FORMATION AGREEMENT
AMONG
BERTELSMANN AG, XXX.XX ONLINE, INC.,
XXXXXX & XXXXX, INC.,
xxxxxxxxxxxxxx.xxx inc.,
B&X.xxx Holding Corp. and B&X.xxx Member Corp
Effective As of 11:59 PM, October 31, 1998
FORMATION AGREEMENT
This FORMATION AGREEMENT is dated as of November 12, 1998 (the "Closing
Date"), but effective as of 11:59 PM on October 31, 1998 (the "Effective Date"),
by and among Bertelsmann AG, an Aktiengesellschaft organized and existing under
the laws of Germany, with offices located at Xxxx-Xxxxxxxxxxx-Xxxxxxx 000, 00000
Xxxxxxxxx, Xxxxxxx ("BAG"), XXX.XX Online, Inc., a Delaware corporation, with
offices located at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("USO"), Xxxxxx &
Xxxxx, Inc., a Delaware corporation, with offices located at 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 ("BN"), xxxxxxxxxxxxxx.xxx inc., a Delaware
corporation, with offices located at 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
("Transferor"), B&X.xxx Member Corp., a Delaware corporation, with offices
located at 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("B&X.xxx Member") and
B&X.xxx Holding Corp., a Delaware corporation, with offices located at 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("B&X.xxx Holding").
W I T N E S S E T H:
WHEREAS, BN is the sole shareholder of each of the Transferor and
B&X.xxx Holding, and Transferor is the sole shareholder of B&X.xxx Member;
WHEREAS, the Transferor has, as of October 31, 1998: (i) formed
xxxxxxxxxxxxxx.xxx llc, a Delaware limited liability company (the "Company");
(ii) contributed all of its assets (except its interests in NuvoMedia, Inc. and
B&X.xxx Member) and liabilities to the Company in exchange for a one hundred
percent (100%) Membership Interest (as hereinafter defined); and (iii)
transferred a one percent (1%) Membership Interest to B&X.xxx Member;
WHEREAS, USO intends, as of the Closing Date, to pay the Transferor
Seventy-Five Million Dollars ($75 million) for a 21.42857% Membership Interest;
WHEREAS, USO intends, as of the Closing Date, to make a capital
contribution to the Company in exchange for an additional 28.57143% Membership
Interest, which, together with the 21.42857% Membership Interest referred to
above, would give USO an aggregate fifty percent (50%) Membership Interest;
WHEREAS, immediately subsequent to the payments described above, but
immediately prior to the execution of the Limited Liability Company Agreement
(as hereinafter defined), each of Transferor and B&X.xxx Member Corp. intend to
assign all of their Membership Interests (which together will aggregate a fifty
percent (50%) Membership Interest) to B&X.xxx Holding;
WHEREAS, as of the Closing Date, immediately subsequent to the
assignment referred to above, BN, B&X.xxx Holding, BAG and USO intend to enter
into the Limited Liability Company Agreement, in order to set forth the rights
and obligations of the members of the Company; and
WHEREAS, the parties hereto desire to set forth, inter alia, the terms
and conditions of their agreements and understanding concerning their respective
undertakings to effectuate the payments and contributions to be made by USO in
exchange for its fifty percent (50%) Membership Interest and the entering into
of the Limited Liability Company Agreement.
NOW, THEREFORE, in consideration of the premises and of the
respective representations, warranties, covenants, agreements and conditions
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall, for the purposes of this Agreement, have the
following meanings (terms defined in the singular or the plural include the
plural or the singular, as the case may be):
Section 1.1 "Affiliate" shall mean, as to any Person, any other Person
that, directly or indirectly, controls, is under common control with, or is
controlled by, that Person. For purposes of this definition, "control"
(including, with its correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. In the case of BOL,
the term "Affiliates" shall include all Persons in which BOL directly or
indirectly owns an equity interest to the extent such Person operates under the
name BOL (or a derivative thereof) provided that no Restricted Transferee (as
defined in the Limited Liability Company Agreement) owns an interest therein.
Section 1.2 "BN Contribution Schedule" shall mean the schedule of
assets and liabilities that Transferor will contribute or cause to be
contributed to the Company in the form annexed as Schedule 1.2 to the Disclosure
Letter which shall describe specifically the contracts, software, leases and
liabilities being contributed, as well as other assets and liabilities of
Transferor in general terms, as included in the Financial Statements (as
modified through the Closing Date).
Section 1.3 "BOL" shall mean XXX.Xxxxxx, Inc., a corporation organized
under the laws of Delaware.
Section 1.4 "Closing" shall mean the closing of the transactions
contemplated by this Agreement.
Section 1.5 "Closing Date" shall have the meaning assigned to such term
in the first paragraph of this Agreement.
Section 1.6 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
Section 1.7 "Code Affiliate" shall mean any Person which could be
treated as a single employer along with the Transferor or the Company under
Section 414(b) or (c) of the Code.
Section 1.8 "Disclosure Letter" shall mean that Disclosure Letter dated
the date hereof prepared by Transferor to which the Schedules referred to herein
are attached.
Section 1.9 "Employee Plan" shall have the meaning assigned to such
term in Section 4.1(q)(i) of this Agreement.
Section 1.10 "Encumbrance" shall mean any mortgage, pledge, security
interest, lien, restriction on use or transfer, other than those
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imposed by law, voting agreement, adverse claim or encumbrance or charge of any
kind (including any agreement to give any of the foregoing), any conditional
sale or other title retention agreement, any lease in the nature thereof, and
the filing of, or any agreement to give, any financing statement under the
Uniform Commercial Code or similar law of any jurisdiction.
Section 1.11 "Environment" shall mean soil, land surface or subsurface
strata, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins, and wetlands), groundwaters, drinking water supply,
stream sediments, ambient air (including indoor air), plant and animal life, and
any other environmental medium or natural resource.
Section 1.12 "Environmental, Health, and Safety Liabilities" shall mean
any cost, damages, expense, liability, obligation, or other responsibility
arising from or under Environmental Law or Occupational Safety and Health Law
and consisting of or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for any
natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
Section 1.13 "Environmental Law" shall mean any legal requirement that
requires or relates to:
(a) advising appropriate authorities, employees, and the public
of intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction, that
could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged,
and used so that they do not present unreasonable risks to human
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health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
Section 1.14 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
Section 1.15 "Facilities" shall mean any real property, leaseholds, or
other interests currently or formerly owned or operated by the Transferor or the
Company and any buildings, plants, structures, or equipment (including motor
vehicles, tank cars, and rolling stock) currently or formerly owned or operated
by the Transferor or the Company.
Section 1.16 "Fulfillment Agreements" shall mean each of the
Fulfillment Agreements between the Company and BOL (or its Affiliates),
regarding the fulfillment by the Company and BOL (or its Affiliates) of certain
customer product orders, each of which shall be negotiated in good faith after
the Closing Date.
Section 1.17 "GAAP" shall mean United States generally accepted
accounting principles as in effect from time to time, consistently applied.
Section 1.18 "Governmental Body" shall mean any domestic or foreign
national, state or municipal or other local government or multinational body
(including, but not limited to, the European Union), any subdivision, agency,
commission or authority thereof, or any quasi-governmental or private body
exercising any regulatory authority thereunder and any corporation, partnership
or other entity directly or indirectly owned by or subject to the control of any
of the foregoing.
Section 1.19 "Hazardous Materials" shall mean any waste or other
substance that is listed, defined, designated, or classified as, or otherwise
determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including any admixture
or solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
Section 1.20 "Limited Liability Company Agreement" shall mean the
Amended and Restated Limited Liability Company Agreement by and between B&X.xxx
Holding, USO, BAG and BN, to be entered into at the Closing as the same may be
amended or modified from time to time in accordance with the terms thereof.
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Section 1.21 "Members" shall mean B&X.xxx Holding, USO and all other
Persons who become members of the Company in accordance with the terms of the
Limited Liability Company Agreement, and the term "Member" shall mean any of
them.
Section 1.22 "Membership Interest" shall mean a Member's entire
interest in the Company, including, but not limited to, (i) the Percentage
Interest now or hereafter owned by it; (ii) its share in any Net Income, Net
Loss and any distributions of the Company; and (iii) its right to participate in
the management of the Company or any other decision of the Members pursuant to
the Limited Liability Company Agreement.
Section 1.23 "Name License Agreements" shall mean each of the
agreements between the Company and BOL and between the Company and BN College
(as defined in the Limited Liability Company Agreement) relating to the right to
use the trade names, trademarks and domain names associated with BOL and "Xxxxxx
and Xxxxx," respectively.
Section 1.24 "Net Profits" and "Net Losses" shall mean the income and
loss of the Company as determined in accordance with the accounting methods
followed by the Company for Federal income tax purposes including income exempt
from tax and described in Code Section 705(a)(1)(B), treating as deductions
items of expenditure described in, or under Treasury Regulations deemed
described in, Code Section 705(a)(2)(B) and treating as an item of gain (or
loss) the excess (deficit), if any, of the fair market value of distributed
property over (under) its book value. Depreciation, depletion, amortization,
income and gain (or loss) with respect to Company assets shall be computed with
reference to their book value rather than to their adjusted basis in the
Company.
Section 1.25 "Occupational Safety and Health Law" shall mean any legal
requirement designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by industry
associations and insurance companies), designed to provide safe and healthful
working conditions.
Section 1.26 "Percentage Interest" shall mean a Member's aggregate
economic percentage interest in the Company as set forth on Schedule I to the
Limited Liability Company Agreement as each such percentage may be adjusted from
time to time in accordance with the Limited Liability Company Agreement.
Section 1.27 "Permitted Encumbrances" shall mean:
(a) such matters as are set forth in Schedule 1.27 of the
Disclosure Letter; and
(b) (i) Encumbrances reflected in the financial statements of
the Company which have been delivered to USO pursuant to this Agreement
(including, but not limited to, purchase money liens which are not overdue as of
a particular date or which are being contested in good faith), (ii) Encumbrances
arising out of contracts entered into in the ordinary course of the Business (as
defined in the Limited Liability Company Agreement), (iii) mechanics',
materialmen's or similar inchoate liens relating to liabilities not yet due and
payable and (iv) liens for current taxes not yet delinquent, to the extent the
validity thereof is being contested in good faith by
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appropriate proceedings, which proceedings have the effect of preventing
foreclosure or enforcement of such liens and where adequate reserves are
established and maintained in accordance with GAAP.
Section 1.28 "Person" shall mean an individual, sole proprietorship,
corporation, partnership, limited liability company, joint venture, trust,
unincorporated organization, mutual company, joint stock company, estate, union,
employee organization, bank, trust company, land trust, business trust or other
organization, whether or not a legal entity, or a Governmental Body.
Section 1.29 "Related Person" shall mean with respect to a particular
individual:
(a) each other member of such individual's family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's family;
(c) any Person in which such individual or members of such
individual's family hold (individually or in the aggregate) an interest equal to
or in excess of twenty percent (20%); and
(d) any Person with respect to which such individual or one or
more members of such individual's family serves as a manager, director, officer,
partner, executor or trustee (or in a similar capacity).
Section 1.30 "Release" shall mean any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata.
Section 1.31 "Software Licenses" shall mean the Software License
between the Company and BOL relating to the exploitation of software owned by
the Company and the Software License between the Company and BOL relating to the
exploitation of software owned by BOL.
Section 1.32 "Taxes" shall mean any federal, state, local or foreign
income, receipts, sales, franchise, ad valorem, profits, license, lease, use,
payroll, withholding, employment, property, excise, occupation, customs, duties
or other tax, fee or assessment of any kind whatever, including penalties
thereon.
Section 1.33 "Tax Return" shall mean any return (including any
information return), report, statement, schedule, notice, form, or other
document or information filed with or submitted to, or required to be filed with
or submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any legal
requirement relating to any Tax.
Section 1.34 "Threat of Release" shall mean a substantial likelihood of
a Release that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
Section 1.35 "Transfer" shall mean any sale, assignment, conveyance,
transfer, donation or any other means to dispose of, or pledge,
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hypothecate or otherwise encumber in any manner whatsoever, or permit or suffer
any Encumbrance of any interest in the Company (whether profits, management or
Percentage Interest).
ARTICLE II
FORMATION AND CONTRIBUTIONS
Section 2.1 Transferor Contribution. As of the Effective Date,
Transferor has: (i) formed the Company; (ii) contributed to the Company all of
Transferor's assets (except for its interests in NuvoMedia, Inc. and B&X.xxx
Member) and liabilities in exchange for a one hundred percent (100%) Membership
Interest; and (iii) transferred a one percent (1%) Membership Interest to
B&X.xxx Member. The Company shall have assumed all of the liabilities of
Transferor, subject to and consistent with the terms and conditions of this
Agreement.
Section 2.2 USO Payment. On the Closing Date, USO agrees to pay
Transferor (or its designee), in immediately available funds by wire transfer to
an account designated by Transferor, Seventy-Five Million Dollars ($75 million)
for a 21.42857% Membership Interest.
Section 2.3 Additional USO Payment to Transferor. Within twenty (20)
days after receipt of notice from Transferor certifying the occurrence of the
sale of stock to the public, on a nationally recognized stock exchange, pursuant
to an initial public stock offering in a corporation which owns at least twenty
percent (20%) (or such lesser percentage to which the parties hereto mutually
agree) of the Membership Interest (or any other entity formed for purposes of
taking the Business of the Company public), USO shall pay to BN the Additional
Sum (as hereinafter defined) provided that such amount shall be payable only if
the value of the Membership Interest owned beneficially by USO (as of and after
giving effect to such offering) based on the value ascribed to the Company in
such offering (on a fully diluted basis taking into consideration, inter alia,
such stock offering) (the "Value") is in excess of the total investment of USO
(as of the date of the consummation of the public offering) in the Company (i.e.
$225 million plus all capital contributions, if any, made by USO pursuant to
Section 5.3 of the Limited Liability Company Agreement) less all capital
returned to USO as of or prior to such time, including capital returned out of
the proceeds of the initial public offering (the "Investment"). The term
"Additional Sum" shall mean the lesser of: (i) Twenty-Five Million Dollars ($25
million); or (ii) the amount of the Value less the Investment. The obligation of
USO to make payment under this Section 2.3 shall expire if an initial public
stock offering is not consummated prior to December 31, 2001 and USO shall not
thereafter have any obligation to make payment by reason of this Section unless
notice is given by Transferor (or its Affiliate), in accordance with the
foregoing, prior to such date.
Section 2.4 USO Contribution.
(a) As of the Closing Date, USO agrees to contribute (or shall
be deemed to have contributed) to the Company, in exchange for an additional
28.57143% Membership Interest (which, together with the 21.42857% Membership
Interest described in Section 2.2, will give USO an aggregate fifty percent
(50%) Membership Interest), One Hundred Fifty Million Dollars ($150 million) in
cash, in immediately available funds, by wire transfer to accounts designated by
the Company as set forth in Section 5.1(b) of the
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Limited Liability Company Agreement.
(b) Subject to the terms and conditions set forth in this
Agreement, USO shall make contributions to the Company as set forth in Section
5.3 of the Limited Liability Company Agreement in accordance with the terms and
conditions of the Limited Liability Company Agreement.
Section 2.5 Transferor Assignment. Immediately subsequent to the USO
payments described in Sections 2.2 and 2.4, but immediately prior to the
execution of the Limited Liability Company Agreement, each of Transferor and
B&X.xxx Member shall assign all of their Membership Interests (which together
shall aggregate a fifty percent (50%) Membership Interest) to B&X.xxx Holding.
Section 2.6 Closing Obligations. At the Closing:
(a) Transferor shall deliver or cause to be delivered to USO:
(i) evidence of the formation and good standing of the
Company;
(ii) a certificate representing fifty percent (50%) of
the Membership Interest, free and clear of Encumbrances, duly issued in the name
of USO;
(iii) the Limited Liability Company Agreement, executed
by Transferor; and
(iv) each of the Name License Agreement, Software
Licenses, Amended and Restated Services Agreement with BN, Amended and Restated
Services Agreement with Marboro, Amended and Restated Database and Software
License Agreement, Contribution, Assignment and Assumption Agreement, and Supply
Agreement to which BN (or any Affiliate) is a party, duly executed by BN (or its
Affiliate which is a party thereto) and the Company.
(b) USO shall deliver or cause to be delivered to Transferor:
(i) the payment described in Section 2.2;
(ii) the capital contribution described in Section
2.4(a);
(iii) the Limited Liability Company Agreement, executed
by USO; and
(iv) each of the Name License Agreement and Software
Licenses to which USO (or any Affiliate) is a party, duly executed by USO (or
its Affiliates) and the Company.
ARTICLE III
CLOSING
Section 3.1 Closing. The Closing of the transactions contemplated by
this Agreement relating to the transfer of Membership Interests to USO shall
take place on November 12, 1998 ("Closing Date"), at 1290 Avenue of the
Americas, 31st Floor, New York, New York, or at such other
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time, date and place as the parties hereto may agree.
Section 3.2 Deliveries. At the Closing, each of USO and Transferor
shall make (or cause to be made) the deliveries described in Section 2.6.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Transferor. Transferor
represents and warrants to USO that, as of the Effective Date and the Closing
Date, with the exception of actions taken to consummate the transactions
described in or contemplated by this Agreement, each of the following statements
are true and correct:
(a) Organization and Existence. BN and the Transferor are each
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each of BN and the Transferor has full corporate power and
authority to own and lease the properties and assets it now owns and leases and
to carry on its business as and where such properties and assets are now owned
or leased and such business is now conducted. Each of BN and the Transferor is
in good standing and duly qualified to conduct its business as a foreign
corporation in each of the jurisdictions in which the ownership or leasing of
its properties or assets or the conduct of its business requires such
qualification, except where any failure to be so qualified would not have a
material adverse effect.
(b) Authority and Approval. Transferor has the requisite
corporate power and authority to enter into this Agreement and each of BN and
Transferor are authorized to perform their respective obligations hereunder.
Transferor has, or on the Closing Date will have, the requisite corporate power
and authority to enter into the Limited Liability Company Agreement and to
perform its obligations thereunder. This Agreement is a valid and binding
obligation of Transferor, enforceable against Transferor in accordance with its
terms, subject to (a) applicable bankruptcy, insolvency or other similar laws
relating to creditors' rights generally and (b) general principles of equity.
When executed, the Limited Liability Company Agreement will be a valid and
binding obligation of B&X.xxx Holding enforceable against Transferor in
accordance with its terms, subject to (a) applicable bankruptcy, insolvency or
other similar laws relating to creditors' rights generally and (b) general
principles of equity. No other act, approval or proceedings on the part of BN
is, or will be, required to authorize the execution and delivery of this
Agreement and the Limited Liability Company Agreement by B&X.xxx Holding or the
consummation of the transactions contemplated by each such agreement.
(c) No Conflict. This Agreement and the Limited Liability
Company Agreement and the execution and delivery of each such agreement by
Transferor and B&X.xxx Holding, respectively do not, and the fulfillment and
compliance with the terms and conditions of each such agreement and the
consummation of the transactions contemplated by each such agreement will not:
(i) conflict with, result in a breach of, constitute a
default under, or require the consent of any Person under, any of the terms,
conditions or provisions of the articles of incorporation or by-laws of BN or
Transferor or B&X.xxx Holding or the constituent documents of the Company;
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(ii) violate any provision of, or require any consent,
authorization or approval under, any law or administrative regulation or any
judicial, administrative or arbitration order, award, judgment, writ, injunction
or decree applicable to BN, B&X.xxx Holding, the Company or Transferor;
(iii) conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or both), or
accelerate or permit the acceleration of the performance required by, or require
any consent, authorization or approval under, the termination of, or the right
to terminate, any material indenture, mortgage, lease, license, franchise,
permit, approval, agreement or instrument to which BN, B&X.xxx Holding, the
Company or Transferor is a party or by which it is bound or to which its assets
or properties are subject; or
(iv) result in the creation or imposition of any
Encumbrance upon the assets or property of BN, B&X.xxx Holding, the Company or
Transferor under any such material indenture, mortgage, lease, license,
franchise, permit, approval, agreement or instrument.
Neither BN, the Company nor Transferor is subject to any order, judgment, decree
or award of any court or other judicial, administrative or regulatory body or
arbitrator having prospective effect on the assets or the business of BN, the
Company or Transferor.
(d) Financial Statement.
(i) BN has delivered to USO true, complete and correct
copies of the: (i) audited balance sheets as of January 31, 1998 of the
Transferor; (ii) audited statements of operations and statements of cash flows
of Transferor for the year ended January 31, 1998; (iii) unaudited balance sheet
of Transferor as of August 1, 1998, and (iv) unaudited statements of operations
for the six (6) month period ended August 1, 1998 (collectively, the "Financial
Statements").
(ii) The Financial Statements have been prepared in
accordance with GAAP, and present fairly the financial condition of Transferor
as of such dates and the results of its operations and changes in cash flow for
such periods.
(e) No Undisclosed Liabilities. Except for: (i) liabilities
which are reflected or reserved against in the Financial Statements, (ii) normal
and usual current commercial liabilities incurred in the ordinary course of
business, or (iii) as set forth in Schedule 4.1(e) of the Disclosure Letter, the
properties, assets or liabilities listed in the BN Contribution Schedule which
will be transferred to the Company are not subject to any material liabilities
or obligations of any nature, whether absolute, accrued, contingent or otherwise
and whether due or to become due.
(f) Litigation. Schedule 4.1(f) of the Disclosure Letter
contains a complete and accurate list and description of all material claims,
demands, suits, actions, proceedings, settlements, awards and judgments upon or
against the Company, B&X.xxx Holding or the Transferor relating to any of the
properties, assets or liabilities listed in the BN Contribution Schedule. Except
as set forth in Schedule 4.1(f) of the Disclosure Letter and to the extent
relating to the assets set forth in the BN Contribution Schedule:
(i) neither the Company, B&X.xxx Holding nor the
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Transferor is charged with a violation of, or to its knowledge threatened with a
charge of a violation of, any provision of any foreign or United States federal,
state or local law or regulation; and
(ii) neither the Company, B&X.xxx Holding nor the
Transferor is operating its business under or subject to, or in default with
respect to, any order, writ, injunction, judgment or decree to which the
Company, Transferor or its predecessors is a party or by which it or its assets
or property is bound, issued by any foreign or United States court or federal,
state, municipal or governmental department, commission, board, agency or
instrumentality.
(g) Capitalization. BN owns all of the issued and outstanding
shares of stock of Transferor. Transferor and B&X.xxx Member own (or will own as
of the Effective Date) an interest equal to one hundred percent (100%) of all
Membership Interests, free and clear of all Encumbrances. No legend or other
reference to any purported Encumbrance appears upon any certificate representing
a Membership Interest, except as required by the Limited Liability Company
Agreement. All of the Membership Interests have been duly authorized and validly
issued and are fully paid and nonassessable. Other than the Limited Liability
Company Agreement, there are no contracts relating to the issuance, sale, or
transfer of any interest in the Company. None of the Membership Interests was
issued in violation of any Legal requirement. The Company does not own, or have
any contract to acquire, any equity securities or other securities of any Person
or any direct or indirect equity or ownership interest in any other Person. Upon
consummation of the transactions contemplated in this Agreement, USO will own a
Membership Interest (free and clear of all Encumbrances) equal to fifty percent
(50%) of the aggregate Membership Interests.
(h) Title to Properties; Encumbrances.
(i) As of the Closing Date the Company will have good and
valid title to all material assets reflected on the Financial Statement or
thereafter acquired, except those sold or otherwise disposed of since the date
of the Financial Statement in the ordinary course of business consistent with
past practice and not in violation of this Agreement, in each case free and
clear of all Encumbrances, except Permitted Encumbrances.
(ii) Schedule 4.1(h)of the Disclosure Letter sets forth a
complete list of all real property and interests in real property leased by the
Company (the "Leased Property"). The Company has good and valid title to the
leasehold estates in all the Leased Property free and clear of all Encumbrances
except;
A. leases, subleases and similar agreements set
forth in Schedule 4.1(h) of the Disclosure
Letter;
B. Permitted Encumbrances;
C. easements, covenants, rights-of-way and other
similar restrictions of record;
D. any conditions that may be shown by a current,
accurate survey or physical inspection of any
Leased Property made prior to Closing; and
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E. zoning, building and other similar
restrictions;
F. Encumbrances, easements, covenants,
rights-of-way and other similar restrictions
that have been placed by any developer,
landlord or other third party on property over
which the Transferor or the Company has
easement rights or on any Leased Property and
subordination or similar agreements relating
thereto; and
G. unrecorded easements, covenants, rights-of-way
and other similar restrictions, none of which
items set forth in this clause (iv),
individually or in the aggregate, materially
impair the continued use and operation of the
property to which they relate in the business
of the Transferor or the Company as presently
conducted.
Neither the Transferor nor the Company owns any real estate.
(i) Condition and Sufficiency of Assets. Except as set forth in
Schedule 4.1(i)of the Disclosure Letter, to the Company's knowledge, the
buildings, plants, structures, and equipment intended to be contributed to the
Company are structurally sound, are in good operating condition and repair, and
are in compliance, in all material respects, with applicable legal requirements,
are adequate for the uses to which they are being put, and none of such
buildings, plants, structures, or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost.
(j) Accounts Receivable. Except as set forth in Schedule 4.1(j)
of the Disclosure Letter, all the accounts receivable that are reflected on the
Financial Statement or on the accounting records of the Company as of the
Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. There is no contest,
claim or right of set-off, other than returns in the ordinary course of
business, under any contract with any obligor of an Accounts Receivable relating
to the amount or validity of such Accounts Receivable.
(k) Inventory. All the inventory contributed or to be
contributed to the Company, whether or not reflected in the Financial Statement,
consists of a quality and quantity usable and salable in the ordinary course of
business, except for obsolete items and items of below- standard quality, all of
which shall have been written off or written down to net realizable value in the
Financial Statement or on the Company's accounting records as of the Closing
Date, as the case may be.
(l) Taxes. Except as otherwise disclosed in Schedule 4.1(l) of
the Disclosure Letter:
(i) each of the Transferor and the Company have filed
when due all material Tax Returns required by applicable law to be filed with
respect to the Transferor and the Company and all Taxes shown to be due on such
Tax Returns have been paid;
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(ii) all Taxes relating to periods ending on or before
the Closing Date owed by the Transferor or the Company, if required to have been
paid, have been paid (except for Taxes which are being contested in good faith);
(iii) any liability of the Transferor or the Company for
Taxes not yet due and payable, or which are being contested in good faith, has
been provided for on the Financial Statement in accordance with generally
accepted accounting principles; and
(iv) there are no Tax Encumbrances with respect to
Transferor that may affect the Company.
(m) No Material Adverse Change. Since the date of the Financial
Statement, there has not been any material adverse change in the business,
operations, properties, assets, or condition of the Transferor or the Company.
(n) Absence of Certain Changes and Events. Except as set forth
in Schedule 4.1(n) of the Disclosure Letter or as a result of the transactions
contemplated herein, since August 1, 1998 each of the Transferor and the Company
have conducted business only in the ordinary course of business and there has
not been any:
(i) change in the Company's Membership Interests; grant
of any option or right to purchase Membership Interests; issuance of any
security convertible into such Membership Interests; purchase, redemption,
retirement, or other acquisition by the Company of any Membership Interests; or
declaration or payment of any dividend or other distribution or payment in
respect of Membership Interests;
(ii) amendment to the organizational documents of the
Company, except as contemplated in the Limited Liability Company Agreement;
(iii) (A) increase, decrease or modification of, nor any
commitment to increase, decrease or modify, the rate or terms of compensation
(including base salary or bonus) payable or to become payable to any officer or
director of the Transferor or the Company, or (B) adoption, entry into,
modification or amendment of, nor any commitment to adopt, enter into, modify or
amend the terms of any Employee Plan, except in connection with the transactions
contemplated by this Agreement;
(iv) damage to or destruction or loss of any asset or
property of the Transferor or the Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business, or
financial condition of the Transferor or the Company, taken as a whole;
(v) entry into, termination of, receipt of notice of
termination of, or cancellation or waiver of any claims or rights with respect
to, any material contract to which Transferor or the Company are or were
parties;
(vi) sale (other than sales of inventory in the ordinary
course of business), lease, or other disposition of any material asset or
property of the Transferor or the Company, distribution of any dividend (whether
in kind or in cash), or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of the Transferor or
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the Company;
(vii) material change in the accounting methods used by
the Transferor or Company; or
(viii) agreement in writing by the Transferor or the
Company to do any of the foregoing.
(o) Insurance. The Transferor maintains, in full force and
effect, and the Company will acquire, by assignment from Transferor, insurance
with responsible and reputable insurance companies or associations in amounts,
on such terms and covering such risks, including fire and other risks insured
against by extended coverage, as is reasonably deemed necessary by BN and
Transferor. Transferor has maintained, in full force and effect, and the Company
will acquire from Transferor by assignment, public liability insurance,
insurance against claims for personal injury or death or property damage
occurring in connection with the activities of the Transferor and the Company
and any properties owned, occupied, or controlled by Transferor or the Company,
except for failure to obtain or maintain as would not have a material adverse
effect on the Transferor or the Company.
(p) Environmental Matters. Except as set forth in Schedule
4.1(p) of the Disclosure Letter:
(i) The Company, to its knowledge, is not in violation of
any material Environmental Law where such violation will have a material adverse
effect on the Company and neither BN, Transferor nor the Company has received
any written communication regarding an alleged violation of any Environmental
Law from any Person or Governmental Body or written notice of any actual or
threatened obligation to undertake or bear the cost of any Environmental, Health
and Safety Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal or mixed) in which Transferor or
the Company has or had an interest. Neither BN, the Transferor or the Company
has received any written notice of potential responsibility or letter of inquiry
from any private party or governmental agency for any Facility of Transferor or
the Company or for any off-site facility under CERCLA or any state or local
counterpart thereof.
(ii) There are no pending or, to the knowledge of BN,
Transferor or the Company, threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any material Environmental, Health,
and Safety Liabilities or arising under or pursuant to any material
Environmental Law, with respect to or affecting any of the Facilities or any
other properties and assets (whether real, personal, or mixed) in which
Transferor or the Company has or had an interest.
(iii) No Hazardous Materials have been used, stored,
manufactured or processed at the Facility except as necessary to the conduct of
its business and in compliance with all material Environmental Laws applicable
to the use, storage, manufacture or processing thereof, or except as will not
have a material adverse effect on the Company. Transferor has obtained (and will
assign to the Company or obtain in the name of the Company) and is in compliance
with all material environmental permits and other material authorizations
required for its operations at the Facilities by any applicable material
Environmental Laws.
(iv) BN, Transferor and the Company do not, to their
knowledge, have any material Environmental, Health, and Safety Liabilities
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with respect to the Facilities or with respect to any other properties and
assets (whether real, personal, or mixed) in which Transferor or the Company (or
any predecessor), has or had an interest, or any such other property or assets.
(v) Except such as were made in full compliance with all
applicable Environmental Laws or except as would not cause a material adverse
effect to the Company, there has been no disposal, Release or, Threat of
Release, of any Hazardous Materials at or from the Facilities or at any other
locations where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by the Facilities,
or from or by any other properties and assets (whether real, personal, or mixed)
in which BN, Transferor or the Company has or had an interest.
(vi) Transferor has delivered to USO true and complete
copies and results of any material reports, studies, analyses, tests or
monitoring possessed or initiated by Transferor or the Company pertaining to the
Facilities and/or concerning compliance by the Transferor and the Company, with
any material Environmental Laws.
(q) Employee Benefits.
(i) Schedule 4.1(q)(i) of the Disclosure Letter sets
forth a list of each formal or informal, oral or written plan, fund, program,
agreement, payroll practice or other arrangement which the Transferor or Company
sponsors, contributes to, participates in, or has or may have any liability or
obligation (including any terminated plan) with respect to current or former
employees or independent contractors of the Transferor or Company or their
respective dependents, and (A) which is an "employee benefit plan" as defined in
Section 3(3) of ERISA, (B) whether or not an "employee benefit plan" as so
defined, which provides any pension, profit sharing, severance, termination,
equity, savings, bonus, change in control, incentive, holiday, vacation,
perquisite, fringe or similar benefit to current or former employees or
independent contractors of the Transferor or Company or their respective
dependents, or (C) which is an employment, retainer, or consulting agreement to
which the Transferor or Company is a party (each of the foregoing in (A), (B) or
(C) an "Employee Plan," and collectively, the "Employee Plans"). Transferor has
delivered or made available to USO true and complete copies of the plan
documents, written instruments and/or agreements governing such Employee Plans.
(ii) A favorable determination letter from the Internal
Revenue Service has been issued with respect to each Employee Plan intended to
qualify under Section 401(a) of the Code, and nothing has occurred since the
date of such determination letter which could result in disqualification of such
Employee Plan. As of the Closing Date, neither the Transferor nor the Company
has any liability or obligations with respect to any plan maintained by a Code
Affiliate which is subject to Title IV of ERISA, other than with respect to the
BN Pension Plan (as defined in Section 5.9 (b)(ii)(A)). The Transferor has
furnished to USO the most recent actuarial valuation with respect to the BN
Pension Plan.
(iii) Each Employee Plan has been maintained in material
compliance with its terms and all provisions of applicable law, and no
prohibited transaction within the meaning of Section 406 of ERISA or Section
4975(c) of the Code has occurred with respect to any Employee Plan as a result
of any act or omission of Transferor or a Code Affiliate. BN has paid
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all contributions required to be paid with respect to the Transferor's employees
under all Employee Plans as and when due.
(iv) Neither the Transferor nor any Code Affiliate has
incurred any withdrawal liability under Title IV of ERISA with respect to any
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA, nor shall the
Transferor or any Code Affiliate incur such withdrawal liability as a result of
the transactions contemplated hereby.
(v) Except as required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, or any similar state statutes, no
Employee Plan provides medical, life insurance or other welfare benefits to or
with respect to former employees or independent contractors of the Transferor.
Except as set forth on Schedule 4.1(q)(v) of the Disclosure Letter, the
transactions contemplated hereby shall not trigger, increase or accelerate any
payment or benefit under any Employee Plan, whether or not such payment or
benefit would constitute an "excess parachute payment" as defined in Section
280G of the Code. No severance or termination benefits shall be payable to any
employee or independent contractor of the Transferor or Company as a result of
or in connection with the transactions contemplated hereby.
(vi) Schedule 4.1(q)(vi) of the Disclosure Letter sets
forth a list of each employee of the Transferor or the Company who participates
in the BN Deferred Comp Plan (as defined in Section 5.9(b)(iii)(A)) as of the
Closing Date and the value of the Deferral Account (as defined thereunder) of
each such participant as of the date set forth on Schedule 4.1(q)(vi) of the
Disclosure Letter. None of the Employee Plans includes a "flexible spending
account" within the meaning of Proposed Treasury Regulation Section 1.125-2,
Q&A-7(c). With regard to any voluntary employees' beneficiary association (as
defined in Section 501(c)(9) of the Code) ("VEBA") which is maintained under or
with respect to any Employee Plan, as of the Closing Date there are no assets
accumulated or held under such VEBA with respect to such employees.
(r) Labor and Employment. There is no collective bargaining
agreement, memorandum agreement or other labor contract covering employees of
the Transferor or the Company, and, to the knowledge of the Transferor or the
Company, no union or other labor organization is seeking to organize such
employees, or to be recognized as a collective bargaining representative of such
employees. There is no pending or, to the knowledge of the Transferor,
threatened strike, work stoppage, material unfair labor practice claim or other
material labor dispute against or affecting the Transferor, the Company or their
respective employees. A list of each current employee of the Transferor and the
Company and his position, status (active, disabled or on other leave) annual
compensation (including latest bonus), date of hire and date of birth will be
provided to USO prior to the Closing Date.
(s) Contracts.
(i) Schedule 4.1(s)(i) of the Disclosure Letter hereto is
a true and complete list of all contracts which are material to the business,
operations, assets and liabilities of the Transferor and which will be assigned
to the Company (the "Contracts").
(ii) Except as otherwise disclosed on Schedule 4.1(s)(ii)
of the Disclosure Letter, the Contracts are valid, binding, and enforceable in
accordance with their terms (assuming the other parties thereto are bound,
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as to which none of BN, Transferor and the Company has any reasonable basis to
believe otherwise) and in full force and effect, except where any such
invalidity or failure to be binding, enforceable or in full force and effect
would not have a material adverse effect.
(iii) Except as otherwise disclosed on Schedule
4.1(s)(iii) of the Disclosure Letter, neither the Transferor nor the Company is,
and to the knowledge of BN, Transferor and the Company, no other party to such
Contract is, in default thereunder, and no event has occurred which, with or
without the passage of time or the giving of notice or both, would constitute a
default thereunder, except in each case for default as would not have,
individually or in the aggregate, a material adverse effect on the conduct of
business by, or the assets and liabilities of, the Transferor or the Company.
(iv) Except as set forth on Schedule 4.1(s)(iv) of the
Disclosure Letter, all of the Contracts are assignable without obtaining third
party consent to the Company, and none of such Contracts has change in control
provisions that would allow another party the right to terminate the Contract or
take action that is adverse to the Transferor or the Company, except with
respect to Contracts as would not have, individually or in the aggregate, a
material adverse effect on the conduct of business or the assets and liabilities
of the Transferor or the Company.
(t) Patents, Trademarks, Software.
(i) Except as disclosed on Schedule 4.1(t) of the
Disclosure Letter hereto, the Transferor owns, and the Company will own as of
the Closing, free and clear of all Encumbrances, the right to use, sell, license
or dispose of such patents, copyrights, trademarks, service marks, and
applications and registrations therefor, and trade names, trade secrets,
customer lists, proprietary technology processes and formulae, source code,
object code, know-how, inventions, other confidential and proprietary
information and other intellectual property rights as are necessary to permit
the Transferor and the Company to carry on the business as currently conducted
by the Transferor, except for failures to own free and clear, license to use or
otherwise have sufficient rights to use as would not have a material adverse
effect (the "Rights"). Schedule 4.1(t) of the Disclosure Letter sets forth all
registered patents, copyrights, trademarks and service marks included in the
Rights, all of which are in full force and effect and are not subject to any
Taxes or maintenance fees, except as set forth on Schedule 4.1(t) of the
Disclosure Letter, or except where the failure to be in full force or effect or
to be so subject would not have a material adverse effect. Except as set forth
on Schedule 4.1(t) of the Disclosure Letter, or pursuant to the Transferor's
"Affiliates Program", neither BN, Transferor nor the Company has licensed or
granted to anyone the right to use the name "Xxxxxx and Xxxxx" in connection
with business conducted on the Internet or any other name associated with or
used by the Transferor in connection with the business conducted by the
Transferor or the Company. Except as set forth on Schedule 4.1(t) of the
Disclosure Letter, none of BN, Transferor nor the Company (i) has licensed or
granted to anyone rights of any nature to use any Rights that would limit the
exercise of such Rights by the Transferor or the Company, or that would limit or
prevent the Transferor or the Company from using, selling, licensing or
disposing of Rights in any market or geographic region, including in direct
competition with any licensee of such Rights in such geographic region; (ii)
except for the $50,000 annual royalty payable by the Company to BN College, is
obligated to pay royalties, fees or other payments to anyone for use of any
single Right; and (iii) has received notice
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from any third party or otherwise has knowledge that any Rights or any services
or products marketed or sold by the Transferor or the Company violates any
intellectual property right of a third party, except for such violations as
would not have a material adverse affect. To Transferor's knowledge, there
exists no infringement by any third party of any Rights that would have a
material adverse effect and there is no pending or, to the knowledge of either
Transferor or the Company, threatened claim or litigation against the Transferor
or the Company contesting its use of any Rights, asserting the misuse of any
Rights, or asserting the infringement or other violation of any rights of a
third party, nor, to the knowledge of either Transferor or the Company, is there
any reasonable basis for any such claim, where, in any such case, individually
or in the aggregate, such infringement, claim or litigation would have a
material adverse effect.
(ii) All copyrightable works, inventions and know-how
conceived by employees or, to the knowledge of BN, the Transferor or the
Company, independent contractors of the Transferor or the Company within the
scope of their employment or retention, as the case may be, and related to the
business conducted by the Transferor were and are "works for hire," or if they
were or are not, then all right, title and interest therein were transferred and
assigned to, or vested in, the Transferor or the Company except where the
failure to be "works for hire" or to have been so transferred, assigned or
vested would not have a material adverse effect.
(iii) Except as set forth on Schedule 4.1(t) of the
Disclosure Letter, the consummation of the transactions contemplated by this
Agreement will not alter, impair or extinguish any of the Rights, the
alteration, impairment or extinguishing of which would have a material adverse
effect. Following the consummation of the transactions contemplated hereby, the
Company will own, free and clear of all Encumbrances, or have the exclusive
right to use, sell, license or dispose of or otherwise will have sufficient
rights to use, the Rights, except for failures to own free and clear, license to
use or otherwise have sufficient rights to use as would not have a material
adverse effect.
(iv) To the best of BN's and Transferor's knowledge, the
software used by Transferor with respect to the Business, including embedded
software, either: (i) is not affected (with respect to performance and
functionality) by dates prior to, during and after the year 2000; or (ii)
insofar as such software is so affected, Transferor has taken reasonable steps
to assure that any problems which may arise with respect to dates prior to,
during and after the year 2000 will be corrected sufficiently in advance of the
year 2000.
(u) Relationships with Related Persons. Except as set forth on
Schedule 4.1(u) of the Disclosure Letter, neither BN nor any Related Person
of BN or its officers or directors has any interest in any property (whether
real, personal, or mixed and whether tangible or intangible), which will be
used in or pertaining to the Company's business. Neither BN nor any Related
Person of BN owns (of record or as a beneficial owner) an equity interest or
any other financial or profit interest in, a Person that has (i) had business
dealings or a material financial interest in any transaction with the Transferor
or the Company other than business dealings or transactions conducted in the
ordinary course of business with the Company at substantially prevailing
market prices and on substantially prevailing market terms, or (ii) engaged in
competition with the Transferor or the Company with respect to any line of the
products or services of such Person in any market presently served by such
company. Except as set forth in Schedule 4.1(u) of
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the Disclosure Letter, neither BN nor any Related Person of BN or of the Company
is a party to any contract with, or has any claim or right against the Company.
(v) Disclosure. No representation or warranty by Transferor
contained in this Agreement, nor any statement contained in the Limited
Liability Company Agreement or in any Schedule, certificate, list or other
instrument furnished or to be furnished by Transferor or BN to USO pursuant to
this Agreement or the Limited Liability Company Agreement or in connection with
the transactions contemplated by either, contains any untrue statement of a
material fact or omits to state a material fact which is necessary in order to
make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading. There is no fact
known to Transferor which materially adversely affects the condition (financial
or otherwise), properties, assets, business, operations or prospects of
Transferor as they relate to the assets listed on the BN Contribution Schedule
which has not been set forth herein or in the Schedules hereto. All documents
delivered or to be delivered by Transferor or BN to USO pursuant to this
Agreement are or will be true and complete copies of what they purport to be.
Section 4.2 Representations and Warranties of USO. USO represents and
warrants to Transferor that:
(a) Organization and Existence. USO is a corporation duly
organized, validly existing and in good standing under the laws of Delaware. USO
has full legal power and authority to own and lease the properties and assets it
now owns and leases and to carry on its business as and where such properties
and assets are now owned or leased and such business is now conducted.
(b) Authority and Approval. Each of BAG and USO has the legal
Spower and authority to enter into this Agreement and to perform its obligations
hereunder. Each of BAG and USO has, or on the Closing Date will have, the legal
power and authority to enter into the Limited Liability Company Agreement and to
perform its obligations thereunder. This Agreement is a legal, valid and binding
obligation of each of BAG and USO, enforceable against each of BAG and USO in
accordance with its terms, subject to:
(i) applicable bankruptcy, insolvency or other similar
laws relating to creditors' rights generally; and
(ii) general principles of equity. When executed, the
Limited Liability Company Agreement will be a valid and binding obligation of
USO enforceable against USO in accordance with its terms, subject to (a)
applicable bankruptcy, insolvency or other similar laws relating to creditors'
rights generally and (b) general principles of equity. No other act, approval or
proceeding on the part of USO is or will be required to authorize the execution
and delivery of this Agreement and the Limited Liability Company Agreement by
USO or the consummation of the transactions contemplated by each such agreement.
(c) No Conflict. This Agreement and the Limited Liability
Company Agreement and the execution and delivery of each such agreement by each
of BAG and USO do not, and the fulfillment and compliance with the terms and
conditions of each such agreement and the consummation of the transactions
contemplated by each will not:
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(i) conflict with any of, or require the consent of any
Person under, the terms, conditions or provisions of the certificate of
incorporation, by-laws or other corporate documents of each of BAG and USO;
(ii) conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or both), or
accelerate or permit the acceleration of the performance required by, or require
any consent, authorization or approval under, any indenture, mortgage, lease,
agreement or instrument to which USO is a party or by which it is bound or to
which any of its assets or property is subject; or
(iii) result in the creation of any Encumbrance upon the
assets or property of USO under any such indenture, mortgage, lease, agreement
or instrument.
USO is not subject to any order, judgment, decree or award of any court or other
judicial, administrative or regulatory body or arbitrator having prospective
effect.
(d) Disclosure. No representation or warranty by either BAG or
USO contained in this Agreement, nor any statement contained in the Limited
Liability Company Agreement or in any Schedule, certificate, list or other
instrument furnished or to be furnished by either BAG or USO to Transferor
pursuant to this Agreement or the Limited Liability Company Agreement or in
connection with the transactions contemplated by either, contains any untrue
statement of a material fact or omits to state a material fact which is
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which they were made, not misleading. All
documents delivered or to be delivered by either BAG or USO to Transferor
pursuant to this Agreement are or will be true and complete copies of what they
purport to be.
ARTICLE V
COVENANTS
Section 5.1 Filings. Each of the parties hereto agree to cooperate
fully with the other in the preparation and filing, whether before or after the
Closing Date, of all documents and instruments required to be filed by BN, BAG,
USO, the Transferor, B&X.xxx Holding or the Company, in connection with the
transactions contemplated by this Agreement and the Limited Liability Company
Agreement, including, without limitation, any business certificate, or any
trade, assumed or fictitious name certificates, or any applications for
authority to do business, or any registrations or assignments of registrations
of any patents, trademarks, trade names, service marks, copyrights or similar
rights.
Section 5.2 Access and Investigation. Between the Effective Date and
the Closing Date, the Transferor and the Company and its representatives shall,
subject to the provisions of Section 9.1: (a) afford USO and its representatives
and prospective lenders and their representatives (collectively, "USO's
Advisors") full and free access to Transferor's and Company's personnel,
properties, contracts, books and records, and other documents and data relating
to the Transferor and/or the Company, (b) furnish USO and USO's Advisors with
copies of all such contracts, books and records, and other existing documents
and data relating to the Transferor and the
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Company and/or the Transferor as USO may reasonably request, and (c) furnish USO
and USO's Advisors with such additional financial, operating, and other data and
information as USO may reasonably request relating to the Transferor and/or the
Company.
Section 5.3 Operation of the Business of the Transferor and Company.
Between the Effective Date and the Closing Date, the Transferor and the Company
shall, other than with respect to actions contemplated in or by this Agreement
or set forth on Schedule 4(n) of the Disclosure Letter:
(a) conduct the business of the Transferor and the Company only
in the ordinary course of business;
(b) use its best efforts to preserve intact the current business
organization of the Transferor and the Company, keep available the services of
the current managers, officers, employees, and agents of the Transferor and the
Company, and maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Transferor and the Company;
(c) confer with USO concerning operational matters of a material
nature with respect to the Transferor and the Company; and
(d) otherwise report periodically to USO concerning the status
of the business, operations, and finances of the Transferor and the Company.
Section 5.4 Negative Covenant. Except as otherwise expressly permitted
by this Agreement, between the Effective Date and the Closing Date, the
Transferor and the Company shall not, without the prior consent of USO, take any
affirmative action, or fail to take any reasonable action within its control, as
a result of which any of the changes or events listed in Section 4.1(n) (other
than as set forth in Schedule 4(n) of the Disclosure Letter) is likely to occur.
Section 5.5 Required Approvals. Transferor and USO acknowledge that
there are no filings required by legal requirements to be made by either party
in order to consummate the contemplated transactions including, but not limited
to, filings under the HSR Act.
Section 5.6 No Negotiation. Until such time, if any, as this Agreement
is terminated pursuant to Section 7.1, the Transferor and its Affiliates shall
not, directly or indirectly, solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, provide any non-public information
to, or consider the merits of any unsolicited inquiries or proposals from, any
Person (other than USO) relating to any transaction involving the potential sale
of the business or assets (other than in the ordinary course of business) of the
Transferor or the Company, or any of the Membership Interests in the Company, or
(except into or with an Affiliate) any merger, consolidation, business
combination, or similar transaction involving the Transferor or the Company.
Section 5.7 Delayed Receipts. In the event that the Transferor receives
any property, assets, payment or otherwise which constitutes a part of the
business contributed to the Company, such item shall be promptly contributed to
the Company.
Section 5.8 Stock Options. As of the Effective Date, the
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Company shall adopt the xxxxxxxxxxxxxx.xxx inc. 1998 Incentive Plan (the
"Incentive Plan") with such changes therein as are necessary to reflect the
issuer as a limited liability company and not a corporation, and any other
mutually agreeable changes that do not adversely affect the awards set forth in
Schedule 5.8 of the Disclosure Letter. The awards to date under the Incentive
Plan are set forth in Section 5.8 of the Disclosure Letter. All such awards
(other than 600,000 of Xxxxxxx Xxxxxx'x 800,000, which shall be forfeited) shall
be converted into the same number of units in the Company, at the same exercise
price per unit and vesting schedule, as set forth on Schedule 5.8 of the
Disclosure Letter and the existing Membership Interests shall be converted into
33,333,334 taking into account the units to be issued to USO pursuant hereto as
well as the Membership Interests currently outstanding, and any units to be
issued in connection with the aforementioned awards shall be in addition to and
not in reduction of the aforementioned 33,333,334 units.
Section 5.9 Employees and Employee Benefits
(a) The employment of all current employees of the Transferor
shall terminate as of the Effective Date, and the Transferor and USO shall cause
the Company to offer employment to such employees, effective as of November 1,
1998 (the "Start Date"), at rates of compensation and with employee benefits
which, subject to Section 5.8, are substantially equivalent to the respective
rates of compensation and benefits paid or provided to such employees by the
Transferor as of the Effective Date. The employees of the Transferor who accept
such offer of employment shall be referred to as "Company Employees." BN, the
Transferor, USO and the Company shall take such action as is necessary to cause
the Company to adopt or enter into, effective as of the Start Date (except as
set forth in Section 5.9(b)(i)A.), benefit plans, funds, programs, agreements,
payroll practices or other arrangements which effectuate the provisions of this
Section 5.9.
(b) As soon as practicable after the Closing Date, but effective
(except as set forth in Section 5.9(b)(i)A.) as of the Start Date, the following
shall occur:
(i) Defined Contribution Plan
A. As of the Closing Date, the Company shall become a
Participating Employer in and adopt the Xxxxxx & Noble, Inc. 401(k) Savings Plan
as in effect as of the Closing Date (the "BN 401(k) Plan") and employees of the
Company shall participate thereunder under the same terms and conditions as BN
employees, and shall earn service credit thereunder for service with the Company
on the same basis as employees of BN receive credit for service with BN.
B. BN shall take all actions necessary to cause the BN
401(k) Plan to provide for investment of the Employer Contribution Accounts of
the Company's Employees participating in the BN 401(k) Plan in BN stock for as
long as BN is an "affiliate" of the Company within the meaning of Section
407(d)(7) of ERISA.
C. BN shall indemnify, defend and hold harmless the
Company and USO against all Damages (as defined in Section 8.2) which arise as a
result of or in connection with the form or operation of the BN 401(k) Plan
under ERISA, the Code or otherwise, provided that BN shall have no such duty
with respect to Damages which arise out of an act or omission of the Company.
The Company shall have the right to terminate its participation in
- 22 -
the BN 401(k) Plan at any time, in which event the Company shall establish a
separate 401(k) Plan (the "Company 401(k) Plan") maintained solely with respect
to employees of the Company, and BN and the Company shall take all actions
necessary to cause the assets and liabilities of Company Employees under the BN
401(k) Plan to be transferred to the Company 401(k) Plan.
(ii) Defined Benefit Plan
A. The Company shall adopt a defined benefit pension plan
designed to qualify under Section 401(a) of the Code (the "Company Pension
Plan") which is substantially equivalent to the Xxxxxx and Xxxxx, Inc.
Employees' Retirement Plan (the "BN Pension Plan") as in effect as of the
Effective Date and provides service credits as set forth in the provisions of
this Section 5.9(b)(ii). BN shall cause the trustees of the BN Pension Plan to
transfer to the trust maintained pursuant to the Company Pension Plan, as soon
as practicable after the Closing Date, an amount of assets in cash equal in
value to the BN Pension Plan's projected benefit obligation determined as of the
Effective Date with respect to Company Employees who are participants in the BN
Pension Plan as of the Effective Date and the BN Pension Plan shall transfer to
the Company Pension Plan the liabilities under the BN Pension Plan determined as
of the Effective Date with respect to such Company Employees. The amount of such
assets and liabilities shall be calculated as soon as practicable after the
Closing Date by the BN Pension Plan's actuary based upon the assumptions set
forth on Schedule 5.9(b)(ii)(A) of the Disclosure Letter, provided that the
value of the assets to be transferred shall (x) be no less than the amount
necessary to satisfy the requirements of Section 414(1) of the Code, (y) be
increased by interest at the rate set forth on Schedule 5.9(b)(ii)(A) of the
Disclosure Letter, for the period from the Effective Date to the date of
transfer, and (z) be decreased to reflect benefit payments by the BN Pension
Plan with respect to Company Employees during the period from the Effective Date
to the date of transfer. The calculation made pursuant to the preceding sentence
shall be available for review prior to such transfer by USO's actuary at USO's
expense. The Company shall cause the Trustee of the Company Pension Plan to
accept such transfer of assets and liabilities. Neither the Company nor the
Company Pension Plan shall assume liability for the valuation of assets and
liabilities under the BN Pension Plan necessary to file a Form 5500 for the BN
Pension Plan. Neither BN, a Code Affiliate of BN nor the BN Pension Plan shall
assume liability for the valuation of assets and liabilities of the Company
Pension Plan necessary to file a Form 5500 for the Company Pension Plan.
B. The BN Pension Plan shall provide that service with
the Company shall be taken into account for purposes of eligibility, vesting and
early retirement subsidies for any person who becomes employed by BN or a Code
Affiliate of BN by virtue of a direct transfer of employment from the Company.
The Company Pension Plan shall provide that service with Transferor, BN or any
Code affiliate of BN shall be taken into account for purposes of eligibility,
vesting and early retirement subsidies for any person who becomes employed by
the Company by virtue of a direct transfer of employment from BN or a Code
Affiliate of BN, provided that such service rendered prior to the Start Date by
a Company Employee also shall be recognized for benefit accrual purposes under
the Company Pension Plan (but in no event will a Company Employee receive
duplicate service credit for benefit accrual purposes under the Company Pension
Plan for the same period of service).
- 23 -
C. The Company Pension Plan shall provide that in the
event that any person becomes employed by BN or a Code Affiliate of BN by virtue
of a direct transfer of employment from the Company, the accrued benefit of such
person under the Company Pension Plan through the date of such transfer shall be
calculated by taking into account increases in such person's age and
compensation paid from BN or such Code Affiliate of BN after the date of such
direct transfer of employment. The BN Pension Plan shall provide that in the
event that any person becomes employed by the Company by virtue of a direct
transfer of employment from BN or a Code Affiliate of BN, the accrued benefit of
such person under the BN Pension Plan through the date of such transfer shall be
calculated by taking into account increases in such person's age and
compensation paid from the Company after the date of such direct transfer of
employment. This Section 5.9(b)(ii)C. shall cease to apply if and when either of
the Company Pension Plan or the BN Pension Plan is terminated or is amended to
cease future accruals for all participants under the respective plan.
D. The Company Pension Plan shall not be amended or
terminated for a period of one year after the Closing Date except that (x) the
Company Pension Plan shall be amended to match an amendment to the BN Pension
Plan adopted within that one year period which does not result in an increase in
benefits under the Company Pension Plan, (y) the Company Pension Plan may be
amended as required by applicable law, and (z) the Company Pension Plan may be
terminated within such one year period to match a termination of the BN Pension
Plan effected within that one year period.
E. Each of the BN Pension Plan and the Company Pension
Plan shall provide that, to the extent that under a provision thereof a
termination of employment renders a participant entitled to immediate payment of
a benefit, a participant who terminates employment with an employer sponsoring
one plan for the purpose of becoming employed by a sponsoring employer of the
other plan shall not be considered to have terminated employment for the purpose
of such provision.
(iii) Deferred Compensation Plan
A. The Company shall establish a deferred compensation
plan (the "Company Deferred Comp Plan") which is substantially equivalent to the
Xxxxxx & Noble, Inc. Deferred Compensation Plan listed as Item 9 on Schedule
4.1(q)(i) of the Disclosure Letter (the "BN Deferred Comp Plan") as in effect on
the Closing Date. The Company Deferred Comp Plan shall give credit for all
service under the BN Deferred Comp Plan.
B. The Administrative Committee of the BN Deferred Comp
Plan shall cause the trustee of any grantor trust established thereunder to
transfer, as soon as practicable after the Closing Date, an amount in cash equal
to the Deferral Account (as defined in the BN Deferred Comp Plan) of a Company
Employee to the Company Deferred Comp Plan.
C. The Company Deferred Comp Plan and the BN Deferred
Comp Plan shall each provide, or shall be amended as soon as practicable after
the Closing Date to provide, that a participant in such plan who transfers
employment to an employer who sponsors the other plan shall not be deemed to
have terminated employment for purposes of eligibility to receive a benefit on
the basis of termination of employment. In the event of such a transfer, the
plan maintained by the employer from which the participant transfers shall, as
soon as practicable after the date of the employment
- 24 -
transfer, transfer to the other plan from the assets of any grantor trust
established thereunder attributable to such participant an amount equal to the
Deferral Account (as defined in the respective plan).
(c) With respect to each Company Employee:
(i) BN or the Transferor shall be responsible for, and
shall indemnify and hold harmless the Company and USO against, any actions,
claims or proceedings brought by or on behalf of any Company Employee at any
time, including, but not limited to, wrongful termination, breach of fiduciary
duty, discrimination, sexual harassment, workers compensation or other
employment-related matters, to the extent such claims are based solely upon
actions, events or circumstances which occurred before the Start Date, except:
(x) to the extent that such matter is fully disclosed to USO pursuant to this
Agreement; or (y) to the extent adequate reserves have been established in the
financial statements of Transferor (as delivered to USO pursuant to this
Agreement).
(ii) Subject to Section 5.9(b), BN or the Employee Plans
shall have liability for or shall be responsible for all benefits provided
pursuant to any Employee Plan, including, but not limited to, (A) deferred
compensation, non-qualified and incentive plans or policies with respect to
services rendered on or before the Effective Date and (B) medical, dental and
other welfare benefits under any Employee Plan based on claims incurred prior to
the Start Date under the terms of such Employee Plans, provided, however, that
effective as of the Start Date a health plan adopted by the Company shall assume
the obligation, if any, of the Xxxxxx and Xxxxx, Inc. Comprehensive Medical and
Dental Plan (the "BN Health Plan") to provide health continuation benefits
pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, to any person (y) who is a "qualified beneficiary" (within the meaning
of Section 4980B(g)(1)(A) of the Code) under the BN Health Plan by virtue of
such person's current or former employment with the Transferor or by virtue of
being the spouse or dependent child of a current or former employee of the
Transferor, and (z) with respect to whom a "qualifying event" (within the
meaning of Section 4980B(f)(3) of the Code) has occurred. Notwithstanding the
foregoing, the Company shall be responsible for satisfying obligations with
respect to accrued vacation and sick time and personal holidays of Company
Employees. Subject to Section 5.9(b), BN shall cause the Employee Plans to
provide effective as of the Start Date that any employee of the Company who
becomes employed by BN or a Code Affiliate of BN upon a direct transfer of
employment from the Company shall be credited with such employee's service with
the Company for purposes of determining benefits under such Employee Plans made
available or provided to employees of BN or the Code Affiliate of BN. Such
credit shall include credit for any co-payments and deductibles paid prior to
the transfer of employment.
(iii) Subject to Section 5.9(b), BN and USO shall cause
the Company to take such action as is necessary such that each Company Employee
and each person who becomes an employee of the Company subsequent to the Start
Date upon a direct transfer of employment from BN or a Code Affiliate of BN
shall be credited with such Company Employee's or such person's service with the
Transferor, BN or the Code Affiliate of BN, as the case may be, for purposes of
determining benefits under any employee benefit plans, funds, programs,
agreements, payroll practices or other arrangements (including, but not limited
to, vacation) made available or provided to employees of the Company. Such
credit shall include credit for co-payments and deductibles paid prior to the
Start Date (in the case of Company
- 25 -
Employees) and prior to transfer of employment (in all other cases). For Company
Employees, the amount of service to be credited shall be based on the years of
service for such Company Employee.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to the Obligations of USO. The obligations of
USO to proceed with the Closing are subject to the satisfaction on or prior to
the Closing Date of all of the following conditions, any one or more of which
may be waived in whole or in part by USO:
(a) Representations and Warranties True. The representations and
warranties contained in Section 4.l and in all schedules and certificates
delivered by Transferor to USO pursuant to this Agreement shall be true and
accurate on and as of the Closing Date with the same effect as though made on
and as of such date, except for such changes, if any, as may be expressly
permitted by this Agreement or agreed to in writing by the parties hereto.
(b) Performance of Covenants. Transferor shall have performed
and complied in all material respects with each and every covenant, agreement
and condition required to be performed or complied with by it hereunder on or
prior to the Closing Date.
(c) Licenses, Consents, etc. Transferor shall have obtained all
licenses, approvals, and permits of governmental authorities required to be
obtained by it for or in connection with the transactions contemplated hereby,
and all consents and approvals, if any, of other parties, including, but not
limited to, the consent of creditors or contracting parties of Transferor, in
each case in which the failure to obtain such consent or approval of other
parties would have a material adverse effect on the assets, properties and
liabilities identified on the BN Contribution Schedule or would materially
interfere with the right or ability of the Company to use the assets and
properties listed on the BN Contribution Schedule or interfere with the rights
or ability of Transferor to transfer good and unencumbered title to or lawful
use of the assets and properties identified in the BN Contribution Schedule, and
no such governmental license, approval or permit or consent or approval of any
third party shall have been withdrawn or suspended.
(d) No Injunction. On the Closing Date, there shall be no
injunction, writ, restraining order or any other order of any nature issued by a
court or governmental agency of competent jurisdiction directing that any of the
transactions provided for in this Agreement or the Limited Liability Company
Agreement not be consummated as herein or therein provided.
(e) No Actions. On the Closing Date, there shall be no action or
proceeding pending or threatened by or before any court or other judicial,
administrative or regulatory body to restrain or prohibit the transactions
contemplated by this Agreement or the Limited Liability Company Agreement.
(f) Corporate Authorization. Transferor shall have delivered to
USO a certificate of the Secretary of Transferor, in form reasonably
satisfactory to USO and its counsel, dated the Closing Date, certifying that (i)
a true and correct copy of the articles of incorporation and by-laws of
- 26 -
the Transferor, as amended as of the Closing Date, is attached thereto, and (ii)
the authorization and approval of this Agreement and the Limited Liability
Company Agreement and the transactions contemplated hereby and thereby by the
Board of Directors of Transferor in accordance with the provisions of its
by-laws.
(g) Other Agreements. Transferor shall execute and deliver or
cause to be executed and delivered, on its own behalf or on behalf of the
Company, whichever applicable, the agreements identified in Section 2.6.
(h) Officer's Certificate. Transferor shall have delivered to
USO a certificate signed by a duly authorized officer of Transferor, dated the
Closing Date, in form and substance reasonably satisfactory to USO and its
counsel, certifying as to the satisfaction on the Closing Date of the conditions
specified in Sections 6.1(a) through (g) hereof and Section 2.6.
Section 6.2 Conditions to the Obligations of Transferor. The
obligations of Transferor to proceed with the Closing are subject to the
satisfaction on or prior to the Closing Date of all of the following conditions,
any one or more of which may be waived in whole or in part by Transferor:
(a) Representations and Warranties True. The representations and
warranties contained in Section 4.2 and in all certificates delivered by USO to
Transferor pursuant to this Agreement shall be true and accurate on and as of
the Closing Date with the same effect as though made on and as of such date,
except for such changes, if any, as may be expressly permitted by this Agreement
or agreed to in writing by the parties hereto.
(b) Performance of Covenants. USO shall have performed and
complied in all material respects with each and every covenant, agreement and
condition required to be performed or complied with by it hereunder on or prior
to the Closing Date.
(c) Licenses, Consents, etc. USO shall have obtained all
licenses, approvals, and permits of governmental authorities required to be
obtained by it for or in connection with the transactions contemplated hereby.
(d) No Injunction. On the Closing Date, there shall be no
injunction, writ, restraining order or any other order of any nature issued by a
court or governmental agency of competent jurisdiction directing that any of the
transactions provided for in this Agreement or the Limited Liability Company
Agreement not be consummated as herein or therein provided.
(e) No Actions. On the Closing Date, there shall be no action or
proceeding pending or threatened by or before any court or other judicial,
administrative or regulatory body to restrain or prohibit the transactions
contemplated by this Agreement or the Limited Liability Company Agreement.
(f) Corporate Authorization. USO shall have delivered to
Transferor a certificate of a duly authorized officer of USO, in form reasonably
satisfactory to Transferor and its counsel, dated the Closing Date, certifying
that (i) a true and correct copy of the certificate of incorporation and by-laws
of USO, as amended as of the Closing Date is attached thereto, and (ii) the
authorization and approval of this Agreement and the Limited Liability Company
Agreement and the transactions contemplated
- 27 -
hereby and thereby by the Board of Directors of USO in accordance with the
provisions of its by-laws.
(g) Other Agreements. USO shall execute and deliver or cause to
be executed and delivered, on its own behalf, or by its Affiliates, as the case
may be, or on behalf of the Company, whichever applicable, the agreements
identified in Section 2.6.
(h) Officer's Certificate USO shall have delivered to Transferor
a certificate signed by a duly authorized officer of USO, dated the Closing
Date, in form and substance reasonably satisfactory to Transferor and its
counsel, certifying as to the satisfaction on the Closing Date of the conditions
specified in Sections 6.2(a) through (g) hereof and Section 2.6.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated before the
Closing Date only as follows:
(a) By written agreement of Transferor and USO at any time.
(b) By USO, by written notice to Transferor at any time, if,
through no fault of USO, one or more of the conditions specified in Section 6.1
is not satisfied at the time at which the Closing would otherwise occur
(provided that Transferor shall have fifteen (15) days after written notice to
cure such conditions) or satisfaction of such a condition is or becomes
impossible.
(c) By Transferor, by written notice to USO at any time, if,
through no fault of Transferor, one or more of the conditions specified in
Section 6.2 is not satisfied at the time at which the Closing would otherwise
occur (provided that USO shall have fifteen (15) days after written notice to
cure such conditions) or satisfaction of such a condition is or becomes
impossible.
(d) By Transferor or USO, by written notice to the other, if,
through no fault of the terminating party, the Closing has not taken place for
any reason on or before April 30, 1999.
ARTICLE VIII
NATURE AND SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 8.1 Nature and Survival of Representations and Warranties. All
representations and warranties made by Transferor or USO in this Agreement and
in any schedules, certificates or other documents delivered in connection with
the transactions contemplated hereby shall survive the Closing for a period of
twelve (12) months after the end of the Company's first fiscal year.
Section 8.2 Indemnification.
(a) Transferor shall promptly indemnify, defend and hold
harmless USO and the Company against all damage, loss, liability, recovery,
- 28 -
deficiency cost or expense, including, without limitation, reasonable attorneys'
fees and costs related thereto ("Damages"), suffered or incurred by USO or the
Company, to the extent such Damages result in a diminution in the value of USO's
Company Interest, arising from or in connection with any misrepresentation or
breach of any representation or warranty or nonfulfillment of a covenant or
agreement made by Transferor set forth in this Agreement or in any Exhibit,
Schedule or certificate delivered pursuant hereto. No investigation by USO at or
prior to the Closing shall relieve Transferor of any liability hereunder, except
with respect to any written disclosures, Schedules, Exhibits, certificates or
documents furnished in connection with this Agreement.
(b) USO shall promptly indemnify, defend and hold harmless
Transferor and the Company against all Damages suffered or incurred by
Transferor or the Company, to the extent such Damages result in a diminution in
the value of Transferor's Company Interest, arising from or in connection with
any misrepresentation or breach of representation or warranty or nonfulfillment
of a covenant or agreement made by USO set forth in this Agreement or in any
Exhibit, Schedule or certificate delivered pursuant hereto. No investigation by
Transferor at or prior to the Closing shall relieve USO of any liability
hereunder, except with respect to any written disclosures, Schedules, Exhibits,
certificates or documents furnished in connection with this Agreement.
Section 8.3 Brokers. Transferor shall indemnify, defend and hold
harmless USO, and USO shall indemnify, defend and hold harmless Transferor, from
and against all loss, liability, damage or expense (including reasonable
attorneys' fees) in connection with any claim by any Person for brokers' or
finders' fees or commissions or similar payments and related expenses based upon
any agreement or understanding alleged to have been made with respect to the
transactions contemplated hereby by such Person with USO (in the case of USO as
the indemnifying party) or with Transferor (in the case of Transferor as the
indemnifying party).
Section 8.4 Indemnification Procedure. Transferor or USO, as the case
may be, shall notify the party against whom indemnification is sought promptly
of any claim it may have or any claim by any third party coming to its attention
which may result in any liability hereunder on the other's part. Neither
Transferor nor USO shall have any liability under this Article VIII unless
notice of a claim for indemnity has been given to the other party, with
sufficient detail of the events giving rise to such claim, on or prior to the
date twelve (12) months after the end of the Company's first fiscal year, with
the exception of any claim under Section 8.3, which claim may be asserted until
the expiration of the relevant statute of limitations. The indemnifying party
shall be entitled at its own expense to conduct the defense of any third party
claim with counsel of its own choosing, subject to approval by the party seeking
indemnification (whose approval shall not be unreasonably withheld), but the
party seeking indemnification shall be entitled to participate in such defense
with counsel of its own choosing and at its own expense, provided that control
of the defense will remain with counsel for the indemnifying party if the
indemnifying party has acknowledged unequivocally in writing its obligation to
indemnify the other in regard to the claims to be defended against. Failure to
give notice as provided herein shall not relieve the indemnifying party of its
obligations hereunder, except to the extent that the defense of any claim is
prejudiced by such failure to give notice. The indemnifying party shall have the
right to compromise or settle for money damages only any claim giving rise to an
obligation for indemnification hereunder; any claim
- 29 -
compromised or settled by the indemnified party shall not be subject to
indemnification hereunder.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Confidentiality. Transferor and USO will, in their
respective capacities, receive and at all times, both before and after the
Closing or termination of this Agreement, treat in confidence, any information
of the disclosing party (or their respective Affiliates) which is disclosed to
the receiving party, pertaining to the finances, technology, production methods
and processes', general business operations, prices charged and pricing
policies, marketing practices or policies, litigation, identity of customers, or
any other confidential aspect (collectively, the "Confidential Matters") of the
disclosing partner or of the Company, except for any such information which:
(i) at the time of disclosure is publicly available or
becomes publicly available through no act or omission of the receiving party;
(ii) was in the receiving party's possession, otherwise
than as a result of a confidential or fiduciary relationship, prior to the
disclosure thereof by the disclosing party; or
(iii) is thereafter disclosed to the receiving party by a
third party which did not acquire the information under an obligation of
confidentiality.
Section 9.2 Governing Law; Jurisdiction. This Agreement shall be
governed by and be construed in accordance with the law of the State of New
York, without regard however to the conflicts of laws principles thereof. Any
action or proceeding seeking to enforce any provision of, or based on any right
arising out of, or otherwise relating to, this Agreement shall be brought
against Transferor or USO in the courts of the State of New York or, if it has
or can acquire jurisdiction, in the United States District Court for the
Southern District of New York, and each of the parties, for itself and its
shareholders, hereby submits to the exclusive jurisdiction of such courts (and
of the appropriate appellate courts) in any such action or proceeding and waives
any objection to venue laid therein.
Section 9.3 Notices. All notices and other communications hereunder
shall be in writing and shall be given and delivered by messenger, transmitted
by telecopy or telegram (in either case followed by reputable overnight courier
sent the same day), by reputable overnight courier or mailed by certified mail,
postage prepaid, return receipt requested, to the parties at the following
addresses (or such other address as shall be specified by such party by like
notice), and shall be deemed given on the date on which so delivered by
messenger or reputable overnight courier, on the next business day following the
date on which so transmitted by telecopy, telegram or on the next business day
following the date on which so transmitted by telecopy, telegram or on the third
business day following the date on which mailed by certified mail:
If to BAG:
Bertelsmann AG
Xxxx-Xxxxxxxxxxx-Xxxxxxx 000
- 00 -
00000 Xxxxxxxxx, Xxxxxxx
Attention: Xx. Xxxxx Xxxxxxxx
Fax: (000) 00 0000 000 000
If to USO:
XXX.XX Online, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Telefax: 212-782-1010/1103
with a copy for each of BAG and USO to:
Xxxxxx, Xxxxxxx, Xxxxxxxxx & Green, P.C.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telefax: 000-000-0000
If to Transferor:
xxxxxxxxxxxxxx.xxx inc.
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxx
Telefax: (000) 000-0000
If to BN:
Xxxxxx & Noble, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Mr. Xxxxxxx Xxxxxx
Telefax: (000) 000-0000
with a copy for each of Transferor and BN to:
Xxxxxxxx Xxxxxxxxx Xxxxxx
Aronsohn & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telefax: 000-000-0000
Section 9.4 Additional Acts. Each of the parties hereto shall deliver
such further documents and agreements, and do such further acts and things as
may be necessary or expedient to carry out the provisions of this Agreement.
Section 9.5 Entire Agreement; Waiver, Modifications. This Agreement and
the other contemporaneous agreements referred to herein constitute a complete
statement of all of the arrangements among the parties as of the date hereof
with respect to the transactions contemplated hereby and thereby, and all other
prior agreements of the parties with respect hereto or thereto are hereby merged
into this Agreement and such other contemporaneous agreements. No modification,
discharge or waiver, in whole
- 31 -
or in part, of any of the provisions hereof shall be valid unless in writing and
signed by the party against whom the same is sought to be enforced. A failure or
omission of either party hereto to insist, in any instance, upon strict
performance by the other party of any term or provision of this Agreement or to
exercise any of its rights hereunder shall not be deemed a modification of any
term or provision hereof, or a waiver or relinquishment of the future
performance of any such term or provision by such party, nor shall such failure
or omission constitute a waiver of the right of such party to insist upon future
performance by the other party of any such term or provision or any other term
or provision of this Agreement.
Section 9.6 Headings; Interpretations. The headings in this Agreement
are intended solely for convenience of reference and shall be given no effect in
the construction or interpretation of this Agreement. Unless the context
otherwise requires, the singular includes the plural, and the plural includes
the singular.
Section 9.7 No Assignment. This Agreement shall inure to the benefit
of, and be binding upon, the parties hereto and any Person that acquires an
interest in the Company as permitted by the terms hereof or the Limited
Liability Company Agreement. Otherwise, this Agreement is not assignable.
Section 9.8 Invalidity. In the event that any provision of this
Agreement is declared by a court of competent jurisdiction to be void or
unenforceable, the remainder of this Agreement shall not be affected thereby and
shall remain in full force and effect to the extent feasible in the absence of
the void and unenforceable provision. The parties furthermore agree to execute
and deliver such amendatory contractual provisions to accomplish lawfully as
nearly as possible the goals and purposes of the provision so held to be void or
unenforceable.
Section 9.9 Third Party Beneficiary. The Company shall be a third party
beneficiary of this Agreement.
Section 9.10 Press Release. Transferor and USO shall cooperate with
each other to issue a press release at such time, and in such form and
substance, which is mutually agreeable to both parties.
Section 9.11 Nonassignable Contracts.
(a) In the event that the transactions contemplated by this
Agreement involve the assignment of rights under any contract, agreement,
license, claim, or of other rights, assets, or property, which are nonassignable
without the consent, authorization or approval of the other party or parties
thereto or any other third party (a "Nonassignable Contract"), and such consent,
authorization or approval shall not have been obtained by Transferor prior to
the Effective Date, then, notwithstanding anything in this Agreement to the
contrary (and without relieving Transferor of any liability or obligation it may
have under this Agreement), any such Nonassignable Contract shall not be
assigned (except any rights to receive payments thereunder) until all such
necessary consents, authorizations and approvals with respect to such
Nonassignable Contract shall have been obtained, whereupon Transferor shall,
without further consideration, promptly assign or cause the assignment of same
to the Company. Notwithstanding any other provision in this Agreement, in the
event that the Transferor complies with Sections 9.11(a) and 9.11(b), Transferor
shall not be held liable or accountable for failing to deliver, assign or make
available to the Company
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any of the licenses or other agreements assigned under this Agreement.
(b) Until such time, if any, as all the necessary consents,
authorizations and approvals shall have been obtained for the assignment of a
Nonassignable Contract, Transferor, at its own expense, shall retain, preserve
and hold in trust for the sole benefit of the Company all rights, interests and
claims with respect to such Nonassignable Contract from and after the Effective
Date; and Transferor shall, at the request of the Company, take all such action,
enter into such arrangements and do or cause to be done such things as shall be
reasonably requested by the Company to provide, make available and secure to the
Company all of the funds, income and payments that would have inured to the
Company upon an outright assignment of such Nonassignable Contract to the extent
permitted by law and by contract. Except as provided by law or the Nonassignable
Contract in question, the performance obligations of Transferor under such
Nonassignable Contract as shall arise both (x) exclusively in respect of periods
from and after the date on which the aforesaid funds are so made available
thereunder and (y) exclusively in connection with the exploitation of such funds
by the Company, shall be deemed to be sublicensed or subcontracted to the
Company but only until such time (if any) as the rights under such Nonassignable
Contract have been effectively assigned to the Company. Transferor shall pay
over to the Company any amounts received by Transferor after the Effective Date
in respect of any Nonassignable Contract, and the Company shall pay over to
Transferor any amounts paid, or expenses incurred, by Transferor in performing
any Nonassignable Contract after the Effective Date.
Section 9.12 Obligations of BN and BAG. By their signatures below, BN
agrees to be liable for any failure by Transferor to perform any of its
obligations under this Agreement, the Limited Liability Company Agreement and
any other agreements executed in connection herewith to which it is a party, and
BAG agrees to be liable for any failure by USO to perform any of its obligations
under this Agreement, the Limited Liability Company Agreement and any other
agreements executed in connection herewith to which it is a party.
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IN WITNESS WHEREOF, the parties hereto, intending legally to be bound,
have caused this Agreement to be duly executed as of the day and year first
herein above written.
BERTELSMANN AG
By: /s/ Xxxxxx Xxxxxxxxxx
-----------------------------------
XXX.XX Online, Inc.
By: /s/ Xxxxxx Xxxxxxxxxx
-----------------------------------
XXXXXX & XXXXX, INC.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
xxxxxxxxxxxxxx.xxx inc.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
B&X.xxx Member Corp.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
B&X.xxx Holding Corp.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
