Exhibit 2.4
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PURCHASE AGREEMENT
among
ZD INC.,
ZD HOLDINGS (EUROPE) LTD.
and
WS-ZD Acquisition, Inc.
Dated as of December 6, 1999
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TABLE OF CONTENTS
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Page
ARTICLE I DEFINITIONS...........................................................................................2
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SECTION 1.1 DEFINIT.........................................................................................2
ARTICLE II SALE AND PURCHASE OF ASSETS AND SHARES...............................................................5
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SECTION 2.1 SALE AND PURCHASE OF ASSETS.....................................................................5
SECTION 2.2 SALE AND PURCHASE OF SHARES.....................................................................6
SECTION 2.3 EXCLUDED ASSETS.................................................................................6
SECTION 2.4 ASSUMPTION OF LIABILITIES.......................................................................8
SECTION 2.5 PURCHASE PRICES................................................................................10
SECTION 2.6 PAYMENT OF PURCHASE PRICE......................................................................12
SECTION 2.7 THE CLOSING....................................................................................13
SECTION 2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENTS........................................................13
SECTION 2.9 CERTAIN EUROPEAN RESTRUCTURING MATTERS.........................................................15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS..........................................................16
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SECTION 3.1 ORGANIZATION AND GOOD STANDING.................................................................16
SECTION 3.2 CAPITALIZATION.................................................................................16
SECTION 3.3 CORPORATE AUTHORITY............................................................................17
SECTION 3.4 CONSENTS AND APPROVALS.........................................................................17
SECTION 3.5 NO VIOLATIONS..................................................................................17
SECTION 3.6 FINANCIAL STATEMENTS...........................................................................18
SECTION 3.7 ABSENCE OF CERTAIN CHANGES AND EVENTS..........................................................18
SECTION 3.8 LITIGATION; ORDERS.............................................................................20
SECTION 3.9 TAXES..........................................................................................20
SECTION 3.10 EMPLOYEE BENEFITS; ERISA......................................................................22
SECTION 3.11 EMPLOYEES; LABOR MATTERS......................................................................23
SECTION 3.12 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS.............................................24
SECTION 3.13 REAL PROPERTY.................................................................................24
SECTION 3.14 CONTRACTS, LEASES AND AGREEMENTS; NO DEFAULT..................................................25
SECTION 3.15 ENVIRONMENTAL MATTERS.........................................................................27
SECTION 3.16 INSURANCE.....................................................................................28
SECTION 3.17 BROKERS AND FINDERS...........................................................................29
SECTION 3.18 NO UNDISCLOSED LIABILITIES....................................................................29
SECTION 3.19 INTELLECTUAL PROPERTY.........................................................................29
SECTION 3.20 TRANSFERRED ASSETS............................................................................29
SECTION 3.21 YEAR 2000 COMPLIANCE..........................................................................30
SECTION 3.22 SEC FILINGS...................................................................................30
SECTION 3.23 RELATED PARTY TRANSACTIONS....................................................................30
SECTION 3.24 CAPITALIZATION................................................................................30
SECTION 3.25 LIABILITIES...................................................................................31
SECTION 3.26 NO OTHER REPRESENTATIONS OR WARRANTIES; DISCLAIMER OF REPRESENTATIONS AND WARRANTIES..........31
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.............................................................31
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SECTION 4.1 ORGANIZATION AND GOOD STANDING.................................................................31
SECTION 4.2 CORPORATE AUTHORITY............................................................................31
SECTION 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS..........................................................31
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SECTION 4.4 SECURITIES ACT..................................................................................32
SECTION 4.5 BROKERS AND FINDERS.............................................................................32
SECTION 4.6 FINANCING.......................................................................................32
SECTION 4.7 LITIGATION......................................................................................33
SECTION 4.8 NO OTHER REPRESENTATIONS OR WARRANTIES..........................................................33
ARTICLE V COVENANTS.............................................................................................33
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SECTION 5.1 CONDUCT OF BUSINESS.............................................................................33
SECTION 5.2 ACCESS..........................................................................................34
SECTION 5.3 REQUIRED CONSENTS, APPROVALS AND ACTIONS........................................................35
SECTION 5.4 COMMERCIALLY REASONABLE EFFORTS.................................................................36
SECTION 5.5 PUBLICITY.......................................................................................36
SECTION 5.6 EXPENSES........................................................................................37
SECTION 5.7 ZDMI NON-SOLICITATION...........................................................................37
SECTION 5.8 EMPLOYEES.......................................................................................37
SECTION 5.9 INTERCOMPANY LIABILITIES........................................................................40
SECTION 5.10 INTERCOMPANY PROGRAMS..........................................................................40
SECTION 5.11 TRANSITION SERVICES AND SUBLEASES..............................................................40
SECTION 5.12 RETENTION OF RECORDS...........................................................................41
SECTION 5.13 ASSET SELLER'S TRADEMARKS......................................................................41
SECTION 5.14 TAX MATTERS....................................................................................42
SECTION 5.15 FURTHER ASSURANCES.............................................................................43
SECTION 5.16 NON-ASSIGNABLE AGREEMENTS......................................................................43
SECTION 5.17 AUDITED FINANCIAL STATEMENTS...................................................................44
SECTION 5.18 CONFIDENTIALITY................................................................................45
SECTION 5.19 STOCKHOLDERS MEETING; INFORMATION SUPPLIED.....................................................46
SECTION 5.20 INSURANCE......................................................................................47
SECTION 5.21 SALE OF INVESTMENTS............................................................................48
SECTION 5.22 ESTOPPEL LETTERS...............................................................................48
SECTION 5.23 UNREGISTERED TRADEMARKS........................................................................48
SECTION 5.24 INTER@CTIVE INVESTOR...........................................................................48
ARTICLE VI CONDITIONS TO CLOSING................................................................................49
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SECTION 6.1 CONDITIONS TO OBLIGATIONS OF BUYER..............................................................49
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF SELLERS............................................................52
ARTICLE VII TERMINATION.........................................................................................53
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SECTION 7.1 TERMINATION.....................................................................................53
SECTION 7.2 EFFECT OF TERMINATION...........................................................................54
ARTICLE VIII INDEMNIFICATION; REMEDIES..........................................................................54
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SECTION 8.1 SURVIVAL........................................................................................54
SECTION 8.2 INDEMNIFICATION BY BUYER AND SELLERS............................................................55
SECTION 8.3 TAX INDEMNIFICATION BY STOCK SELLER; PROCEDURE..................................................55
SECTION 8.4 TAX INDEMNIFICATION BY BUYER; PROCEDURE.........................................................57
ARTICLE IX MISCELLANEOUS........................................................................................59
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SECTION 9.1 ASSIGNMENTS; NO THIRD PARTY RIGHTS..............................................................59
SECTION 9.2 ENTIRE AGREEMENT................................................................................60
SECTION 9.3 AMENDMENT OR MODIFICATION.......................................................................60
SECTION 9.4 NOTICES.........................................................................................60
SECTION 9.5 GOVERNING LAW...................................................................................61
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SECTION 9.6 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL...................................................61
SECTION 9.7 SEVERABILITY....................................................................................62
SECTION 9.8 WAIVER OF CONDITIONS............................................................................62
SECTION 9.9 ACTIONS OF THE COMPANIES........................................................................63
SECTION 9.10 DESCRIPTIVE HEADINGS; CONSTRUCTION.............................................................63
SECTION 9.11 COUNTERPARTS...................................................................................63
SECTION 9.12 KNOWLEDGE......................................................................................63
SECTION 9.13 MATERIALITY....................................................................................63
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EXHIBITS
Exhibit A The Companies
Exhibit B Magazines and other Publications
Exhibit C The Investments
Exhibit D Commitment Letters
Exhibit E ▇▇▇▇ of Sale and Assignment
Exhibit F ZDNet License Agreement
Exhibit G "ZD" ▇▇▇▇ License Agreement
Exhibit H Services Agreement
Exhibit I Assumption Agreement
SELLER'S DISCLOSURE SCHEDULE
Schedule 2.1 Assets Not Related to the Business
Schedule 2.4(i) Special Bonus - Excluded Liability
Schedule 3.2(d) Ownership by the Companies
Schedule 3.4 Governmental Consents and Approvals
Schedule 3.5(b) Violations
Schedule 3.5(c) Consents
Schedule 3.6 Financial Statements
Schedule 3.7 Absence of Certain Changes and Events
Schedule 3.8(a) Litigation
Schedule 3.8(c) Claims by Freelance Employees or Independent Contractors
Schedule 3.9(a) Taxes
Schedule 3.10(a) Benefit Plans
Schedule 3.11(a) Employees of the Division and the Companies
Schedule 3.11(b) Other Employees
Schedule 3.13(a) Real Property
Schedule 3.13(b) Transferability, Enforceability, Encumbrances, Etc.
Schedule 3.14(a) Certain Contracts
Schedule 3.14(b) Enforceability and Compliance under Certain Contracts
Schedule 3.16 Insurance
Schedule 3.19 Intellectual Property
Schedule 3.23 Related Party Transactions
Schedule 5.1(e) New, Terminated or Modified Applicable Contracts
Schedule 5.1(i) Transfer of Assets by Stock Seller
Schedule 5.8(a) Employees on Disability Leave, Authorized Leave or Military
Service
Schedule 5.8(c) Enhanced Severance Benefit Plan
Schedule 5.8(e) Retention Costs and Special Bonuses
Schedule 5.11(a) Use Agreements
Schedule 5.11(b) Subleases
Schedule 5.15 Performance Bond, Letter of Credit or Similar Instrument
Schedule 5.22 Certain Leased Real Property
Schedule 9.12 Persons Deemed to Have Knowledge
Schedule 9.13 Financial Projections
BUYER'S DISCLOSURE SCHEDULE
Schedule 4.3 Consents and Approvals
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PURCHASE AGREEMENT, dated as of December 6, 1999 (this "Agreement"), by and
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between ZD INC., a Delaware corporation ("Asset Seller"), ZD HOLDINGS (EUROPE)
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LTD., a company incorporated under the laws of the United Kingdom ("Stock
Seller") and WS-ZD Acquisition, Inc., a Delaware corporation ("Buyer") and any
permitted assignee of Buyer under Section 9.1. Asset Seller and Stock Seller are
sometimes referred to herein individually as a "Seller" or the "Applicable
Seller" and collectively as "Sellers", as the context requires.
WHEREAS, except as set forth in Exhibit A hereto, Stock Seller owns,
directly or indirectly, all of the issued and outstanding shares of capital
stock of, or other equity interest in, the corporations and the other entities
set forth in Exhibit A (each a "Company" and, collectively, the "Companies").
WHEREAS, Asset Seller, through its ZD Publishing division (the "Division"),
and the Companies are engaged in the business of publishing magazines and other
publications about computers, the Internet, gaming and other technology related
topics, which magazines and other publications are set forth in Exhibit B
hereto, including the businesses of developing and distributing benchmarks for
measuring performance of Internet, computer and network products and systems and
the provision of testing services for technology vendors (collectively, the
"Business").
WHEREAS, the parties have agreed that Asset Seller shall sell, transfer and
assign to Buyer certain assets of Asset Seller related to the Business, and
Buyer shall assume certain liabilities of Asset Seller related to the Business,
in each case upon the terms and subject to the conditions set forth herein.
WHEREAS, the parties have agreed that Stock Seller shall sell and Buyer or
any permitted assignee of Buyer under Section 9.1 shall purchase from Stock
Seller all of the issued and outstanding shares of capital stock of, or other
equity interests in, the Companies (the "Shares") upon the terms and subject to
the conditions set forth herein.
WHEREAS, ▇▇▇▇-▇▇▇▇▇ Inc. holds, directly or indirectly, all of the
outstanding capital stock of Asset Seller and Stock Seller, and SOFTBANK America
Inc. ("SOFTBANK") is holder of 71,619,355 shares of ▇▇▇▇-▇▇▇▇▇ Inc.-ZD Common
Stock and, contemporaneously with the execution hereof, SOFTBANK is executing
and delivering to Buyer an agreement and irrevocable proxy (the "Voting
Agreement") to vote all of its shares of ▇▇▇▇-▇▇▇▇▇ Inc.'s stock to approve the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties and arrangements set forth herein, and intending to
be legally bound hereby, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
The following terms are defined in the sections indicated.
Defined Term Section
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"Accounting Expert"........................................................... Section 2.8(e)
"Action"...................................................................... Section 3.8(a)
"Affiliate"................................................................... Section 2.3(c)
"Agreement"................................................................... Recitals
"Annual Financial Statements"................................................. Section 3.6
"Applicable Contracts"........................................................ Section 3.5(c)
"Applicable Seller"........................................................... Recitals
"Asset Purchase".............................................................. Section 2.1
"Asset Purchase Price"........................................................ Section 2.5(a)
"Asset Seller"................................................................ Recitals
"Asset Seller Benefit Plans".................................................. Section 3.10(a)
"Assumed Liabilities"......................................................... Section 2.4
"Benefit Plans"............................................................... Section 3.10(a)
"Books and Records"........................................................... Section 2.1(g)
"Business".................................................................... Recitals
"Buyer"....................................................................... Recitals
"Buyer's Plan"................................................................ Section 5.8(d)
"Closing"..................................................................... Section 2.7
"Closing Date"................................................................ Section 2.7
"Closing Date Tangible Net Worth"............................................. Section 2.8(a)
"Code"........................................................................ Section 8.3(a)
"Companies"................................................................... Recitals
"Company"..................................................................... Recitals
"Company Benefit Plans"....................................................... Section 3.10(a)
"Confidentiality Agreement"................................................... Section 7.2
"Consideration"............................................................... Section 5.14(c)
"Contract".................................................................... Section 3.5(b)
"Division".................................................................... Recitals
"DOJ"......................................................................... Section 5.3(b)
"Draft Financial Statements" ................................................. Section 5.17(a)
"Draft 1999 EBITDA" .......................................................... Section 2.5(c)(1)
"EBITDA Accounting Expert" ................................................... Section 2.5(c)(4)
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Defined Term Section
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"EBITDA Review Period" ....................................................... Section 2.5(c)(2)
"EBITDA Statement of Objections" ............................................. Section 2.5(c)(3)
"Enforceability Exceptions"................................................... Section 3.3
"Environmental Law"........................................................... Section 3.15(b)
"ERISA"....................................................................... Section 3.10(a)
"Excluded Assets"............................................................. Section 2.3
"Excluded Employment Liabilities"............................................. Section 5.8(a)
"Excluded Liabilities"........................................................ Section 2.4(d)
"Filings and Approvals"....................................................... Section 6.1(c)
"Final Asset Purchase Adjustments"............................................ Section 2.8(h)
"Financial Statements"........................................................ Section 3.6
"Financial Statements Accounting Expert"...................................... Section 5.17(d)
"Financial Statements Review Period".......................................... Section 5.17(b)
"Financial Statements Statement of Objections"................................ Section 5.17(c)
"FTC"......................................................................... Section 5.3(b)
"GAAP"........................................................................ Section 2.8(a)
"Governmental Authorizations"................................................. Section 3.12(b)
"Governmental Entity"......................................................... Section 3.4
"Governmental Prohibition".................................................... Section 6.1(d)
"Hazardous Substance"......................................................... Section 3.15(b)
"HSR Act"..................................................................... Section 2.7
"HSR Filing".................................................................. Section 3.4
"Initial Cash Purchase Price"................................................. Section 2.5(a)
"Initial Cash Purchase Price for the Assets".................................. Section 2.5(a)
"Insignificant Items"......................................................... Section 5.23(a)
"Intellectual Property"....................................................... Section 2.1(a)
"International Plan".......................................................... Section 3.10(g)
"Interim Financial Statements"................................................ Section 3.6
"Inventory Unregistered Trademarks"........................................... Section 5.23
"Investments"................................................................. Section 2.1
"IRS"......................................................................... Section 2.5(a)
"IT Asset" ................................................................... Section 3.21
"Law"......................................................................... Section 3.5(d)
"Lease"....................................................................... Section 2.4(k)
"Leased Real Property"........................................................ Section 3.13(a)
"Liabilities"................................................................. Section 3.18
"Liens"....................................................................... Section 3.2(b)
"1999 Draft Financial Statements"............................................. Section 5.17(a)
"1999 EBITDA"................................................................. Section 2.5(b)
"Non-Assignable Rights"....................................................... Section 5.16
"Order"....................................................................... Section 3.5(d)
"Parent"...................................................................... Section 2.1
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Defined Term Section
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"Parent Stockholders"......................................................... Section 5.19(a)
"Person"...................................................................... Section 2.3(c)
"Plans"....................................................................... Section 3.10(b)
"Pre-1999 Draft Financial Statements"......................................... Section 5.17(a)
"Proxy Statement"............................................................. Section 5.19(b)
"Purchase Price for the Shares"............................................... Section 2.5(a)
"Related to the Business"..................................................... Section 2.1
"Representatives"............................................................. Section 7.2
"Review Period"............................................................... Section 2.8(c)
"SEC"......................................................................... Section 3.22
"SEC Reports"................................................................. Section 3.22
"Securities Act".............................................................. Section 4.4
"Seller"...................................................................... Recitals
"Seller Health Plans"......................................................... Section 5.8(c)(2)
"Seller Life Plan"............................................................ Section 5.8(c)(3)
"Seller Material Adverse Effect".............................................. Section 9.13
"Sellers"..................................................................... Recitals
"September 30 Tangible Net Worth"............................................. Section 2.8(a)
"Shares"...................................................................... Recitals
"Significant Items"........................................................... Section 5.23(a)
"SOFTBANK".................................................................... Recitals
"Statement of Objections"..................................................... Section 2.8(d)
"Stock Purchase".............................................................. Section 2.2
"Stock Seller"................................................................ Recitals
"Stockholders Meeting"........................................................ Section 5.19(a)
"Subsidiary".................................................................. Section 9.1(a)
"Tangible Net Worth".......................................................... Section 2.8(a)
"Tangible Net Worth Adjustment Amount"........................................ Section 2.8(h)(3)
"Tax"......................................................................... Section 8.3(a)
"Tax Package"................................................................. Section 8.4(e)
"Tax Returns"................................................................. Section 3.9(a)
"Transfer Taxes".............................................................. Section 5.14(a)
"Transferred Assets".......................................................... Section 2.1
"Transition Period"........................................................... Section 5.13
"Unregistered Trademarks"..................................................... Section 2.1
"Voting Agreement"............................................................ Recitals
"Year 2000 Compliant"......................................................... Section 3.21
"ZD Market Intelligence Business"............................................. Section 5.7
"ZD Plan"..................................................................... Section 2.8(h)(2)
"ZD Stock" ................................................................... Section 3.24
"ZDNet Stock" ................................................................ Section 3.24
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ARTICLE II
SALE AND PURCHASE OF ASSETS AND SHARES
Section 2.1 Sale and Purchase of Assets. Upon the terms and subject to the
conditions set forth in this Agreement, Asset Seller hereby agrees to, and to
cause ▇▇▇▇-▇▇▇▇▇ Inc. ("Parent") and each of its Affiliates (other than the
Companies) to, sell, convey, transfer, assign and deliver to Buyer free and
clear of all Liens, and Buyer hereby agrees to purchase from Asset Seller, at
the Closing (i) the stock, partnership interests and member interests in the
Companies and other entities set forth in Exhibit C hereto (the "Investments"),
(ii) all of Asset Seller's and each of its Affiliates' (other than the
Companies) right, title and interest in and to the trademarks, trade names,
trade dress, service marks and logos (other than "EQUIP", "Inter@ctive Investor"
and derivatives thereof) which are not registered or the subject of a pending
application for registration, were created for use in the Business (whether or
not also created for use in other businesses of Asset Seller or any of its
Affiliates) or initially used in the Business and were at some point used in the
Business (collectively, the "Unregistered Trademarks"), (iii) all of Asset
Seller's and each of its Affiliates' (other than the Companies) right, title and
interest in and to the registered copyrights, trademark and service ▇▇▇▇
applications and registrations and domain names listed on Schedule 3.19 of the
Disclosure Schedule, the ▇▇▇▇ "eShopper" and derivatives thereof and (iv) all of
Asset Seller's and each of its Affiliates' (other than the Companies) respective
right, title and interest in and to all of its assets that are primarily related
to, or used or held by it for use primarily in connection with, the Business
immediately prior to the Closing ("Related to the Business"), whether or not
reflected on the books of Asset Seller or Parent or any Affiliate of either of
the foregoing and whether tangible or intangible, real, personal or mixed, other
than the Excluded Assets (the "Transferred Assets") (which assets (together with
those assets set forth in Schedule 2.1 of the Disclosure Schedule (which are not
Transferred Assets)) are sufficient to enable Buyer to operate and continue
after the Closing the Business as it is presently conducted), including the
following assets of the Asset Seller or Parent to the extent they are Related to
the Business:
(a) all intellectual property (including software, databases,
know-how, inventions, data, trademarks, trade names, trade dress, service
marks, domain names, logos, patents, trade secrets and copyrights,
including the trademarks, trade names, trade dress, service marks, domain
names and logos that include "▇▇▇▇-▇▇▇▇▇"), licenses and sublicenses
granted or obtained in connection therewith, rights to, and applications
for, protection thereof and rights and remedies with respect to any
infringement thereof (the "Intellectual Property");
(b) all marketing information, marketing research and data and
customer and mailing lists, including works in progress;
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(c) all furniture, fixtures, furnishings, machinery, vehicles,
computers, equipment, supplies and other tangible personal property;
(d) all inventory and all raw materials, work in process, finished
products, wrapping, supply and packaging items;
(e) all prepaid expenses, accounts receivable and other current assets
as of the Closing Date;
(f) all contracts, purchase or other orders, leases, licenses,
commitments, instruments and other agreements to which Asset Seller is a
party and all rights thereunder;
(g) subject to Section 2.3(f) and Section 5.12(b), the originals and
all copies of all books, records, ledgers, files, reports, accounts, data,
plans and operating records, whether in hard copy, electronic format,
magnetic or other media ("Books and Records");
(h) all promotional and advertising materials, whether existing in
print, video, online, magnetic or other media, and all stationery, forms,
labels and other materials;
(i) all licenses, permits, approvals, registrations and similar rights
or authorizations obtained from governmental entities;
(j) all goodwill and other intangible assets Related to the Business;
and
(k) all claims, causes of action and other rights of recovery, set off
or recoupment.
The transactions contemplated by this Section 2.1 are sometimes referred to
herein as the "Asset Purchase."
Section 2.2 Sale and Purchase of Shares. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing Stock Seller hereby
agrees to sell to Buyer or any permitted assignee of Buyer under Section 9.1,
and Buyer (and any assignee) hereby agrees to purchase from Stock Seller all of
the Shares, free and clear of all Liens. The transactions contemplated by this
Section 2.2 are sometimes referred to herein as the "Stock Purchase."
Section 2.3 Excluded Assets. Notwithstanding anything in this Agreement to
the contrary, Asset Seller shall retain from and after the Closing all of its
right, title and interest in and to, and there shall be excluded from the Asset
Purchase and the Transferred Assets, the following (collectively, the "Excluded
Assets"):
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(a) cash, bank accounts and marketable securities (other than the
Investments);
(b) subject to Section 5.20, all rights under all insurance policies,
including insurance policies in respect of directors and officers and to
all claims against insurance carriers;
(c) all amounts owed by Asset Seller or any Affiliate of Asset Seller
(other than the Companies or the Division) to any Company or the Division,
whether or not Related to the Business ("Person" means any individual,
corporation (including any non-profit corporation), general or limited
partnership, limited liability company, Governmental Entity, joint venture,
estate, trust, association, organization or other entity of any kind or
nature; "Affiliate" shall mean, with respect to Sellers, Parent or any
direct or indirect Subsidiary of Parent and, with respect to Buyer, any
Person that controls, is controlled by, or under common control with,
Buyer);
(d) all Books and Records Related to the Business which Asset Seller
is required by law to retain, so long as accurate and complete copies of
such Books and Records are included in the Transferred Assets;
(e) all rights to the name "SOFTBANK" and any derivation or other
variation of such term whether or not Related to the Business;
(f) subject to the license agreements contemplated by Section 6.1(h),
all rights to the name "ZD", "Ziff" and any derivation or other variation
of such terms whether or not Related to the Business and all other
trademarks and trade names, service marks, trade dress, domain names or
logos of Asset Seller or any of its Affiliates not Related to the Business;
(g) all rights, claims, credits, causes of action or rights of set-off
against third parties pertaining to the Excluded Assets, except to the
extent related to the "ZD" ▇▇▇▇ and the logo associated therewith as used
in the Business;
(h) subject to Section 5.16, Asset Seller's rights under any lease,
agreement, contract, purchase order, instrument or other similar
arrangement Related to the Business for which consent to assignment is
required and has not been obtained as of the Closing Date;
(i) any Unregistered Trademark that is deemed to be an Excluded Asset
as contemplated by Section 5.23;
(j) Computer Shopper magazine and, subject to Section 2.1(a), any
special editions thereof, such as the special issue distributed under the
name Computer Shopper eShopper in 1999; and
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(k) the marks "EQUIP" and "Inter@ctive Investor" and derivatives
thereof.
Section 2.4 Assumption of Liabilities. Upon the terms and subject to the
conditions set forth herein, at the Closing Buyer agrees to assume and become
solely responsible for all debts, liabilities or obligations whatsoever of Asset
Seller to the extent arising out of or relating to the ownership of the
Transferred Assets or the operation of the Business, or of any of Asset Seller's
Affiliates to the extent arising out of or relating to the ownership of the
Transferred Assets or the operation of the Business, whether arising before or
after the Closing and whether known or unknown, fixed or contingent, but
excluding the Excluded Liabilities (the "Assumed Liabilities"), including the
following:
(a) all liabilities and obligations of Asset Seller under the
agreements, contracts, leases, licenses and other arrangements included in
the Transferred Assets;
(b) all liabilities with respect to all actions, suits, proceedings,
disputes, claims or investigations that arise out of or relate to the
ownership of the Transferred Assets or the operation of the Business;
(c) employee benefit, compensation, retention and severance
liabilities and other similar liabilities associated with employees of
Asset Seller engaged in the operation of the Business, including the
Liability for the retention costs and special bonuses set forth in Schedule
5.8(e) of the Disclosure Schedule; and
(d) all liabilities of Asset Seller and its Affiliates for Taxes with
respect to the operation of the Business or the Transferred Assets (other
than Taxes imposed with respect to any gain realized as a result of the
transactions contemplated by this Agreement) for any taxable year or period
beginning before and ending after the Closing Date, for the portion of such
taxable year or period after the Closing Date determined in accordance with
Section 8.3(b).
Notwithstanding the foregoing, Assumed Liabilities shall not include (and the
following, collectively, shall constitute the "Excluded Liabilities"):
(a) any Liabilities of the Companies (since these liabilities will
continue to be owed by the Companies);
(b) any Liabilities owed to Asset Seller or any of its Affiliates
(other than the Companies or the Division) by any Company or Asset Seller
(with respect to the Business or the Division) that arise prior to the
Closing Date except for those that will continue under Section 5.10;
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(c) any Liabilities owed by Asset Seller or any of its Affiliates
(other than the Companies or the Division) to any Company or the Division
that arise prior to the Closing Date;
(d) any Liabilities for borrowed money owed by Asset Seller or any of
its Affiliates to third parties;
(e) any Liabilities of Asset Seller or Stock Seller pursuant to this
Agreement or relating to the transfer of assets or stock hereunder;
(f) subject to the license agreements contemplated by Section 6.1(h),
any Liability arising out of or relating to any asset that is not a
Transferred Asset and is not owned by any of the Companies, except to the
extent that such Liability shall have been accrued on the Closing Date
Balance Sheet;
(g) any Liability to the extent arising out of or relating to Excluded
Assets;
(h) all Liability arising out of or resulting from (i) the claims and
Actions listed on Schedule 3.8(a) of the Disclosure Schedule, including any
successor or related claims or Actions, (ii) any claims or Actions which
are not disclosed on Schedule 3.8(a) of the Disclosure Schedule if, as a
result of the failure to disclose such claims or Actions on such Schedule,
the representation set forth in Section 3.8(a) is not true and correct as
of the date of execution of this Agreement (ignoring for this purpose the
reference to Seller Material Adverse Effect but including only claims and
Actions that, individually or in the aggregate, could reasonably be
expected to result in a liability in excess of $1,000,000), and (iii) any
claims or Actions which are not disclosed on Schedule 3.8(a) of the
Disclosure Schedule if, as a result of the failure to disclose such claims
or Actions in such Schedule, the representation in Section 3.8(a) would not
be true and correct as of the Closing Date if restated on the Closing Date;
(i) Excluded Employment Liabilities, as defined in Section 5.8(a), any
Liability in respect of or relating to the issuance or grant of stock
options, stock appreciation rights, performance shares or capital stock to
employees of or consultants to any of the Sellers and their Affiliates, any
Liability in respect of retention costs and special bonuses (including
those set forth on Schedule 2.4(i) of the Disclosure Schedule but not
including those set forth in Schedule 5.8(e) of the Disclosure Schedule)
and any Liability in respect of any agreement set forth in clause 1(q) of
Schedule 3.10(a) of the Disclosure Schedule;
(j) any Liabilities of Asset Seller or any of its Affiliates for Taxes
with respect to the operation of the Business or the Transferred Assets for
any taxable year or period ending on or before the Closing Date and, with
respect to any
-9-
taxable year or period beginning before and ending after the Closing Date,
for the portion of such taxable year or period ending on the Closing Date
as determined in accordance with Section 8.3; and
(k) any obligation to contribute any or all amounts in excess of
$19,250,000.00 incurred by 63 Madison Associates, L.P., as landlord, in its
renovation of the real estate and improvements subject to the Lease of
Asset Seller under that certain Agreement of Lease, dated January 15, 1998,
by and between 63 Madison Associates, L.P. and ▇▇▇▇-▇▇▇▇▇ Inc. (the
"Lease"). -----
Buyer is not assuming or becoming responsible for any debts, liabilities or
obligations other than the Assumed Liabilities.
Section 2.5 Purchase Prices.
---------------
(a) Purchase Price. The purchase price for the Transferred Assets and
--------------
the Shares shall be $780,000,000 minus, if 1999 EBITDA (as defined in
Section 2.5(b) and calculated in accordance with Section 2.5(c)) is less
than $88,400,000 (90% of projected ▇▇▇▇ ▇▇▇▇▇▇), 7.9 times the amount by
which 1999 EBITDA is less than $98,200,000 (100% of projected 1999 EBITDA)
(the "Initial Cash Purchase Price"), plus the Assumed Liabilities, minus
---------------------------
the Final Asset Purchase Adjustments (as defined in Section 2.8). The
Initial Cash Purchase Price shall be paid in accordance with Section 2.6
hereof. The parties will, prior to the Closing, negotiate in good faith and
agree upon a reasonable allocation of the purchase price between the
Transferred Assets and the Shares of each of the Companies, respectively.
The value so allocated to the Shares is herein referred to as the "Purchase
--------
Price for the Shares" and an amount equal to the Initial Cash Purchase
--------------------
Price minus that value is herein referred to as the "Initial Cash Purchase
---------------------
Price for the Assets". An amount equal to the Initial Cash Purchase Price
--------------------
for the Assets plus the Assumed Liabilities minus the Final Asset Purchase
Adjustments (collectively, the "Asset Purchase Price") shall be allocated
--------------------
among the Transferred Assets in accordance with Section 5.14(c) below. Each
party shall use these allocations in all tax and governmental filings,
except as otherwise required by a tax or governmental authority in
connection with an audit or by a court decision. To the extent that
disclosures of these allocations are required to be made by a party to the
Internal Revenue Service (the "IRS"), such party will disclose such
---
reports to the other prior to filing with the IRS.
(b) EBITDA. For purposes of this Agreement, "1999 EBITDA" shall mean
-----------
net income of the Asset Seller in respect of the Division and the Companies
for 1999 plus, to the extent previously deducted in the calculation
thereof, the sum of (i) interest expense for indebtedness for borrowed
money, (ii) income tax expense and (iii) depreciation expense, amortization
expense and other non-cash charges, in each case in 1999. Except as
otherwise provided below, each of the
-10-
foregoing amounts shall be determined on a consolidated basis in accordance
with GAAP on a basis consistent with the basis on which the unaudited
pro-forma combined statement of operations of the Division and the
Companies as of September 30, 1999 referred to in Section 3.6 were
prepared.
(c) Calculation of 1999 EBITDA.
--------------------------
(1) Not later than the later of February 1, 2000 and the date on
which the Draft Audited Financial Statements are delivered to
Buyer pursuant to Section 5.17, Sellers shall prepare and deliver
to Buyer a draft calculation of 1999 EBITDA (the "Draft 1999
----------
EBITDA").
------
(2) Upon receipt of the Draft 1999 EBITDA, Buyers shall have 15 days
(the "EBITDA Review Period") to review the Draft 1999 EBITDA.
--------------------
During the EBITDA Review Period, Sellers shall give Buyer full
access at all reasonable times to all books, records, premises
and facilities and other materials relating to the Division and
the Companies, and to Sellers' personnel and advisors and any
work papers prepared by or for Sellers, in each case as they may
require for the purpose of reviewing such Draft 1999 EBITDA.
(3) On or prior to the last day of the EBITDA Review Period, Buyer
may object to the Draft 1999 EBITDA by delivering to Sellers a
written statement setting forth in reasonable detail Buyer's
objections to the Draft 1999 EBITDA (the "EBITDA Statement of
-------------------
Objections"). If Buyer does not deliver an EBITDA Statement of
----------
Objections within the EBITDA Review Period, the Draft 1999 EBITDA
shall be deemed to have been accepted by the Buyer and shall be
final and binding on the parties and EBITDA reflected in the
Draft 1999 EBITDA shall be the 1999 EBITDA used in computing the
Asset Purchase Price described in Section 2.5(a) above. If Buyer
delivers a EBITDA Statement of Objections within the EBITDA
Review Period, Sellers and Buyer shall negotiate in good faith to
resolve such objections, and any objections that are resolved by
a written agreement between Buyer and Sellers shall be final and
binding on the parties and the amount of EBITDA for 1999 so
agreed shall be the 1999 EBITDA used in computing the Asset
Purchase Price in Section 2.5(a) above.
-11-
(4) If the Sellers and Buyer fail to reach an agreement with respect
to all of the matters set forth in the EBITDA Statement of
Objections, then the matters still in dispute shall, not later
than 5 business days after the earlier of the end of the EBITDA
Review Period or the first date on which one of the parties
affirmatively terminates discussions in writing with respect to
the EBITDA Statement of Objections, be submitted for resolution
to the New York office of one of the five largest United States
independent certified public accountants that has no material
business relationships with Buyer or either of the Sellers, as
selected by Buyer and the Sellers jointly (the "EBITDA Accounting
-----------------
Expert") who, acting as an expert and not as an arbitrator, shall
------
resolve the matters still in dispute and adjust the Draft 1999
EBITDA to reflect such resolution. The EBITDA Accounting Expert's
resolution of the matters in dispute shall be final and binding
on the parties and the Draft 1999 EBITDA, as adjusted in
accordance with the EBITDA Accounting Expert's resolution of the
matters in dispute shall be the 1999 EBITDA for purposes of
Section 2.5(a). The EBITDA Accounting Expert shall make a
determination as soon as practicable and in any event within 10
business days (or such other time as the parties hereto shall
agree in writing) after its engagement. The parties hereto agree
that all adjustments shall be made without regard to materiality.
(5) Buyer shall pay one-half and the objecting Seller shall pay one-
half of the fees and expenses of the EBITDA Accounting Expert.
(6) Sellers and Buyer shall each make readily available to the EBITDA
Accounting Expert all relevant work papers and books and records
in their possession or to which they have the power to grant
access relating to the Division, the Companies, and the Draft
1999 EBITDA.
Section 2.6 Payment of Purchase Price. At the Closing, Buyer agrees to pay to
-------------------------
Asset Seller the Initial Cash Purchase Price for the Assets and Buyer agrees to
pay to Stock Seller the Purchase Price for the Shares, in each case in cash by
wire transfer of immediately available funds to an account designated by the
Applicable Seller, and the Buyer additionally agrees to assume the Assumed
Liabilities.
-12-
Section 2.7 The Closing. The closing of the Asset Purchase and the Stock
-----------
Purchase (collectively, the "Closing") shall take place at 9:30 a.m. local time
on the second business day following the first date on which (a) all waiting
periods applicable to the Asset Purchase or the Stock Purchase under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
---
Act"), or similar applicable waiting periods under the European Union merger
---
regulations or other applicable national laws, shall have expired or been
terminated and (b) all the other conditions to Closing set forth in Article VI
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the fulfillment or waiver of those conditions) shall
have been satisfied or waived, or at such other time, place and date as Buyer
and Sellers may mutually agree; provided, however, that in no event shall the
-------- -------
Closing occur prior to February 15, 2000. The date on which the Closing occurs
is referred to as the "Closing Date."
------------
Section 2.8 Post-Closing Purchase Price Adjustments.
---------------------------------------
(a) Calculation of Tangible Net Worth. As soon as practicable, but in no
---------------------------------
event later than 90 days after the Closing Date, Buyer shall deliver a
computation of Tangible Net Worth as of September 30, 1999 ("September 30
------------
Tangible Net Worth") and a computation of Tangible Net Worth as of the
------------------
Closing Date ("Closing Date Tangible Net Worth"). For purposes of this
-------------------------------
Agreement, "Tangible Net Worth" shall mean the Transferred Assets and all
------------------
assets of the Companies (excluding in each case all intangible assets) minus
all liabilities of the Division and the Companies. Except as otherwise
provided below, Tangible Net Worth shall be determined in accordance with
generally accepted United States accounting principles ("GAAP"). For purposes
----
of calculating Tangible Net Worth, liabilities shall not include any
liabilities that this Agreement expressly provides shall be retained or
discharged by Sellers. In addition, Tangible Net Worth shall reflect all
Assumed Liabilities and all Liabilities of the Companies, but shall not
include any Excluded Assets, any liabilities of the Division other than the
Assumed Liabilities, any current or non-current deferred tax assets, any
current or non-current deferred tax liabilities, any intangible assets or any
Liabilities for the matters referred to in Section 2.8(h)(i) and Section
2.8(h)(ii).
(b) Access to Buyer. Upon reasonable notice to Sellers, Sellers shall
---------------
provide Buyer full access at all reasonable times to such historical
financial information (to the extent still in Sellers' possession or to which
Sellers have power to grant access) relating to the Division or the Companies
as Buyer shall reasonably request to prepare and deliver the computations of
September 30 Tangible Net Worth and Closing Date Tangible Net Worth in
accordance with Section 2.8(a) and to respond to any Statement of Objections.
(c) Examination by Sellers. Upon receipt of the computations of September
----------------------
30 Tangible Net Worth and Closing Date Tangible Net Worth, Sellers
-13-
shall have 45 days (the "Review Period") to review such computations. During
-------------
the Review Period, Buyer shall give Sellers full access at all reasonable
times to all books, records, premises and facilities and other materials
relating to the Division and the Companies, and to Buyer's personnel and
advisors and any work papers prepared by or for Buyer, in each case as they
may require for the purpose of reviewing such computations.
(d) Objection by Sellers. On or prior to the last day of the Review
--------------------
Period, Asset Seller may object to the computation of September 30 Tangible
Net Worth and/or Closing Date Tangible Net Worth by delivering to Buyer a
written statement setting forth in reasonable detail Asset Seller's
objections (the "Statement of Objections"). If Asset Seller does not deliver
-----------------------
a Statement of Objections within the Review Period, the computations of
September 30 Tangible Net Worth and Closing Date Tangible Net Worth shall be
deemed to have been accepted by Asset Seller and shall be final and binding
on the parties, and those computations shall be used in computing the
Tangible Net Worth Adjustment Amount described in Section 2.8(h) below. If
Asset Seller delivers a Statement of Objections within the Review Period,
Asset Seller and Buyer shall negotiate in good faith to resolve such
objections, and if the objections are resolved by a written agreement between
Buyer and Asset Seller, that resolution shall be final and binding on the
parties and shall be used in computing such Tangible Net Worth Adjustment
Amount.
(e) Resolution of Disputes. If Asset Seller and Buyer fail to reach
----------------------
an agreement with respect to all of the matters set forth in a Statement of
Objections, then the matters still in dispute shall, not later than 10
business days after the earlier of the end of the Review Period or the first
date on which one of the parties affirmatively terminates discussions in
writing with respect to the Statement of Objections, be submitted for
resolution to the New York office of one of the five largest United States
independent certified public accountants that has no material business
relationships with Buyer or either of the Sellers, as selected by Buyer and
Asset Seller jointly (the "Accounting Expert") who, acting as an
-----------------
expert and not as an arbitrator, shall resolve the matters still in dispute
and adjust the computation of the Tangible Net Worth Adjustment Amount to
reflect such resolution. The Accounting Expert's resolution of the matters in
dispute shall be final and binding on the parties. The Accounting Expert
shall make a determination as soon as practicable and in any event within 30
days (or such other time as the parties hereto shall agree in writing) after
its engagement. The parties hereto agree that all adjustments shall be made
without regard to materiality.
(f) Fees and Expenses of the Accounting Expert. Buyer shall pay one-half
------------------------------------------
and Asset Seller shall pay one-half of the fees and expenses of the
Accounting Expert.
-14-
(g) Access to Supporting Documentation. Sellers and Buyer shall each
----------------------------------
make readily available to the Accounting Expert all relevant work papers and
books and records in their possession or to which they have the power to
grant access relating to the Division, the Companies and the computations of
September 30 Tangible Net Worth and Closing Date Tangible Net Worth.
(h) Final Asset Purchase Adjustments. As used herein, the term "Final
--------------------------------
Asset Purchase Adjustments" shall mean the sum of:
--------------------------
(1) The actual amounts paid in connection with the retention costs and
special bonuses set forth in Schedule 5.8(e) of the Disclosure
Schedule;
(2) The amount of the discretionary contributions to be made under the
▇▇▇▇-▇▇▇▇▇ Retirement & Savings Plan (the "ZD Plan"), to the
extent accrued as of the Closing Date as contemplated in the last
sentence of Section 5.8(d); and
(3) If (i) the Closing Date Tangible Net Worth is less than (ii) the
September 30 Tangible Net Worth minus $5,000,000, an amount equal
to the September 30 Tangible Net Worth minus the Closing Date
Tangible Net Worth (such amount, the "Tangible Net Worth
------------------
Adjustment Amount").
-----------------
(i) Payment of Adjustment Amounts. Within two business days after the
-----------------------------
date on which the computations of September 30 Tangible Net Worth and
Closing Date Tangible Net Worth become final and binding pursuant to this
Section 2.8, Sellers shall collectively pay to Buyer the Final Asset
Purchase Adjustments together with interest thereon at a rate equal to the
rate announced from time to time by The Bank of New York as its base rate
during the period from the Closing Date to the date of the payment
calculated on the basis of a 365-day year and the actual number of days
elapsed. Any payments by Sellers pursuant to the preceding sentence shall be
allocated to them in such proportion as they shall determine in their
absolute discretion, and Buyer shall have no liability with respect to such
allocation. Notwithstanding the foregoing sentence, the obligation to pay
Buyer the foregoing adjustment shall be a joint and several obligation of
each Seller. Any such payments shall be made by wire transfer of immediately
available funds to a bank account or accounts as shall be designated in
writing by the recipient no later than one business day prior to the payment
date.
Section 2.9 Certain European Restructuring Matters. Notwithstanding
--------------------------------------
anything to the contrary herein, the parties hereto agree that prior to the
Closing, Stock Seller shall be permitted to cause the Companies to transfer all
assets and liabilities of the Companies Related to the Business to one or more
to-be-formed subsidiaries of the
-15-
Companies and if Stock Seller does so, references herein to the Companies shall
be deemed references to such subsidiaries, where appropriate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby represent and warrant to Buyer as follows:
Section 3.1 Organization and Good Standing.
------------------------------
(a) Each Seller and each Company is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, with full corporate or limited liability company power
and authority, as applicable to conduct its businesses and to own or
use its assets as currently conducted, owned and used. Each Company
is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which it is required to be so licensed or
qualified, except for any failures to be so licensed, qualified or
in such good standing that, individually or in the aggregate, is not
reasonably likely to have a Seller Material Adverse Effect.
Section 3.2 Capitalization.
--------------
(a) All of the issued and outstanding shares of capital stock
of, or other equity interests in, each Company have been duly
authorized and are validly issued, fully paid and nonassessable and
free of any transfer restriction.
(b) Stock Seller is, and on the Closing Date will be, the sole
record and beneficial owner of the Shares (other than a de minimis
number of directors' qualifying shares that is not greater than the
minimum required by applicable Law), free and clear of all liens,
claims, mortgages, security interests, charges, title imperfections,
restrictions or other encumbrances (collectively, "Liens").
(c) There are no shares of capital stock of, or other equity
interests in, any Company reserved for issuance or subject to
preemptive rights or any outstanding subscriptions, options,
warrants, calls, rights or convertible or exchangeable securities or
any other agreements or instruments in effect giving any Person the
right to acquire from Stock Seller or any of its Affiliates any
shares of capital stock, or other equity, profits or interests in,
any Company or requiring the Stock Seller or any Company to
repurchase, redeem or otherwise acquire any of its capital stock or
other securities.
(d) Except as set forth in Schedule 3.2(d), none of the
Companies owns shares of capital stock of, or other equity interests
in, any Person.
-16-
Section 3.3 Corporate Authority. Each Seller has the
-------------------
corporate power and authority, and has taken all corporate action necessary, to
execute, deliver and perform its obligations under this Agreement and each of
the agreements contemplated hereby. This Agreement has been duly executed and
delivered by each Seller and constitutes a valid and legally binding agreement
of each Seller, enforceable against each Seller in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles (collectively, the
"Enforceability Exceptions").
-------------------------
Section 3.4 Consents and Approvals. Except for the
----------------------
notification and report form required to be filed under the HSR Act (an "HSR
---
Filing"), European Union merger regulations and except as set forth in Schedule
------
3.4 of the Disclosure Schedule, no notices, reports, consultations,
registrations or other filings are required to be made by Sellers or any Company
with, nor are any consents, approvals, opinions or authorizations required to be
obtained by Sellers or any Company from, any court or other governmental,
judicial, administrative or regulatory authority in the United States or
elsewhere (each, a "Governmental Entity"), or any third party (including,
-------------------
without limitation, any work council or other labor entity) in connection with
the execution, delivery or the performance of this Agreement by Sellers and the
consummation of the transactions contemplated hereby, except for any such
matters the failure of which to make or obtain, individually or in the
aggregate, would not have a Seller Material Adverse Effect.
Section 3.5 No Violations. The execution, delivery and performance
-------------
of this Agreement by Sellers will not:
(a) violate or contravene any provision of the certificate of
incorporation or by-laws (or other comparable governing documents) of
either Seller or any Company;
(b) violate, conflict with, or constitute or result in a default,
acceleration or creation of a Lien under, or a termination of (in each
case with or without notice or lapse of time or both), any provision of
any agreement, license, lease, contract, loan, note, franchise,
mortgage, indenture, or other obligation (each, a "Contract"), to which
--------
either Seller or any Company is a party or by which any of their
respective assets are bound, in each case other than (i) as set forth in
Schedule 3.5(b) of the Disclosure Schedule and (ii) for any such matters
that, individually or in the aggregate, would not have a Seller Material
Adverse Effect;
(c) require either Seller or any Company to obtain the consent,
waiver, authorization or approval of any Person under any Contract to
which either Seller or any Company is a party or by which any of their
respective assets are bound (collectively, "Applicable Contracts"), in
--------------------
each case other than (i) as set forth in
-17-
Schedule 3.5(c) of the Disclosure Schedule and (ii) for any such matters
that, individually or in the aggregate, would not have a Seller Material
Adverse Effect:
(d) violate, contravene or conflict with any foreign or domestic
(federal, state or local) statute, law, rule, regulation or ordinance
(each, a "Law"), or any award, judgment, decree, injunction or other
order (each, an "Order"), of any Governmental Entity having jurisdiction
over either Seller, any Company or any of their respective assets or
businesses.
Section 3.6 Financial Statements. Schedule 3.6 of the Disclosure
--------------------
Schedule contains (i) unaudited combined pro-forma statements of operations of
the Division and the Companies for each of the years ended December 31, 1997 and
1998 (collectively, the "Annual Financial Statements") and (ii) an unaudited
---------------------------
combined pro-forma statement of tangible net worth of the Division and the
Companies as of September 30, 1999 and the related unaudited combined pro-forma
statement of operations for the nine months then ended (collectively, the
"Interim Financial Statements" and, together with the Annual Financial
----------------------------
Statements, the "Financial Statements"). The Financial Statements have been
--------------------
prepared in accordance with GAAP consistently applied throughout the periods
covered by such statements and fairly present the combined financial condition
and results of operations of the Division and the Companies as of the respective
dates and for the periods then ended, as applicable, except that the Financial
Statements are subject to (i) the absence of the level of detail and full
financial footnotes that would be required in regular financial statements, (ii)
the assumptions, qualifications and adjustments set forth in the Basis of
Presentation contained in Schedule 3.6 of the Disclosure Schedule, (iii) the
absence of line items below earnings before interest and taxes in the unaudited
consolidated pro forma statements of operations and (iv) in the case of the
Interim Financial Statements, normal year-end adjustments that are not expected
to be material in amount or effect.
Section 3.7 Absence of Certain Changes and Events.
-------------------------------------
(a) Except as set forth in Schedule 3.7 of the Disclosure Schedule,
since September 30, 1999, there has not occurred any matter,
circumstance, event or effect which has had or is reasonably likely to
have a Seller Material Adverse Effect.
(b) Except as set forth in Schedule 3.7 of the Disclosure Schedule,
since December 31, 1998:
(1) each of Asset Seller (but solely with respect to
the Division) and each Company has conducted its
business only in the ordinary course of business,
consistent with past practice;
-18-
(2) neither Asset Seller nor any Company has sold, leased
or otherwise disposed of, or incurred any Lien on, any
Intellectual Property or any other asset material to
the Business other than sales in the ordinary course of
business consistent with past practice;
(3) neither Seller nor any Company has settled,
compromised, waived, released or assigned any material
rights or claims it has under or in respect of any
Action, Applicable Contract, Tax matter or insurance
policy relating to the Business or the Companies or
made any material modification or material amendment
with respect to any Applicable Contract;
(4) there has not been any change in the accounting
practices, methods or principles used by Asset Seller
(but solely with respect to the Division) or any
Company;
(5) there has not been any material increase in the
benefits under, or the establishment, amendment or
termination of, any bonus, insurance, severance,
deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation,
the granting of stock options, stock appreciation
rights, performance awards or restricted stock awards),
stock purchase or other employee benefit plan covering
any of the employees of the Division or any of the
Companies, or any other material increase in the
compensation payable or to become payable to, or any
other material change in the employment terms for any
officer of the Division or any Company or any other
employee of the Division or any of the Companies
earning in excess of $100,000 per year;
(6) there has not been any entry by Asset Seller (with
respect to the Division) or any Company into an
employment, consulting, severance, termination or
indemnification agreement with any officer of Asset
Seller with respect to the Business or the Division or
any Company or any other employee of Asset Seller with
respect to the Business or the Division or any of the
Companies earning in excess of $100,000 per year;
(7) neither Asset Seller (with respect to the Division) nor
any Company has incurred any material Liabilities,
other than
-19-
Liabilities incurred in the ordinary course
of business consistent with past practice;
(8) neither Asset Seller (with respect to the Division) nor
any Company has entered into any Contract or engaged in
any transaction requiring the performance of services
or the delivery of goods or materials by or to Asset
Seller or any Company for consideration exceeding
$1,000,000 in any one year or which is likely to result
in the incurrence of Liabilities by Asset Seller (but
only with respect to the Division) or any Company in
excess of $1,000,000; and
(9) neither Asset Seller (with respect to the Division) nor
any Company has entered into any Contract or commitment
with respect to any of the foregoing.
Section 3.8 Litigation; Orders.
------------------
(a) Except as set forth in Schedule 3.8(a) of the Disclosure Schedule,
there are no actions, suits or other legal or administrative proceedings by or
before any Governmental Entity or other Person (each, an "Action") pending or,
to the knowledge of Sellers, threatened against any Seller, any Company or any
of their respective assets that relate to the Business or any Company, other
than any such Actions that, individually or in the aggregate, would not cause a
Seller Material Adverse Effect and are not reasonably likely to prohibit,
materially restrict or delay the performance of this Agreement by Sellers.
(b) Neither Seller, nor any Company nor any of their respective assets
is subject to any Order except for those that, individually or in the aggregate,
are not material and are not reasonably likely to prohibit, materially restrict
or delay the performance of this Agreement by Sellers.
(c) Except as set forth in Schedule 3.8(c), there are no Actions
pending or, to the knowledge of Sellers, threatened, as of the date hereof or
within the past three years, against Asset Seller (with respect to the
Division), any Company or any of their respective assets, brought by or on
behalf of any freelance employee or independent contractor that are related to
copyright infringement.
Section 3.9 Taxes.
-----
(a) Each of Asset Seller and each Company has filed or caused to be
filed (on a timely basis since May 5, 1998) all Tax Returns that are or were
required to be filed by or with respect to any of them, either separately or as
a member of a group of corporations, pursuant to applicable Law, and all such
Tax Returns are or, with respect to Tax Returns filed after the date hereof,
will be true and
-20-
complete in all material respects and comply with all applicable Laws. Each of
Asset Seller and each Company has paid, or made provision for the payment of,
all Taxes that have or are reasonably likely to become due pursuant to those Tax
Returns or otherwise, or pursuant to any assessment received by Asset Seller or
any Company, except such Taxes as are listed in Schedule 3.9(a) of the
Disclosure Schedule or are being contested in good faith and for which adequate
reserves have been established in the Financial Statements and the Interim
Financial Statements in accordance with GAAP. "Tax Returns" means all returns,
reports, notices, forms, declarations, claims for refund, estimates, elections,
information statements or other documents relating to any Tax, including any
schedule or attachment thereto, and any amendment thereof.
(b) The charges, accruals and reserves with respect to Taxes of Asset
Seller and each Company provided in the Financial Statements are adequate
(determined in accordance with GAAP) and all Taxes that Asset Seller or any
Company is or was required by Law to withhold or collect have been duly withheld
or collected and, to the extent required, have been paid to the proper
Governmental Entity or other Person.
(c) There are no Liens on any of the Transferred Assets or the assets
of any Company that arose in connection with any failure (or alleged failure) of
Asset Seller or any Company to pay any Tax for any period prior to the Closing
Date nor will any such Liens arise in the future.
(d) No foreign, federal, state or local tax audits or administrative or
judicial Tax proceedings are pending or being conducted with respect to the
Asset Seller or any Company and neither the Asset Seller nor any Company has
received from any foreign, federal, state or local taxing authority any (i)
written notice indicating an intent to open an audit or other review, (ii)
request for information related to Tax matters or (iii) notice of deficiency or
proposed adjustment for any amount of Tax proposed, asserted or assessed by any
taxing authority against the Asset Seller or any Company.
(e) None of the Companies is a party to or bound by any Tax allocation
or Tax sharing agreement.
(f) None of the Companies shall be required to include any items of
income in, or exclude any item of deduction or loss from, taxable income for any
taxable year or period ending after the Closing Date as a result of any prepaid
amount received by the Company on or prior to the Closing Date.
(g) None of the Companies is a party to, and none of the Assumed
Liabilities constitutes, an agreement, contract, arrangement or plan that has
resulted or would result, separately or in the aggregate in the payment of any
-21-
"excess parachute payment" within the meaning of Section 280G of the Code (or
any corresponding provision of state, local or foreign Tax law).
Section 3.10 Employee Benefits; ERISA.
------------------------
(a) Sellers have delivered or otherwise made available to Buyer a
true, complete and correct copy of, and Schedule 3.10(a) of the Disclosure
Schedule sets forth a true, complete and correct list of, each profit-sharing,
pension, severance pay, thrift, savings, incentive, change of control,
employment, retirement, bonus, deferred compensation, group life and health
insurance and other employee benefit plan, agreement, arrangement or commitment,
including any such plan, agreement, arrangement or commitment or any other plan
or program that constitutes an "employee benefit plan" as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), (i) that provides benefits for or pertains to any Division employee
or to which Asset Seller makes contributions on behalf of any Division employee
or is otherwise bound in connection with the Division ("Asset Seller Benefit
--------------------
Plans") or (ii) that provides benefits for or pertains to any current or former
-----
employee of any Company or to which any Company makes contributions on behalf of
any of its current or former employees or is otherwise bound (all of which are
hereinafter referred to as "Company Benefit Plans" and, collectively
---------------------
with Asset Seller Benefit Plans, the "Benefit Plans").
-------------
(b) All Benefit Plans that are employee benefit plans (the "Plans"), to
the extent subject to ERISA or the Code, are in substantial compliance with
their terms, ERISA, the Code and any other applicable Law. Each Plan that is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA and
that is intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS. There is no material pending or, to
the knowledge of Sellers, threatened litigation relating to the Plans. No action
has been taken with respect to any Benefit Plan either to terminate such Benefit
Plan or to cause distributions, other than in the ordinary course of business,
to participants under such Benefit Plan.
(c) Neither Asset Seller, nor any Company, nor any entity that is
considered one employer with Asset Seller or any Company under Section
4001(b)(1) of ERISA or Section 414(b) or (c) of the Code has maintained, or made
or been obligated to make, contributions to any plan subject to Part 3 of Title
I or Title IV of ERISA at any time within the last six years.
(d) All contributions required to be made under the terms of any
Benefit Plan have been timely made when due.
-22-
(e) Neither Asset Seller nor any Company has any commitments or
obligations nor made any representations regarding continuation of welfare
benefits after termination of employment under any of the Benefit Plans,
except as required by Part 6 of Title I of ERISA or similar laws. Neither
Asset Seller (with respect to the Division) nor any Company has any
obligations for retiree health or life benefits. Except to the extent
limited by applicable Law, there are no restrictions on the rights of Asset
Seller or any Company to amend or terminate any such Benefit Plan without
incurring Liability thereunder.
(f) Neither Asset Seller nor any Company has any obligations for
retiree health or life benefits other than as provided under any Benefit
Plan. Except to the extent limited by applicable Law, there are no
restrictions on the rights of Asset Seller or any Company to amend or
terminate any Benefit Plan without incurring Liability thereunder.
(g) Each Benefit Plan covering employees of the Companies (an
"International Plan") has been maintained in substantial compliance with
------------------
its terms and with the requirements prescribed by any and all applicable
Laws (including any special provisions relating to qualified plans where
such International Plan was intended to so qualify) and has been maintained
in good standing with applicable regulatory authorities. The fair market
value of the assets of each funded International Plan (or the liability of
each funded International Plan funded through insurance) is sufficient to
procure or provide for the benefits accrued thereunder through the Closing
Date according to the actuarial assumptions and valuations most recently
used to determine employer contributions to the International Plan. The
Companies conform in all material respects with the provisions of any
applicable national law or regulations in relation to staff delegates and
workers' committees, and in a more general manner in relation to the
representation of the employees within the Companies.
Section 3.11 Employees; Labor Matters. Schedule 3.11(a) of the
Disclosure Schedule contains a true, complete and correct list, as of the date
of this Agreement, of the name, job title, current compensation, and date of
hire of each employee of (i) Asset Seller working for the Division and (ii) the
Companies, including each employee on leave of absence or layoff status.
Schedule 3.11(b) of the Disclosure Schedule contains a true, complete and
correct list, as of the date of this Agreement, of the name, job title, current
compensation, and date of hire of each employee of Asset Seller that provides
services to the Division or the Business but is not listed in Schedule 3.11(a),
including each employee on leave of absence or layoff status. Neither Asset
Seller nor any Company is a party to, or bound by, any collective bargaining
agreement or other labor Contract nor is any such collective bargaining
agreement or other labor Contract currently being negotiated, none of the
employees of Asset Seller (with respect to the Division) or any Company is
represented by any union or labor organization nor, to the knowledge of Sellers,
are there any activities or proceedings of any labor union or
-23-
labor organization to organize any employees of Asset Seller (with respect to
the Division), the Companies or any of the employees listed in Schedule 3.11(b).
Each of Asset Seller (but solely with respect to the Division) and each Company
is in compliance with all Laws in respect of employment and employment
practices, terms and conditions of employment, wages, hours of work, equal
opportunity and occupational health and safety except for such instances of non-
compliance that, individually or in the aggregate, are not reasonably likely to
have a Seller Material Adverse Effect. To the knowledge of Sellers, no employee
of Asset Seller (with respect to the Division) or of any Company that receives
compensation at an annual rate in excess of $200,000 has given notice or has
otherwise informed Asset Seller that he or she intends to terminate employment
with Asset Seller or the applicable Company.
Section 3.12 Compliance with Laws; Governmental Authorizations. Except
-------------------------------------------------
for any such matters that, individually or in the aggregate, have not had and
are not reasonably likely to result in a Seller Material Adverse Effect:
(a) each of Asset Seller (but solely with respect to the Division)
and each Company is in compliance with each Law applicable to it or to its
conduct or operation of the Business and no notice has been received by
Asset Seller or any Company alleging a failure to comply with such Laws;
(b) each of Asset Seller (but solely with respect to the Division)
and each Company has all licenses, permits, certificates and other
approvals or authorizations from Governmental Entities that are necessary
to permit it to lawfully conduct and operate the Business in the manner it
currently does and to permit it to own and use its assets in the manner in
which it currently does ("Governmental Authorizations"); and
---------------------------
(c) each of Asset Seller (but solely with respect to the Division)
and each Company is in full compliance in all material respects with all
of the terms and requirements of each of its Governmental Authorizations
and no notice has been received by Asset Seller or any Company alleging a
failure to comply with such terms and requirements.
Section 3.13 Real Property.
-------------
(a) Schedule 3.13(a) of the Disclosure Schedule contains a true,
complete and correct list, as of the date of this Agreement, of all leased
and subleased real property included in the Transferred Assets or leased
or subleased by any Company (the "Leased Real Property"). Sellers have
--------------------
delivered or made available to Buyer true, complete and correct copies of
the deeds, leases or other instruments and all amendments thereto
(collectively, the "Leases") by which such real property is leased. As of
------
the date of this Agreement, neither Seller nor any Company owns any real
property Related to the Business. There is no
-24-
significant default under any Leases relating to the Leased Real Property
by Asset Seller or any Company or, to the knowledge of Sellers, by the
other parties thereto, and no event has occurred which with the giving of
notice, lapse of time or both would constitute such a significant default.
(b) Each of the Leases are in full force and effect. Except as
set forth in Schedule 3.13(b) of the Disclosure Schedule, each Lease will
continue to be enforceable on substantially identical terms following the
Closing; neither Asset Seller nor any Company has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in any
Lease and each Lease is fully assignable to Buyer without the necessity of
any consent.
(c) Each of Asset Seller and each Company has a valid leasehold
interest in the Leased Real Property held by it free and clear of all
Liens except: (i) mortgages or security interests shown on the Financial
Statements as securing specified Liabilities or obligations, all of which
shall be discharged by Sellers at or prior to Closing, (ii) Liens for
current Taxes and assessments and other charges by Governmental Entities
not yet due and payable or which may thereafter be paid without penalty or
are being contested in good faith by appropriate proceedings and for which
adequate reserves have been established on the Financial Statements and
the Interim Financial Statements in accordance with GAAP, and (iii)
imperfections of title that do not materially impair the use of such
properties by the Asset Seller or the applicable Company, as applicable,
or the value of the leasehold interests of such Leased Real Property.
Section 3.14 Contracts, Leases and Agreements; No Default.
--------------------------------------------
(a) Except as set forth in Schedule 3.14(a) of the Disclosure
Schedule, there are no Applicable Contracts included among the
Transferred Assets or to which any Company is a party or by which
any of them are bound:
(1) evidencing indebtedness for borrowed money in excess
of $1,000,000 or pursuant to which Asset Seller (but
solely with respect to the Division) or any Company
has guaranteed any obligation of any other Person in
excess of $1,000,000;
(2) prohibiting, restricting or limiting the ability of
Asset Seller or any Company to engage in any line of
business, to compete with any Person or to carry on
the Business or any other business activity anywhere
in the world;
(3) leasing real property;
-25-
(4) requiring the performance of services or delivery of
goods or materials by or to Asset Seller or any
Company for consideration exceeding $1,000,000 in
any one year that are not terminable by Asset Seller
or the relevant Company within one year without
penalty;
(5) representing an employment agreement (i) in the case
of employees of the Asset Seller, that cannot be
cancelled with less than 30 days notice and without
penalty or special payment (other than severance in
an amount not to exceed $100,000) and (ii) in the
case of employees of any of the Companies, that
cannot be cancelled without penalty or special
payment (other than severance in an amount not to
exceed $250,000);
(6) that pertain to significant Intellectual Property
including license agreements, indemnification
agreements or other similar arrangements;
(7) that create any joint venture or other similar
arrangements (other than as specifically
contemplated by Section 6.1(h)) or prohibit it from
freely engaging in any business or competing
anywhere in the world;
(8) that are between the Asset Seller (with respect to
the Business or the Division) or any Company, on the
one hand, and any Affiliate of Asset Seller (other
than the Division or any Company), on the other
hand;
(9) requiring any Company to repurchase, redeem or
otherwise acquire any shares of its capital stock or
other securities or that are shareholder agreements,
voting trust agreements, registration rights
agreements or other Contracts between any Company
and its current or former security holders;
(10) in the case of employees of any of the Companies,
which is an employment agreement for which there
exists contractual liability (and excluding any
statutory liability) related to severance in an
amount in excess of $100,000;
(11) constituting capital leases; or
(12) that are otherwise material to the Business.
-26-
Sellers have delivered or made available to Buyer a true, complete
and correct copy of each Applicable Contract listed in Schedule
3.14(a) of the Disclosure Schedule.
(b) Except as set forth in Schedule 3.14(b) of the Disclosure
Schedule or for any such matters that, individually or in the aggregate,
would not have a Seller Material Adverse Effect with respect to each
Applicable Contract listed in Schedule 3.14(a) of the Disclosure
Schedule:
(1) such Applicable Contract is a valid and legally
binding obligation of Asset Seller or the Company
party thereto and, to the knowledge of Sellers, the
other parties thereto;
(2) Asset Seller or the Company that is a party to such
Applicable Contract is in substantial compliance with
all material terms and requirements of such Applicable
Contract;
(3) to the knowledge of Sellers, each other Person that is
a party to such Applicable Contract is in substantial
compliance with all material terms and requirements of
such Applicable Contract;
(4) to the knowledge of Sellers, no event has occurred or
circumstance exists that (with or without the giving
of notice, the lapse of time or both) gives any Person
the right to declare a default, exercise any remedy
under, accelerate the maturity or performance of, or
terminate such Applicable Contract;
(5) except as set forth in Section 3.5(b) of the
Disclosure Schedule, to the knowledge of Sellers upon
the consummation of the transactions contemplated by
this Agreement and subject to the receipt of consents
set forth in Schedule 3.5(c) of the Disclosure
Schedule, each Applicable Contract listed in Schedule
3.14(a) of the Disclosure Schedule will be a valid and
binding obligation of Buyer, enforceable in accordance
with its terms.
Section 3.15 Environmental Matters.
---------------------
(a) Except for any such matters that, individually or in the
aggregate would not have a Seller Material Adverse Effect:
-27-
(1) each of Asset Seller (but solely with respect to the
Division) and each Company is in substantial
compliance with all applicable Environmental Laws;
(2) neither Asset Seller (but solely with respect to the
Division) nor any Company has received any written
notice from any Governmental Entity alleging the
violation of any applicable Environmental Laws other
than for matters that have been resolved prior to the
date hereof;
(3) neither Asset Seller (but solely with respect to the
Division) nor any Company is subject to any Order
arising under any Environmental Law; and
(4) to the knowledge of Sellers, neither Asset Seller
(but solely with respect to the Division) nor any
Company has generated, stored, used, transported,
disposed of or released any Hazardous Substance
except as permitted under applicable Environmental
Laws.
(b) This Section 3.15 constitutes the sole representation and
warranty of Asset Seller and the Companies with respect to any Environmental
Law or Hazardous Substance notwithstanding any other representation and
warranty in this Article III. For purposes of this Agreement, the term
"Environmental Law" means any applicable law, regulation, code, license,
-----------------
permit, order, judgment, decree or injunction promulgated by any Governmental
Entity (i) for the protection of the environment (including air, water, soil
and natural resources) or (ii) regulating the use, storage, handling, release
or disposal of Hazardous Substances, in each case as presently in effect. For
purposes of this Agreement, the term "Hazardous Substance" means any
-------------------
substance to the extent listed, defined, designated or classified as
hazardous, toxic or radioactive under any applicable Environmental Law
including petroleum and any derivative or by-product thereof.
Section 3.16 Insurance. Schedule 3.16 of the Disclosure Schedule sets
forth a true, complete and correct list of all insurance policies covering the
Division, the Companies and any of their assets or operations, including a
description of any and all programs of self-insurance. The insurance policies
listed in Schedule 3.16 of the Disclosure Schedule are sufficient in all
material respects to comply with applicable Laws and any requirements of the
Applicable Contracts. No notice of cancellation or termination of any insurance
policy listed in Schedule 3.16 of the Disclosure Schedule has been received with
respect to any such policy and, to the knowledge of Sellers, each such policy is
in full force and effect.
-28-
Section 3.17 Brokers and Finders. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
-------------------
Incorporated, whose fees shall be paid by Sellers, no agent, broker, investment
banker, intermediary, finder, Person or firm acting on behalf of Sellers or any
Company will be entitled to any broker's or finder's fee or any other commission
or similar fee, directly or indirectly, from any of the parties hereto in
connection with the execution of this Agreement or upon consummation of the
transactions contemplated hereby.
Section 3.18 No Undisclosed Liabilities. The Assumed Liabilities do not
--------------------------
include, and the Companies do not have, any Liabilities except for (a)
Liabilities disclosed in the Disclosure Schedule, (b) Liabilities reflected or
reserved against in the Financial Statements, (c) current liabilities incurred
since September 30, 1999 in the ordinary course of business consistent with past
practice, and (d) any other Liabilities that, individually or in the aggregate,
are not material. "Liabilities" means any debts, liabilities, commitments or
obligations of any kind, character or nature whatsoever, whether known or
unknown, contingent or absolute, due or to become due.
Section 3.19 Intellectual Property. Except as set forth in Schedule 3.19
---------------------
of the Disclosure Schedule, Asset Seller and the Companies own or have the valid
and enforceable right to use all of the Intellectual Property used by them in
the conduct of the Business. Schedule 3.19 of the Disclosure Schedule lists all
registered copyrights, material trademark and service ▇▇▇▇ applications and
registrations and domain names held by Asset Seller and the Companies in
connection with the Business, except for such copyrights, registrations or
applications for trademarks or domain names that are not being used, or that
individually or in the aggregate are not material. Except as set forth in
Schedule 3.19 of the Disclosure Schedule, no proceedings or claims are pending
or, to the knowledge of Sellers, threatened alleging that the use by Sellers or
any Company of any Intellectual Property infringes on the rights of any third
party and no written claim has been received by Sellers or any Company alleging
any such infringement, other than any such infringements, proceedings or claims
that, individually or in the aggregate, would not have a Seller Material Adverse
Effect. Except as set forth in Schedule 3.19 of the Disclosure Schedule, to the
knowledge of Sellers, no Person is infringing any of the Intellectual Property
in any material respect.
Section 3.20 Transferred Assets. Asset Seller has, and at the Closing
------------------
Buyer will receive, good and marketable title to all of the Transferred Assets,
in each case free and clear of any Lien, except for such Liens that would not
materially interfere with the ownership of the Transferred Assets or operation
of the Business, taken as a whole, and which would not reasonably be expected to
interfere with or adversely affect the financing contemplated by Section 6.1(k).
All tangible assets constituting Transferred Assets are in good operating
condition and repair, ordinary wear and tear excepted. Except for the Excluded
Assets, and except for the assets listed on Schedule 2.1 of the Disclosure
Schedule, the Transferred Assets will constitute all of the material assets of
the Asset Seller or any of its Affiliates used in the operation of the Business
as conducted on the Closing Date.
-29-
Section 3.21 Year 2000 Compliance. To the knowledge of Sellers, all
--------------------
hardware, software and embedded technology used by Asset Seller or any Company
in the conduct of the Business (each such item, an "IT Asset") is Year 2000
--------
Compliant, except for such failures to be Year 2000 Compliant that, individually
or in the aggregate, are not reasonably likely to be material. "Year 2000
---------
Compliant" means, with respect to any IT Asset, that the IT Asset can accurately
---------
recognize, manage, accommodate and manipulate date-dependent data, computations,
outputs and other functions for dates on or after January 1, 2000 (including
single-and multi-century formulas and leap years).
Section 3.22 SEC Filings. All forms, reports, statements and other
-----------
documents (the "SEC Reports") filed by Parent with the Securities and Exchange
-----------
Commission ("SEC") have been prepared in all material respects in accordance
---
with the requirements of the Securities Act of 1933, as amended, and the
Exchange Act of 1934, as amended, and the rules and regulations of the SEC
thereunder applicable to such SEC Reports and, to the extent covering
information or matters related to the Business, did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstance under which they were made, not
misleading. Neither Asset Seller nor any other direct or indirect Subsidiary of
Parent is subject to the periodic reporting requirements of the Exchange Act of
1934, as amended.
Section 3.23 Related Party Transactions. Except as set forth in Schedule
--------------------------
3.23 of the Disclosure Schedule, since September 30, 1999, none of Asset Seller
(with respect to the Division) and the Companies is party to any agreement,
contract, commitment, transaction or proposed transaction with any of its
Affiliates (excluding the Division and the Companies), except agreements,
contracts, commitments, transactions and proposed transactions which have been
entered into and conducted on an arm's-length basis.
Section 3.24 Capitalization. The issued and outstanding capital stock of
--------------
Parent consists solely of (i) 103,366,373 shares of ▇▇▇▇-▇▇▇▇▇ Inc.-ZD Common
Stock ("ZD Stock"), of which 71,619,366 shares are owned by SOFTBANK, and (ii)
--------
13,707,063 shares of ▇▇▇▇-▇▇▇▇▇ Inc.-ZDNet Common Stock ("ZDNet Stock"), of
-----------
which no shares are owned by SOFTBANK. Based on the market value of ▇▇▇▇-▇▇▇▇▇
Inc.-ZD Common Stock and ▇▇▇▇-▇▇▇▇▇ Inc.-ZDNet Common Stock as of the date
hereof, SOFTBANK is entitled to approximately 59.4% of the voting power of
Parent on matters generally presented for a vote of stockholders of Parent,
including the matters contemplated by this Agreement. SOFTBANK is able to vote,
without limitation, all shares of ZD Stock it owns until this Agreement
terminates, or, if sooner, the date after the day on which any Stockholders
Meeting convened in accordance with Section 5.19 is held. There are no options
to purchase shares of ZD Stock or ZDNet Stock other than 10,005,060 options to
purchase ZD Stock and 12,852,277 options to purchase ZDNet Stock.
-30-
Section 3.25 Liabilities. All of the Liabilities related to the
-----------
Business or the Transferred Assets are Liabilities of Asset Seller or the
Companies.
Section 3.26 No Other Representations or Warranties; Disclaimer of
-----------------------------------------------------
Representations and Warranties.
------------------------------
(a) Except for the representations and warranties contained in this
Article III, neither of the Sellers nor any other Person makes any express or
implied representation or warranty on behalf of or with respect to Sellers,
any Company, the Transferred Assets, the Division or the Business, and
Sellers hereby disclaim any representation or warranty not contained in this
Article III or in any other agreement, instrument or document delivered by
any of Sellers and the Companies upon execution hereof or at the Closing.
(b) Except as set forth in the first sentence of Section 3.20, the
Sellers do not make any express or implied representation or warranty with
respect to the Investments or the business conducted by the Companies or
entities in which such Investments were made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
Section 4.1 Organization and Good Standing. Buyer is duly organized,
------------------------------
validly existing and in good standing under the laws of its jurisdiction of
incorporation. Buyer has full corporate power and authority to conduct its
businesses and to own or use its assets as it currently does.
Section 4.2 Corporate Authority. Buyer has the corporate power and
-------------------
authority, and has taken all corporate action necessary, to execute, deliver and
perform its obligations under this Agreement. This Agreement has been duly
executed and delivered by Buyer and constitutes a valid and legally binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
subject to the Enforceability Exceptions.
Section 4.3 Consents and Approvals; No Violations.
-------------------------------------
(a) Except for an HSR Filing, European Union merger regulations and
except as set forth in Schedule 4.3 of Buyer's Disclosure Schedule, no
notices, reports, registrations or other filings are required to be made
by Buyer with, nor are any consents, approvals or authorizations required
to be obtained by Buyer from, any Governmental Entity or third-party in
connection with the execution, delivery or performance of this Agreement
by Buyer, in each case except for
-31-
those the failure of which to make or obtain, individually or in the
aggregate, are not material to Buyer's ability to perform its obligations
under this Agreement.
(b) The execution, delivery and performance of this Agreement by
Buyer will not:
(1) violate or contravene any provision of the certificate of
incorporation or by-laws (or other comparable governing
documents) of Buyer;
(2) violate, conflict with, or constitute or result in a
default, acceleration or creation of a Lien under, or a
termination of (in each case with or without notice,
lapse of time or both), any provision of any Contract to
which Buyer is a party or by which any of its assets are
bound;
(3) require Buyer to obtain the consent, waiver,
authorization or approval of, any Person under any
Contract to which Buyer is a party or by which any of its
assets are bound; or
(4) violate, contravene or conflict with any Law or Order of
any Governmental Entity having jurisdiction over Buyer or
any of its assets.
Section 4.4 Securities Act. Buyer is acquiring the Shares for its own
--------------
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act of 1933 (the "Securities Act") in any manner that
--------------
would be in violation of the Securities Act. Buyer has not, directly or
indirectly, offered the Shares to anyone or solicited any offer to buy the
Shares from anyone in any manner that would bring the offer and sale of the
Shares pursuant hereto within the registration requirements of the Securities
Act. Buyer will not sell, convey, transfer or offer for sale any of the Shares
except upon compliance with the Securities Act and any applicable state
securities laws or pursuant to any exemption therefrom.
Section 4.5 Brokers and Finders. No agent, broker, investment banker,
-------------------
intermediary, finder, Person or firm acting on behalf of Buyer is or will be
entitled to any broker's or finder's fee or any other commission or similar fee,
directly or indirectly, from any of the parties hereto, other than Buyer, in
connection with the execution of this Agreement or upon consummation of the
transactions contemplated hereby.
Section 4.6 Financing. Upon funding of the commitment letters
---------
attached as Exhibit D hereto in accordance with customary terms reasonably
---------
satisfactory to Buyer, on the Closing Date Buyer will have available immediately
available funds sufficient to enable it to purchase the Transferred Assets and
Shares on the terms and conditions of this Agreement. Except as set forth in
such commitment letters, Buyer's obligations
-32-
hereunder are not subject to any conditions regarding Buyer's ability to obtain
financing for the consummation of the transactions contemplated herein.
Section 4.7 Litigation. As of the date hereof, there are no Actions
----------
pending or, to the knowledge of Buyer, threatened against Buyer or any of its
Affiliates other than Actions that, individually or in the aggregate, are not
material to its ability to perform its obligations hereunder and are not
reasonably likely to prohibit or materially restrict or delay the performance of
this Agreement by Buyer.
Section 4.8 No Other Representations or Warranties. Except for the
--------------------------------------
representations and warranties contained in this Article IV, neither Buyer nor
any other Person makes any other express or implied representation or warranty
on behalf of or with respect to Buyer and Buyer hereby disclaims any
representation or warranty not contained in this Article IV.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business. Prior to the Closing, except as
-------------------
requested or consented to by Buyer in writing, which consent shall not be
unreasonably withheld or delayed and except as otherwise expressly contemplated
hereby, Asset Seller shall, and Stock Seller shall cause the Companies to,
conduct the Business only in the ordinary course of business consistent with
past practice and use their commercially reasonable efforts to preserve intact
the Business and the relationships of the Division and the Companies with their
employees, suppliers and others having business relationships with them and
Asset Seller shall not (but solely with respect to the Division) and Stock
Seller shall ensure that the Companies shall not:
(a) grant, modify or increase any bonus, salary, severance,
termination or other compensation or benefits to any employee of the
Division or any Company other than in the ordinary course of business
consistent with past practice or adopt or enhance any Benefit Plans;
(b) sell, lease, license or otherwise dispose of, mortgage,
pledge or otherwise subject to a Lien any assets in excess of $1,000,000
Related to the Business and owned by the Asset Seller or any Company
other than (i) dividends of cash or other Excluded Assets; (ii) sales,
licenses or dispositions in the ordinary course of business consistent
with past practice; and (iii) nonconsensual statutory or common law
Liens incurred in the ordinary course of business of a nature that would
not reasonably be expected to interfere with or adversely affect the
financing contemplated by Section 6.1(k).
-33-
(c) acquire or make any investment of more than $1,000,000 in
any other Person or assets, including without limitation by merger,
consolidation or share exchange;
(d) make or commit to make any capital expenditures in excess
of $1,000,000;
(e) except as set forth in Schedule 5.1(e) of the Disclosure
Schedule, enter into any Applicable Contract that would have been
required to be listed in Schedule 3.14(a) of the Disclosure Schedule
if it had been in effect as of the date of this Agreement or
terminate, modify in any material respect or waive any material
rights under any Applicable Contract listed in such Schedule in each
case other than in the ordinary course of business consistent with
past practice;
(f) settle, compromise, waive, release or assign any material
claims or rights it has in respect of any Actions related to the
Business or any Company to which it is a party or by which it is
bound;
(g) incur any indebtedness for borrowed money other than
indebtedness to Sellers or their Affiliates or guaranty any such
indebtedness or issue or sell any debt securities or warrants or
rights to acquire any debt securities, or grant or incur any Liens
for borrowed money or that could reasonably be expected to adversely
affect the Buyer's ability to obtain the financing contemplated by
this Agreement with respect to any of the Transferred Assets or any
assets of any of the Companies;
(h) change any of its accounting methods, policies or
practices;
(i) enter into any material transaction or Contract which, if
entered into prior to the date hereof, would have required
disclosure under Section 3.23 above; or
(j) enter into any agreement to do any of the foregoing.
Notwithstanding the foregoing, at any time before the Closing,
Stock Seller may cause any Company to (i) transfer, by dividend or otherwise, to
Stock Seller or any of its Affiliates any cash, bank accounts, certificates of
deposit, commercial paper, annuities, treasury notes and bills or other
marketable securities and any of the assets listed in Schedule 5.1(i) of the
Disclosure Schedule and (ii) discharge any Liability owed to or by Sellers or
any of their Affiliates.
Section 5.2 Access.
------
(a) Between the date of this Agreement and the Closing Date,
Sellers shall, and shall cause the Companies to, afford Buyer full
and free access, at all
-34-
reasonable times during normal business hours, to the personnel,
premises, properties, Applicable Contracts, books and records and
other documents and data relating to the Division and the Companies
as Buyer may reasonably request. The foregoing shall not require
Sellers or any Company to permit any inspection, or to disclose any
information, that in their reasonable judgment is reasonably likely
to result in the disclosure of any trade secrets of third parties or
violate any of their obligations with respect to confidentiality if
the Applicable Seller or the Company, as the case may be, shall have
used reasonable efforts to obtain the consent of such third party to
such inspection or disclosure. All requests for information made
pursuant to this Section 5.2(a) shall be directed to an executive
officer of the Applicable Seller.
(b) Following the Closing, Buyer shall, and shall cause
the Companies and any other Subsidiary of Buyer to (i) afford
Sellers full and free access, upon reasonable notice at all
reasonable times during normal business hours, to the personnel,
premises, properties, Applicable Contracts, books and records and
other documents and data relating to the Division and the Companies
as Sellers shall reasonably request, (ii) furnish Sellers with
copies of all such Applicable Contracts, books and records and other
existing documents and data as Sellers may reasonably request and
(iii) furnish Sellers with such additional financial, operating and
other data and information as Sellers may reasonably request, in
each case to the extent necessary to prepare its financial
statements, Tax Returns and other documents and reports Sellers or
any of its Affiliates are required to file with Governmental
Entities or which Sellers reasonably require in connection with any
Action against, or tax examination of, Sellers or any of its
Affiliates (other than any Action by or against Buyer or any of its
Affiliates); provided that Buyer shall not be obligated to comply
with any of the foregoing unless and until Sellers shall have
executed a confidentiality agreement in customary form. The
foregoing shall not require Buyer, any Company or any of Buyer's
other Affiliates to permit any inspection, or to disclose any
information, that in their reasonable judgment is reasonably likely
to result in the disclosure of any trade secrets of third parties or
violate any of their obligations with respect to confidentiality if
Buyer, the Companies or Buyer's other Affiliates shall have used
reasonable efforts to obtain the consent of such third party to such
inspection or disclosure. All requests for information made pursuant
to this Section 5.2(b) shall be directed to an executive officer of
Buyer.
Section 5.3 Required Consents, Approvals and Actions.
----------------------------------------
(a) Sellers shall use their commercially reasonable
efforts to promptly prepare and file all necessary documentation, to
effect all necessary notices, reports, registrations or other
filings and documents and to obtain as promptly as practicable all
necessary consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable or to take
such other actions
-35-
necessary or advisable under any Law to consummate the transactions
contemplated herein. Buyer shall provide reasonable assistance to
and cooperate with Sellers' efforts with respect to the matters
described in the preceding sentence. Each party shall have the right
to review in advance, and to the extent practicable each will
consult the other on, in each case subject to applicable Laws
relating to the exchange of information, all the information
relating to Buyer or any Seller or Company that appears in any
filing made with, or written materials submitted to, all third
parties and Governmental Entities in connection with the
transactions contemplated by this Agreement. In exercising the
foregoing right, each of Buyer and Sellers shall act reasonably and
as promptly as practicable. Buyer and Sellers agree that they will
keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein, including
promptly furnishing the other with copies of notice or other
communications received by Buyer, Sellers or the Companies, from all
third parties and Governmental Entities with respect to the
transactions contemplated herein.
(b) Without limiting the generality of the foregoing,
Buyer and Sellers each agree to promptly prepare and file an HSR
Filing with the Federal Trade Commission (the "FTC") and the
---
Antitrust Division of the Department of Justice (the "DOJ"). Each
---
party hereby covenants to request early termination of the waiting
period required by the HSR Act and to cooperate with the other such
party to the extent reasonably necessary to assist in making
reasonable supplemental presentations to the FTC or the DOJ, and if
requested by the FTC or the DOJ, to promptly amend or furnish
additional information thereunder. Buyer agrees to use its best
efforts to do all things necessary, proper or advisable to avoid or
eliminate any impediment under any antitrust law that may be
asserted by any of the FTC, the DOJ or any other Person to the
consummation of the acquisition of the Transferred Assets or the
Shares by the Buyer in accordance with the terms of this Agreement.
Section 5.4 Commercially Reasonable Efforts. Between the
-------------------------------
date of this Agreement and the Closing Date, each of the parties hereto shall
use their respective commercially reasonable efforts to cause the conditions set
forth in Sections 6.1 and 6.2, as applicable, to be satisfied.
Section 5.5 Publicity. The initial press release
---------
announcing the transactions contemplated herein shall be released jointly after
consultation between the parties hereto and thereafter the parties hereto shall
consult with each other to the extent practicable prior to issuing any press
releases or otherwise making public announcements with respect to the
transactions contemplated herein and prior to making any filings with any
Governmental Entity or with any national securities exchange or interdealer
quotation service with respect thereto.
-36-
Section 5.6 Expenses. Except as otherwise expressly provided herein,
--------
whether or not the transactions contemplated herein are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated herein shall be paid by the party incurring such expense; provided
that all fees and expenses arising from the assignment of trademarks or service
marks by Asset Seller or any of its Affiliates to Buyer shall be borne 50% by
Buyer and 50% by Asset Seller. In the event of termination of this Agreement,
the obligation of each party to pay its own expenses will be subject to any
rights of such party arising from a breach of this Agreement by the other party.
Section 5.7 ZDMI Non-Solicitation. Buyer hereby covenants and agrees
---------------------
that for a period of two years following October 1, 1999, Buyer shall not employ
in competition with the ZD Market Intelligence Business any person formerly
employed by Asset Seller's ZD Market Intelligence division who became an
employee of ▇▇▇▇▇-▇▇▇▇▇, Inc. in connection with the sale of the ZD Market
---------
Intelligence Business. "ZD Market Intelligence Business" means the development,
---------------------
compilation and distribution of information on installed and planned technology
hardware and software purchases and the provision of customized service
solutions utilizing such information as conducted by the ZD Market Intelligence
division of Asset Seller before October 1, 1999.
Section 5.8 Employees.
---------
(a) Schedule 5.8(a) of the Disclosure Schedule sets forth, as of the
date hereof, a true, complete and correct list of employees of the
Division and the Companies who are on disability leave, authorized leave
of absence or military service. On the Closing Date, Buyer shall (i) offer
employment to all active employees of Asset Seller listed on Schedules
3.11(a) and 3.11(b) of the Disclosure Schedule and who are still employees
of Asset Seller as of the Closing Date, including the employees of Asset
Seller who are temporarily absent from work for short-term disability,
military service, worker's compensation or Family Medical and Leave Act
reasons and identified as such on Schedule 5.8(a) of the Disclosure
Schedule, for cash compensation substantially comparable to that set forth
on Schedules 3.11(a) and (b) of the Disclosure Schedule as increased in
accordance with the terms of Section 5.1(a), and (ii) offer employment to
all active employees of Asset Seller hired in the ordinary course of
business after the date hereof but prior to the Closing Date (provided,
however, that neither Asset Seller nor any Company shall hire any person
for annual compensation in excess of $150,000 without the prior written
consent of Buyer) for cash compensation equal to that amount for which
they were hired (in the case of persons hired after the date hereof) as
increased in accordance with the terms of Section 5.1(a) in connection
with similar increases for all other employees similarly situated.
Notwithstanding any other provision of this Agreement to the contrary,
Buyer shall not be obligated to offer employment to any person except as
required pursuant to the immediately preceding sentence. Buyer shall have
no liability or
-37-
obligation for (i) any active employee of Asset Seller who does not accept
employment with Buyer or (ii) any non-active or former employee of Asset
Seller (such Liabilities with respect to the foregoing being referred to
as "Excluded Employment Liabilities"). Asset Seller shall use its
-------------------------------
reasonable efforts to ensure the orderly transfer of such employees to
Buyer.
(b) Buyer shall comply in all material respects with all Laws
respecting employment and employment practices in connection with the
transfer of any employees of Asset Seller to Buyer or the retention of
employees by the Companies after the Closing Date.
(c) During the period commencing at the Closing Date and ending
on the first anniversary thereof, Buyer shall, or shall cause one of its
Affiliates to, continue to provide to the employees of the Division and
employees of each Company employee benefit plans, programs, policies and
arrangements (other than stock option or other plans involving the
potential issuance of securities) which in the aggregate are no less
favorable than those provided under the applicable employee benefit plans,
programs, policies and arrangements of the Division or the relevant
Company in effect on the Closing. Without limiting the generality of the
foregoing,
(1) Buyer shall cause each of the Division and each
Company to continue the Enhanced Severance Benefit
Plan set forth in Schedule 5.8(c) of the Disclosure
Schedule for a period of at least 60 days after the
Closing. Employees of the Division and each Company
shall (1) be permitted to carry over up to four
weeks of vacation time accrued during his or her
employment by Asset Seller and (2) be given credit
under each employee benefit plan, program, policy
or arrangement of Buyer or any of its Affiliates in
which the employees are eligible to participate for
all service with the Division, each Company or any
predecessor employer (to the extent such credit was
given by the Division or the relevant Company) for
purposes of eligibility, vesting, benefit accrual,
severance and vacation entitlement.
(2) Buyer shall take all such action as is necessary or
appropriate in order to ensure that employees of
the Division who accept employment by Buyer and
employees of each Company and their spouses and
dependent children covered by the group health
plans sponsored by Sellers or their Affiliates (the
"Seller Health Plans") as of the Closing
-------------------
Date become eligible for coverage under a
substantially comparable group health plan
maintained by Buyer or its
-38-
Affiliates effective immediately after the Closing.
Buyer shall cause the group health plan maintained
by it or its Affiliates to (i) waive any waiting
periods, evidence of insurability requirements or
preexisting condition limitations and (ii) honor
any deductible, co-payment and out-of-pocket
expenses incurred by the employees and their
beneficiaries under the Seller Health Plans during
the portion of 1999 preceding the Closing.
(3) Buyer shall take all such action as is necessary or
appropriate in order to assure that employees of
the Division and each Company covered by the group
term life insurance plan sponsored by Sellers or
their Affiliates (the "Seller Life Plan")
----------------
as of the Closing Date become eligible for
substantially comparable coverage under a group
term life insurance plan maintained by Buyer or its
Affiliates effective immediately after the Closing.
Buyer shall cause such plan to waive any medical
certification for such employees up to the amount
of coverage the employees had under the Seller Life
Plan (but subject to any limits on the maximum
amount of coverage under Buyer's group term life
insurance plan).
(d) The account balances under the ZD Plan of all current and former
employees of the Division and the each Company, (i) if not forfeited under the
terms of the ZD Plan prior to the Closing Date, shall become 100% vested and
non-forfeitable upon the Closing Date, and (ii) shall be transferred to a tax-
qualified defined contribution plan maintained by Buyer or any of its
Affiliates ("Buyer's Plan") in a so-called "trust-to-trust" transfer satisfying
------------
the applicable requirements of Section 414(l) of the Code. An amount equal to
8% of the eligible earnings earned in the year 2000 prior to the Closing Date
of all employees of the Division or any Company shall be accrued as a liability
on the Closing Date Balance Sheet; provided, however, that Buyer shall use such
-------- -------
amount to make a discretionary contribution to Buyer's own retirement plan for
the benefit of such employees.
(e) Employees of the Division and each Company who are on long-term
disability as of the Closing Date shall continue disability coverage under
Sellers' disability plan until such time as they are no longer disabled.
Employees of the Division and each Company who are on short-term disability as
of the Closing Date shall be covered under a short-term disability plan
maintained by Buyer or its Affiliate effective immediately after the Closing
Date, and shall be transferred to a plan maintained by Buyer or its Affiliates
upon becoming permanently disabled or otherwise entitled to long-term disability
benefits under such plan.
-39-
Buyer shall pay to employees of the Division and each
Company the retention costs and special bonuses set forth in
Schedule 5.8(e) of the Disclosure Schedule in accordance with such
Schedule.
Section 5.9 Intercompany Liabilities. Except as otherwise provided
------------------------
in Section 5.10, Sellers shall take all actions necessary so that, as of the
Closing Date, neither Asset Seller (with respect to the Division) nor any of the
Companies shall have any Liability (other than with respect to trade receivables
arising in the ordinary course of business consistent with past practice which
will be reflected on the Closing Date Balance Sheet and included in the
calculation of Closing Net Worth) to any of Sellers and their Affiliates (other
than the Division or any Company) after the Closing, including all borrowings by
Asset Seller (with respect to the Division) or any Company from any of Sellers
and their Affiliates (other than Asset Seller, with respect to the Division or
any Company) or any obligation to pay a dividend to any of Sellers and their
Affiliates (other than Asset Seller, with respect to the Division or any
Company).
Section 5.10 Intercompany Programs. Prior to the Closing, Asset
---------------------
Seller and its Affiliates have proposed or agreed upon transactions with third
parties whereby products or services of the Division and the Companies are
offered or sold to such third parties bundled with other products or services of
Asset Seller and/or its Affiliates. Prior to the Closing, Buyer and Asset Seller
shall, and Asset Seller shall cause its Affiliates to, negotiate in good faith
and, if such Persons agree, execute definitive agreements embodying, the terms
on which Buyer (with respect to the Business and the Division), Asset Seller and
such Affiliates shall provide such products or services to such third parties.
In connection with such negotiations, none of Buyer, Asset Seller and its
Affiliates shall be obligated to accept any payment or other terms, provided
that each will afford to the others the favorable terms which such Person
generally offers third parties buying such products or services from such Person
in similar quantities. Buyer acknowledges that prior to the Closing Date,
certain current Affiliates of Asset Seller may be sold by Asset Seller or its
parent company, ▇▇▇▇-▇▇▇▇▇ Inc.
Section 5.11 Transition Services and Subleases.
---------------------------------
(a) Prior to Closing, Sellers and Buyer shall negotiate in good
faith and execute an agreement covering (i) certain services that
Seller will provide to Buyer for a period of up to six months
following the Closing, at a price equal to the Asset Seller's or
Parent's, as appropriate, cost of providing such services, and (ii)
terms on which Buyer will make available to Affiliates of Sellers
office space at a price equal to a pro rata portion of the lease
payments and other costs related to the use of the office space,
based on the amount of space used by such Affiliate.
-40-
(b) Asset Seller shall, and shall cause its Affiliates to, and
Buyer shall, enter into a sublease as contemplated by Schedule
5.11(b) of the Disclosure Schedule.
Section 5.12 Retention of Records.
--------------------
(a) Buyer shall retain, and cause its Affiliates to retain, all
books and records relating to the conduct of the Business prior to
the Closing Date for a period of at least six years from the date
hereof. After the end of such six-year period, any such document or
record may be disposed of by Buyer or its Affiliates only if Buyer
or such Affiliate first offers to surrender possession thereof to
Sellers at Sellers' expense and Sellers decline such offer. Upon
reasonable notice to Buyer and with Buyer's prior consent, which
consent Buyer will not withhold or delay unreasonably, Sellers may
inspect and make copies of any such records for any reasonable
purpose during business hours, subject to Sellers' obligations under
Section 5.18.
(b) Subject to Sellers' obligations under Section 5.18, Sellers
may retain (i) one copy of the materials included in the data room
organized by Sellers in connection with the Asset Purchase and the
Stock Purchase, together with a copy of all documents referred to in
such materials, (ii) all internal correspondence and memoranda,
valuations, investment banking presentations and bids received from
others in connection with the Asset Purchase and the Stock Purchase
and (iii) a copy of all combined, consolidating and consolidated
financial information and all other accounting records prepared or
used in connection with the preparation of the Financial Statements.
Sellers shall deliver to Buyer all other books and records relating
to the Business and the Companies.
Section 5.13 Asset Seller's Trademarks. Effective as of the
-------------------------
Closing Date, any license agreement pursuant to which Asset Seller or any of its
Affiliates has granted to the Division or any Company the right to use
trademarks, trade names, trade dress, service marks, domain names or logos that
include the words "ZD", "Ziff" or "SOFTBANK" shall be cancelled. Except as
provided in the license agreement contemplated by Section 6.1(h), as promptly as
is practicable after the Closing, Buyer shall, and agrees to cause each Company
to, eliminate the words "ZD", "Ziff" or "SOFTBANK" and every word or expression
derived therefrom from the names under which the Division and the Companies do
business. Except as provided in the license agreement contemplated by Section
6.1(h), within 60 days after the Closing (the "Transition Period"), Buyer shall,
and shall cause each Company to, remove any such trademarks, trade names, trade
dress, service marks, domain names and logos from its respective properties,
stationery and literature, and thereafter neither Buyer nor the Companies shall
use any such trademarks, trade names, trade dress, service marks, domain names
or logos.
-41-
Section 5.14 Tax Matters.
-----------
(a) Transfer Taxes. All excise, sales, use, transfer, documentary,
--------------
filing, recordation and other similar taxes and fees that may be imposed or
assessed as a result of the transactions effected pursuant to this Agreement,
together with any interest, additions or penalties with respect thereto and
any interest in respect of such additions or penalties ("Transfer Taxes"),
--------------
shall be borne 50% by Buyer and 50% by Sellers. Buyer and Sellers shall
cooperate in the timely preparation and filing of any Tax Returns that must be
filed in connection with any Transfer Taxes. Buyer shall promptly and timely
pay all Transfer Taxes. Any Transfer Taxes or fees resulting from any
subsequent transfer of the Transferred Assets or Assumed Liabilities or any
transfer of property on or subsequent to the Closing shall be borne entirely
by Buyer, and Buyer shall indemnify Sellers for any liabilities arising in
connection therewith.
(b) Remittance of Transfer Taxes. Transfer Taxes described in Section
----------------------------
5.14(a) shall be remitted as provided by applicable law, and where the paying
party is entitled to reimbursement, such reimbursement will be made by the
non-paying party in immediately available funds in United States dollars not
later than five business days after the payment of such taxes.
(c) Determination and Allocation of Consideration. Asset Seller and
---------------------------------------------
Buyer agree to determine the amount of and allocate the total consideration
transferred by Buyer to Asset Seller pursuant to this Agreement (the
"Consideration") in accordance with the fair market value of the assets and
liabilities transferred and in accordance with Section 1060 of the Code. Buyer
shall provide Asset Seller with one or more schedules allocating the
Consideration. If Asset Seller disagrees with any items reflected on the
schedules so provided, Asset Seller shall have the right to notify Buyer of
such disagreement and its reasons for so disagreeing, in which case Asset
Seller and Buyer shall attempt to resolve the disagreement. If Asset Seller
and Buyer cannot resolve the disagreement, the disagreement shall be referred
to the Accounting Expert, whose decision shall be final and binding and whose
expenses shall be borne by the party that the Accounting Expert determines has
lost the dispute. Asset Seller and Buyer agree to prepare and file an IRS Form
8594 in a timely fashion in accordance with the rules under Section 1060 of
the Code. To the extent that the Consideration is adjusted after the Closing
Date, the parties agree to revise and amend the schedule and IRS Form 8594 in
the same manner and according to the same procedure. The determination and
allocation of the Consideration derived pursuant to this subsection shall be
binding on Asset Seller and Buyer for all Tax reporting purposes.
(d) Employee Withholding and Reporting Matters. With respect to those
------------------------------------------
employees who are employed by Buyer within the same calendar year as the
-42-
Closing, Buyer shall, in accordance with and to the extent permitted
pursuant to Revenue Procedure 96-60, 1996-2C.B.399, assume all
responsibility for preparing and filing Form W-2, Wage and Tax
Statement, Form W-3, Transmittal of Income and Tax Statements, Form 941,
Employer's Quarterly Federal Tax Return, Form W-4, Employee's
Withholding Allowance Certificate, and Form W-5, Earned Income Credit
Advance Payment Certificate. Sellers and Buyer agree to comply with the
procedures described in Section 5 of Revenue Procedure 96-60.
Section 5.15 Further Assurances. At any time and from time to
------------------
time after the Closing Date, the parties hereto agree to (a) furnish upon
request to each other such further assurances, information, documents and
instruments of transfer or assignment, (b) promptly execute, acknowledge, and
deliver any such further assurances, documents and instruments of transfer or
assignment, and (c) do all such further acts and things, in each case that the
other party may reasonably request for the purpose of carrying out the intent of
this Agreement and the documents referred to herein. In the event either Seller
is the obligor on a performance bond, letter of credit or similar instrument
described on Schedule 5.15 of the Disclosure Schedule which secures the payment
or performance of an Assumed Liability, Buyer shall use its commercially
reasonable efforts to cause such Seller to be released from such obligations and
shall take such actions as are necessary to reimburse the Applicable Seller for
any payments it makes in respect of such obligations.
Section 5.16 Non-Assignable Agreements. Buyer acknowledges that
-------------------------
certain agreements between Asset Seller and third parties require that such
third parties consent to the assignment of such agreements. Asset Seller shall
use commercially reasonable efforts to obtain all consents and approvals
necessary or desirable in connection with the consummation of the transactions
contemplated by this Agreement, in form and substance reasonably satisfactory to
Buyer, including the assignment to Buyer of all agreements, contracts, purchase
orders, instruments or other similar arrangements which, but for Section 2.3(h),
would be Transferred Assets. Without in any way limiting the foregoing, Buyer
shall reasonably cooperate with and provide assistance to Asset Seller in
obtaining all such consents and approvals. If any consent for any agreement is
not obtained, such agreement shall not be assigned, but Asset Seller shall, to
the extent possible without incurring any liability to any third party, keep the
agreement in effect and give the Buyer the benefit of the agreement to the same
extent as if it had been assigned including, without limitation, (i) cooperating
with Buyer in holding any rights under agreements for which no consent to assign
rights to Buyer is obtained ("Non-Assignable Rights") in trust for Buyer or
---------------------
acting as an agent for Buyer; (ii) enforcing any rights of Asset Seller arising
from such Non-Assignable Rights against the issuers thereof or the other party
or parties thereto; (iii) taking all such actions and doing, or causing to be
done, all such things at the request of Buyer as shall be reasonably necessary
and proper in order that the value of any Non-Assignable Rights shall be
preserved and shall inure to the benefit of Buyer and (iv) paying over to Buyer
all monies or other assets
-43-
collected by or paid to Asset Seller in respect of such Non-Assignable Rights.
Buyer shall perform the obligations under the agreement relating to the benefit
obtained by Buyer. Nothing in this Agreement shall be construed as an attempt to
assign any agreement or other instrument that is by its terms non-assignable
without the consent of the other party.
Section 5.17 Audited Financial Statements.
----------------------------
(a) Delivery. Sellers will use their commercially reasonable efforts to
--------
deliver to Buyer (i) by January 15, 2000 draft audited consolidated balance
sheets of Asset Seller (with respect to the Division) and the Companies as
of December 31, 1997 and 1998 and the related draft audited consolidated
statements of operations and cash flow for Asset Seller (with respect to
the Division) and the Companies for the successive fiscal year periods
ended on such dates ("the "Pre-1999 Draft Financial Statements") and (ii)
-----------------------------------
by February 1, 2000 a draft audited consolidated balance sheet of Asset
Seller (with respect to the Division) and the Companies as of December 31,
1999, and the related draft audited consolidated statements of operations
and cash flow for Asset Seller (with respect to the Division) and the
Companies for the fiscal year period ended on such date (the "1999 Draft
----------
Financial Statements" and, together with the Pre-1999 Draft Financial
--------------------
Statements, the "Draft Financial Statements"). The parties hereto agree
--------------------------
that each such draft audited balance sheet shall include only assets
Related to the Business, the assets of the Companies and the liabilities to
the extent Related to the Business, and shall exclude the Excluded Assets
and the Excluded Liabilities in each case as of, or for, the date or period
referred to in such financial statements, and that the audited financial
statements shall, in each case, be in form and substance consistent with
the requirements of the SEC for a registered offering.
(b) Review by Buyer. Upon receipt of all of the Draft
---------------
Financial Statements, Buyer shall have 15 days (the "Financial Statements
Review Period") to review the Draft Financial Statements. From and after
the date hereof, Sellers shall give Buyer and Buyer's personnel and
advisors reasonable access at all reasonable times to all books, records
and other materials relating to the Division and the Companies and any work
papers prepared by or for Sellers (including accountant's work papers), in
each case as is reasonably requested.
(c) Objection by Buyer. On or prior to the last day of the
------------------
Financial Statements Review Period, Buyer may object to the Draft Financial
Statements by delivering to Seller a written statement setting forth in
reasonable detail such Seller's objections to the Draft Financial Statements
(the "Financial Statements Statement of Objections"). If Buyer does not
--------------------------------------------
deliver a Financial Statements Statement of Objections within the Financial
Statements Review Period, the Draft Financial Statements shall be deemed to
have been accepted by the Buyers and,
-44-
assuming the final audited version thereof does not depart therefrom, the
condition set forth in Section 6.1(l) shall be deemed to have been
satisfied. If Buyer delivers a Financial Statements Statement of Objections
within the Financial Statements Review Period, Sellers and Buyer shall
negotiate in good faith to resolve such objections, and any objections that
are resolved by a written agreement between Buyer and Sellers shall be final
and binding on the parties. If all objections are so resolved and the final
audited financial statements do not depart from that resolution, the
condition set forth in Section 6.1(l) shall be deemed to have been
satisfied.
(d) Resolution of Disputes. If the Seller and Buyer fail to reach an
----------------------
agreement with respect to all of the matters set forth in the Financial
Statements Statement of Objections, then the matters still in dispute shall,
not later than 5 business days after the earlier of the end of the Financial
Statements Review Period or the first date on which one of the parties
affirmatively terminates discussions in writing with respect to the
Financial Statements Statement of Objections, be submitted for resolution to
the New York office of one of the five largest United States independent
certified public accountants that has no material business relationships
with Buyer or either of the Sellers, as selected by Buyer and the Sellers
jointly (the "Financial Statements Accounting Expert") who, acting as an
--------------------------------------
expert and not as an arbitrator, shall resolve the matters still in dispute.
The Financial Statements Accounting Expert's resolution of the matters in
dispute shall be final and binding on the parties. The Financial Statements
Accounting Expert shall make a determination as soon as practicable and in
any event within 10 days (or such other time as the parties hereto shall
agree in writing) after its engagement. The parties hereto agree that all
adjustments shall be made without regard to materiality. If the final
audited financial statements do not depart from such resolution, the
condition set forth in Section 6.1(l) shall be deemed to have been
satisfied.
(e) Fees and Expenses. Buyer shall pay one-half and the objecting
-----------------
Seller shall pay one-half of the fees and expenses of the Financial
Statements Accounting Expert.
(f) Access to Supporting Documentation. Sellers and Buyer shall each
----------------------------------
make readily available to the Financial Statements Accounting Expert all
relevant work papers and books and records in their possession or to which
they have the power to grant access relating to the Division, the
Companies, and the Draft Financial Statements.
Section 5.18 Confidentiality.
---------------
(a) Confidentiality. Each Seller shall treat and hold as confidential
---------------
any information concerning the business and affairs of the Company that is
not
-45-
already generally available to the public (the "Confidential Information"),
refrain from using any of the Confidential Information except in connection
with this Agreement, and (except for any information that this Agreement
expressly permits Sellers to retain) deliver promptly to Buyer, at the
request and option of Buyer, all tangible embodiments (and all copies) of
the Confidential Information which are in its possession or under its
control. If Seller is required to disclose any Confidential Information in
order to avoid violating any Law, Sellers will provide the Buyer with
prompt notice of such requirement. To the extent legally permissible and at
Buyer's expense, Sellers shall provide the Buyer, in advance of any such
disclosure, with copies of any Confidential Information Sellers intend to
disclose (and, if applicable, the text of the disclosure language itself)
and to cooperate with Buyers to the extent Buyer may seek to limit such
disclosure. If, in the absence of a protective order or the receipt of a
waiver from the Buyer after a request in writing therefor is made by
Sellers, and after complying with the foregoing, Sellers are, on the advice
of counsel, by Law required to disclose Confidential Information, Sellers
may do so without liability hereunder.
(b) Remedy for Breach. Each Seller acknowledges and agrees that in
-----------------
the event of a breach by any Seller of any of the provisions of this
Section 5.18, monetary damages shall not constitute a sufficient remedy.
Consequently, in the event of any such breach, Buyer and its successors or
assigns may, in addition to other rights and remedies existing in its
favor, apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce
or prevent any violations of the provisions hereof, in each case without
the requirement of posting a bond or proving actual damages.
(c) Enforcement. If the final judgment of a court of competent
-----------
jurisdiction declares that any term or provision of this Section 5.18 is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to
reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as
so modified after the expiration of the time within which the judgment may
be appealed.
Section 5.19 Stockholders Meeting; Information Supplied.
------------------------------------------
(a) If deemed appropriate, Parent will take all action necessary to
convene a meeting (the "Stockholders Meeting") of Parent's stockholders
("Parent Stockholders"), to occur as promptly as practicable after the
date hereof, to approve the transactions contemplated hereby.
-46-
(b) Parent and Buyer each agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion in the proxy
statement (and any amendment or supplement thereto) to be filed with
the SEC by Parent in connection with the Asset Purchase and Stock
Purchase (the "Proxy Statement") will, at the date of mailing to
stockholders and at the time of the Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under
which they were made, not misleading. Parent will cause the Proxy
Statement to comply as to form in all material respects with the
applicable provisions of the Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
(c) Buyer shall, upon request by Parent, furnish Parent with
all information concerning itself, its Subsidiaries, directors,
officers and shareholders and such other matters as may be
reasonably necessary or advisable in connection with the filing and
mailing of the Proxy Statement.
(d) Buyer and its counsel shall be given an opportunity to
review the Proxy Statement, and all amendments or supplements
thereof, prior to their being filed with the SEC and Parent shall
not make any such filing without the approval of Buyer (which shall
not be unreasonably withheld or delayed). Parent shall advise Buyer,
promptly after it receives notice thereof, of the time when the
Proxy Statement has been cleared by the SEC or any request by the
SEC for amendment of the Proxy Statement or proposed responses
thereto or requests by the SEC for additional information.
Section 5.20 Insurance. The parties acknowledge the possibility
---------
that losses Buyer may suffer after the Closing as a result of events or
occurrences affecting the Division or the Companies before the Closing may be
covered by insurance policies of Sellers or their Affiliates. The parties
further acknowledge the possibility that they may be able to put in place
arrangements that would make available to Buyer the benefit of such coverage
with respect to such losses without prejudicing Seller's other rights under such
policies. The parties agree to cooperate fully with each other and Sellers shall
use their best efforts to put such arrangements in place by naming the Buyer as
an additional insured under the insurance policies of Sellers or otherwise
enable Buyer to benefit from the insurance policies; provided that, if Buyer
receives any benefit as a result of any such arrangement in respect of any loss
as to which it has already been compensated through an adjustment in the
Purchase Price as contemplated by Section 2.8, Buyer and Seller will agree on
appropriate measures to avoid any windfall to Buyer. Buyer agrees to reimburse
Sellers for all of Sellers' reasonable expenses incurred in connection with
obtaining for Buyer the benefit of such insurance coverage with respect to such
losses.
-47-
Section 5.21 Sale of Investments. Buyer acknowledges (i) that ZD APN
-------------------
Partners and Ziff-▇▇▇▇▇ ▇▇▇▇▇▇▇ Media LDC hold assets that are not Related to
the Business; (ii) that, prior to Closing, Stock Seller intends to cause such
entities to transfer or other otherwise convey to Affiliates of Stock Seller
those assets not Related to the Business; and (iii) that such transfer or
conveyance may require the consent of other Persons who hold interests in such
entities. In the event that Stock Seller cannot obtain the consents contemplated
by this Section or otherwise cannot transfer such assets to Affiliates of Stock
Seller, the parties hereto shall negotiate in good faith to determine the
appropriate percentage of the interests the Companies currently hold in such
entities to remain in the Companies at Closing and the appropriate percentage of
such interests to be conveyed to Stock Seller or Affiliates of Stock Seller at
Closing in recognition that ZDNet assets are in included in such investments.
Section 5.22 Estoppel Letters. Prior to the Closing, Sellers shall use
----------------
their reasonable best efforts to obtain and deliver to Buyer at the Closing
estoppel letters with respect to the parcels of Leased Real Property listed on
Schedule 5.22 of the Disclosure Schedule.
Section 5.23 Unregistered Trademarks. The following provisions of this
-----------------------
Section 5.23 will apply solely to Unregistered Trademarks that have not been
used by the Business at any time since January 1, 1999 ("Inventory Unregistered
----------------------
Trademarks"):
----------
(a) Prior to Closing, Asset Seller may deliver a list of Inventory
Unregistered Trademarks which (i) have been used by Asset Seller since
January 1, 1999 other than in connection with the Business, and (ii) Asset
Seller reasonably believes in good faith are significant to it other than
in connection with the Business, it being understood that presentations of
Inventory Unregistered Trademarks on the website of a Buyer publication
shall not constitute a use of such trademark for the purposes of this
Section 5.23. Buyer will then, in a reasonable and good faith manner,
determine which items on that list are or may become significant to the
Business ("Significant Items") and which items are not Significant Items
-----------------
("Insignificant Items").
-------------------
(b) At Closing, Buyer and Asset Seller will enter into a quit claim
agreement, in a form reasonably satisfactory to the parties, agreeing that
neither party will object to the use of any Significant Item by the other
party. Each Insignificant Item will be deemed to be an Excluded Asset.
Section 5.24 Inter@ctive Investor. At Closing, Buyer and Asset Seller
--------------------
will enter into a license agreement, in a form reasonably satisfactory to the
parties, pursuant to which Asset Seller will grant to Buyer a perpetual license
to use the name Inter@ctive Investor and derivatives thereof in any print
--------------------
publication and in Alternative Electronic Versions (as defined in the license
agreement set forth in Exhibit F hereto) (to the fullest extent that Asset
Seller has rights therein that it may so license).
-48-
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to Obligations of Buyer. The obligation of Buyer to
----------------------------------
consummate the Asset Purchase and the Stock Purchase and to take the other
actions to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived in whole or in part by Buyer):
(a) Representations and Warranties. The representations and warranties
------------------------------
of Sellers set forth in this Agreement, individually and in the aggregate,
shall have been true and correct in all material respects as of the date of
this Agreement and shall be true and correct in all material respects as of
the Closing Date as though made on and as of the Closing Date (in each case
ignoring for this purpose any qualification of any such representations and
warranties which uses the word "material" or the words "Seller Material
Adverse Effect" or any variation of either of the foregoing set forth therein
and except that any such representations and warranties that are expressly
made as of an earlier date shall be made as of such date and not restated as
of a later date); in addition, the aggregate damage to Buyer resulting from
all breaches of covenants set forth herein by Sellers or either of them
(except in respect of matters which are not within the reasonable control of
Sellers or their Affiliates) on or after the date of execution of this
Agreement and from all breaches of representations and warranties set forth
herein by Sellers or either of them as of the date of execution of this
Agreement (in each case ignoring for this purpose any qualification of any
such representations and warranties which uses the word "material" or the
words "Seller Material Adverse Effect" or any variation of either of the
foregoing set forth therein) shall not exceed $15,000,000; and Buyer shall
have received a certificate, dated the Closing Date, signed on behalf of
Sellers by one senior executive officer of each of them to the foregoing
effect.
(b) Covenants. Sellers shall have performed in all material respects
---------
all obligations required to be performed by them under this Agreement at or
prior to the Closing Date, and Buyer shall have received a certificate, dated
the Closing Date, signed on behalf of each of Sellers by one senior executive
officer of each of them to such effect.
(c) HSR Act; Governmental and Third Party Approvals. The waiting period
-----------------------------------------------
applicable to the Asset Purchase and the Stock Purchase under the HSR Act
shall have expired or been terminated and all the notices, reports,
registrations and other filings with, and all consents, approvals and
authorizations from, Governmental Entities listed in Schedule 3.4 of the
Disclosure Schedule and
-49-
Schedule 4.3 of the Buyer's Disclosure Schedule and all other third party
consents, consultations and approvals required in connection with the
transactions contemplated hereby (collectively, "Filings and Approvals"),
shall have been made or obtained, as the case may be, except for any such
Filings and Approvals the failure of which to make or obtain would not,
individually or in the aggregate, have a Seller Material Adverse Effect.
(d) Litigation. No Governmental Entity of competent jurisdiction
----------
shall have enacted, issued, promulgated, enforced or entered any Law or Order
(whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits or challenges the validity or
legality of the sale of the Transferred Assets or the Shares or the other
transactions contemplated by this Agreement or seeks material damages with
respect thereto (each, a "Governmental Prohibition"), and no Governmental
------------------------
Entity or any other Person shall have instituted any Action or threatened in
writing to institute any Action seeking any Governmental Prohibition.
(e) Receipt of Shares. Buyer shall have received from Stock Seller a
-----------------
certificate or certificates evidencing all of the then issued and outstanding
Shares, free and clear of all Liens, duly endorsed in blank or accompanied by
stock powers duly executed in blank, in proper form for transfer and with any
requisite stock transfer tax stamps properly affixed thereto, or any other
documents or copies of registrations required under Laws applicable to the
Companies.
(f) Opinion of Counsel. Buyer shall have received an opinion, dated
------------------
as of the Closing Date, of counsel of Sellers in a form reasonably acceptable
to Buyer and Sellers and covering customary matters for a transaction of this
sort.
(g) ▇▇▇▇ of Sale. Sellers shall have executed the ▇▇▇▇ of Sale, in
------------
substantially the form of Exhibit E hereto.
(h) License Agreements. Asset Seller and Buyer shall have entered
------------------
into a license agreement with terms identical to that attached as Exhibit F
---------
hereto, a license agreement with respect to the ZD name in the form attached
hereto as Exhibit G and a Services Agreement in the form of Exhibit H hereto,
---------
and each such agreement shall be in full force and effect.
(i) Transition Services Agreement. Sellers and their Affiliates
-----------------------------
identified therein shall have executed and delivered to Buyer a Transition
Services Agreement as contemplated by Section 5.11, and such agreement shall
be in full force and effect.
-50-
(j) No Seller Material Adverse Effect. There shall not be any
---------------------------------
matter, circumstance or event which has had or is reasonably likely to have a
Seller Material Adverse Effect.
(k) Funding of Commitment Letters. Buyer shall have received the
-----------------------------
financing proceeds described in the commitment letters set forth in Exhibit D
hereto on the terms and conditions set forth therein as they may be modified
in a manner that is reasonably acceptable to Buyer.
(l) Audited Financial Statements. Sellers shall have delivered to
----------------------------
Buyer financial statements, prepared in accordance with GAAP consistently
applied and audited by PricewaterhouseCoopers LLC (which financial statements
shall fully reflect all of the binding decisions or recommendations of any
arbitrator appointed pursuant to Section 5.17, if any), consisting of
combined balance sheets of the Companies and the Asset Seller (with respect
to the Division) as of each of December 31, 1997, 1998 and 1999 (including
only the Transferred Assets and the assets of the Companies, and excluding
the Excluded Assets, and including only Assumed Liabilities, and excluding
the Excluded Liabilities) and the related audited consolidated statements of
operations and cash flows for Asset Seller (with respect to the Division) and
the Companies for the successive fiscal year periods ended on such dates, in
each case in form and substance consistent with the requirements of the SEC
for a registered offering.
(m) Ancillary Documents. Buyer shall have received from Asset Seller
-------------------
instruments of transfer, assignment and conveyance as are necessary to vest
in Buyer the right, title and interest of Sellers in accordance with this
Agreement in and to the Transferred Assets and the Shares in a form
reasonably satisfactory to the Buyer.
(n) Estoppel Letters. At or prior to Closing, Asset Seller shall have
----------------
(i) obtained and delivered to Buyer estoppel letters, in form and content
reasonably satisfactory to Buyer and Buyer's lender, from the landlords and,
if any, sublandlords for the Leased Real Property at ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ and the Leased Real Properties in San Francisco and Medford at
which PC Computing and PC Week are based, or (ii) indemnified Buyer against
the consequence of failure to obtain such letters.
(o) Compliance with Section 5.9. Buyer shall have received evidence
---------------------------
reasonably satisfactory to Buyer that the covenant set forth in Section 5.9
has been satisfied.
(p) EBITDA Calculation. The 1999 EBITDA calculation shall have
------------------
become final.
-51-
(q) License and Quit Claim Agreements. The license agreement
---------------------------------
contemplated by Section 5.24 shall have been authorized, executed and
delivered by Asset Seller; in addition, if there are any Significant Items,
the quit claim agreement contemplated by Section 5.23 shall have been
authorized, executed and delivered by Asset Seller.
Section 6.2 Conditions to Obligations of Sellers. The obligation of
------------------------------------
Sellers to consummate the Asset Purchase and the Stock Purchase and to take the
other actions to be taken by Sellers at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived in whole or in part by Sellers):
(a) Representations and Warranties. The representations and warranties
------------------------------
of Buyer set forth in this Agreement shall have been true and correct in all
material respects as of the date of this Agreement and shall be true and
correct in all material respects as of the Closing Date as though made on and
as of the Closing Date (except that any such representations and warranties
that are expressly made as of an earlier date need only be true in all
material respects as of such earlier date and any representation already
qualified by the word "material" or any variation thereof shall be true and
correct in all respects) and Sellers shall have received a certificate, dated
the Closing Date, signed on behalf of Buyer by one of its senior executive
officers to such effect.
(b) Covenants. Buyer shall have performed in all material respects all
---------
obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and Sellers shall have received a certificate, dated the
Closing Date, signed on behalf of Buyer by one of its senior executive
officers to such effect.
(c) HSR Act; Governmental Approvals. The waiting period applicable to
-------------------------------
the Asset Purchase and the Stock Purchase under the HSR Act shall have
expired or been terminated and all the Filings and Approvals shall have been
made or obtained, as the case may be, except for any such Filings and
Approvals the failure of which to make or obtain are not, individually or in
the aggregate, material.
(d) Litigation. No Governmental Entity of competent jurisdiction shall
----------
have enacted, issued, promulgated, enforced or entered any Governmental
Prohibition, and no Governmental Entity or any other Person shall have
instituted any Action or threatened in writing to institute any Action
seeking any Governmental Prohibition.
(e) Receipt of Purchase Price. Sellers shall have received from Buyer
-------------------------
the payments required to be made pursuant to Section 2.6 hereof.
-52-
(f) Opinion of Counsel. Sellers shall have received an opinion, dated
------------------
as of the Closing Date, of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel for Buyer, in a form
reasonably acceptable to Buyer and Sellers and covering customary matters
for a transaction of this sort.
(g) Assignment and Assumption Agreement. Buyer and its Affiliates, as
-----------------------------------
appropriate, shall have executed and delivered the Assignment and Assumption
Agreement, in substantially the form of Exhibit I hereto.
(h) Stockholder Approval. If a Stockholders Meeting is convened in
--------------------
accordance with Section 5.19, the Stockholders Meeting shall have been held.
(i) EBITDA Calculation. The 1999 EBITDA calculation shall have become
------------------
final.
(j) Quit Claim Agreement. If there are any Significant Items, the quit
--------------------
claim agreement contemplated by Section 5.23 shall have been authorized,
executed and delivered by Buyer.
ARTICLE VII
TERMINATION
Section 7.1 Termination. Notwithstanding anything in this Agreement to the
-----------
contrary, this Agreement and the transactions contemplated herein may, by
written notice given at any time prior to the Closing, be terminated:
(a) by either Buyer or Sellers, upon their mutual written consent;
(b) by either Buyer or Sellers, without liability to the terminating
party on account of such termination if the Closing has not occurred within
120 days of the date hereof; provided, however, that a party may not effect a
termination pursuant to this Section 7.1(b) if it has breached this Agreement
and such breach has proximately contributed to the failure to close;
(c) by either Buyer or Sellers, if the other party has breached any of
its representations, warranties or covenants contained in this Agreement in
any material respect and, if curable, such breach has not been cured within
10 days after the terminating party shall have given the other party notice
of such breach; provided, however, that termination pursuant to this Section
-------- -------
7.1(c) shall not relieve the breaching party of liability for such breach or
otherwise;
(d) by either Buyer or Sellers, if any Governmental Entity shall have
issued, enacted, entered, promulgated or enforced any Governmental
Prohibition and such Governmental Prohibition shall have become final and
non-appealable;
-53-
provided that the right to terminate this Agreement pursuant to this Section
7.1(d) shall not be available to any party that has failed to comply with its
obligations hereunder in any manner that shall have proximately contributed
to the occurrence of such Governmental Prohibition;
(e) by Buyer, if any of the conditions set forth in Section 6.1 have
not been satisfied as of, or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to fully comply
with its obligations hereunder) by, the date that is 120 days after the date
hereof; or
(f) by Sellers, if any of the conditions set forth in Section 6.2 have
not been satisfied as of, or if satisfaction of such a condition is or
becomes impossible (other than through the failure of any of Sellers to fully
comply with its obligations hereunder or SOFTBANK to comply with its
obligations under the Voting Agreement) by, the date that is 120 days after
the date hereof.
Section 7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement pursuant to Section 7.1, this Agreement (other than Section 5.6
(Expenses), this Section 7.2 (Effect of Termination), Section 9.5 (Governing
Law) and Section 9.6 (Consent to Jurisdiction; Waiver of Jury Trial) and the
Confidentiality Agreement between Buyer and Sellers' agent, dated September 15,
1999 (the "Confidentiality Agreement"), which shall remain in full force and
-------------------------
effect) shall forthwith become null and void and no party hereto (or any of its
respective Affiliates, Representatives or stockholders) shall have any liability
or further obligation to any other party hereto, except as provided in this
Section 7.2; provided, however, that termination will not relieve a party of
liability for breach of this Agreement prior thereto. For purposes of this
Agreement, the "Representatives" of a Person include such Person's directors,
---------------
officers, employees, agents, consultants, legal counsel, accountants and
financial advisors.
ARTICLE VIII
INDEMNIFICATION; REMEDIES
Section 8.1 Survival. None of the representations, warranties or
covenants (other than (i) Section 5.16 (Non-Assignable Agreements) and Section
5.20 (Insurance), which will survive indefinitely, (ii) covenants to the extent
to be performed at or after the Closing which will survive indefinitely, (iii)
Section 5.1 (Conduct of Business), which will survive until the Final Asset
Purchase Adjustments shall have been finally determined in accordance with this
Agreement, but only in respect of any action or omission to the extent it has
the effect of increasing the cash the Seller is able to sweep from the Division
or the Companies or decreasing the Final Asset Purchase Adjustments, and (iv)
Section 5.18 (Confidentiality) and the final sentence of Section 5.8(a), which
will survive until the Final Asset Purchase Adjustments) of the parties
contained in this Agreement shall survive the Closing and no claims for breach
or otherwise in respect
-54-
thereof may be made or continued after the Closing by any party; provided,
however that the representations set forth in Sections 3.2, 3.3, and 4.2 shall
survive the Closing.
Section 8.2 Indemnification by Buyer and Sellers.
------------------------------------
(a) Buyer shall indemnify and hold harmless Sellers and (without
duplication) its successors, assigns, stockholders, Affiliates and
Representatives from and against any and all damages, losses, liabilities,
judgments and out-of-pocket expenses (including out-of-pocket costs of
investigation and defense and reasonable attorneys' and accountants' fees)
of any kind or nature whatsoever incurred or sustained by them arising out
of or resulting from any Assumed Liabilities.
(b) The Sellers shall jointly and severally indemnify and hold harmless
each of Buyer and the Companies and (without duplication) each of its
respective successors, assigns, stockholders, Affiliates and Representatives
from and against any and all damages, losses, liabilities, judgments and
out-of-pocket expenses (including out-of-pocket costs of investigation and
defense and reasonable attorneys' and accountants' fees) of any kind or
nature whatsoever incurred or sustained by them arising out of or resulting
from (i) the Excluded Liabilities, and each other Liability of any of the
Sellers and their Affiliates, other than Assumed Liabilities and Liabilities
of any of the Companies, and (ii) the failure of Asset Seller to assign to
Buyer any Nonassignable Rights.
Section 8.3 Tax Indemnification by Stock Seller; Procedure.
----------------------------------------------
(a) Stock Seller shall be liable for, and indemnify Buyer for (i) Taxes
imposed on members (other than the Companies) of a group of corporations
that includes or included any Company for any taxable year (including any
obligation to contribute to the payment of Tax determined on a consolidated,
combined or unitary basis with respect to a group of corporations that
includes or included any Company and Tax resulting from any Company ceasing
to be a member of such group), and (ii) Tax of the Companies for any taxable
year or period ending on or before the Closing Date and, with respect to any
taxable year or period beginning before and ending after the Closing Date,
for the portion of such taxable year or period ending on and including the
Closing Date. Stock Seller shall be entitled to any refund of Taxes of any
Company received for such periods. For purposes of this Agreement, "Tax"
---
means any foreign, federal, state or local income, gross receipts, license,
severance, occupation, capital gains, premium, environmental (including
taxes under Section 59A of the Internal Revenue Code of 1986, as amended
(the "Code")), customs, duties, profits, disability, registration,
----
alternative or add-on minimum, estimated, withholding, payroll, employment,
unemployment insurance, social security (or similar), excise, production,
sales, use, value-added, occupancy, franchise, real property, personal
property, business
-55-
and occupation, mercantile, windfall profits, capital stock, stamp,
transfer, workmen's compensation or other tax, fee or imposition of any kind
whatsoever, including any interest, penalties, additions, assessments or
deferred liability with respect thereto, and any interest in respect of such
penalties, additions, assessments or deferred liability, whether disputed or
not.
(b) For purposes of Section 8.3(a), whenever it is necessary to
determine the liability for Taxes of any Company for a portion of a taxable
year or period that begins before and ends after the Closing Date, the
determination of the Taxes of any Company for the portion of the year or
period ending on, and the portion of the year or period beginning after, the
Closing Date shall be determined by assuming that such Company had a taxable
year or period which ended at the close of the Closing Date, except that
exemptions, allowances or deductions that are calculated on an annual basis,
such as the deduction for depreciation, shall be apportioned on a time
basis.
(c) Stock Seller shall pay to Buyer the Taxes for which Stock
Seller is liable pursuant to Section 8.3(a) but which are payable with Tax
Returns to be filed by Buyer pursuant to Section 8.4(c) within 10 days prior
to the due date for the filing of such Tax Returns.
(d) Stock Seller shall file or cause to be filed when due, in
accordance with past practice, all Tax Returns that are required to be filed
by or with respect to the Companies for taxable years or periods ending on
or before the Closing Date and shall remit any Taxes due in respect of such
Tax Returns.
(e) Any tax allocation or sharing agreement or arrangement,
whether or not written, that may have been entered into by any Company shall
be terminated as to any Company as of the Closing Date, and no payments
which are owed by or to the Company pursuant thereto shall be made
thereunder.
(f) Any payment of Taxes made pursuant to this Section 8.3
shall be treated as an adjustment to the Purchase Price for the Shares.
(g) After the Closing Date, Stock Seller shall:
(1) assist, and cause its respective Affiliates to
assist, Buyer in preparing any Tax Returns or reports
which Buyer is responsible for preparing and filing
in accordance with Section 8.4(c);
(2) cooperate fully with Buyer in preparing for any
audits of, or disputes with taxing authorities
regarding, any Tax Returns of the Companies;
-56-
(3) make available to Buyer and to any taxing authority
as reasonably requested all information, records, and
documents relating to Taxes of the Companies;
(4) provide timely notice to Buyer in writing of any
pending or threatened tax audits or assessments of
the Companies for taxable periods for which Buyer may
have a liability under Section 8.4(a); and
(5) furnish Buyer with copies of all correspondence
received from any taxing authority in connection with
any tax audit or information request with respect to
any such taxable period.
(h) The obligations of Stock Seller set forth in this Section 8.3 shall
remain in effect until the expiration of the relevant statutes of limitations
(including any extensions thereof).
Section 8.4 Tax Indemnification by Buyer; Procedure.
---------------------------------------
(a) Buyer shall be liable for and indemnify Stock Seller for Taxes of
the Companies for any taxable year or period that begins after the Closing
Date and, with respect to any taxable year or period beginning before and
ending after the Closing Date, for the portion of such taxable year beginning
after the Closing Date.
(b) For purposes of Section 8.4(a), whenever it is necessary to
determine the liability for Taxes of any Company for a portion of a taxable
year or period that begins before and ends after the Closing Date, the
determination of the Taxes of any Company for the portion of the year or
period ending on, and the portion of the year or period beginning after, the
Closing Date shall be determined by assuming that such Company had a taxable
year or period which ended at the close of the Closing Date, except that
exemptions, allowances or deductions that are calculated on an annual basis,
such as the deduction for depreciation, shall be apportioned on a time basis.
(c) Buyer shall file or cause to be filed when due, in accordance with
past practice, all Tax Returns that are required to be filed by or with
respect to any Company for taxable years or periods ending after the Closing
Date and shall remit any Taxes due in respect of such Tax Returns.
(d) Buyer shall promptly notify Stock Seller in writing upon receipt by
Buyer, any of its Affiliates or any Company of notice of any pending or
threatened Tax audits or assessments which may materially affect the tax
liabilities of any Company for which Stock Seller would be required to
indemnify
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Buyer pursuant to Section 8.3(a). Stock Seller shall have the sole right to
represent any Company's interests in any Tax audit or administrative or court
proceeding relating to taxable periods ending on or before the Closing Date,
and to employ counsel of its choice at its expense. Stock Seller shall be
entitled to participate at its expense in the defense of any claim for Taxes
for a year or period ending after the Closing Date which may be the subject
of indemnification by Stock Seller pursuant to Section 8.3(a) and, with the
written consent of Buyer, and at its sole expense, may assume the entire
defense of such Tax claim. Neither Buyer nor any Company may agree to settle
any Tax claim for the portion of the year or period ending on or before the
Closing Date which may be the subject of indemnification by Stock Seller
under Section 8.3(a) without the prior written consent of Stock Seller, which
consent shall not be unreasonably withheld.
(e) With respect to the taxable year of Stock Seller ending
1999 and the period prior to the Closing Date, Buyer shall promptly cause
each Company to prepare and provide to Stock Seller a package of tax
information materials (the "Tax Package"), which shall be completed in
-----------
accordance with past practice including past practice as to providing the
information, schedules and work papers and as to the method of computation of
separate taxable income or other relevant measures of income of such Company.
Buyer shall cause the Tax Package for the portion of the taxable period
ending on the Closing Date to be delivered to Stock Seller within 120 days
after the Closing Date.
(f) Any payment of Taxes made pursuant to this Section 8.4
shall be treated as an adjustment to the Purchase Price for the Shares.
(g) After the Closing Date, Buyer shall:
(1) assist, and cause its respective Affiliates to
assist, Sellers in preparing any Tax Returns or
reports which Stock Seller is responsible for
preparing and filing in accordance with Section
8.3(d);
(2) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax
Returns of any Company;
(3) make available to Stock Seller and to any taxing
authority as reasonably requested all information,
records, and documents relating to Taxes of the
Companies;
(4) provide timely notice to Stock Seller in writing of
any pending or threatened tax audits or assessments
of any Company for taxable periods for which Stock
Seller may have a liability under Section 8.3(a) ;
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(5) provide to Stock Seller at least 30 days before due
any Tax Returns or reports relating to a taxable
period for which Stock Seller may have a liability
under Section 8.3(a); and
(6) furnish Stock Seller with copies of all
correspondence received from any taxing authority in
connection with any tax audit or information request
with respect to any such taxable period.
(h) The obligations of Buyer set forth in this Section 8.4 shall
remain in effect until the expiration of the relevant statutes of limitations
(including any extensions thereof).
ARTICLE IX
MISCELLANEOUS
Section 9.1 Assignments; No Third Party Rights.
----------------------------------
(a) Buyer may not assign any of its rights or obligations under this
Agreement without the prior written consent of Sellers (which may not be
unreasonably withheld or delayed) and any purported assignment without such
consent shall be void. The preceding sentence notwithstanding, Buyer may assign
this Agreement or all or any part of its rights and obligations under this
Agreement, following written notice to Sellers, to a wholly owned Subsidiary of
Buyer or to a lender or financing source for collateral purposes; provided,
however, that no such assignment shall relieve Buyer of its obligations under
this Agreement. "Subsidiary" means, with respect to any Person, any corporation
----------
or other entity of which such Person has, directly or indirectly, (i) ownership
of securities or other interests having the power to elect a majority of the
Board of Directors or similar governing body of such corporation or other
entity, or (ii) the power to direct the business and policies of that
corporation or other entity.
(b) Sellers may not assign any of its rights or obligations under this
Agreement without the prior written consent of Buyer and any purported
assignment without such consent shall be void.
(c) Except as provided in Section 8.2, nothing in this Agreement,
express or implied, is intended to confer upon any Person other than the parties
hereto any rights or remedies of any nature whatsoever under or by reason of
this Agreement or any provision of this Agreement. Except as provided in Section
8.2, this Agreement and all of its provisions and conditions are for the sole
and exclusive benefit of the parties to this Agreement and their successors and
permitted assigns.
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Section 9.2 Entire Agreement. This Agreement, including the Exhibits
----------------
hereto, the Disclosure Schedule, the Buyer's Disclosure Schedule and the other
agreements and written understandings referred to herein or otherwise entered
into by the parties hereto on the date hereof, and the Confidentiality Agreement
constitute the entire agreement and understanding and supersede all other prior
covenants, agreements, undertakings, obligations, promises, arrangements,
communications, representations and warranties, whether oral or written, by any
party hereto or by any director, officer, employee, agent, Affiliate or
Representative of any party hereto. There are no covenants, agreements,
undertakings or obligations with respect to the subject matter of this Agreement
other than those expressly set forth or referred to herein and no
representations or warranties of any kind or nature whatsoever, express or
implied, including any implied warranties of merchantability or fitness for a
particular purpose, are made or shall be deemed to be made herein by the parties
hereto except those expressly made herein.
Section 9.3 Amendment or Modification. This Agreement may be amended
-------------------------
or modified only by written instrument signed by all of the parties hereto.
Section 9.4 Notices. All notices, requests, instructions, claims,
-------
demands, consents and other communications required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given (i)
when delivered personally to the recipient, (ii) one business day after being
sent to the recipient by reputable overnight courier service (charges prepaid),
(iii) upon machine-generated acknowledgment of receipt after transmittal by
facsimile if so acknowledged to have been received before 5:00 p.m. on a
business day at the location of receipt and otherwise on the next following
business day, provided that each such notice, demand or other communication is
also deposited within 24 hours thereafter with a reputable overnight courier
service (charges prepaid) for delivery to the same Person, or (iv) five days
after being mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid, to the parties at the following
addresses:
If to Buyer: WS-ZD Acquisition, Inc.
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇, ▇.▇.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: 312/▇▇▇-▇▇▇▇
Facsimile: 312/422-2418
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Avy ▇. ▇▇▇▇▇
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With a copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: 312/▇▇▇-▇▇▇▇
Facsimile: 312/861-2200
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
If to Sellers: ZD Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
or to such other persons or addresses as the person to whom notice is given may
have previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
Section 9.5 Governing Law. This agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York applicable to
contracts made and performed in such State and without regard to the conflict of
law principles thereof.
Section 9.6 Consent to Jurisdiction; Waiver of Jury Trial.
---------------------------------------------
(a) The parties hereto hereby irrevocably submit to the jurisdiction of
the courts of the State of New York and the federal courts of the United
States of America located in the State of New York solely in respect of the
interpretation and enforcement of the provisions of this agreement and of the
documents referred to in this Agreement, and in respect of the transactions
contemplated herein, and hereby waive, and agree not to assert, as a defense
in any action for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action may not be
brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that
all claims with respect to such action or
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proceeding shall be heard and determined in such a New York state or federal
court. The parties hereby consent to and grant any such court jurisdiction
over the person of such parties and over the subject matter of such dispute
and agree that mailing of process or other papers in connection with any such
action or proceeding in the manner provided in Section 9.4 hereof or in such
other manner as may be permitted by law, shall be valid and sufficient
service thereof.
(b) Each party hereto hereby acknowledges and agrees that any
controversy which may arise under this agreement is likely to involve
complicated and difficult issues, and therefore each such party hereby
irrevocably and unconditionally waives any right such party may have to a
trial by jury in respect of any litigation directly or indirectly arising out
of or relating to this agreement or the transactions contemplated by this
Agreement. Each party certifies and acknowledges that (i) no representative,
agent or attorney of any other party has represented, expressly or otherwise,
that such other party would not, in the event of litigation, seek to enforce
the foregoing waiver, (ii) each such party understands and has considered the
implications of this waiver, (iii) each such party makes this waiver
voluntarily, and (iv) each such party has been induced to enter into this
agreement by, among other things, the mutual waivers and certifications in
this Section 9.6.
Section 9.7 Severability. In case any one or more of the
------------
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such provision or provisions shall be
ineffective only to the extent of such invalidity, illegality or
unenforceability, without invalidating the remainder of such provision or
provisions or the remaining provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein, unless such a construction would be
unreasonable.
Section 9.8 Waiver of Conditions.
--------------------
(a) To the extent permitted by applicable Law: (i) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other
party; (ii) no waiver that may be given by a party will be applicable except
in the specific instance for which it is given and (iii) no notice to or
demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
(b) The rights and remedies of the parties hereto are
cumulative and not alternative. Except where a specific period for action or
inaction is provided
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herein, neither the failure nor any delay on the part of any party in
exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such
right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any other or further exercise
thereof or the exercise of any other such right, power or privilege. The
failure of a party to exercise any right conferred herein within the
time required shall cause such right to terminate with respect to the
transaction or circumstances giving rise to such right, but not to any
such right arising as a result of any other transactions or
circumstances.
Section 9.9 Actions of the Companies. Whenever this Agreement
------------------------
requires any Company to take any action, such requirement shall be deemed to
involve, with respect to actions to be taken at or prior to the Closing, an
undertaking on the part of the Applicable Seller to cause such Company to take
such action and, with respect to actions to be taken after the Closing, an
undertaking on the part of Buyer to cause such Company to take such action.
Section 9.10 Descriptive Headings; Construction. The descriptive
----------------------------------
headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning, construction or interpretation
of, this Agreement. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms and shall be deemed to be followed
by the phrase "without limitation."
Section 9.11 Counterparts. For the convenience of the parties
------------
hereto, this Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
Section 9.12 Knowledge. When references are made in this
---------
Agreement to information being "to the knowledge of Sellers" or similar
language, such knowledge shall refer to the knowledge of the officers of Sellers
and the Companies set forth in Schedule 9.12 of the Disclosure Schedule. Such
individuals shall be deemed to have "knowledge" of a particular fact or other
matter if such individual is actually aware of such fact or other matter after
due inquiry.
Section 9.13 Materiality. Whenever (i) the terms "material,"
-----------
"materially," "in all material respects" or similar materiality qualifiers are
used in this Agreement in relation to (a) Sellers, (b) the Division, (c) the
Companies or all or any of (a), (b) and (c), they shall be deemed to refer only
to matters, circumstances or events that are material to the business, assets,
liabilities, results of operations or condition (financial or otherwise) of the
Division and the Companies taken as a whole, and (ii) the term "Seller Material
---------------
Adverse Effect" is used in this Agreement, it shall be deemed to refer to any
--------------
matters, effects, circumstances or events that have had or are reasonably likely
to
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have a material adverse effect on the business, assets, liabilities, results of
operations or condition (financial or otherwise) of the Division and the
Companies taken as a whole; provided, however, that whenever such terms are used
-------- -------
in connection with the performance of or failure to perform any covenant (except
in respect of matters which are not within the reasonable control of Sellers or
their Affiliates) after the date hereof or in a representation or warranty
insofar as it speaks as of the date of execution of this Agreement, such terms
shall be deemed to refer to matters, circumstances, effects or events that have
resulted in, or would result in, damages, losses, liabilities, judgments or
expenses of $15,000,000 or greater; and provided, further, that for purposes of
-------- -------
Section 6.1(j) and, to the extent relating to Section 3.7(a), Section 6.1(a), no
material adverse change that is fully reflected in the financial projections
included in Schedule 9.13 of the Disclosure Schedule shall be considered.
(SIGNATURE PAGE FOLLOWS)
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers duly authorized as of the
date first written above.
ZD INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Title: Chief Financial Officer
ZD HOLDINGS (EUROPE) LTD.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Title: Director
WS-ZD ACQUISITION, INC.
By: /s/ AVY ▇. ▇▇▇▇▇
------------------------------
Name: Avy ▇. ▇▇▇▇▇
Title: President