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EXHIBIT 2.2
PURCHASE AGREEMENT
by and between
ZD INC.
and
WP EDUCATION HOLDINGS LLC
Dated as of November 17, 1999
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TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS.......................................................1
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SECTION 1.1 Definitions..................................................1
ARTICLE II SALE AND PURCHASE OF ASSETS AND SHARES...........................4
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SECTION 2.1 Sale and Purchase of Assets..................................4
SECTION 2.2 Sale and Purchase of Shares..................................5
SECTION 2.3 Excluded Assets..............................................5
SECTION 2.4 Assumption of Liabilities; Excluded Liabilities..............7
SECTION 2.5 Purchase Price...............................................8
SECTION 2.6 Payment of Purchase Price....................................8
SECTION 2.7 The Closing..................................................8
SECTION 2.8 Post-Closing Purchase Price Adjustment.......................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER.......................12
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SECTION 3.1 Organization and Good Standing..............................12
SECTION 3.2 Capitalization..............................................12
SECTION 3.3 Corporate Authority.........................................13
SECTION 3.4 Consents and Approvals......................................13
SECTION 3.5 No Violations...............................................13
SECTION 3.6 Financial Statements........................................14
SECTION 3.7 Absence of Certain Changes and Events.......................14
SECTION 3.8 Litigation; Orders..........................................15
SECTION 3.9 Taxes.......................................................15
SECTION 3.10 Employee Benefits; ERISA...................................16
SECTION 3.11 Employees; Labor Matters...................................17
SECTION 3.12 Compliance with Laws; Governmental Authorizations..........18
SECTION 3.13 Real Property..............................................18
SECTION 3.14 Contracts, Leases and Agreements; No Default...............19
SECTION 3.15 Environmental Matters......................................20
SECTION 3.16 Insurance..................................................21
SECTION 3.17 Brokers and Finders........................................22
SECTION 3.18 No Undisclosed Liabilities.................................22
SECTION 3.19 Intellectual Property......................................22
SECTION 3.20 Transferred Assets.........................................24
SECTION 3.21 Year 2000 Compliance.......................................24
SECTION 3.22 Intercompany Transactions..................................25
SECTION 3.23 No Other Representations or Warranties.....................25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.........................25
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SECTION 4.1 Organization and Good Standing..............................25
SECTION 4.2 Limited Liability Company Authority.........................25
SECTION 4.3 Consents and Approvals; No Violations.......................26
SECTION 4.4 Securities Act..............................................26
SECTION 4.5 Brokers and Finders.........................................26
SECTION 4.6 Financing...................................................27
SECTION 4.7 Litigation..................................................27
SECTION 4.8 No Other Representations or Warranties......................27
ARTICLE V COVENANTS........................................................27
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SECTION 5.1 Conduct of Business.........................................27
SECTION 5.2 Access; Confidentiality.....................................28
SECTION 5.3 Required Consents and Approvals.............................30
SECTION 5.4 Reasonable Best Efforts.....................................30
SECTION 5.5 Publicity...................................................30
SECTION 5.6 Expenses....................................................31
SECTION 5.7 ZDMI Non-Solicitation.......................................31
SECTION 5.8 Employees...................................................31
SECTION 5.9 Intercompany Liabilities and Debt...........................33
SECTION 5.10 Intercompany Programs......................................33
SECTION 5.11 Retention of Records.......................................34
SECTION 5.12 Seller's Trademarks........................................34
SECTION 5.13 Tax Matters................................................36
SECTION 5.14 Further Assurances.........................................37
SECTION 5.15 Non-Assignable Agreements..................................37
SECTION 5.16 Insurance..................................................38
ARTICLE VI CONDITIONS TO CLOSING...........................................39
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SECTION 6.1 Conditions to Obligations of Buyer..........................39
SECTION 6.2 Conditions to Obligations of Seller.........................40
ARTICLE VII TERMINATION....................................................41
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SECTION 7.1 Termination.................................................41
SECTION 7.2 Effect of Termination.......................................42
ARTICLE VIII INDEMNIFICATION; REMEDIES.....................................43
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SECTION 8.1 Survival....................................................43
SECTION 8.2 Indemnification.............................................43
SECTION 8.3 Tax Indemnifications by Seller..............................43
SECTION 8.4 Tax Indemnifications by Buyer...............................46
SECTION 8.5 No Affiliate Liability......................................48
ARTICLE IX MISCELLANEOUS...................................................48
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SECTION 9.1 Assignments; No Third Party Rights..........................48
SECTION 9.2 Entire Agreement............................................49
SECTION 9.3 Amendment or Modification...................................49
SECTION 9.4 Notices.....................................................49
SECTION 9.5 Governing Law...............................................50
SECTION 9.6 Consent to Jurisdiction; Waiver of Jury Trial...............51
SECTION 9.7 Severability................................................51
SECTION 9.8 Waiver of Conditions........................................52
SECTION 9.9 Actions of the Company......................................52
SECTION 9.10 Descriptive Headings; Construction.........................52
SECTION 9.11 Counterparts...............................................52
SECTION 9.12 Knowledge..................................................53
SECTION 9.13 Materiality................................................53
Schedule 3.2(a) Capitalization
Schedule 3.2(b) Liens
Schedule 3.4 Governmental Consents and Approvals
Schedule 3.5(b) Violations
Schedule 3.5(c) Third Party Consents
Schedule 3.6 Financial Statements
Schedule 3.7 Absence of Certain Changes and Events
Schedule 3.8(a) Litigation
Schedule 3.9(a) Taxes
Schedule 3.10(a) Employee Benefit Plans
Schedule 3.10(e) ERISA
Schedule 3.11 Employees
Schedule 3.13(a) Property
Schedule 3.13(b) Liens on Property
Schedule 3.14(a) Applicable Contracts
Schedule 3.14(b) Enforceability and Compliance under Applicable Contracts
Schedule 3.16 Insurance Policies
Schedule 3.18 Undisclosed Liabilities
Schedule 3.19(a) Intellectual Property Rights
Schedule 3.19(b) Intellectual Property: Enforceability and Compliance
Schedule 5.8(a) Enhanced Severance Benefit Plan
Schedule 5.8(c)(i) Employees on Leave, Authorized Leave or Military Service
Compensation
Schedule 5.8(c)(ii) Employees on Long-Term Disability
Schedule 5.8(d) Retention and Special Bonuses
Schedule 5.10 Intercompany Programs
Schedule 5.10(c)(i) License Agreement with SmartPlanet, Inc.
Schedule 5.10(c)(ii) License Agreement with ZDNet
Schedule 5.15 Reasonable Efforts to Obtain Consent
Schedule 6.1(b) Certain Consents Delivered at Closing
Schedule 9.12 Persons Deemed to Have Knowledge
EXHIBIT A XXXX OF SALE AND ASSIGNMENT
EXHIBIT B ASSUMPTION AGREEMENT
EXHIBIT C TRADEMARK GUIDELINES
EXHIBIT D FINANCING TERM SHEET
PURCHASE AGREEMENT, dated as of November 17, 1999 (this
"Agreement"), by and between ZD INC., a Delaware corporation ("Seller"), and WP
Education Holdings LLC, a limited liability company organized under the laws of
the State of Delaware ("Buyer").
WHEREAS, Seller, through its ZD Education division (the
"Division"), and Xxxx-Xxxxx Education Canada, Inc. (the "Company") are engaged
in the business of providing integrated IT learning solutions to businesses and
organizations (the "Business").
WHEREAS, the parties hereby agree that Seller shall sell,
transfer and assign to Buyer the assets, properties and rights of the Business,
including all of the issued and outstanding shares of capital stock (the
"Shares") of the Company, and Buyer shall assume certain liabilities of Seller,
in each case upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
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DEFINITIONS
SECTION 1.1 Definitions. The following terms are defined in the sections
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indicated.
Defined Term Section
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"Accounting Expert" Section 2.8(e)
"Action" Section 3.8(a)
"Adjustment Amount" Section 2.8(h)
"Affiliate" Section 2.3(d)
"Agreement" Recitals
"Ancillary Agreements" Section 3.5
"Annual Financial Statements" Section 3.6
"Applicable Contracts" Section 3.7(d)
"Asset Purchase" Section 2.1
"Assumed Liabilities" Section 2.4(a)
"Benefit Plans" Section 3.10(a)
"Xxxx of Sale" Section 2.7(b)(i)
"Books and Records" Section 2.1(g)
"Business" Recitals
"Business Systems" Section 3.21(a)
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"Buyer" Recitals
"Buyer Affiliate" Section 8.5
"Buyer License" Section 3.19(b)(i)
"Buyer's Plan" Section 5.8(b)
"Closing" Section 2.7(a)
"Closing Date" Section 2.7(a)
"Closing Statement" Section 2.8(a)
"Code" Section 3.10(b)
"Company" Recitals
"Company Benefit Plans" Section 3.10(a)
"Conducted" Section 3.1
"Confidentiality Agreement" Section 7.2
"Consideration" Section 5.13(b)
"Content" Section 2.1(a)
"Continuing Employee" Section 5.8(a)
"Contract" Section 2.1(f)
"Contracts" Section 2.1(f)
"Copyrights" Section 2.1(a)
"Damages" Section 8.2(a)
"Date Data" Section 3.21(b)
"Division" Recitals
"DOJ" Section 5.3(b)
"Enforceability Exceptions" Section 3.3
"Environmental Claim" Section 3.15(c)(i)
"Environmental Law" Section 3.15(c)(ii)
"ERISA" Section 3.10(a)
"ERISA Affiliate" Section 3.10(c)
"Excluded Assets" Section 2.3
"Excluded Liabilities" Section 2.4(b)
"Financial Statements" Section 3.6
"FTC" Section 5.3(b)
"GAAP" Section 2.8(a)
"Governmental Authorizations" Section 3.12(b)
"Governmental Entity" Section 3.4
"Governmental Filings and Approvals" Section 6.1(c)
"Governmental Order" Section 6.1(d)
"Hazardous Substance" Section 3.15(c)(iii)
"HSR Act" Section 2.7(a)
"HSR Filing" Section 3.4
"Intellectual Property" Section 2.1(a)
"International Plan" Section 3.10(g)
"Interim Financial Statements" Section 3.6
"IRS" Section 2.5
"Law" Section 3.5(d)
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"Leased Real Property" Section 3.13(a)
"Lender" Section 4.6
"Liabilities" Section 3.18
"Liens" Section 3.2(b)
"Marks" Section 5.12(b)
"Non-Assignable Rights" Section 5.15
"Order" Section 3.5(d)
"Pacifica Litigation" Section 2.4(b)(vii)
"Patents" Section 2.1(a)
"Pension Plan" Section 3.10(b)
"Person" Section 3.2(c)
"Plans" Section 3.10(b)
"Purchase Price" Section 2.5
"Pre-Closing Taxes" Section 8.3(c)
"Related to the Business" Section 2.1
"Representatives" Section 7.2
"Review Period" Section 2.8(c)
"Securities Act" Section 4.4
"Seller" Recitals
"Seller Benefit Plans" Section 3.10(a)
"Seller Group" Section 8.3(a)
"Seller Health Plans" Section 5.8(a)(ii)
"Seller Life Plan" Section 5.8(a)(iii)
"Sept. 30 Balance Sheet" Section 2.8(a)
"Shares" Recitals
"Software" Section 2.1(a)
"Statement of Objections" Section 2.8(d)
"Stock Purchase" Section 2.2
"Subsidiary" Section 9.1(a)
"Tax" Section 8.3(b)
"Tax Package" Section 8.4(e)
"Tax Returns" Section 2.3(e)
"Trade Secrets" Section 2.1(a)
"Trademarks" Section 2.1(a)
"Transfer Taxes" Section 5.13(a)
"Transferred Assets" Section 2.1
"Year 2000 Compliance" Section 3.21(c)
"Year 2000 Compliant" Section 3.21(c)
"ZD Xxxx" Section 5.12(b)
"ZD Plan" Section 2.8(a)
"Ziff-Xxxxx Xxxx" Section 5.12(b)
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ARTICLE II
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SALE AND PURCHASE OF ASSETS AND SHARES
SECTION 2.1 Sale and Purchase of Assets. Upon the terms and subject to the
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conditions set forth in this Agreement, Seller hereby agrees to sell, convey,
transfer, assign and deliver to Buyer, and Buyer hereby agrees to purchase from
Seller, at the Closing, all of Seller's right, title and interest in and to all
assets, rights and properties primarily related to, or used or held for use
primarily in connection with, the Business immediately prior to the Closing
("Related to the Business"), whether tangible or intangible, real, personal or
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mixed, other than the Excluded Assets (the "Transferred Assets"), including, but
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not limited to, the following assets, rights and properties of Seller to the
extent Related to the Business:
(a) all intellectual property (the "Intellectual Property") defined as
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any United States, foreign, international and state: patents and patent
applications, industrial design registrations, certificates of invention
and utility models (collectively, "Patents"); trademarks, service marks,
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and trademark or service xxxx registrations and applications, trade names,
logos, designs and slogans, together with all goodwill related to the
foregoing (collectively, "Trademarks"); Internet domain names, copyrights,
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copyright registrations, renewals and applications for copyrights,
including without limitation for the Content and the Software (each as
defined below in this Section 2.1) (collectively, "Copyrights"); Content;
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Software, trade secrets and other confidential information, know-how,
proprietary processes, formulae, algorithms, models and methodologies
(collectively, "Trade Secrets"), rights of publicity, and all license
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agreements and other agreements granting rights relating to any of the
foregoing. "Software" means any and all (i) computer programs, including
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any and all software implementations of algorithms, models and
methodologies, whether in source code or object code form, (ii) databases,
compilations, and any other electronic data files, including any and all
collections of data, whether machine readable or otherwise, (iii)
descriptions, flow-charts, technical and functional specifications, and
other work product used to design, plan, organize, develop, test,
troubleshoot and maintain any of the foregoing, (iv) without limitation to
the foregoing, the software technology supporting any functionality
contained on Internet site(s) and (v) all documentation, including
technical, end-user, training and troubleshooting manuals and materials,
relating to any of the foregoing. "Content" means any and all information,
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pictures, images, graphics, video, audio, text and any other content or
information, in whatever form and on any media;
(b) all marketing information, marketing research and data and
customer and mailing lists, including works in progress;
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(c) all furniture, fixtures, furnishings, machinery, vehicles,
computers, equipment, supplies and other tangible personal property located
in the Division's headquarters in Rochester, New York or elsewhere;
(d) all inventory and all raw materials, work in process, finished
products, wrapping, supply and packaging items located in the Division's
headquarters in Rochester, New York or elsewhere;
(e) all prepaid expenses, accounts receivable and other current assets
as of the Closing Date;
(f) all contracts, purchase or other orders, leases, licenses,
commitments, instruments and other agreements to which Seller is a party
(each, a "Contract" and collectively, the "Contracts") and all rights
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thereunder;
(g) originals or copies of all books, records, ledgers, files,
reports, accounts, data, plans and operating records, whether in hard copy,
electronic format, magnetic or other media ("Books and Records");
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(h) all promotional and advertising materials, whether existing in
print, video, online, magnetic or other media, and all stationery, forms,
labels and other materials;
(i) all licenses, permits, approvals, registrations and similar rights
or authorizations obtained from governmental entities;
(j) all claims, causes of action and other rights of recovery, set off
or recoupment (but excluding any recovery (whether by settlement or
otherwise) of attorneys' fees and expenses incurred by Seller in connection
with the Pacifica Litigation (as defined herein)); and
(k) all goodwill relating to the Business or any of the foregoing.
The transactions contemplated by this Section 2.1 are sometimes referred to
herein as the "Asset Purchase."
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SECTION 2.2 Sale and Purchase of Shares. Upon the terms and subject to the
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conditions set forth in this Agreement, at the Closing, Seller hereby agrees to
sell to Buyer, and Buyer hereby agrees to purchase from Seller, all of the
Shares. The transactions contemplated by this Section 2.2 are sometimes referred
to herein as the "Stock Purchase."
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SECTION 2.3 Excluded Assets. Notwithstanding anything in this Agreement to
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the contrary, Seller shall retain from and after the Closing all of its direct
and indirect right, title and interest in and to, and there shall be excluded
from the Asset
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Purchase, the Stock Purchase and the Transferred Assets, the following
(collectively, the "Excluded Assets"):
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(a) cash, bank accounts and marketable securities of Seller (other
than the Shares);
(b) all assets of Seller not Related to the Business;
(c) Seller's rights under all insurance policies, including insurance
policies in respect of directors and officers and to all claims against
insurance carriers;
(d) all amounts owed by Seller or any of its Affiliates (other than
the Company or the Division) to the Company or the Division, whether or not
Related to the Business. For purposes of this Agreement, an "Affiliate" is
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any Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or under common control with such Person;
(e) all returns, reports, notices, forms, declarations, claims for
refund, estimates, elections, information statements or other documents
relating to any Tax, including any schedule or attachment thereto, and any
amendment thereof ("Tax Returns") so long as copies of such Tax Returns
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insofar as they relate exclusively to the Company are included in the
Transferred Assets;
(f) all Books and Records Related to the Business which Seller is
required by law to retain, so long as copies of such Books and Records are
included in the Transferred Assets;
(g) subject to Sections 5.10(c) and 5.12 below, all rights to the
names "Xxxx-Xxxxx," "Ziff," "ZD," any derivation or other variation of such
terms whether or not Related to the Business and all other trademarks and
trade names, service marks, trade dress, domain names or logos of Seller or
any of its Affiliates that are not Related to the Business;
(h) all assets sold or otherwise disposed of by Seller or any of its
Affiliates in the ordinary course of business prior to the Closing Date;
(i) all rights, claims, credits, causes of action or rights of set-off
against third parties pertaining to the Excluded Assets; and
(j) subject to Sections 5.15 and 6.1, Seller's rights under any
Contract Related to the Business for which consent to assignment is
required and has not been obtained as of the Closing Date.
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SECTION 2.4 Assumption of Liabilities; Excluded Liabilities.
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(a) Upon the terms and subject to the conditions set forth herein, at
the Closing, Buyer agrees to assume and become solely responsible for all
debts, liabilities or obligations whatsoever of Seller or any of its
Affiliates that arise out of or relate to the ownership of the Transferred
Assets or the operation of the Business, whether arising before or after
the Closing and whether known or unknown, disclosed or undisclosed, mature
or unmatured, accrued, absolute, contingent or otherwise, including the
following (such debts, liabilities and obligations to be assumed, the
"Assumed Liabilities"):
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(i) except as provided in Section 2.4(b)(vi), all liabilities and
obligations of Seller under the Contracts;
(ii) all liabilities with respect to all actions, suits,
proceedings, disputes, claims or investigations that arise out of or
relate to the ownership of the Transferred Assets or the operation of
the Business, at law, in equity or otherwise (but excluding the
Pacifica Litigation);
(iii) all employee benefit, compensation, retention and severance
liabilities and other similar liabilities associated with employees of
the Division (it being expressly understood and agreed that the
retention and special bonuses set forth in Schedule 5.8(d) of the
Disclosure Schedule, to the extent paid, and the contribution to the
ZD Plan contemplated in Section 5.8(b), shall be accrued as
liabilities on the Closing Statement).
(b) It is understood and agreed by the parties hereto that the Assumed
Liabilities shall not include liabilities of Seller or the Business other
than those set forth in clause (a) above, whether known or unknown,
disclosed or undisclosed, mature or unmatured, accrued, absolute,
contingent or otherwise, and shall also not include the following (all such
excluded liabilities, the "Excluded Liabilities"):
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(i) any liabilities and obligations to the extent arising out of
the Excluded Assets;
(ii) any liabilities of the Company (since these liabilities will
continue to be owed by the Company rather than Buyer);
(iii) except as provided with respect to Transfer Taxes in
Section 5.13(a) hereof, expenses incurred by Seller in connection with
the sale of the Transferred Assets;
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(iv) any intercompany liabilities owed by the Division to Seller
or any of its Affiliates (other than the Company or the Division) that
arise prior to the Closing and any debt for borrowed money owed by the
Division to third parties;
(v) any obligations for borrowed money;
(vi) any liabilities or obligations under any agreement that is
not a Contract, or any agreement that is not effectively assigned to
Buyer; and
(vi) all liabilities and obligations with respect to the
litigation referred to in Schedule 3.8 of the Disclosure Schedule (the
"Pacifica Litigation").
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SECTION 2.5 Purchase Price. The purchase price for the Transferred Assets
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and the Shares shall be One Hundred Seventy-Two Million Dollars and Zero Cents
($172,000,000) (the "Purchase Price") plus or minus the Adjustment Amount. The
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Purchase Price shall be paid in accordance with Section 2.6 hereof. The Purchase
Price shall be allocated among the Transferred Assets and the Shares in
accordance with Section 5.13(b) below. Each party shall use this allocation in
all tax and governmental filings, except as otherwise required by a tax or
governmental authority in connection with an audit or by a court decision. To
the extent that disclosures of this allocation are required to be made by the
parties to the Internal Revenue Service (the "IRS"), Buyer and Seller will
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disclose such reports to the other prior to filing with the IRS.
SECTION 2.6 Payment of Purchase Price. At the Closing, Buyer agrees to pay
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to Seller the Purchase Price in cash by wire transfer of immediately available
funds to the account designated by Seller.
SECTION 2.7 The Closing.
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(a) The closing of the Asset Purchase and the Stock Purchase
(collectively, the "Closing") shall take place at the offices of Seller at
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9:30 a.m. local time on the first business day following the first date on
which (i) all waiting periods applicable to the Asset Purchase or the Stock
Purchase under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), shall have expired or been terminated and (ii) all
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the other conditions to Closing set forth in Article VI (other than those
conditions that by their nature are to be satisfied at the Closing, but
subject to the fulfillment or waiver of those conditions) shall have been
satisfied or waived, or at such other time, place and date as Buyer and
Seller may mutually agree; provided, however, that if the Closing would
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otherwise occur prior to January 18, 2000, then the Closing shall occur on
January 18, 2000. The date on which the Closing occurs is referred to as
the "Closing Date."
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(b) At the Closing, Seller shall deliver to Buyer:
(i) a duly executed xxxx of sale and assignment in the form
attached hereto as Exhibit A (the "Xxxx of Sale");
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(ii) the ancillary documents referred to in Section 6.1(h);
(iii) assignments of all the Intellectual Property;
(iv) executed copies of the consents referred to on Schedule
6.1(b) of the Disclosure Schedule;
(v) all of the Books and Records;
(vi) the officer's certificate referred to in Sections 6.1(a)
hereof;
(vii) the Shares in the form provided in Section 6.1(e);
(viii) the opinion of counsel referred to in Section 6.1(f); and
(ix) such other documents and certificates as are required to be
delivered by Seller to Buyer pursuant to this Agreement.
(c) At the Closing, Buyer shall deliver (unless previously delivered):
(i) the Purchase Price;
(ii) the Assumption Agreement in substantially the form of
Exhibit B attached hereto duly executed by Buyer;
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(iii) the Xxxx of Sale, duly executed by Buyer;
(iv) the certificate referred to in Sections 6.2(a) and (b);
(v) such other documents as are required to be delivered by Buyer
to Seller pursuant to this Agreement; and
(vi) the opinion of counsel referred to in Section 6.2(f).
SECTION 2.8 Post-Closing Purchase Price Adjustment.
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(a) Preparation of Closing Statement. As soon as practicable, but in no
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event later than 45 days after the Closing Date, Buyer shall prepare and deliver
to Seller the Closing Statement. For purposes of this Agreement, "Closing
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Statement" shall mean the statement setting forth the net assets of the Division
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and the Company which for purposes of this Agreement shall mean the excess of
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assets over liabilities as of the Closing Date. Net assets shall be determined
in accordance with generally accepted United States accounting principles
("GAAP") applied on a basis consistent with the basis on which the unaudited
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consolidated balance sheet of the Division and the Company as of September 30,
1999 referred to in Section 3.6 (the "Sept. 30 Balance Sheet") was prepared,
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except as otherwise provided below. For purposes of calculating net assets,
"assets" in the Sept. 30 Balance Sheet and the Closing Statement shall not
include any Excluded Assets, and "liabilities" shall include only those
liabilities that are Assumed Liabilities or liabilities of the Company and shall
not include any liabilities that this agreement expressly provides shall be
retained or discharged (or indemnified against) by Seller. In addition, for
purposes of calculating liabilities for the Closing Statement only, the
following shall be accrued as liabilities: (i) liabilities relating to retention
and special bonuses set forth in Schedule 5.8(d) of the Disclosure Schedule, but
only to the extent those amounts are actually paid and (ii) the discretionary
contributions to be made under the Xxxx-Xxxxx Retirement & Savings Plan (the "ZD
--
Plan") as contemplated in the last sentence of Section 5.8(b) hereof.
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(b) Access to Buyer. Upon reasonable notice to Seller, Seller shall provide
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Buyer full access at all reasonable times to such historical financial
information (to the extent still in Seller's possession) relating to the
Division and the Company as Buyer shall reasonably request to prepare and
deliver the Closing Statement in accordance with Section 2.8(a) and to respond
to any Statement of Objections.
(c) Examination by Seller. Upon receipt of the Closing Statement, Seller
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shall have 45 days (the "Review Period") to review such Closing Statement and
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related computation of net assets. During the Review Period Buyer shall give
Seller full access at all reasonable times to the books, records, premises and
facilities and other materials of the Division and the Company and the personnel
of, and work papers prepared by or for Buyer or in Buyer's possession to the
extent that they relate to the Division or the Company for the purpose of
reviewing such Closing Statement and the related computation of net assets.
(d) Objection by Seller. On or prior to the last day of the Review Period,
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Seller may object to the Closing Statement by delivering to Buyer a written
statement setting forth in reasonable detail Seller's objections to the Closing
Statement and/or the computation of net assets (the "Statement of Objections").
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If Seller fails to deliver a Statement of Objections within the Review Period,
the Closing Statement and computation of net assets shall be deemed to have been
accepted by Seller and shall be final and binding on the parties and the net
assets reflected in the Closing Statement shall be used in computing the
Adjustment Amount described in Section 2.8(h) below. If Seller delivers a
Statement of Objections within the Review Period, Seller and Buyer shall
negotiate in good
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faith to resolve such objections, and any objections that are resolved by a
written agreement between Buyer and Seller shall be final and binding on the
parties for purposes of the Closing Statement.
(e) Resolution of Disputes. If Seller and Buyer fail to reach an agreement
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with respect to all of the matters set forth in a Statement of Objections, then
the matters still in dispute shall, not later than 10 business days after the
earlier of the end of the Review Period or the first date on which one of the
parties affirmatively terminates discussions in writing with respect to the
Statement of Objections, be submitted for resolution to the New York office of
one of the five largest United States independent certified public accountants
that has no material business relationships with Buyer or Seller, as selected by
Buyer and Seller jointly (the "Accounting Expert") who, acting as an expert and
-----------------
not as an arbitrator, shall resolve the matters still in dispute and adjust the
Closing Statement and the net assets to reflect such resolution. The Accounting
Expert's resolution of the matters in dispute shall be final and binding on the
parties. The Accounting Expert shall make a determination as soon as practicable
and in any event within 30 days (or such other time as the parties hereto shall
agree in writing) after its engagement. The parties hereto agree that all
adjustments shall be made without regard to materiality.
(f) Fees and Expenses of the Accounting Expert. The fees and expenses
------------------------------------------
of the Accounting Expert shall be divided equally between Seller and Buyer.
(g) Access to Supporting Documentation. Seller and Buyer shall each
----------------------------------
make readily available to the Accounting Expert all relevant work papers
and books and records relating to the Business, the Closing Statement and
the computation of the net assets.
(h) Payment of Adjustment Amount. Within two business days after the
----------------------------
Closing Statement and the computation of the net assets become final and
binding, (i) if the net assets shown on the Closing Statement is less than
the net assets shown on the Sept. 30 Balance Sheet, the Purchase Price
shall be decreased on a dollar-for-dollar basis by the amount by which net
assets on the Sept. 30 Balance Sheet exceeds the net assets shown on the
Closing Statement, (ii) if the net assets shown on the Closing Statement is
greater than the net assets shown on the Sept. 30 Balance Sheet, the
Purchase Price shall be increased on a dollar-for-dollar basis by the
amount by which net assets on the Sept. 30 Balance Sheet is less the net
assets shown on the Closing Statement (the increase or decrease in Purchase
Price each being an "Adjustment Amount") and (iii) Seller shall pay to
-----------------
Buyer (in the case of clause (i)) or Buyer shall pay to Seller (in the case
of clause (ii)), as the case may be, the Adjustment Amount, together with
interest thereon at a rate equal to the rate announced from time to time by
The Bank of New York as its base rate during the period from the Closing
Date to the date of the adjustment
-11-
payment required by this Section 2.8(h) calculated on the basis of a
365-day year and the actual number of days elapsed. Any such payment shall
be made by wire transfer of immediately available funds to a bank account
or accounts as shall be designated in writing by the recipient no later
than one business day prior to the payment date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER
Seller hereby represents and warrants to Buyer as follows:
SECTION 3.1 Organization and Good Standing. Each of Seller and the Company
------------------------------
is duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, with full corporate power and authority to conduct
its businesses and to own or use its assets as currently conducted or as
contemplated to be conducted ("Conducted"), owned and used. The Company is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which it is required to be so licensed or qualified, except for
any failures to be so licensed, qualified or in such good standing that,
individually or in the aggregate, are not material.
SECTION 3.2 Capitalization.
--------------
(a) The authorized, issued and outstanding capital stock of, or other
equity interest in, the Company as of the date of this Agreement is set
forth in Schedule 3.2(a) of the Disclosure Schedule. All of the issued and
outstanding shares of capital stock of, or other equity interests in, the
Company have been duly authorized and are validly issued, fully paid and
nonassessable.
(b) Except as set forth in Schedule 3.2(b) of the Disclosure Schedule,
Seller is, and on the Closing Date will be, the sole record and beneficial
owner of the Shares, free and clear of all liens, mortgages, security
interests, charges, pledges, claims, options, voting trusts, restrictions
or other encumbrances (collectively, "Liens"). At the Closing, Buyer will
-----
obtain good and marketable title to the Shares, free and clear of all
Liens.
(c ) There are no shares of capital stock of, or other equity
interests in, the Company reserved for issuance or subject to preemptive
rights or any outstanding subscriptions, options, warrants, calls, rights
or convertible or exchangeable securities, phantom stock, participation
interests, SARs or any other agreements or other instruments in effect
giving any Person the right to acquire from Seller or any of its Affiliates
any shares of capital stock of, or other equity interests in, the Company.
"Person" means any individual, corporation (including any non-profit
------
-12-
corporation), general or limited partnership, limited liability company,
Governmental Entity, joint venture, estate, trust, association,
organization or other entity of any kind or nature. The Company owns no
equity interests in any other Person.
SECTION 3.3 Corporate Authority. Seller has the corporate power and
-------------------
authority, and has taken all corporate action necessary, to authorize, execute,
deliver and perform its obligations under this Agreement and the Ancillary
Agreements (as defined below). This Agreement and the Ancillary Agreements and
the transactions contemplated hereby have been duly authorized, executed and
delivered by Seller and constitutes valid and legally binding obligations of
Seller, enforceable against Seller in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles (collectively, the "Enforceability
--------------
Exceptions").
----------
SECTION 3.4 Consents and Approvals. Except for the notification and report
----------------------
form required to be filed under the HSR Act (such filing, the "HSR Filing") and
----------
except as set forth in Schedule 3.4 of the Disclosure Schedule, no notices,
reports, registrations or other filings are required to be made or delivered by
Seller with, nor are any consents, approvals or authorizations required to be
obtained by Seller from, any court or other governmental, administrative or
regulatory authority in the United States or elsewhere (each, a "Governmental
------------
Entity"), in connection with the execution, delivery or the performance of this
------
Agreement, the Ancillary Agreements or the transactions contemplated hereby or
thereby by Seller, except for any such matters the failure of which to make or
obtain, individually or in the aggregate, are not material.
SECTION 3.5 No Violations. The execution, delivery and performance of this
-------------
Agreement and any agreement required to be delivered in connection herewith and
the licenses contemplated by Section 5.10(c) (the "Ancillary Agreements") by
--------------------
Seller and of the transactions contemplated hereby or thereby will not:
(a) violate or contravene any provision of the certificate of
incorporation or by-laws (or other comparable governing documents) of
Seller or the Company;
(b) violate, conflict with, or constitute or result in a default,
acceleration or creation of a Lien under, or a termination of (in each case
with or without notice or lapse of time or both), or result in the loss of
any benefit under, any provision of any Contract to which Seller or the
Company is a party or by which any of their respective assets are bound, in
each case other than (i) as set forth in Schedule 3.5(b) of the Disclosure
Schedule and (ii) for any such matters that, individually or in the
aggregate, are not material;
-13-
(c) require Seller or the Company to obtain the consent, waiver,
authorization or approval of any Person under any Contract to which Seller
or the Company is a party or by which any of their respective assets are
bound, in each case other than (i) as set forth in Schedule 3.5(c) of the
Disclosure Schedule or (ii) for any such matters that, individually or in
the aggregate, are not material; or
(d) violate, contravene or conflict with any statute, law, rule or
regulation (each, a "Law"), or any award, judgment, decree, or other order
---
(each, an "Order"), of any Governmental Entity having jurisdiction over
-----
Seller or the Company or any of their assets.
SECTION 3.6 Financial Statements. Schedule 3.6 of the Disclosure Schedule
--------------------
contains (i) unaudited consolidated pro-forma balance sheets of the Division and
the Company as of December 31, 1997 and 1998, and the related unaudited
consolidated pro-forma statements of operations for each of the years then ended
(collectively, the "Annual Financial Statements") and (ii) an unaudited
---------------------------
consolidated balance sheet of the Division and the Company as of September 30,
1999 and the related unaudited consolidated pro-forma statement of operations
for the nine months then ended (collectively, the "Interim Financial
-----------------
Statements," and, together with the Annual Financial Statements, the "Financial
---------- ---------
Statements"). The Financial Statements have been prepared based on the books and
----------
records of Seller in accordance with GAAP consistently applied throughout the
periods covered by such statements and fairly present the financial condition
and the results of operations of the Division and the Company as of the
respective dates and for the periods then ended, as applicable, subject to (i)
in the case of the Interim Financial Statements, normal year-end adjustments
that are not expected to be material in amount or effect, (ii) the absence of
the level of detail and full financial footnotes that would be required in
regular financial statements, (iii) the absence of line items below earnings
before interest and taxes in the unaudited consolidated pro forma statements of
operations, (iv) the exclusion of operations Related to the Business that have
been sold by Seller prior to the date hereof and (v) the pro forma adjustments
described therein.
SECTION 3.7 Absence of Certain Changes and Events. Except as set forth in
Schedule 3.7 of the Disclosure Schedule, since September 30, 1999:
(a) there has not been any material adverse change in the business,
assets, liabilities, prospects, results of operations or condition
(financial or otherwise) of the Division and the Company taken as a whole;
(b) each of Seller (but solely with respect to the Division) and the
Company has Conducted its business only in the ordinary course of business,
consistent with past practice;
-14-
(c) neither Seller nor the Company has sold, leased or otherwise
disposed of, or incurred any Lien on, any material asset of the Business;
(d) neither Seller nor the Company has settled, compromised, waived,
released or assigned any material rights or claims it has under or in
respect of any Action or Contract included in the Transferred Assets or to
which the Company is a party or by which its assets are bound
(collectively, "Applicable Contracts"), tax matter or insurance policy; and
--------------------
(e) there has not been any material change in the accounting
practices, methods or principles used by Seller (but solely with respect to
the Division) or the Company.
SECTION 3.8 Litigation; Orders.
------------------
(a) Except as set forth in Schedule 3.8(a) of the Disclosure Schedule,
there are no actions, suits or other legal or administrative proceedings or
investigations by or before any Governmental Entity (each, an "Action")
------
pending or, to the knowledge of Seller, threatened against Seller or the
Company or any of their respective assets, other than Actions that,
individually or in the aggregate, are not material or not reasonably likely
to prohibit, materially restrict or delay the performance of this Agreement
or the Ancillary Agreements by Seller or the Company.
(b) None of Seller, the Company or any of their assets is subject to
any Order except for those that, individually or in the aggregate, are not
material or not reasonably likely to prohibit, materially restrict or delay
the performance of this Agreement or the Ancillary Agreements by Seller or
the Company.
SECTION 3.9 Taxes.
-----
(a) Each of Seller and the Company has filed or caused to be filed all
Tax Returns that are or were required to be filed by or with respect to any
of them, either separately or as a member of a group of corporations,
pursuant to applicable Law, and all such Tax Returns are or will be true,
complete and correct in all material respects. Each of Seller and the
Company has paid, or made provision for the payment of, all Taxes that have
or are reasonably likely to become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Seller or the Company,
except such Taxes, if any, as are listed in Schedule 3.9(a) of the
Disclosure Schedule or are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been provided
in the Financial Statements.
(b) The charges, accruals and reserves with respect to Taxes provided
in the Financial Statements are adequate (determined in accordance with
GAAP) and
-15-
all Taxes that Seller or the Company is or was required by Law to withhold
or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity or other Person.
(c) There are no Liens on any of the Transferred Assets or the assets
of the Company that arose in connection with any failure (or alleged
failure) to pay any Tax.
SECTION 3.10 Employee Benefits; ERISA.
------------------------
(a) Seller has delivered or otherwise made available to Buyer a true,
complete and correct copy of, and Schedule 3.10(a) of the Disclosure
Schedule sets forth a true, complete and correct list of, each
profit-sharing, pension, severance pay, thrift, savings, incentive, change
of control, employment, retirement, bonus, deferred compensation, group
life and health insurance and other employee benefit plan, agreement,
arrangement or commitment, including any such plan, agreement, arrangement
or commitment or any other plan or program that constitutes an "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (i) that provides benefits for
-----
or pertains to any Division employee or to which Seller makes contributions
on behalf of any Division employee or is otherwise bound in connection with
the Division ("Seller Benefit Plans") or (ii) that provides benefits for or
--------------------
pertains to any Company employee or to which the Company makes
contributions on behalf of any of its employees or is otherwise bound (all
of which are hereinafter referred to as "Company Benefit Plans" and,
---------------------
collectively with Seller Benefit Plans, the "Benefit Plans").
-------------
(b) All Benefit Plans that are employee benefit plans (the "Plans"),
to the extent subject to ERISA or the Internal Revenue Code of 1986, as
amended (the "Code"), are in substantial compliance with ERISA and the
----
Code. Each Plan that is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA ("Pension Plan") and that is intended to
------------
be qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS and nothing has occurred following
receipt of such letter that is reasonably likely to cause such letter to be
revoked. There is no material pending or, to the knowledge of Seller,
threatened litigation relating to the Plans. No action has been taken with
respect to any Benefit Plan either to terminate such Benefit Plan or to
cause distributions, other than in the ordinary course of business, to
participants under such Benefit Plan.
(c) Neither Seller, the Company nor any entity that is considered one
employer with Seller or the Company under Section 4001(b)(1) of ERISA or
Section 414(b) or (c) of the Code (an "ERISA Affiliate") has maintained, or
---------------
made
-16-
or been obligated to make, contributions to any plan subject to Part 3 of
Title I or Title IV of ERISA at any time within the last six years.
(d) All contributions required to be made under the terms of any
Benefit Plan have been timely made when due.
(e) None of Seller or the Company has any commitments or obligations
nor made any representations regarding continuation of welfare benefits
after termination of employment under any of the Benefit Plans, except as
required by Part 6 of Title I of ERISA or similar laws or as set forth in
Schedule 3.10(e) of the Disclosure Schedule. Except to the extent limited
by applicable Law, there are no restrictions on the rights of Seller or the
Company to amend or terminate any such Benefit Plan without incurring
Liability thereunder.
(f) None of Seller or the Company has any obligations for retiree
health or life benefits. Except to the extent limited by applicable Law,
there are no restrictions on the rights of Seller or the Company to amend
or terminate any Benefit Plan without incurring Liability thereunder.
(g) Each Benefit Plan covering non-U.S. employees (an "International
-------------
Plan") has been maintained in substantial compliance with its terms and
----
with the requirements prescribed by any and all applicable Laws (including
any special provisions relating to qualified plans where such International
Plan was intended to so qualify) and has been maintained in good standing
with applicable regulatory authorities. The fair market value of the assets
of each funded International Plan (or the liability of each funded
International Plan funded through insurance) is sufficient to procure or
provide for the benefits accrued thereunder through the Closing Date
according to the actuarial assumptions and valuations most recently used to
determine employer contributions to the International Plan. The Company
conforms in all material respects with the provisions of any applicable
national law or regulations in relation to staff delegates and workers'
committees, and in a more general manner in relation to the representation
of the employees within the Company.
SECTION 3.11 Employees; Labor Matters. Schedule 3.11 of the Disclosure
------------------------
Schedule contains a true, complete and correct list of the name, job title,
current compensation, and date of hire of each employee of (a) Seller in the
Division and (b) the Company, including each employee on leave of absence or
layoff status. Neither Seller nor the Company is a party to, or bound by, any
collective bargaining agreement or other labor Contract nor is any such
collective bargaining agreement or other labor Contract currently being
negotiated, nor, to the knowledge of Seller, are there any activities or
proceedings of any labor union or labor organization to organize any employees
of Seller in the Division or the Company.
-17-
SECTION 3.12 Compliance with Laws; Governmental Authorizations. Except for
-------------------------------------------------
any such matters that, individually or in the aggregate, are not material:
(a) each of Seller and the Company is in compliance with each Law
applicable to it or to its conduct, ownership or operation of the Business
and no notice has been received by Seller or the Company alleging a failure
to comply with such Laws;
(b) each of Seller and the Company has all licenses, permits and other
approvals or authorizations from Governmental Entities that are necessary
to permit it to lawfully conduct and operate the Business in the manner it
currently does and to permit it to own and use its assets in the manner in
which it currently does ("Governmental Authorizations"); and
---------------------------
(c) each of Seller and the Company is in full compliance in all
material respects with all of the terms and requirements of each of its
Governmental Authorizations and no notice has been received by Seller or
the Company alleging a failure to comply with such terms and requirements.
SECTION 3.13 Real Property.
-------------
(a) Schedule 3.13(a) of the Disclosure Schedule contains a true,
complete and correct list of all leased real property (the "Leased Real
-----------
Property") included in the Transferred Assets or leased by the Company.
--------
Seller has delivered or made available to Buyer true, complete and correct
copies of the deeds, leases or other instruments by which such real
property is leased. Neither Seller nor the Company owns any real property
Related to the Business. There is no default under any leases relating to
the Leased Real Property by Seller or the Company or, to the knowledge of
Seller, by the other parties thereto and, to the knowledge of Seller, no
event has occurred which with the giving of notice, lapse of time or both
would constitute such a default other than in each such case for any such
defaults that, individually or in the aggregate, are not material. Each
lease relating to the Leased Real Property is valid, binding and
enforceable in accordance with its terms and in full force and effect.
(b) Each of Seller and the Company hold the leasehold interests in the
Leased Real Property free and clear of all Liens except: (i) Liens
------
disclosed in Schedule 3.13(b) of the Disclosure Schedule, (ii) mortgages or
security interests shown on the Financial Statements as securing specified
Liabilities or obligations, (iii) mortgages or security interests incurred
in connection with the purchase of property or assets after September 30,
1999 and disclosed in Schedule 3.13(b) of the Disclosure Schedule (such
mortgages and security interests being limited to the property or assets so
acquired), (iv) Liens for current Taxes and assessments and other charges
by Governmental Entities not yet due and payable or which
-18-
may thereafter be paid without penalty or are being contested in good faith
by appropriate proceedings, and (v) imperfections of title that are not
material.
SECTION 3.14 Contracts, Leases and Agreements; No Default.
--------------------------------------------
(a) Except as set forth in Schedule 3.14(a) of the Disclosure
Schedule, there are no Applicable Contracts:
(i) evidencing indebtedness for borrowed money or pursuant to
which Seller or the Company has guaranteed any obligation of any other
Person;
(ii) prohibiting or limiting the ability of Seller or the Company
to engage in any line of business, to compete with any Person or to
carry on the Business anywhere in the world;
(iii) requiring the performance of services or delivery of goods
or materials by or to Seller or the Company or the lease of personal
property by or from any Person for consideration exceeding $100,000 in
any one year;
(iv) regarding the employment or severance arrangements of any
employee;
(v) with directors, officers or employees that are not
cancellable by it on notice of not longer than 30 days and without
liability, penalty or premium or providing for the payment of any
bonus or commission based upon sales or earnings; or
(vi) that are material to the Business.
Seller has delivered or made available to Buyer a true, complete and
correct copy of each Applicable Contract listed in Schedule 3.14(a) of the
Disclosure Schedule.
(b) Except as set forth in Schedule 3.14(b) of the Disclosure
Schedule or for any such matters that, individually or in the aggregate,
are not material, with respect to each Applicable Contract listed in
Schedule 3.14(a) of the Disclosure Schedule:
(i) such Applicable Contract is a valid, legally binding and
enforceable obligation of Seller or the Company party thereto, subject
to the Enforceability Exceptions;
-19-
(ii) Seller or the Company that is a party to such Applicable
Contract is in substantial compliance with all terms and requirements
of such Applicable Contract;
(iii) to the knowledge of Seller, each other Person that is a
party to such Applicable Contract is in substantial compliance with
all terms and requirements of such Applicable Contract and
(iv) to the knowledge of Seller, no event has occurred or
circumstance exists that (with or without the giving of notice, the
lapse of time or both) gives any Person other than Seller or the
Company that is a party to such Applicable Contract the right to
declare a default, exercise any remedy under, accelerate the maturity
or performance of, or terminate such Applicable Contract.
SECTION 3.15 Environmental Matters.
---------------------
(a) Except for any such matters that, individually or in the
aggregate, are not material: (i) each of Seller (but solely with respect to
the Division) and the Company is in compliance with all applicable
Environmental Laws; (ii) neither Seller (but solely with respect to the
Division) nor the Company has received any written notice from any
Governmental Entity, citizens group, employee or otherwise alleging that
Seller (but solely with respect to the Division) is in violation of any
applicable Environmental Laws; (iii) there is no Environmental Claim
pending or, to the knowledge of Seller, threatened against Seller (but
solely with respect to the Division) and/or the Company against any person
or entity whose liability for any Environmental Claim Seller (but solely
with respect to the Division) or the Company has or may have retained or
assumed either contractually or by operation of law and (iv) there are no
past or present (or to the knowledge of Seller) future actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release or presence of any Hazardous Substance which could
form the basis of any Environmental Claim against Seller (but solely with
respect to the Division) or the Company, or to the knowledge of Seller,
against any person or entity whose liability for any Environmental Claim
Seller (but solely with respect to the Division) or the Company has or may
have retained or assumed either contractually or by operation of law.
(b) This Section 3.15 constitutes the sole representation and warranty
of Seller or the Company with respect to any Environmental Law or Hazardous
Substance notwithstanding any other representation and warranty in this
Article III.
-20-
(c) For the purposes of this Agreement, the term:
(i) "Environmental Claim" means any claim, action, cause of
-------------------
action, investigation or notice (written or oral) by any person or
entity alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or
resulting from (1) the presence, or release of any Hazardous
Substances at any location, whether or not owned or operated by Seller
or the Company, or (2) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
(ii) "Environmental Law" means any applicable federal, state,
-----------------
local and foreign law, regulation, code, license, permit, order,
judgment, decree or injunction promulgated by any Governmental Entity
(1) relating to pollution or protection of human health or the
environment (including air, water, soil and natural resources) or (2)
the manufacture, processing, distribution, use, treatment, storage,
transport, handling, release or disposal of Hazardous Substances, and
all laws and regulations relating to the record keeping, notification,
disclosure and reporting requirements respecting Hazardous Substances.
(iii) "Hazardous Substance" means any substance to the extent
-------------------
listed, defined, designated, classified or regulated as hazardous,
toxic, radioactive, a pollutant, contaminant or oil under either the
National Oil and Hazardous Substances Pollution Contingency Plan (40
X.X.X.xx. 300.5) or any applicable Environmental Law, including
petroleum and any derivative or by-product thereof.
SECTION 3.16 Insurance. Schedule 3.16 of the Disclosure Schedule sets forth
---------
a true, complete and correct list of all insurance policies covering the
Division, the Company and any of their assets or employees. The insurance
policies listed in Schedule 3.16 of the Disclosure Schedule are (a) in such
amounts and ensure against such risks and losses as are consistent with standard
industry practice and (b) are sufficient to comply with applicable laws and the
requirements of any Applicable Contract. No notice of cancellation or
termination of any insurance policy listed in Schedule 3.16 of the Disclosure
Schedule has been received with respect to any such policy and each such policy
is in full force and effect.
-21-
SECTION 3.17 Brokers and Finders. Except for Xxxxxx Xxxxxxx & Co.
-------------------
Incorporated, whose fees shall be paid by Seller, no agent, broker, investment
banker, intermediary, finder, Person or firm acting on behalf of Seller or the
Company will be entitled to any broker's or finder's fee or any other commission
or similar fee, directly or indirectly, from any of the parties hereto in
connection with the execution of this Agreement or upon consummation of the
transactions contemplated hereby.
SECTION 3.18 No Undisclosed Liabilities. The Assumed Liabilities do not
--------------------------
include, and the Company does not have, any Liabilities except for (a)
Liabilities disclosed in Schedule 3.18 of the Disclosure Schedule, (b)
Liabilities reflected or adequately reserved against in the Financial
Statements, (c) current Liabilities incurred in the ordinary course of business,
consistent with past practice and (d) other Liabilities that, individually or in
the aggregate, are not material. "Liabilities" means any debts, liabilities,
-----------
commitments or obligations of any kind, character or nature whatsoever, whether
known or unknown, accrued, contingent or absolute, due or to become due.
SECTION 3.19 Intellectual Property.
-------------------
(a) Schedule 3.19(a) of the Disclosure Schedule sets forth, for all
Intellectual Property included in the Transferred Assets or owned by the
Company, a complete and accurate list of all U.S. and foreign: (i) Patents;
(ii) Trademark registrations (including Internet domain name registrations)
and applications and (iii) Copyright registrations and Copyright
applications. Except as set forth on Schedule 3.19(b) of the Disclosure
Schedule, Seller or the Company is the sole and exclusive beneficial owner,
and, with respect to the United States, record owner (except for U.S. Reg.
No. 1631580), of the items on Schedule 3.19(a).
(b) Except as set forth in Schedule 3.19(b) of the Disclosure Schedule
and except in such instances as is not reasonably likely to be material:
(i) Seller, the Company, or the Division own or have the right to
use all Intellectual Property which is used in or necessary for the
Business as currently conducted, free and clear of all liens or other
encumbrances. The Intellectual Property owned by or licensed to the
Company, and included in the Transferred Assets and covered by the
arrangements and license agreements contemplated under Sections 5.10
and 5.12 (the "Buyer License") constitutes all of the Intellectual
-------------
Property used in or necessary for the business as currently conducted,
including but not limited to all Intellectual Property contained in or
necessary to manufacture, use, sell, reproduce, display and, with
respect to Intellectual Property owned by Seller or the Company, make
derivative works of the products sold by the Business and all product
names (other than Seller's trademarks, trade names, service marks,
domain names or logos that
-22-
include the words "Ziff Xxxxx," "Ziff," "ZD" or "Softbank" as
described in Section 5.12);
(ii) all Intellectual Property owned by the Company or included
in the Transferred Assets or covered by the Buyer License, has been
duly maintained, is valid and subsisting, in full force and effect and
has not been cancelled, expired or abandoned;
(iii) Seller, the Company or the Division has not received
written notice from any third party regarding any actual or potential
infringement by Seller with respect to the Business, the Company or
the Division of any intellectual property of such third party, and
Seller, the Company or the Division has no knowledge of any valid
basis for such a claim against Seller, the Company or the Division;
(iv) Seller, the Company or the Division has not received written
notice from any third party regarding any assertion or claim
challenging the validity of any Intellectual Property owned by the
Company or included in the Transferred Assets or covered by the Buyer
License, and Seller, the Company or the Division has no knowledge of
any valid basis for such a claim;
(v) to Seller's knowledge, no third party is misappropriating,
infringing, diluting or violating any Intellectual Property owned by
the Company or Seller and included in the Transferred Assets or
covered by the Buyer License;
(vi) neither Seller with respect to the Transferred Assets, nor
the Company or the Division have licensed or sublicensed its rights in
any Intellectual Property, or received or been granted any such
rights, other than pursuant to the Contracts;
(vii) Seller, the Company or the Division take reasonable
measures to protect the confidentiality of Trade Secrets owned by or
licensed to Company, the Division or to Seller and included in the
Transferred Assets or covered by the Buyer License;
(viii) the execution, delivery and performance by Seller, the
Company or the Division of this Agreement, and the consummation of the
transactions contemplated hereby, will not result in the loss or
impairment of, or give rise to any right of any third party to
terminate or alter, any of the Intellectual Property rights of the
Company or the Division, or of the rights of Buyer as the successor
owner of the Transferred Assets, nor require the consent of any
Governmental Entity or third party in respect of any such Intellectual
Property; and
-23-
(ix) there are no settlement agreements, consents or covenants
not to xxx concerning any Intellectual Property to which the Company,
the Division or Seller is a party (to the extent such Intellectual
Property is included in the Transferred Assets).
SECTION 3.20 Transferred Assets. Seller has, and at the Closing Buyer will
------------------
receive, good and marketable title to all of the Transferred Assets, in each
case free and clear of any Lien, except for such Liens that would not materially
interfere with the ownership or operation of the Business or the Transferred
Assets, taken as a whole, and which will not secure debt as of the Closing Date.
All tangible assets constituting Transferred Assets are (i) in good operating
condition and repair, ordinary wear and tear excepted and (ii) are suitable for
operation of the Business, are fit for their intended purposes and meet all
requirements of Law or any Governmental Entity, except for such failures that
individually or in the aggregate are not likely to be material. The Transferred
Assets together with the other rights conferred to Buyer as contemplated by this
Agreement constitute all of the assets, properties and rights necessary for the
operation of the Business as conducted and are adequate and sufficient for the
operation of the Business as presently conducted.
SECTION 3.21 Year 2000 Compliance.
--------------------
(a) Except as is not reasonably likely to be material, (i) the
products sold by the Business are Year 2000 Compliant; and (ii) all of the
internal computer systems of Seller (but solely with respect to the
Division) and the Company comprised of software, hardware, databases or
embedded control systems (microprocessor controlled, robotic or other
device) that are used in the Business, or the operation of the Company or
the Division (collectively the "Business Systems"), including but not
----------------
limited to accounting systems, are Year 2000 Compliant.
(b) Except as is not reasonably likely to be material, Seller (but
solely with respect to the Division) and the Company have obtained written
representations or assurances from each entity that (x) provides data of
any type that includes date information or which is otherwise derived from,
dependent on or related to date information ("Date Data") to Seller (but
---------
solely with respect to the Division) or the Company, (y) processes in any
way Date Data for Seller (but solely with respect to the Division) or the
Company or (z) otherwise provides any material product or service to Seller
with respect to the Business or, the Company or the Division, that all of
such entity's Date Data and related hardware, software and embedded
technology that are used for, or on behalf of, Seller, the Company or the
Division are Year 2000 Compliant. Neither Seller (but solely with respect
to the Division) nor the Company is reasonably likely to incur material
expenses arising from or relating to the continuing efforts by the Business
to achieve Year 2000 compliance or the failure of any of the products sold
by the Business, or to the knowledge of Seller or the Company, the Business
Systems used by or relied upon by the Business to be Year 2000 Compliant.
-24-
(c) As used herein, "Year 2000 Compliant" and "Year 2000 Compliance"
------------------- --------------------
mean for all dates and times, including, without limitation dates and times
after December 31, 1999 and in the multi-century scenario, when used on a
stand-alone system or in combination with other software or systems: (i)
the application system functions and receives and processes dates and times
correctly without abnormal results; (ii) all date-related calculations are
correct (including, without limitation, age calculations, duration
calculations and scheduling calculations); (iii) all manipulations and
comparisons of date-related data produce correct results for all valid date
values within the scope of the application; (iv) there is no century
ambiguity; (v) all reports and displays are sorted correctly; and (vi) leap
years are accounted for and correctly identified (including, without
limitation, that 2000 is recognized as a leap year).
SECTION 3.22 Intercompany Transactions. All arrangements and agreements
-------------------------
between the Division and the Company on the one hand, and Seller and its
Affiliates (other than the Company or the Division) on the other, are on terms
no cheaper to the Division and the Company than arm's length, commercially
reasonable transactions and the amounts with respect thereto are representative
of amounts charged to the Division and the Company.
SECTION 3.23 No Other Representations or Warranties. Except for the
--------------------------------------
representations and warranties contained in this Article III, neither Seller nor
any other Person makes any express or implied representation or warranty on
behalf of or with respect to Seller, the Company, the Transferred Assets, the
Division or the Business, and Seller hereby disclaims any representation or
warranty not contained in this Article III.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
SECTION 4.1 Organization and Good Standing. Buyer is duly organized,
------------------------------
validly existing and in good standing under the laws of its jurisdiction of
organization. Buyer has full limited liability company power and authority to
conduct its businesses and to own or use its assets as it currently does or as
will be Conducted.
SECTION 4.2 Limited Liability Company Authority. Buyer has the limited
-----------------------------------
liability company power and authority, and has taken all limited liability
company action necessary, to authorize, execute, deliver and perform its
obligations under this Agreement. This Agreement has been duly authorized,
executed and delivered by Buyer and constitutes a valid and legally binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
subject to the Enforceability Exceptions.
-25-
SECTION 4.3 Consents and Approvals; No Violations.
-------------------------------------
(a) Except for the HSR Filing, no notices, reports, registrations or
other filings are required to be made by Buyer with, nor are any consents,
approvals or authorizations required to be obtained by Buyer from, any
Governmental Entity, in connection with the execution, delivery or
performance of this Agreement by Buyer, in each case except for those the
failure of which to make or obtain, individually or in the aggregate, are
not material.
(b) The execution, delivery and performance of this Agreement by Buyer
will not:
(i) violate or contravene any provision of the governing
documents of Buyer;
(ii) violate, conflict with, or constitute or result in a
default, acceleration or creation of a Lien under, or a termination of (in
each case with or without notice, lapse of time or both), any provision, or
result in the loss of any benefit under, any Contract to which Buyer is a
party or by which any of its assets are bound;
(iii) require Buyer to obtain the consent, waiver, authorization
or approval of, any Person under any Contract to which Buyer is a
party or by which any of its assets are bound; or
(iv) violate, contravene or conflict with any Law or Order of any
Governmental Entity having jurisdiction over Buyer or any of its
assets.
SECTION 4.4 Securities Act. Buyer is acquiring the Shares for its own
--------------
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act of 1933 (the "Securities Act") in any manner that
--------------
would be in violation of the Securities Act. Buyer has not, directly or
indirectly, offered the Shares to anyone or solicited any offer to buy the
Shares from anyone, so as to bring such offer and sale of the Shares by Buyer
within the registration requirements of the Securities Act. Buyer will not sell,
convey, transfer or offer for sale any of the Shares except upon compliance with
the Securities Act and any applicable state securities laws or pursuant to any
exemption therefrom.
SECTION 4.5 Brokers and Finders. Except for Wasserstein, Perella & Co.,
-------------------
Inc., whose fees shall be paid by Buyer, no agent, broker, investment banker,
intermediary, finder, Person or firm acting on behalf of Buyer is or will be
entitled to any broker's or finder's fee or any other commission or similar fee,
directly or indirectly, from any of the parties hereto in connection with the
execution of this Agreement or upon consummation of the transactions
contemplated hereby.
-26-
SECTION 4.6 Financing. Buyer has received and furnished to Seller true,
---------
complete and accurate copies of a commitment letter from Fleet Boston Financial
("Lender"), pursuant to which Lender has committed, subject to the terms and
------
conditions thereof, to provide Buyer with all of the debt financing that Buyer
will require in order to satisfy its obligations to fund the Purchase Price.
SECTION 4.7 Litigation. As of the date hereof, there are no Actions pending
----------
or, to the knowledge of Buyer, threatened against Buyer or any of its assets,
other than Actions that, individually or in the aggregate, are not material to
its ability to perform its obligations hereunder or not reasonably likely to
prohibit or materially restrict or delay the performance of this Agreement by
Buyer.
SECTION 4.8 No Other Representations or Warranties. Except for the
--------------------------------------
representations and warranties contained in this Article IV, neither Buyer nor
any other Person makes any other express or implied representation or warranty
on behalf of or with respect to Buyer and Buyer hereby disclaims any
representation or warranty not contained in this Article IV.
ARTICLE V
---------
COVENANTS
SECTION 5.1 Conduct of Business. Prior to the Closing, except as requested
-------------------
or consented to by Buyer in writing, which consent shall not be unreasonably
withheld or delayed and except as otherwise expressly contemplated hereby,
Seller shall, and agrees to cause the Company to, conduct the Business only in
the ordinary course of business consistent with past practice and use their
respective commercially reasonable efforts to preserve intact the Business and
the relationships of the Division and the Company with their employees,
suppliers and others having business relationships with them and Seller shall
not (solely with respect to the Division) and Company shall not:
(a) grant or increase any bonus, salary, severance, termination or
other compensation or benefits to any director, officer or
employee of the Division or the Company other than in the
ordinary course of business consistent with past practice;
(b) sell, lease or otherwise dispose of, mortgage, pledge or otherwise
subject to a Lien, any material Transferred Assets or any assets of the
Company other than in the ordinary course of business consistent with past
practice;
(c) acquire or make any material investment in any other Person or
assets;
(d) make or commit to make any capital expenditure in excess of
$150,000;
-27-
(e) enter into any Applicable Contract that would have been required
to be listed in Schedule 3.14(a) of the Disclosure Schedule if it had been
in effect as of the date of this Agreement or terminate, modify in any
material respect or waive any material rights under any Applicable Contract
listed in such Schedule;
(f) settle, compromise, waive, release or assign any material claims
or rights it has in respect of any material Actions to which it is a party
or by which it is bound;
(g) incur any indebtedness for money borrowed other than indebtedness
to Seller or its Affiliates, which shall remain the obligation of Seller
and shall not be assumed by Buyer;
(h) change any of its accounting methods, policies or practices;
(i) enter into any agreement to do any of the foregoing; and
(j) settle or compromise any material tax liability or dispute or
matter or revoke any tax election.
The preceding sentence notwithstanding, Seller may cause the Company to
transfer, by dividend or otherwise, to Seller or any of its Affiliates:
(a) any cash, bank accounts, certificates of deposit, commercial
paper, annuities, treasury notes and bills or other marketable
securities other than the Transferred Assets or the Shares; and
(b) any of the Excluded Assets.
SECTION 5.2 Access; Confidentiality.
-----------------------
(a) Between the date of this Agreement and the Closing Date, Seller
shall, and shall cause the Company to, afford Buyer full and free access,
at all reasonable times during normal business hours, to the personnel,
premises, properties, Applicable Contracts, books and records, and other
documents and data of the Division and the Company as Buyer may reasonably
request. The foregoing shall not require Seller or the Company to permit
any inspection, or to disclose any information, that in their reasonable
judgment is reasonably likely to result in the disclosure of any trade
secrets of third parties or violate any of their obligations with respect
to confidentiality if Seller or the Company, as the case may be, shall have
used reasonable best efforts to obtain the consent of such third party to
such inspection or disclosure. All requests for information made pursuant
to this Section 5.2(a) shall be directed to an executive officer of Seller.
-28-
(b) Following the Closing, Buyer shall, and shall cause the Company
and any of Buyer's other Affiliates to (i) afford Seller full and free
access, upon reasonable notice, during normal business hours, to the
personnel, premises, properties, Applicable Contracts, books and records,
and other documents and data of the Division and the Company as Seller
shall reasonably request, (ii) furnish Seller with copies of all such
Applicable Contracts, books and records, and other existing documents and
data as Seller may reasonably request and (iii) furnish Seller with such
additional financial, operating, and other data and information as Seller
may reasonably request in order for Seller to prepare its financial
statements, Tax Returns and other documents and reports Seller or any of
its Affiliates are required to file with Governmental Entities or
reasonably require in connection with any Action against, or tax
examination of, Seller or any of its Affiliates. The foregoing shall not
require Buyer, the Company or any of Buyer's other Affiliates to permit any
inspection, or to disclose any information, that in their reasonable
judgment is reasonably likely to result in the disclosure of any trade
secrets of third parties or violate any of their obligations with respect
to confidentiality if Buyer, the Company or Buyer's other Affiliates shall
have used reasonable best efforts to obtain the consent of such third party
to such inspection or disclosure. All requests for information made
pursuant to this Section 5.2(b) shall be directed to an executive officer
of Buyer.
(c) Seller hereby covenants and agrees that from and after the Closing
Date it will use its reasonable best efforts to ensure that its
Representatives, affiliates, successors and assigns (including assignees of
any portion of its other businesses) hold in confidence and prevent the
disclosure to any person or use by any Person of any information and
documents concerning the Business and the Transferred Assets, including but
not limited to the information compiled in the data room (other than
pursuant to a court order or subpoena or with respect to Tax Returns and
other reports or information required by law to be disclosed), except to
authorized representatives of Buyer. Seller agrees that it shall not and it
shall cause its Representatives, affiliates, successors and assigns not to
use any confidential documents or information for any purpose other than
the preparation of Seller's financial statements, Tax Returns or other
documents or reports required to be filed by Seller with any Governmental
Entities or reasonably required in connection with any Action against, or
examination of Seller or its Affiliates. The parties agree that irreparable
damage may occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that Buyer shall be entitled
to seek an injunction or injunctions to prevent breaches of this paragraph
and to enforce specifically the terms and provisions of this paragraph in
any court, without having to prove irreparable damages, this being in
addition to any other remedy to which it is entitled at law or equity.
-29-
SECTION 5.3 Required Consents and Approvals.
-------------------------------
(a) Each party hereto hereby agrees to cooperate with each other party
and use its reasonable best efforts to promptly prepare and file all
necessary documentation, to effect all necessary notices, reports,
registrations or other filings and documents and to obtain as promptly as
practicable all necessary consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to
consummate the transactions contemplated herein. Each party shall have the
right to review in advance, and to the extent practicable each will consult
the other on, in each case subject to applicable Laws relating to the
exchange of information, all the information relating to Buyer, Seller or
the Company that appears in any filing made with, or written materials
submitted to, all third parties and Governmental Entities in connection
with the transactions contemplated in this Agreement. In exercising the
foregoing right, each of Buyer and Seller shall act reasonably and as
promptly as practicable. Buyer and Seller agree that they will keep the
other apprised of the status of matters relating to completion of the
transactions contemplated herein, including promptly furnishing the other
with copies of notice or other communications received by Buyer, Seller or
the Company, from all third parties and Governmental Entities with respect
to the transactions contemplated herein.
(b) Buyer and Seller each agree to promptly prepare and file an HSR
Filing with the Federal Trade Commission (the "FTC") and the Antitrust
---
Division of the Department of Justice (the "DOJ"). Each such party hereby
---
covenants to cooperate with the other such party to the extent reasonably
necessary to assist in making reasonable supplemental presentations to the
FTC or the DOJ, and if requested by the FTC or the DOJ, to promptly amend
or furnish additional information thereunder. Nothing in this Agreement
shall be construed as an obligation on the part of any of the parties
hereto to take any actions with respect to the FTC or the DOJ other than
those set forth in this Section 5.3(b).
SECTION 5.4 Reasonable Best Efforts. Between the date of this Agreement and
-----------------------
the Closing Date, each of the parties hereto shall use its respective reasonable
best efforts to cause the conditions in Sections 6.1 and 6.2 to be satisfied as
soon as practicable (subject to the proviso in Section 2.7(a)).
SECTION 5.5 Publicity. The initial press release announcing the
---------
transactions contemplated herein shall be released jointly after consultation
between the parties hereto and thereafter the parties hereto shall consult with
each other prior to issuing any press releases or otherwise making public
announcements with respect to the transactions contemplated herein and prior to
making any filings with any Governmental Entity or with any national securities
exchange or interdealer quotation service with respect thereto, except as may be
required by applicable Law or by obligations pursuant
-30-
to any listing agreement with or rules of any national securities exchange or
interdealer quotation service.
SECTION 5.6 Expenses. Except as otherwise expressly provided herein,
--------
whether or not the transactions contemplated herein are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated herein shall be paid by the party incurring such expense. In the
event of termination of this Agreement, the obligation of each party to pay its
own expenses will be subject to any rights of such party arising from a breach
of this Agreement by the other party.
SECTION 5.7 ZDMI Non-Solicitation. Buyer hereby covenants and agrees that
---------------------
for a period of two years following October 1, 1999, Buyer shall not employ any
person formerly employed by Seller's ZD Market Intelligence division who became
an employee of Xxxxx-Xxxxx, Inc. in connection with the sale of the ZD Market
Intelligence business, and in competition with such business (such business
being the development, compilation and distribution of information on installed
and planned technology hardware and software purchases and the provision of
customized service solutions utilizing such information).
SECTION 5.8 Employees.
---------
(a) As of the Closing Date, Buyer shall, or shall cause the Company
to, continue to employ all of the employees of the Division and the Company
at the Closing Date (each, a "Continuing Employee") for cash compensation
-------------------
substantially comparable to that currently being provided to them by Seller
(it being understood that nothing contained herein shall require Buyer to
maintain the employment of any Continuing Employee after the Closing Date).
Seller shall use its reasonable best efforts to ensure the orderly transfer
of such employees to Buyer. Further, with respect to Continuing Employees:
(i) Buyer shall cause each of the Division and the Company to
continue the Enhanced Severance Benefit Plan set forth in Schedule
5.8(a) of the Disclosure Schedule for a period of at least 60 days
after the Closing (but shall have no obligations thereafter).
Continuing Employees of the Division and the Company shall be given
credit under each employee benefit plan, program, policy or
arrangement of Buyer or any of its Affiliates in which the employees
are eligible to participate for all service with the Division, the
Company or any predecessor employer (to the extent such credit was
given by the Division or the Company) for purposes of eligibility,
vesting, benefit accrual (excluding, however, benefits accrued under
any defined benefit or defined contribution pension plan), severance
and vacation entitlement.
-31-
(ii) Buyer shall take all such action as is necessary or
appropriate in order to ensure that Continuing Employees of the
Division and the Company and their spouses and dependent children
covered by the group health plans sponsored by Seller (the "Seller
------
Health Plans") as of the Closing Date become eligible for coverage
------------
under a group health plan maintained by Buyer or its Affiliates
effective immediately after the Closing. Buyer shall cause the group
health plan maintained by it or its Affiliates to (i) waive any
waiting periods, evidence of insurability requirements or preexisting
condition limitations and (ii) honor any deductible, co-payment and
out-of-pocket expenses incurred by the employees and their
beneficiaries under the Seller Health Plans during the portion of 1999
preceding the Closing.
(iii) Buyer shall take all such action as is necessary or
appropriate in order to assure that Continuing Employees of the
Division and the Company covered by the group term life insurance plan
sponsored by Seller (the "Seller Life Plan") as of the Closing Date
----------------
become eligible for coverage under a group term life insurance plan
maintained by Buyer or its Affiliates effective immediately after the
Closing.
(b) The account balances under the ZD Plan of all current and former
employees of the Division and the Company, (i) if not forfeited under the
terms of the ZD Plan prior to the Closing Date, shall become 100% vested
and non-forfeitable upon the Closing Date, and (ii) shall be transferred to
Buyer's tax-qualified defined contribution plan ("Buyer's Plan") in a
------------
so-called "trust-to-trust" transfer satisfying the applicable requirements
of Section 414(l) of the Code. Seller shall make a discretionary
contribution consistent with past practice under the ZD Plan to the
accounts of all eligible employees of the Division and under the Registered
Retirement Service Plan to the accounts of all eligible employees of the
Company for all of 1999. An amount equal to 8% of the eligible earnings
earned in the year 2000 prior to the Closing Date of all Continuing
Employees who would be eligible for a discretionary contribution in the
year 2000 shall be accrued as a liability on the Closing Statement,
provided that Buyer shall use such amount to make a discretionary
-------------
contribution to Buyer's own retirement plan for the benefit of such
Continuing Employees.
(c) Employees of the Division and the Company who, immediately prior
to the Closing Date, are on disability leave, authorized leave of absence
or military service shall become employees of Buyer or its Affiliates as of
the Closing Date and such employees as of the date hereof are listed on
Schedule 5.8(c)(i) of the Disclosure Schedule. Continuing Employees who are
on long-term disability as of the Closing Date shall continue disability
coverage under Seller's disability plan until such time as they are no
longer disabled and such employees as of the date hereof are listed on
Schedule 5.8(c)(ii) of the Disclosure
-32-
Schedule. Continuing Employees who are on short-term disability as of the
Closing Date shall be covered under a short-term disability plan maintained
by Buyer or its Affiliates effective immediately after the Closing Date,
and shall be transferred to a long-term disability plan maintained by Buyer
or its Affiliates upon becoming permanently disabled or otherwise entitled
to long-term disability benefits under such plan. Such employees as of the
date hereof are listed on Schedule 5.8(c)(i) of the Disclosure Schedule.
(d) Buyer shall pay to employees of the Division and the Company the
retention and special bonuses set forth in Schedule 5.8(d) of the
Disclosure Schedule in accordance with such Schedule to the extent such
employees become entitled thereto.
SECTION 5.9 Intercompany Liabilities and Debt. Seller shall take all
---------------------------------
actions necessary so that at the Closing (a) neither the Company nor the
Division shall have (except as set forth in this Agreement) any (i) Liability
(other than with respect to trade receivables arising in the ordinary course of
business consistent with past practice) to Seller or any Affiliate of Seller
(other than to the Division or the Company), including all borrowings by Seller
or the Company from Seller or any Affiliate of Seller or any obligation to pay a
dividend to Seller or any Affiliate of Seller or (ii) indebtedness for borrowed
money and (b) neither Seller nor any Affiliate of Seller (other than the Company
or the Division) shall have any liability to the Company or the Division.
SECTION 5.10 Intercompany Programs.
---------------------
(a) Prior to the date hereof, Seller has proposed or agreed upon
transactions (each of which is set forth on Schedule 5.10 of the Disclosure
Schedule and a copy of which has been provided to Buyer) with third parties
whereby Seller has offered to them products of the Division and the Company
bundled with other products of Seller and/or its Affiliates. Buyer shall
cause the Division and the Company to provide such products to such third
parties in substantially the same manner as such services were provided
immediately prior to the Closing. Seller shall allocate to Buyer the
revenue and costs arising from such transactions in the same manner as such
revenue and costs were allocated immediately prior to the Closing. Within
30 days of receipt of payments in connection with such transactions, Seller
shall deliver to Buyer its allocated revenue, less costs, arising from such
transactions.
(b) Prior to the date hereof, Seller and its Affiliates, on the one
hand, and the Division and the Company, on the other hand, have provided
the other party with certain cross-marketing services in connection with
their respective products. Commencing on the Closing Date and continuing
for a period of six months following the Closing Date, Seller and its
Affiliates shall provide such cross-marketing services to Buyer and Buyer
shall cause the Division and the Company
-33-
to provide such cross-marketing services to Seller and its Affiliates in
substantially the same manner as such services were provided by such
parties prior to the Closing.
(c) Prior to the date hereof, the Division, as licensor, entered into
a license agreement with SmartPlanet, Inc., a copy of which is attached
hereto as Schedule 5.10(c)(i) of the Disclosure Schedule. Prior to the
Closing, the Division, as licensee, also entered into a license agreement
with ZDNet, a copy of which is attached hereto as Schedule 5.10(c)(ii) of
the Disclosure Schedule. Notwithstanding the terms and conditions of this
Agreement, these agreements shall remain in full force and effect following
the Closing.
SECTION 5.11 Retention of Records.
--------------------
(a) Buyer shall retain, and cause the Company to retain, all books and
records relating to the conduct of the Business prior to the Closing Date
for a period of at least six years from the date hereof. After the end of
such six-year period, any such document or record may be disposed of by
Buyer or the Company only if Buyer or the Company first offers to surrender
possession thereof to Seller at Seller's expense and Seller declines such
offer. Seller shall have the right during business hours, upon reasonable
notice to Buyer, to inspect and make copies of any such records for any
reasonable purpose.
(b) Seller may retain (i) all internal correspondence and memoranda,
valuations, investment banking presentations and bids received from others
in connection with the Asset Purchase and the Stock Purchase and (ii) a
copy of all consolidating and consolidated financial information and all
other accounting records prepared or used in connection with the
preparation of the Financial Statements. Seller shall deliver to Buyer all
other books and records relating to the Business and the Company.
SECTION 5.12 Seller's Trademarks.
-------------------
(a) Except as set forth in Section 5.10(c) above, (i) effective as of
the Closing Date, any license agreement pursuant to which Seller or any
Affiliate of Seller has granted to the Division or the Company the right to
use trademarks, trade names, service marks, domain names or logos that
include the words "Xxxx-Xxxxx," "Ziff," "ZD" or "Softbank" shall be
cancelled, and (ii) as promptly as is practicable after the Closing, Buyer
shall and agrees to cause the Company to eliminate the words "Xxxx-Xxxxx,"
"Ziff," "ZD" and "Softbank" and every word or expression derived therefrom
from the names under which the Division and the Company do business. Within
90 days after the Closing, Buyer shall, and shall cause the Company to,
remove any such trademarks, trade names, service marks, domain names and
logos from its respective properties, stationery and literature,
-34-
and thereafter neither Buyer nor the Company shall use any such trademarks,
trade names, service marks, domain names or logos.
(b) Seller hereby grants to Buyer a nontransferable, royalty-free
license and right for a period of 90 days immediately after the Closing to
use, reproduce and distribute (i) the "ZD" trademark (the "ZD Xxxx") as
-------
part of the composite "ZD Education" and "ZD Journals" trademarks and (ii)
the "Xxxx-Xxxxx" trademark (the "Ziff-Xxxxx Xxxx," collectively with the ZD
---------------
Xxxx, the "Marks"), as part of the composite "Xxxx-Xxxxx Education Center"
-----
trademark, solely in connection with the Business and for transition
purposes only. Such use shall be in accordance with the trademark
guidelines set forth in Exhibit C. In the event that Seller reasonably
---------
modifies or changes the guidelines and Seller notifies Buyer of such
modification or change, Buyer shall promptly modify its use of the Marks.
(c) All rights and goodwill arising from the use of the Marks and/or
any similar names or marks (including logos) shall inure solely to Seller's
benefit. Buyer agrees that neither Buyer, nor any of its Affiliates, shall
use, directly or indirectly, either the ZD Xxxx or the Ziff-Xxxxx Xxxx, or
any marks similar thereto, as part of Buyer's or any of its Affiliates' own
trade names, or in any other way that suggests that there is any relation
or affiliation between Seller and Buyer or any of its Affiliates other than
that created by this Agreement, or as a trademark, service xxxx or trade
name for any other business, product or service. Buyer shall have no
interest in the Marks except as expressly provided in this Agreement and
shall not claim any other rights therein. Nothing in this Agreement or in
the performance thereof, or that might otherwise be implied by law, shall
operate to grant Buyer any right, title, or interest in or to the Marks
other than as specified in the limited license grant in this Agreement. All
rights not expressly granted in this Agreement or herein are reserved to
Seller. Buyer's right to use the Marks shall automatically cease upon the
earlier of (i) the end of the 90-day period immediately after the Closing
or (ii) Buyer's failure to cure any material breach with respect to its use
of the Marks within 120 days of receipt of written notice from Seller.
(d) Buyer agrees to assign to Seller and does hereby assign to Seller
all rights it may acquire, if any, by operation of law or otherwise in the
Marks, including all applications or registrations therefore, along with
the goodwill associated therewith. Buyer shall assist Seller in protecting
and maintaining Seller's rights in the Marks in connection with Buyer's
licensed use hereunder, including preparation and execution of documents
necessary or appropriate to register the Marks and/or record this
Agreement. As between the parties, Seller shall have the sole right to, and
in its sole discretion may, commence, prosecute or defend, and control any
action concerning the Marks.
-35-
(e) Buyer agrees to maintain the quality of all aspects of the
Business (e.g., products and services, advertising) at a level that meets
or exceeds those standards maintained by Seller immediately prior to the
execution of this Agreement. Buyer shall fully correct and remedy any
deficiencies in its use of the Marks or the quality of the products and
services associated with the Business, and the advertising and promotion
thereof, and all other aspects of the Business, upon notice from Seller.
(f) Neither Buyer nor any of its Affiliates shall, directly or
indirectly, contest the validity of, by act or omission jeopardize, or take
any action inconsistent with, Seller's rights or goodwill in the Marks
(including attempting to register the Marks or a xxxx incorporating either
the ZD Xxxx or the Ziff-Xxxxx Xxxx or any xxxx confusingly similar
thereto). Buyer's rights under this Agreement are personal and may not be
sublicensed, assigned or otherwise transferred except to a purchaser of all
or substantially all of the Business.
(g) Notwithstanding the foregoing, Buyer and its Affiliates may
continue to use all courseware which incorporates the ZD Xxxx or the
Ziff-Xxxxx Xxxx or any similar xxxx existing in inventory as of the Closing
until such inventory is exhausted.
SECTION 5.13 Tax Matters.
-----------
(a) Transfer Taxes. All excise, sales, use, transfer, documentary,
-------------
filing, recordation and other similar Taxes and fees that may be imposed or
assessed as a result of the transactions effected pursuant to this
Agreement, together with any interest, additions or penalties with respect
thereto and any interest in respect of such additions or penalties
("Transfer Taxes"), shall be borne 50% by Buyer and 50% by Seller. Buyer
--------------
and Seller shall cooperate in the timely preparation and filing of any Tax
Returns that must be filed in connection with any Transfer Taxes. Buyer
shall promptly and timely pay all Transfer Taxes and Seller shall reimburse
Buyer for its share of such Transfer Taxes within 5 days of the filing of
such Tax Returns by Buyer in immediately available funds in United States
dollars. Any such Taxes or fees resulting from any subsequent transfer of
the Transferred Assets or Assumed Liabilities or any transfer of property
on or subsequent to the Closing shall be borne entirely by Buyer, and Buyer
shall indemnify Seller for any liabilities arising in connection therewith.
(b) Determination and Allocation of Consideration. The parties to this
---------------------------------------------
Agreement agree to determine the amount of and allocate the total
consideration transferred by Buyer to Seller pursuant to this Agreement
(the "Consideration") in accordance with the fair market value of the
assets and liabilities transferred and in accordance with Section 1060 of
the Code. Buyer shall provide Seller with one or more schedules allocating
the Consideration, and such schedule(s) shall be
-36-
binding upon the parties, unless Seller notifies Buyer of its disagreement
with such schedule(s) within 10 days. If Seller reasonably disagrees with
any items reflected on the schedules so provided, Seller shall have the
right within 30 business days of its receipt of such schedules to notify
Buyer of such disagreement and its reasons for so disagreeing, in which
case Seller and Buyer shall attempt in good faith to resolve the
disagreement. If Seller and Buyer cannot resolve the disagreement, the
disagreement shall be referred to the Accounting Expert, whose decision
shall be final and binding and whose expenses shall be borne by the party
that the Accounting Expert determines has lost the dispute. Seller and
Buyer agree to prepare and file an IRS Form 8594 in a timely fashion in
accordance with the rules under Section 1060 of the Code. To the extent
that the Consideration is adjusted after the Closing Date, the parties
agree to revise and amend the schedule and IRS Form 8594 in the same manner
and according to the same procedure. The determination and allocation of
the Consideration derived pursuant to this subsection shall be binding on
Seller and Buyer for all Tax reporting purposes.
(c) Employee Withholding and Reporting Matters. With respect to those
------------------------------------------
employees who are employed by Buyer within the same calendar year as the
Closing, Buyer shall, in accordance with and to the extent permitted
pursuant to Revenue Procedure 84-77, 1984-2 C.B. 753, assume all
responsibility for preparing and filing Form W-2, Wage and Tax Statement,
Form W-3, Transmittal of Income and Tax Statements, Form 941, Employer's
Quarterly Federal Tax Return, Form W-4, Employee's Withholding Allowance
Certificate, and Form W-5, Earned Income Credit Advance Payment
Certificate. Seller and Buyer agree to comply with the procedures described
in Section 5 of Revenue Procedure 84-77.
SECTION 5.14 Further Assurances. At any time and from time to time after
------------------
the Closing Date, the parties hereto agree to (a) furnish upon request to each
other such further assurances, information, documents and instruments of
transfer or assignment, (b) promptly execute, acknowledge, and deliver any such
further assurances, documents and instruments of transfer or assignment and (c)
do all such further acts and things, in each case that the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to herein. In the event Seller is the obligor on a
performance bond, letter of credit or similar instrument for the benefit of the
Business, Buyer shall cause Seller to be released from such obligations and
shall take such actions as are necessary to reimburse Seller for any payments
Seller makes in respect of such obligations.
SECTION 5.1.5 Non-Assignable Agreements. Buyer acknowledges that certain
-------------------------
agreements between Seller and third parties require that such third parties
consent to the assignment of such agreements. Seller shall use reasonable best
-37-
efforts to obtain all consents and approvals listed in Schedule 5.15 in form and
substance reasonably satisfactory to Buyer. Without in any way limiting the
foregoing, Buyer shall reasonably cooperate with and provide assistance to
Seller in obtaining all such consents and approvals. If any consent for any
agreement is not obtained, such agreement shall not be assigned, but Seller
shall, to the extent possible without incurring any liability to any third
party, keep the agreement in effect and give Buyer the benefit of the agreement
to the same extent as if it had been assigned including, without limitation, (a)
cooperating with Buyer in holding any rights under agreements for which no
consent to assign rights to Buyer is obtained ("Non-Assignable Rights") in trust
---------------------
for Buyer or acting as an agent for Buyer; (b) enforcing any rights of Seller
arising from such Non-Assignable Rights against the issuers thereof or the other
party or parties thereto; (c) taking all such actions and doing, or causing to
be done, all such things at the request of Buyer as shall be reasonably
necessary and proper in order that the value of any Non-Assignable Rights shall
be preserved and shall inure to the benefit of Buyer and (d) paying over to
Buyer all monies or other assets collected by or paid to Seller in respect of
such Non-Assignable Rights. Buyer shall perform the obligations under the
agreement relating to the benefit obtained by Buyer. Nothing in this Agreement
shall be construed as an attempt to assign any agreement or other instrument
that is by its terms non-assignable without the consent of the other party.
SECTION 5.16 Insurance. The parties acknowledge the possibility that losses
---------
Buyer may suffer after the Closing as a result of events or occurrences
affecting the Division or the Company before the Closing may be covered by
insurance policies of Seller or its Affiliates. The parties further acknowledge
the possibility that they may be able to put in place arrangements that would
make available to Buyer the benefit of such coverage with respect to such losses
without prejudicing Seller's other rights under such policies. The parties agree
to cooperate fully with each other and use their reasonable best efforts to put
such arrangements in place to the extent practicable including, without
limitation, by (i) seeking the consent of the insurer under such policies to
permit Buyer or the Company to make claims directly against the insurer or (ii)
making claims on the insurer under such policy and remitting any proceeds to
Buyer or the Company; provided that, if Buyer receives any benefit as a result
-------------
of any such arrangement in respect of any loss as to which it has already been
compensated through an adjustment in the Purchase Price as contemplated by
Section 2.8, Buyer and Seller will agree on appropriate measures to avoid any
windfall to Buyer. Buyer agrees to reimburse Seller for all of Seller's
reasonable expenses incurred in connection with obtaining for Buyer the benefit
of such insurance coverage with respect to such losses.
-38-
ARTICLE VI
----------
CONDITIONS TO CLOSING
SECTION 6.1 Conditions to Obligations of Buyer. The obligation of Buyer to
----------------------------------
consummate the Asset Purchase and the Stock Purchase and to take the other
actions to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived in whole or in part by Buyer subject to the provisions of Section
9.8):
(a) Representations and Warranties, Covenants, Consents and Material
----------------------------------------------------------------
Adverse Changes. (i) The representations and warranties of Seller set forth
---------------
in this Agreement shall have been true and correct in all respects as of
the date of this Agreement and shall be true and correct in all respects as
of the Closing Date as though made on and as of the Closing Date (except
that any such representations and warranties that are expressly made as of
an earlier date need only be true in all respects as of such earlier date
and except that any qualifications, limitations or exceptions in any such
representation or warranty as to materiality or material adverse effect
shall be of no force or effect), (ii) Seller shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, (iii) Seller shall have obtained
all consents listed in Schedules 3.4 and 3.5(c) of the Disclosure Schedule
and (iv) there shall not have occurred any material adverse change in the
business, assets, liabilities, results of operations, prospects or
condition (financial or otherwise) of the Division and the Company taken as
a whole, except, in the case of clauses (i), (ii), (iii) and (iv) above,
for such matters as do not, individually or in the aggregate, result in a
diminution in excess of $8.6 million in the value of the Company and the
Division taken as a whole (excluding for purposes of this calculation any
portion of such diminution that results in a corresponding reduction in the
net assets on the Closing Statement as compared to the net assets that
would have appeared on the Closing Statement in the absence of such
matters), and Buyer shall have received a certificate, dated the Closing
Date, signed on behalf of Seller by one of its senior executive officers to
that effect.
(b) Certain Consents. Seller shall have obtained all consents listed
----------------
in Schedule 6.1(b) of the Disclosure Schedule.
(c) HSR Act; Governmental Approvals. The waiting period applicable to
-------------------------------
the Asset Purchase and the Stock Purchase under the HSR Act shall have
expired or been terminated and all the notices, reports, registrations and
other filings with, and all consents, approvals and authorizations from,
Governmental Entities listed in Schedule 3.4 of the Disclosure Schedule
(collectively, "Governmental Filings and Approvals") shall have been made
----------------------------------
or obtained, as the case may be, except for
-39-
any such Governmental Filings and Approvals the failure of which to make or
obtain are not, individually or in the aggregate, material.
(d) Litigation. No Governmental Entity of competent jurisdiction shall
----------
have enacted, issued, promulgated, enforced or entered any Law or Order
(whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits or challenges the validity or
legality of the sale of the Transferred Assets or the Shares or the other
transactions contemplated by this Agreement (each, a "Governmental Order"),
------------------
and no Governmental Entity or any other Person shall have instituted any
Action or threatened in writing to institute any Action seeking any
Governmental Order.
(e) Receipt of Shares. Buyer shall have received from Seller a
-----------------
certificate or certificates evidencing all of the then issued and
outstanding Shares, duly endorsed in blank or accompanied by stock powers
duly executed in blank, in proper form for transfer and with any requisite
stock transfer tax stamps properly affixed thereto.
(f) Opinion of Counsel. Buyer shall have received an opinion, dated as
------------------
of the Closing Date, of counsel of or to Seller in a form reasonably
acceptable to Buyer and Seller and covering customary matters for a
transaction of this sort. At the request of Buyer, such opinion shall be
confirmed to any lenders providing financing for the transactions
contemplated hereby.
(g) Xxxx of Sale and Assignment. Seller shall have executed and
---------------------------
delivered the Xxxx of Sale and Assignment.
(h) Ancillary Documents. Buyer shall have received from Seller such
-------------------
instruments of transfer, assignment and conveyance as are necessary to vest
in Buyer the right, title and interest of Seller in accordance with this
Agreement in and to the Transferred Assets and the Shares in a form
reasonably satisfactory to Buyer.
(i) Financing. Buyer shall have received the financing contemplated by
---------
Section 4.6 on generally the terms set forth in the commitment letter and
term sheet attached hereto as Exhibit D.
---------
SECTION 6.2 Conditions to Obligations of Seller. The obligation of Seller
-----------------------------------
to consummate the Asset Purchase and the Stock Purchase and to take the other
actions to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived in whole or in part by Seller):
(a) Representations and Warranties. The representations and warranties
------------------------------
of Buyer set forth in this Agreement shall have been true and correct in
all
-40-
material respects as of the date of this Agreement and shall be true and
correct in all material respects as of the Closing Date as though made on
and as of the Closing Date (except that any such representations and
warranties that are expressly made as of an earlier date need only be true
in all material respects as of such earlier date) and Seller shall have
received a certificate, dated the Closing Date, signed on behalf of Buyer
by one of its senior executive officers to such effect.
(b) Covenants. Buyer shall have performed in all material respects all
---------
obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and Seller shall have received a certificate, dated
the Closing Date, signed on behalf of Buyer by one of its senior executive
officers to such effect.
(c) HSR Act; Governmental Approvals. The waiting period applicable to
-------------------------------
the Asset Purchase and the Stock Purchase under the HSR Act shall have
expired or been terminated and all the Governmental Filings and Approvals
shall have been made or obtained, as the case may be, except for any such
Governmental Filings and Approvals the failure of which to make or obtain
are not, individually or in the aggregate, material.
(d) Litigation. No Governmental Entity of competent jurisdiction shall
----------
have enacted, issued, promulgated, enforced or entered any Governmental
Order, and no Governmental Entity or any other Person shall have instituted
any Action or threatened in writing to institute any Action seeking any
Governmental Order.
(e) Receipt of Purchase Price. Seller shall have received from Buyer
-------------------------
the payments required to be made pursuant to Section 2.6 hereof.
(f) Opinion of Counsel. Seller shall have received an opinion, dated
------------------
as of the Closing Date, of counsel to Buyer in a form reasonably acceptable
to Buyer and Seller and covering customary matters for a transaction of
this sort.
(g) Assumption Agreement. Buyer and its Affiliates, as appropriate,
--------------------
shall have executed and delivered the Assumption Agreement.
ARTICLE VII
-----------
TERMINATION
SECTION 7.1 Termination. Notwithstanding anything in this Agreement to the
-----------
contrary, this Agreement and the transactions contemplated herein may, by
written notice given at any time prior to the Closing, be terminated:
(a) by either Buyer or Seller, upon their mutual written consent;
-41-
(b) by either Buyer or Seller, without liability to the terminating
party on account of such termination if the Closing has not occurred by
March 1, 2000; provided, however, that a party may not effect a termination
-------- -------
pursuant to this Section 7.1(b) if it has breached this Agreement and such
breach has proximately contributed to the failure to close;
(c) by either Buyer or Seller, if the other party has breached any of
its representations, warranties or covenants contained in this Agreement in
any material respect and, if curable, such breach has not been cured within
10 days after the terminating party shall have given the other party notice
of such breach; provided, however, that termination pursuant to this
-------- -------
Section 7.1(c) shall not relieve the breaching party of liability for such
breach or otherwise;
(d) by either Buyer or Seller, if any Governmental Entity shall have
issued, enacted, entered, promulgated or enforced any Governmental Order
and such Governmental Order shall have become final and non-appealable;
provided that the right to terminate this Agreement pursuant to this
--------
Section 7.1(d) shall not be available to any party that has failed to
comply with its obligations hereunder in any manner that shall have
proximately contributed to the occurrence of such Governmental Order;
(e) by Buyer, if any of the conditions set forth in Section 6.1 become
incapable of being satisfied (other than through the failure of Buyer to
fully comply with its obligations hereunder) by March 1, 2000; or
(f) by Seller, if any of the conditions set forth in Section 6.2
become incapable of being satisfied (other than through the failure of
Seller to fully comply with its obligations hereunder) by March 1, 2000.
SECTION 7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement pursuant to Section 7.1, this Agreement (other than Section 5.6
(Expenses), Section 9.5 (Governing Law) and Section 9.6 (Consent to
Jurisdiction; Waiver of Jury Trial) and the Confidentiality Agreement between
Buyer and Seller's agent, dated September 28, 1999 (the "Confidentiality
---------------
Agreement"), which shall remain in full force and effect) shall forthwith become
---------
null and void and no party hereto (or any of its respective Affiliates,
Representatives or stockholders) shall have any liability or further obligation
to any other party hereto, except as provided in this Section 7.2; provided,
--------
however, that if this Agreement is terminated by a party because of a breach of
-------
this Agreement by the other party or because one or more of the conditions to
the terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to fully comply with its obligations under
this Agreement, the terminating party's rights to pursue all legal remedies will
survive such termination unimpaired. For purposes of this Agreement, the
"Representatives" of a Person include such Person's
----------------
-42-
affiliates, members, partners, directors, officers, employees, agents,
consultants, legal counsel, accountants, financing sources and financial
advisors.
ARTICLE VIII
------------
INDEMNIFICATION; REMEDIES
SECTION 8.1 Survival. None of the representations, warranties or
--------
covenants (other than covenants to be performed after the Closing, which will
survive indefinitely) of the parties contained in this Agreement shall survive
the Closing and no claims for breach or otherwise in respect thereof may be made
or continued after the Closing by any party.
SECTION 8.2 Indemnification.
---------------
(a) Buyer shall indemnify and hold harmless Seller and (without
duplication) its successors, assigns, stockholders, Affiliates and
Representatives from and against any and all damages, losses, liabilities,
judgments and expenses (including costs of investigation and defense and
reasonable attorneys' and accountants' fees) of any kind or nature whatsoever
(collectively, "Damages") incurred or sustained by them arising out of or
-------
resulting from any Assumed Liabilities. Seller shall cooperate with and assist
Buyer (at Buyer's expense) in the event that Buyer must defend against any
claims for Damages arising our of or resulting from any Assumed Liabilities.
(b) Seller shall indemnify and hold harmless Buyer and (without
duplication) its successors, assigns, stockholders, Affiliates and
Representatives from and against any and all Damages incurred or sustained by
them arising out of or resulting from the Excluded Liabilities. Buyer shall
cooperate with and assist Seller (at Seller's expense) in the event that Seller
must defend against any claims for Damages arising out of or resulting from any
Excluded Liabilities.
SECTION 8.3 Tax Indemnifications by Seller.
------------------------------
(a) Seller shall be liable for, and indemnify Buyer for, (i) all Taxes
(including any obligation to contribute to the payment of a Tax determined on a
consolidated, combined or unitary basis with respect to a group of corporations
that includes or included the Company and Taxes resulting from the Company
ceasing to be a member of Seller Group) imposed on Seller Group (other than the
Company) for any taxable year and (ii) Pre-Closing Taxes. Seller shall be
entitled to any refund of Taxes of the Company received for such periods. The
term "Seller Group" shall mean Seller and any "affiliated group" (as defined in
------------
Section 1504(a) of the Code without regard to the limitations contained in
Section 1504(b)
-43-
of the Code) that includes Seller or any predecessor of or successor to Seller
(or another such predecessor or successor).
(b) For purposes of this Agreement, "Tax" means any foreign, federal, state
---
or local income, gross receipts, license, severance, occupation, capital gains,
premium, environmental (including taxes under Section 59A of the Code), customs,
duties, profits, disability, registration, alternative or add-on minimum,
estimated, withholding, payroll, employment, unemployment insurance, social
security (or similar), excise, production, sales, use, value-added, occupancy,
franchise, real property, personal property, business and occupation,
mercantile, windfall profits, capital stock, stamp, transfer, workmen's
compensation or other tax, fee or imposition of any kind whatsoever relating to
the Business, including any interest, penalties, additions, assessments or
deferred liability with respect thereto, and any interest in respect of such
penalties, additions, assessments or deferred liability, whether disputed or
not.
(c) For purposes of this Agreement, "Pre-Closing Taxes" shall mean all
-----------------
liabilities for Taxes imposed on, or with respect to, the Company, the Business
or Transferred Assets with respect to any period (and whether imposed on Seller,
the Company or any of their Affiliates, Buyer or any third party that acquires
any of the foregoing) other than (i) Taxes imposed on the Company or for which
the Company may otherwise be liable for any taxable year or period that begins
and ends after the Closing Date, and with respect to any taxable period which
begins before and ends after the Closing Date, the portion of such taxable year
beginning on and including the day following the Closing Date and (ii) Taxes
that arise out of or are attributable to the Business for any taxable year or
period that begins and ends after the Closing Date and, with respect to any
taxable year or period beginning before and ending after the Closing Date, the
portion of such taxable year beginning on and including the day following the
Closing Date. It is hereby agreed and understood that the foregoing obligations
shall include, but not be limited to, defending Buyer or the Company (at
Seller's sole cost and expense), or reimbursing Buyer's reasonable fees and
expenses to the extent that Buyer elects to defend, before any foreign or
domestic taxing authority.
(d) For purposes of Section 8.3(a), whenever it is necessary to determine
the liability for Taxes of the Company or Taxes attributable to or arising out
of the Business for a portion of a taxable year or period that begins before and
ends after the Closing Date, the determination of the Taxes of the Company for
the portion of the year or period ending on, and the portion of the year or
period beginning after, the Closing Date shall be determined by assuming that
the Company or the Business had a taxable year or period which ended at the
close of the Closing Date, except that exemptions, allowances or deductions that
are calculated on an annual basis and are not affected by the purchases
contemplated
-44-
by this Agreement, such as the deduction for real property taxes, shall be
apportioned on a time basis.
(e) Seller shall pay Buyer the Taxes for which Seller is liable pursuant to
Section 8.3(a) but which are payable with Tax Returns to be filed by Buyer
pursuant to Section 8.4(c) within 10 days prior to the due date for the filing
of such Tax Returns.
(f) Seller shall file or cause to be filed when due all Tax Returns that
are required to be filed by or with respect to the Company for taxable years or
periods ending on or before the Closing Date and shall remit any Taxes due in
respect of such Tax Returns.
(g) Seller and Buyer shall each be liable for 50% of the transfer Taxes
arising from the sale of the Shares.
(h) Any tax allocation or sharing agreement or arrangement, whether or not
written, that may have been entered into by Seller or any member of Seller Group
and the Company shall be terminated as to the Company as of the Closing Date,
and no payments which are owed by or to the Company pursuant thereto shall be
made thereunder.
(i) Seller and Buyer shall jointly determine the character of any payment
of Taxes made pursuant to this Section 8.3 and subsequent Tax filings shall
reflect such characterization.
(j) After the Closing Date, Seller shall:
(i) assist, and cause its respective Affiliates to assist, Buyer
in preparing any Tax Returns or reports which Buyer is responsible for
preparing and filing in accordance with Section 8.4(c);
(ii) cooperate fully in preparing for any audits of, or disputes
with taxing authorities regarding, any Tax Returns of the Company;
(iii) make available to Buyer and to any taxing authority as
reasonably requested all information, records, and documents relating to
Taxes of the Company;
(iv) provide timely notice to Buyer in writing of any pending or
threatened tax audits or assessments of the Company for taxable periods
for which Buyer may have a liability under Section 8.4(a);
-45-
(v) furnish Buyer with copies of all correspondence received from
any taxing authority in connection with any tax audit or information
request with respect to any such taxable period;
(vi) be responsible for all costs and expenses of Buyer, the
Company and Seller in connection with any investigations, audits or
disputes with any taxing authorities relating to Pre-Closing Taxes; and
(vii) not settle or compromise any material dispute with any
taxing authority relating to Pre-Closing Taxes without the written
consent of Buyer, which consent shall not be unreasonably withheld.
(k) The obligations of Seller set forth in this Section 8.3 shall remain in
effect until the expiration of the relevant statutes of limitations.
SECTION 8.4 Tax Indemnifications by Buyer.
-----------------------------
(a) Buyer shall be liable for and indemnify Seller for the Taxes of the
Company for any taxable year or period that begins after the Closing Date and,
with respect to any taxable year or period beginning before and ending after the
Closing Date, the portion of such taxable year beginning after the Closing Date.
(b) For purposes of Section 8.4(a), whenever it is necessary to determine
the liability for Taxes of the Company or Taxes attributable to or arising out
of the Business for a portion of a taxable year or period that begins before and
ends after the Closing Date, the determination of the Taxes of the Company or
attributable to or arising out of the Business for the portion of the year or
period ending on, and the portion of the year or period beginning after, the
Closing Date shall be determined by assuming that the Company or the Business
had a taxable year or period which ended at the close of the Closing Date,
except that exemptions, allowances or deductions that are calculated on an
annual basis and are not affected by the purchases contemplated by this
Agreement, such as the deduction for real property taxes, shall be apportioned
on a timely basis.
(c) Buyer shall file or cause to be filed when due all Tax Returns that are
required to be filed by or with respect to the Company for taxable years or
periods ending after the Closing Date and shall remit any Taxes due in respect
of such Tax Returns.
(d) Buyer shall promptly notify Seller in writing upon receipt by Buyer,
any of its Affiliates or the Company of notice of any pending or threatened
federal, state, local or foreign income or franchise Tax audits or assessments
which may materially affect the tax liabilities of the Company for which Seller
would be required to indemnify Buyer pursuant to Section 8.3(a). Seller shall
have the sole right to represent the Company' interests in any Tax audit or
-46-
administrative or court proceeding relating to taxable periods ending on or
before the Closing Date, and to employ counsel of its choice at its expense (it
being understood that Buyer may represent the Company's interest at Seller's
expense if Seller shall not have assumed such representation). Seller shall be
entitled to participate at its expense in the defense of any claim for Taxes for
a year or period ending after the Closing Date which may be the subject of
indemnification by Seller pursuant to Section 8.3(a) and, with the written
consent of Buyer, and at its sole expense, may assume the entire defense of such
Tax claim. Neither Buyer nor the Company may agree to settle any Tax claim for
the portion of the year or period ending on the Closing Date which may be the
subject of indemnification by Seller under Section 8.3(a) without the prior
written consent of Seller, which consent shall not be unreasonably withheld.
(e) With respect to the taxable year of Seller ending 1999 and the period
prior to the Closing Date, Buyer shall promptly cause the Company to prepare and
provide to Seller a package of tax information materials (the "Tax Package"),
-----------
which shall be completed in accordance with past practice including past
practice as to providing the information, schedules and work papers and as to
the method of computation of separate taxable income or other relevant measures
of income of the Company. Buyer shall cause the Tax Package for the portion of
the taxable period ending on the Closing Date to be delivered to Seller within
120 days after the Closing Date.
(f) Seller and Buyer shall jointly determine the character of any payment
of Taxes made pursuant to this Section 8.4 and subsequent Tax filings shall
reflect such characterization.
(g) After the Closing Date, Buyer shall:
(i) assist, and cause its respective Affiliates to assist, Seller
in preparing any Tax Returns or reports which Seller is responsible for
preparing and filing in accordance with Section 8.3(d);
(ii) cooperate fully in preparing for any audits of, or disputes
with taxing authorities regarding, any Tax Returns of the Company;
(iii) make available to Seller and to any taxing authority as
reasonably requested all information, records, and documents relating to
Taxes of the Company;
(iv) provide timely notice to Seller in writing of any pending or
threatened tax audits or assessments of the Company for taxable periods
for which Seller may have a liability under Section 8.3(a);
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(v) provide to Seller at least 30 days before due any Tax Returns
or reports which Buyer is responsible for preparing and filing in
accordance with Section 8.4(c); and
(vi) furnish Seller with copies of all correspondence received
from any taxing authority in connection with any tax audit or information
request with respect to any such taxable period.
(h) The obligations of Buyer set forth in this Section 8.4 shall remain in
effect until the expiration of the relevant statutes of limitations.
SECTION 1.0 No Affiliate Liability. Each of the following is herein
----------------------
referred to as a "Buyer Affiliate": (a) any direct or indirect holder of any
---------------
equity interests or securities in Buyer (whether limited or general partners,
members, stockholders or otherwise), (b) any Affiliate of Buyer, or (c) any
director, officer, employee, representative or agent of (i) Buyer, (ii) any
Affiliate of Buyer or (iii) any such holder of equity interests or securities
referred to in clause (a) above. No Buyer Affiliate shall have any liability or
obligation of any nature whatsoever in connection with or under this Agreement
or the transactions contemplated hereby and Seller hereby waives and releases
all claims of any such liability and obligation, it being understood that no
such Person or entity (other than Buyer) shall be liable for or in respect of
such matters.
ARTICLE IX
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MISCELLANEOUS
SECTION 9.1 Assignments; No Third Party Rights.
----------------------------------
(a) Buyer may not assign any of its rights or obligations under this
Agreement without the prior written consent of Seller (which may not be
unreasonably withheld or delayed) and any purported assignment without such
consent shall be void. The preceding sentence notwithstanding, Buyer may assign
this Agreement or all or any part of its rights and obligations under this
Agreement, following written notice to Seller, to a wholly owned Subsidiary of
Buyer or a Person or entity which controls Buyer within the meaning of the
Securities Act or to any Person or entity required by Buyer's financing sources
in order to secure Buyer's obligations to such financing sources; provided,
--------
however, that no such assignment shall relieve Buyer of its
-------
obligations under this Agreement. "Subsidiary" means, with respect to any
----------
Person, any corporation or other entity of which such Person has, directly or
indirectly, (i) ownership of securities or other interests having the power to
elect a majority of the Board of Directors or similar governing body of such
corporation or other entity, or (ii) the power to direct the business and
policies of that corporation or other entity.
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(b) Seller may not assign any of its rights or obligations under
this Agreement without the prior written consent of Buyer (which may not
be unreasonably withheld or delayed) and any purported assignment without
such consent shall be void. The preceding sentence notwithstanding,
Seller may assign this Agreement or all or any part of its rights and
obligations under this Agreement, following written notice to Buyer, to a
wholly owned Subsidiary of Seller; provided, however, that no such
-------- -------
assignment shall relieve Seller of its obligations under this Agreement.
(c) Except as provided in Section 5.8, nothing in this Agreement,
express or implied, is intended to confer upon any Person other than the
parties hereto any rights or remedies of any nature whatsoever under or
by reason of this Agreement or any provision of this Agreement. This
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their successors
and permitted assigns.
SECTION 9.2 Entire Agreement. This Agreement, including the
----------------
Exhibits hereto, the Disclosure Schedule, the Buyer's Disclosure Schedule and
the other agreements and written understandings referred to herein or otherwise
entered into by the parties hereto on the date hereof, and the Confidentiality
Agreement constitute the entire agreement and understanding and supersede all
other prior covenants, agreements, undertakings, obligations, promises,
arrangements, communications, representations and warranties, whether oral or
written, by any party hereto or by any director, officer, employee, agent,
Affiliate or Representative of any party hereto. There are no covenants,
agreements, undertakings or obligations with respect to the subject matter of
this Agreement other than those expressly set forth or referred to herein and no
representations or warranties of any kind or nature whatsoever, express or
implied, including any implied warranties of merchantability or fitness for a
particular purpose, are made or shall be deemed to be made herein by the parties
hereto except those expressly made herein.
SECTION 9.3 Amendment or Modification. This Agreement may be
-------------------------
amended or modified only by written instrument signed by all of the parties
hereto.
SECTION 9.4 Notices. All notices, requests, instructions, claims,
-------
demands, consents and other communications required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given on the
date delivered by hand or by courier service such as Federal Express, or by
other messenger (or, if delivery is refused, upon presentment) or upon receipt
by facsimile transmission (with confirmation), or upon delivery by registered or
certified mail (return receipt requested), postage prepaid, to the parties at
the following addresses:
(a) If to Buyer:
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WP Education Holdings LLC
c/o WP Management Partners, L.L.C.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
(b) With a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
(c) If to Seller:
ZD Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: J. Xxxxxxx Xxxxxx
With a copy to:
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxxx
or to such other persons or addresses as the person to whom notice is given may
have previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.5 Governing Law. This agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York applicable to
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contracts made and performed in such State and without regard to the conflict of
law principles thereof.
SECTION 9.6 Consent to Jurisdiction; Waiver of Jury Trial.
---------------------------------------------
(a) The parties hereto hereby irrevocably submit to the jurisdiction of the
courts of the State of New York, County of New York and the federal courts of
the United States of America located in the State of New York solely in respect
of the interpretation and enforcement of the provisions of this agreement and of
the documents referred to in this agreement, and in respect of the transactions
contemplated herein, and hereby waive, and agree not to assert, as a defense in
any action for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action may not be brought or is not
maintainable in said courts or that the venue thereof may not be appropriate or
that this agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a New York state
or federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 9.4 hereof or in
such other manner as may be permitted by law, shall be valid and sufficient
service thereof.
(b) Each party hereto hereby acknowledges and agrees that any controversy
which may arise under this agreement is likely to involve complicated and
difficult issues, and therefore each such party hereby irrevocably and
unconditionally waives any right such party may have to a trial by jury in
respect of any litigation directly or indirectly arising out of or relating to
this agreement or the transactions contemplated in this agreement. Each party
certifies and acknowledges that (i) no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce the foregoing waiver, (ii) each
such party understands and has considered the implications of this waiver, (iii)
each such party makes this waiver voluntarily, and (iv) each such party has been
induced to enter into this agreement by, among other things, the mutual waivers
and certifications in this Section 9.6.
SECTION 9.7 Severability. In case any one or more of the provisions
-----------
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such provision or provisions shall be ineffective
only to the extent of such invalidity, illegality or unenforceability, without
invalidating the remainder of such provision or provisions or the remaining
provisions of this Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision or
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provisions had never been contained herein, unless such a construction would be
unreasonable.
SECTION 9.8 Waiver of Conditions.
--------------------
(a) To the extent permitted by applicable Law: (i) no claim or right
arising out of this Agreement or the documents referred to in this Agreement can
be discharged by one party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by the other party; (ii) no waiver
that may be given by a party will be applicable except in the specific instance
for which it is given and (iii) no notice to or demand on one party will be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
(b) The rights and remedies of the parties hereto are cumulative and not
alternative. Except where a specific period for action or inaction is provided
herein, neither the failure nor any delay on the part of any party in exercising
any right, power or privilege under this Agreement or the documents referred to
in this Agreement shall operate as a waiver thereof, nor shall any waiver on the
part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any other or
further exercise thereof or the exercise of any other such right, power or
privilege. The failure of a party to exercise any right conferred herein within
the time required shall cause such right to terminate with respect to the
transaction or circumstances giving rise to such right, but not to any such
right arising as a result of any other transactions or circumstances.
SECTION 9.9 Actions of the Company. Whenever this Agreement requires the
----------------------
Company to take any action, such requirement shall be deemed to involve, with
respect to actions to be taken at or prior to the Closing, an undertaking on the
part of Seller to cause the Company to take such action and, with respect to
actions to be taken after the Closing, an undertaking on the part of Buyer to
cause the Company to take such action.
SECTION 9.10 Descriptive Headings; Construction. The descriptive headings
----------------------------------
herein are inserted for convenience of reference only and are not intended to be
part of, or to affect the meaning, construction or interpretation of, this
Agreement. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms and shall be deemed to be followed by the
phrase "without limitation."
SECTION 9.11 Counterparts. For the convenience of the parties hereto, this
------------
Agreement may be executed in any number of counterparts, each such counterpart
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being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
SECTION 9.12 Knowledge. When references are made in this Agreement to
---------
information being "to the knowledge of Seller" or similar language, such
knowledge shall refer to the knowledge of the officers of Seller and the Company
set forth in Schedule 9.12 of the Disclosure Schedule. Such individuals shall be
deemed to have "knowledge" of a particular fact or other matter if such
individual is actually or otherwise should have been aware of such fact or other
matter.
SECTION 9.13 Materiality. Whenever the terms "material," "materially," "in
-----------
all material respects" or similar materiality qualifiers are used in this
Agreement with respect to Seller or the Division or any of them, they shall be
deemed to refer only to matters, circumstances or events that are material to
the business, assets, liabilities, results of operations, prospects or condition
(financial or otherwise) of the Division and the Company taken as a whole.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers duly authorized as of the date first
above written.
ZD INC.
By /s/ XXXXX X. XXXX
--------------------------------
Name: Xxxxx X. Xxxx
Title: Senior Vice President of Development
and Planning
WP EDUCATION HOLDINGS LLC
By /s/ XXXXX XXXXXX
--------------------------------
Name: Xxxxx Xxxxxx
Title: President
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