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