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EXHIBIT 10.9
Draft of November 17, 1999
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PURCHASE AGREEMENT
by and between
ZD INC.
and
WP EDUCATION HOLDINGS LLC
Dated as of November 17, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS..................................................................................................1
SECTION 1.1 Definitions.....................................................................................1
ARTICLE II SALE AND PURCHASE OF ASSETS AND SHARES.......................................................................6
SECTION 2.1 Sale and Purchase of Assets.....................................................................6
SECTION 2.2 Sale and Purchase of Shares.....................................................................8
SECTION 2.3 Excluded Assets.................................................................................8
SECTION 2.4 Assumption of Liabilities; Excluded Liabilities.................................................9
SECTION 2.5 Purchase Price.................................................................................11
SECTION 2.6 Payment of Purchase Price......................................................................11
SECTION 2.8 Post-Closing Purchase Price Adjustment.........................................................13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER....................................................................16
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..........................................................19
SECTION 3.8 Litigation; Orders.............................................................................19
SECTION 3.9 Taxes..........................................................................................20
SECTION 3.10 Employee Benefits; ERISA......................................................................20
SECTION 3.11 Employees; Labor Matters......................................................................22
SECTION 3.12 Compliance with Laws; Governmental Authorizations.............................................22
SECTION 3.13 Real Property.................................................................................23
SECTION 3.14 Contracts, Leases and Agreements; No Default..................................................24
SECTION 3.15 Environmental Matters.........................................................................25
SECTION 3.16 Insurance.....................................................................................27
SECTION 3.17 Brokers and Finders...........................................................................27
SECTION 3.18 No Undisclosed Liabilities....................................................................27
SECTION 3.19 Intellectual Property.........................................................................27
SECTION 3.20 Transferred Assets............................................................................29
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SECTION 3.21 Year 2000 Compliance..........................................................................30
SECTION 3.22 Intercompany Transactions.....................................................................31
SECTION 3.23 No Other Representations or Warranties........................................................31
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.....................................................................31
SECTION 4.1 Organization and Good Standing.................................................................31
SECTION 4.2 Limited Liability Company Authority............................................................32
SECTION 4.4 Securities Act.................................................................................33
SECTION 4.5 Brokers and Finders............................................................................33
SECTION 4.6 Financing......................................................................................33
SECTION 4.7 Litigation.....................................................................................33
SECTION 4.8 No Other Representations or Warranties.........................................................33
ARTICLE V COVENANTS...................................................................................................34
SECTION 5.1 Conduct of Business............................................................................34
SECTION 5.2 Access; Confidentiality........................................................................35
SECTION 5.3 Required Consents and Approvals................................................................37
SECTION 5.4 Reasonable Best Efforts........................................................................38
SECTION 5.5 Publicity......................................................................................38
SECTION 5.6 Expenses.......................................................................................38
SECTION 5.7 ZDMI Non-Solicitation..........................................................................38
SECTION 5.8 Employees......................................................................................38
SECTION 5.9 Intercompany Liabilities and Debt..............................................................41
SECTION 5.10 Intercompany Programs..........................................................................41
SECTION 5.11 Retention of Records...........................................................................42
SECTION 5.12 Seller's Trademarks............................................................................42
SECTION 5.13 Tax Matters....................................................................................44
SECTION 5.14 Further Assurances.............................................................................46
SECTION 5.15 Non-Assignable Agreements......................................................................46
SECTION 5.16 Insurance......................................................................................47
ARTICLE VI CONDITIONS TO CLOSING.......................................................................................47
SECTION 6.1 Conditions to Obligations of Buyer.............................................................47
SECTION 6.2 Conditions to Obligations of Seller............................................................49
ARTICLE VII TERMINATION.................................................................................................51
SECTION 7.1 Termination....................................................................................51
SECTION 7.2 Effect of Termination..........................................................................52
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ARTICLE VIII INDEMNIFICATION; REMEDIES...................................................................................52
SECTION 8.1 Survival.......................................................................................52
SECTION 8.2 Indemnification................................................................................52
SECTION 8.3 Tax Indemnifications by Seller.................................................................53
SECTION 8.4 Tax Indemnifications by Buyer..................................................................56
SECTION 8.5 No Affiliate Liability.........................................................................58
ARTICLE IX MISCELLANEOUS...............................................................................................59
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
SECTION 9.6 Consent to Jurisdiction; Waiver of Jury Trial..................................................62
SECTION 9.7 Severability...................................................................................63
SECTION 9.8 Waiver of Conditions...........................................................................63
SECTION 9.9 Actions of the Company.........................................................................63
SECTION 9.10 Descriptive Headings; Construction.............................................................64
SECTION 9.11 Counterparts...................................................................................64
SECTION 9.12 Knowledge......................................................................................64
SECTION 9.13 Materiality....................................................................................64
EXHIBIT A ▇▇▇▇ OF SALE AND ASSIGNMENT
EXHIBIT B ASSUMPTION AGREEMENT
EXHIBIT C TRADEMARK GUIDELINES
EXHIBIT D FINANCING TERM SHEET
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PURCHASE AGREEMENT, dated as of November 17, 1999 (this
"Agreement"), by and between ZD INC., a Delaware corporation ("Seller"), and WP
Education Holdings LLC, a limited liability company organized under the laws of
the State of Delaware ("Buyer").
WHEREAS, Seller, through its ZD Education division (the
"Division"), and ▇▇▇▇-▇▇▇▇▇ Education Canada, Inc., (the "Company") are engaged
in the business of providing integrated IT learning solutions to businesses and
organizations (the "Business").
WHEREAS, the parties hereby agree that Seller shall sell, transfer
and assign to Buyer the assets, properties and rights of the Business, including
all of the issued and outstanding shares of capital stock (the "Shares") of the
Company, and Buyer shall assume certain liabilities of Seller, in each case upon
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
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)
"Adjustment Amount" Section 2.8(h)
"Affiliate" Section 2.3(d)
"Agreement" Recitals
"Ancillary Agreements" Section 3.5
"Annual Financial Statements" Section 3.6
"Applicable Contracts" Section 3.7(d)
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Defined Term Section
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"Asset Purchase" Section 2.1
"Assumed Liabilities" Section 2.4(a)
"Benefit Plans" Section 3.10(a)
"▇▇▇▇ of Sale" Section 2.7(b)(i)
"Books and Records" Section 2.1(g)
"Business" Recitals
"Business Systems" Section 3.21(a)
"Buyer" Recitals
"Buyer Affiliate" Section 8.5
"Buyer License" Section 3.19(b)(i)
"Buyer's Plan" Section 5.8(b)
"Closing" Section 2.7(a)
"Closing Date" Section 2.7(a)
"Closing Statement" Section 2.8(a)
"Code" Section 3.10(b)
"Company" Recitals
"Company Benefit Plans" Section 3.10(a)
"Conducted" Section 3.1
"Confidentiality Agreement" Section 7.2
"Consideration" Section 5.13(b)
"Content" Section 2.1(a)
"Continuing Employee" Section 5.8(a)
"Contract" Section 2.1(f)
"Contracts" Section 2.1(f)
"Copyrights" Section 2.1(a)
"Damages" Section 8.2(a)
"Date Data" Section 3.21(b)
"Division" Recitals
"DOJ" Section 5.3(b)
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Defined Term Section
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"Enforceability Exceptions" Section 3.3
"Environmental Claim" Section 3.15(c)(i)
"Environmental Law" Section 3.15(c)(ii)
"ERISA" Section 3.10(a)
"ERISA Affiliate" Section 3.10(c)
"Excluded Assets" Section 2.3
"Excluded Liabilities" Section 2.4(b)
"Financial Statements" Section 3.6
"FTC" Section 5.3(b)
"GAAP" Section 2.8(a)
"Governmental Authorizations" Section 3.12(b)
"Governmental Entity" Section 3.4
"Governmental Filings and Approvals" Section 6.1(c)
"Governmental Order" Section 6.1(d)
"Hazardous Substance" Section 3.15(c)(iii)
"HSR Act" Section 2.7(a)
"HSR Filing" Section 3.4
"Intellectual Property" Section 2.1(a)
"International Plan" Section 3.10(g)
"Interim Financial Statements" Section 3.6
"IRS" Section 2.5
"Law" Section 3.5(d)
"Leased Real Property" Section 3.l3(a)
"Lender" Section 4.6
"Liabilities" Section 3.18
"Liens" Section 3.2(b)
"Marks" Section 5.12(b)
"Non-Assignable Rights" Section 5.15
"Order" Section 3.5(d)
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Defined Term Section
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"Pacifica Litigation" Section 2.4(b)(vii)
"Patents" Section 2.1(a)
"Pension Plan" Section 3.10(b)
"Person" Section 3.2(c)
"Plans" Section 3.10(b)
"Purchase Price" Section 2.5
"Pre-Closing Taxes" Section 8.3(c)
"Related to the Business" Section 2.1
"Representatives" Section 7.2
"Review Period" Section 2.8(c)
"Securities Act" Section 4.4
"Seller" Recitals
"Seller Benefit Plans" Section 3.10(a)
"Seller Group" Section 8.3(a)
"Seller Health Plans" Section 5.8(a)(ii)
"Seller Life Plan" Section 5.8(a)(iii)
"Sept. 30 Balance Sheet" Section 2.8(a)
"Shares" Recitals
"Software" Section 2.1(a)
"Statement of Objections" Section 2.8(d)
"Stock Purchase" Section 2.2
"Subsidiary" Section 9.1(a)
"Tax"' Section 8.3(b)
"Tax Package" Section 8.4(e)
"Tax Returns" Section 2.3(e)
"Trade Secrets" Section 2.1(a)
"Trademarks" Section 2.1(a)
"Transfer Taxes" Section 5.13(a)
"Transferred Assets" Section 2.1
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Defined Term Section
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"Year 2000 Compliance" Section 3.21(c)
"Year 2000 Compliant" Section 3.21(c)
"ZD ▇▇▇▇" Section 5.12(b)
"ZD Plan" Section 2.8(a)
"Ziff-▇▇▇▇▇ ▇▇▇▇" Section 5.12(b)
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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, Seller hereby agrees to
sell, convey, transfer, assign and deliver to Buyer, and Buyer hereby agrees to
purchase from Seller, at the Closing, all of Seller's right, title and interest
in and to all assets, rights and properties primarily related to, or used or
held for use primarily in connection with, the Business immediately prior to the
Closing ("Related to the Business"), whether tangible or intangible, real,
personal or mixed, other than the Excluded Assets (the "Transferred Assets"),
including, but not limited to, the following assets, rights and properties of
Seller to the extent Related to the Business:
(a) all intellectual property (the "Intellectual Property")
defined as any United States, foreign, international and state: patents
and patent applications, industrial design registrations, certificates of
invention and utility models (collectively, "Patents"); trademarks,
service marks, and trademark or service ▇▇▇▇ registrations and
applications, trade names, logos, designs and slogans, together with all
goodwill related to the foregoing (collectively, "Trademarks"); Internet
domain names, copyrights, copyright registrations, renewals and
applications for copyrights, including without limitation for the Content
and the Software (each as defined below in this Section 2.1)
(collectively, "Copyrights"); Content; Software, trade secrets and other
confidential information, know-how, proprietary processes, formulae,
algorithms, models and methodologies (collectively, "Trade Secrets"),
rights of publicity, and all license agreements and other agreements
granting rights relating to any of the foregoing. "Software" means any
and all (i) computer programs, including any and all software
implementations of algorithms, models and methodologies, whether in
source code or object code form, (ii) databases, compilations, and any
other electronic data files, including any and all collections of data,
whether machine readable or otherwise, (iii) descriptions, flow-charts,
technical and functional specifications, and other work product used to
design, plan, organize, develop, test, troubleshoot and maintain any of
the foregoing, (iv) without limitation to the foregoing, the software
technology supporting any functionality contained on Internet site(s) and
(v) all documentation, including technical, end-user, training and
troubleshooting manuals and materials, relating to any of the foregoing.
"Content" means any and
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all information, pictures, images, graphics, video, audio, text and any
other content or information, in whatever form and on any media;
(b) all marketing information, marketing research and data and
customer and mailing lists, including works in progress;
(c) all furniture, fixtures, furnishings, machinery, vehicles,
computers, equipment, supplies and other tangible personal property
located in the Division's headquarters in Rochester, New York or
elsewhere;
(d) all inventory and all raw materials, work in process,
finished products, wrapping, supply and packaging items located in the
Division's headquarters in Rochester, New York or elsewhere;
(e) all prepaid expenses, accounts receivable and other current
assets as of the Closing Date;
(f) all contracts, purchase or other orders, leases, licenses,
commitments, instruments and other agreements to which Seller is a party
(each, a "Contract" and collectively, the "Contracts") and all rights
thereunder;
(g) originals or copies of all books, records, ledgers, files,
reports, accounts, data, plans and operating records, whether in hard
copy, electronic format, magnetic or other media ("Books and Records");
(h) all promotional and advertising materials, whether existing
in print, video, on-line, magnetic or other media, and all stationery
forms, labels and other materials;
(i) all licenses, permits, approvals, registrations and similar
rights or authorizations obtained from governmental entities;
(j) all claims, causes of action and other rights of recovery,
set off or recoupment (but excluding any recovery (whether by settlement
or otherwise) of attorneys' fees and expenses incurred by Seller in
connection with the Pacifica Litigation (as defined herein)); and
(k) all goodwill relating to the Business or any of the
foregoing.
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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, Seller
hereby agrees to sell to Buyer, and Buyer hereby agrees to purchase from Seller,
all of the Shares. The transactions contemplated by this Section 2.2 are
sometimes referred to herein as the "Stock Purchase."
SECTION 2.3 Excluded Assets. Notwithstanding anything in this
Agreement to the contrary, Seller shall retain from and after the Closing all of
its direct and indirect right, title and interest in and to, and there shall be
excluded from the Asset Purchase, the Stock Purchase and the Transferred Assets,
the following (collectively, the "Excluded Assets"):
(a) cash, bank accounts and marketable securities of Seller
(other than the Shares);
(b) all assets of Seller not Related to the Business;
(c) Seller's rights under all insurance policies, including
insurance policies in respect of directors and officers and to all claims
against insurance carriers;
(d) all amounts owed by Seller or any of its Affiliates (other
than the Company or the Division) to the Company or the Division, whether
or not Related to the Business. For purposes of this Agreement, an
"Affiliate" is any Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or under common
control with such Person;
(e) all returns, reports, notices, forms, declarations, claims
for refund, estimates, elections, information statements or other
documents relating to any Tax, including any schedule or attachment
thereto, and any amendment thereof ("Tax Returns") so long as copies of
such Tax Returns insofar as they relate exclusively to the Company are
included in the Transferred Assets;
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(f) all Books and Records Related to the Business which Seller
is required by law to retain, so long as copies of such Books and Records
are included in the Transferred Assets;
(g) subject to Sections 5.10(c) and 5.12 below, all rights to
the names "▇▇▇▇-▇▇▇▇▇," "Ziff," "ZD," any derivation or other variation
of such terms whether or not Related to the Business and all other
trademarks and trade names, service marks, trade dress, domain names or
logos of Seller or any of its Affiliates that are not Related to the
Business;
(h) all assets sold or otherwise disposed of by Seller or any
of its Affiliates in the ordinary course of business prior to the Closing
Date;
(i) all rights, claims, credits, causes of action or rights of
set-off against third parties pertaining to the Excluded Assets; and
(j) subject to Sections 5.15 and 6.1, Seller's rights under any
Contract Related to the Business for which consent to assignment is
required and has not been obtained as of the Closing Date.
SECTION 2.4 Assumption of Liabilities; Excluded Liabilities.
(a) Upon the terms and subject to the conditions set forth
herein, at the Closing, Buyer agrees to assume and become solely
responsible for all debts, liabilities or obligations whatsoever of
Seller or any of its Affiliates that arise out of or relate to the
ownership of the Transferred Assets or the operation of the Business,
whether arising before or after the Closing and whether known or unknown,
disclosed or undisclosed, mature or unmatured, accrued, absolute,
contingent or otherwise, including the following (such debts, liabilities
and obligations to be assumed, the "Assumed Liabilities"):
(i) except as provided in Section 2.4(b)(vi), all
liabilities and obligations of Seller under the Contracts;
(ii) all liabilities with respect to all actions, suits,
proceedings, disputes, claims or investigations that arise out of
or relate to the ownership of the Transferred Assets or the
operation of the Business, at law, in equity or otherwise (but
excluding the Pacifica Litigation);
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(iii) all employee benefit, compensation, retention and
severance liabilities and other similar liabilities associated
with employees of the Division (it being expressly understood and
agreed that the retention and special bonuses set forth in
Schedule 5.8(d) of the Disclosure Schedule, to the extent paid,
and the contribution to the ZD Plan contemplated in Section
5.8(b), shall be accrued as liabilities on the Closing Statement).
(b) It is understood and agreed by the parties hereto that the
Assumed Liabilities shall not include liabilities of Seller or the
Business other than those set forth in clause (a) above, whether known or
unknown, disclosed or undisclosed, mature or unmatured, accrued,
absolute, contingent or otherwise, and shall also not include the
following (all such excluded liabilities, the "Excluded Liabilities"):
(i) any liabilities and obligations to the extent
arising out of the Excluded Assets;
(ii) any liabilities of the Company (since these
liabilities will continue to be owed by the Company rather than
Buyer);
(iii) except as provided with respect to Transfer Taxes in
Section 5.13(a) hereof, expenses incurred by Seller in connection
with the sale of the Transferred Assets;
(iv) any intercompany liabilities owed by the Division to
Seller or any of its Affiliates (other than the Company or the
Division) that arise prior to the Closing and any debt for
borrowed money owed by the Division to third parties;
(v) any obligations for borrowed money;
(vi) any liabilities or obligations under any agreement
that is not a Contract, or any agreement that is not effectively
assigned to Buyer; and
(vii) all liabilities and obligations with respect to the
litigation referred to in Schedule 3.8 of the Disclosure Schedule
(the "Pacifica Litigation").
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SECTION 2.5 Purchase Price. The purchase price for the Transferred
Assets and the Shares shall be One Hundred Seventy-Two Million Dollars and Zero
Cents ($172,000,000) (the "Purchase Price") plus or minus the Adjustment Amount.
The Purchase Price shall be paid in accordance with Section 2.6 hereof. The
Purchase Price shall be allocated among the Transferred Assets and the Shares in
accordance with Section 5.13(b) below. Each party shall use this allocation in
all tax and governmental filings, except as otherwise required by a tax or
governmental authority in connection with an audit or by a court decision. To
the extent that disclosures of this allocation are required to be made by the
parties to the Internal Revenue Service (the "IRS"), Buyer and Seller will
disclose such reports to the other prior to filing with the IRS.
SECTION 2.6 Payment of Purchase Price. At the Closing, Buyer
agrees to pay to Seller the Purchase Price in cash by wire transfer of
immediately available funds to the account designated by Seller.
SECTION 2.7 The Closing.
(a) The closing of the Asset Purchase and the Stock Purchase
(collectively, the "Closing") shall take place at the offices of Seller
at 9:30 a.m. local time on the first business day following the first
date on which (i) all waiting periods applicable to the Asset Purchase or
the Stock Purchase under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), shall have expired or been
terminated and (ii) 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 Seller may mutually agree; provided,
however, that if the Closing would otherwise occur prior to January 18,
2000, then the Closing shall occur on January 18, 2000. The date on which
the Closing occurs is referred to as the "Closing Date."
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(b) At the Closing, Seller shall deliver to Buyer:
(i) a duly executed ▇▇▇▇ of sale and assignment in the
form attached hereto as Exhibit A (the "▇▇▇▇ of Sale");
(ii) the ancillary documents referred to in Section
6.1(h);
(iii) assignments of all the Intellectual Property;
(iv) executed copies of the consents referred to on
Schedule 6.1(b) of the Disclosure Schedule;
(v) all of the Books and Records;
(vi) the officer's certificate referred to in Sections
6.1(a) hereof;
(vii) the Shares in the form provided in Section 6.1(e);
(viii) the opinion of counsel referred to in Section
6.1(f); and
(ix) such other documents and certificates as are
required to be delivered by Seller to Buyer pursuant to this
Agreement.
(c) At the Closing, Buyer shall deliver (unless previously
delivered):
(i) the Purchase Price;
(ii) the Assumption Agreement in substantially the form
of Exhibit B attached hereto duly executed by Buyer;
(iii) the ▇▇▇▇ of Sale, duly executed by Buyer;
(iv) the certificate referred to in Sections 6.2(a) and
(b);
(v) such other documents as are required to be delivered
by Buyer to Seller pursuant to this Agreement; and
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(vi) the opinion of counsel referred to in Section
6.2(f).
SECTION 2.8 Post-Closing Purchase Price Adjustment.
(a) Preparation of Closing Statement. As soon as practicable,
but in no event later than 45 days after the Closing Date, Buyer shall
prepare and deliver to Seller the Closing Statement. For purposes of this
Agreement, "Closing Statement" shall mean the statement setting forth the
net assets of the Division and the Company which for purposes of this
Agreement shall mean the excess of assets over liabilities as of the
Closing Date. Net assets shall be determined in accordance with generally
accepted United States accounting principles ("GAAP") applied on a basis
consistent with the basis on which the unaudited consolidated balance
sheet of the Division and the Company as of September 30, 1999 referred
to in Section 3.6 (the "Sept. 30 Balance Sheet") was prepared, except as
otherwise provided below. For purposes of calculating net assets,
"assets" in the Sept. 30 Balance Sheet and the Closing Statement shall
not include any Excluded Assets, and "liabilities" shall include only
those liabilities that are Assumed Liabilities or liabilities of the
Company and shall not include any liabilities that this agreement
expressly provides shall be retained or discharged (or indemnified
against) by Seller. In addition, for purposes of calculating liabilities
for the Closing Statement only, the following shall be accrued as
liabilities: (i) liabilities relating to retention and special bonuses
set forth in Schedule 5.8(d) of the Disclosure Schedule, but only to the
extent those amounts are actually paid and (ii) the discretionary
contributions to be made under the ▇▇▇▇-▇▇▇▇▇ Retirement & Savings Plan
(the "ZD Plan") as contemplated in the last sentence of Section 5.8(b)
hereof.
(b) Access to Buyer. Upon reasonable notice to Seller, Seller
shall provide Buyer full access at all reasonable times to such
historical financial information (to the extent still in Seller's
possession) relating to the Division and the Company as Buyer shall
reasonably request to prepare and deliver the Closing Statement in
accordance with Section 2.8(a) and to respond to any Statement of
Objections.
(c) Examination by Seller. Upon receipt of the Closing
Statement, Seller shall have 45 days (the "Review Period") to review such
Closing Statement and related computation of net assets. During the
Review Period Buyer shall give Seller full access at all reasonable times
to the books,
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records, premises and facilities and other materials of the Division and
the Company and the personnel of, and work papers prepared by or for
Buyer or in Buyer's possession to the extent that they relate to the
Division or the Company for the purpose of reviewing such Closing
Statement and the related computation of net assets.
(d) Objection by Seller. On or prior to the last day of the
Review Period, Seller may object to the Closing Statement by delivering
to Buyer a written statement setting forth in reasonable detail Seller's
objections to the Closing Statement and/or the computation of net assets
(the "Statement of Objections"). If Seller fails to deliver a Statement
of Objections within the Review Period, the Closing Statement and
computation of net assets shall be deemed to have been accepted by Seller
and shall be final and binding on the parties and the net assets
reflected in the Closing Statement shall be used in computing the
Adjustment Amount described in Section 2.8(h) below. If Seller delivers a
Statement of Objections within the Review Period, Seller and Buyer shall
negotiate in good faith to resolve such objections, and any objections
that are resolved by a written agreement between Buyer and Seller shall
be final and binding on the parties for purposes of the Closing
Statement.
(e) Resolution of Disputes. If Seller and Buyer fail to reach
an agreement with respect to all of the matters set forth in a Statement
of Objections, then the matters still in dispute shall, not later than 10
business days after the earlier of the end of the Review Period or the
first date on which one of the parties affirmatively terminates
discussions in writing with respect to the Statement of Objections, be
submitted for resolution to the New York office of one of the five
largest United States independent certified public accountants that has
no material business relationships with Buyer or Seller, as selected by
Buyer and Seller jointly (the "Accounting Expert") who, acting as an
expert and not as an arbitrator, shall resolve the matters still in
dispute and adjust the Closing Statement and the net assets to reflect
such resolution. The Accounting Expert's resolution of the matters in
dispute shall be final and binding on the parties. The Accounting Expert
shall make a determination as soon as practicable and in any event within
30 days (or such other time as the parties hereto shall agree in writing)
after its engagement. The parties hereto agree that all adjustments shall
be made without regard to materiality.
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(f) Fees and Expenses of the Accounting Expert. The fees and
expenses of the Accounting Expert shall be divided equally between Seller
and Buyer.
(g) Access to Supporting Documentation. Seller and Buyer shall
each make readily available to the Accounting Expert all relevant work
papers and books and records relating to the Business, the Closing
Statement and the computation of the net assets.
(h) Payment of Adjustment Amount. Within two business days
after the Closing Statement and the computation of the net assets become
final and binding, (i) if the net assets shown on the Closing Statement
is less than the net assets shown on the Sept. 30 Balance Sheet, the
Purchase Price shall be decreased on a dollar-for-dollar basis by the
amount by which net assets on the Sept. 30 Balance Sheet exceeds the net
assets shown on the Closing Statement, (ii) if the net assets shown on
the Closing Statement is greater than the net assets shown on the Sept.
30 Balance Sheet, the Purchase Price shall be increased on a
dollar-for-dollar basis by the amount by which net assets on the Sept. 30
Balance Sheet is less the net assets shown on the Closing Statement (the
increase or decrease in Purchase Price each being an "Adjustment Amount")
and (iii) Seller shall pay to Buyer (in the case of clause (i)) or Buyer
shall pay to Seller (in the case of clause (ii)), as the case may be, the
Adjustment Amount, together with interest thereon at a rate equal to the
rate announced from time to time by The Bank of New York as its base rate
during the period from the Closing Date to the date of the adjustment
payment required by this Section 2.8(h) calculated on the basis of a
365-day year and the actual number of days elapsed. Any such payment
shall be made by wire transfer of immediately available funds to a bank
account or accounts as shall be designated in writing by the recipient no
later than one business day prior to the payment date.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
SECTION 3.1 Organization and Good Standing. Each of Seller and the
Company is duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, with full corporate power and authority to
conduct its businesses and to own or use its assets as currently conducted or as
contemplated to be conducted ("Conducted"), owned and used. The Company is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which it is required to be so licensed or qualified, except for
any failures to be so licensed, qualified or in such good standing that,
individually or in the aggregate, are not material.
SECTION 3.2 Capitalization.
(a) The authorized, issued and outstanding capital stock of, or
other equity interest in, the Company as of the date of this Agreement is
set forth in Schedule 3.2(a) of the Disclosure Schedule. All of the
issued and outstanding shares of capital stock of, or other equity
interests in, the Company have been duly authorized and are validly
issued, fully paid and nonassessable.
(b) Except as set forth in Schedule 3.2(b) of the Disclosure
Schedule, Seller is, and on the Closing Date will be, the sole record and
beneficial owner of the Shares, free and clear of all liens, mortgages,
security interests, charges, pledges, claims, options, voting trusts,
restrictions or other encumbrances (collectively, "Liens"). At the
Closing, Buyer will obtain good and marketable title to the Shares, free
and clear of all Liens.
(c) There are no shares of capital stock of, or other equity
interests in, the Company reserved for issuance or subject to preemptive
rights or any outstanding subscriptions, options, warrants, calls, rights
or convertible or exchangeable securities, phantom stock, participation
interests, SARs or any other agreements or other instruments in effect
giving any Person the right to acquire from Seller or any of its
Affiliates any shares of capital stock of, or other equity interests in,
the Company. "Person" means any individual,
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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. The Company owns no equity interests in any other Person.
SECTION 3.3 Corporate Authority. Seller has the corporate power
and authority, and has taken all corporate action necessary, to authorize,
execute, deliver and perform its obligations under this Agreement and the
Ancillary Agreements (as defined below). This Agreement and the Ancillary
Agreements and the transactions contemplated hereby have been duly authorized,
executed and delivered by Seller and constitutes valid and legally binding
obligations of Seller, enforceable against Seller in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles (collectively, the
"Enforceability Exceptions").
SECTION 3.4 Consents and Approvals. Except for the notification
and report form required to be filed under the HSR Act (such filing, the "HSR
Filing") and except as set forth in Schedule 3.4 of the Disclosure Schedule, no
notices, reports, registrations or other filings are required to be made or
delivered by Seller with, nor are any consents, approvals or authorizations
required to be obtained by Seller from, any court or other governmental,
administrative or regulatory authority in the United States or elsewhere (each,
a "Governmental Entity"), in connection with the execution, delivery or the
performance of this Agreement, the Ancillary Agreements or the transactions
contemplated hereby or thereby by Seller, except for any such matters the
failure of which to make or obtain, individually or in the aggregate, are not
material.
SECTION 3.5 No Violations. The execution, delivery and performance
of this Agreement and any agreement required to be delivered in connection
herewith and the licenses contemplated by Section 5.10(c) (the "Ancillary
Agreements") by Seller and of the transactions contemplated hereby or thereby
will not:
(a) violate or contravene any provision of the certificate of
incorporation or by-laws (or other comparable governing documents) of
Seller or the Company;
(b) violate, conflict with, or constitute or result in a
default, acceleration or creation of a Lien under, or a termination of
(in each case with
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or without notice or lapse of time or both), or result in the loss of any
benefit under, any provision of any Contract to which Seller or the
Company is a party or by which any of their respective assets are bound,
in each case other than (i) as set forth in Schedule 3.5(b) of the
Disclosure Schedule and (ii) for any such matters that, individually or
in the aggregate, are not material;
(c) require Seller or the Company to obtain the consent,
waiver, authorization or approval of any Person under any Contract to
which Seller or the Company is a party or by which any of their
respective assets are bound, in each case other than (i) as set forth in
Schedule 3.5(c) of the Disclosure Schedule or (ii) for any such matters
that, individually or in the aggregate, are not material; or
(d) violate, contravene or conflict with any statute, law, rule
or regulation (each, a "Law"), or any award, judgment, decree, or other
order (each, an "Order"), of any Governmental Entity having jurisdiction
over Seller or the Company or any of their assets.
SECTION 3.6 Financial Statements. Schedule 3.6 of the Disclosure
Schedule contains (i) unaudited consolidated pro-forma balance sheets of the
Division and the Company as of December 31, 1997 and 1998, and the related
unaudited consolidated pro-forma statements of operations for each of the years
then ended (collectively, the "Annual Financial Statements") and (ii) an
unaudited consolidated balance sheet of the Division and the Company as of
September 30, 1999 and the related unaudited consolidated pro-forma statement of
operations for the nine months then ended (collectively, the "Interim Financial
Statements," and, together with the Annual Financial Statements, the "Financial
Statements"). The Financial Statements have been prepared based on the books and
records of Seller in accordance with GAAP consistently applied throughout the
periods covered by such statements and fairly present the financial condition
and the results of operations of the Division and the Company as of the
respective dates and for the periods then ended, as applicable, subject to (i)
in the case of the Interim Financial Statements, normal year-end adjustments
that are not expected to be material in amount or effect, (ii) the absence of
the level of detail and full financial footnotes that would be required in
regular financial statements, (iii) the absence of line items below earnings
before interest and taxes in the unaudited consolidated pro-forma statements of
operations, (iv) the exclusion of operations Related to the Business that have
been sold by Seller prior to the date hereof and (v) the pro-forma adjustments
described therein.
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SECTION 3.7 Absence of Certain Changes and Events. Except as set
forth in Schedule 3.7 of the Disclosure Schedule, since September 30, 1999:
(a) there has not been any material adverse change in the
business, assets, liabilities, prospects, results of operations or
condition (financial or otherwise) of the Division and the Company taken
as a whole;
(b) each of Seller (but solely with respect to the Division)
and the Company has Conducted its business only in the ordinary course of
business, consistent with past practice;
(c) neither Seller nor the Company has sold, leased or
otherwise disposed of, or incurred any Lien on, any material asset of the
Business;
(d) neither Seller nor the Company has settled, compromised,
waived, released or assigned any material rights or claims it has under
or in respect of any Action or Contract included in the Transferred
Assets or to which the Company is a party or by which its assets are
bound (collectively, "Applicable Contracts"), tax matter or insurance
policy; and
(e) there has not been any material change in the accounting
practices, methods or principles used by Seller (but solely with respect
to the Division) or the Company.
SECTION 3.8 Litigation; Orders.
(a) Except as set forth in Schedule 3.8(a) of the Disclosure
Schedule, there are no actions, suits or other legal or administrative
proceedings or investigations by or before any Governmental Entity (each,
an "Action") pending or, to the knowledge of Seller, threatened against
Seller or the Company or any of their respective assets, other than
Actions that, individually or in the aggregate, are not material or not
reasonably likely to prohibit, materially restrict or delay the
performance of this Agreement or the Ancillary Agreements by Seller or
the Company.
(b) None of Seller, the Company or any of their assets is
subject to any Order except for those that, individually or in the
aggregate, are not material or not reasonably likely to prohibit,
materially restrict or delay the
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performance of this Agreement or the Ancillary Agreements by Seller or
the Company.
SECTION 3.9 Taxes.
(a) Each of Seller and the Company has filed or caused to be
filed all Tax Returns that are or were required to be filed by or with
respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Law, and all such Tax Returns are or
will be true, complete and correct in all material respects. Each of
Seller and the Company has paid, or made provision for the payment of,
all Taxes that have or are reasonably likely to become due pursuant to
those Tax Returns or otherwise, or pursuant to any assessment received by
Seller or the Company, except such Taxes, if any, as are listed in
Schedule 3.9(a) of the Disclosure Schedule or are being contested in good
faith and as to which adequate reserves (determined in accordance with
GAAP) have been provided in the Financial Statements.
(b) The charges, accruals and reserves with respect to Taxes
provided in the Financial Statements are adequate (determined in
accordance with GAAP) and all Taxes that Seller or the Company is or was
required by Law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Entity or other Person.
(c) There are no Liens on any of the Transferred Assets or the
assets of the Company that arose in connection with any failure (or
alleged failure) to pay any Tax.
SECTION 3.10 Employee Benefits; ERISA.
(a) Seller has delivered or otherwise made available to Buyer a
true, complete and correct copy of, and Schedule 3.10(a) of the
Disclosure Schedule sets forth a true, complete and correct list of, each
profit-sharing, pension, severance pay, thrift, savings, incentive,
change of control, employment, retirement, bonus, deferred compensation,
group life and health insurance and other employee benefit plan,
agreement, arrangement or commitment, including any such plan, agreement,
arrangement or commitment or any other plan or program that constitutes
an "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of
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1974, as amended ("ERISA"), (i) that provides benefits for or pertains to
any Division employee or to which Seller makes contributions on behalf of
any Division employee or is otherwise bound in connection with the
Division ("Seller Benefit Plans") or (ii) that provides benefits for or
pertains to any Company employee or to which the Company makes
contributions on behalf of any of its employees or is otherwise bound
(all of which are hereinafter referred to as "Company Benefit Plans" and,
collectively with Seller Benefit Plans, the "Benefit Plans").
(b) All Benefit Plans that are employee benefit plans (the
"Plans"), to the extent subject to ERISA or the Internal Revenue Code of
1986, as amended (the "Code"), are in substantial compliance with ERISA
and the Code. Each Plan that is an "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA ("Pension Plan") and that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS and nothing has occurred
following receipt of such letter that is reasonably likely to cause such
letter to be revoked. There is no material pending or, to the knowledge
of Seller, threatened litigation relating to the Plans. No action has
been taken with respect to any Benefit Plan either to terminate such
Benefit Plan or to cause distributions, other than in the ordinary course
of business, to participants under such Benefit Plan.
(c) Neither Seller, the Company nor any entity that is
considered one employer with Seller or the Company under Section
4001(b)(1) of ERISA or Section 414(b) or (c) of the Code (an "ERISA
Affiliate") has maintained, or made or been obligated to make,
contributions to any plan subject to Part 3 of Title I or Title IV of
ERISA at any time within the last six years.
(d) All contributions required to be made under the terms of
any Benefit Plan have been timely made when due.
(e) None of Seller or the Company has any commitments or
obligations nor made any representations regarding continuation of
welfare benefits after termination of employment under any of the Benefit
Plans, except as required by Part 6 of Title I of ERISA or similar laws
or as set forth in Schedule 3.10(e) of the Disclosure Schedule. Except to
the extent limited by applicable Law, there are no restrictions on the
rights of Seller or the
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Company to amend or terminate any such Benefit Plan without incurring
Liability thereunder.
(f) None of Seller or the Company has any obligations for
retiree health or life benefits. Except to the extent limited by
applicable Law, there are no restrictions on the rights of Seller or the
Company to amend or terminate any Benefit Plan without incurring
Liability thereunder.
(g) Each Benefit Plan covering non-U.S. employees (an
"International Plan") has been maintained in substantial compliance with
its terms and with the requirements prescribed by any and all applicable
Laws (including any special provisions relating to qualified plans where
such International Plan was intended to so qualify) and has been
maintained in good standing with applicable regulatory authorities. The
fair market value of the assets of each funded International Plan (or the
liability of each funded International Plan funded through insurance) is
sufficient to procure or provide for the benefits accrued thereunder
through the Closing Date according to the actuarial assumptions and
valuations most recently used to determine employer contributions to the
International Plan. The Company conforms in all material respects with
the provisions of any applicable national law or regulations in relation
to staff delegates and workers' committees, and in a more general manner
in relation to the representation of the employees within the Company.
SECTION 3.11 Employees; Labor Matters. Schedule 3.11 of the
Disclosure Schedule contains a true, complete and correct list of the name, job
title, current compensation, and date of hire of each employee of (a) Seller in
the Division and (b) the Company, including each employee on leave of absence or
layoff status. Neither Seller nor the Company is a party to, or bound by, any
collective bargaining agreement or other labor Contract nor is any such
collective bargaining agreement or other labor Contract currently being
negotiated, nor, to the knowledge of Seller, are there any activities or
proceedings of any labor union or labor organization to organize any employees
of Seller in the Division or the Company.
SECTION 3.12 Compliance with Laws; Governmental Authorizations.
Except for any such matters that, individually or in the aggregate, are not
material:
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(a) each of Seller and the Company is in compliance with each
Law applicable to it or to its conduct, ownership or operation of the
Business and no notice has been received by Seller or the Company
alleging a failure to comply with such Laws;
(b) each of Seller and the Company has all licenses, permits
and other approvals or authorizations from Governmental Entities that are
necessary to permit it to lawfully conduct and operate the Business in
the manner it currently does and to permit it to own and use its assets
in the manner in which it currently does ("Governmental Authorizations");
and
(c) each of Seller and the Company is in full compliance in all
material respects with all of the terms and requirements of each of its
Governmental Authorizations and no notice has been received by Seller or
the Company alleging a failure to comply with such terms and
requirements.
SECTION 3.13 Real Property.
(a) Schedule 3.13(a) of the Disclosure Schedule contains a
true, complete and correct list of all leased real property (the "Leased
Real Property") included in the Transferred Assets or leased by the
Company. Seller has delivered or made available to Buyer true, complete
and correct copies of the deeds, leases or other instruments by which
such real property is leased. Neither Seller nor the Company owns any
real property Related to the Business. There is no default under any
leases relating to the Leased Real Property by Seller or the Company or,
to the knowledge of Seller, by the other parties thereto and, to the
knowledge of Seller, no event has occurred which with the giving of
notice, lapse of time or both would constitute such a default other than
in each such case for any such defaults that, individually or in the
aggregate, are not material. Each lease relating to the Leased Real
Property is valid, binding and enforceable in accordance with its terms
and in full force and effect.
(b) Each of Seller and the Company hold the leasehold interests
in the Leased Real Property free and clear of all Liens except: (i) Liens
disclosed in Schedule 3.13(b) of the Disclosure Schedule, (ii) mortgages
or security interests shown on the Financial Statements as securing
specified Liabilities or obligations, (iii) mortgages or security
interests incurred in connection with the purchase of property or assets
after September 30, 1999
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and disclosed in Schedule 3.13(b) of the Disclosure Schedule (such
mortgages and security interests being limited to the property or assets
so acquired), (iv) Liens for current Taxes and assessments and other
charges by Governmental Entities not yet due and payable or which may
thereafter be paid without penalty or are being contested in good faith
by appropriate proceedings, and (v) imperfections of title that are not
material.
SECTION 3.14 Contracts, Leases and Agreements; No Default.
(a) Except as set forth in Schedule 3.14(a) of the Disclosure
Schedule, there are no Applicable Contracts:
(i) evidencing indebtedness for borrowed money or
pursuant to which Seller or the Company has guaranteed any
obligation of any other Person;
(ii) prohibiting or limiting the ability of Seller or the
Company to engage in any line of business, to compete with any
Person or to carry on the Business anywhere in the world;
(iii) requiring the performance of services or delivery of
goods or materials by or to Seller or the Company or the lease of
personal property by or from any Person for consideration
exceeding $100,000 in any one year;
(iv) regarding the employment or severance arrangements
of any employee;
(v) with directors, officers or employees that are not
cancellable by it on notice of not longer than 30 days and without
liability, penalty or premium or providing for the payment of any
bonus or commission based upon sales or earnings; or
(vi) that are material to the Business.
Seller has delivered or made available to Buyer a true, complete and correct
copy of each Applicable Contract listed in Schedule 3.14(a) of the Disclosure
Schedule.
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(b) Except as set forth in Schedule 3.14(b) of the Disclosure
Schedule or for any such matters that, individually or in the aggregate,
are not material, with respect to each Applicable Contract listed in
Schedule 3.14(a) of the Disclosure Schedule:
(i) such Applicable Contract is a valid, legally binding
and enforceable obligation of Seller or the Company party thereto,
subject to the Enforceability Exceptions;
(ii) Seller or the Company that is a party to such
Applicable Contract is in substantial compliance with all terms
and requirements of such Applicable Contract;
(iii) to the knowledge of Seller, each other Person that
is a party to such Applicable Contract is in substantial
compliance with all terms and requirements of such Applicable
Contract; and
(iv) to the knowledge of Seller, no event has occurred or
circumstance exists that (with or without the giving of notice,
the lapse of time or both) gives any Person other than Seller or
the Company that is a party to such Applicable Contract the right
to declare a default, exercise any remedy under, accelerate the
maturity or performance of, or terminate such Applicable Contract.
SECTION 3.15 Environmental Matters.
(a) Except for any such matters that, individually or in the
aggregate, are not material: (i) each of Seller (but solely with respect
to the Division) and the Company is in compliance with all applicable
Environmental Laws; (ii) neither Seller (but solely with respect to the
Division) nor the Company has received any written notice from any
Governmental Entity, citizens group, employee or otherwise alleging that
Seller (but solely with respect to the Division) is in violation of any
applicable Environmental Laws; (iii) there is no Environmental Claim
pending or, to the knowledge of Seller, threatened against Seller (but
solely with respect to the Division) and/or the Company against any
person or entity whose liability for any Environmental Claim Seller (but
solely with respect to the Division) or the Company has or may have
retained or assumed either contractually or by operation of law and (iv)
there are no past or present (or to the knowledge of Seller) future
actions,
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activities, circumstances, conditions, events or incidents, including,
without limitation, the release or presence of any Hazardous Substance
which could form the basis of any Environmental Claim against Seller (but
solely with respect to the Division) or the Company, or to the knowledge
of Seller, against any person or entity whose liability for any
Environmental Claim Seller (but solely with respect to the Division) or
the Company has or may have retained or assumed either contractually or
by operation of law.
(b) This Section 3.15 constitutes the sole representation and
warranty of Seller or the Company with respect to any Environmental Law
or Hazardous Substance notwithstanding any other representation and
warranty in this Article III.
(c) For the purposes of this Agreement, the term:
(i) "Environmental Claim" means any claim, action, cause
of action, investigation or notice (written or oral) by any person
or entity alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resources damages,
property damages, personal injuries, or penalties) arising out of,
based on or resulting from (1) the presence, or release of any
Hazardous Substances at any location, whether or not owned or
operated by Seller or the Company, or (2) circumstances forming
the basis of any violation, or alleged violation, of any
Environmental Law.
(ii) "Environmental Law" means any applicable federal,
state, local and foreign law, regulation, code, license, permit,
order, judgment, decree or injunction promulgated by any
Governmental Entity (1) relating to pollution or protection of
human health or the environment (including air, water, soil and
natural resources) or (2) the manufacture, processing,
distribution, use, treatment, storage, transport, handling,
release or disposal of Hazardous Substances, and all laws and
regulations relating to the record keeping, notification,
disclosure and reporting requirements respecting Hazardous
Substances.
(iii) "Hazardous Substance" means any substance to the
extent listed, defined, designated, classified or regulated as
hazardous,
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toxic, radioactive, a pollutant, contaminant or oil under either
the National Oil and Hazardous Substances Pollution Contingency
Plan (40 C.F.R. Section 300.5) or any applicable Environmental
Law, including petroleum and any derivative or by-product thereof.
SECTION 3.16 Insurance. Schedule 3.16 of the Disclosure Schedule
sets forth a true, complete and correct list of all insurance policies covering
the Division, the Company and any of their assets or employees. The insurance
policies listed in Schedule 3.16 of the Disclosure Schedule are (a) in such
amounts and ensure against such risks and losses as are consistent with standard
industry practice and (b) are sufficient to comply with applicable laws and the
requirements of any Applicable Contract. No notice of cancellation or
termination of any insurance policy listed in Schedule 3.16 of the Disclosure
Schedule has been received with respect to any such policy and each such policy
is in full force and effect.
SECTION 3.17 Brokers and Finders. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
Incorporated, whose fees shall be paid by Seller, no agent, broker, investment
banker, intermediary, finder, Person or firm acting on behalf of Seller or the
Company will be entitled to any broker's or finder's fee or any other commission
or similar fee, directly or indirectly, from any of the parties hereto in
connection with the execution of this Agreement or upon consummation of the
transactions contemplated hereby.
SECTION 3.18 No Undisclosed Liabilities. The Assumed Liabilities
do not include, and the Company does not have, any Liabilities except for (a)
Liabilities disclosed in Schedule 3.18 of the Disclosure Schedule, (b)
Liabilities reflected or adequately reserved against in the Financial
Statements, (c) current Liabilities incurred in the ordinary course of business,
consistent with past practice and (d) other Liabilities that, individually or in
the aggregate, are not material. "Liabilities" means any debts, liabilities,
commitments or obligations of any kind, character or nature whatsoever, whether
known or unknown, accrued, contingent or absolute, due or to become due.
SECTION 3.19 Intellectual Property.
(a) Schedule 3.19(a) of the Disclosure Schedule sets forth, for
all Intellectual Property included in the Transferred Assets, or owned by
the Company a complete and accurate list of all U.S. and foreign: (i)
Patents; (ii) Trademark registrations (including Internet domain name
registrations) and
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applications; and (iii) Copyright registrations and Copyright
applications. Except as set forth on Schedule 3.19(b) of the Disclosure
Schedule, Seller or the Company is the sole and exclusive beneficial
owner, and, with respect to the United States, record owner (except for
U.S. Reg. No. 1631580), of the items on Schedule 3.19(a).
(b) Except as set forth in Schedule 3.19(b) of the Disclosure
Schedule and except in such instances as is not reasonably likely to be
material:
(i) Seller, the Company, or the Division own or have the
right to use all Intellectual Property which is used in or
necessary for the Business as currently conducted, free and clear
of all liens or other encumbrances. The Intellectual Property
owned by or licensed to the Company, and included in the
Transferred Assets and covered by the arrangements and license
agreements contemplated under Sections 5.10 and 5.12 (the "Buyer
License") constitutes all of the Intellectual Property used in or
necessary for the business as currently conducted, including but
not limited to all Intellectual Property contained in or necessary
to manufacture, use, sell, reproduce, display and, with respect to
Intellectual Property owned by Seller or the Company, make
derivative works of the products sold by the Business and all
product names (other than Seller's trademarks, trade names,
service marks, domain names or logos that include the words "Ziff
▇▇▇▇▇," "Ziff," "ZD" or "Softbank" as described in Section 5.12);
(ii) all Intellectual Property owned by the Company or
included in the Transferred Assets or covered by the Buyer
License, has been duly maintained, is valid and subsisting, in
full force and effect and has not been cancelled, expired or
abandoned;
(iii) Seller, the Company or the Division has not received
written notice from any third party regarding any actual or
potential infringement by Seller with respect to the Business, the
Company or the Division of any intellectual property of such third
party, and Seller, the Company or the Division has no knowledge of
any valid basis for such a claim against Seller, the Company or
the Division;
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(iv) Seller, the Company or the Division has not received
written notice from any third party regarding any assertion or
claim challenging the validity of any Intellectual Property owned
by the Company or included in the Transferred Assets or covered by
the Buyer License, and Seller, the Company or the Division has no
knowledge of any valid basis for such a claim;
(v) to Seller's knowledge, no third party is
misappropriating, infringing, diluting or violating any
Intellectual Property owned by the Company or Seller and included
in the Transferred Assets or covered by the Buyer License;
(vi) neither Seller with respect to the Transferred
Assets, nor the Company or the Division have licensed or
sublicensed its rights in any Intellectual Property, or received
or been granted any such rights, other than pursuant to the
Contracts;
(vii) Seller, the Company or the Division take reasonable
measures to protect the confidentiality of Trade Secrets owned by
or licensed to Company, the Division or to Seller and included in
the Transferred Assets or covered by the Buyer License;
(viii) the execution, delivery and performance by Seller,
the Company or the Division of this Agreement, and the
consummation of the transactions contemplated hereby, will not
result in the loss or impairment of, or give rise to any right of
any third party to terminate or alter, any of the Intellectual
Property rights of the Company or the Division, or of the rights
of Buyer as the successor owner of the Transferred Assets, nor
require the consent of any Governmental Entity or third party in
respect of any such Intellectual Property;
(ix) There are no settlement agreements, consents or
covenants not to ▇▇▇ concerning any Intellectual Property to which
the Company, the Division or Seller is a party (to the extent such
Intellectual Property is included in the Transferred Assets).
SECTION 3.20 Transferred Assets. Seller has, and at the Closing
Buyer will receive, good and marketable title to all of the Transferred Assets,
in each case free and clear of any Lien, except for such Liens that would not
materially
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interfere with the ownership or operation of the Business or the Transferred
Assets, taken as a whole, and which will not secure debt as of the Closing Date.
All tangible assets constituting Transferred Assets are (i) in good operating
condition and repair, ordinary wear and tear excepted and (ii) are suitable for
operation of the Business, are fit for their intended purposes and meet all
requirements of Law or any Governmental Entity, except for such failures that
individually or in the aggregate are not likely to be material. The Transferred
Assets together with the other rights conferred to Buyer as contemplated by this
Agreement constitute all of the assets, properties and rights necessary for the
operation of the Business as conducted and are adequate and sufficient for the
operation of the Business as presently conducted.
SECTION 3.21 Year 2000 Compliance.
(a) Except as is not reasonably likely to be material, (i) the
products sold by the Business are Year 2000 Compliant; and (ii) all of
the internal computer systems of Seller (but solely with respect to the
Division) and the Company comprised of software, hardware, databases or
embedded control systems (microprocessor controlled, robotic or other
device) that are used in the Business, or the operation of the Company or
the Division (collectively the "Business Systems"), including but not
limited to accounting systems, are Year 2000 Compliant.
(b) Except as is not reasonably likely to be material, Seller
(but solely with respect to the Division) and the Company have obtained
written representations or assurances from each entity that (x) provides
data of any type that includes date information or which is otherwise
derived from, dependent on or related to date information ("Date Data")
to Seller (but solely with respect to the Division) or the Company, (y)
processes in any way Date Data for Seller (but solely with respect to the
Division) or the Company or (z) otherwise provides any material product
or service to Seller with respect to the Business or, the Company or the
Division, that all of such entity's Date Data and related hardware,
software and embedded technology that are used for, or on behalf of,
Seller, the Company or the Division are Year 2000 Compliant. Neither
Seller (but solely with respect to the Division) nor the Company is
reasonably likely to incur material expenses arising from or relating to
the continuing efforts by the Business to achieve Year 2000 Compliance or
the failure of any of the products sold by the Business, or to the
knowledge of Seller or the Company, the Business Systems used by or
relied upon by the Business to be Year 2000 Compliant.
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(c) As used herein, "Year 2000 Compliant" and "Year 2000
Compliance" mean for all dates and times, including, without limitation
dates and times after December 31, 1999 and in the multi-century
scenario, when used on a stand-alone system or in combination with other
software or systems: (i) the application system functions and receives
and processes dates and times correctly without abnormal results; (ii)
all date related calculations are correct (including, without limitation,
age calculations, duration calculations and scheduling calculations);
(iii) all manipulations and comparisons of date-related data produce
correct results for all valid date values within the scope of the
application; (iv) there is no century ambiguity; (v) all reports and
displays are sorted correctly; and (vi) leap years are accounted for and
correctly identified (including, without limitation, that 2000 is
recognized as a leap year).
SECTION 3.22 Intercompany Transactions. All arrangements and
agreements between the Division and the Company on the one hand, and Seller and
its Affiliates (other than the Company or the Division) on the other, are on
terms no cheaper to the Division and the Company than arm's length, commercially
reasonable transactions and the amounts with respect thereto are representative
of amounts charged to the Division and the Company.
SECTION 3.23 No Other Representations or Warranties. Except for
the representations and warranties contained in this Article III, neither Seller
nor any other Person makes any express or implied representation or warranty on
behalf of or with respect to Seller, the Company, the Transferred Assets, the
Division or the Business, and Seller hereby disclaims any representation or
warranty not contained in this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
SECTION 4.1 Organization and Good Standing. Buyer is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Buyer has full limited liability company power and
authority to
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conduct its businesses and to own or use its assets as it currently does or as
will be Conducted.
SECTION 4.2 Limited Liability Company Authority. Buyer has the
limited liability company power and authority, and has taken all limited
liability company action necessary, to authorize, execute, deliver and perform
its obligations under this Agreement. This Agreement has been duly authorized,
executed and delivered by Buyer and constitutes a valid and legally binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
subject to the Enforceability Exceptions.
SECTION 4.3 Consents and Approvals; No Violations.
(a) Except for the HSR Filing, no notices, reports,
registrations or other filings are required to be made by Buyer with, nor
are any consents, approvals or authorizations required to be obtained by
Buyer from, any Governmental Entity, in connection with the execution,
delivery or performance of this Agreement by Buyer, in each case except
for those the failure of which to make or obtain, individually or in the
aggregate, are not material.
(b) The execution, delivery and performance of this Agreement
by Buyer will not:
(i) violate or contravene any provision of the governing
documents of Buyer;
(ii) violate, conflict with, or constitute or result in a
default, acceleration or creation of a Lien under, or a
termination of (in each case with or without notice, lapse of time
or both), any provision, or result in the loss of any benefit
under, any Contract to which Buyer is a party or by which any of
its assets are bound;
(iii) require Buyer to obtain the consent, waiver,
authorization or approval of, any Person under any Contract to
which Buyer is a party or by which any of its assets are bound; or
(iv) violate, contravene or conflict with any Law or
Order of any Governmental Entity having jurisdiction over Buyer or
any of its assets.
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SECTION 4.4 Securities Act. Buyer is acquiring the Shares for its
own account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act of 1933 (the "Securities Act") in any manner
that would be in violation of the Securities Act. Buyer has not, directly or
indirectly, offered the Shares to anyone or solicited any offer to buy the
Shares from anyone, so as to bring such offer and sale of the Shares by Buyer
within the registration requirements of the Securities Act. Buyer will not sell,
convey, transfer or offer for sale any of the Shares except upon compliance with
the Securities Act and any applicable state securities laws or pursuant to any
exemption therefrom.
SECTION 4.5 Brokers and Finders. Except for Wasserstein, Perella &
Co., Inc., whose fees shall be paid by Buyer, no agent, broker, investment
banker, intermediary, finder, Person or firm acting on behalf of Buyer is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee, directly or indirectly, from any of the parties hereto in
connection with the execution of this Agreement or upon consummation of the
transactions contemplated hereby.
SECTION 4.6 Financing. Buyer has received and furnished to Seller
true, complete and accurate copies of a commitment letter from Fleet Boston
Financial ("Lender"), pursuant to which Lender has committed, subject to the
terms and conditions thereof, to provide Buyer with all of the debt financing
that Buyer will require in order to satisfy its obligations to fund the Purchase
Price.
SECTION 4.7 Litigation. As of the date hereof, there are no
Actions pending or, to the knowledge of Buyer, threatened against Buyer or any
of its assets, other than Actions that, individually or in the aggregate, are
not material to its ability to perform its obligations hereunder or not
reasonably likely to prohibit or materially restrict or delay the performance of
this Agreement by Buyer.
SECTION 4.8 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article IV, neither Buyer nor
any other Person makes any other express or implied representation or warranty
on behalf of or with respect to Buyer and Buyer hereby disclaims any
representation or warranty not contained in this Article IV.
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ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business. Prior to the Closing, except as
requested or consented to by Buyer in writing, which consent shall not be
unreasonably withheld or delayed and except as otherwise expressly contemplated
hereby, Seller shall, and agrees to cause the Company to, conduct the Business
only in the ordinary course of business consistent with past practice and use
their respective commercially reasonable efforts to preserve intact the Business
and the relationships of the Division and the Company with their employees,
suppliers and others having business relationships with them and Seller shall
not (solely with respect to the Division) and Company shall not:
(a) grant or increase any bonus, salary, severance, termination
or other compensation or benefits to any director, officer or employee of
the Division or the Company other than in the ordinary course of business
consistent with past practice;
(b) sell, lease or otherwise dispose of, mortgage, pledge or
otherwise subject to a Lien, any material Transferred Assets or any
assets of the Company other than in the ordinary course of business
consistent with past practice;
(c) acquire or make any material investment in any other Person
or assets;
(d) make or commit to make any capital expenditure in excess of
$150,000;
(e) enter into any Applicable Contract that would have been
required to be listed in Schedule 3.14(a) of the Disclosure Schedule if
it had been in effect as of the date of this Agreement or terminate,
modify in any material respect or waive any material rights under any
Applicable Contract listed in such Schedule;
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(f) settle, compromise, waive, release or assign any material
claims or rights it has in respect of any material Actions to which it is
a party or by which it is bound;
(g) incur any indebtedness for money borrowed other than
indebtedness to Seller or its Affiliates which shall remain the
obligation of Seller and shall not be assumed by Buyer;
(h) change any of its accounting methods, policies or
practices;
(i) enter into any agreement to do any of the foregoing; and
(j) settle or compromise any material tax liability or dispute
or matter or revoke any tax election.
The preceding sentence notwithstanding, Seller may cause the Company to
transfer, by dividend or otherwise, to Seller or any of its Affiliates:
(a) any cash, bank accounts, certificates of deposit,
commercial paper, annuities, treasury notes and bills or other marketable
securities other than the Transferred Assets or the Shares; and
(b) any of the Excluded Assets.
SECTION 5.2 Access; Confidentiality.
(a) Between the date of this Agreement and the Closing Date,
Seller shall, and shall cause the Company to, afford Buyer full and free
access, at all reasonable times during normal business hours, to the
personnel, premises, properties, Applicable Contracts, books and records,
and other documents and data of the Division and the Company as Buyer may
reasonably request. The foregoing shall not require Seller or the Company
to permit any inspection, or to disclose any information, that in their
reasonable judgment is reasonably likely to result in the disclosure of
any trade secrets of third parties or violate any of their obligations
with respect to confidentiality if Seller or the Company, as the case may
be, shall have used reasonable best efforts to obtain the consent of such
third party to such inspection or disclosure. All requests for
information made pursuant to this Section 5.2(a) shall be directed to an
executive officer of Seller.
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(b) Following the Closing, Buyer shall, and shall cause the
Company and any of Buyer's other Affiliates to (i) afford Seller full and
free access, upon reasonable notice, during normal business hours, to the
personnel, premises, properties, Applicable Contracts, books and records,
and other documents and data of the Division and the Company as Seller
shall reasonably request, (ii) furnish Seller with copies of all such
Applicable Contracts, books and records, and other existing documents and
data as Seller may reasonably request and (iii) furnish Seller with such
additional financial, operating, and other data and information as Seller
may reasonably request in order for Seller to prepare its financial
statements, Tax Returns and other documents and reports Seller or any of
its Affiliates are required to file with Governmental Entities or
reasonably require in connection with any Action against, or tax
examination of, Seller or any of its Affiliates. The foregoing shall not
require Buyer, the Company or any of Buyer's other Affiliates to permit
any inspection, or to disclose any information, that in their reasonable
judgment is reasonably likely to result in the disclosure of any trade
secrets of third parties or violate any of their obligations with respect
to confidentiality if Buyer, the Company or Buyer's other Affiliates
shall have used reasonable best efforts to obtain the consent of such
third party to such inspection or disclosure. All requests for
information made pursuant to this Section 5.2(b) shall be directed to an
executive officer of Buyer.
(c) Seller hereby covenants and agrees that from and after the
Closing Date it will use its reasonable best efforts to ensure that its
Representatives, affiliates, successors and assigns (including assignees
of any portion of its other businesses) hold in confidence and prevent
the disclosure to any person or use by any Person of any information and
documents concerning the Business and the Transferred Assets, including
but not limited to the information compiled in the data room (other than
pursuant to a court order or subpoena or with respect to Tax Returns and
other reports or information required by law to be disclosed), except to
authorized representatives of Buyer. Seller agrees that it shall not and
it shall cause its Representatives, affiliates, successors and assigns
not to use any confidential documents or information for any purpose
other than the preparation of Seller's financial statements, Tax Returns
or other documents or reports required to be filed by Seller with any
Governmental Entities or reasonably required in connection with any
Action against, or examination of Seller or its Affiliates. The parties
agree that irreparable damage may occur in the event that any of the
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provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that
Buyer shall be entitled to seek an injunction or injunctions to prevent
breaches of this paragraph and to enforce specifically the terms and
provisions of this paragraph in any court, without having to prove
irreparable damages this being in addition to any other remedy to which
it is entitled at law or equity.
SECTION 5.3 Required Consents and Approvals.
(a) Each party hereto hereby agrees to cooperate with each
other party, and use its reasonable best efforts to promptly prepare and
file all necessary documentation, to effect all necessary notices,
reports, registrations or other filings and documents and to obtain as
promptly as practicable all necessary consents, approvals and
authorizations of all third parties and Governmental Entities necessary
or advisable to consummate the transactions contemplated herein. Each
party shall have the right to review in advance, and to the extent
practicable each will consult the other on, in each case subject to
applicable Laws relating to the exchange of information, all the
information relating to Buyer, Seller or the Company that appears in any
filing made with, or written materials submitted to, all third parties
and Governmental Entities in connection with the transactions
contemplated in this Agreement. In exercising the foregoing right, each
of Buyer and Seller shall act reasonably and as promptly as practicable.
Buyer and Seller agree that they will keep the other apprised of the
status of matters relating to completion of the transactions contemplated
herein, including promptly furnishing the other with copies of notice or
other communications received by Buyer, Seller or the Company, from all
third parties and Governmental Entities with respect to the transactions
contemplated herein.
(b) Buyer and Seller each agree to promptly prepare and file an
HSR Filing with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "DOJ"). Each such
party hereby covenants to cooperate with the other such party to the
extent reasonably necessary to assist in making reasonable supplemental
presentations to the FTC or the DOJ, and if requested by the FTC or the
DOJ, to promptly amend or furnish additional information thereunder.
Nothing in this Agreement shall be construed as an obligation on the part
of any of the parties
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hereto to take any actions with respect to the FTC or the DOJ other than
those set forth in this Section 5.3(b).
SECTION 5.4 Reasonable Best Efforts. Between the date of this
Agreement and the Closing Date, each of the parties hereto shall use their
respective reasonable best efforts to cause the conditions in Sections 6.1 and
6.2 to be satisfied as soon as practicable (subject to the proviso in Section
2.7(a)).
SECTION 5.5 Publicity. The initial press release announcing the
transactions contemplated herein shall be released jointly after consultation
between the parties hereto and thereafter the parties hereto shall consult with
each other prior to issuing any press releases or otherwise making public
announcements with respect to the transactions contemplated herein and prior to
making any filings with any Governmental Entity or with any national securities
exchange or interdealer quotation service with respect thereto, except as may be
required by applicable Law or by obligations pursuant to any listing agreement
with or rules of any national securities exchange or interdealer quotation
service.
SECTION 5.6 Expenses. Except as otherwise expressly provided
herein, whether or not the transactions contemplated herein are consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated herein shall be paid by the party incurring such
expense. In the event of termination of this Agreement, the obligation of each
party to pay its own expenses will be subject to any rights of such party
arising from a breach of this Agreement by the other party.
SECTION 5.7 ZDMI Non-Solicitation. Buyer hereby covenants and
agrees that for a period of two years following October 1, 1999, Buyer shall not
employ any person formerly employed by Seller's ZD Market Intelligence division
who became an employee of ▇▇▇▇▇-▇▇▇▇▇, Inc. in connection with the sale of the
ZD Market Intelligence business, and in competition with such business (such
business being the development, compilation and distribution of information on
installed and planned technology hardware and software purchases and the
provision of customized service solutions utilizing such information).
SECTION 5.8 Employees.
(a) As of the Closing Date, Buyer shall, or shall cause the
Company to continue to employ all of the employees of the Division and
the
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Company at the Closing Date (each, a "Continuing Employee") for cash
compensation substantially comparable to that currently being provided to
them by Seller (it being understood that nothing contained herein shall
require Buyer to maintain the employment of any Continuing Employee after
the Closing Date). Seller shall use its reasonable best efforts to ensure
the orderly transfer of such employees to Buyer. Further, with respect to
Continuing Employees:
(i) Buyer shall cause each of the Division and the
Company to continue the Enhanced Severance Benefit Plan set forth
in Schedule 5.8(a) of the Disclosure Schedule for a period of at
least 60 days after the Closing (but shall have no obligations
thereafter). Continuing Employees of the Division and the Company
shall be given credit under each employee benefit plan, program,
policy or arrangement of Buyer or any of its Affiliates in which
the employees are eligible to participate for all service with the
Division, the Company or any predecessor employer (to the extent
such credit was given by the Division or the Company) for purposes
of eligibility, vesting, benefit accrual (excluding, however,
benefits accrued under any defined benefit or defined contribution
pension plan), severance and vacation entitlement.
(ii) Buyer shall take all such action as is necessary or
appropriate in order to ensure that Continuing Employees of the
Division and the Company and their spouses and dependent children
covered by the group health plans sponsored by Seller (the "Seller
Health Plans") as of the Closing Date become eligible for coverage
under a group health plan maintained by Buyer or its Affiliates
effective immediately after the Closing. Buyer shall cause the
group health plan maintained by it or its Affiliates to (i) waive
any waiting periods, evidence of insurability requirements or
preexisting condition limitations and (ii) honor any deductible,
co-payment and out-of-pocket expenses incurred by the employees
and their beneficiaries under the Seller Health Plans during the
portion of 1999 preceding the Closing.
(iii) Buyer shall take all such action as is necessary or
appropriate in order to assure that Continuing Employees of the
Division and the Company covered by the group term life insurance
plan sponsored by Seller (the "Seller Life Plan") as of the
Closing
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Date become eligible for coverage under a group term life
insurance plan maintained by Buyer or its Affiliates effective
immediately after the Closing.
(b) The account balances under the ZD Plan of all current and
former employees of the Division and the Company, (i) if not forfeited
under the terms of the ZD Plan prior to the Closing Date, shall become
100% vested and non-forfeitable upon the Closing Date, and (ii) shall be
transferred to Buyer's tax-qualified defined contribution plan ("Buyer's
Plan") in a so-called "trust-to-trust" transfer satisfying the applicable
requirements of Section 414(l) of the Code. Seller shall make a
discretionary contribution consistent with past practice under the ZD
Plan to the accounts of all eligible employees of the Division and under
the Registered Retirement Service Plan to the accounts of all eligible
employees of the Company for all of 1999. An amount equal to 8% of the
eligible earnings earned in the year 2000 prior to the Closing Date of
all Continuing Employees who would be eligible for a discretionary
contribution in the year 2000 shall be accrued as a liability on the
Closing Statement, provided, that Buyer, shall use such amount to make a
discretionary contribution to Buyer's own retirement plan for the benefit
of such Continuing Employees.
(c) Employees of the Division and the Company who, immediately
prior to the Closing Date, are on disability leave, authorized leave of
absence or military service shall become employees of Buyer or its
Affiliates as of the Closing Date and such employees as of the date
hereof are listed on Schedule 5.8(c)(i) of the Disclosure Schedule.
Continuing Employees who are on long-term disability as of the Closing
Date shall continue disability coverage under Seller's disability plan
until such time as they are no longer disabled and such employees as of
the date hereof are listed on Schedule 5.8(c)(ii) of the Disclosure
Schedule. Continuing Employees who are on short-term disability as of the
Closing Date shall be covered under a short-term disability plan
maintained by Buyer or its Affiliates effective immediately after the
Closing Date, and shall be transferred to a long-term disability plan
maintained by Buyer or its Affiliates upon becoming permanently disabled
or otherwise entitled to long-term disability benefits under such plan.
Such employees as of the date hereof are listed on Schedule 5.8(c)(i) of
the Disclosure Schedule.
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(d) Buyer shall pay to employees of the Division and the
Company the retention and special bonuses set forth in Schedule 5.8(d) of
the Disclosure Schedule in accordance with such Schedule to the extent
such employees become entitled thereto.
SECTION 5.9 Intercompany Liabilities and Debt. Seller shall take
all actions necessary so that at the Closing (a) neither the Company nor the
Division shall have (except as set forth in this Agreement) any (i) Liability
(other than with respect to trade receivables arising in the ordinary course of
business consistent with past practice) to Seller or any Affiliate of Seller
(other than to the Division or the Company), including all borrowings by Seller
or the Company from Seller or any Affiliate of Seller or any obligation to pay a
dividend to Seller or any Affiliate of Seller or (ii) indebtedness for borrowed
money and (b) neither Seller nor any Affiliate of Seller (other than the Company
or the Division) shall have any liability to the Company or the Division.
SECTION 5.10 Intercompany Programs.
(a) Prior to the date hereof, Seller has proposed or agreed
upon transactions (each of which is set forth on Schedule 5.10 of the
Disclosure Schedule and a copy of which has been provided to Buyer) with
third parties whereby Seller has offered to them products of the Division
and the Company bundled with other products of Seller and/or its
Affiliates. Buyer shall cause the Division and the Company to provide
such products to such third parties in substantially the same manner as
such services were provided immediately prior to the Closing. Seller
shall allocate to Buyer the revenue and costs arising from such
transactions in the same manner as such revenue and costs were allocated
immediately prior to the Closing. Within 30 days of receipt of payments
in connection with such transactions, Seller shall deliver to Buyer its
allocated revenue, less costs, arising from such transactions.
(b) Prior to the date hereof, Seller and its Affiliates, on the
one hand, and the Division and the Company, on the other hand, have
provided the other party with certain cross-marketing services in
connection with their respective products. Commencing on the Closing Date
and continuing for a period of six months following the Closing Date,
Seller and its Affiliates shall provide such cross-marketing services to
Buyer and Buyer shall cause the Division and the Company to provide such
cross-marketing services to
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Seller and its Affiliates in substantially the same manner as such
services were provided by such parties prior to the Closing.
(c) Prior to the date hereof, the Division, as licensor,
entered into a license agreement with SmartPlanet, Inc., a copy of which
is attached hereto as Schedule 5.10(c)(i) of the Disclosure Schedule.
Prior to the Closing, the Division, as licensee, also entered into a
license agreement with ZDNet, a copy of which is attached hereto as
Schedule 5.l0(c)(ii) of the Disclosure Schedule. Notwithstanding the
terms and conditions of this Agreement, these agreements shall remain in
full force and effect following the Closing.
SECTION 5.11 Retention of Records.
(a) Buyer shall retain, and cause the Company to retain, all
books and records relating to the conduct of the Business prior to the
Closing Date for a period of at least six years from the date hereof.
After the end of such six-year period, any such document or record may be
disposed of by Buyer or the Company only if Buyer or the Company first
offers to surrender possession thereof to Seller at Seller's expense and
Seller declines such offer. Seller shall have the right during business
hours, upon reasonable notice to Buyer, to inspect and make copies of any
such records for any reasonable purpose.
(b) Seller may retain (i) all internal correspondence and
memoranda, valuations, investment banking presentations and bids received
from others in connection with the Asset Purchase and the Stock Purchase
and (ii) a copy of all consolidating and consolidated financial
information and all other accounting records prepared or used in
connection with the preparation of the Financial Statements. Seller shall
deliver to Buyer all other books and records relating to the Business and
the Company.
SECTION 5.12 Seller's Trademarks.
(a) Except as set forth in Section 5.10(c) above, (i) effective
as of the Closing Date, any license agreement pursuant to which Seller or
any Affiliate of Seller has granted to the Division or the Company the
right to use trademarks, trade names, service marks, domain names or
logos that include the words "▇▇▇▇-▇▇▇▇▇," "Ziff," "ZD" or "Softbank"
shall be cancelled, and (ii) as promptly as is practicable after the
Closing, Buyer shall and agrees to cause the Company to eliminate the
words "▇▇▇▇-▇▇▇▇▇," "Ziff," "ZD" and
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"Softbank" and every word or expression derived therefrom from the names
under which the Division and the Company do business. Within 90 days
after the Closing, Buyer shall, and shall cause the Company to, remove
any such trademarks, trade names, service marks, domain names and logos
from its respective properties, stationery and literature, and thereafter
neither Buyer nor the Company shall use any such trademarks, trade names,
service marks, domain names or logos.
(b) Seller hereby grants to Buyer a nontransferable,
royalty-free license and right for a period of 90 days immediately after
the Closing to use, reproduce and distribute (i) the "ZD" trademark (the
"ZD ▇▇▇▇") as part of the composite "ZD Education" and "ZD Journals"
trademarks and (ii) the "▇▇▇▇-▇▇▇▇▇" trademark (the "Ziff-▇▇▇▇▇ ▇▇▇▇,"
collectively with the ZD ▇▇▇▇, the "Marks"), as part of the composite
"▇▇▇▇-▇▇▇▇▇ Education Center" trademark, solely in connection with the
Business and for transition purposes only. Such use shall be in
accordance with the trademark guidelines set forth in Exhibit C. In the
event that Seller reasonably modifies or changes the guidelines and
Seller notifies Buyer of such modification or change, Buyer shall
promptly modify its use of the Marks.
(c) All rights and goodwill arising from the use of the Marks
and/or any similar names or marks (including logos) shall inure solely to
Seller's benefit. Buyer agrees that neither Buyer, nor any of its
Affiliates, shall use, directly or indirectly, either the ZD ▇▇▇▇ or the
Ziff-▇▇▇▇▇ ▇▇▇▇, or any marks similar thereto, as part of Buyer's or any
of its Affiliates' own trade names, or in any other way that suggests
that there is any relation or affiliation between Seller and Buyer or any
of its Affiliates other than that created by this Agreement, or as a
trademark, service ▇▇▇▇ or trade name for any other business, product or
service. Buyer shall have no interest in the Marks except as expressly
provided in this Agreement and shall not claim any other rights therein.
Nothing in this Agreement or in the performance thereof, or that might
otherwise be implied by law, shall operate to grant Buyer any right,
title, or interest in or to the Marks other than as specified in the
limited license grant in this Agreement. All rights not expressly granted
in this Agreement or herein are reserved to Seller. Buyer's right to use
the Marks shall automatically cease upon the earlier of (i) the end of
the 90-day period immediately after the Closing or (ii) Buyer's failure
to cure any material breach with respect to its use of the Marks within
120 days of receipt of written notice from Seller.
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(d) Buyer agrees to assign to Seller and does hereby assign to
Seller all rights it may acquire, if any, by operation of law or
otherwise in the Marks, including all applications or registrations
therefore, along with the goodwill associated therewith. Buyer shall
assist Seller in protecting and maintaining Seller's rights in the Marks
in connection with Buyer's licensed use hereunder, including preparation
and execution of documents necessary or appropriate to register the Marks
and/or record this Agreement. As between the parties, Seller shall have
the sole right to, and in its sole discretion may, commence, prosecute or
defend, and control any action concerning the Marks.
(e) Buyer agrees to maintain the quality of all aspects of the
Business (e.g., products and services, advertising) at a level that meets
or exceeds those standards maintained by Seller immediately prior to the
execution of this Agreement. Buyer shall fully correct and remedy any
deficiencies in its use of the Marks or the quality of the products and
services associated with the Business, and the advertising and promotion
thereof, and all other aspects of the Business, upon notice from Seller.
(f) Neither Buyer nor any of its Affiliates shall directly or
indirectly, contest the validity of, by act or omission jeopardize, or
take any action inconsistent with, Seller's rights or goodwill in the
Marks (including attempting to register the Marks or a ▇▇▇▇ incorporating
either the ZD ▇▇▇▇ or the Ziff-▇▇▇▇▇ ▇▇▇▇ or any ▇▇▇▇ confusingly similar
thereto). Buyer's rights under this Agreement are personal and may not be
sublicensed, assigned or otherwise transferred except to a purchaser of
all or substantially all of the Business.
(g) Notwithstanding the foregoing, Buyer and its Affiliates may
continue to use all courseware which incorporates the ZD ▇▇▇▇ or the
Ziff-▇▇▇▇▇ ▇▇▇▇ or any similar ▇▇▇▇ existing in inventory as of the
Closing until such inventory is exhausted.
SECTION 5.13 Tax Matters.
(a) Transfer Taxes. All excise, sales, use, transfer,
documentary, filing, recordation and other similar Taxes and fees that
may be imposed or assessed as a result of the transactions effected
pursuant to this Agreement,
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together with any interest, additions or penalties with respect thereto
and any interest in respect of such additions or penalties ("Transfer
Taxes"), shall be borne 50% by Buyer and 50% by Seller. Buyer and Seller
shall cooperate in the timely preparation and filing of any Tax Returns
that must be filed in connection with any Transfer Taxes. Buyer shall
promptly and timely pay all Transfer Taxes and Seller shall reimburse
Buyer for its share of such Transfer Taxes within 5 days of the filing of
such Tax Returns by Buyer in immediately available funds in United States
dollars. Any such Taxes or fees resulting from any subsequent transfer of
the Transferred Assets or Assumed Liabilities or any transfer of property
on or subsequent to the Closing shall be borne entirely by Buyer, and
Buyer shall indemnify Seller for any liabilities arising in connection
therewith.
(b) Determination and Allocation of Consideration. The parties
to this Agreement agree to determine the amount of and allocate the total
consideration transferred by Buyer to Seller pursuant to this Agreement
(the "Consideration") in accordance with the fair market value of the
assets and liabilities transferred and in accordance with Section 1060 of
the Code. Buyer shall provide Seller with one or more schedules
allocating the Consideration, and such schedule(s) shall be binding upon
the parties, unless Seller notifies Buyer of its disagreement with such
schedule(s) within 10 days. If Seller reasonably disagrees with any items
reflected on the schedules so provided, Seller shall have the right
within 30 business days of its receipt of such schedules to notify Buyer
of such disagreement and its reasons for so disagreeing, in which case
Seller and Buyer shall attempt in good faith to resolve the disagreement.
If Seller and Buyer cannot resolve the disagreement, the disagreement
shall be referred to the Accounting Expert, whose decision shall be final
and binding and whose expenses shall be borne by the party that the
Accounting Expert determines has lost the dispute. Seller and Buyer agree
to prepare and file an IRS Form 8594 in a timely fashion in accordance
with the rules under Section 1060 of the Code. To the extent that the
Consideration is adjusted after the Closing Date, the parties agree to
revise and amend the schedule and IRS Form 8594 in the same manner and
according to the same procedure. The determination and allocation of the
Consideration derived pursuant to this subsection shall be binding on
Seller and Buyer for all Tax reporting purposes.
(c) Employee Withholding and Reporting Matters. With respect to
those employees who are employed by Buyer within the same calendar
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year as the Closing, Buyer shall, in accordance with and to the extent
permitted pursuant to Revenue Procedure 84-77, 1984-2 C.B. 753, assume
all responsibility for preparing and filing Form W-2, Wage and Tax
Statement, Form W-3, Transmittal of Income and Tax Statements, Form 941,
Employer's Quarterly Federal Tax Return, Form W-4, Employee's Withholding
Allowance Certificate, and Form W-5, Earned Income Credit Advance Payment
Certificate. Seller and Buyer agree to comply with the procedures
described in Section 5 of Revenue Procedure 84-77.
SECTION 5.14 Further Assurances. At any time and from time to time
after the Closing Date, the parties hereto agree to (a) furnish upon request to
each other such further assurances, information, documents and instruments of
transfer or assignment, (b) promptly execute, acknowledge, and deliver any such
further assurances, documents and instruments of transfer or assignment and (c)
do all such further acts and things, in each case that the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to herein. In the event Seller is the obligor on a
performance bond, letter of credit or similar instrument for the benefit of the
Business, Buyer shall cause Seller to be released from such obligations and
shall take such actions as are necessary to reimburse Seller for any payments
Seller makes in respect of such obligations.
SECTION 5.15 Non-Assignable Agreements. Buyer acknowledges that
certain agreements between Seller and third parties require that such third
parties consent to the assignment of such agreements. Seller shall use
reasonable best efforts to obtain all consents and approvals listed in Schedule
5.15 in form and substance reasonably satisfactory to Buyer. Without in any way
limiting the foregoing, Buyer shall reasonably cooperate with and provide
assistance to Seller in obtaining all such consents and approvals. If any
consent for any agreement is not obtained, such agreement shall not be assigned,
but Seller shall, to the extent possible without incurring any liability to any
third party, keep the agreement in effect and give Buyer the benefit of the
agreement to the same extent as if it had been assigned including, without
limitation, (a) cooperating with Buyer in holding any rights under agreements
for which no consent to assign rights to Buyer is obtained ("Non-Assignable
Rights") in trust for Buyer or acting as an agent for Buyer; (b) enforcing any
rights of Seller arising from such Non-Assignable Rights against the issuers
thereof or the other party or parties thereto; (c) taking all such actions and
doing, or causing to be done, all such things at the request of Buyer as shall
be reasonably necessary and proper in order that the value of any Non-Assignable
Rights shall be
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preserved and shall inure to the benefit of Buyer; and (d) paying over to Buyer
all monies or other assets collected by or paid to Seller in respect of such
Non-Assignable Rights. Buyer shall perform the obligations under the agreement
relating to the benefit obtained by Buyer. Nothing in this Agreement shall be
construed as an attempt to assign any agreement or other instrument that is by
its terms non-assignable without the consent of the other party.
SECTION 5.16 Insurance. The parties acknowledge the possibility
that losses Buyer may suffer after the Closing as a result of events or
occurrences affecting the Division or the Company before the Closing may be
covered by insurance policies of Seller or its Affiliates. The parties further
acknowledge the possibility that they may be able to put in place arrangements
that would make available to Buyer the benefit of such coverage with respect to
such losses without prejudicing Seller's other rights under such policies. The
parties agree to cooperate fully with each other and use their reasonable best
efforts to put such arrangements in place to the extent practicable including,
without limitation, by (i) seeking the consent of the insurer under such
policies to permit Buyer or the Company to make claims directly against the
insurer or (ii) making claims on the insurer under such policy and remitting any
proceeds to Buyer or the Company; provided that, if Buyer receives any benefit
as a result of any such arrangement in respect of any loss as to which it has
already been compensated through an adjustment in the Purchase Price as
contemplated by Section 2.8. Buyer and Seller will agree on appropriate measures
to avoid any windfall to Buyer. Buyer agrees to reimburse Seller for all of
Seller's reasonable expenses incurred in connection with obtaining for Buyer the
benefit of such insurance coverage with respect to such losses.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.1 Conditions to Obligations of Buyer. The obligation of
Buyer to consummate the Asset Purchase and the Stock Purchase and to take the
other actions to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived in whole or in part by Buyer subject to the
provisions of Section 9.8):
(a) Representations and Warranties, Covenants, Consents and
Material Adverse Changes. (i) The representations and warranties of
Seller set forth in this Agreement shall have been true and correct in
all respects as
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of the date of this Agreement and shall be true and correct in all
respects as of the Closing Date as though made on and as of the Closing
Date (except that any such representations and warranties that are
expressly made as of an earlier date need only be true in all respects as
of such earlier date and except that any qualifications, limitations or
exceptions in any such representation or warranty as to materiality or
material adverse effect shall be of no force or effect), (ii) Seller
shall have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing Date,
(iii) Seller shall have obtained all consents listed in Schedule 3.4 and
3.5(c) of the Disclosure Schedule and (iv) there shall not have occurred
any material adverse change in the business, assets, liabilities, results
of operations, prospects or condition (financial or otherwise) of the
Division and the Company taken as a whole, except, in the case of clauses
(i), (ii), (iii) and (iv) above, for such matters as do not, individually
or in the aggregate, result in a diminution in excess of $8.6 million in
the value of the Company and the Division taken as a whole (excluding for
purposes of this calculation any portion of such diminution that results
in a corresponding reduction in the net assets on the Closing Statement
as compared to the net assets that would have appeared on the Closing
Statement in the absence of such matters), and Buyer shall have received
a certificate, dated the Closing Date, signed on behalf of Seller by one
of its senior executive officers to that effect.
(b) Certain Consents. Seller shall have obtained all consents
listed in Schedule 6.1(b) of the Disclosure Schedule.
(c) HSR Act; Governmental Approvals. The waiting period
applicable to the Asset Purchase and the Stock Purchase under the HSR Act
shall have expired or been terminated and all the notices, reports,
registrations and other filings with, and all consents, approvals and
authorizations from, Governmental Entities listed in Schedule 3.4 of the
Disclosure Schedule (collectively, "Governmental Filings and Approvals")
shall have been made or obtained, as the case may be, except for any such
Governmental Filings and Approvals the failure of which to make or obtain
are not, individually or in the aggregate, material.
(d) Litigation. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any Law or Order (whether temporary, preliminary or permanent) that is in
effect and restrains, enjoins or otherwise prohibits or challenges the
validity or legality
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of the sale of the Transferred Assets or the Shares or the other
transactions contemplated by this Agreement (each, a "Governmental
Order"), and no Governmental Entity or any other Person shall have
instituted any Action or threatened in writing to institute any Action
seeking any Governmental Order.
(e) Receipt of Shares. Buyer shall have received from Seller a
certificate or certificates evidencing all of the then issued and
outstanding Shares, duly endorsed in blank or accompanied by stock powers
duly executed in blank, in proper form for transfer and with any
requisite stock transfer tax stamps properly affixed thereto.
(f) Opinion of Counsel. Buyer shall have received an opinion,
dated as of the Closing Date, of counsel of or to Seller in a form
reasonably acceptable to Buyer and Seller and covering customary matters
for a transaction of this sort. At the request of Buyer, such opinion
shall be confirmed to any lenders providing financing for the
transactions contemplated hereby.
(g) ▇▇▇▇ of Sale and Assignment. Seller shall have executed and
delivered the ▇▇▇▇ of Sale and Assignment.
(h) Ancillary Documents. Buyer shall have received from Seller
instruments of transfer, assignment and conveyance as are necessary to
vest in Buyer the right, title and interest of Seller in accordance with
this Agreement in and to the Transferred Assets and the Shares in a form
reasonably satisfactory to Buyer.
(i) Financing. Buyer shall have received the financing
contemplated by Section 4.6 on generally the terms set forth in the
commitment letter and term sheet attached hereto as Exhibit D.
SECTION 6.2 Conditions to Obligations of Seller. The obligation of
Seller to consummate the Asset Purchase and the Stock Purchase and to take the
other actions to be taken by Seller at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived in whole or in part by Seller):
(a) Representations and Warranties. The representations and
warranties of Buyer set forth in this Agreement shall have been true and
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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 Seller shall have received a certificate, dated the Closing Date,
signed on behalf of Buyer by one of its senior executive officers to such
effect.
(b) Covenants. Buyer shall have performed in all material
respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Seller shall have received
a certificate, dated the Closing Date, signed on behalf of Buyer by one
of its senior executive officers to such effect.
(c) HSR Act; Governmental Approvals. The waiting period
applicable to the Asset Purchase and the Stock Purchase under the HSR Act
shall have expired or been terminated and all the Governmental Filings
and Approvals shall have been made or obtained, as the case may be,
except for any such Governmental Filings and Approvals the failure of
which to make or obtain are not, individually or in the aggregate,
material.
(d) Litigation. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any Governmental Order, and no Governmental Entity or any other Person
shall have instituted any Action or threatened in writing to institute
any Action seeking any Governmental Order.
(e) Receipt of Purchase Price. Seller shall have received from
Buyer the payments required to be made pursuant to Section 2.6 hereof.
(f) Opinion of Counsel. Seller shall have received an opinion,
dated as of the Closing Date, of counsel to Buyer in a form reasonably
acceptable to Buyer and Seller and covering customary matters for a
transaction of this sort.
(g) Assumption Agreement. Buyer and its Affiliates, as
appropriate, shall have executed and delivered the Assumption Agreement.
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ARTICLE VII
TERMINATION
SECTION 7.1 Termination. Notwithstanding anything in this
Agreement to the contrary, this Agreement and the transactions contemplated
herein may, by written notice given at any time prior to the Closing, be
terminated:
(a) by either Buyer or Seller, upon their mutual written
consent;
(b) by either Buyer or Seller, without liability to the
terminating party on account of such termination if the Closing has not
occurred by March 1, 2000; provided, however, that a party may not effect
a termination pursuant to this Section 7.1(b) if it has breached this
Agreement and such breach has proximately contributed to the failure to
close;
(c) by either Buyer or Seller, if the other party has breached
any of its representations, warranties or covenants contained in this
Agreement in any material respect and, if curable, such breach has not
been cured within 10 days after the terminating party shall have given
the other party notice of such breach; provided, however, that
termination pursuant to this Section 7.1(c) shall not relieve the
breaching party of liability for such breach or otherwise;
(d) by either Buyer or Seller, if any Governmental Entity shall
have issued, enacted, entered, promulgated or enforced any Governmental
Order and such Governmental Order shall have become final and
non-appealable; provided that the right to terminate this Agreement
pursuant to this Section 7.1(d) shall not be available to any party that
has failed to comply with its obligations hereunder in any manner that
shall have proximately contributed to the occurrence of such Governmental
Order;
(e) by Buyer, if any of the conditions set forth in Section 6.1
becomes incapable of being satisfied (other than through the failure of
Buyer to fully comply with its obligations hereunder) by March 1, 2000;
or
(f) by Seller, if any of the conditions set forth in Section
6.2 becomes incapable of being satisfied (other than through the failure
of Seller to fully comply with its obligations hereunder) by March 1,
2000.
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SECTION 7.2 Effect of Termination. In the event of termination of
this Agreement pursuant to Section 7.1, this Agreement (other than Section 5.6
(Expenses), Section 9.5 (Governing Law) and Section 9.6 (Consent to
Jurisdiction; Waiver of Jury Trial) and the Confidentiality Agreement between
Buyer and Seller's agent, dated September 28, 1999 (the "Confidentiality
Agreement"), which shall remain in full force and effect) shall forthwith become
null and void and no party hereto (or any of its respective Affiliates,
Representatives or stockholders) shall have any liability or further obligation
to any other party hereto, except as provided in this Section 7.2; provided,
however, that if this Agreement is terminated by a party because of a breach of
this Agreement by the other party or because one or more of the conditions to
the terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to fully comply with its obligations under
this Agreement, the terminating party's rights to pursue all legal remedies will
survive such termination unimpaired. For purposes of this Agreement, the
"Representatives" of a Person include such Person's affiliates, members,
partners, directors, officers, employees, agents, consultants, legal counsel,
accountants, financing sources and financial advisors.
ARTICLE VIII
INDEMNIFICATION; REMEDIES
SECTION 8.1 Survival. None of the representations, warranties or
covenants (other than covenants to be performed after the Closing, which will
survive indefinitely) of the parties contained in this Agreement shall survive
the Closing and no claims for breach or otherwise in respect thereof may be made
or continued after the Closing by any party.
SECTION 8.2 Indemnification.
(a) Buyer shall indemnify and hold harmless Seller and (without
duplication) its successors, assigns, stockholders, Affiliates and
Representatives from and against any and all damages, losses,
liabilities, judgments and expenses (including costs of investigation and
defense and reasonable attorneys' and accountants' fees) of any kind or
nature whatsoever (collectively, "Damages") incurred or sustained by them
arising out of or resulting from any Assumed Liabilities. Seller shall
cooperate with and assist Buyer (at
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Buyer's expense) in the event that Buyer must defend against any claims
for Damages arising our of or resulting from any Assumed Liabilities.
(b) Seller shall indemnify and hold harmless Buyer and (without
duplication) its successors, assigns, stockholders, Affiliates and
Representatives from and against any and all Damages incurred or
sustained by them arising out of or resulting from the Excluded
Liabilities. Buyer shall cooperate with and assist Seller (at Seller's
expense) in the event that Seller must defend against any claims for
Damages arising out of or resulting from any Excluded Liabilities.
SECTION 8.3 Tax Indemnifications by Seller.
(a) Seller shall be liable for, and indemnify Buyer for, (i)
all Taxes (including any obligation to contribute to the payment of a Tax
determined on a consolidated, combined or unitary basis with respect to a
group of corporations that includes or included the Company and Taxes
resulting from the Company ceasing to be a member of Seller Group)
imposed on Seller Group (other than the Company) for any taxable year and
(ii) Pre-Closing Taxes. Seller shall be entitled to any refund of Taxes
of the Company received for such periods. The term "Seller Group" shall
mean Seller and any "affiliated group" (as defined in Section 1504(a) of
the Code without regard to the limitations contained in Section 1504(b)
of the Code) that includes Seller or any predecessor of or successor to
Seller, (or another such predecessor or successor).
(b) For purposes of this Agreement, "Tax" means any foreign,
federal, state or local income, gross receipts, license, severance,
occupation, capital gains, premium, environmental (including taxes under
Section 59A of the Code), customs, duties, profits, disability,
registration, alternative or add-on minimum, estimated, withholding,
payroll, employment, unemployment insurance, social security (or
similar), excise, production, sales, use, value-added, occupancy,
franchise, real property, personal property, business and occupation,
mercantile, windfall profits, capital stock, stamp, transfer, workmen's
compensation or other tax, fee or imposition of any kind whatsoever
relating to the Business, including any interest, penalties, additions,
assessments or deferred liability with respect thereto, and any interest
in respect of such penalties, additions, assessments or deferred
liability, whether disputed or not.
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(c) For purposes of this Agreement, "Pre-Closing Taxes" shall
mean all liabilities for Taxes imposed on, or with respect to, the
Company, the Business or Transferred Assets with respect to any period
(and whether imposed on Seller, the Company or any of their Affiliates,
Buyer or any third party that acquires any of the foregoing) other than
(i) Taxes imposed on the Company or for which the Company may otherwise
be liable for any taxable year or period that begins and ends after the
Closing Date, and with respect to any taxable period which begins before
and ends after the Closing Date, the portion of such taxable year
beginning on and including the day following the Closing Date and (ii)
Taxes that arise out of or are attributable to the Business for any
taxable year or period that begins and ends after the Closing Date and,
with respect to any taxable year or period beginning before and ending
after the Closing Date, the portion of such taxable year beginning on and
including the day following the Closing Date. It is hereby agreed and
understood that the foregoing obligations shall include, but not be
limited to, defending Buyer or the Company (at Seller's sole cost and
expense), or reimbursing Buyer's reasonable fees and expenses to the
extent that Buyer elects to defend, before any foreign or domestic taxing
authority.
(d) For purposes of Section 8.3(a), whenever it is necessary to
determine the liability for Taxes of the Company or Taxes attributable to
or arising out of the Business for a portion of a taxable year or period
that begins before and ends after the Closing Date, the determination of
the Taxes of the Company for the portion of the year or period ending on,
and the portion of the year or period beginning after, the Closing Date
shall be determined by assuming that the Company or the Business had a
taxable year or period which ended at the close of the Closing Date,
except that exemptions, allowances or deductions that are calculated on
an annual basis and are not affected by the purchases contemplated by
this Agreement, such as the deduction for real property taxes, shall be
apportioned on a time basis.
(e) Seller shall pay Buyer the Taxes for which Seller is liable
pursuant to Section 8.3(a) but which are payable with Tax Returns to be
filed by Buyer pursuant to Section 8.4(c) within 10 days prior to the due
date for the filing of such Tax Returns.
(f) Seller shall file or cause to be filed when due all Tax
Returns that are required to be filed by or with respect to the Company
for taxable
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years or periods ending on or before the Closing Date and shall remit any
Taxes due in respect of such Tax Returns.
(g) Seller and Buyer shall each be liable for 50% of the
transfer Taxes arising from the sale of the Shares.
(h) Any tax allocation or sharing agreement or arrangement,
whether or not written, that may have been entered into by Seller or any
member of Seller Group and the Company shall be terminated as to the
Company as of the Closing Date, and no payments which are owed by or to
the Company pursuant thereto shall be made thereunder.
(i) Seller and Buyer shall jointly determine the character of
any payment of Taxes made pursuant to this Section 8.3 and subsequent Tax
filings shall reflect such characterization.
(j) After the Closing Date, Seller shall:
(i) assist, and cause its respective Affiliates to
assist, Buyer in preparing any Tax Returns or reports which Buyer
is responsible for preparing and filing in accordance with Section
8.4(c);
(ii) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns of the
Company;
(iii) make available to Buyer and to any taxing authority
as reasonably requested all information, records, and documents
relating to Taxes of the Company;
(iv) provide timely notice to Buyer in writing of any
pending or threatened tax audits or assessments of the Company for
taxable periods for which Buyer may have a liability under Section
8.4(a);
(v) furnish Buyer with copies of all correspondence
received from any taxing authority in connection with any tax
audit or information request with respect to any such taxable
period;
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(vi) be responsible for all costs and expenses of Buyer,
the Company and Seller in connection with any investigations,
audits or disputes with any taxing authorities relating to
Pre-Closing Taxes; and
(vii) not settle or compromise any material dispute with
any taxing authority relating to Pre-Closing Taxes without the
written consent of Buyer, which consent shall not be unreasonably
withheld.
(k) The obligations of Seller set forth in this Section 8.3
shall remain in effect until the expiration of the relevant statutes of
limitations.
SECTION 8.4 Tax Indemnifications by Buyer.
(a) Buyer shall be liable for and indemnify Seller for the
Taxes of the Company for any taxable year or period that begins after the
Closing Date and, with respect to any taxable year or period beginning
before and ending after the Closing Date, the portion of such taxable
year beginning after the Closing Date.
(b) For purposes of Section 8.4(a), whenever it is necessary to
determine the liability for Taxes of the Company or Taxes attributable to
or arising out of the Business for a portion of a taxable year or period
that begins before and ends after the Closing Date, the determination of
the Taxes of the Company or attributable to or arising out of the
Business for the portion of the year or period ending on, and the portion
of the year or period beginning after, the Closing Date shall be
determined by assuming that the Company or the Business had a taxable
year or period which ended at the close of the Closing Date, except that
exemptions, allowances or deductions that are calculated on an annual
basis and are not affected by the purchases contemplated by this
Agreement, such as the deduction for real property taxes, shall be
apportioned on a timely basis.
(c) Buyer shall file or cause to be filed when due all Tax
Returns that are required to be filed by or with respect to the Company
for taxable years or periods ending after the Closing Date and shall
remit any Taxes due in respect of such Tax Returns.
(d) Buyer shall promptly notify Seller in writing upon receipt
by Buyer, any of its Affiliates or the Company of notice of any pending
or
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threatened federal, state, local or foreign income or franchise Tax
audits or assessments which may materially affect the tax liabilities of
the Company for which Seller would be required to indemnify Buyer
pursuant to Section 8.3(a). Seller shall have the sole right to represent
the Company'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 it being
understood that Buyer may represent the Company's interest at Seller's
expense if Seller shall not have assumed such representation). Seller
shall be entitled to participate at its expense in the defense of any
claim for Taxes for a year or period ending after the Closing Date which
may be the subject of indemnification by Seller pursuant to Section
8.3(a) and, with the written consent of Buyer, and at its sole expense,
may assume the entire defense of such Tax claim. Neither Buyer nor the
Company may agree to settle any Tax claim for the portion of the year or
period ending on the Closing Date which may be the subject of
indemnification by Seller under Section 8.3(a) without the prior written
consent of Seller, which consent shall not be unreasonably withheld.
(e) With respect to the taxable ear of Seller ending 1999 and
the period prior to the Closing Date, Buyer shall promptly cause the
Company to prepare and provide to Seller a package of tax information
materials (the "Tax Package"), which shall be completed in accordance
with past practice including past practice as to providing the
information, schedules and work papers and as to the method of
computation of separate taxable income or other relevant measures of
income of the Company. Buyer shall cause the Tax Package for the portion
of the taxable period ending on the Closing Date to be delivered to
Seller within 120 days after the Closing Date.
(f) Seller and Buyer shall jointly determine the character of
any payment of Taxes made pursuant to this Section 8.4 and subsequent Tax
filings shall reflect such characterization.
(g) After the Closing Date, Buyer shall:
(i) assist, and cause its respective Affiliates to
assist, Seller in preparing any Tax Returns or reports which
Seller is responsible for preparing and filing in accordance with
Section 8.3(d);
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(ii) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns of the
Company;
(iii) make available to Seller and to any taxing authority
as reasonably requested all information, records, and documents
relating to Taxes of the Company;
(iv) provide timely notice to Seller in writing of any
pending or threatened tax audits or assessments of the Company for
taxable periods for which Seller may have a liability under
Section 8.3(a);
(v) provide to Seller at least 30 days before due any
Tax Returns or reports which Buyer is responsible for preparing
and filing in accordance with Section 8.4(c); and
(vi) furnish Seller with copies of all correspondence
received from any taxing authority in connection with any tax
audit or information request with respect to any such taxable
period.
(h) The obligations of Buyer set forth in this Section 8.4
shall remain in effect until the expiration of the relevant statutes of
limitations.
SECTION 8.5 No Affiliate Liability. Each of the following is
herein referred to as a "Buyer Affiliate": (a) any direct or indirect holder of
any equity interests or securities in Buyer (whether limited or general
partners, members, stockholders or otherwise), (b) any Affiliate of Buyer, or
(c) any director, officer, employee, representative or agent of (i) Buyer, (ii)
any Affiliate of Buyer or (iii) any such holder of equity interests or
securities referred to in clause (a) above. No Buyer Affiliate shall have any
liability or obligation of any nature whatsoever in connection with or under
this Agreement or the transactions contemplated hereby and Seller hereby waives
and releases all claims of any such liability and obligation, it being
understood that no such Person or entity (other than Buyer) shall be liable for
or in respect of such matters.
ARTICLE IX
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MISCELLANEOUS
SECTION 9.1 Assignments; No Third Party Rights.
(a) Buyer may not assign any of its rights or obligations under
this Agreement without the prior written consent of Seller (which may not
be unreasonably withheld or delayed) and any purported assignment without
such consent shall be void. The preceding sentence notwithstanding, Buyer
may assign this Agreement or all or any part of its rights and
obligations under this Agreement, following written notice to Seller, to
a wholly owned Subsidiary of Buyer or a Person or entity which controls
Buyer within the meaning of the Securities Act or to any Person or entity
required by Buyer's financing sources in order to secure Buyer's
obligations to such financing sources; provided, however, that no such
assignment shall relieve Buyer of its obligations under this Agreement.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which such Person has, directly or indirectly, (i) ownership of
securities or other interests having the power to elect a majority of the
Board of Directors or similar governing body of such corporation or other
entity, or (ii) the power to direct the business and policies of that
corporation or other entity.
(b) Seller may not assign any of its rights or obligations
under this Agreement without the prior written consent of Buyer (which
may not be unreasonably withheld or delayed) and any purported assignment
without such consent shall be void. The preceding sentence
notwithstanding, Seller may assign this Agreement or all or any part of
its rights and obligations under this Agreement, following written notice
to Buyer, to a wholly owned Subsidiary of Seller; provided, however, that
no such assignment shall relieve Seller of its obligations under this
Agreement.
(c) Except as provided in Section 5.8, nothing in this
Agreement, express or implied, is intended to confer upon any Person
other than the parties hereto any rights or remedies of any nature
whatsoever under or by reason of this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and
their successors and permitted assigns.
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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 on the
date delivered by hand or by courier service such as Federal Express, or by
other messenger (or, if delivery is refused, upon presentment) or upon receipt
by facsimile transmission (with confirmation), or upon delivery by registered or
certified mail (return receipt requested), postage prepaid, to the parties at
the following addresses:
(a) If to Buyer:
WP Education Holdings LLC
c/o WP Management Partners, L.L.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
With a copy to:
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Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(b) If to Seller:
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.
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SECTION 9.6 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF NEW YORK
AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE
STATE OF NEW YORK SOLELY IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT
OF THE PROVISIONS OF THIS AGREEMENT AND OF THE DOCUMENTS REFERRED TO IN
THIS AGREEMENT, AND IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREIN,
AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION FOR
THE INTERPRETATION OR ENFORCEMENT HEREOF OR OF ANY SUCH DOCUMENT, THAT IT
IS NOT SUBJECT THERETO OR THAT SUCH ACTION MA NOT BE BROUGHT OR IS NOT
MAINTAINABLE IN SAID COURTS OR THAT THE VENUE THEREOF MAY NOT BE
APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE
ENFORCED IN OR BY SUCH COURTS, AND THE PARTIES HERETO IRREVOCABLY AGREE
THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION OR PROCEEDING SHALL BE HEARD
AND DETERMINED IN SUCH A NEW YORK STATE OR FEDERAL COURT. THE PARTIES
HEREBY CONSENT TO AND GRANT ANY SUCH COURT JURISDICTION OVER THE PERSON
OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF SUCH DISPUTE AND AGREE
THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 9.4 HEREOF OR IN
SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND
SUFFICIENT SERVICE THEREOF.
(b) EACH PARTY HERETO HEREBY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED IN
THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii)
EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.6.
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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 herein, neither the failure nor any delay on the
part of any party in exercising any right, power or privilege under this
Agreement or the documents referred to in this Agreement shall operate as
a waiver thereof, nor shall any waiver on the part of any party of any
such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any other or further exercise
thereof or the exercise of any other such right, power or privilege. The
failure of a party to exercise any right conferred herein within the time
required shall cause such right to terminate with respect to the
transaction or circumstances giving rise to such right, but not to any
such right arising as a result of any other transactions or
circumstances.
SECTION 9.9 Actions of the Company. Whenever this Agreement
requires the Company to take any action, such requirement shall be deemed to
involve, with respect to actions to be taken at or prior to the Closing, an
undertaking
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on the part of Seller to cause the Company to take such action and, with respect
to actions to be taken after the Closing, an undertaking on the part of Buyer to
cause the Company to take such action.
SECTION 9.10 Descriptive Headings; Construction. The descriptive
headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning, construction or interpretation
of, this Agreement. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms and shall be deemed to be followed
by the phrase "without limitation."
SECTION 9.11 Counterparts. For the convenience of the parties
hereto, this Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
SECTION 9.12 Knowledge. When references are made in this Agreement
to information being "to the knowledge of Seller" or similar language, such
knowledge shall refer to the knowledge of the officers of Seller and the Company
set forth in Schedule 9.12 of the Disclosure Schedule. Such individuals shall be
deemed to have "knowledge" of a particular fact or other matter if such
individual is actually or otherwise should have been aware of such fact or other
matter.
SECTION 9.13 Materiality. Whenever the terms "material,"
"materially," "in all material respects" or similar materiality qualifiers are
used in this Agreement with respect to Seller or the Division or any of them,
they shall be deemed to refer only to matters, circumstances or events that are
material to the business, assets, liabilities, results of operations, prospects
or condition (financial or otherwise) of the Division and the Company taken as a
whole.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their officers duly authorized as of the date first written
above.
ZD INC.
By:
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Name:
Title:
WP EDUCATION HOLDINGS LLC
By:
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Name:
Title: