(1) RIVERDEEP, INC.
-AND-
(2) GTG/WIZARD, LLC
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SALE AND PURCHASE AGREEMENT
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Dated 23 August, 2002
1 Sale And Purchase...................................................................................2
2 Purchase Price: Payment; Escrow......................................................................3
2.1 Purchase Price; Escrow......................................................................3
2.2 Allocation of Purchase Price................................................................3
2.3 Retention of Books and Records..............................................................3
3 The Closing..........................................................................................4
3.1 Time and Place of Closing...................................................................4
3.2 Deliveries by Seller........................................................................4
3.3 Deliveries by the Purchaser.................................................................5
3.4 Conditions to Obligations of the Parties....................................................5
3.5 Termination.................................................................................6
4 Representations and Warranties of Seller.............................................................6
4.1 Organization................................................................................6
4.2 Authority: Execution: Delivery..............................................................7
4.3 No Conflicts: Consents......................................................................7
4.4 No Other Agreements to Sell Business Assets or the Companies................................8
4.5 Capitalization..............................................................................8
4.6 Financial Statements........................................................................8
4.7 Absence of Undisclosed Liabilities and Obligations..........................................8
4.8 Absence of Certain Changes or Events........................................................9
4.9 Tax Matters................................................................................11
4.10 Title to Business Assets: Assets Necessary to Business.....................................11
4.11 Tangible Properties........................................................................12
4.12 Contracts and Related Matters..............................................................12
4.13 Intellectual Property......................................................................13
4.14 Environmental Matters......................................................................15
4.15 Insurance..................................................................................16
4.16 Labor Matters..............................................................................16
4.17 Employee Benefits..........................................................................16
4.18 Litigation.................................................................................18
4.19 Compliance with Laws.......................................................................18
4.20 No Brokers.................................................................................19
4.21 Illegal Payments...........................................................................19
4.22 Transactions with Certain Persons..........................................................19
4.23 Inventories................................................................................19
4.24 BCLtd Assets and Liabilities...............................................................19
5 Representations and Warranties of Purchaser.........................................................19
5.1 Organization and Authority.................................................................20
5.2 No Conflicts: Consents.....................................................................20
5.3 Litigation.................................................................................20
5.4 No Brokers.................................................................................20
5.5 Financing..................................................................................21
6 Certain Covenants and Agreements....................................................................21
6.1 Nondisclosure..............................................................................21
6.2 Name.......................................................................................21
6.3 Schedules and Exhibits.....................................................................21
6.4 Further Assurances.........................................................................21
6.5 Certain Consents...........................................................................22
6.6 Execution of Assignments...................................................................22
6.7 Employees..................................................................................22
6.8 Termination of Intercompany Accounts: Letters of Credit and Guarantees.....................22
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6.9 Retained Product Trademarks and Logos: Patents.............................................22
6.10 Non-Competition: Non-Solicitation..........................................................23
6.11 Tax Matters................................................................................23
6.12 Post Closing Audit.........................................................................25
6.13 Mattel Trademarks..........................................................................25
6.14 Cooperation Concerning Intellectual Property...............................................25
6.15 Further Obligation of Seller...............................................................26
6.16 GTG/Wizard Equity Participation Plan.......................................................26
6.17 No Amendment of Charter Documents or Operating Agreements..................................26
6.18 Insurance..................................................................................27
6.19 Distributions and Cash.....................................................................27
6.20 Sale of Backlisted Titles..................................................................29
6.21 Conduct 29
7 Nature and Survival of Representations and Warranties - indemnification, etc........................29
7.1 Survival of Representations, Warranties, Etc...............................................29
7.2 Seller's Agreement to Indemnify............................................................30
7.3 Purchaser's Agreement to Indemnify.........................................................30
7.4 Third Party Claims.........................................................................30
7.5 Limitation of Liability....................................................................32
7.6 Sole Remedy................................................................................32
8 Payment of Certain Expenses.........................................................................32
9 Remedies............................................................................................33
10 Waiver..............................................................................................33
11 Notices, etc........................................................................................33
12 [Intentionally Omitted].............................................................................34
13 Entire Agreement; Amendment.........................................................................34
14 Press Releases......................................................................................34
15 General.............................................................................................35
16 Jurisdiction........................................................................................35
17 Severability........................................................................................35
18 Interpretation......................................................................................35
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SCHEDULES
SCHEDULE 1.................The Products
SCHEDULE 2.2......Allocation of Purchase Price
SCHEDULE 3.2......Seller's Approvals and Consents Required
SCHEDULE 3.3......Purchaser's Required Consents and Approvals
SCHEDULE 4........Knowledge of Seller
SCHEDULE 4.1......Organization
SCHEDULE 4.3......No Conflicts, Consents
SCHEDULE 4.4......No Other Agreements to Sell Business Assets or the Companies
SCHEDULE 4.5......Capitalization
SCHEDULE 4.6......Financial Statements
SCHEDULE 4.8......Absence of Certain Changes Or Events
SCHEDULE 4.9......Tax Matters
SCHEDULE 4.10(a)..Title to Business Assets; Assets Necessary to Business
SCHEDULE 4.10(b)..Retained Assets
SCHEDULE 4.11.....Tangible Properties
SCHEDULE 4.12.....Contracts and Related Matters
SCHEDULE 4.13.....Intellectual Property
SCHEDULE 4.15.....Insurance
SCHEDULE 4.16.....Labor Matters
SCHEDULE 4.17.....Employee Benefits
SCHEDULE 4.18.....Litigation
SCHEDULE 4.20.....No Brokers
SCHEDULE 4.22.....Transactions with Certain Persons
SCHEDULE 4.24.....BCLtd Assets and Liabilities
SCHEDULE 5.................Knowledge of Purchaser
SCHEDULE 5.2......No Conflicts; Consents
SCHEDULE 5.3......Litigation
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SCHEDULE 6.2......Name
SCHEDULE 6.4......Conduct
SCHEDULE 6.6......Execution of Assignments
SCHEDULE 6.7......Employees
SCHEDULE 6.8......Termination of Intercompany Accounts; Letters of Credit
and Guarantees
SCHEDULE 6.10.....Non-Competition; Non-Solicitation
SCHEDULE 6.20.....Sale of Backlisted Titles
SCHEDULE 7.2......Purchaser Indemnification
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THIS SALE AND PURCHASE AGREEMENT (this "Agreement") is entered into as of August
23, 2002 by and between RIVERDEEP, INC., a Delaware corporation (the
"Purchaser"), and GTG/WIZARD, LLC, a Delaware limited liability company (the
"Seller").
WHEREAS, Broderbund LLC, a Minnesota limited liability company ("BLC"),
Broderbund Properties LLC, a Delaware limited liability company ("BPLC"), and
Broderbund (Canada) Limited, a company organized in Ontario, Canada ("BCLtd"
along with BLC and BPLC, each, a "Company," and collectively, the "Companies")
are engaged in the business of developing, publishing and marketing the consumer
productivity software titles listed on Schedule 1 (the "Products");
WHEREAS, the Seller is the sole and exclusive owner of all of the interests in
each of the Companies;
WHEREAS, the Seller desires to sell, and the Purchaser desires to purchase, all
of the Seller's interest in the Companies, all for the consideration and on the
terms and conditions set forth herein; and
WHEREAS, an Affiliate (as hereinafter defined) of the Purchaser has previously
paid to the Seller US$1,000,000 as an upfront fee (the "Down Payment") to be
credited against the Purchase Price (as hereinafter defined) to, among other
things, secure an exclusive negotiating period to complete the transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
DEFINITIONS
For purposes of this Agreement:
"Affiliate" of any specified Person shall mean a Person that directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, the specified Person. For the purposes of this
definition, the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting stock, through the right or power to
appoint a majority of the board of directors, by contract or otherwise and the
terms "controlled by" and "under common control with" have the corresponding
meanings.
"Balance Sheet" shall mean the unaudited balance sheet of the Seller's
Subsidiaries as of June 30, 2002.
"Balance Sheet Date" shall mean June 30, 2002.
"Benefit Plan" shall mean a plan, arrangement, agreement or program contributed
to, maintained or sponsored by any Company to which it may be obligated to
contribute or could have any liability, whether direct or indirect, and that is:
(i) a profit-sharing, deferred compensation, bonus, stock option, stock
purchase, pension, retainer, consulting, retirement, severance, welfare or
incentive plan, agreement or arrangement, whether or not funded and whether or
not terminated, (ii) an agreement with respect to employment, severance or other
benefits with any current or former employees, directors or consultants, (iii) a
personnel policy or fringe benefit plan, policy, program or arrangement
providing for benefits or perquisites to current or former employees, officers,
directors, consultants or agents, whether or not funded and whether or not
terminated, or (iv) any other employee benefit plan as defined under Section
3(3) of ERISA, whether or not funded and whether or not terminated.
"Broderbund Entities" shall mean the Seller and the Companies.
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"Business Assets" shall mean all the assets of the Companies, including, without
limitation, those assets that were transferred pursuant to the transactions
among the Seller and its Subsidiaries (including the Companies) prior to the
Closing, or will be transferred to the Companies upon the receipt of applicable
third party consents.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and all regulations promulgated thereunder.
"GAAP" shall mean generally accepted accounting principles in the U.S.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"In the ordinary course", "in accordance with past practice" and "consistent
with past practice" shall mean, with respect to the Seller, the Companies or the
Business Assets, the practices of the Seller or the Companies since October 19,
2000.
"Material Adverse Effect" shall mean, with respect to any Person or assets of
such Person, an event or matter which has had or is reasonably likely to have a
material adverse effect on the business, condition (financial or otherwise) or
results of operations of such Person or such assets, and, in the case of a
representation by, or covenant or condition affecting, the Seller, refers to a
material adverse effect on the Companies or the business of the Companies, in
each case, taken as a whole, not on the Seller or any individual Company.
"Person" shall mean a person, corporation, partnership, limited liability
company, joint venture, trust or other entity or organization.
"Subsidiary" shall mean, with respect to any Person, any corporation, entity or
other organization, whether incorporated or unincorporated, of which (i) such
Person, directly or indirectly, owns or controls at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions or (ii) such Person is, in the case of a partnership, a general
partner or, in the case of a limited liability company, a manager or managing
member. For purposes of clarity, the parties agree that for all periods prior to
the Closing Date, the Companies shall be considered Subsidiaries of the Seller.
"Tax" or "Taxes" shall mean any and all federal, state, local and foreign taxes,
assessments, special assessments, installments and other governmental charges,
duties, impositions, levies and liabilities, including, without limitation,
taxes based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, gains, capital, estate,
franchise, withholding, payroll, recapture, employment, excise, unemployment,
insurance, social security, business license, occupation, business organization,
stamp duty, environmental and property taxes, together with all interest,
penalties and additions imposed with respect to such amounts.
"Tax Returns" shall mean any report, return, election, notice, estimate,
declaration, information statement and other forms and documents (including,
without limitation, all amendments thereof and schedules, exhibits and other
attachments thereto) relating to and filed or required to be filed with a taxing
authority in connection with any Taxes (including, without limitation, estimated
Taxes).
"WARN Act" shall mean the Worker Adjustment and Retraining Notification Act, 29
USCss.ss.2101 et. seq.
1 SALE AND PURCHASE
Upon the terms and subject to the conditions of this Agreement, at the
Closing (as hereinafter defined), the Seller shall sell, convey, assign,
transfer and deliver to the Purchaser, and the Purchaser shall purchase and
acquire from the Seller, good, valid and marketable title to 100%
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of the outstanding limited liability company interests or capital stock, as
the case may be, of the Companies (the "Interests").
2 PURCHASE PRICE: PAYMENT; ESCROW
2.1 Purchase Price; Escrow
(a) The purchase price (the "Purchase Price") to be paid by the Purchaser
on the Closing Date for the Interests being purchased hereunder shall
be an amount in cash equal to US$57,187,703. The Purchase Price, less
the Down Payment, receipt of which is hereby confirmed by the Seller,
and less $3,000,000, to be deposited with the escrow agent named under
the Escrow Agreement (as hereinafter defined), shall be paid to the
Seller in cash by wire transfer of immediately available United States
federal funds to an account designated in writing to the Purchaser by
the Seller at least one business day before the Closing Date.
(b) On the Closing Date, the Purchaser shall deposit $3,000,000 in escrow
(the "Escrow Funds") with the escrow agent, pursuant to the Escrow
Agreement.
2.2 Allocation of Purchase Price
As and to the extent attributable thereto, the Purchase Price and all other
capitalizable costs and assumed liabilities and obligations relating to the
Companies, the business of the Companies and the Business Assets (the
"Consideration") shall be allocated among the various categories of the
Business Assets and the "Non-Competition/Non-Solicitation" obligations
provided for in Section 6.10, as applicable, in such manner as shall be
determined by the Purchaser and the Seller, in accordance with Section 1060
of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations promulgated thereunder and all applicable provisions of state,
local or foreign law. Such allocation is set forth in an allocation
schedule attached hereto as Schedule 2.2. Each of the parties hereto agrees
to prepare and file, or cause to be prepared and filed, all Tax Returns,
including Form 8594 (and any supplement thereto), in a manner consistent
with such allocation and to report this transaction for federal, state,
local and foreign income tax purposes in accordance with such allocation of
the Consideration and shall use their commercially reasonable efforts to
sustain such allocation in any subsequent Tax audit or dispute.
2.3 Retention of Books and Records
The Purchaser shall, and shall cause the Companies to, (a) hold all of the
books and records of the Companies existing on the Closing Date and not
destroy or dispose of any thereof for a period of six years from the
Closing Date or such longer time as may be required by law, and thereafter,
if it desires to destroy or dispose of such books and records, offer first
in writing at least 60 days prior to such destruction or disposition to
surrender them to the Seller; provided, that if the Seller does not respond
in writing within 60 days of the Purchaser's notice, it shall be deemed to
have consented to such destruction or disposition, and (b) from and after
the Closing, afford the Seller, its accountants and counsel, during normal
business hours, upon reasonable request, at any time, reasonable access to
such books, records and other data and to the employees of the Purchaser
and any of its Subsidiaries operating the business of the Companies, to the
extent that such access may be required for any legitimate purpose (which,
for any Person other than Mattel, Inc. ("Mattel"), shall be limited to
audits of the Seller's books and records or other financial reporting
matters, any matter relating to the Seller's or its Affiliates' Taxes, any
disputes between the Seller or its Affiliates, and a third party (other
than the Purchaser, the Companies or their Affiliates, which shall be
governed by Section 7), Seller's or its Affiliates' compliance with laws or
regulations governing their business, or the fulfillment of obligations to
former employees of the Companies), at no cost to the Seller
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(other than for the Purchaser's reasonable out-of-pocket expenses). The
Seller may, at its option, at any time extend its rights under this Section
2.3 to Mattel or Mattel's Subsidiaries with respect to the records of the
Companies for periods prior to October 19, 2000, in order to comply with
the Seller's obligations under that certain Sale and Purchase Agreement
dated as of September 28, 2000, as amended (the "Mattel Agreement"), and in
connection with such assignment the Seller shall use its commercially
reasonable efforts to obtain Mattel's agreement to hold the Companies'
confidential information and trade secrets in confidence. In addition, the
Seller may, at its option, at any time extend its rights under this Section
2.3 to Mattel or Mattel's Subsidiaries with respect to the records of the
Companies solely in order for Mattel or its Subsidiaries to conduct an
audit pursuant to Section 7.2 of the Mattel Agreement, subject to the
Purchaser's right to require Mattel and/or its Subsidiaries, as the case
may be, to enter into a customary confidentiality agreement reasonably
satisfactory to the Purchaser. Notwithstanding anything in the foregoing to
the contrary, the parties hereby agree that Seller or Mattel shall have no
right to access or review any source code, development plans or other
similar confidential Product information or data. In furtherance of the
foregoing, in the event and for so long as any party to this Agreement
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection
with any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act or
transaction prior to the Closing Date involving the Companies or the
Business Assets, the other party will use commercially reasonable efforts
to cooperate with it and its counsel in the contest or defense, make
reasonably available their personnel, and provide such testimony and such
reasonable access to their books and records as shall be reasonably
necessary in connection with the contest or defense, without charge to the
contesting or defending party, and without derogation of either party's
indemnification obligations in Section 7.
3 THE CLOSING
3.1 Time and Place of Closing
Upon the terms and subject to the conditions contained in this Agreement,
the transfer of Interests contemplated by this Agreement shall take place
at such place and in such manner as mutually agreed upon by the parties,
effective upon Seller's receipt of the wire transfer of the Purchase Price,
less the Escrow Funds and the Down Payment, in immediately available funds
and the deposit of the Escrow Funds pursuant to Section 2.1(b). For all
purposes (including allocation of risk of loss and benefit of all revenues)
the closing (the "Closing") of the -transactions contemplated hereby will
be deemed to have occurred effective at the opening of business on the day
the parties have satisfied or waived all of the conditions set forth in
Section 3.4 hereof (the "Closing Date")
3.2 Deliveries by Seller
At the Closing, the Seller shall deliver or cause to be delivered to the
Purchaser the following:
(a) assignments and other instruments of transfer and documents in form
and substance reasonably satisfactory to the Purchaser and its
counsel, as are effective to vest in the Purchaser, as applicable,
good, valid and marketable title to the Interests free and clear of
any Liens;
(b) limited liability company or corporate books, stock ledgers, minute
books or other similar documents and corporate seals of the Companies;
(c) resignations of the members, managing members, managers, officers and
directors of the Companies other than those managers, officers and
directors which the Purchaser designates in writing that it desires to
retain as employees or consultants;
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(d) a duly executed certification of non-foreign status, pursuant to
Section 1445(b)(2) of the Code and Treas. Reg. ss. I .1445-2(b)(2),
which certification shall conform to the model certification provided
in Treas. Reg. ss. 1.1445-2(b)(2)(iii)(B);
(e) a duly executed transition services agreement between the Seller and
the Purchaser (the "Transition Services Agreement");
(f) a duly executed escrow agreement among the Seller, the Purchaser and
the escrow agent (the "Escrow Agreement");
(g) a duly executed termination agreement between the Seller and Riverdeep
Group plc (the "Termination Agreement");
(h) consents from governmental or regulatory bodies or agencies or from
any other Person set forth on Schedule 3.2 attached hereto;
(i) instruments sufficient to evidence the full assignment to the
Purchaser of all of the Seller's right, title and interest in and to
the name and xxxx "Broderbund" and all goodwill related thereto and
symbolized thereby, including, without limitation, all registrations
and applications for registrations therefor, and any and all
formatives, variants and derivatives thereof;
(j) evidence reasonably satisfactory to the Purchaser of the release of
any liens set forth in Schedule 4.5 and
(k) such other duly executed documents and certificates as may be required
to be delivered by the Seller pursuant to the terms of this Agreement
or as may be reasonably requested by the Purchaser prior to the
Closing.
3.3 Deliveries by the Purchaser
At the Closing, the Purchaser shall deliver or cause to be delivered to the
Seller the following:
(a) the Purchase Price in cash, less the Down Payment and the amount
transferred to the escrow agent pursuant to Section 2.1(b);
(b) a duly executed Transition Services Agreement;
(c) a duly executed Escrow Agreement;
(d) a duly executed Termination Agreement;
(e) consents from governmental or regulatory bodies or agencies or from
any other Person set forth on Schedule 3.3 attached hereto; and
(f) such other duly executed documents and certificates as may be required
to be delivered by the Purchaser pursuant to the terms of this
Agreement or as may be reasonably requested by the Seller prior to
Closing.
3.4 Conditions to Obligations of the Parties
The obligations of the Seller and the Purchaser to consummate the
transactions contemplated by this Agreement shall be subject to the
fulfillment, or waiver by each party, on or prior to the Closing Date, of
the following conditions:
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(a) Material Adverse Change. From the date of this Agreement to the
Closing, there shall not have occurred any event or condition which
has had or is reasonably likely to have a Material Adverse Effect on
the Companies or the Business Assets.
(b) HSR Act. The waiting period (and any extension thereof) applicable to
the sale of the Interests under the HSR Act shall have been terminated
or shall have expired.
(c) Delivery of Documents. Each party shall have furnished to the other
party all of the documents or other deliverables required by Sections
3.2 and 3.3, as applicable.
(d) Each party shall have complied, in all material respects, with its
covenants and agreements set forth herein, and the representations and
warranties of each party shall be true and correct in all material
respects, except for representations and warranties qualified by
materiality, Material Adverse Effect or similar qualifiers, which
shall be true and correct in all respects.
3.5 Termination
Either party may terminate this Agreement in the event of a material breach
by the other of a representation, warranty, covenant or condition (which,
following written notice, is not cured by August 31, 2002), or if the
Closing shall not have occurred by August 31, 2002. Termination shall not
relieve a party of liability for its willful breach of this Agreement.
4 REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth on the disclosure schedules delivered by the Seller to
the Purchaser and attached to this Agreement (the "Schedules"), the Seller
hereby represents and warrants to the Purchaser as follows. For the purpose
of this Agreement, "knowledge" shall mean, with respect to the Seller, the
knowledge of individuals listed on Schedule 4.
4.1 Organization
(a) Each of the Seller, BLC, BPLC and BCLtd is a limited liability company
or a corporation, as the case may be, duly formed or incorporated, as
the case may be, validly existing and in good standing under the laws
of the jurisdiction of its formation or incorporation. Each of the
Seller, BLC, BPLC and BCLtd has all requisite limited liability
company or corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Each
of the Seller, BLC, BPLC and BCLtd is duly qualified and in good
standing to do business as a foreign limited liability company or
corporation in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes
such qualification necessary, except in such jurisdictions where the
failure to be duly qualified and in good standing would not have,
individually or in the aggregate, a Material Adverse Effect. Schedule
4.1 sets forth a complete and accurate list of all jurisdictions in
which each of the Seller, BLC, BPLC and BCLtd is duly qualified to do
business as a foreign limited liability company.
(b) None of the Companies have any direct or indirect Subsidiaries.
(c) The Seller has heretofore made available to the Purchaser or its
counsel true and complete copies of the charters and limited liability
agreements or other similar agreements, as the case may be, of each of
the Companies.
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4.2 Authority: Execution: Delivery
The Seller has all necessary limited liability company power and authority
to enter into this Agreement and the other agreements, instruments,
certificates and documents required or contemplated hereby or thereby to be
executed or delivered by it, and to sell, convey, assign, transfer and
deliver the Interests in accordance with the terms hereof. The execution,
delivery and performance of this Agreement and the Transition Services
Agreement by the Seller, including, without limitation, the sales,
conveyances, assignments, transfers and deliveries contemplated hereby or
thereby, have been duly authorized by all necessary limited liability
company action by the Seller. No other limited liability company
proceedings on the part of the Seller are necessary to authorize this
Agreement, the Transition Services Agreement or the transactions
contemplated hereby or thereby. This Agreement and the Transition Services
Agreement have been duly executed and delivered by the Seller and
constitute the legal, valid and binding obligations of the Seller,
enforceable against the Seller in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors rights in general,
moratorium laws or by general principles of equity.
4.3 No Conflicts: Consents
Neither the execution and delivery of this Agreement and the Transition
Services Agreement and the consummation of the transactions contemplated
hereby or thereby nor compliance by the Seller with any of the provisions
hereof or thereof will (i) violate or conflict with the charters, by-laws
or limited liability company agreements or other similar agreements, as the
case may be, of the Seller or the Companies, as the same may have been
amended or will be amended; (ii) except as set forth on Schedule 4.3,
violate, conflict with, result in a breach of constitute a default (or an
event which, with the giving of notice or lapse of time or both, would
constitute a default) under, or result in the acceleration of performance
under, or termination or cancellation of, or result in any change in any
terms of, any note, bond, mortgage, indenture, lease, deed of trust,
license, agreement or any other instrument or obligation to which the
Seller or the Companies is a party, or by which the Seller or the Companies
may be bound or affected; (iii) result in the creation of any lien, pledge,
option, charge, security interest, or encumbrance of any nature whatsoever
(collectively, "Liens") upon the Companies or the Business Assets other
than (A) Liens for Taxes either not yet due and payable or due but for
which notice of assessment has not been given; (B) Liens, charges and
privileges incidental to current operations or the ordinary course of
business; (C) statutory Liens, charges, adverse claims, security interests
or encumbrances claimed or held by any governmental authority that have not
at the time been filed or registered against title to the Business Assets
or that relate to obligations that are not due or delinquent; (D) security
given in the ordinary course of business to any public utility,
governmental authority or to any statutory or public authority in the
connection with the Business Assets; (E) interests of lessors in property
leased to the Seller or the Companies and used in the operation of the
Companies or the Business Assets as provided in this Agreement or the
Schedules hereto; (F) Liens that do not materially affect the value or use
of the Business Assets; and (G) the Liens described in Schedule 4.3
(collectively, "Permitted Liens"); (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Seller,
the Companies or the Business Assets; or (v) except as set forth on
Schedule 4.3, and other than compliance with the HSR Act pre-notification
requirements, require the Seller or the Companies to obtain the consent,
approval, permission or other authorization of or qualification or filing
by or with any court, arbitrator or governmental, administrative,
regulatory or self-regulatory authority or of any third party which has not
been obtained by the Closing Date, except in the cases of clauses (ii)-(v)
for any conflicts, violations, defaults, consents or other occurrences that
would not have a Material Adverse Effect.
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4.4 No Other Agreements to Sell Business Assets or the Companies
Except as contemplated by this Agreement or set forth on Schedule 4.4, no
Broderbund Entity or any of their Affiliates has any obligation, absolute
or contingent, to any Person (i) to sell or otherwise transfer the Business
Assets (other than sales of inventory or delivery of services in the
ordinary course of business), (ii) to issue, sell or otherwise transfer any
limited liability company interests, capital stock or other equity
interests or any security convertible into or exchangeable for such limited
liability company interests, capital stock or other equity interests of any
Company, or (iii) to effect any merger, consolidation or other
reorganization of any Broderbund Entity or enter into any agreement with
respect to any of the foregoing. No asset that may be transferred pursuant
to the agreements listed on Schedule 4.4 is material to the business of the
Companies.
4.5 Capitalization
The authorized, issued and outstanding capitalization of each Company is as
set forth on Schedule 4.5. All of the outstanding limited liability company
interests, or other equity interests in BLC and BPLC and all outstanding
capital stock of BCLtd are duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights. The Interests constitute all
the outstanding limited liability company or other equity interests in BLC
and BPLC and outstanding capital stock of BCLtd. Other than the Interests,
the Companies have no other equity interests authorized, issued or
outstanding. Except as set forth on Schedule 4.5, the Seller has good,
valid and marketable title to the Interests, free and clear of Liens, and,
at the Closing, the Seller will deliver the Interests to the Purchaser,
free and clear of any Liens. Except as set forth on Schedule 4.5, there are
no options, warrants, rights or agreements, written or oral, obligating the
Seller or any of the Companies to issue, sell or otherwise transfer any
limited liability company interests, capital stock or other equity
interests of the Companies, or any security convertible into or
exchangeable or exercisable for any such limited liability company
interests, capital stock or other equity interests of the Companies or any
agreements, arrangements or understandings granting any Person such
options, warrants, rights or securities. The Companies do not own, directly
or indirectly, any capital stock or equity interest in any entity. There
are no shareholders' agreements, voting trusts or other similar agreements
or understandings with respect to any of the Companies.
4.6 Financial Statements
Schedule 4.6 sets forth true and complete copies of (a) the audited
consolidated balance sheet, statement of income and statement of cash flows
of the Seller and its Subsidiaries, taken as a whole, for the year ended
December 31, 2001, together with the report of KPMG LLP thereon (the
"Audited Statements") and (b) the unaudited balance sheet and unaudited
statement of income for the Seller's Subsidiaries on a combined basis as of
and for the six (6) months ended June 30, 2002 (the "Unaudited Statements",
and collectively with the Audited Statements, the "Financial Statements").
Except as disclosed on Schedule 4.6 hereto and except for normal year end
adjustments and lack of footnote disclosure, the Financial Statements (i)
have been prepared in accordance with the books and records of the Seller
or its Subsidiaries, as the case may be; (ii) have been prepared in
accordance with GAAP, consistently applied throughout the periods covered
thereby; and (iii) fairly present in all material respects the financial
condition and results of operations of the Seller on a consolidated or
combined basis or the Seller's Subsidiaries on a consolidated or combined
basis, as the case may be, as of the date thereof and for the periods
covered therein.
4.7 Absence of Undisclosed Liabilities and Obligations
The Companies have no liabilities, debts, obligations or claims (whether
accrued, absolute, contingent or otherwise) required to be disclosed on a
balance sheet prepared in accordance
8
with GAAP, other than the debts, liabilities, obligations or claims (a)
disclosed in the Seller's Schedules to this Agreement, (b) accrued for on
the Balance Sheet or specifically disclosed in the notes to the Balance
Sheet, (c) incurred in the ordinary course of business consistent with past
practice between the Balance Sheet Date and the Closing, or (d) obligations
under contracts or commitments described in the Seller's Schedules. To the
knowledge of the Seller, the Companies have no other material contingent
liabilities.
4.8 Absence of Certain Changes or Events
Except for the transactions contemplated hereby or as set forth in Schedule
4.8, from the Balance Sheet Date to the date hereof, with respect to the
Companies, there has not been any:
(a) change, event or condition of any character which has had or is
reasonably likely to have a Material Adverse Effect on the Business
Assets, or on the Companies;
(b) amendment to, or proposal to amend, the charters, certificates of
formation or other organizational documents or limited liability
company agreements or other similar agreements of the Companies;
(c) issuance, sale or agreement or commitment to issue, sell or deliver
(whether through the issuance or granting of options, warrants,
commitments, rights to purchase or otherwise), pledge or other
encumbrance of any limited liability company interests, capital stock
or other equity interests of the Companies, or any securities
convertible into, or exchangeable or exercisable for, such limited
liability company interests, capital stock or other equity interests;
(d) mortgage, pledge or subjection to any Lien of any of the Business
Assets or the Interests (other than, solely with respect to the
Business Assets, Permitted Liens);
(e) sale, assignment or transfer of any material Business Assets (other
than sales of inventory in the ordinary course of business consistent
with past practice);
(f) material change in accounting methods, principles or practices, except
as required by GAAP;
(g) waiver of any material rights of the Companies, other than in the
ordinary course of business;
(h) cancellation, termination or modification of any material contract,
agreement or other instrument, other than in the ordinary course of
business consistent with past practice, or execution and delivery of
any employment agreement or any consulting agreement not within the
Companies' budget;
(i) liability incurred, except (i) any liability incurred in the ordinary
course of business in accordance with past practice, or (ii) other
liabilities outside the ordinary course of business that are not
material in the aggregate;
(j) capital expenditure or the execution of any lease, or any incurring of
liability therefor with respect to any of the foregoing, involving
payments in excess of US$50,000 individually, exclusive of any loans
from the Seller and/or its Affiliates, in each case other than in the
ordinary course of business;
(k) borrowing of money or guaranteeing of any indebtedness of any Person
by any Company in each case other than in the ordinary course of
business consistent with past practice;
9
(l) lending of any money or otherwise pledging the credit of any Company
or the Business Assets;
(m) failure to manage the Companies or the Business Assets in the ordinary
course of business consistent with past practice;
(n) to the knowledge of the Seller, dispute with suppliers, customers and
contractors which would reasonably be expected to have a Material
Adverse Effect;
(o) acceleration of collection of accounts receivable or delay or failure
in the payment of accounts payable, other than in the ordinary course
of business consistent with past practice, or any account payable
contested in good faith;
(p) delay or failure to pay any other current obligations of the Companies
or the business of the Companies in accordance with past practice,
except for those being contested in good faith;
(q) material cancellations by any supplier, customer or contractor of the
Companies or the business of the Companies;
(r) increase or, to the knowledge of the Seller, proposed increase, in (i)
the compensation payable by any Company to any Broderbund Employees or
any increase of general applicability in the compensation payable to
Broderbund Employees (as hereinafter defined), in each case other than
in the ordinary course of business consistent with past practice, or
(ii) any employee welfare, pension, retirement, profit sharing or
similar payment or arrangement as agreed by the Seller or any Company
for any present or former Broderbund Employee (but excluding grants
under the Seller's 2000 Equity Participation Plan);
(s) any labor trouble or material controversy or grievance pending or, to
the knowledge of the Seller, threatened, between the Seller or any
Company and any Broderbund Employee or a collective bargaining
organization representing or seeking to represent Broderbund
Employees;
(t) loss of any Broderbund Employee who is material to the operation of
the business of the Companies;
(u) damage, destruction or casualty loss, whether or not covered by
insurance, that would reasonably be expected to have a Material
Adverse Effect;
(v) to the knowledge of the Seller, sales of Products (including items
which would have been included in the Business Assets but for such
sale) (i) at a price, with terms or in a quantity that would
reasonably be expected to have a Material Adverse Effect on the
Purchaser's ability to sell the Products after the Closing in the
ordinary course of business, consistent with past practice, or (ii) in
conjunction with other benefits to the customer not in the ordinary
course of business with such customer;
(w) material change in Tax methods, material Tax elections or amendments
or revocation thereof, or settlement or compromise of any material Tax
dispute; or
(x) to the knowledge of the Seller, agreement to do any of the foregoing.
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4.9 Tax Matters
(a) Except as set forth on Schedule 4.9(a), and except for Tax Returns
where the amounts involved in the aggregate are not material to the
Companies, the Seller has timely filed or caused to be filed (taking
into account extensions) all Tax Returns required to be filed by the
Companies or with respect to the business of the Companies or the
Business Assets for taxable periods beginning on or after October 19,
2000 and ending prior to the Closing Date, and has timely paid or
caused to be paid such Taxes (whether or not shown or required to be
shown on any Tax Return) required to be paid with respect to the
Companies or with respect to the business of the Companies or the
Business Assets. Except as set forth on Schedule 4.9(a), all such Tax
Returns were true, complete and accurate in all material respects.
(b) There are no Liens for Taxes upon any of the Business Assets other
than Permitted Liens.
(c) To the knowledge of the Seller with respect to any period on or prior
to October 19, 2000 and except as set forth on Schedule 4.9(c) hereto,
there are no pending audits, litigation or other proceedings with
respect to Taxes relating to the Companies or with respect to the
business of the Companies or the Business Assets.
(d) To the knowledge of the Seller with respect to any period on or prior
to October 19, 2000 and except as set forth on Schedule 4.9(d) hereto,
no written claim has ever been made by a taxing authority in a
jurisdiction where the Companies or the Seller do not file Tax Returns
that any of the Companies or the Seller, with respect to the business
of the Companies or the Business Assets, may be subject to Tax by that
jurisdiction.
(e) From the date of its acquisition by the Seller until the Closing, each
of BLC and BPLC (i) has been a direct, wholly-owned subsidiary of the
Seller and (ii) has been and will be treated as a disregarded entity
for U.S. federal income tax purposes within the meaning of Treas. Reg.
Section 301.7701-3(b) (and for relevant state income tax purposes) and
will not elect to be treated otherwise. From the date of its
formation, BCLtd has been taxable as a corporation for Canadian tax
purposes.
(f) The Seller is, and will be treated as, a partnership for U.S. federal
income tax purposes pursuant to Treas. Reg. xx.xx. 301.7701-2 and -3.
The Seller has more than one direct owner and has not elected to be
treated as an association or a corporation or as any entity other than
a partnership for such purposes.
(g) To the knowledge of the Seller with respect to any period on or prior
to October 19, 2000 and except as set forth on Schedule 4.9(g), no
revaluation of any of the Business Assets for any property or similar
U.S. federal, state or local tax purposes has been proposed in writing
by (or is pending with) any U.S. federal, state or local tax
authority.
4.10 Title to Business Assets: Assets Necessary to Business
(a) At the Closing, except as set forth on Schedule 4.10(a), the Companies
will be the sole owners or, subject to the receipt of applicable third
party consents, the licensees of the Business Assets and have good,
valid and marketable title to the Business Assets, free and clear of
any Liens, other than Permitted Liens. Since October 19, 2000, neither
the Interests nor any Business Assets are, or have been, held by any
Affiliate of the Seller, other than direct or indirect Subsidiaries of
the Seller.
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(b) The Business Assets, and the retained assets listed on Schedule
4.10(b) (the "Retained Assets"), constitute all of the assets and
properties used in the conduct of the business of the Companies, as
currently conducted, and the sale of the Products to the Companies'
customers. The Seller hereby waives any and all claims it may have
against the Purchaser with respect to the Backlisted Titles included
on Schedule 4.4 that are Retained Assets under Schedule 4.10(b), Item
12., and that are transferred to an unaffiliated third party by
Purchaser after the Closing.
4.11 Tangible Properties
The Companies do not own any real property ("Real Property"). Schedule 4.11
sets forth a complete and accurate list of all (i) Real Property leases
("Real Property Leases"), (ii) all leases of material personal property
used in the operation of the business of the Companies, and (iii) all
material executory contracts to which the Companies are a party for the
sale or purchase of real and personal property (excluding contracts for the
purchase or sale of inventory or supplies in the ordinary course of
business). Each of the Companies has valid, binding and enforceable in
accordance with its terms (except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general, moratorium laws or by general principles of
equity) leases with respect to any personal or real property leased by it,
has performed all the obligations required to be performed by it under said
leases, except where any such failure to perform would not have,
individually or in the aggregate, a Material Adverse Effect, and possesses
and quietly enjoys said properties under said leases, and such properties
are not subject to any Liens, easements, rights of way, building or use
restrictions, exceptions, reservations or limitations, other than Permitted
Liens. None of the Companies has received notice of (A) any violation of
any applicable zoning regulation, ordinance or other law, order, regulation
or requirement relating to the operations of owned or leased properties
related to the business of the Companies and none of the Companies has any
knowledge of any violation or (B) any pending or threatened condemnation
proceedings relating to any of the owned or leased properties included in
the Business Assets and there are no such pending or threatened
proceedings. The plants, structures, tangible properties and equipment
owned, operated or leased relating to the business of the Companies, as
currently conducted, are in good operating condition and repair, ordinary
wear and tear excepted, and are in conformity with all applicable laws,
ordinance, orders, regulations and other requirements (including applicable
zoning laws and regulations and Environmental Laws (as hereinafter
defined)) presently in effect or scheduled to take effect, except where
such failure would not have, individually or in the aggregate, a Material
Adverse Effect. The Seller has delivered to or made available to the
Purchaser or the Purchaser's counsel true and complete copies of all
leases, agreements, contracts and deeds or other evidence of title to owned
or leased property listed on Schedule 4.11 hereof.
4.12 Contracts and Related Matters
To the knowledge of the Seller:
(a) Schedule 4.12 sets forth (i) all material contracts (other than
purchase orders entered into in the ordinary course of business)
relating to the business of the Companies, and currently binding on
the Companies and (ii) any contract under which the Companies,
directly or indirectly, has limited or restricted its right to compete
with any Person in any respect.
(b) Except as set forth in this Agreement or disclosed in the Schedules,
each contract which is listed on the Schedules is valid, binding and
enforceable in accordance with its terms (except as enforcement
thereof may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general, moratorium
laws or by general principles of equity) and the Companies or the
Seller
12
(as the case may be) is not, and each counterparty to any contract is
not, and neither will be with notice, the lapse of time, or both, in
default under any contract. No material waiver or indulgence has been
granted by any of the parties to any contract and no party to any such
contract has repudiated any material provision thereof
(c) The Seller has delivered or made available to the Purchaser or its
counsel true and complete copies of all contracts listed on Schedule
4.12 hereof.
4.13 Intellectual Property
(a) For the purposes of this Agreement, the term "Intellectual Property"
shall mean the following, as used in the operation of the business of
the Companies as currently conducted: all (i) mailing lists, client
lists, customer and prospect lists ("Customer List"), (ii) dealer,
supplier and distributor lists and account files, subscriber lists,
order and order log books, commission records or agreements, price
lists, manuals or business procedures or information, technology,
technical information, research records, market surveys or reports,
promotional literature, sales brochures, trade secrets, inventions,
processes, formulae, know-how, concepts, ideas, research and
development, designs, business plans, strategies, marketing and other
proprietary or confidential information (including, without
limitation, financial information and pricing arrangements with
clients or suppliers), whether or not the rights therein of the owner
thereof are protectable under applicable law (collectively, the "Trade
Secrets") and (iii) (1) U.S. and foreign (A) utility and design
patents, registered designs and invention disclosures (including,
without limitation, those relating to Computer Software (as defined
below)), and all grants, registrations and applications therefor, (B)
registered, unregistered and pending trade names, trade dress,
trademarks, service marks, assumed names, business names and logos,
together with all goodwill symbolized thereby or associated therewith,
and (C) copyrights (including, without limitation, those in Computer
Software), and all registrations and applications therefor, (2)
internet domain names, and all registrations and applications
therefor, and web sites and web pages and related items (and all
intellectual property and proprietary rights incorporated therein),
(3) computer software, data files, databases, source and object codes,
user interfaces, manuals and other specifications and documentation,
and all know-how incorporated therein (collectively, the "Computer
Software"), (4) rights of privacy or publicity, other intellectual
property or intangible proprietary rights not specified in items
(l)-(3), and (5) contracts (including, without limitation, all
licenses, assignments, distribution agreements or other agreements),
concerning intellectual property matters (the "IP Contracts");
(b) Schedule 4.13(b) sets forth a complete and accurate list, indicating
the owner or licensor thereof, of (i) all patents, patent
applications, registered copyrights and trademarks, and all
applications therefor, and domain names included in the Intellectual
Property ("IP Property"), and (ii) to the knowledge of the Seller, all
IP Contracts (except for (x) off-the-shelf Computer Software and (y)
non-material IP Contracts relating to the business of the Companies
unless such non-material IP Contract restricts the Companies' rights
in and to the Intellectual Property). The Seller has delivered or made
available to the Purchaser or its counsel true and complete copies of
all the IP Contracts listed on Schedule 4.13(b) hereof.
(c) To the knowledge of the Seller, except as set forth as Schedule
4.13(c), BPLC or BLC is the sole and exclusive owner of, or has the
valid and enforceable (except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights in general, moratorium laws or general principles
of equity) right to use in all material respects (through an IP
Contract), all Intellectual Property, and, subject to receipt of any
requisite consents set forth on
13
Schedule 4.3, after the Closing, BPLC or BLC will exclusively own or
otherwise have the valid right to use in all material respects, on the
same terms as exist prior to the Closing, all Intellectual Property,
free and clear of any Lien (other than Permitted Liens). Except as set
forth in Schedule 4.13(c), BPLC is listed in the records of the
appropriate U.S. and/or foreign governmental agencies as the sole and
exclusive owner of record for each registration, grant and application
included in the IP Property. There are no pending claims which cause
or would cause any of the Intellectual Property to be invalid or
unenforceable, and, to the knowledge of the Seller, neither the
Companies nor the Seller has received any written notice that any
Person may bring such a claim, except for such claims or notices that,
individually or in the aggregate, would not have a Material Adverse
Effect.
(d) Except to the extent set forth in Schedule 4.13(d), (i) with respect
to the business of the Companies, there are no pending or, to the
knowledge of the Seller, threatened, legal actions involving, and
neither the Companies nor the Seller nor any Affiliate of the Seller
has received in writing notice of any claim which involves, the
infringement or violation of any intellectual property or proprietary
rights of any third party or libel or defamation, and (ii) except to
the extent as, individually or in the aggregate, would not have a
Material Adverse Effect: (A) all of the Companies' rights in the
Intellectual Property are valid, and enforceable (except as
enforcement thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights in
general, moratorium laws or general principles of equity); (B) to the
knowledge of the Seller, there are no infringements of any of the
Intellectual Property and there are no pending, instituted, asserted
or threatened proceedings or claims in which the Companies or an
Affiliate of the Seller alleges that any Person is infringing upon or
otherwise violating any Intellectual Property; and (C) to the
knowledge of the Seller, the development, manufacturing, marketing,
licensing and/or sale of the Products, and the purchase by the
customer of the Products so developed, manufactured, marketed,
licensed and/or sold, does not infringe or violate any patent,
trademark, service xxxx, copyright, trade secret, right of privacy or
publicity, or other proprietary right of any third party.
(e) Except to the extent as, individually or in the aggregate, would not
have a Material Adverse Effect, the Companies or the Seller has
obtained from all individuals who participated in any respect in the
invention or authorship of any IP Property (as employees, as
consultants, as employees of consultants or otherwise) effective
waivers of any and all ownership rights of such individuals in such IP
Property, and/or assignments to the Companies or the Seller of all
rights with respect thereto, other than from such individuals whose
copyrightable works the Seller hereby represents to be "works made for
hire" within the meaning of Section 101 of the Copyright Act of 1976.
To the knowledge of the Seller, no Broderbund Employee or any other
employee, member, managing member, officer or director of the Seller
or the Companies is subject to any agreement with any other Person or
entity which requires such Person to assign any interest in inventions
or other intellectual property relating to the business of the
Companies or the Products or keep confidential any trade secrets,
proprietary data, customer lists or other business information or
which restricts such officer or employee from engaging in competitive
activities or solicitation of customers.
(f) To the knowledge of the Seller, except to the extent as, individually
or in the aggregate, would not have a Material Adverse Effect, or as
set forth on Schedule 4.13(f), each of the Companies and the Seller
has not, prior to the date hereof, divulged, furnished to or made
accessible to any Person, including, without limitation, any
Broderbund Employees, any Trade Secrets without prior thereto having
obtained an agreement of confidentiality from such Person.
14
(g) To the knowledge of the Seller, except to the extent as, individually
or in the aggregate, would not have a Material Adverse Effect, or as
set forth on Schedule 4.13(g), each of the Companies and the Seller
has taken all actions which are necessary or advisable in order to
fully protect the Intellectual Property in a manner consistent with
prudent commercial practice in the consumer software industry.
(h) Except to the extent as, individually or in the aggregate, would not
have a Material Adverse Effect, or as set forth on Schedule 4.13(h),
no act has been done or omitted to be done by the Companies or the
Seller or any licensee thereof, which has had or could have the effect
of impairing or dedicating to the public, or entitling any U.S. or
foreign governmental authority or any other Person to cancel, forfeit,
modify or consider abandoned, any IP Property, or give any Person any
rights with respect thereto (other than pursuant to an IP Contract).
(i) For the avoidance of doubt, notwithstanding anything to the contrary
contained herein, no representation or warranty is made herein
regarding prior versions of any of the Products identified on Schedule
1 or software titles no longer offered for retail sale (the
"Backlisted Titles") or any Intellectual Property (registered or
unregistered) used in the development or marketing of the Backlisted
Titles; provided, that the foregoing disclaimer does not apply to any
Intellectual Property used in the development or marketing of the
Backlisted Titles to the extent such Intellectual Property is used by
the Companies in the production, development, marketing, distribution
or sale of current versions of the Products or software titles offered
for sale from and after the Closing to the extent such Backlisted
Titles incorporate the same Intellectual Property as the current
versions of the Products. The Backlisted Titles are transferred as
assets of the Companies on an "as is" basis, and the Seller shall have
no liability, or obligation under Section 7, if the Purchaser or any
Affiliate of the Purchaser elects to utilize the Backlisted Titles, or
any Intellectual Property therein, in its operations on or after the
Closing Date.
4.14 Environmental Matters
To the knowledge of the Seller, (i) each of the Companies is in compliance,
and at all times has complied, with all applicable Environmental Laws; (ii)
no Hazardous Substance is present, and there has not been any Release or
any threatened Release of any Hazardous Substance, on, at or beneath any
other property (including soils, groundwater, surface water, buildings and
other structures, and equipment) currently or formerly owned, leased,
operated or used in connection with the business of the Companies; (iii)
none of the Companies has treated, stored or disposed, or arranged for the
treatment, storage or disposal, or arranged for the transportation for
treatment, storage or disposal of any Hazardous Substances at any location
except in compliance with Environmental Laws; (iv) neither the Companies
nor the Seller has received any notice, demand, letter, claim or request
for information alleging that the Seller may be in violation of, or liable
under, any Environmental Law; (v) none of the Companies is subject to any
order, decree, injunction or other arrangement with any governmental
authority or subject to any indemnity or other agreement with any third
party relating to liability under any Environmental Law or relating to
Hazardous Substances; and (vi) there are no circumstances or conditions
(including, without limitation, any Release or threatened Release of any
Hazardous Substance) that could reasonably be expected to result in any
claims, liability, investigation or cost pursuant to any Environmental Law,
except, in each case, as would not have a Material Adverse Effect.
For the purposes of this Section 4.14 and as used elsewhere in this
Agreement, (A) "Environmental Law" means all national, provincial,
regional, federal, state, foreign, local, or municipal statutes, laws,
regulations, rules, orders, decrees, judgments, ordinances, permits,
licenses, registrations, approvals, or requirements or authorizations of
any governmental
15
authority relating to the environment, natural resources, safety, or health
of humans or other living organisms, including the manufacture,
distribution in commerce, and use of, or Release to the natural environment
of, Hazardous Substances; (B) "Hazardous Substance" means any pollutant,
contaminant, hazardous substance, hazardous waste, medical waste, special
waste, toxic substance, petroleum or petroleum-derived substance, waste, or
additive, asbestos, PCBs, radioactive material, or other compound, element,
material or substance in any form whatsoever (including, without
limitation, products) regulated, restricted or addressed by or under any
Environmental Law; and (C) "Release" shall mean any release, pumping,
pouring, emptying, injecting, escaping, leaching, migrating, dumping,
seepage, spill, leak, flow, discharge, disposal or emission.
4.15 Insurance
Schedule 4.15 sets forth all material insurance policies maintained by the
Seller for the benefit of or in connection with the Companies or the
Business Assets. The Companies and the Business Assets are covered by valid
and in force policies of insurance customary in type and amount for the
business conducted by the Seller and the Companies.
4.16 Labor Matters
To the knowledge of the Seller:
At no time has any Company been or have any of its employees listed on
Schedule 4.16 hereto (the "Broderbund Employees") or any of its other
employees been party to any collective bargaining agreements, labor
contracts or similar agreements. (i) The Companies are and have been in
material compliance with all applicable laws respecting employment, and
employment practices, terms and conditions of employment, employee
classification, wages and hours, WARN Act, collective bargaining,
discrimination, civil rights, safety and health, workers' compensation and
the collection and payment of withholding and/or social security taxes and
any similar tax, and are and have not engaged in any unfair labor practice
with respect to the any employees; (ii) there are no pending or, to the
knowledge of the Seller, threatened complaints, charges or claims against
any of the Companies brought or filed with any governmental authority,
arbitrator or court (including, the National Labor Relations Board) based
on, arising out of, in connection with or otherwise relating to the
employees or other persons providing services to or on behalf of the
Companies; (iii) there is no labor strike, work stoppage, slowdown,
lockout, representation campaign or other material labor dispute pending or
threatened, with respect to the employees of the Companies; (iv) no
grievance or arbitration proceeding arising out of or under collective
bargaining agreements is pending and no claim therefor has been asserted
against any Company with respect to the employees of the Companies; and (v)
the Seller and the Companies have not experienced any significant work
stoppage with respect to the employees of the Companies. The Seller has
delivered or made available to the Purchaser or its counsel true and
complete copies of all collective bargaining agreements, labor contracts,
employment agreements, written or verbal compensation agreements, written
or verbal bonus agreements, written or verbal consulting or similar
agreements and vacation benefits relating to the employees of the Companies
(the "Compensation Documents"), and other than such Compensation Documents
at no time since October 19, 2000 have any of the employees of the Company
been party to any employment agreement, compensation agreement, bonus
agreement, consulting or similar agreement and collective bargaining
agreement with the Companies or the Seller.
4.17 Employee Benefits
To the knowledge of the Seller:
(a) Schedule 4.17(a) lists the name of each Benefit Plan.
16
(b) No Benefit Plan is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA. None of the Companies or any entity
that is required to be treated as a single employer with any of the
Companies under Section 414(b), (c), (in) or (o) of the Code have
maintained or sponsored a plan that is subject to Section 412 of the
Code, Section 302 of ERISA, or Title IV of ERISA. None of the
Companies has maintained or contributed to, or had any obligation to
contribute to (or borne any liability with respect to) (i) any
"multiple employer plan" within the meaning of the Code or ERISA or
any "multiemployer plan" as defined in Section 4001(a)(3) or 3(37) of
ERISA, (ii) any plan of the type described in Sections 4063 and 4064
of ERISA or in Section 413 of the Code (and regulations promulgated
thereunder), or (iii) except as set forth on Schedule 4.17(b), any
plan that provides health, life insurance, accident or other
"welfare-type" benefits to current or future retirees or former
employees or directors, their spouses or dependents, other than
required by Section 4980B of the Code.
(c) The Seller has made available to the Purchaser and its counsel true,
complete and correct copies of (i) all documents pursuant to which the
Benefit Plans are maintained, funded, and administered, including
summary plan descriptions, (ii) the annual reports (Form 5500 series)
filed with the IRS (with attachments) since October 19, 2000, (iii)
actuarial reports, if any, prepared since October 19, 2000, (iv)
governmental filings for any Benefit Plans for the period from October
19, 2000 to the date hereof, including, without limitation, excise tax
returns and reportable events filings, and (v) all governmental
rulings, determinations, and opinions (and pending requests for
governmental communications, rulings, determinations, and opinions)
for any Benefit Plans during the period from October 19, 2000 to the
date hereof
(d) Each Benefit Plan, and all related trusts, insurance contracts and
funds, has been maintained, funded and administered in compliance in
all material respects with its own terms and in compliance in all
material respects with all applicable laws and regulations, including,
but not limited to, ERISA and the Code.
(e) Each Benefit Plan that is intended to be qualified under Section
401(a) of the Code has, as currently in effect, been determined to be
so qualified by the Internal Revenue Service. Each trust established
in connection with any Benefit Plan that is intended to be exempt from
federal income taxation under Section 50 1(a) of the Code has, as
currently in effect, been determined to be so exempt by the Internal
Revenue Service. Since the date of each most recent determination
referred to in this paragraph, no event has occurred and no
circumstance has existed that resulted or is likely to result in the
revocation of any such determination or that could adversely affect
the qualified status of any such Benefit Plan.
(f) With respect to each Benefit Plan, all required material payments,
premiums, contributions, reimbursements or accruals for all periods
ending prior to or as of the Closing shall have been made.
(g) Through the date of this Agreement, no Broderbund Entity has any
formal plan or commitment (whether legally binding or not) to create
any plan or arrangement that would constitute a Benefit Plan, or,
except as necessary to comply with applicable laws, to make any
modifications or changes to any Benefit Plan, or to make any
contributions to any Benefit Plan outside the ordinary course of
business or that are inconsistent with past practice with regard to
amounts.
(h) Except as set forth on Schedule 4.17(h), neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (either alone or in conjunction with any
other event) result in, cause the accelerated vesting,
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funding or delivery of, or increase the amount or value of, any
material payment or benefit to any employee, officer or director of
the Companies or result in a limitation on the right of the Companies
to amend, merge, terminate or receive a reversion of assets from any
Benefit Plan or related trust. Without limiting the generality of the
foregoing, no amount paid or payable by the Companies in connection
with the transactions contemplated hereby (either solely as a result
thereof or as a result of such transactions in conjunction with any
other event) will be an "excess parachute payment" within the meaning
of Section 280G of the Code.
(i) With respect to any Benefit Plan, no actions, suits, claims or audits
(other than routine claims for benefits) are pending or threatened.
(j) Any previously terminated Benefit Plan intended to comply with Section
401(a) of the Code was terminated in compliance with the requirements
of ERISA and the Code, has received a favorable determination letter
therefor, and the liabilities of such Benefit Plan were fully
satisfied.
(k) No "leased employee," as that term is defined in Section 4 14(n) of
the Code, performs services for any Company or any ERISA Affiliate of
any Company. All persons to whom any Company has made payments for the
performance of services during the period from October 19, 2000 to the
date hereof have been properly classified as employees or
non-employees for purposes of federal income and employment tax
withholding and coverage under all of the Benefit Plans.
(l) No prohibited transaction (which shall mean any transaction prohibited
by Section 406 of ERISA and not exempt under Section 408 of ERISA or
Section 4975 of the Code, whether by statutory, class or individual
exemption) has occurred with respect to any Benefit Plan that could
result in the imposition, directly or indirectly, of any excise tax,
penalty or other liability under Section 4975 of the Code or Section
409 or 502(i) of ERISA.
4.18 Litigation
Except as set forth on Schedule 4.18, there is no claim, litigation,
proceeding or government investigation pending or, to the knowledge of the
Seller, threatened against or relating to, the Companies or the Business
Assets, other than claims, litigation or proceedings which could not
reasonably be expected to have a Material Adverse Effect. There are no
writs, decrees, injunctions or orders of any court or governmental or
regulatory agency, authority or body outstanding against the Companies or
the Business Assets. There is no investigation pending or, to the knowledge
of the Seller, threatened against or affecting the Companies or the
Business Assets by or before any court or governmental or regulatory
authority or body which could reasonably be expected to have a Material
Adverse Effect.
4.19 Compliance with Laws
Each of the Companies and the Seller has complied with all applicable
statutes, regulations, orders, ordinances and other laws of the United
States, all state, local and foreign governments or other governmental
bodies or authorities and agencies of any of the foregoing applicable to
the Companies or the Business Assets, except where the failure to comply
would not have a Material Adverse Effect. To the knowledge of the Seller,
the Companies and the Seller have not received any written notice to the
effect that, or otherwise been advised that, the Companies are not in
compliance in all material respects with any such statute, regulation,
order, ordinance or other law.
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4.20 No Brokers
Schedule 4.20 sets forth all agreements, arrangements or understanding of
the Companies, the Seller or any of their respective Affiliates which would
result in the obligation of the Companies or any of their respective
Affiliates (other than the Seller) or, after giving effect to the Closing,
the Purchaser or any of its Affiliates, to pay any finders' fees, brokerage
commission or similar payment in connection with the transactions
contemplated hereby.
4.21 Illegal Payments
To the knowledge of the Seller, neither the Companies nor the Seller or any
of their respective Affiliates has made any payment of funds with respect
to the Companies or the Business Assets prohibited by law, and no such
funds have been set aside to be used for any payment prohibited by law.
4.22 Transactions with Certain Persons
To the knowledge of Seller, except (a) as described in the Financial
Statements, (b) as set forth in Schedule 4.22, or (c) for any contract,
agreement or other arrangement that terminates at or prior to the Closing
with no further liability or other obligation on the part of any Company,
no member, managing member, officer, director or employee of the Companies,
the Seller or any Affiliates of the Seller or member of his or her
immediate family is presently a party to any material transaction with the
Companies or relating to the business of the Companies including, without
limitation, any contract, agreement or other arrangement (i) providing for
the rental of real or personal property from, (ii) providing for the
furnishing of services by, or (iii) otherwise requiring payments to (in
each case, other than services as officers, directors or employees) any
such Person or entity in which any such Person has a substantial interest
as a shareholder, officer, director, trustee, member, partner or similar
status.
4.23 Inventories
The inventories of the Companies reflected on the Balance Sheet and Closing
Date books and records of the Seller and the Companies consist, in all
material respects, of items of a quality and quantity usable or saleable in
the normal course of the operations of the business of the Companies and
have, in the aggregate, a fair market value equal, net of reserves, in all
material respects to the values at which such items are carried on its
books. The values at which such inventories are carried on the books of the
Seller, net of reserves, reflect, in all material respects, the normal
inventory valuation policy of the Seller and the Companies (including the
writing down of the value of slow moving or obsolete inventory or inventory
of below standard quality to realizable market value in accordance with
GAAP), stating inventories at the lower of cost or market. Any change in
such inventories subsequent to the Balance Sheet Date was reasonable and
warranted in the ordinary course of business.
4.24 BCLtd Assets and Liabilities
Schedule 4.24 hereto sets forth all the material assets and liabilities of
BCLtd.
5 REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as set forth on Schedules delivered by the Purchaser to the Seller
and attached to this Agreement, the Purchaser hereby represents and
warrants to the Seller as follows. For the purpose of this Agreement,
"knowledge" shall mean with respect to the Purchaser, the knowledge of the
individuals listed on Schedule 5.
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5.1 Organization and Authority
The Purchaser is a corporation duly incorporated, validly existing and in
good standing under the laws of Delaware. The Purchaser has all necessary
corporate power and authority to execute and deliver this Agreement, to
perform its obligations under this Agreement and to consummate the
transactions contemplated by this Agreement. The execution, delivery and
performance of this Agreement by the Purchaser and the consummation by the
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of the Purchaser
and no other corporate actions or proceedings on the part of the Purchaser
are necessary to authorize this Agreement or for the Purchaser to
consummate the transactions contemplated by this Agreement. This Agreement
has been duly and validly executed and delivered by the Purchaser and
constitutes a legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights in general, moratorium
laws or by general principles of equity.
5.2 No Conflicts: Consents
Neither the execution and delivery of this Agreement and the consummation
by the Purchaser of the transactions contemplated herein nor compliance by
the Purchaser with any of the provisions hereof will (a) violate or
conflict with any provision of the certificate of incorporation or by-laws
of the Purchaser; (b) violate, conflict with, result in a breach of,
constitute a default (or an event which, with the giving of notice or lapse
of time or both, would constitute a default) under, or result in the
acceleration of performance under, or termination or cancellation of, any
note, bond mortgage, indenture, lease, deed of trust, license, agreement or
any other instrument or obligation to which the Purchaser is a party, or by
which the Purchaser may be bound or affected; (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Purchaser
or any of its assets or properties; or (d) other than as set forth on
Schedule 5.2 and other than compliance with the HSR Act pre-notification
requirements, require the consent, approval, permission or other
authorization of or qualification or filing by or with any court,
arbitrator or governmental, administrative, regulatory or self-regulatory
authority or any third party which have not been obtained by the Closing.
5.3 Litigation
Except as set forth on Schedule 5.3, there is no claim, litigation,
proceeding or government investigation pending or, to the Purchaser's
knowledge, threatened against or relating to, the Purchaser which would
preclude the Purchaser from consummating the transactions contemplated by
this Agreement. There are no writs, decrees, injunctions or orders of any
court or governmental or regulatory agency, authority or body outstanding
against the Purchaser which would preclude the Purchaser from consummating
the transactions contemplated by this Agreement.
5.4 No Brokers
Neither the Purchaser nor any of its Affiliates has entered into or will
enter into any agreement, arrangement or understanding with any Person
which will result in the obligation of the Seller or any Affiliate of the
Seller to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
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5.5 Financing
The Purchaser has secured the necessary financing commitment for, and will
have at the Closing, cash funds readily available in amounts sufficient to
enable the Purchaser to pay the Purchase Price (less the Down Payment) due
to the Seller at the Closing and the amount to be transferred to the escrow
agent pursuant to Section 2.1(b).
6 CERTAIN COVENANTS AND AGREEMENTS
6.1 Nondisclosure
The Seller will not, and will not permit its representatives, agents,
members, managing members or employees to, at any time after the date
hereof, divulge, furnish or make accessible to anyone any knowledge or
information with respect to (i) confidential or secret processes,
inventions, discoveries, improvements, formulae, plans, material, devices
or ideas or know-how, whether patentable or not, with respect to any
proprietary aspects of the Companies or their business or (ii) any
disclosure made to the Seller or its Affiliates, or any information or
knowledge the Seller or its Affiliates learned, in either case pursuant to
Sections 2.3, 6.11 and 6.19 hereof; provided, that nothing herein shall
prohibit the Seller from complying with any order or decree of any court of
competent jurisdiction or governmental authority, but the Seller will give
the Purchaser timely notice of the receipt of any such order or decree, and
the foregoing provision shall not apply to any information which is or
becomes generally available to the public through no breach of this
Agreement.
6.2 Name
From and after the Closing, the Purchaser shall possess, to the exclusion
of the Seller and any Subsidiary of the Seller (other than the Companies)
and their Affiliates, all right, title and interest in and to the names and
marks "Broderbund", or any other trademarks included in the Intellectual
Property, and all goodwill related thereto and symbolized thereby,
including, without limitation, any registrations and applications for
registrations therefor, and any and all formatives, variants and
derivatives thereof (collectively, the "Marks"). Neither the Seller nor any
Subsidiary of the Seller shall use any name or xxxx that is confusingly
similar to the Marks or any formative, variant or derivative thereof in
connection with any business, and the Seller shall cause each of its
remaining Subsidiaries that has a legal or trade name variant or derivative
of "Broderbund" to change its corporate name within 10 days after the
Closing Date or, with respect to the entities set forth on Schedule 6.2,
within 90 days after the Closing Date. The Seller acknowledges and agrees
that, on and after the Closing Date, the Purchaser will own all right,
title and interest in and to the Marks and the Seller further agrees not to
challenge the validity of the Purchaser's rights therein.
6.3 Schedules and Exhibits
Disclosure of any fact or item in any Schedule or Exhibit hereto shall be
deemed disclosure of such fact or item in other Schedules or Exhibits
requiring such disclosure if by the nature of such disclosure it is
apparent that the disclosure applies to other Schedules or Exhibits;
provided that the Seller shall in good faith attempt to provide appropriate
cross-references on the applicable Schedule or Exhibit. Matters reflected
in Schedules and Exhibits hereto are not necessarily material or limited to
matters required by this Agreement to be disclosed herein or therein, and
may be provided for informational purposes only.
6.4 Further Assurances
From time to time after the Closing, without additional consideration, each
of the parties hereto will (or, if appropriate, cause their Affiliates to)
execute and deliver such further
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instruments and take such other action as may be necessary to make
effective the transactions contemplated by this Agreement. If any party to
this Agreement shall, following the Closing, have in its possession any
property, asset or right which under this Agreement should have been
delivered to another party, such party shall promptly deliver such
property, asset or right to the other party. The Seller agrees, that in the
event it receives any proceeds derived from the business of the Companies
or otherwise earned by the Companies after the Closing, it shall promptly
transfer such proceeds to the Purchaser or the Companies, as appropriate.
The Purchaser agrees that in the event it receives any proceeds derived
from the business of the Companies prior to the Closing or otherwise owned
by Seller, it shall promptly transfer such proceeds to the Seller.
6.5 Certain Consents
The Seller and the Purchaser shall use their commercially reasonable
efforts to obtain all consents and approvals required as a result of the
change in control of the Companies. The Seller shall not be obligated to
pay money or make any other concession to obtain a consent.
6.6 Execution of Assignments
The Seller shall, and shall cause its Subsidiaries to, use its and their
commercially reasonable efforts to execute and deliver, to BPLC instruments
fully and validly assigning to BPLC all right, title and interest in and to
any fights held by the Seller or its Subsidiaries (other than BPLC)
pursuant to the agreements or contracts set forth in Schedule 6.6 within 45
days after the Closing.
6.7 Employees
The Seller's and the Purchaser's rights and responsibilities with respect
to the Broderbund Employees are set forth on Schedule 6.7.
6.8 Termination of Intercompany Accounts: Letters of Credit and Guarantees
Immediately prior to the Closing, intercompany accounts between the
Companies, on the one hand, and the Seller, or any other Affiliate of the
Seller, on the other hand, shall be eliminated, without any payment of
funds in connection therewith. The Purchaser and the Seller shall cooperate
in order that any letters of credit, listed and described on Schedule 6.8,
issued by the Seller's lenders to secure or support obligations of any
Company (a) shall be replaced at the Closing by a letter of credit issued
by the Purchaser's lenders, or (b) the Purchaser shall provide substitute
security to Foothill Capital Corporation, including cash collateral equal
to 105% of the face amount of the letter of credit, for such letters of
credit, so that the Seller's obligations with respect thereto shall then be
terminated effective upon the Closing. The Purchaser shall use reasonable
commercial efforts to obtain for the Seller releases from the guarantees
set forth on Schedule 6.8, including, if necessary, providing a substitute
guarantor acceptable to the creditor.
6.9 Retained Product Trademarks and Logos: Patents
(a) To the extent that the Seller or its Subsidiaries (other than the
Companies) has fights therein, effective at the Closing, the Seller
hereby grants (and shall cause its Subsidiaries to grant) to the
Purchaser and its Affiliates (including, without limitation, the
Companies) a non-exclusive, world-wide, fully-paid up license to use
any trademarks, logos, trade names or service marks embedded in the
existing software programs (including, without limitation, the source
code, object code and all documentation or material related thereto),
software packaging, disk art, package inserts, and collateral product
disk and packaging materials included in the Products
22
(collectively, the "Retained Trademarks and Logos") for up to three
(3) months from the Closing Date; provided, however, that the
Purchaser and its Affiliates shall use commercially reasonable efforts
to terminate such use of the Retained Product Trademarks and Logos as
soon as practicable thereafter and shall use the Retained Trademarks
and Logos in association or conjunction with currently existing
inventories, shipping materials, invoices, brochures, sales and
marketing flyers and brochures, marketing materials, websites and
office materials (such office materials to include, for example, but
not be limited to, business cards, stationery, facsimile cover sheets
and other general office materials), only until such time as such
inventory existing on the Closing Date is sold, removed from
distribution for sale or destroyed in the ordinary course of business,
and for no longer than three (3) months from and after the Closing
Date. The Purchaser agrees that the Seller or the Seller's
Subsidiaries owns all right, title and interest in the Retained
Product Trademarks and Logos that are not used in or related to the
Products or otherwise owned by the Companies, and further agrees not
to challenge the validity of the Seller's or its Subsidiaries' right
therein. The Purchaser acknowledges that it has no right to use the
Retained Product Trademarks and Logos except as provided herein or in
any separate agreement.
(b) If during the period ending six months after the Closing the Purchaser
identifies a patent held by the Seller or one of its Subsidiaries that
relates to the Products or the Backlisted Products and was not
conveyed to BPLC, upon written notice from the Purchaser, the Seller
shall promptly cause such patent to be assigned to Purchaser's
designee.
6.10 Non-Competition: Non-Solicitation
(a) For a period of one (1) year following the Closing Date, neither the
Seller or any of its Subsidiaries, nor any of their respective
successors (other than those successors that are actively competing as
of the date hereof in the consumer productivity channel as defined by
NPD Intellect (the "Specified Entities")) shall develop and/or market
new products which compete directly with the Products in such consumer
productivity channel.
(b) For a period of one (1) year following the Closing Date, neither the
Seller nor any Affiliates of the Seller shall request, induce or
attempt to influence any Broderbund Employee to terminate his or her
employment or consulting relationship with the Purchaser or the
Purchaser's Affiliates; provided, however, that nothing contained in
this Section 6.10(b) shall preclude the Seller or any of its
Affiliates from conducting its business in the ordinary course
consistent with past practice, or from offering employment to the
persons listed on Schedule 6.10. For a period of one (1) year
following the Closing Date, the Purchaser and its Affiliates shall not
request, induce or attempt to influence any employee or consultant of
the Seller, Seller's Subsidiaries or Gores Technology Group ("GTG") to
terminate his or her employment or consulting relationship with the
Seller, the Seller's Subsidiaries or GTG.
(c) For a period of one (1) year following the Closing Date, the Seller
and its Affiliates shall not intentionally cause any person not to do
business with the Purchaser or the Companies. For a period of one (1)
year following the Closing Date, the Purchaser and its Affiliates
shall not intentionally cause any person not to do business with the
Seller or its Affiliates (other than the Specified Entities).
6.11 Tax Matters
The Purchaser and the Seller hereby covenant and agree as follows:
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(a) The Seller shall prepare or cause to be prepared and timely file or
cause to be filed all Tax Returns which any of the Companies is
required to file for any taxable period ending prior to the Closing
Date.
(b) The Purchaser shall prepare or cause to be prepared and timely file or
cause to be filed all Tax Returns which any of the Companies is
required to file for all taxable periods ending on and after the
Closing Date.
(c) Each of the Companies, the Purchaser and the Seller shall cooperate
fully, as and to the extent reasonably requested by the other party,
in connection with the filing of such Tax Returns and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon another party's request) the
provision of records and information reasonably relevant to any such
audit, litigation, or other proceeding and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Each of the Companies,
the Purchaser and the Seller agrees (i) to retain all books and
records with respect to Tax matters pertinent to the Companies
relating to any taxable period beginning before the Closing Date until
expiration of the applicable statute of limitations (and, to the
extent notified by the applicable party, any extensions thereof) of
the respective taxable periods, but no less than 10 years after the
Closing Date (or such longer period as required by Revenue Procedure
98-25) and to abide by all record retention agreements entered into by
it with any taxing authority, and (ii) to give the other party
reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so
requests, each of the Companies, the Purchaser or the Seller, as the
case may be, shall allow the other party to take possession of such
books and records.
(d) Each of the Companies, the Purchaser and the Seller agree (i) to
furnish the others with copies of all correspondence received from any
taxing authority in connection with any audit relating to the Tax
Returns of the Companies for periods beginning prior to the Closing
Date, and (ii) to furnish the other with adequate information which
would enable the other party to determine its entitlement to, and the
amount of, any refund or credit relating to the Tax Returns of the
Companies which either party reasonably believes the other party may
be entitled.
(e) The Purchaser and the Seller further agree, upon request, to use their
commercially reasonable efforts to make any filing or to obtain any
certificate or other document from any governmental authority or any
other Person as may be necessary to mitigate, reduce or eliminate any
Tax that could be imposed (including with respect to the transactions
contemplated hereby).
(f) Except as to any agreements herein, all tax sharing agreements or
similar agreements with respect to or involving the Companies shall be
terminated as of the Closing Date and, after the Closing Date, none of
the Companies shall not be bound thereby or have any liability
thereunder.
(g) The Seller shall be entitled to any refunds of non-income taxes of the
Companies for any taxable periods ending before the Closing Date (the
"Pre-Closing Period"). The Purchaser and the Companies agree that if
as a result of any adjustment made with respect to any Tax item by any
taxing authority with respect to the Pre-Closing Period, a Company or
the Purchaser receives a Tax Benefit, then the Company shall pay to
the Seller the amount of such Tax Benefit within 10 days of the
receipt of such Tax Benefit. For purposes of determining the amount
and timing of any Tax Benefit, the recipient of the Tax Benefit shall
be deemed to pay Tax at the highest marginal rate in effect in the
year such Tax Benefit is utilized. A "Tax Benefit" shall mean the Tax
24
effect of any item of loss, deduction or credit or any other item
which decreases Taxes paid or payable.
(h) The Seller shall not file an amended Tax Return with respect to any of
the Companies without the prior written consent of the Purchaser
(which consent shall not be withheld unless such amended Tax Return
(i) would result in any Loss for which the Purchaser is required to
indemnify any Seller Indemnified Parties under this Agreement or (ii)
result in a material increase in any Tax for the Purchaser, any of the
Companies or any of their Affiliates that is unreasonable under the
circumstances).
6.12 Post Closing Audit
In the event the Purchaser wishes to obtain audited financial statements of
the Companies on a stand-alone basis for any full or partial fiscal period
prior to the Closing (a "Post Closing Audit"), then the Purchaser shall
retain auditors and complete such Post Closing Audit at its expense. The
Seller shall have no liability arising from the fact that the Companies
were integrated with the Seller's business, but shall provide reasonable
assistance to the Purchaser at the Purchaser's request, including, without
limitation, by making its employees, officers, members, managing members,
agents and representatives, and any and all documents and information
reasonably requested, available to the Purchaser and the Purchaser's
auditors in connection with the Post Closing Audit, and by requesting the
Seller's auditors to cooperate with the Purchaser's auditors, including,
without limitation, by supplying audit work papers and other material
reasonably requested, subject to any confidentiality and/or indemnity
agreement reasonably requested by the Seller's auditors. The Purchaser
shall reimburse the Seller for its reasonable out-of-pocket costs and the
cost of providing personnel, based on an agreed upon hourly rate.
6.13 Mattel Trademarks
After the Closing, the Purchaser agrees that, except as provided in any
separate agreement, neither it or the Companies nor any of their Affiliates
shall make any use of the Mattel Interactive Trademarks and Logos (as such
term is defined in Schedule 1(a)(i) of that certain Asset Purchase
Agreement dated as of September 5, 2001, as amended, among the parties and
TLC Education Properties, LLC). Unless otherwise provided for under a
separate agreement, the Purchaser agrees that Mattel, as between the
Purchaser and Mattel, owns all right, title and interest in the "Mattel"
and "Mattel Interactive" name, trade name, trademark and service xxxx and
further agrees never to challenge the validity of any of Mattel's rights
therein.
6.14 Cooperation Concerning Intellectual Property
(a) Effective as of the Closing, and in consideration of the transactions
contemplated hereby, the Purchaser hereby grants, and shall cause its
Subsidiaries (including the Companies) to grant, to the Seller an
irrevocable, nonexclusive, worldwide, royalty-free license to use any
and all registered trademarks (other than titles, characters or
content of or included in the Products) that are owned by the
Companies as of the Closing solely to the extent necessary for the
administration and wind-up of the Seller's business functions with
respect to the Companies (but excluding in any event with respect to
the production, development, marketing, distribution or sale of the
Products), such license to have a term for 12 months following the
Closing.
(b) The Seller's rights set forth in this Section 6.14 shall not be
sublicensable or assignable to any person (including an Affiliate of
the Seller) and shall terminate upon the earlier of (i) the merger or
purchase or other transfer of the business or any substantial portion
of the assets of the Seller or any change of control of the Seller or
(ii) as provided in Section 6.14(a).
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(c) If the Seller becomes aware that it is utilizing rights under this
Section 6.14 in more than a de minimis fashion, it will give prompt
written notice of such use to the Purchaser.
(d) The Seller acknowledges that, notwithstanding the Seller's failure to
disclose any contract relating to the business of the Companies on
Schedule 4.12 or 4.13 hereto (whether or not required to be
disclosed), the Purchaser and the Companies shall nonetheless be
entitled to receive all of the Seller's or the Companies' rights under
any such contract (which for the avoidance of doubt includes both
material and non-material contracts) which the Seller has so failed to
disclose.
6.15 Further Obligation of Seller
The Seller shall, and shall cause its Subsidiaries to, fulfill or satisfy
any and all of its or their obligations under this Agreement.
6.16 GTG/Wizard Equity Participation Plan
Nothing in this Agreement shall constitute, or be deemed to constitute, an
assumption by any Company or the Purchaser or their Affiliates of any
obligation of the Seller under the GTG/ Wizard, LLC 2000 Equity
Participation Plan ("EPP"), and the Seller shall pay, perform and discharge
all obligations under the EPP, and indemnify and hold the Purchaser
Indemnified Parties (as hereinafter defined) harmless from any such
obligations, without regard to any time or amount limitation on
indemnification in Section 7 hereof. The Purchaser agrees, after the
Closing, to assist the Seller in fulfilling its obligations under the EPP
upon receipt from the Seller of written schedules from time to time (the
each a "Schedule"") setting forth the name of each eligible employee under
the EPP who is owed payments under the EPP and the gross payment amount for
such eligible employee. The Seller shall, on or prior to any date when
payments are due, make a lump sum payment to the Purchaser equal to the
aggregate amount owed in respect of the EPP on that date. The Purchaser or
BLC shall make the payments set forth on the Schedule; provided, that the
Purchaser shall withhold such Taxes as may be required to be withheld under
applicable law in accordance with W-4 forms on file with the Companies and
pay such Taxes to the applicable authority. To the extent the Purchaser
makes payment in accordance with the Schedule, the Seller shall indemnify
and hold harmless the Purchaser Indemnified Parties, without regard to any
time or amount limitations on indemnification contained in Section 7
hereof, with respect to amounts paid or payable to any Person pursuant to
the EPP or for any action or inaction of any Purchaser Indemnified Party
pursuant to this Section 6.16, and reimburse the Purchaser for all
reasonable costs and expenses (including, but not limited to, reasonable
legal costs) incurred by the Purchaser in connection with the performance
of its obligations under this Section 6.16. If the Purchaser or any of its
Subsidiaries gains actual knowledge of a claim by any Broderbund Employee
related to the EPP, the Seller shall be promptly notified of the claim, and
the Seller shall have the right to contact the employee directly regarding
the claim.
6.17 No Amendment of Charter Documents or Operating Agreements
The Purchaser shall ensure that neither BLC nor BPLC amends its charter
documents or operating agreement in a manner that would circumvent or limit
its indemnification obligations to any current or former officer, director,
manager or agent of BLC or BPLC for a period of six (6) years after the
Closing Date. After the Closing, the Seller covenants and agrees that it
shall not bring any suit or make any claim against any officer, director,
manager, agent or any other person who is an employee of a Company as of
the Closing Date and to the extent BLC or BPLC has any indemnification
obligation to such Person.
26
6.18 Insurance
The Purchaser acknowledges that as of the Closing, the Companies will no
longer be covered by the insurance policies which had been in effect prior
to the Closing. The Purchaser and the Companies shall be solely responsible
for obtaining and implementing all insurance policies with respect to the
Companies following the Closing, including directors' and officers'
insurance for current and former directors and officers to the extent those
individuals qualify for coverage under the Purchaser's insurance policies
in effect as of the Closing.
6.19 Distributions and Cash
(a) Prior to the Closing, the Seller may, or may cause the Companies to
(i) distribute cash to the Seller or its Affiliates, or to pay amounts
due or to become due from any Company to the Seller or its Affiliates
and (ii) sweep, and shall be entitled to, all cash generated or
received by any Company on any date prior to the Closing Date (even if
amounts which are lodged but have not cleared are not available for
withdrawal from banking institutions prior to the Closing), except
that in the case of clauses (i) and (ii) Seller will leave sufficient
funds in the Companies, to pay checks issued by the Companies prior to
the Closing that have not cleared prior to the Closing.
(b) The Seller and Purchaser also agree:
(i) Within 90 days after the Closing, the Seller and the Purchaser
shall cooperate in order that the Seller may prepare and deliver
to the Purchaser a final bank reconciliation as of the opening of
business on the Closing Date for all bank accounts of the
Companies existing at the Closing ("Final Bank Reconciliations").
Except as specified in the "except" clause in Section 6.19(a),
Seller shall pay by wire transfer of immediately available funds
to an account of the Purchaser the amount by which the net book
cash balance at the Closing is less than $0 and the Purchaser
shall pay to the Seller the amount by which the net book cash
balance at the Closing is greater than $0.
(ii) Within 90 days after the Closing, the Seller and the Purchaser
shall cooperate in order that the Seller may prepare and deliver
to the Purchaser a written statement (the "Reserve Statement")
reconciling the reserve balance of $1,792,865 as of the Closing
(the "Reserve Balance") that had been held by BLC for returns and
other allowances pursuant to the distribution agreements between
the Purchaser or its Affiliates ("Riverdeep") and BLC: The Seller
shall deduct from the Reserve Balance all credits that have
previously not been deducted related to returns and other
allowances that have been deducted by the customers for Riverdeep
product prior to the Closing to arrive at an "Adjusted Reserve
Balance". The Seller shall pay by wire transfer of immediately
available funds to an account of the Purchaser the amount by
which such Adjusted Reserve Balance is greater than $ 0, or the
Purchaser shall pay to the Seller the amount by which such
Reserve Balance is less than $ 0, in each case no later than two
business days after agreement on or resolution of such Reserve
Statement as provided below.
(iii) Within 90 days after the Closing, the Seller and the Purchaser
shall cooperate in order that the Seller may prepare and deliver
to the Purchaser a written statement detailing the "Additional
Net Distribution Receipts" (which shall mean amounts received by
the Companies prior to the Closing related to sales of the
Riverdeep products pursuant to the distribution agreements
between Riverdeep and BLC less any transition services fees
incurred and properly invoiced for the period up to the Closing
Date and distribution fees incurred
27
prior to the Closing and payable to the Seller as assignee of BLC
as a result of this Section, on a prorata basis if necessary, in
excess of amounts previously reported to the Purchaser through
August 10, 2002). Seller shall pay by wire transfer of
immediately available funds to an account of the Purchaser the
amount by which such Additional Net Distribution Receipts is
greater than $ 0, or the Purchaser shall pay to the Seller the
amount by which such Additional Net Distribution Receipts is less
than $ 0, in each case no later than two business days after
agreement on or resolution of such Additional Net Distribution
Receipts as provided below.
(iv) Following delivery of the statement of Additional Net
Distribution Receipts, Final Bank Reconciliations and the Reserve
Statement, the Purchaser shall have the right to review and
confirm the accuracy thereof, and in connection therewith, the
Seller shall cooperate with the Purchaser and provide the
Purchaser and its authorized representatives any records and data
of the Seller related to the calculation of the Additional Net
Distribution Receipts, Final Bank Reconciliations or the Adjusted
Reserve Balance reasonably requested to confirm the accuracy of
the calculation. The Purchaser will provide reasonable access to
its books, records and personnel necessary to the Seller in
calculating the Additional Net Distribution Receipts, Final Bank
Reconciliations or the Adjusted Reserve Balance. Unless the
Purchaser delivers to the Seller a reasonably detailed statement
describing its objections thereto, within 15 days after receipt
of such statement of Additional Net Distribution Receipts, Final
Bank Reconciliations or Reserve Statement, the determination of
the Seller shall be final and binding. If the Purchaser shall
deliver a statement of objections, the Seller and the Purchaser
shall use their commercially reasonable efforts to resolve any
disputes between the parties. If the parties cannot agree on a
final statement of Additional Net Distribution Receipts, Final
Bank Reconciliations or Reserve Statement within 120 days after
the Closing, the parties shall refer any remaining disputes to
PricewaterhouseCoopers LLP ("PWC") or if PWC is unwilling or
unable to serve, then to an international accounting firm
selected by the parties based on its neutrality with respect to
each party. The Seller and the Purchaser shall provide such
reviewing accountants with reasonable access to their books and
records and all other data reasonably necessary to make a
determination of the Additional Net Distribution Receipts, Final
Bank Reconciliations or Reserve Balance. The reviewing
accountants shall have 30 days after the matter has been
submitted by the Purchaser and the Seller in which to make a
determination as to the Additional Net Distribution Receipts,
Final Bank Reconciliations or Reserve Balance. The determination
of the reviewing accountants shall be final and binding on the
parties, and upon such determination, the Seller or the
Purchaser, as appropriate, shall make the net cumulative
adjustment payment required by Section 6.1 9(b)(i), (ii) and
(iii). All payments shall be made within two business days of the
reviewing accountants' determination or an agreement between the
parties by wire transfer of immediately available funds. The fees
and expenses of the reviewing accountants shall be shared by the
Purchaser and the Seller such that the fees and expenses of the
reviewing accountants for a determination pursuant to this
Section 6.19 shall be paid by the parties based upon the degree
to which the reviewing accountants accept the respective
positions of the parties. Any payments under this Section 6.19
shall be treated by the parties for all purposes as an adjustment
to the Purchase Price.
28
6.20 Sale of Backlisted Titles
The Seller hereby agrees that it will not sell or otherwise transfer
Backlisted Titles to any Person, other than to the Purchaser or an
Affiliate of the Purchaser, except pursuant to any agreement set forth on
Schedule 4.4.
6.21 Conduct
The Seller shall, and the Seller shall cause the Companies to, from the
date hereof up to and including the Closing Date, (i) manage the business
of the Companies in the ordinary course of business, consistent with past
practice; (ii) maintain in full force and effect insurance of the
Companies; (iii) use commercially reasonable efforts, consistent with past
practice, to preserve the business of the Companies and the Business
Assets; (iv) maintain its and their books and records in accordance with
GAAP and in the manner consistent with past practices and promptly advise
the Purchaser in writing of any adverse change in the condition (financial
or otherwise) of the assets, liabilities, results of operation of the
Companies or the Business Assets; (v) use commercially reasonable efforts,
consistent with past practice, and subject to the Seller's right to dispose
of the Retained Assets, to preserve the business organization of the
Companies intact, to preserve the Companies' operations at their present
levels, to keep available to the Purchaser the services of Broderbund
Employees and to preserve the Companies' current relationships with those
suppliers, customers, creditors and others having business relations
material to the business of the Companies, and refrain from any material
capital expenditures or significant organization changes with respect
thereto, other than in the ordinary course of business; (vi) refrain from
taking any actions that if taken prior to the date hereof would have been
required to be disclosed pursuant to Sections 4.8(b)-(l), (o), (p), (r) and
(w); and (vii) sell any Business Assets in accordance with the Companies'
sales policy which in the aggregate is not materially different from the
Companies' customary sales policy, consistent with past practice. In
addition, the Seller shall not, and the Seller shall cause the Companies
not to, from the date hereof up to and including the Closing Date, adopt,
sponsor or amend any employee benefit plan, program or arrangement other
than required by applicable law.
7 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES - INDEMNIFICATION,
ETC.
All statements contained in the Schedules or Exhibits hereto or in any
certificate or instrument of conveyance delivered by or on behalf of the
parties pursuant to this Agreement hereby shall be deemed representations
and warranties by the parties hereunder. -
7.1 Survival of Representations, Warranties, Etc.
All representations and warranties of the parties made in this Agreement or
in any certificate or instrument delivered in connection herewith shall
survive the Closing for a period of 12 months after the Closing (and, with
respect to the representations and warranties made by the parties
notwithstanding any investigation made at any time by or on behalf of
either party); provided, that all representations and warranties made by
the Seller in Section 4.9 (Tax Matters), Section 4.14 (Environmental
Matters) and Section 4.17 (Employee Benefits) shall survive until the
applicable period of limitation (or any extension thereof) has expired (the
"Survival Period") and all representations and warranties made by the
Seller in Section 4.1 (Organization) and Section 4.5 (Capitalization) shall
survive indefinitely. All representations and warranties related to any
claim asserted in writing prior to the expiration of the applicable
Survival Period shall survive until such claim shall be resolved and
payment in respect thereof, if any is owing, shall be made. The Tax
indemnity provisions set forth in Section 7.2 and 7.3 below shall survive
until expiration of the applicable statute of limitations.
29
7.2 Seller's Agreement to Indemnify
Subject to Section 7.5, the Seller shall, in accordance with the terms
hereof, indemnify and hold harmless the Purchaser, its Subsidiaries and all
of their Affiliates, officers, directors, employees, representatives and
agents (the "Purchaser Indemnified Parties") against and in respect of any
and all liabilities, losses, damages, deficiencies, penalties, fines,
costs, Tax or expenses (including, without limitation, the reasonable fees
and expenses of investigation and counsel) (collectively, "Losses")
resulting from: (i) any misrepresentation or breach of warranty or the
non-fulfillment of any agreement, covenant or obligation by the Seller made
in this Agreement; (ii) any and all actions, suits, proceedings, claims,
demands, assessments, judgments incidental to the enforcement of such
indemnification; (iii) any and all Taxes or liability (including any
liability incurred as a transferee or successor, by contract, operation of
law or otherwise) for or in respect of Taxes (A) of the Seller or any of
the Seller's Subsidiaries or Affiliates (including Taxes relating to any
transaction contemplated under Section 6.19 or any Taxes related to any
transactions among the Seller and its Subsidiaries (including the
Companies) within one week prior to the Closing)), except (1) as otherwise
provided in Section 8 with respect to sharing of certain transfer taxes
upon the sale of the Interests, or (2) with respect to Taxes of the
Companies accrued on the Balance Sheet or Taxes, other than income Taxes,
incurred and accrued for on the Companies' books and records in the
ordinary course of business consistent with past practice between the
Balance Sheet Date and the Closing Date ("Assumed Sales Taxes"), (B)
relating to or attributable to the Companies for any taxable period (or
portion thereof) ending before the Closing Date (other than Assumed Sales
Taxes), or (C) whether determined on a separate, consolidated, combined,
group or unitary basis of the Seller or any of the Seller's Subsidiaries or
Affiliates (1) pursuant to Treas. Reg. Sec. 1.1502-6 or any comparable
provision of state, local, or foreign law with respect to any taxable
period and (2) pursuant to any guaranty, indemnification, Tax sharing, or
similar agreement relating to the sharing of liability for, or payment of
Taxes by the Seller or any of the Seller's Subsidiaries or Affiliates; (iv)
all Losses resulting, directly or indirectly, from claims made or rights
asserted by Mattel against the Purchaser, the Companies, or the Business
Assets relating to or arising out of the transactions contemplated herein;
(v) the litigation or potential litigation matters set forth on Schedule
7.2 and (vi) those additional matters or liabilities set forth on Schedule
7.2.
7.3 Purchaser's Agreement to Indemnify
Subject to Section 7.5, the Purchaser shall, in accordance with the terms
hereof, indemnify and hold harmless the Seller and all of its Affiliates,
officers, directors, employees, representatives and agents (the "Seller
Indemnified Parties") against and in respect of any and all Losses: (i)
resulting from any misrepresentation or breach of warranty or the
non-fulfillment of any agreement, covenant or obligation by the Purchaser
made in this Agreement, (ii) arising out of the ownership or operation of
the Companies or the Business from and after the Closing (including,
without limitation, Taxes), except to the extent the Purchaser is entitled
to be indemnified by the Seller hereunder with respect thereto, and (iii)
resulting from any payment by the Seller under a guarantee set forth on the
Seller's Schedules in favor of a Company and not released prior to the
Closing.
7.4 Third Party Claims
(a) Promptly after the receipt by any party hereto of notice of any claim,
action, suit or proceeding of any third party which is subject to
indemnification hereunder, such party (the "Indemnified Party") shall
give written notice of such claim to the party obligated to provide
indemnification hereunder (the "Indemnifying Party"), stating the
nature and basis of such claim and the amount thereof, to the extent
known. The Indemnifying Party shall be entitled to defend any such
indemnified matter, so long as it chooses counsel that is reasonably
satisfactory to the Indemnified Party; provided,
30
that the Indemnifying Party shall not settle or compromise any such
claim that may have an adverse effect on the Indemnified Party (or if
the Indemnifying Party is the Seller, on the Companies), without the
Indemnified Party's prior written consent, which consent shall not be
unreasonably withheld, delayed or conditioned. If the Indemnifying
Party elects to assume the defense of, negotiate, settle or otherwise
deal with any claim which relates to any Losses indemnified against
hereunder, the Indemnifying Party shall within 15 business days of
receipt of written notice of the assertion of a claim notify in
writing the Indemnified Party of its intent to do so. If the
Indemnifying Party elects not to defend against, negotiate, settle or
otherwise deal with any claim which relates to any Losses indemnified
against hereunder, the Indemnified Party may defend against,
negotiate, settle, or otherwise deal with such claim. If the
Indemnifying Party fails to notify the Indemnified Party of its
election as herein provided or the Indemnifying Party contests its
obligation to indemnify the Indemnified Party for such Losses under
this Agreement, the Indemnified Party may defend against, negotiate,
settle or otherwise deal with such claim. The Indemnified Party may
participate in the defense of such claim, at its own expense, if the
Indemnifying Party undertakes such defense. The Indemnifying Party
shall reasonably cooperate in any such defense or settlement and give
the Indemnified Party full access to all information relevant thereto.
(b) The Seller shall have the right to represent the interests of the
Companies in any Tax audit or administrative or court proceeding
relating to Tax Returns for periods ending before the Closing Date
with respect to which the Seller is liable for Taxes pursuant to this
Agreement; provided, that the Seller shall be responsible for all
costs and expenses, (including, but not limited to, legal costs)
relating to such representation. Notwithstanding the foregoing, the
Purchaser shall have the right to participate in any such audit or
proceeding to the extent that any such audit or proceeding may affect
the Tax liability of the Purchaser, any of its Affiliates, or the
Companies for any period ending on or after the Closing Date, and to
employ counsel of the Purchaser's choice at its own expense for
purposes of such participation. Notwithstanding anything to the
contrary contained or implied in this Agreement, without the prior
written consent of the Purchaser, which consent shall not be
unreasonably withheld, delayed or conditioned, none of the Seller or
any Affiliate of the Seller shall agree or consent to compromise or
settle, either administratively or after the commencement of
litigation, any issue or claim arising in any such audit or
proceeding, or otherwise agree or consent to any Tax liability with
respect to the Companies, to the extent that any such compromise,
settlement, consent or agreement will (i) result in a Loss for which
the Purchaser is required to indemnify any Seller Indemnified Parties
under this Agreement or (ii) result in the material payment of any Tax
following the Closing Date by the Purchaser or any of the Companies or
Affiliates thereof which is unreasonable under the circumstances and
which would not have been paid in the absence of such agreement,
consent, compromise or settlement.
(c) The Purchaser shall have the right to represent the interests of the
Companies in and to control any Tax audit or administrative or court
proceeding relating to Tax Returns for periods beginning on or after
the Closing Date; provided, however, that the Seller shall have the
right to participate in any such audit or proceeding to the extent
that any such audit or proceeding may result in a Loss for which the
Seller is required to indemnify the Purchaser Indemnified Parties
under this Agreement, and to employ counsel of the Seller's choice at
its own expense for purposes of such participation. Notwithstanding
anything to the contrary contained or implied in this Agreement,
without the prior written consent of the Seller, which consent shall
not be unreasonably withheld, delayed or conditioned, none of the
Purchaser or any Affiliate of the Purchaser shall agree or consent to
compromise or settle, either administratively or after the
commencement of litigation, any issue or claim arising in any such
audit
31
or proceeding, or otherwise agree or consent to any Tax liability with
respect to the Companies, to the extent that any such compromise,
settlement, consent or agreement will result in a material Loss for
which the Seller is required to indemnify any Purchaser Indemnified
Parties under this Agreement which it is unreasonable for Seller to
pay under the circumstances.
(d) The Purchaser shall notify the Seller in writing within ten days of
receipt by it, or by any of the Purchaser's Affiliates or the
Companies, of any written notice of any pending or threatened Tax
audits or assessments relating to the income, properties or operations
of the Companies, in each case for periods ending before the Closing
Date. Failure to provide such notice shall not affect the Seller's
indemnification obligations under this Agreement except to the extent
that such failure has actually and materially prejudiced the Seller
and then only to the extent of such prejudice; provided, that the
Seller shall be deemed to be materially prejudiced if as a result of
the Purchaser's failure to give timely notice or the Purchaser's
failure to comply with Section 2.3 or 6.11 the Seller's rights to
obtain indemnification from Mattel are impaired, and the Purchaser
shall not be indemnified by the Seller up to the amount, if any, of
indemnification which would have been obtained from Mattel by the
Seller if but for the Purchaser's actions or in actions the Seller
would have been indemnified by Mattel.
7.5 Limitation of Liability
The Seller, on the one hand, and the Purchaser, on the other hand (in each
case,- the "Indemnifying Party"), shall not be liable for any amounts with
respect to the breach of a representation and warranty unless and until
such amounts shall exceed in the aggregate $1.0 million (in which case the
Indemnifying Party shall only be liable with respect to the excess over
such amount); provided, however, that such limitation shall not apply to
any Losses of the Purchaser Indemnified Parties pursuant to the (a)
litigation or other matters on Schedule 7.2, (b) Losses resulting from the
breach of the representation or warranty set forth in Section 4.1
(Organization), Section 4.5 (Capitalization) and Section 4.9 (Tax Matters),
or (c) Losses subject to indemnification pursuant to Sections 7.2(iii),
(iv), (v) and (vi), for which the Purchaser Indemnified Parties shall be
indemnified from the first dollar of loss. In no event shall the
Indemnifying Party's liability with respect to the breach of
representations and warranties exceed 25% of the Purchase Price.
None of the Closing, any party's waiver of any condition to Closing or a
party's knowledge .of any breach prior to the Closing shall constitute a
waiver of any right such party may have hereunder.
7.6 Sole Remedy
Following the Closing, the provisions of this Section 7 shall be the sole
and exclusive remedy for the breach or nonfulfillment of any representation
or warranty made by a party to this Agreement, or any facts or
circumstances constituting such an inaccuracy or breach; provided, that
nothing herein shall relieve any party from any liability for fraud.
8 PAYMENT OF CERTAIN EXPENSES
The Seller on the one hand, and the Purchaser, on the other hand, will each
pay one-half of all U.S. sales, transfer and similar U.S. taxes which may
be payable by reason of the consummation of the sale and purchase of the
Interests provided, however, that the Seller will pay all U.S. sales,
transfer and similar U.S. taxes payable by reason of the transfer of any
Retained Assets or arising out of or related it to any transactions among
the Seller and its Subsidiaries (including the Companies) within one week
prior to the Closing. Subject to the
32
foregoing, the Seller, on the one hand, and the Purchaser, on the other
hand, will be liable for their own costs and expenses, including legal
fees, in connection with this Agreement and the transactions contemplated
hereby.
9 REMEDIES
The Purchaser and the Seller acknowledge that irreparable damage would
result if the provisions of the Agreement, including, without limitation,
Sections 6.1, 6.2 and 6.10 were not complied with in accordance with their
respective terms. Accordingly, the Seller and the Purchaser agree that the
other party hereto shall have the right, in addition to any other rights or
remedies it may have, to injunctive relief and to specific performance, in
respect of any failure on the part of the Seller or the Purchaser to comply
with the provisions of Sections 6.1, 6.2 or 6.10.
10 WAIVER
Any of the terms or conditions of this Agreement may be waived at any time
and from time to time in writing by the party entitled to the benefits
thereof without affecting any other terms or conditions of this Agreement.
11 NOTICES, ETC.
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given, if delivered in
person or by courier, or by facsimile transmission or three days after
being mailed by certified or registered mail, postage prepaid:
if to the Seller:
GTG/Wizard, LLC
do Gores Technology Group
00000 Xxxxxxxx Xxxx., Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
with a copy to:
Gores Technology Group
0000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
Xxxxxxx & XxXxxxxx
300 5. Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
if to the Purchaser:
Riverdeep, Inc.
0xx Xxxxx Xxxxx Xxxxx
Xxxxx Xxxxxx, Xxxxxx 0
Xxxxxxx
Attention: Xxxxx X'Xxxxxxxxx
33
Facsimile: 353-1-670-7626
with copies to:
Riverdeep Group plc
000 Xxxxxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Facsimile: (61 7)-995- 1201
and:
Xxxxx Xxxxxxxxxx LLP
0 Xxxxxxxxxx
Xxxxxx XX0X 0XX
Xxxxxxx
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: 00-000-000-0000
Any party may, by written notice to the other, change the address to
which notices to such party are to be delivered or mailed.
12 [INTENTIONALLY OMITTED]
13 ENTIRE AGREEMENT; AMENDMENT
This Agreement and the other agreements and instruments delivered by the
parties pursuant hereto set forth the entire agreement and understanding of
the parties in respect of the transactions contemplated hereby and
supersede all prior agreements, arrangements and understandings relating to
the subject matter hereof. No representation, promise, inducement or
statement of intention has been made by the Seller or the Purchaser which
is not embodied in this Agreement, the Schedules or Exhibits hereto, the
written statements, certificates or other agreements, instruments or
documents delivered pursuant hereto, and neither the Seller nor the
Purchaser shall be bound by or liable for any alleged representation,
promise, inducement or statement of intention not so set forth. This
Agreement may be amended or modified only by a written instrument executed
by the Seller and the Purchaser or by their respective successors and
assigns.
14 PRESS RELEASES
Neither the Seller, on the one hand, nor the Purchaser, on the other hand,
shall issue any press releases or make any public announcements of any of
the transactions contemplated by this Agreement except as may be mutually
agreed to by both the Seller and the Purchaser; provided, that
notwithstanding the foregoing, the parties shall be permitted, upon prior
notice to the other, to make such disclosures to the public or governmental
authorities or shareholders of each party or the Securities and Exchange
Commission, the Nasdaq National Market and the Irish Stock Exchange Limited
to maintain compliance with, or to prevent violation of, applicable laws or
regulations, including the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and rules and regulations of
the Nasdaq National Market and the Irish Stock Exchange Limited. The Seller
and the Purchaser shall cooperate and mutually approve the text of a press
release regarding the execution of this Agreement and any announcements to
employees or other interested persons in connection therewith.
34
15 GENERAL
This Agreement: (a) shall be construed and enforced in accordance with the
laws of the State of New York, without giving effect to the choice of law
principles thereof; (b) shall inure to the benefit of and be binding upon
the legal representatives, successors and assigns of the Seller and the
successors and assigns of the Purchaser, nothing in this Agreement,
expressed or implied, being intended to confer upon any other Person any
right or remedies hereunder, other than successors or assigns of the Seller
or the Purchaser; and (c) may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together shall
constitute one and the same instrument. The Section and other headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
16 JURISDICTION
The parties consent to the exclusive jurisdiction of any state or federal
court in the State of Delaware, and waive any objection to Delaware venue
in any action instituted hereunder.
17 SEVERABILITY
To the extent that any provision of this Agreement shall be invalid or
unenforceable, it shall be considered deleted herefrom and the remainder of
such provision and of this Agreement shall be unaffected and shall continue
in full force and effect. In furtherance and not in limitation of the
foregoing, if any provision, term, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, then
such provision, term, covenant or restriction shall be construed to cover
only that duration, extent or activities which may be validly and
enforceably covered and the remainder of the provisions, terms, covenants
and restrictions contained herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
18 INTERPRETATION
All references in this Agreement, the Exhibits and the Schedules to US$, US
dollar or $ shall refer to the currency of the United States of America.
35
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement the day
and year first above written.
PURCHASER:
RIVERDEEP, INC.
By:
-----------------------------------
Name:
Title:
SELLER:
GTG/WIZARD, LLC
By:
-----------------------------------
Name:
Title:
