ANNEX A
ASSET PURCHASE AGREEMENT
DATED AS OF DECEMBER 8, 1996
AMONG
QUIXOTE CORPORATION
DISC MANUFACTURING, INC.
CINRAM LTD.
AND
CINRAM INC.
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
1.1. Definitions......................................................................................................... A-1
ARTICLE II
PURCHASE AND SALE
2.1. Purchased Assets.................................................................................................... A-6
2.2. Excluded Assets..................................................................................................... A-8
2.3. Assumed Liabilities................................................................................................. A-8
2.4. Excluded Liabilities................................................................................................ A-8
ARTICLE III
PURCHASE PRICE
3.1. Purchase Price...................................................................................................... A-10
3.2. Allocation of Purchase Price........................................................................................ A-10
3.3. Determination of Purchase Price..................................................................................... A-10
3.4. Option to Terminate................................................................................................. A-11
ARTICLE IV
CLOSING
4.1. Closing Date........................................................................................................ A-11
4.2. Payment on the Closing Date......................................................................................... A-11
4.3. Deliveries of Parent and/or Cinram.................................................................................. A-11
4.4. Deliveries of Quixote and/or DMI.................................................................................... A-12
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF QUIXOTE AND DMI
5.1. Organization of Quixote and DMI..................................................................................... A-14
5.2. Subsidiaries and Investments........................................................................................ A-14
5.3. Authority........................................................................................................... A-14
5.4. Financial Statements................................................................................................ A-15
5.5. Operations Since September 30, 1996................................................................................. A-15
5.6. No Undisclosed Liabilities.......................................................................................... A-17
5.7. Taxes............................................................................................................... A-17
5.8. Availability of Assets.............................................................................................. A-18
5.9. Governmental Permits................................................................................................ A-18
5.10. Owned Real Property................................................................................................. A-9
5.11. Real Property Leases................................................................................................ A19
5.12. Condemnation........................................................................................................ -19
5.13. Personal Property................................................................................................... A-19
5.14. Personal Property Leases............................................................................................ A-19
5.15. Intellectual Property; Software..................................................................................... A-20
5.16. Accounts Receivable; Inventories.................................................................................... A-21
5.17. Title to Property................................................................................................... A-22
5.18. Employee Benefit Plans.............................................................................................. A-22
5.19. Requirements of Laws Relating to Employees.......................................................................... A-25
5.20. Contracts........................................................................................................... A-25
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5.21. Status of Contracts................................................................................................. A-26
5.22. No Violation, Litigation or Regulatory Action....................................................................... A-26
5.23. Environmental Matters............................................................................................... A-27
5.24. Insurance........................................................................................................... A-28
5.25. Customers and Suppliers............................................................................................. A-28
5.26. Budget.............................................................................................................. A-28
5.27. Warranties.......................................................................................................... A-28
5.28. No Finder........................................................................................................... A-28
5.29. Financial Information............................................................................................... A-28
5.30. Accrued Vacation and Other Remuneration............................................................................. A-28
5.31. Employee Claims..................................................................................................... A-28
5.32. Disclosure.......................................................................................................... A-29
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND CINRAM
6.1. Organization of Parent and Cinram................................................................................... A-29
6.2. Authority........................................................................................................... A-29
6.3. No Finder........................................................................................................... A-30
6.4. Financial Capacity.................................................................................................. A-30
ARTICLE VII
ACTION PRIOR TO THE CLOSING DATE
7.1. Investigation by Parent and Cinram.................................................................................. A-30
7.2. Preserve Accuracy of Representations and Warranties................................................................. A-30
7.3. Consents of Third Parties; Governmental Approvals................................................................... A-31
7.4. Operations Prior to the Closing Date................................................................................ A-31
7.5. Notification by Quixote and DMI of Certain Matters.................................................................. A-33
7.6. Antitrust Law Compliance............................................................................................ A-33
7.7. Commitment for Title Insurance and Survey........................................................................... A-34
7.8. Quixote Stockholder Meeting......................................................................................... A-34
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1. Covenant Not to Compete or Solicit Business......................................................................... A-34
8.2. Production of Replacement Products.................................................................................. A-35
8.3. Taxes............................................................................................................... A-35
8.4. Discharge of Liabilities............................................................................................ A-37
8.5. Employees and Employee Benefit Plans................................................................................ A-37
8.6. Cooperation with Quixote Regarding Certain Litigation............................................................... A-40
8.7. Change in Corporate Name............................................................................................ A-40
8.8. No Solicitation..................................................................................................... A-40
8.9. Third Party Standstill Agreements................................................................................... A-40
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND CINRAM
9.1. No Misrepresentation or Breach of Covenants and Warranties.......................................................... A-41
9.2. No Changes or Destruction of Property............................................................................... A-41
9.3. No Restraint or Litigation.......................................................................................... A-41
9.4. Necessary Governmental Approvals.................................................................................... A-41
9.5. Necessary Consents.................................................................................................. A-41
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9.6. Title Insurance and Survey.......................................................................................... A-41
9.7 Quixote Stockholder Approval........................................................................................ A-42
9.8 Absence of Material Environmental Liabilities....................................................................... A-42
9.9 Bank Accounts....................................................................................................... A-42
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF QUIXOTE AND DMI
10.1. No Misrepresentation or Breach of Covenants and Warranties.......................................................... A-42
10.2. No Restraint or Litigation.......................................................................................... A-42
10.3. Necessary Governmental Approvals.................................................................................... A-42
10.4. Quixote Stockholder Approval........................................................................................ A-42
ARTICLE XI
INDEMNIFICATION
11.1. Indemnification by Quixote and DMI.................................................................................. A-43
11.2. Indemnification by Cinram........................................................................................... A-44
11.3. Notice of Claims.................................................................................................... A-45
11.4. Third Person Claims................................................................................................. A-45
11.5. Indemnification Payments on After-Tax Basis......................................................................... A-4
ARTICLE XII
TERMINATION
12.1. Termination......................................................................................................... A-46
12.2. Notice of Termination............................................................................................... A-47
12.3. Effect of Termination............................................................................................... A-47
ARTICLE XIII
GENERAL PROVISIONS
13.1. Survival of Obligations............................................................................................. A-48
13.2. Confidential Nature of Information.................................................................................. A-48
13.3. No Public Announcement.............................................................................................. A-48
13.4. Notices............................................................................................................. A-48
13.5. Successors and Assigns.............................................................................................. A-50
13.6. Access to Records after Closing..................................................................................... A-50
13.7. Entire Agreement; Amendments........................................................................................ A-51
13.8. Interpretation...................................................................................................... A-51
13.9. Waivers............................................................................................................. A-51
13.10. Expenses; Other Rights.............................................................................................. A-51
13.11. Partial Invalidity.................................................................................................. A-52
13.12. Execution in Counterparts........................................................................................... A-52
13.13. Further Assurances.................................................................................................. A-52
13.14. Governing Law....................................................................................................... A-53
13.15. Submission to Jurisdiction.......................................................................................... A-53
13.16. Substitution of Purchaser........................................................................................... A-53
13.17. Guarantee of Performance............................................................................................ A-53
13.18. Punitive Damages.................................................................................................... A-53
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LIST OF SCHEDULES
2.2 Excluded Assets
2.3(b) Assumed Contracts
2.4(h) Long-term Liabilities and Obligations
3.1 Valuation Date Statement
4.3(e) Terms and Conditions of the Huntsville Facility Sublease
4.3(f) Terms and Conditions of the Consulting Agreement
5.1 Jurisdictions in which DMI Carrying on Business
5.2 Ownership in Subsidiaries and Other Companies
5.3 Breaches; Assignable Contracts
5.4 Audited Financial Statements of Quixote
5.5(a) Material Adverse Changes Since September 30, 1996
5.5(b) Exceptions to Ordinary Course Operations
5.6 Undisclosed Liabilities
5.7 Taxes
5.8 Unavailable Assets; Material Services to the Business
5.9 Governmental Permits
5.10 Owned Real Property
5.11 Real Property Leases
5.13 Personal Property
5.15 Intellectual Property and Software
5.17 Exceptions to Marketable Title
5.18 ERISA Benefit Plans
(a) ERISA Benefit Plans
(b) Non-ERISA Commitments
(e) Administration of ERISA Benefit Plans
(i) Employees and Commission Salespersons; Compensation
(j) Conflicts of Interest; Illegal Payments; SEC Investigations
5.19 Compliance with Employment Laws; Collective Bargaining Relationships
5.20 Contracts
5.21 Enforceability and Assignability of Sellers' Agreements
5.22 Requirements of Laws, Court Orders and Litigation
5.23 Exceptions to Environmental Compliance
5.24 Insurance
5.26 1997 Operation Plan
5.27 Form of Warranty; Warranty Expenses
8.5(c) Employee Benefits
9.5 Necessary Consents
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ASSET PURCHASE AGREEMENT dated as of December 8, 1996 among CINRAM LTD. a
Canadian corporation ("Parent"), CINRAM INC., a Delaware corporation and an
indirect wholly-owned subsidiary of Parent ("Cinram"), QUIXOTE CORPORATION, a
Delaware corporation ("Quixote"), and DISC MANUFACTURING, INC., a Delaware
corporation and a wholly-owned subsidiary of Quixote ("DMI").
WHEREAS, Quixote is, among other things, engaged, primarily through DMI, in
the business of manufacturing audio compact discs and CD-ROM discs for
entertainment, data storage, multimedia and education applications (the
"Business") in its facilities located in Anaheim, California and Huntsville,
Alabama (the "Facilities"); and
WHEREAS, Quixote and DMI desire to sell to Cinram, and Cinram desires to
purchase from Quixote and DMI, on a going concern basis (but only to the extent
hereinafter provided), all of the assets, properties and other rights used in,
dedicated to or necessary for the Business (except as otherwise expressly
provided herein), on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the covenants and other
agreements set forth herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, each intending to be contractually bound,
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS. In this Agreement, the following terms have the meanings
specified in this Section 1.1, which terms shall be equally applicable to both
the singular and plural forms thereof. Any agreement referred to below shall
mean such agreement as amended, supplemented and modified from time to time to
the extent permitted by the applicable provisions thereof and of this Agreement.
"AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"AGREED ACCOUNTING PRINCIPLES" means United States generally accepted
accounting principles consistently applied; PROVIDED, HOWEVER, that, with
respect to any matter as to which there is more than one generally accepted
accounting principle, Agreed Accounting Principles means the generally accepted
accounting principles applied in the preparation of the 1996 audited financial
statements of Quixote contained in Schedule 5.4.
"ALLOCATION SCHEDULE" has the meaning specified in Section 3.2.
"ASSUMED CONTRACTS" means the contracts and agreements described on Schedule
2.3(b).
"ASSUMED LIABILITIES" has the meaning specified in Section 2.3.
"BUSINESS" has the meaning specified in the first recital clause to this
Agreement.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Sections 9601 ET SEQ., any amendments thereto, any
successor statutes and any regulations promulgated thereunder.
"CERTIFIED VALUATION DATE STATEMENT" has the meaning specified in Section
3.3(a).
"CINRAM" has the meaning specified in the first paragraph of this Agreement.
"CINRAM ANCILLARY AGREEMENTS" means all agreements, instruments and
documents to be executed and delivered by Cinram pursuant to this Agreement.
"CINRAM'S 401(K) PLAN" has the meaning specified in Section 8.5(c).
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"CINRAM GROUP MEMBER" means Cinram, its Affiliates and their respective
successors and assigns.
"CLAIM NOTICE" has the meaning specified in Section 11.3(a).
"CLOSING" means the closing of the sale of the Business and the Purchased
Assets to Cinram.
"CLOSING DATE" has the meaning specified in Section 4.1.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement dated August
7, 1996, as amended October 30, November 13, November 22, November 25 and
December 8, 1996, between Parent and Quixote.
"CONSULTING AGREEMENT" has the meaning specified on Schedule 4.3(f).
"CONTAMINANT" means any waste, pollutant, hazardous or toxic substance or
waste, petroleum, petroleum-based substance or waste, special waste or any
constituent of any such substance or waste.
"CONTEMPORANEOUS TAKEOVER PROPOSAL" has the meaning specified in Section
13.10(b).
"COOPERS & ▇▇▇▇▇▇▇" means Coopers & ▇▇▇▇▇▇▇ L.L.P., independent public
accountants for Quixote and DMI.
"COPYRIGHTS" means United States and foreign copyrights, copyrightable works
and maskworks, whether registered or unregistered, common law copyright rights,
pending applications to register the same and renewals or reversionary interests
related thereto.
"COURT ORDER" means any judgment, order, award or decree of any federal,
state, local, foreign or other court or tribunal and any award in any
arbitration proceeding.
"DMI" has the meaning specified in the first paragraph of this Agreement.
"ENCUMBRANCE" means any lien, claim, charge, security interest, mortgage,
pledge, easement, conditional sale or other title retention agreement, defect in
or exception to title, covenant, condition or other restriction of any kind.
"ENVIRONMENTAL ENCUMBRANCE" means an Encumbrance in favor of any
Governmental Body for (i) any liability under any Environmental Law or (ii) any
damages arising from, or any costs incurred by such Governmental Body in
response to, a Release or threatened Release of a Contaminant into the
environment.
"ENVIRONMENTAL LAW" means all Requirements of Laws derived from or relating
to any federal, state, local or foreign law or regulation relating to or
addressing the environment, health or safety, including, but not limited to,
CERCLA, OSHA and RCRA, any state equivalent thereof or any common law obligation
predicated on a Release of a Containment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means: (i) any corporation which on, or at any time during
the six-year period ending on, the Closing Date is or was a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as Quixote or DMI; (ii) any partnership, trade or business (whether or not
incorporated) which on, or at any time during the six-year period ending on, the
Closing Date is or was under common control (within meaning of Section 414(c) of
the Code) with Quixote or DMI; and (iii) any entity which on, or at any time
during the six-year period ending on, the Closing Date is or was a member of the
same affiliated service group (within the meaning of Section 414(m) of the Code)
as Quixote, DMI, any corporation described in clause (i) of this definition or
any partnership, trade or business described in clause (ii) of this definition.
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"ERISA BENEFIT PLANS" has the meaning specified in Section 5.18(a).
"EXCLUDED ASSETS" has the meaning specified in Section 2.2.
"EXCLUDED TAXES" has the meaning specified in Section 8.3(a).
"EXPENSES" means any and all expenses incurred in connection with
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including, without
limitation, court filing fees, court costs, arbitration fees or costs, witness
fees and reasonable fees and disbursements of legal counsel, investigators,
expert witnesses, consultants, accountants and other professionals).
"FACILITIES" has the meaning specified in the first recital clause to this
Agreement.
"GOVERNMENTAL BODY" means any government or political subdivision, whether
federal, state, local or foreign, or any agency, authority or instrumentality of
any such government or political subdivision.
"GOVERNMENTAL PERMITS" has the meaning specified in Section 5.9.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended.
"HUNTSVILLE FACILITY SUBLEASE" has the meaning specified in Section 4.3(e).
"HUNTSVILLE OWNED REAL PROPERTY" means the Owned Real Property described
under the subparagraph b. caption "Huntsville" on Schedule 5.10.
"INDEMNIFIED PARTY" has the meaning specified in Section 11.3(a).
"INDEMNITOR" has the meaning specified in Section 11.3(a).
"INTELLECTUAL PROPERTY" means Copyrights, Patent Rights, Trademarks and
Trade Secrets.
"IRS" means the Internal Revenue Service.
"KPMG" means KPMG Peat Marwick ▇▇▇▇▇▇, independent accountants for Parent
and Cinram.
"LATER TAKEOVER PROPOSAL" has the meaning specified in Section 13.10(d).
"LOSSES" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges incurred in connection with any claim, action,
suit or proceeding indemnified against hereunder.
"NON-ERISA COMMITMENTS" has the meaning specified in Section 5.18(b).
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C. Sections 651
ET SEQ., any amendments thereto, any successor statutes and any regulations
promulgated thereunder.
"OWNED REAL PROPERTY" has the meaning specified in Section 5.10.
"OWNED SOFTWARE" has the meaning specified in Section 5.15(g).
"PARENT" has the meaning specified in the first paragraph of this Agreement.
"PATENT RIGHTS" means United States and foreign patents, patent
applications, continuations, continuations-in-part, divisions, reissues, patent
disclosures, expired patents, inventions (whether or not patentable) and
improvements thereto.
"PENSION PLANS" has the meaning specified in Section 5.18(a).
"PERMISSIBLE PAYMENTS" means cash payments by DMI to Quixote during the
period commencing October 1, 1996 and ending at the close of business on the day
preceding the Closing Date in respect of such period, but only if made in the
ordinary course of business consistent with past practice, for the following
purposes: (i) employee and DMI matching contributions to
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Quixote's 401(k) Plan on behalf of DMI employees, which are to be remitted
promptly by Quixote to the Trustee for such Plan; (ii) royalty payments due to
U.S. ▇▇▇▇▇▇▇▇ Corporation by DMI, which are to be remitted promptly by Quixote
to such corporation; (iii) Taxes, including payroll withholding taxes, owed by
DMI to Governmental Bodies in connection with DMI's employees, which are to be
remitted promptly by Quixote to the appropriate Governmental Bodies; (iv)
amounts for the legal defense reserve account maintained on Quixote's books, but
not to exceed a royalty of $.03 per unit (which may be payable to ▇. ▇. ▇▇▇▇▇▇▇)
and a royalty of $.013 per unit (which may be payable to Discovision
Associates); (v) reimbursement of base compensation, benefits and expenses paid
by Quixote to ▇▇▇▇▇ ▇. ▇▇▇▇▇; (vi) sums due as the allocated cost of property
and health insurance for the benefit of DMI, which sums are to be remitted
promptly to the appropriate insurance carriers by Quixote on behalf of DMI; and
(vii) reimbursement of amounts paid by Quixote to ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ pursuant to
Search No. 6-05-078.
"PERMITTED ENCUMBRANCES" means: (i) liens for taxes and other governmental
charges and assessments which are not yet due and payable; (ii) liens of
landlords and liens of carriers, warehousemen, mechanics and materialmen and
other like liens arising in the ordinary course of business for sums not yet due
and payable; and (iii) other liens or imperfections of title which are not
material in amount and do not materially detract from the value of or materially
impair the existing use of the property affected by such lien or imperfection;
PROVIDED, HOWEVER, that this term shall not include any Encumbrance (iv) arising
under ERISA or the Code or otherwise in connection with, or in any way related
to, any "employee benefit plan," as defined in Section 3(3) of ERISA, or any
plan, policy, trust, understanding, arrangement or agreement of any kind
described in clause (A) or (B) of the first sentence of Section 5.18(b)
(irrespective of the second sentence thereof) or (v) relating to any security
interest in any Intellectual Property.
"PERSON" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, Governmental Body or other entity.
"PURCHASE PRICE" has the meaning specified in Section 3.1.
"PURCHASED ASSETS" has the meaning specified in Section 2.1.
"QUIXOTE" has the meaning specified in the first paragraph of this
Agreement.
"QUIXOTE'S 401(K) PLAN" has the meaning specified in Section 8.5(d).
"QUIXOTE STOCKHOLDER MEETING" has the meaning specified in Section 7.8.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
SectionSection 6901 ET SEQ., any amendments thereto, any successor statutes and
any regulations promulgated thereunder.
"RELEASE" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration of a Contaminant
into the indoor or outdoor environment or into or out of the Facilities,
including the movement of Contaminants through or in the air, soil, surface
water, groundwater or Sellers' Property.
"REMEDIAL ACTION" means actions required to (i) clean up, remove, treat or
in any other way address Contaminants in the indoor or outdoor environment; (ii)
prevent the Release or threatened Release or minimize the further Release of
Contaminants; or (iii) investigate and determine if a remedial response is
needed and to design such a response and post-remedial investigation,
monitoring, operation, maintenance and care.
"REQUIREMENTS OF LAWS" means all federal, state, local or foreign laws,
statutes, regulations, rules, codes or ordinances enacted, adopted, issued or
promulgated by any Governmental Body (including, without limitation, any thereof
pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) and all requirements of common law.
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"SELF INSURED PLANS" has the meaning specified in Section 5.18(e).
"SELLERS' AGREEMENTS" has the meaning specified in Section 5.21.
"SELLERS' ANCILLARY AGREEMENTS" means all agreements, instruments and
documents to be executed and delivered by DMI or Quixote, as the case may be,
pursuant to this Agreement.
"SELLERS' GROUP MEMBER" means Quixote and DMI, their Affiliates and their
respective successors and assigns.
"SELLERS' PROPERTY" means any real or personal property, plant, building,
facility, structure, underground storage tank, equipment or unit, or any other
asset owned, leased or operated by DMI, or Quixote with respect to the Business,
and used in, dedicated to or necessary for the Business.
"SIGNIFICANT SUBSIDIARY" has the meaning specified in Section 8.8.
"SOFTWARE" means computer software programs and software systems, including,
without limitation, all databases, compilations, tool sets, compilers, higher
level or "proprietary" languages and related documentation and materials,
whether in source code, object code or human readable form.
"STRADDLE PERIOD" means any taxable year or period beginning before and
ending after the Closing Date.
"SUBSIDIARIES" has the meaning specified in Section 5.2(b).
"SUBSIDIARY ERISA AFFILIATE" means: (i) any corporation which on, or at any
time during the six-year period ending on, the Closing Date is or was a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as any Subsidiary; (ii) any partnership, trade or business
(whether or not incorporated) which on, or at any time during the six-year
period ending on, the Closing Date is or was under common control (within
meaning of Section 414(c) of the Code) with any Subsidiary; and (iii) any entity
which on, or at any time during the six-year period ending on, the Closing Date
is or was a member of the same affiliated service group (within the meaning of
Section 414(m) of the Code) as any Subsidiary, any corporation described in
clause (i) of this definition or any partnership, trade or business described in
clause (ii) of this definition.
"SUPERIOR PROPOSAL" has the meaning specified in Section 8.8.
"TAKEOVER PROPOSAL" has the meaning specified in Section 8.8.
"TAX" (and, with correlative meaning, "TAXES" and "TAXABLE") means: (i) any
federal, state, local or foreign net income, gross income, gross receipts,
windfall profit, severance, property, production, sales, use, privilege,
license, excise, franchise, employment, payroll, withholding, alternative or
add-on minimum, ad valorem, value added, transfer, stamp or environmental tax,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty, addition
to tax or additional amount imposed by any Governmental Body; and (ii) any
liability for the payment of amounts with respect to payments of a type
described in clause (i) of this definition as a result of being a member of an
affiliated, consolidated, combined or unitary group, or as a result of any
obligation under any Tax sharing arrangement or Tax indemnity agreement.
"TAX RETURN" means any return, report or similar statement required to be
filed with respect to any Taxes (together with any attached schedules),
including, without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.
"TRADEMARKS" means United States, state and foreign trademarks, service
marks, logos, trade dress, trade names and Internet addresses or "URL's,"
whether registered or unregistered, common law trademark rights and pending
applications to register any of the foregoing.
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"TRADE SECRETS" means confidential ideas and information, trade secrets,
know-how, concepts, methods, processes, formulae, reports, data, customer lists,
mailing lists, business plans or other proprietary information or materials.
"TRANSFERRED EMPLOYEE" has the meaning specified in Section 8.5(a).
"VALUATION DATE STATEMENT" means Schedule 3.1, which is intended to set
forth the net assets of the Business as at September 30, 1996, and which, as set
forth in Section 3.3(a), is to be audited as at such date by Coopers & ▇▇▇▇▇▇▇.
As specified in Section 3.3(a), in connection with such audit, Coopers & ▇▇▇▇▇▇▇
shall determine that Schedule 3.1 properly reflects the net book value of the
assets of DMI as set forth on the audited balance sheet of DMI as at September
30, 1996 in accordance with Agreed Accounting Principles, adjusted for the
following:
(i) the exclusion of the Excluded Assets to the extent these assets would
otherwise be included in the net book value of DMI;
(ii) the inclusion of the book value of Quixote's investment in Prospectus
Plus, Inc. (25,000 shares of Series A Preferred Stock, with an option
to purchase 31,250 additional shares), Myriad Entertainment, Inc.
(1,000 shares) and Emerald Multimedia, Inc. (250,000 shares of Series A
Preferred Stock)
(iii) the exclusion of:
(A) all intercompany loans and payables;
(B) all long-term indebtedness (including the option/obligation to
repurchase the Agency Parcel under the Disposition and Development
Agreement dated August 30, 1994 among DMI, the Anaheim Redevelopment
Agency and the City of Anaheim, but excluding the Rand ▇▇▇▇▇▇▇ Media
Services, Inc. advance);
(C) any assets or liabilities related to Taxes (including income,
franchise, sales and current and deferred Taxes), other than those
liabilities in respect of Taxes specifically reserved for in
Schedule 3.1;
(D) royalty payments and reserves for the legal defense reserve account;
and
(E) accrued legal expenses, roof repairs related to the Huntsville Owned
Real Property and additional Huntsville IDB option).
"WARN" means the Worker Adjustment and Retraining Notification Act, 29
U.S.C. SectionSection 2101 ET SEQ.
"WELFARE PLANS" has the meaning specified in Section 5.18(a).
ARTICLE II
PURCHASE AND SALE
2.1. PURCHASED ASSETS. On the Closing Date, Quixote and DMI shall deliver
to Cinram one or more bills of sale and instruments of assignment and one or
more grant deeds to effectuate the sale, assignment, transfer and conveyance of
the Business and the Purchased Assets. Subject to Section 2.2 and upon the terms
and subject to the conditions of this Agreement, at the Closing, DMI and Quixote
shall sell, transfer, assign, convey and deliver to Cinram, and Cinram shall
purchase, on a going concern basis (but only to the extent herein provided),
free and clear of all Encumbrances (other than Permitted Encumbrances), the
Business and all assets and properties of DMI, and Quixote with respect to the
Business, of every kind and description, wherever located, real, personal or
mixed, tangible or intangible, used in, dedicated to or necessary for the
Business, as the same shall exist on the Closing Date (herein
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collectively referred to as the "Purchased Assets"), including, without
limitation, all right, title and interest of DMI and Quixote in, to and under
the following:
(a) all of the assets reflected on the Certified Valuation Date
Statement, other than any assets disposed of or otherwise converted into
cash after September 30, 1996 in the ordinary course of business and in
compliance with this Agreement;
(b) all cash and cash equivalents, including deposits and prepaid
expenses (other than Excluded Assets);
(c) except as provided in Section 2.2, all notes and accounts
receivable generated by the Business;
(d) all raw materials, supplies, work-in-process and other materials
included in the inventory of the Business;
(e) the Governmental Permits;
(f) the Owned Real Property (other than the Huntsville Owned Real
Property) listed on Schedule 5.10;
(g) the real estate leases and leasehold improvements listed or
described on Schedule 5.11;
(h) the machinery, equipment, vehicles, furniture and other personal
property listed or described on Schedule 5.13;
(i) the personal property leases listed on Schedule 5.14;
(j) the Copyrights, Patent Rights and Trademarks (and all goodwill
associated therewith), and the agreements, contracts, licenses, sublicenses,
assignments and indemnities, listed on Schedule 5.15 (except as otherwise
noted thereon);
(k) the Software listed on Schedule 5.15 (except as otherwise noted
thereon);
(l) the contracts, agreements or understandings listed or described on
Schedule 2.3(b)(except as otherwise noted thereon);
(m) all Trade Secrets and other proprietary or confidential information
used in, dedicated to or necessary for the Business;
(n) except with respect to the litigation specifically so indicated on
Schedule 5.22, all rights, claims or causes of action against third Persons
relating to the assets and properties described in this Section 2.1 or the
Business arising out of transactions occurring prior to the Closing Date;
(o) all books and records (including all data and other information
stored on discs, tapes or other media) relating to the assets and properties
described in this Section 2.1 or the Business;
(p) Quixote's and DMI's interest in and to all telephone, telex and
telephone facsimile numbers and other directory listings utilized primarily
in connection with the Business; and
(q) except as otherwise expressly provided in this Section 2.1: (i) all
of Quixote's and DMI's other rights, titles and interests in and to the
Business, including, without limitation, any of their business activities
relating to the manufacture, sale and distribution of multimedia and/or
optical discs; (ii) all of Quixote's and DMI's right, title and interest in
and to Prospectus Plus, Inc., Emerald Multimedia, Inc., DMI do Brazil Ltd.
and Myriad Entertainment, Inc.; and (iii) all of Quixote's and DMI's right,
title and interest in and to the names "Disc Manufacturing, Inc." and "DMI."
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Quixote has advised Parent that, in furtherance of its publicly announced
plan to establish a laser video division, Quixote and DMI will be transferring,
prior to the Closing, certain of the assets (but none of the liabilities)
described above located in Anaheim, California to a wholly-owned subsidiary
solely in exchange for shares of capital stock of such subsidiary (and for no
other consideration). In lieu of transferring such assets as above provided,
Quixote and DMI shall transfer to Cinram good and valid title to all of the
issued and outstanding shares of capital stock of such subsidiary, free and
clear of all Encumbrances or other claims, together with the unconditional
representation and warranty of Quixote and DMI that such subsidiary has no
liabilities, whether absolute, contingent, accrued or otherwise. Such shares of
capital stock shall constitute "Purchased Assets."
2.2. EXCLUDED ASSETS. Notwithstanding the provisions of Section 2.1, the
Purchased Assets shall not include, and there shall not be sold, transferred,
assigned, conveyed or delivered to Cinram: (i) the assets listed on Schedule
2.2; (ii) except as expressly provided in Section 8.5(d), Quixote's and DMI's
rights to any assets set aside in trust with respect to any ERISA Benefit Plan
and identified as such on Schedule 2.2; and (iii) Quixote's and DMI's rights
with respect to any ERISA Benefit Plan and Non-ERISA Commitment, other than any
Non-ERISA Commitment which constitutes an Assumed Contract (hereinafter referred
to as the "Excluded Assets").
2.3. ASSUMED LIABILITIES. On the Closing Date, Cinram shall deliver to
Quixote and DMI an instrument of assumption, pursuant to which Cinram shall
assume and agree to discharge the following obligations and liabilities of the
Business in accordance with the respective terms thereof, subject, in each case,
to all of the respective conditions thereof:
(a) accounts payable and other current liabilities of the Business on
the Closing Date arising and continuing in the ordinary course of business;
(b) all liabilities and obligations of the Business under the Assumed
Contracts after the Closing Date;
(c) all liabilities in respect of Taxes for which Cinram shall become
liable pursuant to Section 8.3; and
(d) unless constituting an Excluded Liability, all liabilities and
obligations of whatever kind or description of the type required to be
reflected on the Certified Valuation Date Statement based upon events,
conditions or circumstances related to, associated with or arising out of
the conduct of the Business and occurring after September 30, 1996, but only
if such liability or obligation (i) shall have been incurred in the ordinary
course of business consistent with past practice and in compliance with this
Agreement or (ii) shall not be material in amount; PROVIDED, HOWEVER, that
nothing in this Section 2.3(d) shall be deemed to modify or limit (iii) any
representation or warranty contained in Article V or any covenant or
obligation of Quixote or DMI contained in this Agreement or any Sellers'
Ancillary Agreement or (iv) the obligation of Quixote and DMI to indemnify
each Cinram Group Member as provided in Article XI.
The foregoing liabilities and obligations to be assumed by Cinram (excluding
all Excluded Liabilities) are referred to herein as the "Assumed Liabilities."
2.4. EXCLUDED LIABILITIES. Neither Parent nor Cinram shall assume or be
obligated to pay, perform or otherwise discharge any liability or obligation of
DMI, Quixote or the Business, direct or indirect, known or unknown, absolute or
contingent, not expressly assumed by Cinram pursuant to the instrument of
assumption delivered pursuant to Section 2.3 (all such unassumed liabilities and
obligations being herein referred to as the "Excluded Liabilities"). Anything in
Section 2.3 to the contrary notwithstanding, each of the following shall
constitute Excluded Liabilities for all purposes of this Agreement:
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(a) all liabilities in respect of Taxes for which Quixote and DMI are
liable pursuant to Section 8.3;
(b) except as set forth on the Certified Valuation Date Statement, all
intercompany payables and other liabilities or obligations of the Business
to Quixote or any of its Affiliates;
(c) except as otherwise expressly provided in this Agreement, all costs
and expenses incurred by Quixote and DMI incident to their negotiation and
preparation of this Agreement and their performance of and compliance with
the terms, conditions and agreements contained herein;
(d) all liabilities and obligations in respect of the Excluded Assets
(other than ordinary and necessary expenses related to the Business which
are incurred after the date hereof and prior to the Closing Date in
conformity with this Agreement and which become payable after the Closing
Date);
(e) all accrued liabilities of whatever kind or description required to
be reflected on the Certified Valuation Date Statement in accordance with
Agreed Accounting Principles which were not reflected thereon as a dollar
amount;
(f) all liabilities and obligations related to, associated with or
arising out of (i) the occupancy, operation, use or control of the Owned
Real Property or any of the Facilities on or prior to the Closing Date or
(ii) the operation of the Business on or prior to the Closing Date, in each
case incurred or imposed by any Environmental Law (including, without
limitation, any Release of any Contaminant on, at or from (A) the Owned Real
Property or the Facilities, including, without limitation, all facilities,
improvements, structures and equipment thereon, surface water thereon or
adjacent thereto and soil or groundwater thereunder, or any conditions
whatsoever on, under or in the vicinity of such real property, or (B) any
real property or facility owned by a third Person to which Contaminants
generated by the Business were sent prior to the Closing Date;
(g) except as otherwise expressly provided in this Agreement, any
liability or obligation of Quixote or DMI based upon or arising under this
Agreement;
(h) except as set forth on Schedule 2.4(h), all long-term liabilities
and obligations of DMI, Quixote and the Business;
(i) except as otherwise indicated on Schedule 5.22, all liabilities in
respect of claims, litigation and proceedings (i) based upon events,
conditions or circumstances occurring or existing on or prior to September
30, 1996 or (ii) described on Schedule 5.22, including, without limitation,
the legal proceedings related to the following cases: QUIXOTE CORPORATION V.
LASERVIDEO ACQUISITION CORPORATION; THOMSON S. A. V. TIME WARNER, ET AL.;
DISC MANUFACTURING, INC. V. PIONEER AND DISCOVISION; AND DISCOVISION
ASSOCIATES V. DISC MANUFACTURING, INC.;
(j) any product liability or claims for injury to person or property,
regardless of when made or asserted, relating to products manufactured,
distributed or sold by the Business or services performed by the Business on
or prior to September 30, 1996;
(k) any recalls on or after September 30, 1996 mandated by any
Governmental Body of the products manufactured, distributed or sold by the
Business on or prior to September 30, 1996;
(l) any obligation to provide parts and service on, or to repair or
replace, any disc products manufactured, distributed or sold by the Business
on or prior to September 30, 1996, except to the extent of the reserves
provided therefor on the Certified Valuation Date Statement; and
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(m) anything in the preceding clauses of this Section 2.4 to the
contrary notwithstanding, all liabilities and obligations in connection
with, or in any way related to, the current or former officers, directors,
employees and consultants of Quixote, DMI or their Affiliates or the
Business arising in connection with, or in any way related to, their
employment or termination of employment at any time, including, but not
limited to, all liabilities and obligations (including Taxes) arising under,
or otherwise in connection with or in any way related to, any "employee
benefit plan," as defined in Section 3(3) of ERISA, or any plan, policy,
trust, understanding, arrangement or agreement of any kind described in
clause (A) or (B) of the first sentence of Section 5.18(b) (irrespective of
the second sentence thereof); PROVIDED, HOWEVER, that any liability or
obligation to make any vacation or sick pay payments after the Closing to
the Transferred Employees pursuant to any vacation or sick pay plan
disclosed pursuant to Section 5.18, and any liability to make payments after
the Closing of wages, salary or commissions to the Transferred Employees at
the rates indicated on Schedule 5.18(i), shall not constitute an Excluded
Liability to the extent such payments are not made prior to the Closing and
are either reserved for on the Certified Valuation Date Statement or
properly accrue after September 30, 1996 and prior to the Closing Date, and
shall not be paid prior to the Closing.
Any of the foregoing Excluded Liabilities which are nonetheless reserved for
on the Certified Valuation Date Statement (except as described in clause (m) of
the preceding sentence) shall not constitute Excluded Liabilities to the extent
of such reserve.
ARTICLE III
PURCHASE PRICE
3.1. PURCHASE PRICE. The price (the "Purchase Price") for the Business and
the Purchased Assets shall be as set forth on the Certified Valuation Date
Statement, as adjusted pursuant to Section 3.3.
3.2. ALLOCATION OF PURCHASE PRICE. At least 15 days prior to the Closing
Date, Cinram and Quixote shall mutually agree on a schedule (the "Allocation
Schedule") allocating the Purchase Price (including, for the purposes of this
Section 3.2, any other consideration paid to Quixote or DMI, including the
Assumed Liabilities) among the Purchased Assets. The Allocation Schedule shall
be prepared in accordance with Section 1060 and, if applicable, Section 338 of
the Code and the regulations promulgated thereunder. Cinram and Quixote shall
each execute the Allocation Schedule. Cinram, Quixote and DMI each agree to file
Internal Revenue Service Form 8594, and all federal, state, local and foreign
Tax Returns, in accordance with the Allocation Schedule. Cinram, Quixote and DMI
each agree to provide the others promptly with any other information required to
complete Form 8594.
3.3. DETERMINATION OF PURCHASE PRICE. (a) As promptly as practicable (but
not later than December 15, 1996), Quixote shall deliver to Parent the Valuation
Date Statement, as audited and certified in accordance with Agreed Accounting
Principles by Coopers & ▇▇▇▇▇▇▇ (the "Certified Valuation Date Statement").
(b) Promptly following receipt of the Certified Valuation Date Statement,
Parent and KPMG may review the same and, within three business days after the
date of such receipt, Parent or KPMG may request such documents and information
as they may reasonably require to complete their review of the Certified
Valuation Date Statement. Within five business days after the receipt of such
documents and information, Parent or KPMG may deliver to Quixote a certificate
setting forth its objections to the Certified Valuation Date Statement, together
with a summary of the reasons therefor and the calculations which, in its
opinion, are necessary to eliminate such objections. In the event Parent or KPMG
does not so object within such five
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business day period, the Certified Valuation Date Statement shall be final and
binding for all purposes of this Agreement.
(c) In the event Parent or KPMG shall so object within such five business
day period, Parent and Quixote shall use their reasonable best efforts to
resolve by written agreement any objections to the Certified Valuation Date
Statement; and in the event that Parent and Quixote shall so resolve any such
objections, the Certified Valuation Date Statement, as adjusted by such written
agreement, shall be final and binding as the Certified Valuation Date Statement
for all purposes of this Agreement.
(d) In the event any objections raised by Parent or KPMG shall not be
resolved within the 10-day period next following such five business day period,
then Parent and Quixote shall submit the objections that are then unresolved to
the Chicago Office of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, and such firm shall be directed by
Parent and Quixote to resolve the unresolved objections (based solely on the
presentations by Parent, KPMG, Quixote and Coopers & ▇▇▇▇▇▇▇ as to whether any
disputed matter had been determined in a manner consistent with Agreed
Accounting Principles and Schedule 3.1) as promptly as possible and to deliver
written notice to each of Parent and Quixote setting forth its resolution of the
disputed matters. The Certified Valuation Date Statement, after giving effect to
the resolution of disputed matters by Parent and Quixote and by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP, shall be final and binding as the Certified Valuation Date Statement for
all purposes of this Agreement.
(e) The parties hereto shall make available to Cinram, KPMG, Quixote and
Coopers & ▇▇▇▇▇▇▇ and, if applicable, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP such books, records
and other information (including work papers) as any of the foregoing may
reasonably request to prepare or review the Certified Valuation Date Statement
or any matters submitted to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP. The fees and expenses of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP hereunder shall be paid 50% by Cinram and 50% by Quixote.
3.4. OPTION TO TERMINATE. If the Purchase Price (as determined in
accordance with this Article III) shall differ from $79,670,996 by more than
$3,000,000, Parent (if the Purchase Price shall exceed $82,670,996) or Quixote
(if the Purchase Price shall be less than $76,670,996) shall have the option to
terminate this Agreement in the manner and with the effect provided in Article
XII.
ARTICLE IV
CLOSING
4.1. CLOSING DATE. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Sidley & Austin,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ at 10:00 a.m., local time on (i)
February 28, 1997 or (ii) such other date as may be agreed upon by Parent and
Quixote after the conditions set forth in Articles IX and X have been satisfied.
The time and date on which the Closing is actually held are sometimes referred
to herein as the "Closing Date."
4.2. PAYMENT ON THE CLOSING DATE. Subject to the fulfillment or waiver of
the conditions set forth in Article IX, at the Closing Cinram shall pay DMI an
amount equal to the Purchase Price by wire transfer of immediately available
funds payable in United States dollars to the account in the United States
specified by Quixote in writing to Parent at least two business days prior to
the Closing Date.
4.3. DELIVERIES OF PARENT AND/OR CINRAM. Subject to the fulfillment or
waiver of the conditions set forth in Article IX, at the Closing Parent and
Cinram shall deliver to Quixote the following:
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(a) a copy of the Articles of Incorporation of Parent, certified as of
a recent date by the Department of Consumer and Corporate Affairs of Canada,
and a copy of the Certificate of Incorporation of Cinram, certified as of a
recent date by the Secretary of State of the State of Delaware;
(b) a Certificate of Compliance of Parent and a Certificate of Good
Standing (long form) of Cinram issued as of a recent date by the Department
of Consumer and Corporate Affairs of Canada and the Secretary of State of
the State of Delaware, respectively;
(c) a Certificate, dated the Closing Date, of the Secretary or an
Assistant Secretary of Parent and Cinram, respectively, in form and
substance reasonably acceptable to Quixote, as to: (i) no amendments to the
Articles of Incorporation of Parent or the Certificate of Incorporation of
Cinram, as the case may be, since the date of the above certification; (ii)
the By-laws of Parent or Cinram, as the case may be; (iii) the resolutions
of the Board of Directors of Parent or Cinram, as the case may be,
authorizing the execution and performance of this Agreement and the
consummation of the transactions contemplated hereby; and (iv) the
incumbency and signatures of the officers of Parent or Cinram, as the case
may be, executing this Agreement or any Cinram Ancillary Agreement;
(d) an instrument of assumption, in form and substance reasonably
acceptable to Quixote, duly executed by Cinram assuming the Assumed
Liabilities;
(e) a sublease, in recordable form, between Cinram and DMI covering the
Huntsville Owned Real Property and containing the terms and conditions set
forth on Schedule 4.3(e), including a right of first offer granted by DMI to
Cinram, covering the Huntsville Owned Real Property (the "Huntsville
Facility Sublease") duly executed by Cinram;
(f) a consulting agreement between Cinram and Quixote with respect to
▇▇▇▇▇ ▇. ▇▇▇▇▇ containing the terms and conditions set forth on Schedule
4.3(f) (the "Consulting Agreement") duly executed by Cinram;
(g) an Opinion, dated the Closing Date, of Sidley & Austin, United
States counsel to Parent and Cinram, in form and substance reasonably
acceptable to Quixote;
(h) an Opinion, dated the Closing Date, of Fogler, Rubinoff, Canadian
counsel to Parent and Cinram, in form and substance reasonably acceptable to
Quixote;
(i) the Certificate, dated the Closing Date, required by Section 10.1
duly executed by the President or any Vice President of Parent and Cinram,
respectively; and
(j) any other document that Quixote may reasonably request to
consummate the transactions contemplated by this Agreement.
4.4. DELIVERIES OF QUIXOTE AND/OR DMI. Subject to the fulfillment or
waiver of the conditions set forth in Article X, at the Closing Quixote and DMI
shall deliver to Cinram the following:
(a) a copy of the Certificate of Incorporation of Quixote and DMI,
respectively, certified as of a recent date by the Secretary of State of the
State of Delaware;
(b) a Certificate of Good Standing (long form) of DMI issued as of a
recent date by the Secretary of State of the States of Delaware, California
and Alabama and a Certificate of Good Standing (long form) of Quixote issued
as of a recent date by the Secretary of State of the State of Delaware;
(c) a Certificate, dated the Closing Date, of the Secretary or an
Assistant Secretary of Quixote and DMI, respectively, in form and substance
reasonably acceptable to Cinram, as to: (i) no amendments to the Certificate
of Incorporation of Quixote or DMI, as the case may be, since the date of
the above certification; (ii) the By-laws of Quixote or DMI, as the
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case may be; (iii) the resolutions of the Board of Directors of Quixote or
DMI, as the case may be, and of the stockholders of Quixote authorizing the
execution and performance of this Agreement and the consummation of the
transactions contemplated hereby; and (iv) the incumbency and signatures of
the officers of Quixote or DMI, as the case may be, executing this Agreement
or any Sellers' Ancillary Agreement;
(d) a grant deed, in recordable form, subject only to Permitted
Encumbrances, with respect to each parcel of Owned Real Property (other than
the Huntsville Owned Real Property) duly executed by DMI and in form and
substance reasonably acceptable to Cinram;
(e) an assignment, which, if the lease was recordable, shall be in
recordable form (except as indicated on Schedule 5.11), with respect to each
lease of real estate described on such Schedule duly executed by DMI and in
form and substance reasonably acceptable to Cinram;
(f) such other bills of sale, assignments, deeds and other instruments
of transfer or conveyance duly executed by Quixote or DMI, as appropriate,
as Cinram may reasonably request or as may be otherwise necessary to
evidence and effect the sale, assignment, transfer, conveyance and delivery
of the Purchased Assets and the Business to Cinram;
(g) the Huntsville Facility Sublease duly executed by DMI;
(h) the Consulting Agreement duly executed by Quixote;
(i) Certificates of Title or Origin (or similar documents) with respect
to any vehicles or other equipment included in the Purchased Assets for
which such a document is required in order to transfer title;
(j) all consents, waivers or approvals required to be obtained by
Quixote and/or DMI with respect to the sale, assignment, transfer and
conveyance of the Purchased Assets and the Business or the consummation of
the transactions contemplated by this Agreement;
(k) stock certificates or other appropriate evidence representing in
the aggregate all of the outstanding equity interests of Quixote and DMI in
the Subsidiaries and, if applicable, the subsidiary described in the last
paragraph of Section 2.1, together with, in each case, duly executed and
witnessed stock powers (in blank) attached thereto;
(l) an Opinion, dated the Closing Date, of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇,
counsel to Quixote and DMI, in form and substance reasonably acceptable to
Parent;
(m) the Certificates, dated the Closing Date, required by Sections 9.1
and 9.2 duly executed by the President or any Vice President of Quixote and
DMI, respectively;
(n) evidence of compliance with Section 9.9 reasonably satisfactory to
Cinram; and
(o) any other document that Parent may reasonably request to consummate
the transactions contemplated by this Agreement.
In addition to the above deliveries, Quixote and DMI shall take all steps
and actions as Cinram may reasonably request or as may otherwise be necessary to
put Cinram in actual possession or control of the Purchased Assets.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF QUIXOTE AND DMI
As an inducement to Parent and Cinram to enter into this Agreement and to
consummate the transactions contemplated hereby, Quixote and DMI represent and
warrant, jointly and severally, to Parent and Cinram and agree as follows:
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5.1. ORGANIZATION OF QUIXOTE AND DMI. Quixote is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; and DMI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. DMI is duly qualified to
transact business as a foreign corporation and is in good standing in each of
the jurisdictions listed on Schedule 5.1, which are the only jurisdictions in
which the ownership or leasing of the Purchased Assets or the conduct of the
Business requires such qualification. No other jurisdiction has demanded,
requested or otherwise indicated that DMI is required to so qualify on account
of the ownership or leasing of the Purchased Assets or the conduct of the
Business. DMI has full power and authority to own or lease and to operate and
use the Purchased Assets and to carry on the Business as now conducted.
True and complete copies of the Certificate of Incorporation, as amended to
date, and of the By-laws, as amended to date, of Quixote and DMI have been
delivered to Parent.
5.2. SUBSIDIARIES AND INVESTMENTS. (a) Except as set forth on Schedule
5.2, neither Quixote nor DMI, directly or indirectly: (i) owns, of record or
beneficially, any outstanding voting securities or other equity interests in any
corporation, partnership, joint venture or other Person which constitutes or
relates to any part of the Business or (ii) controls any corporation,
partnership, joint venture or other Person which is involved in or relates to
the Business.
(b) Schedule 5.2 sets forth the authorized capital stock of Prospectus Plus,
Inc., Emerald Multimedia, Inc., DMI do Brasil Ltd. and Myriad Entertainment,
Inc. (the "Subsidiaries") and indicates the number of issued and outstanding
shares of capital stock, the number of issued shares of capital stock held as
treasury shares and the number of shares of capital stock reserved for any
purpose of each Subsidiary. Except as set forth on Schedule 5.2 and except for
this Agreement, there are no agreements, arrangements, options, warrants, calls,
rights or commitments of any character relating to the issuance, sale, purchase
or redemption of any shares of capital stock of any of the Subsidiaries. All of
the outstanding shares of capital stock of each of the Subsidiaries are validly
issued, fully paid and nonassessable. All of the outstanding shares of capital
stock of each of the Subsidiaries are owned by Quixote or DMI, of record and
beneficially, free from all Encumbrances.
5.3. AUTHORITY. The Board of Directors of Quixote has declared as
advisable and fair to and in the best interests of the stockholders of Quixote
the transactions contemplated by this Agreement and has approved this Agreement.
The Board of Directors of DMI has approved this Agreement. Quixote has full
power and authority to enter into, execute and deliver this Agreement and the
Sellers' Ancillary Agreements to which it will be a party and (subject to
approval by at least 60% of the votes entitled to be cast at the Quixote
Stockholder Meeting by the holders of the outstanding shares of Quixote capital
stock) to consummate the transactions contemplated hereby. DMI has full power
and authority to enter into, execute and deliver this Agreement and the Sellers'
Ancillary Agreements to which it will be a party and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the Sellers' Ancillary Agreements by Quixote and DMI and the consummation by
Quixote and DMI of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Quixote and DMI,
subject to approval by at least 60% of the votes entitled to be cast at the
Quixote Stockholder Meeting as aforesaid. This Agreement has been, and each of
the Sellers' Ancillary Agreements to be delivered by Quixote and DMI at the
Closing will be, duly executed and delivered by Quixote and/or DMI, as the case
may be, and (assuming the due authorization, execution and delivery of this
Agreement by Parent and Cinram and of the Cinram Ancillary Agreements by Cinram
and the validity and binding effect hereof and thereof on Parent and/or Cinram,
as the case may be) is, or upon execution and delivery by Quixote and/or DMI, as
the case may be, will be, the valid and binding obligation of Quixote and/or
DMI, as the case may be, enforceable against Quixote and/or DMI, as the case may
be, in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws affecting the enforcement of creditors'
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rights and remedies generally or general principles of equity (regardless of
whether considered and applied in a proceeding at law or in equity).
Except as set forth on Schedule 5.3, neither the execution and delivery of
this Agreement or any of the Sellers' Ancillary Agreements or the consummation
of any of the transactions contemplated hereby or thereby, nor compliance with
or fulfillment of the terms, conditions and provisions hereof or thereof, will:
(i) result in a breach of the terms, conditions or provisions of, or
constitute a default, an event of default or an event creating rights of
acceleration, termination or cancellation or a loss of rights under, or
result in the creation or imposition of any Encumbrance upon any of the
Purchased Assets or the Business under: (A) the charter, by-laws or similar
organizational documents of Quixote, DMI or any of their Affiliates; (B) any
note, instrument, agreement, mortgage, lease, license, franchise, permit or
other authorization, right, restriction or obligation to which Quixote, DMI
or any of their Affiliates is a party or any of the Purchased Assets or the
Business is subject or by which Quixote, DMI or any of their Affiliates is
bound; (C) any Court Order to which Quixote, DMI or any of their Affiliates
is a party or any of the Purchased Assets or the Business is subject or by
which Quixote, DMI or any of their Affiliates is bound; or (D) any
Requirements of Laws affecting Quixote, DMI or any of their Affiliates or
the Purchased Assets or the Business; or
(ii) require the approval, consent, authorization or act of, or the
making by Quixote, DMI or any of their Affiliates of any declaration, filing
or registration with, any Person, except as provided under the HSR Act.
5.4. FINANCIAL STATEMENTS. (a) Schedule 5.4 contains the audited
consolidated balance sheet and the related audited consolidated statements of
operations, stockholders' equity and cash flows of Quixote as at and for the
fiscal years ended June 30, 1996, 1995 and 1994.
(b) Not later than December 11, 1996, Quixote shall deliver to Parent: (i)
the audited consolidated balance sheets of DMI as at June 30, 1996 and 1995;
(ii) the related audited consolidated statements of operations, stockholders'
equity and cash flows of DMI for the fiscal years ended June 30, 1996, 1995 and
1994; (iii) the audited consolidated balance sheet of DMI as at September 30,
1996; and (iv) the unaudited consolidated balance sheets and the related
unaudited consolidated statements of operations, stockholders' equity and cash
flows of DMI as at and for the three months ended September 30, 1996 and 1995.
All of the foregoing shall include a reconciliation of the material variations
between Agreed Accounting Principles as applied in Canada and Agreed Accounting
Principles as applied in the United States. Upon reasonable request, the parties
hereto shall have the opportunity to review such financial statements. In
addition, Quixote shall cause Coopers & ▇▇▇▇▇▇▇ to deliver, promptly upon
written request, such "comfort" and consent letters as Parent may reasonably
request to consummate its current financing arrangements and such further
cooperation as may reasonably be requested by Parent. The fees and expenses
associated with the preparation of the foregoing shall be allocated in an
equitable manner between Parent and Quixote.
(c) The Valuation Date Statement presents fairly in all material respects
the information set forth therein in accordance with Agreed Accounting
Principles (except to the extent required to be modified by the footnotes
contained on Schedule 3.1 or the definition of "Valuation Date Statement.").
5.5. OPERATIONS SINCE SEPTEMBER 30, 1996. (a) Except as set forth on
Schedule 5.5(a), since September 30, 1996, there has been:
(i) no material adverse change in the Purchased Assets or the
operations, liabilities, profits, prospects or condition (financial or
otherwise) of the Business, and no fact or condition occurring or existing
or currently contemplated or threatened which might reasonably be expected
to cause such a change in the future; or
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(ii) no damage, destruction, loss or claim, whether or not covered by
insurance, or condemnation or other taking adversely affecting any of the
Purchased Assets or the Business.
(b) Except as set forth on Schedule 5.5(b), since September 30, 1996,
Quixote and DMI have conducted the Business only in the ordinary course and in
conformity with past practice. Without limiting the generality of the foregoing,
since September 30, 1996, except as set forth on Schedule 5.5(b), neither DMI,
or Quixote with respect of the Business, has:
(i) sold, leased (as lessor), transferred or otherwise disposed of
(including any transfer from the Business to Quixote or any of its
Affiliates), or mortgaged, pledged, imposed or suffered to be imposed any
Encumbrance (other than Permitted Encumbrances) on, any of the assets
required to be reflected on the Valuation Date Statement or any assets
acquired for the Business after September 30, 1996, except for inventory and
other insignificant items of personal property sold or otherwise disposed of
for fair value in the ordinary course of business consistent with past
practice;
(ii) cancelled any debts owed to or claims for the benefit of the
Business (including the settlement of any claims or litigation) other than
in the ordinary course of business consistent with past practice;
(iii) created, incurred or assumed, or agreed to create, incur or
assume, any indebtedness for borrowed money in respect of the Business, or
entered into, as lessee, any capitalized lease obligation (as defined in
Statement of Financial Accounting Standards No. 13);
(iv) accelerated or delayed collection of any note or account receivable
generated by the Business in advance of or beyond its regular due date or
the date when the same would have been collected in the ordinary course of
business consistent with past practice;
(v) delayed or accelerated payment of any account payable or other
liability of the Business beyond or in advance of its due date or the date
when the same would have been paid in the ordinary course of business
consistent with past practice;
(vi) allowed the levels of raw materials, supplies, work-in-process or
other materials included in the inventory of the Business to vary in any
material respect from the levels customarily maintained in the Business;
(vii) made, or agreed to make, any payment of cash or distribution of
assets to Quixote or any of its Affiliates, whether pursuant to any
management fee or services agreement or similar arrangement; PROVIDED,
HOWEVER, Quixote shall be entitled to receive cash from the Business, on a
monthly basis, in an amount equal to the interest which would have been
earned on the Purchase Price (determined as provided in Article III) for the
period commencing October 1, 1996 and ending on March 31, 1997 as if the
amount of such Purchase Price had been deposited on October 1, 1996 in an
account bearing interest at the rate of 5% per annum; PROVIDED FURTHER that
if the Closing shall occur prior to March 31, 1997, Quixote shall be
entitled to receive from the Business, on the Closing Date, cash in an
amount equal to the difference between the amount received as aforesaid and
the amount it would have received if the Closing had occurred on March 31,
1997; and PROVIDED FURTHER that DMI shall be entitled to make Permissible
Payments;
(viii) except as set forth on Schedule 5.18(i), instituted any increase
in any compensation payable to any employee of DMI, or Quixote with respect
to the Business, or instituted any change or increase in any, "employee
benefit plan," as such term is defined in Section 3(3) of ERISA, or any
plan, policy, trust, understanding, arrangement or agreement of any kind
described in clause (A) or (B) of the first sentence of Section 5.18(b)
(irrespective of the second sentence thereof), or any compensation plan,
with respect to any such employee,
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or incurred or accrued any cost, expense or liability with respect to any
agreement, understanding or arrangement of any kind described in clause (B)
of the first sentence of Section 5.18(b) (irrespective of the second
sentence thereof);
(ix) made any change in the accounting principles and practices used by
Quixote and DMI from Agreed Accounting Principles;
(x) (A) declared, set aside or paid any dividends on, or made any other
actual, constructive or deemed distributions in respect of, any of the
capital stock of DMI, or otherwise made any payments to the stockholders of
DMI in their capacity as such; (B) split, combined or reclassified any of
the capital stock of DMI or issued or authorized the issuance of any other
securities in respect of, in lieu of or in substitution for any shares of
the capital stock of DMI; or (C) purchased, redeemed or otherwise acquired
any shares of the capital stock of DMI or those of any Subsidiary or any
other securities of DMI or any Subsidiary or any rights, warrants or options
to acquire any such shares or other securities; or
(xi) entered into any agreement, commitment or arrangement in connection
with or affecting the Business with any current or newly hired employee of
DMI, or Quixote with respect to the Business.
5.6. NO UNDISCLOSED LIABILITIES. Except as set forth on Schedule 5.6,
neither DMI, nor Quixote with respect to the Business, are subject to any
liability (including, without limitation, unasserted claims, whether known or
unknown), whether absolute, contingent, accrued or otherwise, which is not shown
or which is in excess of the amount shown or reserved for on the Valuation Date
Statement, other than liabilities of the same nature as those set forth on the
Valuation Date Statement and the notes thereto reasonably incurred in the
ordinary course of the Business after September 30, 1996.
5.7. TAXES. Except as set forth on Schedule 5.7: (i) Quixote and DMI have
filed and will continue to file through the Closing Date, in respect of the
Business and the Purchased Assets, all Tax Returns which are required to be
filed and have paid and will pay all Taxes which have become due pursuant to
such Tax Returns or pursuant to any assessment which has become payable; (ii)
all such Tax Returns are and will be complete and accurate and disclose all
Taxes required to be paid in respect of the Business and the Purchased Assets;
(iii) all such Tax Returns which have been filed on or prior to the date hereof
have been examined by the relevant taxing authority or the period for assessment
of the Taxes in respect of which such Tax Returns were required to be filed has
expired; (iv) there is no action, suit, investigation, audit, claim or
assessment pending or proposed or threatened with respect to Taxes relating to
the Business or the Purchased Assets, and, to the best of Quixote's and DMI's
knowledge, no basis exists therefor; (v) neither Quixote nor DMI has waived or
been requested to waive any statute of limitations in respect of Taxes
associated with the Business or the Purchased Assets; (vi) all monies required
to be withheld by Quixote or DMI (including from employees of the Business for
income Taxes and social security and other payroll Taxes) have been collected or
withheld, and either paid to the respective taxing authorities, set aside in
accounts for such purpose or accrued, reserved against and entered upon the
books of DMI and Quixote relating to the Business; (vii) none of the Purchased
Assets is properly treated as owned by persons other than DMI or Quixote for
income Tax purposes pursuant to Section 168(f)(8) of the Code (as in effect
prior to its amendment by the Tax Reform Act of 1986) or otherwise; and (viii)
none of the Purchased Assets is "tax-exempt use property" (within the meaning of
Section 168(h) of the Code) or subject to a so-called "TRAC lease" under Section
7701(h) of the Code (or any predecessor provision). No payment or other benefit,
and no acceleration of the vesting of any options, payments or other benefits,
will be, as a direct or indirect result of the transactions contemplated by this
Agreement, an "excess parachute payment" to a "disqualified individual," as such
terms are defined in Section 280G of the Code and the Treasury Regulations
promulgated thereunder. Except as set forth on Schedule 5.7, no payment or other
benefit, and no
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acceleration of the vesting of any options, payments or other benefits, will be
(or under Section 280G of the Code and the Treasury Regulations promulgated
thereunder be presumed to be), as a direct or indirect result of the
transactions contemplated by this Agreement, a "parachute payment" to a
"disqualified individual," as such terms are defined in Section 280G of the Code
and the Treasury Regulations promulgated thereunder, without regard to whether
such payment or acceleration is reasonable compensation for personal services
performed or to be performed in the future. No transaction contemplated by this
Agreement is subject to withholding under Section 1445 of the Code, and, except
as set forth on Schedule 5.7, no sales Taxes, use Taxes, real estate transfer
Taxes or other similar Taxes will be imposed on the transfer of the Purchased
Assets or the Business or the assumption of the Assumed Liabilities pursuant to
this Agreement. Quixote or DMI, as the case may be, is properly treated as the
owner, for all federal, state, local and foreign income Tax purposes, of all
property of which it is the lessor.
5.8. AVAILABILITY OF ASSETS. (a) Except as set forth on Schedule 5.8 and
for the Excluded Assets, the Purchased Assets constitute all the assets used in,
dedicated to or necessary for the Business (including, but not limited to, all
books, records, computers and computer programs and data processing systems) and
are in good condition (subject to normal wear and tear) and serviceable
condition and are suitable for the uses for which intended as the Business is
currently conducted.
(b) Schedule 5.8 sets forth a description of all material services provided
by Quixote, DMI or any Affiliate thereof with respect to the Business utilizing
either (i) assets not included in the Purchased Assets or (ii) employees not
listed on Schedule 5.18(i) (other than employees not listed by reason of clause
(i) of Section 5.18(i)) and the manner in which the costs of providing such
services have been allocated to the Business.
5.9. GOVERNMENTAL PERMITS. Quixote and DMI own, hold or possess all
licenses, franchises, permits, privileges, immunities, approvals and other
authorizations from a Governmental Body which are necessary to entitle them to
own or lease, operate and use the Purchased Assets and to carry on and conduct
the Business substantially as currently conducted (herein collectively referred
to as "Governmental Permits"), except for such Governmental Permits as to which
the failure to so own, hold or possess would not have a material adverse effect
on the Purchased Assets or the operations, liabilities, profits, prospects or
condition (financial or otherwise) of the Business. Within 10 days after the
execution of this Agreement, Quixote shall deliver to Parent a list and brief
description of each Governmental Permit, except for such incidental licenses,
permits and other authorizations which would be readily obtainable by any
qualified applicant without undue burden in the event of any lapse, termination,
cancellation or forfeiture thereof. Complete and correct copies of all of the
Governmental Permits will be delivered to Parent by Quixote or DMI at such time.
Except as set forth on Schedule 5.9: (i) Quixote and DMI have fulfilled and
performed their respective obligations under each of the Governmental Permits,
and no event has occurred and no condition or state of facts exists which
constitutes or, after notice or lapse of time or both, would constitute a breach
or default under any Governmental Permit or which permits or, after notice or
lapse of time or both, would permit revocation or termination of any
Governmental Permit, or which might adversely affect the rights of Quixote or
DMI under any Governmental Permit; (ii) no notice of cancellation, default or
dispute concerning any Governmental Permit, or of any event, condition or state
of facts described in the preceding clause, has been received by, or is known
to, Quixote or DMI; and (iii) each of the Governmental Permits is valid,
subsisting and in full force and effect and may be assigned and transferred to
Cinram in accordance with this Agreement and will continue in full force and
effect thereafter, in each case without (A) the occurrence of any breach,
default or forfeiture of rights thereunder or (B) the consent, approval or act
of, or the making of any filing with, any Governmental Body.
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5.10. OWNED REAL PROPERTY. Schedule 5.10 contains a brief description of
(i) each parcel of real property owned by DMI or Quixote and used in, dedicated
to or necessary for the Business (the "Owned Real Property"), showing the record
title holder, legal description, permanent index number, location, improvements,
the uses being made thereof and any indebtedness secured by a mortgage or other
Encumbrance thereon, and (ii) each option held by DMI or Quixote to acquire any
real property for use in the Business. Complete and correct copies of any title
opinions and surveys in DMI's or Quixote's possession or any policies of title
insurance currently in force and in the possession of DMI or Quixote with
respect to each such parcel have heretofore been delivered by Quixote to Parent.
DMI and Quixote have fulfilled and performed in all material respects all
obligations binding upon any Purchased Asset under each of the Encumbrances to
which such Purchased Asset is subject, and neither Quixote or DMI nor any
Purchased Asset is in breach or default under, in violation of or in
noncompliance with any of such Encumbrances, and no event has occurred and no
condition or state of facts exists which constitutes or, after notice or lapse
of time or both, would constitute such a breach, default, violation or
noncompliance. The consummation of the transactions contemplated by this
Agreement will not result in any breach or violation of, default under or
noncompliance with, or any forfeiture or impairment of any rights under, any
Encumbrance to which any Purchased Asset is subject, or require any consent,
approval or act of, or the making of any filing with, any Person. All public
utilities, including water, sewer, gas, electric, telephone and drainage
facilities, give adequate service to the Owned Real Property to support current
use and operations, and the Owned Real Property has direct access to and from
publicly dedicated streets.
5.11. REAL PROPERTY LEASES. Schedule 5.11 sets forth a list and brief
description of each lease or similar agreement (showing the parties thereto,
annual rental, expiration date, renewal and purchase options, if any, the
improvements thereon, the uses being made thereof and the location and
description of the real property covered by such lease or other agreement) under
which (i) DMI or Quixote is lessee of, or holds or operates, any real property
owned by any third Person and used in, dedicated to or necessary for the
Business or (ii) DMI, or Quixote with respect to the Business, is lessor of any
of the Owned Real Property. Except as set forth on Schedule 5.11, DMI or Quixote
has the right to quiet enjoyment of all the real property described on such
Schedule for the full term of each such lease or similar agreement (and any
renewal option related thereto) and the leasehold or other interest of DMI or
Quixote in such real property is not subject or subordinate to any Encumbrance
(other than Permitted Encumbrances). Complete and correct copies of any title
opinions, surveys and appraisals in Quixote's or DMI's possession or any
policies of title insurance currently in force and in the possession of Quixote
or DMI with respect to each such parcel of leased property have heretofore been
delivered by DMI to Parent.
5.12. CONDEMNATION. Neither the whole nor any part of the Owned Real
Property or any real property leased, used or occupied by DMI, or Quixote with
respect to the Business, is subject to any pending suit for condemnation or
other taking by any Governmental Body, and, to the best knowledge of Quixote and
DMI, no such condemnation or other taking is threatened or contemplated.
5.13. PERSONAL PROPERTY. Schedule 5.13 contains a detailed list of all
machinery, equipment, vehicles, furniture and other personal property owned by
DMI, or Quixote with respect to the Business, having an original cost of $5,000
or more and used in, dedicated to or necessary for the Business.
5.14. PERSONAL PROPERTY LEASES. Within 10 days after the execution of this
Agreement, Quixote shall deliver to Parent a brief description of each lease or
other agreement or right, whether written or oral (including, in each case, the
annual rental, the expiration date thereof and a brief description of the
property covered), under which DMI or Quixote is lessee of, or holds or
operates, any machinery, equipment, vehicle, furniture or other tangible
personal property owned by a third Person and used in, dedicated to or necessary
for the Business, except
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for any such lease, agreement or right that is terminable by DMI or Quixote
without penalty or payment on notice of 30 days or less, or which involves the
payment by DMI or Quixote of rentals of less than $2,000 per year.
5.15. INTELLECTUAL PROPERTY; SOFTWARE. (a) Schedule 5.15 contains a list
and description (showing or identifying, in each case, the subject covered
thereby, the registered or other owner thereof, the expiration date thereof and
the number, if any) of all Copyrights, Patent Rights and Trademarks (including
all assumed or fictitious names under which DMI and/or Quixote, as the case may
be, is currently conducting the Business or in the past has conducted the
Business) acquired by, owned by or licensed or used by DMI, Quixote or any
predecessor in interest to LaserVideo Acquisition Corporation, as the case may
be, in connection with the conduct of the Business, whether or not currently
valid and in force.
(b) Schedule 5.15 contains a list and title or description, to be updated in
compliance with such Schedule (showing, in each case, any owner, licensor or
licensee), of all Software owned by, licensed to or used by DMI and/or Quixote,
as the case may be, in the conduct of the Business; PROVIDED, HOWEVER, that
Schedule 5.15 need not list Software licensed to DMI and/or Quixote, as the case
may be, that is available in consumer retail stores and subject to "shrink-wrap"
license agreements.
(c) Schedule 5.15 contains a list and description (showing, in each case,
the parties thereto and the material terms thereof) of all agreements,
contracts, licenses, sublicenses, assignments and indemnities which relate to
(i) any Copyrights, Patent Rights or Trademarks listed on Schedule 5.15, (ii)
any Trade Secrets owned by, licensed to or used by DMI or Quixote, as the case
may be, in connection with the conduct of the Business, (iii) any Software
listed on Schedule 5.15 or (iv) any Intellectual Property licensed to DMI or
Quixote, as the case may be, in connection with the conduct of the Business,
including either a specific identification of such Intellectual Property or a
schedule attached to such licenses.
(d) Except as disclosed on Schedule 5.15, either DMI or Quixote: (i) owns
the entire right, title and interest in and to the Intellectual Property and
Software included in the Purchased Assets, free and clear of any Encumbrance; or
(ii) has the perpetual, royalty-free right to use the same, with the right to
assign or transfer such rights to Cinram.
(e) Except as disclosed on Schedule 5.15: (i) all registrations for
Copyrights, Patent Rights and Trademarks identified on Schedule 5.15 as being
owned by DMI or Quixote are valid and in force, and all applications to register
any unregistered Copyrights, Patent Rights or Trademarks so identified are
pending and in good standing, all without challenge of any kind; (ii) the
Intellectual Property owned by DMI, or Quixote with respect to the Business, is,
to the best knowledge of Quixote and DMI, valid and enforceable; and (iii) DMI
or Quixote, as the case may be, has the sole and exclusive right to bring
actions for infringement, misappropriation or unauthorized use of the
Intellectual Property and Software owned by it and included in the Purchased
Assets, and, to the best knowledge of DMI and Quixote, there is no basis for any
such action. Correct and complete copies of each of the following shall be
delivered to Parent (within 60 days after the execution of this Agreement): (i)
the registrations for all registered Copyrights, Patent Rights and Trademarks
listed on Schedule 5.15 as being owned by DMI or Quixote; (ii) all pending
applications to register unregistered Copyrights, Patent Rights and Trademarks
listed on Schedule 5.15 as being owned by DMI or Quixote (together with any
subsequent correspondence or filings relating to the foregoing); (iii) evidence
of valid proof of ownership or possession of all Software loaded on personal
computers and laptop computers used in the Business by its personnel; and (iv)
all expired Patent Rights and abandoned or cancelled Trademarks relating to the
Business.
(f) Except as set forth on Schedule 5.15: (i) no infringement or
misappropriation of any Intellectual Property of any other Person or violation
of a right of privacy of any other Person has occurred or results in any way
from the operations of the Business; (ii) no claim of any
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infringement or misappropriation of any Intellectual Property of any other
Person or violation of a right of privacy of any other Person has been made or
asserted in respect of the operations of the Business; and (iii) neither Quixote
nor DMI has had notice of, or has knowledge of any basis for, a claim against
either or the Business that the operations, activities, products, software,
equipment, machinery or processes of the Business infringe or misappropriate any
Intellectual Property of any other Person or violate a right of privacy of any
other Person.
(g) Except as disclosed on Schedule 5.15: (i) the Software included in the
Purchased Assets is not subject to any transfer, assignment, site, equipment or
other operational limitations; (ii) Quixote and DMI have maintained and
protected the Software included in the Purchased Assets that is owned by either
(the "Owned Software"), including, without limitation, all source code and
system specifications, with appropriate proprietary notices (including, without
limitation, the notice of copyright in accordance with the requirements of 17
U.S.C. Section 401), confidentiality and non-disclosure agreements and such
other measures as are necessary to protect the proprietary, trade secret or
confidential information contained therein; (iii) the Owned Software has been
registered or is eligible for protection and registration under applicable
copyright law and has not been forfeited to the public domain; (iv) Quixote
and/or DMI have copies of all releases or separate versions of the Owned
Software so that the same may be subject to registration in the United States
Copyright Office; (v) DMI or Quixote, as the case may be, has complete and
exclusive right, title and interest in and to the Owned Software; (vi) DMI or
Quixote has developed the Owned Software through their own efforts and for their
own account without the aid or use of any consultants, agents, independent
contractors or Persons (other than individuals who are employees of DMI or
Quixote); (vii) the Owned Software does not infringe or misappropriate any
Intellectual Property of any other Person or violate any right of privacy of any
other Person; (viii) any Owned Software includes the source code, system
documentation, statements of principles of operation and schematics, as well as
any pertinent commentary, explanation, program (including compilers),
workbenches, tools and higher level (or "proprietary") language used for the
development, maintenance, implementation and use thereof, so that a trained
computer programmer could develop, maintain, support, compile and use all
releases or separate versions of the same that are currently subject to
maintenance obligations by DMI or Quixote, as the case may be; (ix) there are no
agreements or arrangements in effect with respect to the marketing,
distribution, licensing or promotion of the Owned Software by any other Person;
(x) the Owned Software complies with all applicable Requirements of Laws
relating to the export or reexport of the same; and (xi) the Owned Software may
be exported or reexported to all countries without the necessity of any license,
other than to those countries specified as prohibited destinations pursuant to
applicable regulations of the United States Department of Commerce and/or the
United States State Department.
(h) Except as disclosed on Schedule 5.15, all employees, agents, consultants
or contractors who have contributed to or participated in the creation or
development of any copyrightable, patentable or trade secret material on behalf
of DMI, or Quixote with respect to the Business, or any predecessor in interest
thereto either: (i) is a party to a "work-for-hire" agreement under which DMI or
Quixote, as the case may be, is deemed to be the original owner/author of all
property rights therein; or (ii) has executed an assignment or an agreement to
assign in favor of DMI or Quixote (or such predecessor in interest, as
applicable) of all right, title and interest in such material.
5.16. ACCOUNTS RECEIVABLE; INVENTORIES. (a) All accounts and notes
receivable of the Business have arisen from bona fide transactions in the
ordinary course of business. All accounts and notes receivable reflected on the
Valuation Date Statement are good and collectible in the ordinary course of
business at the aggregate recorded amounts thereof, net of any applicable
allowance for doubtful accounts reflected on the Valuation Date Statement. All
accounts and notes receivable constituting a part of the Purchased Assets will
be good and collectible in the
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ordinary course of business at the aggregate recorded amounts thereof, net of
any applicable allowance for doubtful accounts reflected on the books and
records of the Business.
(b) The inventories of the Business (including raw materials, supplies,
work-in-process, finished goods and other materials) (i) are in good,
merchantable and useable condition, (ii) are reflected on the Valuation Date
Statement at the lower of cost or market in accordance with Agreed Accounting
Principles and (iii) are, in the case of finished goods, of a quality and
quantity saleable in the ordinary course of business and, in the case of all
other inventories, are of a quality and quantity useable in the ordinary course
of business. The inventory obsolescence policies of the Business are appropriate
for the nature of the products sold and the marketing methods used by the
Business, and the reserve for inventory obsolescence reflected on the Valuation
Date Statement fairly reflects the amount of obsolete inventory as of September
30, 1996. Quixote has heretofore delivered to Parent a list of places where
material inventories of the Business were located as of September 30, 1996. The
inventories of the Business (including raw materials, supplies, work-in process,
finished goods and other materials) constituting a part of the Purchased Assets
(i) will be in good, merchantable and useable condition and (ii) will be, in the
case of finished goods, of a quality and quantity saleable in the ordinary
course of business and, in the case of all other inventories, will be of a
quality and quantity useable in the ordinary course of business.
5.17. TITLE TO PROPERTY. Except as set forth on Schedule 5.17, DMI has
good and marketable title in fee simple absolute to all Owned Real Property and
to all buildings, structures and other improvements thereon, in each case free
and clear of all Encumbrances (other than Permitted Encumbrances). DMI or
Quixote will have good and marketable title on the Closing Date to all of the
other Purchased Assets, free and clear of all Encumbrances (other than Permitted
Encumbrances). Upon delivery to Cinram on the Closing Date of the instruments of
transfer contemplated by Section 4.4, DMI or Quixote will thereby transfer to
Cinram good and marketable title to the Purchased Assets, subject to no
Encumbrances (other than Permitted Encumbrances).
5.18. EMPLOYEE BENEFIT PLANS. (a) Separately identified on Schedule
5.18(a) is a true and complete list of each "employee pension benefit plan," as
such term is defined in Section 3(2) of ERISA, maintained by Quixote, DMI or any
ERISA Affiliate, or with respect to which Quixote, DMI or any ERISA Affiliate is
or will be required to make any payment, or which provides or will provide
benefits to current or former employees of Quixote, DMI or any ERISA Affiliate
due to such employment (the "Pension Plans"). Separately identified on Schedule
5.18(a) is a true and complete list of each "employee welfare benefit plan," as
such term is defined in Section 3(1) of ERISA, maintained by DMI, or by Quixote
or any Affiliate thereof with respect to the Business, or with respect to which
DMI, or Quixote or any Affiliate thereof with respect to the Business, is or
will be required to make any payment, or which provides or will provide benefits
to current or former employees of Quixote, DMI or any of their Affiliates due to
such employment with respect to the Business (the "Welfare Plans"), the Pension
Plans and the Welfare Plans being referred to herein as the "ERISA Benefit
Plans." There does not currently exist and has never existed any "employee
pension benefit plan," as such term is defined in Section 3(2) of ERISA, ever
subject to Section 302 of ERISA and (i) maintained by Quixote, DMI or any ERISA
Affiliate at any time during the six-year period ending on the Closing Date or
(ii) with respect to which Quixote, DMI or any ERISA Affiliate was required to
make any contribution or other payment at any time during such period. For each
of the ERISA Benefit Plans identified in one of the two lists set forth on
Schedule 5.18(a), DMI has separately identified on such Schedule the entities
whose employees or former employees are covered by such plan. Separately
identified on Schedule 5.18(a) is a true and complete list of all ERISA
Affiliates; in addition, separately identified on Schedule 5.18(a) is a true and
complete list of all Persons that are Subsidiary ERISA Affiliates.
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(b) In addition to the ERISA Benefit Plans, separately identified on
Schedule 5.18(b) is a true and complete list of each of the following (which do
not constitute ERISA Benefit Plans) to which (i) DMI is a party, or Quixote or
any Affiliate thereof with respect to the Business, is a party; (ii) with
respect to which DMI is or will be required to make any payment, or Quixote or
any Affiliate thereof with respect to the Business is or will be required to
make any payment; or (iii) with respect to which DMI, or Quixote or any
Affiliate thereof with respect to the Business, is bound (the "Non-ERISA
Commitments"):
(A) each retirement, savings, profit sharing, deferred compensation,
severance, stock ownership, stock purchase, stock option, performance,
bonus, incentive, vacation, holiday or sick pay, hospitalization or other
medical, disability, life or other insurance or other welfare benefit or
fringe benefit plan, policy, trust, understanding or arrangement of any
kind, whether written, oral, established through policy or practice or
otherwise; and
(B) each employee collective bargaining agreement and each agreement,
understanding or arrangement of any kind, whether written, oral, established
through policy or practice or otherwise, with or for the benefit of any
current or former officer, director, employee or consultant (including,
without limitation, each employment, compensation, deferred compensation,
severance or consulting agreement or arrangement and any agreement or
arrangement associated with a change in ownership of DMI or the Business).
For the purposes of clause (B) of the preceding sentence, an oral agreement,
understanding or arrangement shall include only an agreement, understanding or
arrangement which is exclusively oral and has not in any manner been written or
otherwise established through a written or otherwise published statement of
policy or practice and (i) under which one or more employees of the Business has
or will derive benefits prior to the Closing Date or (ii) of which any officer
or director of Quixote or DMI has any knowledge. Quixote and DMI have delivered
to Cinram correct and complete copies of (i) all written Non-ERISA Commitments
and (ii) all insurance and annuity policies, contracts and other documents
relevant to any Non-ERISA Commitment. Set forth on Schedule 5.18(b) is a
complete and accurate description of all oral Non-ERISA Commitments. For each of
the Non-ERISA Commitments, Schedule 5.18(b) separately identifies the entities
whose employees or former employees are covered by such Non-ERISA Commitment.
(c) Quixote and DMI have delivered to Cinram, with respect to each ERISA
Benefit Plan, correct and complete copies, where applicable, of (i) all plan
documents and amendments thereto, trust agreements and amendments thereto and
insurance and annuity contracts and policies, (ii) the current summary plan
description, (iii) the Annual Report (Form 5500 series) and accompanying
schedules, as filed, for the most recently completed plan year for which such
report has been filed, (iv) the financial statements for the most recently
completed plan year for which such statements have been prepared, (v) the most
recent determination letter issued by the IRS and the application submitted with
respect to such letter and (vi) all correspondence with the IRS or the
Department of Labor concerning any controversy. Each statement described in
clause (iv) of the preceding sentence accurately describes the liabilities of
the plan to which it relates. No ERISA Benefit Plan is a "multiemployer plan,"
as such term is defined in Section 3(37) of ERISA, or is subject to Section 302
or Title IV of ERISA or Section 412 of the Code.
(d) Each Pension Plan which is intended to qualify under Section 401(a) of
the Code has been determined to be so qualified by the IRS, and no circumstance
has occurred or exists which might cause such plan to cease being so qualified.
(e) There is no pending or, to the best knowledge of Quixote and DMI,
threatened claim in respect of any of the ERISA Benefit Plans or the Non-ERISA
Commitments that cover employees of DMI, or Quixote or any Affiliate thereof
with respect to the Business, other than claims for benefits in the ordinary
course of business. Except as set forth on Schedule 5.18(e),
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each of the ERISA Benefit Plans (i) has been administered in accordance with its
terms and (ii) complies in form, and has been administered in accordance, with
the requirements of ERISA and, where applicable, the Code. Quixote, DMI and each
ERISA Affiliate has complied in all respects with the health care continuation
requirements of Part 6 of Title I of ERISA. Neither DMI, nor Quixote or any
Affiliate thereof with respect to the Business, has any obligations under any
ERISA Benefit Plan or otherwise to provide health or other welfare benefits to
any employees or any other persons, other than while employed by DMI, Quixote or
such Affiliate, or except as required by Part 6 of Title I of ERISA. Quixote,
DMI and their Affiliates are in compliance with the requirements of WARN and
have no liabilities pursuant to WARN. Quixote, DMI and their Affiliates are in
compliance with the requirements of OSHA and have no liabilities pursuant to
OSHA, and no inspections or audits have been conducted during the six-month
period ending on the Closing Date. Except for the ERISA Benefit Plans and the
Non-ERISA Commitments so identified on Schedule 5.18(e) (the "Self-Insured
Plans"), each ERISA Benefit Plan and Non-ERISA Commitment that provides medical
or other health benefits (including, but not limited to, drug reimbursement,
dental benefits and vision benefits), short or long-term disability benefits,
death benefits, accidental death or dismemberment benefits or other similar
benefits does so on a fully-insured basis (with respect to Quixote, DMI and the
Business). With respect to each Self-Insured Plan, stop-loss insurance has been
obtained by Quixote or DMI and is in full force and effect whereby Quixote, DMI
and the Business are reimbursed for all benefits provided under such
Self-Insured Plan on a self-insured basis, except to the extent otherwise set
forth on Schedule 5.18(e).
(f) None of Quixote, DMI and the ERISA Affiliates has incurred any
liability with respect to any "multiemployer plan," as such term is defined in
Section 3(37) of ERISA, on account of a "partial withdrawal" or a "complete
withdrawal" (within the meaning of Sections 4205 and 4203, respectively, of
ERISA), no such liability has been asserted, there are no events or
circumstances which could result in any such partial or complete withdrawal and
none of Quixote, DMI and the ERISA Affiliates is bound by a contract or
agreement with respect to, or has any obligation or liability described in,
Section 4204 of ERISA.
(g) Neither Quixote or DMI nor, to the best knowledge of Quixote and DMI,
any other "disqualified person" (within the meaning of Section 4975 of the Code)
or "party in interest" (within the meaning of Section 3(14) of ERISA) has taken
any action with respect to any ERISA Benefit Plan which could subject such plan
(or its related trust), or Quixote, DMI, any Affiliate of Quixote or any
officer, director or employee of any of the foregoing, to penalty or tax under
Section 502(i) or Section 502(l) of ERISA or Section 4975 of the Code.
(h) Neither Quixote nor DMI has any potential liability, whether direct or
indirect, contingent or otherwise, under Section 4063, 4064, 4069, 4204 or
4212(c) of ERISA. No Person of which any stock or other equity interest will be
purchased by Cinram pursuant to this Agreement (i) will ever have any obligation
or other liability, direct or indirect, contingent or otherwise, prior to, on or
after the Closing Date, with respect to any "employee benefit plan," as such
term is defined in Section 3(3) of ERISA, or any plan, policy, trust,
understanding, arrangement or agreement of any kind described in clause (A) or
(B) of the first sentence of Section 5.18(b) (irrespective of the second
sentence thereof), as a result of having been an Affiliate of Quixote or DMI or
an Affiliate of any other Person prior to the Closing or (ii) will have
maintained, contributed to or had any obligation or liability with respect to
any such employee benefit plan, plan, policy, trust, understanding, arrangement
or agreement prior to or as of the Closing.
(i) Schedule 5.18(i) contains: (i) a list of all employees or commission
salespersons of the Business as of September 30, 1996 (including those on leave
of absence or layoff status, with such status noted when applicable); (ii) the
amount of the then current annual compensation (including bonuses and
commissions) of, and a description of the fringe benefits (other than those
generally available to employees of the Business) provided to, and the amount of
any
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vacation accrued by, each such employee or salesperson; (iii) for each such
employee or salesperson, the service credited for purposes of benefit formula,
vesting and eligibility to participate under pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit or
payroll stock ownership), severance pay, insurance, medical, welfare or vacation
plan or any other employee benefit plan covering such employee or salesperson;
(iv) a list of all current or former employees or commission salespersons of the
Business in calendar year 1996 who have terminated or given notice of their
intention to terminate their relationship with the Business since September 30,
1996; (v) a list of any increases, effective after September 30, 1996, in the
rates of compensation of any employees or commission salespersons of the
Business; and (vi) a list of all substantial changes in job assignments of, or
arrangements with, or promotions or appointments of, the employees and
commission salespersons of the Business.
(j) Except as set forth on Schedule 5.18(j): (i) to the best knowledge of
Quixote and DMI, the Business is not involved in any transaction or other
situation with any employee, officer, director or Affiliate of Quixote or DMI
which may be generally characterized as a "conflict of interest," including, but
not limited to, direct or indirect interests in the business of competitors,
suppliers or customers of the Business, and (ii) there are no situations with
respect to the Business which involved or involve (A) the use of any corporate
funds for unlawful contributions, gifts, entertainment or other expenses related
to political activity, (B) the making of any direct or indirect unlawful
payments to government officials or others from corporate funds or the
establishment or maintenance of any unlawful or unrecorded funds, (C) the
violation of any of the provisions of The Foreign Corrupt Practices Act of 1977,
or any rules or regulations promulgated thereunder, (D) the receipt of any
illegal discounts or rebates or the occurrence of any other violation of the
antitrust laws or (E) any investigation by the Securities and Exchange
Commission or any other federal, state, local or foreign government agency or
authority.
5.19. REQUIREMENTS OF LAWS RELATING TO EMPLOYEES. Except as set forth on
Schedule 5.19, DMI and Quixote have complied with all applicable laws, rules and
regulations which relate to prices, wages, hours, discrimination in employment,
OSHA, WARN and collective bargaining with respect to the operation of the
Business, and are not liable for any arrears of wages or any Taxes or penalties
for failure to comply with any of the foregoing. DMI, and Quixote with respect
to the Business, believe that their relations with the employees of the Business
are satisfactory. Quixote and DMI are not a party to, and the Business is not
affected by or threatened with, any dispute or controversy with a union or with
respect to unionization or collective bargaining involving the employees of the
Business. Neither Quixote or DMI nor the Business is materially affected by any
dispute or controversy with a union or with respect to unionization or
collective bargaining involving any supplier or customer of the Business.
Schedule 5.19 sets forth a description of any union organizing or election
activities involving any non-union employees of the Business which have occurred
since January 1, 1992 or, to the best knowledge of Quixote and DMI, are
threatened as of the date hereof.
5.20. CONTRACTS. Except as set forth on Schedule 5.20 or any other
Schedule hereto, neither DMI, nor Quixote with respect to the Business, is a
party to or bound by:
(i) any contract for the purchase or sale of real property;
(ii) any contract which involved the payment of more than $25,000 since
January 1, 1996;
(iii) any contract for the sale of goods or services which has not been
entered into in the ordinary course of business consistent with past
practice or contains a "most favored nation" pricing provision, as such term
is commonly understood in the optical disc industry;
(iv) any contract for the purchase, licensing or development of Software
to be used by the Business;
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(v) any consignment, distributor, dealer, manufacturers representative,
sales agency, advertising representative or advertising or public relations
contract;
(vi) any guarantee of the obligations of customers, suppliers, officers,
directors, employees, Affiliates or others;
(vii) any agreement which provides for, or relates to, the incurrence by
the Business of debt for borrowed money (including, without limitation, any
interest rate or foreign currency swap, cap, collar, hedge or insurance
agreements, or options or forwards on such agreements, or other similar
agreements for the purpose of managing the interest rate and/or foreign
exchange risk associated with its financing);
(viii) any contract not made in the ordinary course; or
(ix) any other contract, agreement, commitment, understanding or
instrument which is material to the Business or which is not terminable
without payment or penalty on notice of 60 days or less.
5.21. STATUS OF CONTRACTS. Except as set forth on Schedule 5.21 or in any
other Schedule hereto, each of the leases, contracts, licenses and other
agreements listed on Schedules 5.11, 5.14, 5.15 and 5.20 (collectively, the
"Sellers' Agreements") constitutes a valid and binding obligation of the parties
thereto and is in full force and effect and (except as set forth on Schedule 5.3
and except for those Sellers' Agreements which by their terms will expire prior
to the Closing Date or are otherwise terminated prior to the Closing Date in
accordance with the provisions hereof) may be transferred to Cinram pursuant to
this Agreement and will continue in full force and effect thereafter, in each
case without breaching the terms thereof or resulting in the forfeiture or
impairment of any rights thereunder and without the consent, approval or act of,
or the making of any filing with, any other party. Quixote and DMI have
fulfilled and performed their respective obligations under each of the Sellers'
Agreements, and Quixote and DMI are not in, or alleged to be in, breach or
default under, nor is there any basis or alleged to be any basis for the
termination of, any of the Sellers' Agreements; and no other party to any of the
Sellers' Agreements has breached or defaulted thereunder, and no event has
occurred and no condition or state of facts exists which, after notice or lapse
of time or both, would constitute such a default or breach by Quixote, DMI or
any such other party. Neither Quixote nor DMI is currently renegotiating any of
the Sellers' Agreements or paying liquidated damages in lieu of performance
thereunder. None of the Sellers' Agreements contains terms unduly burdensome to
the Business or is harmful to the Business. Complete and correct copies of each
of the Sellers' Agreements have heretofore been delivered to Parent by Quixote
or DMI.
5.22. NO VIOLATION, LITIGATION OR REGULATORY ACTION. Except as set forth
on Schedule 5.22:
(i) the Purchased Assets and their current uses comply with all
applicable Requirements of Laws and Court Orders;
(ii) Quixote and DMI have complied with all applicable Requirements of
Laws and Court Orders with respect to the Purchased Assets and the Business;
(iii) there are no lawsuits, claims, actions, proceedings or
investigations pending or, to the best knowledge of Quixote and DMI,
threatened against or affecting DMI or Quixote with respect to the Purchased
Assets or the Business; to the best knowledge of Quixote and DMI, there is
no basis for any such lawsuit, claim, action, proceeding or investigation;
and there are no lawsuits, actions or proceedings pending in which Quixote
or DMI is the plaintiff or claimant and which relate to the Purchased Assets
or the Business;
(iv) there is no lawsuit, claim, action, proceeding or investigation
pending or, to the best knowledge of Quixote and DMI, threatened which
questions the legality or propriety of the transactions contemplated by this
Agreement; and
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(v) to the best knowledge of Quixote and DMI, no legislative or
regulatory proposal has been adopted or is pending which could adversely
affect the Business.
5.23. ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.23:
(i) the operations of the Business comply with all applicable
Environmental Laws;
(ii) DMI, and Quixote with respect to the Business, have obtained all
environmental, health and safety Governmental Permits necessary for the
operation of the Business and the Purchased Assets, and all such
Governmental Permits are in good standing; and DMI and Quixote are in
compliance with all terms and conditions of such Governmental Permits;
(iii) neither DMI, or Quixote with respect to the Business, nor any of
the current properties or operations of the Business, or any of the past
properties or operations of the Business, are subject to any on-going
investigation by, order from or agreement with any Person (including,
without limitation, any prior owner or operator of any property) respecting
(i) any Environmental Law, (ii) any Remedial Action or (iii) any claim of
losses and expenses arising from the Release or threatened Release of a
Contaminant into the environment;
(iv) DMI, and Quixote with respect to the Business, are not subject to
any judicial or administrative proceeding, order, judgment, decree or
settlement alleging or addressing a violation of or liability under any
Environmental Law;
(v) neither DMI, nor Quixote with respect to the Business, has:
(A) reported a Release of a hazardous substance pursuant to Section
103(a) of CERCLA, or any state law equivalent;
(B) filed a notice pursuant to Section 103(c) of CERCLA;
(C) filed notice, pursuant to Section 3010 of RCRA, indicating the
generation of any "hazardous waste," as such term is defined under 40 CFR
Part 261, or pursuant to any state law equivalent; or
(D) filed any notice under any applicable Environmental Law
reporting a substantial violation of such Environmental Law;
(vi) there is not now, nor, to the best knowledge of Quixote and DMI,
has there ever been, on or in any property used in the Business:
(A) any treatment, recycling, storage or disposal of any "hazardous
waste," as such term is defined under 40 CFR Part 261, or any state law
equivalent, that requires or required a Governmental Permit pursuant to
Section 3005 of RCRA; or
(B) any underground storage tank or surface impoundment or landfill
or waste pile;
(vii) there is not now on or in any Sellers' Property any
polychlorinated biphenyls (PCB) used in pigments, hydraulic oils, electrical
transformers or other equipment;
(viii) neither DMI, nor Quixote with respect to the Business, has
disposed of, or arranged for the treatment or disposal of, a Contaminant at
any facility undergoing Remedial Action, or received any notice or claim to
the effect that it is or may be liable to any Person as a result of the
Release or threatened Release of a Contaminant;
(ix) no Environmental Encumbrance has attached to any Sellers' Property;
(x) any asbestos-containing material which is on or part of any
Sellers' Property is in good repair according to the current standards and
practices governing such material, and its presence or condition does not
violate any currently applicable Environmental Law; and
(xi) none of the products manufactured, distributed or sold in
connection with the Business, currently or in the past, contains or
contained asbestos or asbestos-containing material.
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5.24. INSURANCE. Schedule 5.24 sets forth a list and brief description
(including nature of coverage, limits, deductibles, premiums and loss experience
for the three most recently completed calendar years with respect to each type
of coverage) of all policies of insurance maintained, owned or held by Quixote
and DMI on the date hereof with respect to the Purchased Assets or the Business.
Quixote and DMI shall keep or cause such insurance or comparable insurance to be
kept in full force and effect through the Closing Date. Quixote and DMI have
complied with each of such insurance policies and have not failed to give any
notice or present any claim thereunder in a due and timely manner. Quixote and
DMI have delivered to Parent correct and complete copies of the most recent
inspection reports, if any, received from insurance underwriters as to the
condition of the Purchased Assets.
5.25. CUSTOMERS AND SUPPLIERS. Quixote shall deliver to Parent not more
than 10 days after the date of this Agreement a list of the names and addresses
of the 10 largest customers and the 10 largest suppliers (measured, in each
case, by dollar volume) of the Business and the percentage of the Business which
each such customer or supplier represented during the fiscal years ended June
30, 1996 and 1995 and the three-months' period ended September 30, 1996. Such
list will not disclose any actual or threatened termination, cancellation or
limitation of, or any modification or change in, the business relationship of
DMI or Quixote with any customer or group of customers identified on such list,
or whose purchases (individually or in the aggregate) are material to the
operation of the Business, or with any supplier or group of suppliers identified
on such list, or whose sales (individually or in the aggregate) are material to
the operation of the Business; and there currently exists no condition or state
of facts or circumstances involving customers, suppliers or sales
representatives which DMI or Quixote can now reasonably foresee would materially
adversely affect the Business or prevent the conduct of the Business after the
consummation of the transactions contemplated by this Agreement in essentially
the same manner in which it has heretofore been conducted.
5.26 BUDGET. Schedule 5.26 sets forth the 1997 Operation Plan with respect
to the Business, which Plan was carefully and reasonably prepared in accordance
with Quixote's customary budgeting practices.
5.27 WARRANTIES. Schedule 5.27 sets forth (i) a specimen copy of the form
of written warranties covering products sold by the Business which have not yet
expired and (ii) a summary of the warranty expense incurred by the Business
during each of its last three fiscal years.
5.28 NO FINDER. Neither Quixote or DMI nor any Person acting on their
behalf has paid or become obligated to pay any fee or commission to any broker,
finder or intermediary for or on account of the transactions contemplated by
this Agreement other than to Salomon Brothers Inc and ▇▇▇▇ Commercial Brokerage,
whose fees and expenses, to the extent payable, shall be paid by Quixote.
5.29 FINANCIAL INFORMATION. Quixote has made available to Cinram certain
financial information, including the Preliminary Report to the President and
Chief Operating Officer of Quixote and certain monthly unit shipment analyses,
with respect to the Business, which information was prepared for internal use
only. Quixote and DMI represent and warrant that such information was prepared
in good faith and is based on assumptions believed to be reasonable.
5.30 ACCRUED VACATION AND OTHER REMUNERATION. Quixote and DMI warrant that
the Certified Valuation Date Statement will accurately reflect the amount, if
any, of all vacation, sick leave, commissions, bonuses or other remuneration
accrued and unpaid as of September 30, 1996, or which will thereafter accrue,
for all periods ending on or prior to September 30, 1996 with respect to the
Business.
5.31 EMPLOYEE CLAIMS. Except as otherwise indicated on Schedule 5.22, with
respect to each employee of Quixote or DMI who is to be offered employment with
Cinram, there will be no claims (or any basis therefor) with respect to
discrimination, workers' compensation, OSHA,
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WARN or similar federal, state or local workers' protection claims, regardless
of when asserted, with respect to any occurrence or condition arising or
existing on or prior to the Closing Date.
5.32 DISCLOSURE. None of the representations or warranties of Quixote and
DMI contained herein, none of the information contained in the Schedules
referred to in this Article V and none of the other information or documents
furnished to Parent or any of its representatives by Quixote or DMI or their
representatives pursuant to the terms of this Agreement is or will be false or
misleading in any material respect or omits or will omit to state a fact herein
or therein necessary to make the statements herein or therein not misleading in
any material respect. There is no fact which adversely affects or in the future
is likely to adversely affect the Purchased Assets or the Business in any
material respect which has not been set forth or referred to in this Agreement
or the Schedules hereto.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND CINRAM
As an inducement to Quixote and DMI to enter into this Agreement and to
consummate the transactions contemplated hereby, Parent and Cinram hereby
represent and warrant, jointly and severally, to Quixote and DMI and agree as
follows:
6.1. ORGANIZATION OF PARENT AND CINRAM. Parent is a corporation duly
organized, validly existing and in good standing under the laws of Canada; and
Cinram is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate power and
authority to own or lease and to operate and use its properties and assets and
to carry on its business as now conducted.
6.2. AUTHORITY. Parent and Cinram each has all requisite power and
authority to enter into, execute and deliver this Agreement and the Cinram
Ancillary Agreements to which it will be a party and to consummate the
transactions contemplated hereby. This Agreement has been, and each of the
Cinram Ancillary Agreements to be delivered by Cinram at the Closing will be,
duly authorized, executed and delivered by Parent and/or Cinram, as the case may
be, and (assuming the due authorization, execution and delivery of this
Agreement and the Sellers' Ancillary Agreements by Quixote and/or DMI, as the
case may be, and the validity and binding effect hereof and thereof on Quixote
and/or DMI, as the case may be) is, or upon execution by Cinram will be, the
valid and binding obligation of Parent and/or Cinram, as the case may be,
enforceable against Parent and/or Cinram, as the case may be, in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws affecting the enforcement of creditors' rights and remedies generally or
general principles of equity (regardless of whether considered and applied in a
proceeding at law or in equity).
Neither the execution and delivery of this Agreement or any of the Cinram
Ancillary Agreements or the consummation of any of the transactions contemplated
hereby or thereby, nor compliance with or fulfillment of the terms, conditions
and provisions hereof or thereof, will:
(i) result in a breach of the terms, conditions or provisions of, or
constitute a default, an event of default or an event creating rights of
acceleration, termination or cancellation or a loss of rights under: (A) the
Articles of Incorporation or By-laws of Parent or the Certificate of
Incorporation or By-laws of Cinram; (B) any material note, instrument,
agreement, mortgage, lease, license, franchise, permit or other
authorization, right, restriction or obligation to which Parent or Cinram is
a party or any of its respective material properties is subject or by which
Parent or Cinram is bound; (C) any Court Order to which Parent or Cinram is
a party or by which Parent or Cinram is bound; or (D) any Requirements of
Laws affecting Parent or Cinram; or
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(ii) require the approval, consent, authorization or act of, or the
making by Parent or Cinram of any declaration, filing or registration with,
any Person, except as provided under the HSR Act and except as may be
required for Cinram to present Quixote with evidence that Cinram's 401(k)
Plan is a qualified plan, as required by Section 8.5(d).
6.3. NO FINDER. Neither Parent or Cinram nor any Person acting on their
behalf has paid or become obligated to pay any fee or commission to any broker,
finder or intermediary for or on account of the transactions contemplated by
this Agreement other than to ▇▇▇▇▇▇ Capital Corporation, whose fees and
expenses, to the extent payable, shall be paid by Parent.
6.4. FINANCIAL CAPACITY. Parent and Cinram have the necessary financial
capacity to consummate the transactions contemplated by this Agreement.
ARTICLE VII
ACTION PRIOR TO THE CLOSING DATE
The parties hereto covenant and agree to take the following actions between
the date hereof and the Closing Date:
7.1. INVESTIGATION BY PARENT AND CINRAM. Quixote and DMI shall afford to
the officers, employees and authorized representatives of Parent and Cinram
(including, without limitation, their independent accountants, environmental
consultants and attorneys) complete access during normal business hours to the
offices, properties, employees, business and financial records (including
computer files, retrieval programs and similar documentation) of the Business
and such access and information as may be necessary in connection with any
environmental audit of the Business to the extent Parent and Cinram shall deem
necessary or desirable and shall furnish to Parent or Cinram or their authorized
representatives such additional information concerning the Purchased Assets, the
Business and the operations of the Business as shall be reasonably requested,
including all such information as shall be necessary to enable Parent and Cinram
or their representatives to assess actual and potential liabilities of the
Business (excluding information with respect to all litigation set forth on
Schedule 5.22 constituting an Excluded Liability), to verify the accuracy of the
representations and warranties contained in this Agreement, to verify that the
covenants of Quixote and DMI contained in this Agreement have been complied with
and to determine whether the conditions set forth in Article IX have been
satisfied. Parent and Cinram agree that such investigation shall be conducted in
such a manner as not to interfere unreasonably with the operations of Quixote,
DMI or the Business. No investigation made by Parent or Cinram or their
representatives hereunder shall affect the representations and warranties of
Quixote and DMI hereunder. In the event that Parent or Cinram shall commission
any environmental investigation, Parent shall provide Quixote with a copy of any
proposed report to be issued with respect thereto. In addition, prior to
undertaking any invasive sampling of soil or groundwater, Parent shall consult
with Quixote regarding the proposed scope of work, and Quixote shall have the
right to comment thereon and consent thereto, which consent shall not be
unreasonably withheld. If Quixote shall fail to consent to any such sampling
deemed necessary or prudent by Parent, Parent shall have the option to terminate
this Agreement in the manner and with the effect provided in Article XII.
7.2. PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the
parties hereto shall refrain from taking any action which would render any
representation or warranty contained in Article V or VI of this Agreement
inaccurate as of the Closing Date. Each party hereto shall promptly notify the
other parties of any action, suit or proceeding that shall be instituted or
threatened against such party to restrain, prohibit or otherwise challenge the
legality of any of the transactions contemplated by this Agreement. Quixote and
DMI shall promptly notify Parent of any lawsuit, claim, action, proceeding or
investigation that may be threatened, brought,
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asserted or commenced against Quixote or DMI which would have been listed on
Schedule 5.22 if such lawsuit, claim, action, proceeding or investigation had
arisen prior to the date hereof.
7.3. CONSENTS OF THIRD PARTIES; GOVERNMENTAL APPROVALS. (a) Quixote and
DMI shall act diligently and reasonably to secure, before the Closing Date, the
consent, approval or waiver, in form and substance reasonably acceptable to
Parent, from each party to any of the Sellers' Agreements required to be
obtained to assign or transfer the same to Cinram or to otherwise satisfy the
conditions set forth on Section 9.5; PROVIDED, HOWEVER, that none of Quixote,
DMI, Parent or Cinram shall have any obligation to offer or pay any
consideration in order to obtain any such consent, approval or waiver; PROVIDED
FURTHER that if any such party shall reasonably request the guarantee by Parent
of the obligations of Cinram under the agreement to be assigned as a condition
to giving such consent, approval or waiver and Parent shall refuse to deliver
such guarantee, the assignment of such agreement shall not be required and
Quixote and DMI shall have no obligation to indemnify any Cinram Group Member
with respect to such assignment pursuant to Section 11.1(a)(iv); and PROVIDED
FURTHER that Quixote and DMI shall not make any agreement or enter into any
understanding affecting the Purchased Assets or the Business in connection with
obtaining any such consent, approval or waiver without the prior written consent
of Parent. During the period prior to the Closing Date, Parent and Cinram shall
act diligently and reasonably cooperate with Quixote and DMI to obtain the
consents, approvals and waivers contemplated by this Section 7.3(a) and Section
9.5.
(b) During the period prior to the Closing Date, Quixote, DMI, Parent and
Cinram shall act diligently and reasonably cooperate with the others to secure
all consents and approvals of all Governmental Bodies required to be obtained in
order to assign or transfer the Governmental Permits to Cinram, to permit the
consummation of the transactions contemplated by this Agreement or to otherwise
satisfy the conditions set forth in Section 9.4; PROVIDED, HOWEVER, that Quixote
and DMI shall not make any agreement or enter into any understanding affecting
the Purchased Assets or the Business in connection with obtaining any such
consent or approval without the prior written consent of Parent.
7.4. OPERATIONS PRIOR TO THE CLOSING DATE. (a) Quixote and DMI shall
operate and carry on the Business only in the ordinary course and substantially
as currently operated and conducted. On a reasonable and timely basis, Quixote
and DMI shall inform Parent of the general status of the condition and
operations of the Business. In furtherance thereof, Quixote and DMI shall keep
and maintain the Purchased Assets in good operating condition and repair and
shall use their best efforts, consistent with sound business practice, to
maintain the business organization of the Business intact and to preserve and
enhance the goodwill of the suppliers, contractors, licensors, employees,
customers, distributors and others having business relations with the Business.
Neither Quixote nor DMI shall (i) transfer or cause to be transferred from the
Business any employee or agent thereof, (ii) offer employment after the Closing
Date to any such employee or agent or (iii) otherwise attempt to persuade any
such Person to terminate his, her or its relationship with the Business.
(b) Notwithstanding Section 7.4(a), except as expressly permitted by this
Agreement or except with the express written approval of Parent (which shall not
be unreasonably withheld), neither Quixote nor DMI shall:
(i) make any change in the Business or in the operation of the Business
or make or contract or commit to make any expenditure, whether or not
contemplated by the budget set forth on Schedule 5.26, in respect of the
Business which shall, in any one case, exceed $25,000;
(ii) enter into any contract, agreement, undertaking or commitment,
including any purchase order not in the ordinary course of business
consistent with past practice or containing a "most favored nation" pricing
provision, as such term is commonly understood in the optical disc industry,
or which would have been required to be set forth on
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Schedule 5.20 if in effect on the date hereof or enter into any contract
which cannot be assigned to Cinram or a permitted assignee of Cinram under
Section 13.5 or 13.16;
(iii) enter into any contract for the purchase of real property to be
used by the Business or for the sale of any Owned Real Property or exercise
any option to purchase real property listed on Schedule 5.10 or any option
to extend a lease listed on Schedule 5.11;
(iv) sell, lease (as lessor), transfer or otherwise dispose of
(including any transfer (except a Permissible Payment) from the Business to
Quixote or any of its Affiliates), or mortgage, pledge, impose or suffer to
be imposed any Encumbrance (other than Permitted Encumbrances) on, any of
the assets acquired for the Business, except for inventory and other
insignificant items of personal property sold or otherwise disposed of for
fair value in the ordinary course of the business consistent with past
practice;
(v) cancel any debts owed to or claims held for the benefit of the
Business (including the settlement of any claims or litigation) other than
in the ordinary course of business consistent with past practice;
(vi) create, incur or assume, or agree to create, incur or assume, any
indebtedness for borrowed money in respect of the Business, or enter into,
as lessee, any capitalized lease obligation (as defined in Statement of
Financial Accounting Standards No. 13);
(vii) accelerate or delay collection of any note or account receivable
generated by the Business in advance of or beyond its regular due date or
the date when the same would have been collected in the ordinary course of
business consistent with past practice;
(viii) delay or accelerate payment of any account payable or other
liability of the Business beyond or in advance of its due date or the date
when the same would have been paid in the ordinary course of business
consistent with past practice;
(ix) allow the levels of raw materials, supplies, work-in-process or
other materials included in the inventory of the Business to vary in any
material respect from the levels customarily maintained in the Business;
(x) make, or agree to make, any payment of cash or distribution of
assets to Quixote or any of its Affiliates, whether pursuant to any
management fee or services agreement or similar arrangement; PROVIDED,
HOWEVER, Quixote shall be entitled to receive cash from the Business, on a
monthly basis, in an amount equal to the interest which would have been
earned on the Purchase Price (determined as provided in Article III) for the
period commencing October 1, 1996 and ending on March 31, 1997 as if the
amount of such Purchase Price had been deposited on October 1, 1996 in an
account bearing interest at the rate of 5% per annum; PROVIDED FURTHER that
if the Closing shall occur prior to March 31, 1997, Quixote shall be
entitled to receive from the Business, on the Closing Date, cash in an
amount equal to the difference between the amount received as aforesaid and
the amount it would have received if the Closing had occurred on March 31,
1997; and PROVIDED FURTHER that DMI shall be entitled to make Permissible
Payments;
(xi) institute any increase in any compensation payable to any employee
of DMI, or Quixote with respect to the Business, or adopt any new, or
institute any change or increase in any, "employee benefit plan," as such
term is defined in Section 3(3) of ERISA, or any plan, policy, trust,
understanding, arrangement or agreement of any kind described in clause (A)
or (B) of the first sentence of Section 5.18(b) (irrespective of the second
sentence thereof), or institute any compensation plan, with respect to
employees of the Business, or incur or accrue any cost, expense or liability
with respect to any agreement, understanding or arrangement of any kind
described in clause (B) of the first sentence of Section 5.18(b)
(irrespective of the second sentence thereof);
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(xii) make any change in the accounting principles and practices used by
Quixote and DMI from Agreed Accounting Principles;
(xiii) (A) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of the
capital stock of DMI, or otherwise make any payments to the stockholders of
DMI in their capacity as such; (B) split, combine or reclassify any of the
capital stock of DMI or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for any shares of
the capital stock of DMI; or (C) purchase, redeem or otherwise acquire any
shares of the capital stock of DMI or those of any Subsidiary or any other
securities of DMI or any Subsidiary or any rights, warrants or options to
acquire any such shares or other securities;
(xiv) hire or agree to hire any new employee for the Business or enter
into any agreement, commitment or arrangement in connection with or
affecting the Business with any current or newly hired employee, or
individual who will be an employee (excluding ▇▇▇▇▇ ▇. ▇▇▇▇▇) of DMI, or
Quixote with respect to the Business, other than the hiring of employees in
the ordinary course of business; or
(xv) make any payment of, or in respect of, Taxes (including, without
limitation, payments of, or in respect of, Taxes pursuant to a Tax sharing
arrangement) out of the assets of the Business, except to the extent (A)
such Taxes are Excluded Taxes (and such payment is made in accordance with
past practice) or (B) Quixote reimburses the Business for the payment of, or
in respect of, such Taxes so that, on the Closing Date, the Purchased Assets
will not be reduced by the amount of such payment of Taxes.
Anything in this Section 7.4 to the contrary notwithstanding, if, during the
period commencing on the date hereof and ending at the close of business on the
day preceding the Closing Date, DMI shall experience any shortage of cash for
working capital purposes, DMI may borrow such cash shortfall from Quixote at the
interest rate of 7.16% per annum; PROVIDED, HOWEVER, that any such borrowing
shall be repaid (both as to principal and interest) as promptly as practicable
and, in any event, not later than the close of business on the day preceding the
Closing Date.
7.5. NOTIFICATION BY QUIXOTE AND DMI OF CERTAIN MATTERS. During the period
prior to the Closing Date, Quixote and DMI shall promptly advise Parent in
writing of (i) any material adverse change in the condition of the Purchased
Assets or the Business, (ii) any threatened or possible event, occurrence or
condition which could reasonably be expected to result in any adverse change in
the Purchased Assets or the Business, (iii) any notice or other communication
from any third Person alleging that the consent of such third Person is or may
be required in connection with the transactions contemplated by this Agreement
and (iv) any material default under any of the Sellers' Agreements or any event
which, with notice or lapse of time or both, would become such a default on or
prior to the Closing Date and of which Quixote or DMI has knowledge.
7.6. ANTITRUST LAW COMPLIANCE. As promptly as practicable after the date
hereof, Parent and Quixote shall file with the Federal Trade Commission and the
Antitrust Division of the Department of Justice the notifications and other
information required to be filed under the HSR Act, or any rules and regulations
promulgated thereunder, with respect to the transactions contemplated hereby.
Each party hereto warrants that all such filings by it will be in all material
respects, as of the date filed, true and accurate and in accordance with the
requirements of the HSR Act and any such rules and regulations. Each of Parent,
Cinram, DMI and Quixote agrees to make available to the others such information
as any of them may reasonably request relative to its business, assets and
property (including, in the case of Quixote and DMI, the Business) as may be
required of each of them to file any additional information requested by such
agencies under the HSR Act and any such rules and regulations.
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7.7. COMMITMENT FOR TITLE INSURANCE AND SURVEY. Quixote shall cause to be
delivered to Parent not more than 30 days after the date hereof, with respect to
each parcel of Owned Real Property identified on Schedule 5.10 and the parcel of
leased real property identified as Item No. 6 on Schedule 5.11: (i) a current
commitment for the issuance of an owner's title insurance policy (or leasehold
owner's title insurance policy, as the case may be), all of which policies shall
be ALTA 1992 Form-B policies with an endorsement deleting the "creditor's
rights" exception or exclusion, with an ALTA Form 3.1 zoning endorsement, an
access endorsement insuring that each street adjacent to the real property is a
public street and that there is direct and unencumbered access to such street
and an endorsement insuring that there is no violation of any covenants,
conditions or restrictions affecting the real property, with extended coverage
over general exceptions 1 (rights or claims of parties in possession), 2 (survey
matters), 3 (easements), 4 (mechanic's liens) and 5 (taxes or special
assessments not shown as existing liens), written by First American Title
Company or another nationally recognized title insurance company in an amount
equal to the value to be allocated to such parcel on the Allocation Schedule, in
form and substance satisfactory to Parent, and providing that, upon the
satisfaction of the conditions specified therein, Cinram will have good and
marketable title thereto, free and clear of all Encumbrances (other than
Permitted Encumbrances); and (ii) an ALTA land title survey, certified to Parent
and acceptable to such title company, of a recent date with respect to each such
parcel showing no encroachments or other survey defects with respect to the
buildings, structures and other improvements located on such property.
7.8. QUIXOTE STOCKHOLDER MEETING. As promptly as practicable after the
date hereof, Quixote shall call a meeting of its stockholders (the "Quixote
Stockholder Meeting") to be held as promptly as practicable for the purpose of
voting upon this Agreement and the transactions contemplated hereby. Quixote
shall, through its Board of Directors, recommend to its stockholders approval of
such matters and shall not withdraw such recommendation; PROVIDED, HOWEVER, that
such Board of Directors shall not be required to make, and shall be entitled to
withdraw, such recommendation if, as a result of any change in the facts and
circumstances, such Board of Directors concludes in good faith on the basis of
the advice of its outside counsel that the making of, or the failure to
withdraw, such recommendation would violate the fiduciary obligations of such
Board of Directors under applicable law.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1. COVENANT NOT TO COMPETE OR SOLICIT BUSINESS. In furtherance of the
sale of the Purchased Assets and the Business to Cinram hereunder by virtue of
the transactions contemplated hereby and more effectively to protect the value
and goodwill of the Purchased Assets and the Business so sold, Quixote and DMI
covenant and agree that, for a period ending on the fifth anniversary of the
Closing Date, neither Quixote or DMI nor any of their Affiliates shall:
(i) directly or indirectly (whether as principal, agent, independent
contractor, partner or otherwise) own, manage, operate, control, participate
in, perform services for or otherwise carry on a business similar to or
competitive with the Business anywhere in the world; or
(ii) induce or attempt to persuade any employee, agent or customer of
the Business to terminate such employment, agency or business relationship
in order to enter into any such relationship on behalf of any other business
organization in competition with the Business;
PROVIDED, HOWEVER, that nothing contained in this Section 8.1 shall prohibit
Quixote, DMI or their Affiliates from owning not to exceed 5% in the aggregate
of any class of capital stock of any corporation if such stock is publicly
traded and listed on any national or regional stock exchange or on the NASDAQ
market system. In addition, Quixote and DMI covenant and agree that
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neither they nor any of their Affiliates will divulge or make use of any Trade
Secrets or other confidential information of the Business other than to disclose
such secrets and information to Parent, Cinram or their Affiliates. In the event
Quixote, DMI or any Affiliate thereof shall violate any of their obligations
under this Section 8.1, Parent and/or Cinram may proceed against them in law or
in equity for such damages or other relief as a court may deem appropriate.
Quixote and DMI acknowledge that a violation of this Section 8.1 may cause
Parent and Cinram irreparable harm which may not be adequately compensated for
by money damages. Quixote and DMI therefore agree that, in the event of any
actual or threatened violation of this Section 8.1, Parent and/or Cinram shall
be entitled, in addition to other remedies that may be available, to a temporary
restraining order and to preliminary and final injunctive relief against
Quixote, DMI and any Affiliates thereof to prevent any violations of this
Section 8.1, without the necessity of posting a bond or of proving actual
monetary loss. It is hereby expressly understood and agreed that such injunctive
or other equitable relief shall not be Parent's and Cinram's exclusive remedy.
The prevailing party in any action commenced under this Section 8.1 shall also
be entitled to receive reasonable attorneys' fees and court costs. It is the
intent and understanding of each party hereto that if, in any action before any
court or agency legally empowered to enforce this Section 8.1, any term,
restriction, covenant or promise in this Section 8.1 is found to be unreasonable
and for that reason unenforceable, then such term, restriction, covenant or
promise shall be deemed modified to the extent necessary to make it enforceable
by such court or agency.
8.2. PRODUCTION OF REPLACEMENT PRODUCTS. From and after the Closing Date,
Cinram shall, at Quixote's reasonable request and at Cinram's cost for labor,
material and variable overhead with respect to services performed or products
furnished to or for the benefit of Quixote and DMI, provide a reasonable
quantity of the products required to replace any products manufactured and
delivered by the Business prior to the Closing Date. In providing such
replacement products for the benefit of Quixote and DMI, Cinram shall first use
any excess products which result from any production overrun before incurring
additional costs to manufacture such replacement products. Neither Parent nor
Cinram shall be liable for any product liability or claims for injury to person
or property, regardless of when made or asserted, with respect to the
manufacture or provision of such replacement products or the performance of any
replacement services.
8.3. TAXES. (a) Quixote and DMI shall be liable for and pay, and pursuant
to Article XI shall indemnify Cinram against: (i) all Taxes imposed on any
Subsidiary (which, for purposes of this Section 8.3, shall include the
subsidiary referred to in the last paragraph of Section 2.1), or for which such
Subsidiary may otherwise be liable, as a result of having been a member of an
"affiliated group," as defined in Section 1504(a) of the Code without regard to
the limitations contained in Section 1504(b) of the Code, that, at any time on
or prior to the Closing, includes or has included such Subsidiary or any
predecessor of or successor to such Subsidiary (or another such predecessor or
successor), or any other group of corporations that, at any time on or prior to
the Closing, files or has filed Tax Returns on a combined, consolidated or
unitary basis with such Subsidiary or any predecessor of or successor to such
Subsidiary (or another such predecessor or successor), including, without
limitation, Taxes for which any Subsidiary may be liable pursuant to Treas. Reg.
Section 1.1502-6 or similar provisions of any state, local or foreign law as a
result of having been a member of such an affiliated group); and (ii) all Taxes
(whether assessed or unassessed) applicable to the Business, the Purchased
Assets and the Assumed Liabilities, in each case attributable to taxable years
or periods ending on or prior to the Closing Date and, with respect to any
Straddle Period, the portion of such Straddle Period ending on and including the
Closing Date; PROVIDED, HOWEVER, that Quixote and DMI shall not be liable for,
and shall not indemnify Cinram against, any such Taxes that (i) are other than
federal, state, local or foreign income or franchise Taxes and (ii) are
attributable to periods (including partial periods) beginning after September
30, 1996 (the Taxes described in this proviso being herein referred to as the
"Excluded Taxes"). Quixote and DMI shall be entitled to any refund of any Taxes
for which they are liable pursuant to the preceding sentence. Cinram shall be
liable for and shall pay, and
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pursuant to Article XI shall indemnify Quixote and DMI against: (i) all Taxes
(whether assessed or unassessed) applicable to the Business, the Purchased
Assets and the Assumed Liabilities that are attributable to taxable years or
periods beginning after the Closing Date and, with respect to any Straddle
Period, the portion of such Straddle Period beginning after the Closing Date and
(ii) all Excluded Taxes. Anything in this Section 8.3(a) to the contrary
notwithstanding, Quixote and DMI shall in all events be liable for, and shall
indemnify Cinram against, all Taxes described in Section 2.4(m), and such Taxes
shall not constitute Excluded Taxes. Cinram shall be entitled to any refund of
any Taxes for which it is liable pursuant to the second preceding sentence. All
Excluded Taxes that are payable on or prior to the Closing Date shall be timely
paid by DMI out of the assets of the Business (in accordance with past practice)
and, to the extent so paid, shall be treated as having been paid by Cinram, and
Cinram shall have no liability or indemnification obligation with respect
thereto. For purposes of this Section 8.3: (i) any Straddle Period shall be
treated on a "closing of the books" basis as two partial periods, one ending at
the close of business on the Closing Date and the other beginning on the day
after the Closing Date; and (ii) the amount of Excluded Taxes attributable to
any taxable year or period beginning before and ending after September 30, 1996
shall similarly be treated on a "closing of the books" basis as two partial
periods, one ending at the close of business on September 30, 1996 and the other
beginning on October 1, 1996. Notwithstanding the foregoing, Taxes (such as
property Taxes) imposed on a periodic basis shall be allocated on a daily basis.
(b) Quixote and DMI, on the one hand, or Cinram, on the other hand, as the
case may be, shall provide reimbursement for any Tax paid by the other party,
all or a portion of which is the responsibility of the first party in accordance
with the terms of this Section 8.3 (it being understood that any payment of
Excluded Taxes made by Quixote or DMI shall be treated as though made by
Cinram). Within a reasonable time prior to the payment of any such Tax, the
party paying such Tax shall give notice to the other party of the Tax payable
and the portion thereof which is the liability of each party, although failure
to do so will not relieve the other party from its liability hereunder. Such
notice shall set forth in reasonable detail the methodology used to calculate
the liability of each party, which shall be consistent with Section 8.3(a).
(c) After the Closing Date, each of Quixote, DMI and Cinram shall (and
cause its respective Affiliates to):
(i) assist any other party hereto in preparing any Tax Returns which
such other party is responsible for preparing and filing;
(ii) cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any Tax Returns of the Business or the
Purchased Assets;
(iii) make available to the other parties hereto and to any taxing
authority, as reasonably requested, all information, records and documents
relating to Taxes of the Business or the Purchased Assets;
(iv) provide timely notice to the other parties hereto in writing of any
pending or threatened Tax audits or assessments relating to Taxes of the
Business or the Purchased Assets for taxable periods for which the other
parties may have a liability under this Section 8.3; and
(v) furnish the other parties hereto with copies of all correspondence
received from any taxing authority in connection with any Tax audit or
information request with respect to any such taxable period.
(d) Anything in this Agreement to the contrary notwithstanding, the
obligations of the parties contained in this Section 8.3 shall be unconditional
and absolute and shall remain in effect without limitation as to time.
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(e) ELECTION UNDER SECTION 338(H)(10). DMI and Cinram shall make a joint
election for the subsidiary referred to in the last paragraph of Section 2.1
(and any of the Subsidiaries for which an election is available) under Section
338(h)(10) of the Code and under any applicable similar provisions of state or
local law with respect to the purchase of the shares of such entity
(collectively, the "Section 338(h)(10) Elections"). DMI and Cinram shall, within
30 days after the completion of the Allocation Schedule, but in no event later
than five days prior to the due date for filing Internal Revenue Service Form
8023-A, exchange completed and executed copies of Internal Revenue Service Form
8023-A and required schedules thereto, and any similar state and foreign forms.
If any changes are required in these forms as a result of information which
becomes available only after these forms are prepared, Quixote, DMI and Cinram
will promptly agree on such changes.
8.4. DISCHARGE OF LIABILITIES. (a) Quixote and DMI covenant and agree that
they shall, jointly and severally, pay and discharge, and hold Parent and Cinram
harmless from, each and every liability and obligation of Quixote and DMI in
respect of the Business or the Purchased Assets arising from events occurring on
or prior to the Closing Date, excepting only those liabilities and obligations
expressly assumed by Cinram at the Closing pursuant to the instrument of
assumption delivered to Quixote and DMI.
(b) Parent and Cinram covenant and agree that they shall, jointly and
severally, pay and discharge, and hold Quixote and DMI harmless from, each and
every liability and obligation of Parent and Cinram in respect of the Assumed
Liabilities.
8.5. EMPLOYEES AND EMPLOYEE BENEFIT PLANS. (a) Except for ▇▇▇▇▇ ▇. ▇▇▇▇▇,
immediately after the Closing, Cinram shall offer immediate employment on an
"at-will" basis, initially at salary or hourly rates, as appropriate, that are
substantially comparable to those in effect at the Closing, to:
(i) each of the employees of the Business who are actively at work as
of the Closing Date and (A) are identified on Schedule 5.18(i) or (B) are
not identified on such Schedule because they were not employees or
commission salespersons of the Business on September 30, 1996 but (1) are
hired after such date as hourly employees at standard scheduled wage rates,
with only the benefits generally available to all employees of the Business,
as to whom the information described in Section 5.18(i) will be delivered to
Parent not later than three business days prior to the Closing, or (2) have
been hired after such date and prior to the date hereof as salaried
employees and as to whom the information described in Section 5.18(i) has
been provided on Schedule 5.18(i) (except as otherwise indicated on such
Schedule); and
(ii) to any individual identified on Schedule 5.18(i) who is an
employee of the Business as of the Closing Date and is receiving sick-leave
or short-term disability benefits under Quixote's or DMI's sick-leave or
short-term disability program or who is on an approved leave of absence as
of the Closing Date and is entitled to reinstatement under applicable
federal or state law, subject to the following conditions (except to the
extent that such conditions are not applicable to the reason for such
individual's absence): (A) such individual is released by his or her
physician to return to active employment; and (B) such individual actually
returns to active employment immediately upon such release; PROVIDED,
HOWEVER, that no individual need be offered employment because of this
Section 8.5(a)(ii) after six months following the Closing Date or any
applicable longer period required by law.
This Agreement shall not create any obligation on the part of Cinram to
continue the employment of any employee for any definite period or,
notwithstanding any provision of Section 8.5(c) to the contrary, with any
particular term or condition of employment. Any person to whom employment is
offered pursuant to this Section 8.5(a) and who accepts such employment is
herein referred to as a "Transferred Employee."
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(b) Quixote, DMI and their Affiliates have not offered and will not offer
employment to any of the employees to whom Cinram must offer employment pursuant
to Section 8.5(a) during the two-year period immediately following the Closing
Date without the prior written consent of Cinram; and after the expiration of
such two-year period, Quixote or DMI may hire any employee who voluntarily
terminates employment with Cinram only if such employee terminates such
employment without any inducement from Quixote or DMI.
(c) Cinram shall use reasonable efforts to provide initially, immediately
following the Closing, the Transferred Employees with benefits of the types
listed on Schedule 8.5(c) that are substantially comparable to those benefits of
the same type provided to such employees by Quixote or DMI prior to the Closing
Date (with such comparability determined by reference to the descriptions of
such benefits found in the Draft #5 DMI Employee Handbook (unpublished) dated
October 15, 1996 or in plan documents delivered by Quixote or DMI to Cinram
pursuant to Section 5.18(c)). Such benefits may exclude, in Cinram's sole
discretion, any post-retirement or other post-termination medical or other
benefits and long-term disability insurance with respect to any pre-existing
conditions. Such reasonable efforts may exclude, in Cinram's sole discretion,
providing any medical, health, dental, eye care, long-term disability or death
benefits to any person other than on an insured basis. Quixote and DMI shall
provide, both before and after the Closing, Cinram with such information as
Cinram may reasonably request in order for Cinram to fulfill this Section
8.5(c). Cinram agrees to recognize service with DMI as if it were service with
Cinram for the purpose of determining the eligibility of the Transferred
Employees to participate in the plans providing benefits of the types listed on
Schedule 8.5(c) to be made available by Cinram to the Transferred Employees,
except to the extent that to do so would jeopardize the favorable tax status of
any such plan (without making modifications to such plan). Such service shall be
so recognized for purposes other than participation eligibility (such as for
vesting or benefit accrual under any retirement plan) only to the extent Cinram
determines in its sole discretion. Notwithstanding the preceding sentence, the
Transferred Employees shall be allowed to participate in the Cinram, Inc. 401(k)
Profit Sharing Plan and Trust ("Cinram's 401(k) Plan"), and, Cinram agrees to
recognize service with DMI as if it were service with Cinram for the purposes of
determining the eligibility of the Transferred Employees to participate in
Cinram's 401(k) Plan and to vest in benefits accrued thereunder, except to the
extent that to do so would jeopardize the favorable tax status of such plan
(without making modifications to such plan).
(d) Quixote and DMI shall take all necessary actions to assure that the
Transferred Employees will be fully vested in their accounts in the Quixote
Corporation Incentive Savings Plan ("Quixote's 401(k) Plan") as of the Closing
Date. As soon as practicable after the Closing Date, Quixote, DMI and Cinram
will co-operate to take all reasonable actions necessary to cause there to be
transferred to Cinram's 401(k) Plan the Transferred Employees' account balances
under Quixote's 401(k) Plan as of the day of transfer to Cinram's 401(k) Plan,
and at the same time cause there to be transferred from Quixote's 401(k) Plan to
Cinram's 401(k) Plan assets with a fair market value equal, as of the day of
transfer, to the sum of the account balances of the Transferred Employees in
Quixote's 401(k) Plan as of the day of transfer. Quixote shall be responsible
for there being transferred to Cinram's 401(k) Plan the correct amounts of
balances and assets, and that such amount of assets shall represent the
Transferred Employees' portion of the fair market value of all assets of
Quixote's 401(k) Plan as of such transfer date (based on the ratio by investment
of the account balances of the Transferred Employees to all account balances
under Quixote's 401(k) Plan as of such transfer date). Quixote shall provide
Cinram with such information as may be reasonably requested by Cinram to confirm
the proper balances and assets are being so transferred and to administer
Cinram's 401(k) Plan with respect to such balances after such transfers. Such
transfers shall be made only after Cinram presents to Quixote a copy of a
current IRS favorable determination letter or other evidence that Cinram's
401(k) Plan is a "qualified" plan (within the meaning of Section 401(a) of the
Code) and after Quixote presents to Cinram a copy of a current IRS favorable
determination letter or other evidence that
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Quixote's 401(k) Plan is so qualified. The transfer of assets shall be made in
cash, or in other assets if Quixote and Cinram shall so agree. The transfers
shall be made only in a manner that complies with the Code and all other
applicable laws. If (i) it shall be determined by Quixote or Cinram that the
Transferred Employees' account balances cannot be required to be transferred
pursuant to this Section 8.5(d), (ii) Cinram shall determine that such a
required transfer would require (in order for Cinram's 401(k) Plan to maintain
its qualified status) that Cinram's 401(k) Plan be amended to provide
distribution options as to time or manner or other features (other than
participant loans) with respect to the transferred account balances not
otherwise provided by Cinram's 401(k) Plan prior to the Closing, (iii) Cinram
shall determine that such a required transfer would require (in order for
Cinram's 401(k) Plan to maintain its qualified status) that Cinram's 401(k) Plan
be amended to provide distribution options as to time or manner or other
features (including participant loans) with respect to account balances of
persons (other than the Transferred Employees) that are not otherwise provided
by Cinram's 401(k) Plan prior to the Closing, (iv) Quixote or Cinram shall
determine that such assets may be liquidated to be so transferred only if such
accounts would incur a charge or penalty pursuant to any insurance or annuity
contract or otherwise or (v) Quixote or Cinram shall determine that such a
required transfer would jeopardize the tax qualified status of such plan, then
at Quixote or Cinram's option, whichever makes such determination, such transfer
shall not be made and the Transferred Employees will be entitled to
distributions from Quixote's 401(k) Plan at such times as are provided therein.
All such determinations shall be reasonable and shall be made in good faith.
Quixote and DMI agree that, for the plan year of Quixote's 401(k) Plan which
includes the Closing Date, DMI shall contribute amounts to the accounts of all
Transferred Employees, as cash or deferred contributions, employer matching
contributions and employer discretionary contributions in the same amounts as
would have been contributed if the Transferred Employees had not terminated
employment with DMI or Quixote; PROVIDED, HOWEVER, that the amount of any such
employer discretionary contributions shall be determined only by reference to
the amount of compensation earned by the Transferred Employees while employed by
Quixote or DMI. Quixote and DMI hereby represent to Cinram that the assets and
account balances to be transferred to Cinram's 401(k) Plan pursuant to this
Section 8.5(d) will not incur a charge or penalty pursuant to any insurance or
annuity contract or otherwise as a result of any such transfer being made in the
form of cash and are not invested in any life insurance with respect to any
Transferred Employee's life, and that distributions are only available under
Quixote's 401(k) Plan in the form of lump sum cash distributions. Prior to the
time any transfers are made pursuant to this Section 8.5(d), and if for any
reason it is determined that such transfers shall not be made, Transferred
Employees' account balances shall be maintained under Quixote's 401(k) Plan and
distributed in the manner and at the time provided therein.
(e) Quixote and DMI agree to take all actions necessary so that all of the
requirements of Part 6 of Title I of ERISA are satisfied and continue to be
satisfied with respect to (i) persons who are employed by DMI or Quixote at any
time prior to the Closing Date and are not employed by Cinram immediately after
the Closing Date, and all qualified beneficiaries with respect to such persons,
(ii) all Transferred Employees, and all qualified beneficiaries with respect to
such persons, as a result of such Transferred Employees' termination of
employment with DMI or Quixote and (iii) all other persons entitled to
continuation coverage under Part 6 of Title I of ERISA as a result of an event
occurring on or prior to the Closing Date. Such actions shall include providing
to all such persons an option to maintain health coverage that is at least as
valuable as that provided by Quixote and DMI prior to the Closing Date. Quixote
and DMI agree to continue all long-term disability insurance policies for all
Transferred Employees who are receiving benefits thereunder as of the Closing
Date or who are absent from work as of the Closing Date due to a disability and
would, but for any waiting period under such policy, be receiving benefits
thereunder as of the Closing Date. Quixote and DMI agree to continue such
policies in effect until such disabled employees become Transferred Employees.
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(f) During the time period following the Closing Date required under
applicable law, Quixote and DMI shall pay all wages, salaries, commissions,
bonuses and severance payments, and all payments required under all ERISA
Benefit Plans and Non-ERISA Commitments, which have accrued on or prior to the
Closing Date, or thereafter accrue or otherwise become payable, and which are
owed to employees of the Business due to employment prior to the Closing or as a
result of the transactions contemplated by this Agreement, and shall satisfy all
liabilities and obligations described in Section 2.4(m), other than those that
constitute Assumed Liabilities.
8.6. COOPERATION WITH QUIXOTE REGARDING CERTAIN LITIGATION. From and after
the Closing Date, Cinram and its Affiliates conducting the Business shall
cooperate with Quixote with respect to the litigation set forth on Schedule 8.6
by providing Quixote reasonable access during normal business hours and on
reasonable advance notice to the relevant records of the Business, and to
employees of the Business who may be called by Quixote as witnesses in any such
litigation or may be needed to provide copies of such records or any other
information which Quixote may reasonably require for such litigation and which
is not protected by any confidentiality agreement with a third Person. Quixote
shall reimburse Cinram for the direct costs of such employees' time, including
benefits, and Cinram's other out-of-pocket expenses.
8.7. CHANGE IN CORPORATE NAME. Quixote shall cause DMI promptly after the
Closing Date to change its corporate name to a name that does not include the
word "Disc" or any variation thereof.
8.8. NO SOLICITATION. From and after the date hereof, neither Quixote nor
DMI shall, directly or indirectly, solicit, initiate or encourage (including by
way of furnishing information) any Takeover Proposal from any Person, or
commence new discussions with, or continue current discussions or negotiations
relating to, any Takeover Proposal, and shall use its reasonable best efforts to
prevent any of its directors, officers, attorneys, financial advisors and other
authorized representatives from, directly or indirectly, taking any such action;
PROVIDED, HOWEVER, that Quixote and DMI may engage in discussions or
negotiations with, or furnish information concerning DMI and its properties,
assets and business to, any Person which makes, or indicates in writing an
intention to make, a Superior Proposal if the Board of Directors of Quixote
shall conclude in good faith that the failure to take such action would violate
the fiduciary obligations of such Board of Directors under applicable law.
Quixote shall promptly notify Parent of any Takeover Proposal, including the
material terms and conditions thereof. As used in this Agreement: (i) "Takeover
Proposal" means any proposal or offer for, or any expression of interest (by
public announcement or otherwise) by any Person (other than a proposal or offer
by Parent or any of its Subsidiaries or other Affiliates) in, any tender or
exchange offer for 20% or more of the equity of Quixote or DMI, any merger,
consolidation or other business combination involving Quixote or DMI or any of
its Significant Subsidiaries, any acquisition in any manner of 20% or more of
the equity of, or 20% or more of the assets of, DMI or any of its Significant
Subsidiaries or any inquiry by any person with respect to Quixote's or DMI's
willingness to receive or discuss any of the foregoing; (ii) "Superior Proposal"
means a bona fide, written and unsolicited proposal or offer made by any Person
(or group) (other than Parent or any of its Subsidiaries or other Affiliates) to
acquire Quixote or DMI pursuant to any Takeover Proposal on terms which a
majority of the members of the Board of Directors of Quixote determines in good
faith, and in the exercise of reasonable judgment (based on the advice of
independent financial advisors), to be more favorable to Quixote and its
stockholders than the transactions contemplated hereby; and (iii) "Significant
Subsidiary" shall have the meaning specified in Rule 1-02 of Regulation S-X of
the SEC.
8.9. THIRD PARTY STANDSTILL AGREEMENTS. During the period from the date of
this Agreement through the Closing Date, neither Quixote nor DMI shall
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which it or any of its subsidiaries or Affiliates is a
party. During such period, Quixote or DMI shall enforce, to the fullest extent
permitted under applicable law, the provisions of any such agreement, including,
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but not limited to, by obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in any
court of the United States of America or of any state having jurisdiction.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND CINRAM
The obligations of Parent and Cinram under this Agreement shall, at the
option of Parent, be subject to the satisfaction, on or prior to the Closing
Date, of the following conditions:
9.1. NO MISREPRESENTATION OR BREACH OF COVENANTS AND WARRANTIES. There
shall have been no material breach by Quixote or DMI in the performance of any
of their covenants and agreements herein; each of the representations and
warranties of Quixote and DMI contained or referred to herein shall be true and
correct on the Closing Date as though made on the Closing Date, except for
changes therein specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by Parent or any transaction
permitted by Section 7.4; and there shall have been delivered to Parent a
certificate to such effect, dated the Closing Date and signed on behalf of
Quixote and DMI, respectively, by its President or any Vice President.
9.2. NO CHANGES OR DESTRUCTION OF PROPERTY. Between the date hereof and
the Closing Date, there shall have been (i) no material adverse change in the
Purchased Assets or the operations, liabilities, profits, prospects or condition
(financial or otherwise) of the Business; (ii) no material adverse federal or
state legislative or regulatory change affecting the Business or its products or
services; and (iii) no material damage to the Purchased Assets by fire, flood,
casualty, act of God or the public enemy or other cause, regardless of insurance
coverage for such damage; and there shall have been delivered to Parent a
certificate to such effect, dated the Closing Date and signed on behalf of
Quixote and DMI, respectively, by its President or any Vice President.
9.3. NO RESTRAINT OR LITIGATION. The waiting period under the HSR Act
shall have expired or been terminated, and no action, suit, investigation or
proceeding shall have been instituted or threatened to restrain, prohibit or
otherwise challenge the legality or validity of the transactions contemplated
hereby or which, if the Person instituting or threatening the same were to
prevail, could reasonably be expected to have a material adverse change on the
Business or the Purchased Assets.
9.4. NECESSARY GOVERNMENTAL APPROVALS. The parties hereto shall have
received all approvals and actions of or by, or have made all necessary filings
with, all Governmental Bodies which are necessary to consummate the transactions
contemplated hereby, which are either specified on Schedule 5.3 or otherwise
required to be obtained or filed prior to the Closing by applicable Requirements
of Laws or which are necessary to prevent a material adverse change in the
Purchased Assets or the operations, liabilities, profits, prospects or condition
(financial or otherwise) of the Business.
9.5. NECESSARY CONSENTS. Quixote and DMI shall have received consents, in
form and substance reasonably acceptable to Parent, to the transactions
contemplated hereby from the other parties to all contracts, leases, licenses,
agreements and permits to which DMI or Quixote are a party or by which DMI,
Quixote or any of the Purchased Assets is affected and which are specified on
Schedule 9.5.
9.6. TITLE INSURANCE AND SURVEY. Parent shall have received, with respect
to each parcel of the Owned Real Property identified on Schedule 5.10: (i) a
current owner's title insurance policy and, with respect to the Huntsville Owned
Real Property and any other leased real property identified on Schedule 5.11, a
current leasehold owner's title insurance policy, with all premiums and related
charges paid by Quixote and/or DMI, each of which policies shall be in the form
and
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contain the endorsements, coverage and other provisions specified in Section 7.7
with respect to the commitments for such policies, and (ii) the survey required
by Section 7.7.
9.7 QUIXOTE STOCKHOLDER APPROVAL. The execution and performance of this
Agreement and the transactions contemplated hereby shall have been approved by
at least 60% of the votes entitled to be cast at the Quixote Stockholder Meeting
by the holders of the outstanding shares of Quixote capital stock in accordance
with applicable law and the Certificate of Incorporation and By-laws of Quixote.
9.8 ABSENCE OF MATERIAL ENVIRONMENTAL LIABILITIES. Cinram's environmental
investigation pursuant to Section 7.1 shall not have revealed any environmental
conditions at any of the Sellers' Properties or with respect to any of the
Purchased Assets, or any environmental non-compliance, obligation or liability
affecting the Purchased Assets or the Business, which, in any such case, could
result in any material Loss or Expense or could otherwise have a material
adverse effect on the Purchased Assets or the Business; PROVIDED, HOWEVER, that
this condition shall not be deemed to be unsatisfied until Parent shall advise
Quixote in writing of the environmental problem, specify its objections with
particularity, and Quixote shall not have satisfied Parent with respect to such
objections within 30 days after receipt by Quixote of such notice.
9.9 BANK ACCOUNTS. Prior to the Closing Date, Quixote shall have provided
to Parent a list of each bank account, safe deposit box or lock box used by DMI,
or Quixote with respect to the Business, and at the Closing shall cause each
authorized signatory thereto to resign if the same holds or relates to any of
the Purchased Assets.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF QUIXOTE AND DMI
The obligations of Quixote and DMI under this Agreement shall, at the option
of Quixote, be subject to the satisfaction, on or prior to the Closing Date, of
the following conditions:
10.1. NO MISREPRESENTATION OR BREACH OF COVENANTS AND WARRANTIES. There
shall have been no material breach by Parent or Cinram in the performance of any
of their covenants and agreements herein; each of the representations and
warranties of Parent and Cinram contained or referred to herein shall be true
and correct on the Closing Date as though made on the Closing Date, except for
changes therein specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by Quixote or any transaction
contemplated by this Agreement; and there shall have been delivered to Quixote a
certificate to such effect, dated the Closing Date and signed on behalf of
Parent and Cinram, respectively, by its President or any Vice President.
10.2. NO RESTRAINT OR LITIGATION. The waiting period under the HSR Act
shall have expired or been terminated, and no action, suit or proceeding by any
Governmental Body shall have been instituted or threatened to restrain, prohibit
or otherwise challenge the legality or validity of the transactions contemplated
hereby.
10.3. NECESSARY GOVERNMENTAL APPROVALS. The parties hereto shall have
received all approvals and actions of or by all Governmental Bodies which are
necessary to consummate the transactions contemplated hereby and are required to
be obtained prior to the Closing by applicable Requirements of Laws.
10.4. QUIXOTE STOCKHOLDER APPROVAL. The execution and performance of this
Agreement and the transactions contemplated hereby shall have been approved by
at least 60% of the votes entitled to be cast at the Quixote Stockholder Meeting
by the holders of the outstanding shares of Quixote capital stock in accordance
with applicable law and the Certificate of Incorporation and By-laws of Quixote.
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ARTICLE XI
INDEMNIFICATION
11.1. INDEMNIFICATION BY QUIXOTE AND DMI. (a) Quixote and DMI agree,
jointly and severally, to indemnify and hold harmless each Cinram Group Member
from and against any and all Losses and Expenses incurred by such Cinram Group
Member in connection with or arising from:
(i) any breach or alleged breach by Quixote or DMI of any of its
covenants in this Agreement or in any Sellers' Ancillary Agreement;
(ii) any failure of Quixote or DMI to perform any of its obligations in
this Agreement or in any Sellers' Ancillary Agreement;
(iii) any breach or alleged breach of any warranty or the inaccuracy of
any representation of Quixote or DMI contained or referred to in this
Agreement or in any written information or certificate delivered by or on
behalf of Quixote or DMI pursuant hereto;
(iv) any failure of Quixote or DMI to obtain prior to the Closing any
required consent with respect to any document referred to on Schedule 2.3(b)
or on Schedule 9.5;
(v) the failure of Quixote or DMI to comply with any applicable bulk
sales law, except that this clause (v) shall not affect the obligation of
Cinram to pay and discharge the Assumed Liabilities; or
(vi) the failure of Quixote or DMI to satisfy or otherwise perform any
Excluded Liability;
PROVIDED, HOWEVER, that neither Quixote nor DMI shall be required to
indemnify and hold harmless under clauses (i), (ii) and (iii) of this sentence
with respect to any Loss or Expense incurred by Cinram Group Members (other than
Losses and Expenses incurred as a result of inaccuracies in the representations
and warranties contained in the last paragraph of Section 2.1 or in Sections
5.1, 5.3, 5.7, 5.9, 5.17, 5.18 and 5.28 and Losses and Expenses incurred as a
result of a breach by Quixote and DMI of their covenants and obligations set
forth in Sections 3.2, 7.3, 8.3, 8.5(e), 8.5(f), 8.6 and 13.10, as to all of
which this proviso shall have no effect) only to the extent that the aggregate
amount of such Losses and Expenses exceeds $1,000,000; PROVIDED, HOWEVER, that
such aggregate amount limitation shall not apply to any claim or series of
related claims in which the aggregate amount of Losses and Expenses shall exceed
$100,000 (it being understood that, for this purpose, the amounts owed by any
account debtor and its Affiliates shall not be combined with amounts owed by
other account debtors); and PROVIDED FURTHER that the reimbursement and
indemnification obligations of Quixote and DMI under this Section 11.1 (other
than with respect to Excluded Liabilities) shall be limited to 50% of the
Purchase Price.
(b) The indemnification provided for in this Section 11.1 shall terminate
three years after the Closing Date (and no claims shall be made by any Cinram
Group Member under this Section 11.1 thereafter), except that the
indemnification by Quixote and DMI shall continue as to:
(i) the obligations and representations of Quixote and DMI under all
deeds, bills of sale and instruments of assignment delivered pursuant to
Section 4.4, as to which no time limitation shall apply;
(ii) the representations and warranties set forth in the last paragraph
of Section 2.1 and in Sections 5.7, 5.9, 5.17 and 5.18 and the covenants of
Quixote and DMI set forth in Sections 3.2, 8.3, 8.4, 8.5(e), 8.5(f), 13.2,
13.6, 13.10 and 13.13, as to all of which no time limitation shall apply
(except as may be otherwise expressly provided therein);
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(iii) the covenant set forth in Section 8.1, as to which the
indemnification provided for in this Section 11.1 shall terminate one year
after the expiration of the noncompetition period provided for therein;
(iv) any Loss or Expense of which any Cinram Group Member has notified
Quixote or DMI in accordance with the requirements of Section 11.3 on or
prior to the date such indemnification would otherwise terminate in
accordance with this Section 11.1, as to which the obligations of Quixote
and DMI shall continue until their liability shall have been determined
pursuant to this Article XI, and Quixote and DMI shall have reimbursed all
Cinram Group Members for the full amount of such Losses and Expenses in
accordance with this Article XI; and
(v) the obligations of Quixote and DMI with respect to the Excluded
Liabilities, as to which no time limitation or dollar amount limit shall
apply.
11.2. INDEMNIFICATION BY CINRAM. (a) Cinram agrees to indemnify and hold
harmless each Sellers' Group Member from and against any and all Losses and
Expenses incurred by such Sellers' Group Member in connection with or arising
from:
(i) any breach or alleged breach by Parent or Cinram of any of its
covenants in this Agreement or in any Cinram Ancillary Agreement;
(ii) any failure of Parent or Cinram to perform any of its obligations
in this Agreement or in any Cinram Ancillary Agreement; or
(iii) any breach or alleged breach of any warranty or the inaccuracy of
any representation of Parent or Cinram contained or referred to in this
Agreement or in any certificate delivered by or on behalf of Parent or
Cinram pursuant hereto;
PROVIDED, HOWEVER, that Cinram shall be required to indemnify and hold
harmless under this Section 11.2 with respect to any Loss or Expense incurred by
Sellers' Group Members (other than Losses and Expenses incurred as a result of
Cinram's failure to pay, perform or discharge any of the Assumed Liabilities,
Losses and Expenses incurred as a result of inaccuracies in the representations
and warranties contained in Article VI and Losses and Expenses incurred as a
result of a breach by Cinram of its covenants and obligations set forth in
Sections 3.2, 4.2, 7.3, 8.3, 8.6 and 13.10, as to all of which this proviso
shall have no effect) only to the extent that the aggregate amount of such
Losses and Expenses shall exceed $1,000,000; PROVIDED, HOWEVER, that such
aggregate amount limitation shall not apply to any claim or series of related
claims in which the aggregate amount of Losses and Expenses shall exceed
$100,000; and PROVIDED FURTHER that the reimbursement and indemnification
obligations of Parent and Cinram under this Section 11.2 (other than with
respect to Assumed Liabilities) shall be limited to 50% of the Purchase Price.
(b) The indemnification provided for in this Section 11.2 shall terminate
three years after the Closing Date (and no claims shall be made by any Sellers'
Group Member under this Section 11.2 thereafter), except that the
indemnification by Cinram shall continue as to:
(i) the obligations of Cinram under all instruments of assumption
delivered pursuant to Section 4.3, as to which no time limitation shall
apply;
(ii) the covenants of Parent and Cinram set forth in Sections 3.2, 8.3,
8.4, 13.2, 13.6, 13.10 and 13.13, as to all of which no time limitation
shall apply (except as may be otherwise expressly provided therein); and
(iii) any Loss or Expense of which any Sellers' Group Member has
notified Cinram in accordance with the requirements of Section 11.3 on or
prior to the date such indemnification would otherwise terminate in
accordance with this Section 11.2, as to which the obligation of Cinram
shall continue until the liability of Cinram shall have been determined
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pursuant to this Article XI, and Cinram shall have reimbursed all Sellers'
Group Members for the full amount of such Losses and Expenses in accordance
with this Article XI.
11.3. NOTICE OF CLAIMS. (a) Any Cinram Group Member or Sellers' Group
Member (the "Indemnified Party") seeking indemnification hereunder shall give to
the party obligated to provide indemnification to such Indemnified Party (the
"Indemnitor") a notice (a "Claim Notice") describing in reasonable detail the
facts giving rise to any claim for indemnification hereunder and shall include
in such Claim Notice (if then known) the amount or the method of computation of
the amount of such claim, and a reference to the provision of this Agreement or
any other agreement, document or instrument executed hereunder or in connection
herewith upon which such claim is based; PROVIDED, HOWEVER, that a Claim Notice
in respect of any action at law or suit in equity by or against a third Person
as to which indemnification will be sought shall be given promptly after the
action or suit is commenced; and PROVIDED FURTHER that failure to give such
notice shall not relieve the Indemnitor of its obligations hereunder except to
the extent it shall have been prejudiced by such failure.
(b) In calculating any Loss or Expense, there shall be deducted (i) any
insurance recovery in respect thereof (and no right of subrogation shall accrue
hereunder to any insurer) and (ii) the amount of any tax benefit to the
Indemnified Party (or any of its Affiliates) with respect to such Loss or
Expense (after giving effect to the tax effect of receipt of the indemnification
payments), as determined in accordance with Section 11.5.
(c) After the giving of any Claim Notice pursuant hereto, the amount of
indemnification to which an Indemnified Party shall be entitled under this
Article XI shall be determined: (i) by the written agreement between the
Indemnified Party and the Indemnitor; (ii) by a final judgment or decree of any
court of competent jurisdiction; or (iii) by any other means to which the
Indemnified Party and the Indemnitor shall agree. The judgment or decree of a
court shall be deemed final when the time for appeal, if any, shall have expired
and no appeal shall have been taken or when all appeals taken shall have been
finally determined. The Indemnified Party shall have the burden of proof in
establishing the amount of Loss and Expense suffered by it.
11.4. THIRD PERSON CLAIMS. (a) Subject to Section 11.4(b), the
Indemnified Party shall have the right to conduct and control, through counsel
of its choosing, the defense, compromise or settlement of any third Person
claim, action or suit against such Indemnified Party as to which indemnification
will be sought by the Indemnified Party from the Indemnitor, and, in any such
case, the Indemnitor shall cooperate in connection therewith and shall furnish
such records, information and testimony and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested by the
Indemnified Party in connection therewith; PROVIDED, HOWEVER, that the
Indemnitor may participate, through counsel chosen by it and at its own expense,
in the defense of any such claim, action or suit which the Indemnified Party has
elected to conduct and control the defense thereof; and PROVIDED FURTHER that
the Indemnified Party shall not, without the written consent of the Indemnitor
(which written consent shall not be unreasonably withheld), pay, compromise or
settle any such claim, action or suit, except that no such consent shall be
required if, following a written request from the Indemnified Party, the
Indemnitor shall fail, within 14 days after the making of such request, to
acknowledge and agree in writing that, if such claim, action or suit shall be
adversely determined, the Indemnitor has an obligation to provide
indemnification hereunder to the Indemnified Party. Notwithstanding the
preceding sentence, the Indemnified Party shall have the right to pay, settle or
compromise any such claim, action or suit without such consent; PROVIDED,
HOWEVER, that in such event the Indemnified Party shall waive any right to
indemnification hereunder therefor unless such consent shall have been
unreasonably withheld.
(b) If any third Person claim, action or suit against any Indemnified Party
shall be solely for money damages or, when Quixote and/or DMI shall be the
Indemnitor, could have no continuing effect in any material respect on the
Business or the Purchased Assets, then the Indemnitor shall
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have the right to conduct and control, through counsel of its choosing, the
defense, compromise or settlement of such third Person claim, action or suit if
indemnification will be sought hereunder by the Indemnified Party from the
Indemnitor, but only if the Indemnitor shall have acknowledged and agreed in
writing that, if such claim, action or suit shall be adversely determined, the
Indemnitor has an obligation to provide indemnification hereunder to the
Indemnified Party in respect thereof; and, in any such case, the Indemnified
Party shall cooperate in connection therewith and shall furnish such records,
information and testimony and attend such conferences, discovery proceedings,
hearings, trials and appeals as may be reasonably requested by the Indemnitor in
connection therewith; PROVIDED, HOWEVER, that the Indemnified Party may
participate, through counsel chosen by it and at its own expense, in the defense
of any such claim, action or suit which the Indemnitor has elected to conduct
and control the defense thereof. Notwithstanding the preceding sentence, the
Indemnified Party shall have the right to pay, settle or compromise any such
claim, action or suit; PROVIDED, HOWEVER, that in such event the Indemnified
Party shall waive any right to indemnification hereunder therefor unless the
Indemnified Party shall have sought the consent of the Indemnitor to such
payment, settlement or compromise and such consent shall have been unreasonably
withheld, in which event no claim for indemnification hereunder therefor shall
be waived.
11.5 INDEMNIFICATION PAYMENTS ON AFTER-TAX BASIS. Any indemnification
payment hereunder with respect to any Loss or Expense shall be an amount which
is sufficient to compensate the Indemnified Party for the amount of such Loss or
Expense, after taking into account: (i) all increases in federal, state, local,
foreign or other Taxes payable by the Indemnified Party as a result of the
receipt of such payment (by reason of such payment being included in income,
resulting in a reduction of tax basis or otherwise increasing the Taxes payable
by the Indemnified Party at any time); (ii) all increases in Taxes (including
estimated Taxes) payable by the Indemnified Party for all affected taxable years
as a result of the event giving rise to indemnification; and (iii) all
reductions in Taxes (including estimated Taxes) payable by the Indemnified Party
as a result of the event giving rise to indemnification. This Section 11.5 shall
not apply to any payment made by Cinram to Quixote or DMI to reimburse Quixote
or DMI for a payment of Taxes made by Quixote or DMI for which Cinram is liable
pursuant to this Agreement.
ARTICLE XII
TERMINATION
12.1. TERMINATION. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual written consent of Parent and Quixote;
(b) by Parent if (i) Quixote or DMI shall have failed to comply in any
material respect with any of its covenants or agreements contained in this
Agreement required to be complied with prior to the date of such
termination, which failure to comply has not been cured within 30 days after
receipt by Quixote of notice of such failure to comply, or (ii) the
stockholders of Quixote shall not approve this Agreement and the
transactions contemplated hereby at the Quixote Stockholder Meeting or any
adjournment thereof prior to February 28, 1997;
(c) by Quixote if (i) Parent or Cinram shall have failed to comply in
any material respect with any of its covenants or agreements contained in
this Agreement required to be complied with prior to the date of such
termination, which failure to comply has not been cured within 30 days after
receipt by Parent of notice of such failure to comply, or (ii) the
stockholders of Quixote shall not approve this Agreement and the
transactions contemplated hereby at the Quixote Stockholder Meeting or any
adjournment thereof prior to April 30, 1997;
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(d) by either Parent or Quixote if there has been (i) a material breach
by the other (or DMI if Parent is the terminating party or Cinram if Quixote
is the terminating party) of any representation or warranty that is not
qualified as to materiality or (ii) a breach by the other (or DMI if Parent
is the terminating party or Cinram if Quixote is the terminating party) of
any representation or warranty that is qualified as to materiality, in each
case which breach has not been cured within 30 days after receipt by the
breaching party of notice of the breach;
(e) by either Parent or Quixote if: (i) the Closing has not been
effected on or prior to the close of business on June 30, 1997; PROVIDED,
HOWEVER, that the right to terminate this Agreement pursuant to this clause
(e) shall not be available to any party whose failure to fulfill any
obligation of this Agreement has been the cause of, or resulted in, the
failure of the Closing to have occurred on or prior to such date; or (ii)
any court or other Governmental Body having jurisdiction over a party hereto
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable;
(f) by either Parent or Quixote if the Board of Directors of Quixote
shall reasonably determine that a Takeover Proposal constitutes a Superior
Proposal; PROVIDED, HOWEVER, that Quixote may not terminate this Agreement
pursuant to this clause (f) unless (i) 10 business days shall have elapsed
after delivery to Parent of a written notice of such determination by such
Board of Directors and during such 10 business-day period Quixote shall have
fully cooperated with Parent, including, without limitation, informing
Parent of the terms and conditions of such Takeover Proposal, with the
intent of enabling Parent and Cinram to agree to a modification of the terms
and conditions of this Agreement so that the transactions contemplated
hereby may be effected, and (ii) at the end of such 10 business-day period
such Board of Directors shall continue reasonably to believe that such
Takeover Proposal constitutes a Superior Proposal and promptly thereafter
Quixote shall enter into a definitive acquisition, merger or similar
agreement to effect such Superior Proposal;
(g) by Parent if the Board of Directors of Quixote shall not have
recommended this Agreement and the transactions contemplated hereby to
Quixote's stockholders, or shall have resolved not to make such
recommendation, or shall have modified or rescinded its recommendation
thereof to Quixote's stockholders as being advisable and fair to and in the
best interests of Quixote and its stockholders, or shall have modified or
rescinded its approval of this Agreement, or shall have resolved to do any
of the foregoing;
(h) by Parent in accordance with the last sentence of Section 7.1
within 30 days after Quixote shall have refused in writing to give the
requested consent;
(i) by Parent if Quixote or DMI shall breach any of their covenants or
agreements contained in Section 8.8; or
(j) by Parent or Quixote in accordance with Section 3.4 within 10
business days after the Purchase Price shall have been finally determined.
The right of Parent to terminate this Agreement pursuant to this Section
12.1 shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of Parent, whether prior to or after the
execution of this Agreement.
12.2. NOTICE OF TERMINATION. Any party desiring to terminate this
Agreement pursuant to Section 12.1 shall give written notice of such termination
to the other parties to this Agreement.
12.3. EFFECT OF TERMINATION. In the event that this Agreement shall be
terminated pursuant to this Article XII, all further obligations of the parties
under this Agreement (other than Sections 13.2 and 13.10) shall be terminated
without further liability of any party to the other parties, provided that
nothing herein shall relieve any party from liability for its willful breach of
this Agreement.
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ARTICLE XIII
GENERAL PROVISIONS
13.1. SURVIVAL OF OBLIGATIONS. All representations, warranties, covenants
and obligations contained in this Agreement shall survive the consummation of
the transactions contemplated by this Agreement; PROVIDED, HOWEVER, that, except
as otherwise provided in Article XI, the representations and warranties
contained in Articles V and VI shall terminate on the third anniversary of the
Closing Date. Except as otherwise provided herein, no claim shall be made for
the breach of any representation or warranty contained in Article V or VI or in
any written information or certificate delivered with respect thereto under this
Agreement after the date on which such representations and warranties terminate
as set forth in this Section 13.1.
13.2. CONFIDENTIAL NATURE OF INFORMATION. Each party hereto agrees that it
will treat in confidence all documents, materials and other information which it
shall have obtained regarding the other parties during the course of the
negotiations leading to the consummation of the transactions contemplated hereby
(whether obtained before or after the date of this Agreement), the investigation
provided for herein and the preparation of this Agreement and other related
documents, and, in the event the transactions contemplated hereby shall not be
consummated, each party hereto shall return all copies of nonpublic documents
and materials which have been furnished in connection therewith. Such documents,
materials and information shall not be communicated to any third Person (other
than, in the case of Parent and Cinram, to their counsel, accountants, financial
advisors or lenders and, in the case of Quixote and DMI, to their counsel,
accountants or financial advisors). No party hereto shall use any confidential
information in any manner whatsoever except solely for the purpose of evaluating
the proposed purchase and sale of the Purchased Assets and the Business;
PROVIDED, HOWEVER, that, after the Closing, Parent and Cinram may use or
disclose any confidential information included in the Purchased Assets or
otherwise reasonably related to the Business or the Purchased Assets. Prior to
the Closing, Parent and Cinram shall refrain from disclosing any confidential
information to any employee of Parent or any of its Affiliates, other than the
Chairman, President and Chief Executive Officer, the Vice-President of Finance
and Chief Financial Officer and the Controller of Parent; and the President and
Chief Executive Officer and the Director of Finance and Administration of
Cinram. The obligation of each party hereto to treat such documents, materials
and other information in confidence shall not apply to any information which (i)
is or becomes available to such party from a source other than the other parties
hereto, (ii) is or becomes available to the public other than as a result of
disclosure by such party or its agents, (iii) is required to be disclosed under
applicable law or judicial process, but only to the extent it must be disclosed,
or (iv) such party reasonably deems necessary to disclose to obtain any of the
consents or approvals contemplated hereby.
13.3. NO PUBLIC ANNOUNCEMENT. Parent and Quixote shall not, without the
approval of the other, make any press release or other public announcement
concerning the transactions contemplated by this Agreement, except as and to the
extent that either such party shall be so obligated by law or the rules of any
stock exchange, in which case the other shall be advised and such parties shall
use their best efforts to cause a mutually agreeable release or announcement to
be issued; PROVIDED, HOWEVER, that the foregoing shall not preclude
communications or disclosures necessary to implement the provisions of this
Agreement or to comply with all applicable statutory or regulatory disclosure
obligations. At the time of the signing of this Agreement, or as soon as
practicable thereafter, Parent and Quixote shall jointly communicate such event,
in form and substance reasonably acceptable to each, to the customers, suppliers
and employees of the Business.
13.4. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, sent by
facsimile transmission or sent by certified, registered or express mail, postage
prepaid. Any such notice shall be deemed given when
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delivered personally or sent by facsimile transmission (after receiving
confirmation of receipt) or, if mailed, five days after the date of deposit in
the United States mail, postage prepaid, or, if express mailed, one business day
after delivery to a reputable over-night express mail courier, as follows:
If to Parent or Cinram, to:
Cinram Ltd.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ Philosophe
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Cinram U.S. Holdings
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Fogler, ▇▇▇▇▇▇▇▇
Suite 4400 -- P. O. ▇▇▇ ▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ May, Q.C.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and
Sidley & Austin
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to Quixote, to:
Quixote Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Quixote Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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If to DMI, to:
Disc Manufacturing Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇ Schiave, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Any party hereto may by notice given in accordance with this Section 13.4 to the
other parties designate another address or Person for receipt of notices
hereunder. Notices hereunder may be given by the attorney for any party hereto.
13.5. SUCCESSORS AND ASSIGNS. (a) Except as otherwise provided in Section
13.16, the rights of the parties under this Agreement shall not be assignable
prior to the Closing without the written consent of the other parties. Following
the Closing, any party hereto may assign any of its rights hereunder, but no
such assignment shall relieve the assigning party of any of its obligations
hereunder.
(b) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. The
successors and permitted assigns of Cinram shall include, without limitation,
any permitted assignee as well as the successors in interest to such permitted
assignee (whether by merger, liquidation (including successive mergers or
liquidations) or otherwise). Nothing in this Agreement, expressed or implied, is
intended or shall be construed to confer upon any Person (other than the parties
hereto and their respective successors and permitted assigns) any right, remedy
or claim under or by reason of this Agreement.
13.6. ACCESS TO RECORDS AFTER CLOSING. (a) For a period of six years after
the Closing Date, Quixote, DMI and their representatives shall have reasonable
access to all of the books and records of the Business transferred to Cinram
hereunder to the extent that such access may reasonably be required by Quixote
or DMI in connection with matters relating to or affected by the operations of
the Business prior to the Closing Date. Such access shall be afforded by Cinram
upon receipt of reasonable advance notice and during normal business hours.
Except as otherwise expressly provided in Section 8.6, Quixote shall be solely
responsible for all costs or expenses incurred pursuant to this Section 13.6(a).
If Cinram shall desire to dispose of any of such books and records prior to the
expiration of such six-year period, Cinram shall, prior to such disposition,
give Quixote a reasonable opportunity, at Quixote's expense, to segregate and
remove such books and records as Quixote may select.
(b) For a period of six years after the Closing Date, Parent, Cinram and
their representatives shall have reasonable access to all of the books and
records relating to the Business which Quixote, DMI or any of their Affiliates
may retain after the Closing Date. Such access shall be afforded by Quixote, DMI
and their Affiliates upon receipt of reasonable advance notice and during normal
business hours. Parent shall be solely responsible for all costs and expenses
incurred pursuant to this Section 13.6(b). If Quixote, DMI or any of their
Affiliates shall desire to dispose of any of such books and records prior to the
expiration of such six-year period, Quixote shall, prior to such disposition,
give Parent a reasonable opportunity, at Parent's expense, to segregate and
remove such books and records as Parent may select.
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13.7. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Exhibits and
Schedules referred to herein and the documents delivered pursuant hereto contain
the entire understanding of the parties hereto with regard to the subject matter
contained herein or therein, and supersede all prior agreements, understandings
or letters of intent between or among any of the parties hereto, except that the
Confidentiality Agreement shall survive. This Agreement shall not be amended,
modified or supplemented except by a written instrument signed by an authorized
representative of each of the parties hereto.
13.8. INTERPRETATION. The headings in this Agreement are for convenience
of reference only and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement. The Schedules and Exhibits referred to
herein and the documents delivered pursuant hereto shall be construed with and
as an integral part of this Agreement, to the same extent as if they were set
forth verbatim herein.
13.9. WAIVERS. Any term or provision of this Agreement may be waived, or
the time for its performance may be extended, by the party or parties hereto
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to a
particular party, such waiver is authorized in writing by an authorized
representative of such party. The failure of any party hereto to enforce at any
time any provision of this Agreement shall not be construed to be a waiver of
such provision, nor in any way to affect the validity of this Agreement or any
part hereof or the right of such party thereafter to enforce such provision. No
waiver of any breach of this Agreement shall be held to constitute a waiver of
any other or subsequent breach.
13.10. EXPENSES; OTHER RIGHTS. (a) Each party hereto shall pay all costs
and expenses incident to its negotiation and preparation of this Agreement and
to its performance of and compliance with all agreements and conditions
contained herein on its part to be performed or complied with, including the
fees, expenses and disbursements of its counsel and, subject to Section 5.4, its
accountants. The cost of the commitments for title insurance described in
Section 7.7 and the cost of the title insurance policies described in Section
9.6 shall be paid by Quixote. The cost of the surveys described in Section 7.7
shall be paid by Cinram.
(b) Notwithstanding any provision in this Agreement to the contrary, if (i)
this Agreement shall be terminated pursuant to Section 12.1(g) or (ii)(A) the
stockholders of Quixote shall not approve this Agreement and the transactions
contemplated hereby at the Quixote Stockholder Meeting or any adjournment
thereof prior to April 30, 1997 and (B) there shall have been a bona fide
Takeover Proposal (a "Contemporaneous Takeover Proposal") which shall have been
publicly disclosed at or prior to such meeting, Quixote shall, in addition to
any other rights or claims available to Cinram under applicable law, immediately
pay to Cinram an amount in cash equal to $4,250,000 plus Cinram's legal fees and
expenses.
(c) If (i) this Agreement shall be terminated by Parent or Quixote without
Cinram having purchased the Business and the Purchased Assets and (ii) any
Contemporaneous Takeover Proposal shall relate to the equity or assets of DMI,
Quixote shall, in addition to making the payment required by Section 13.10(b),
also offer to sell, transfer, assign, convey and deliver such equity or assets
to Cinram at a purchase price equal to the price thereof specified in such
Contemporaneous Takeover Proposal and upon the other terms and conditions set
forth therein. Cinram shall have 15 days in which to accept or reject such
offer.
(d) If (i) this Agreement shall be terminated by Parent or Quixote without
Cinram having purchased the Business and the Purchased Assets (other than by
Quixote pursuant to Section 12.1(d) and (ii) no Contemporaneous Takeover
Proposal shall have been consummated within 75 days after such termination,
Cinram shall be offered the right to match any other or further Takeover
Proposal (a "Later Takeover Proposal") received by Quixote or DMI prior to
January 1, 1998 for the assets or equity of DMI. Cinram shall have 15 days in
which to accept or reject such offer.
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(e) If prior to January 1, 1998, pursuant to any transaction between Parent
or Cinram and any Person consummating a Contemporaneous Takeover Proposal or a
Later Takeover Proposal, (i) Parent or Cinram shall acquire all or substantially
all of the assets of DMI or all of the outstanding capital stock of DMI at a
price less than what the Purchase Price (determined as provided in Article III)
would have been had the Closing hereunder occurred and (ii) Cinram shall have
received from Quixote the cash amount specified in Section 13.10(b), Cinram
shall immediately pay to Quixote an amount in cash equal to the difference
between such price (which shall be deemed to include any liabilities assumed by
Parent or Cinram, as the case may be) and the Purchase Price, but not to exceed
the cash amount so received by Cinram from Quixote.
(f) The parties hereto shall cooperate fully, pursuant to advice from their
respective counsel, with respect to all matters affecting California sales and
real estate transfer Taxes that may become due and payable by Quixote, DMI,
Cinram or the subsidiary referred to in the last paragraph of Section 2.1,
whether prior to, at or after the Closing Date, as a result of the transactions
contemplated hereby. The liability for such sales and real estate transfer
Taxes, plus any interest due with respect thereto and any counsel fees or
expenses of contesting the same, shall be paid 50% by Cinram and 50% by Quixote;
PROVIDED, HOWEVER, that Quixote's liability therefor shall be limited to
$250,000. Cinram shall pay all such sales and real estate transfer Taxes, plus
any interest with respect thereto and any counsel fees or expenses of contesting
the same, to the extent that the aggregate liability therefor shall exceed
$500,000. Cinram agrees to timely sign and deliver such certificates or forms as
may be necessary or appropriate to establish an exemption from, or file Tax
Returns with respect to, such sales and real estate transfer Taxes.
13.11. PARTIAL INVALIDITY. Wherever possible, each provision hereof shall
be interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability, without invalidating the remainder
of such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
13.12. EXECUTION IN COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts shall together
constitute one and the same instrument.
13.13. FURTHER ASSURANCES. From time to time following the Closing,
Quixote and DMI shall execute and deliver, or cause to be executed and
delivered, to Cinram such other instruments of conveyance and transfer as Parent
may reasonably request or as may be necessary in order to more effectively
convey and transfer to, and vest in, Cinram, and put Cinram in possession of,
any part of the Purchased Assets. In case any of the licenses, certificates,
approvals, authorizations, agreements, contracts, leases, easements, Government
Permits and other commitments included in the Purchased Assets which cannot be
transferred or assigned effectively without the consent of third Persons, which
consent shall not have been obtained prior to the Closing, Quixote and DMI shall
to cooperate with Cinram, at its request, in endeavoring to obtain such consent
promptly thereafter; and if any such consent shall be unobtainable, Quixote and
DMI shall use their best efforts to secure to Cinram the benefits of the
unassigned instrument in some other manner (including the exercise of the rights
of Quixote and/or DMI thereunder); PROVIDED, HOWEVER, that nothing in this
Section 13.13 shall relieve Quixote or DMI of their obligations under Section
7.3. Anything in this Agreement to the contrary notwithstanding, this Agreement
shall not constitute an agreement to assign any license, certificate, approval,
authorization, agreement, contract, lease, easement, Government Permit or other
commitment included in the Purchased Assets if an attempted assignment thereof,
without the consent of another party thereto, would constitute a breach thereof.
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13.14. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Illinois, regardless of the laws
that might otherwise govern under applicable principles of conflict of laws of
such state.
13.15. SUBMISSION TO JURISDICTION. Parent, Cinram, Quixote and DMI each
hereby irrevocably submit in any suit, action or proceeding arising out of or
related to this Agreement or any of the transactions contemplated hereby to the
jurisdiction of the United States District Court for the Northern District of
Illinois and the jurisdiction of any court of the State of Illinois located in
Chicago and waive any and all objections to jurisdiction that it may have under
the laws of the United States or the State of Illinois. Parent and Cinram each
designate CT Corporation System with offices on the date hereof at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ as its agent to receive
service of any and all process and documents on its behalf in any suit, action
or proceeding referred to in the preceding sentence.
13.16. SUBSTITUTION OF PURCHASER. Parent shall have the right to
substitute any of its Affiliates as the purchaser of the Purchased Assets and
the Business hereunder by written notice to Quixote, which notice shall be
signed by Parent, Cinram and such Affiliate and shall contain such Affiliate's
agreement to be bound by this Agreement and a confirmation by such Affiliate of
the accuracy with respect to it of the representations set forth in Article VI.
Upon receipt of such notice, wherever the word "Cinram" appears in this
Agreement (other than in this Section 13.16), such word shall be deemed to refer
to such Affiliate in lieu of Cinram. Cinram shall, upon delivery of such notice,
be discharged of all further liability and obligation hereunder.
13.17. GUARANTEE OF PERFORMANCE. Parent hereby unconditionally guarantees,
for the benefit of Quixote and DMI, the representations and warranties of Cinram
(including any successor pursuant to Section 13.16) herein and the due and
punctual performance of each of the obligations and covenants of Cinram
(including any such successor) hereunder and under the instrument of assumption
delivered pursuant to Section 4.3(d).
13.18. PUNITIVE DAMAGES. In the event that any of the parties hereto shall
file any action or suit against one or more of the other parties hereto, the
party instituting such action or suit hereby waives any right to seek punitive
or treble damages and shall limit its claims to compensatory damages.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
CINRAM LTD.
By
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(Title)
-----------------------------------
CINRAM INC.
By
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(Title)
-----------------------------------
QUIXOTE CORPORATION
By
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(Title)
-----------------------------------
DISC MANUFACTURING, INC.
By
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(Title)
-----------------------------------
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