or service the Licensed Programs licensed herein.
8. LICENSE FEES. The parties acknowledge that there shall be no fees payable by
the Licensee for the benefits received herein as consideration has been paid the
Licensor pursuant to the Stock Purchase Agreement.
9. GENERAL. The Licensee acknowledges that he has read this Agreement,
understands it and agrees to be bound by all terms and conditions hereof. All
subsequent modifications, amendments, and waivers to this Agreement must be by
written instrument, executed by authorized representatives of the parties
hereto. In the event that any provision under this Agreement shall be deemed
illegal or otherwise unenforceable by any applicable statute or rule of law,
such provision shall be omitted and the entire Agreement shall not fail on
account thereof and the remainder of the Agreement shall continue in full force
and effect. No waiver of any breach of any provision of this Agreement shall
constitute a waiver of any other breach of any other provision hereof. The
Licensor shall not be liable for delay or failure to perform its obligations
herein set forth if such delay or failure is due to any cause or condition
beyond its reasonable control. This Agreement shall be binding upon and inure to
the benefit of any assignee or successor of the Licensee, who, whether by
merger, purchase, or otherwise, acquires all or substantially all of the assets
or business of the Licensee.
4
Both parties agree that neither party shall solicit or hire the other party's
information technology employees involved directly in the relationship
established by this Agreement as an employee or as a consultant, .This provision
shall remain in effect until one (1) year has passed since the date the last
services were provided by Licensor to Licensee. Both parties recognize that
their employees are valuable resources whose loss may be damaging to their
respective businesses, and therefore, violation of this restriction shall result
in the violating party making an immediate restitution payment of one year's
total compensation that is anticipated to be paid the wrongfully employed or
retained employee or consultant. to the other, payable within 30 days of the
start date of the hired employee or consultant.
Except as set forth below, once the Licensor delivers to the Licensee copies of
the Licensed Programs, the Licensor shall have no further obligation to provide
any modifications or revisions of the Licensed Programs to the Licensee. Any
modifications made to the Licensed Programs by the Licensee shall be the owned
exclusively by the Licensee.
The Licensor agrees to provide its reasonable assistance to the Licensee while
the Licensed Programs are moved from the Plainview Platform to the Licensee's
platform.
10. NOTICES. All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given, upon receipt, if mailed by
registered or certified mail, postage prepaid, return receipt requested,
overnight delivery, or hand delivered, and sent via confirmed facsimile
transmission as follows:
(a) If to Licensor, to:
xxxxxxxxxxxxx.xxx Corp.
00 X. Xxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxxx
Chief Executive Officer
with a copy to:
Xxxxxxxx X. Xxxxx, Esquire
Meritz & Xxxxx XXX
Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
5
(b) If to Licensee, to
PHH Vehicle Management Services, LLC
000 Xxxxxxxxxxxxx Xxxxxx
Mail Code "CP"
Xxxx Xxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: General Counsel
with a copy to:
Cendant Corporation
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxx
Senior Vice President and Secretary
or to such other address as the party to whom notice is given may have
previously furnished to the other party in writing in accordance herewith.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK OTHER THAN
CONFLICT OF LAWS PRINCIPLES THEREOF DIRECTING THE APPLICATION OF ANY LAW OTHER
THAN THAT OF NEW YORK. COURTS WITHIN THE STATE OF NEW YORK (LOCATED WITHIN THE
COUNTY OF NASSAU, NEW YORK) WILL HAVE JURISDICTION OVER ALL DISPUTES BETWEEN THE
PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE AGREEMENTS,
INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES HEREBY CONSENT TO AND
AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. EACH OF THE PARTIES HERETO
WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH PARTY'S
PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (III) ANY
LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM. EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY
OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.
6
15. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements and
understandings, oral or written, between parties hereto with respect to the
subject matter hereof and hereof.
(b) Amendments. This Agreement may not be amended, modified or
supplemented except by written agreement of the parties hereto.
(c) No Waiver. Nothing contained in this Agreement shall cause the
failure of either party to insist upon strict compliance with any covenant,
obligation, condition or agreement contained herein to operate as a waiver of,
or estoppel with respect to, any such covenant, obligation, condition or
agreement by the party entitled to the benefit thereof.
(c) Headings. 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.
(d) Defined Terms. Capitalized terms used and not otherwise defined
in this Agreement shall have the meaning set forth for such terms in the Stock
Purchase Agreement.
(f) Counterparts. This Agreement may be executed in counterparts
each of which shall be deemed to constitute an original and constitute one and
the same instrument.
(g) Severability. If any provisions hereof shall be held invalid or
unenforceable by any court of competent jurisdiction or as a result of future
legislative action, such holding or action shall be strictly construed and shall
not affect the validity or effect of any other provision hereof; provided,
however, that the parties shall use reasonable efforts, including, but not
limited to, the amendment of this Agreement, to ensure that this Agreement shall
reflect as closely as practicable the intent of the parties hereto.
(h) Specific Performance. Each of the parties hereto acknowledges
and agrees that the other party hereto would be irreparably damaged in the event
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. Accordingly, each of the
parties hereto agrees that they each shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions thereof in any
action instituted in any court of the United States or any state or jurisdiction
having subject matter jurisdiction, in addition to any other remedy to
7
which such party may be entitled, at law or in equity.
(i) Independent Contractors. Nothing herein contained shall be
construed to place the parties in the relationship of partners or joint
venturers, and neither party shall have any power to obligate or bind the other
in any manner whatsoever, except as otherwise provided for herein.
(j) Schedules. Each of the Schedules attached hereto is fully
incorporated herein and made part hereof.
IN WITNESS WHEREOF, the duly authorized officers of the parties
hereto have executed this Agreement as of the day and year first written above.
Licensor: xxxxxxxxxxxxx.xxx Corp.
By: ____________________________________
Name:
Title:
Licensee: PHH VEHICLE MANAGEMENT SERVICES, LLC
By: _____________________________________
Name:
Title:
8
Schedule I
[To be supplied]
9
