Exhibit 10.11
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ASSET PURCHASE AGREEMENT
by and among
CENDANT CORPORATION,
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.,
RENT NET, INC.,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
and
METRO-RENT, INC.
Dated as of October 29, 1999
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TABLE OF CONTENTS
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ARTICLE I
SALE OF ASSETS
Section 1.1. Seller's Assets ............................................. 2
Section 1.2. Assumption of Liabilities ................................... 5
Section 1.3. Retained Liabilities ........................................ 6
Section 1.4. Purchase Price .............................................. 7
Section 1.5. Deferred Payments ........................................... 7
Section 1.6. Time and Place of Closing ................................... 18
Section 1.7. Deliveries by the Seller .................................... 18
Section 1.8. Deliveries by the Buyer or the Sub .......................... 19
Section 1.9. Deliveries by the Seller Shareholders ....................... 20
Section 1.10. Preclosing Transactions ..................................... 20
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE SELLER AND THE SELLER SHAREHOLDERS
Section 2.1. Organization; Etc ........................................... 21
Section 2.2. Authority Relative to this Agreement ........................ 21
Section 2.3. Consents and Approvals; No Violations ....................... 22
Section 2.4. Financial Statements ........................................ 23
Section 2.5. Absence of Undisclosed Liabilities .......................... 23
Section 2.6. Absence of Certain Changes .................................. 24
Section 2.7. Litigation .................................................. 24
Section 2.8. Compliance with Law ......................................... 24
Section 2.9. Employee Benefit Plans ...................................... 25
Section 2.10. Labor Relations ............................................. 26
Section 2.11. Taxes ....................................................... 26
Section 2.12. Contracts ................................................... 27
Section 2.13. Real Property ............................................... 28
Section 2.14. Intellectual Property ....................................... 28
Section 2.15. Year 2000 Compliance ........................................ 32
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Section 2.16. Assets ...................................................... 33
Section 2.17. Affiliate Transactions ...................................... 33
Section 2.18. Brokers; Finders and Fees ................................... 33
Section 2.19. Restricted Securities ....................................... 33
Section 2.20. Suitability Standards ....................................... 34
Section 2.21. No General Solicitation ..................................... 35
Section 2.22. Private Placement ........................................... 35
Section 2.23. Fair Credit Reporting Act ................................... 36
Section 2.24. Sale of Inventory ........................................... 36
Section 2.25. Homerenters Guide ........................................... 36
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE BUYER, THE SUB AND CENDANT
Section 3.1. Organization; Etc ........................................... 36
Section 3.2. Authority Relative to this Agreement ........................ 36
Section 3.3. Consents and Approvals; No Violations ....................... 37
Section 3.4. Availability of Funds ....................................... 38
Section 3.5. Brokers; Finders and Fees ................................... 38
Section 3.6. Status of Share Equivalents ................................. 38
Section 3.7. Licenses and Approvals ...................................... 38
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.1. Conduct of Business of the Seller ........................... 38
Section 4.2. Access to Information for Cendant, the Buyer and the Sub .... 39
Section 4.3. Consents; Cooperation ....................................... 40
Section 4.4. No Solicitation ............................................. 40
Section 4.5. Best Efforts ................................................ 41
Section 4.6. Public Announcements ........................................ 41
Section 4.7. Tax Matters ................................................. 41
Section 4.8. Knowledge of Breach; Prior Knowledge; Supplemental
Disclosure ................................................ 42
Section 4.9. Employees; Employee Benefits ................................ 43
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Section 4.10. Maintenance of Books and Records ............................ 43
Section 4.11. Covenant Not to Compete ..................................... 44
Section 4.12. Post-Closing Confidentiality ................................ 45
Section 4.13. Transfers Not Effected as of Closing ........................ 46
Section 4.14. Seller Shareholder Loans .................................... 46
Section 4.15. Post Closing Capital Budgets and Acquisitions ............... 49
Section 4.16. Ancillary Revenues .......................................... 49
Section 4.17. Escrow Delivery ............................................. 49
Section 4.18. Lockup ...................................................... 50
Section 4.19. Post Closing Operations and Expense Budget .................. 50
Section 4.20. Release of Personal Liability ............................... 50
Section 4.21. Monthly Financial Information ............................... 50
Section 4.22. Mail Received After the Closing ............................. 51
Section 4.23. Use of Trademarks ........................................... 51
ARTICLE V
CONDITIONS TO CONSUMMATION OF THE ASSET PURCHASE
Section 5.1. Conditions to Each Party's Obligations to Consummate
the Asset Purchase ........................................ 52
Section 5.2. Further Conditions to the Seller's and the Seller
Shareholders' Obligations ................................. 52
Section 5.3. Further Conditions to Cendant's, the Buyer's and the
Sub's Obligations ......................................... 53
ARTICLE VI
TERMINATION AND ABANDONMENT
Section 6.1. Termination ................................................. 55
Section 6.2. Procedure for and Effect of Termination ..................... 56
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
Section 7.1. Survival Periods ............................................ 57
Section 7.2. The Seller's and the Seller Shareholders' Agreement to
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Indemnify ................................................. 57
Section 7.3. The Buyer's and the Sub's Agreement to Indemnify ............ 59
Section 7.4. Third-Party Indemnification ................................. 60
Section 7.5. No Duplication; Sole Remedy ................................. 62
Section 7.6. Indemnification Matters Governed by this Article VII ........ 62
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1. Entire Agreement ............................................ 62
Section 8.2. Severability ................................................ 63
Section 8.3. Notices ..................................................... 63
Section 8.4. Governing Law; Jurisdiction ................................. 64
Section 8.5. Descriptive Headings ........................................ 65
Section 8.6. Counterparts ................................................ 65
Section 8.7. Assignment .................................................. 65
Section 8.8. Fees and Expenses ........................................... 65
Section 8.9. Interpretation .............................................. 66
Section 8.10. No Third-Party Beneficiaries ................................ 66
Section 8.11. No Waivers; Modification .................................... 67
Section 8.12. Specific Performance ........................................ 67
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INDEX OF DEFINED TERMS
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AAA ....................................................................... 16
AAA Rules ................................................................. 16
Accepted Additions ........................................................ 7
Accounting Changes ........................................................ 23
Acquired Assets ........................................................... 2
Acquisition Proposal ...................................................... 40
Actual Capital Expenditures ............................................... 8
Actual Expenses ........................................................... 8
Actual Results ............................................................ 15
Actual Revenues ........................................................... 8
Actual Tax Payment ........................................................ 47
Affected Employee ......................................................... 43
Agreement ................................................................. 1
Allocation Schedule ....................................................... 41
Appreciated Value ......................................................... 48
Assumed Liabilities ....................................................... 5
Balance Sheet ............................................................. 23
Big Five Accounting Firm .................................................. 16
Books and Records ......................................................... 2
Budgeted Capital .......................................................... 8
Budgeted Expenses ......................................................... 9
Budgeted Revenues ......................................................... 9
Business .................................................................. 1
Business Material Adverse Effect .......................................... 23
Buyer ..................................................................... 1
Buyer Common Stock ........................................................ 7
Buyer Damages ............................................................. 57
Buyer Indemnitees ......................................................... 57
Buyer Material Adverse Effect ............................................. 37
Calculated Deferred Payment ............................................... 9
Calculation Certificate ................................................... 15
Capital Adjustment ........................................................ 9
Capital Savings ........................................................... 10
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Cendant ................................................................... 1
Cendant Internet Business ................................................. 1
CIB Stock ................................................................. 1
Claim ..................................................................... 60
Closing ................................................................... 18
Closing Arbitrator ........................................................ 16
Closing Cash Payment ...................................................... 7
Closing Date .............................................................. 18
Closing Dispute ........................................................... 16
Closing Payments .......................................................... 7
Closing Stock Payment ..................................................... 7
Code ...................................................................... 25
Confidential Information .................................................. 45
Confidentiality Agreements ................................................ 40
Contracts ................................................................. 2
Copyrights ................................................................ 3
Date Data ................................................................. 32
Deferred Payment .......................................................... 10
Deferred Payment Period ................................................... 10
Deferred Payment Target ................................................... 10
Dispute Notice ............................................................ 16
Employment Agreements ..................................................... 25
ERISA ..................................................................... 25
ERISA Affiliate ........................................................... 25
Escrow Agent .............................................................. 49
Escrow Agreement .......................................................... 19
Escrow Amount ............................................................. 49
Excess Capital Expenditures ............................................... 11
Expanded Business ......................................................... 11
Expense Adjustment ........................................................ 11
Expense Percentage at Budget .............................................. 12
Financial Statements ...................................................... 23
Governmental Entity ....................................................... 22
Gross-up Amount ........................................................... 48
Intellectual Property ..................................................... 28
Interest Bearing Seller Shareholder Loan .................................. 48
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IPO ....................................................................... 1
Law ....................................................................... 22
Laws ...................................................................... 22
Legal Proceeding .......................................................... 24
License Agreements ........................................................ 29
Liens ..................................................................... 4
Lockup Period ............................................................. 50
McWeeny ................................................................... 1
Monthly Unaudited Financial Information ................................... 51
Patents ................................................................... 3
Permits ................................................................... 24
Person .................................................................... 66
Personal Liability Creditors .............................................. 50
Plans ..................................................................... 25
Preclosing Transaction Expenses ........................................... 21
Preclosing Transactions ................................................... 21
Preis ..................................................................... 1
Proprietary Software ...................................................... 29
Purchase Price ............................................................ 7
Real Property Leases ...................................................... 28
Registration Rights Agreement ............................................. 19
Retained Assets ........................................................... 5
Retained Employment Contracts ............................................. 5
Retained Insurance Policies ............................................... 5
Retained Liabilities ...................................................... 6
Revenue Adjusted Target ................................................... 12
Review Period ............................................................. 16
Section ................................................................... 66
Securities Act ............................................................ 33
Seller .................................................................... 1
Seller Damages ............................................................ 59
Seller Financial Advisor .................................................. 6
Seller Indemnitees ........................................................ 59
Seller Shareholder Employment Agreement.................................... 20
Seller Shareholder Loan ................................................... 47
Seller Shareholder Loans .................................................. 47
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Seller Shareholders ....................................................... 1
Seller's Service ▇▇▇▇ and Logos ........................................... 51
Share Equivalents ......................................................... 7
Share Value ............................................................... 7
Shareholders' Agreement ................................................... 5
Software .................................................................. 2
Sub ....................................................................... 1
Tax ....................................................................... 27
Tax Liability ............................................................. 47
Tax Returns ............................................................... 27
Taxes ..................................................................... 27
Trade Secrets ............................................................. 3
Trademarks ................................................................ 3
Transfer .................................................................. 50
Year ...................................................................... 13
Year 1, Year 2, and Year 3 ................................................ 13
Year 2 Actual Expenses .................................................... 8
Year 2 Budgeted Expenses .................................................. 9
Year 2 Budgeted Revenues .................................................. 9
Year 2 Deferred Payment Target ............................................ 11
Year 2000 Compliance ...................................................... 32
Year 2000 Compliant ....................................................... 32
Year 3 Actual Revenues .................................................... 8
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of October 29, 1999 (this
"Agreement"), by and among Cendant Corporation, a Delaware corporation
("Cendant"), ▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation and an indirect
wholly owned subsidiary of Cendant (the "Buyer"), Rent Net, Inc., a Delaware
corporation and a wholly owned subsidiary of the Buyer (the "Sub"), ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ ("McWeeny"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("Preis"), and together with McWeeny, the
"Seller Shareholders") and Metro-Rent, Inc., a California corporation (the
"Seller").
WHEREAS, the Seller is engaged in an Internet-based real estate and
ancillary services business (the "Business");
WHEREAS, the Buyer (or the Sub if designated by the Buyer) desires to
purchase and assume from the Seller, and the Seller desires to sell, convey,
assign, and transfer to the Buyer (or the Sub if designated by the Buyer), all
the assets and properties relating to the Business, together with certain
obligations and liabilities relating thereto, all in the manner and subject to
the terms and conditions set forth herein;
WHEREAS, the only assets of the Seller immediately after the Closing (as
hereinafter defined) will consist exclusively of the consideration provided by
the Buyer (or the Sub if designated by the Buyer) as set forth in Section 1.4 of
this Agreement and the Retained Assets (as hereinafter defined);
WHEREAS, it is contemplated that the Business will form part of an
Internet real estate portal business being developed by the Buyer (the "Cendant
Internet Business") which will include among other business operations the Sub
and certain other Cendant real estate assets; and
WHEREAS, Cendant is currently planning an initial public offering
("IPO") of a new series of tracking stock designed to reflect the performance of
the Cendant Internet Business (the "CIB Stock") although the plans for the
Cendant Internet Business are not finalized and are not likely to be finalized
before the closing of the transactions contemplated herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
SALE OF ASSETS
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Section 1.1. SELLER'S ASSETS.
a) ACQUIRED ASSETS. Subject to the terms of this Agreement, the
Seller agrees to sell, assign, transfer, convey and deliver to the Buyer (or the
Sub if designated by the Buyer), and the Buyer (or the Sub if designated by the
Buyer) agrees to purchase and acquire from the Seller, free and clear of all
Liens (as hereinafter defined), all of the Seller's right, title and interest in
and to the assets held for use or used in, arising from or related to the
Business of every kind and nature, tangible and intangible, wherever located and
whether or not on the books of the Seller (collectively, the "Acquired Assets"),
including without the limitation the following:
(i) all goodwill related to the Business;
(ii) all of the Seller's contracts, agreements, Intellectual
Property (as hereinafter defined) agreements, license agreements and
leases, including amendments and supplements, modifications, side
letters or agreements relating to the foregoing, or entered into after
the date hereof in accordance with the terms of Section 4.1
(collectively, the "Contracts");
(iii) all marketing, sales and promotional literature, books,
records, files, documents, financial records, bills, accounting,
internal and audit records, operating manuals, personnel records,
customer and supplier lists and files, preprinted materials, art work,
and other similar items related to the Business in the possession or
under the control of the Seller or related primarily to the Business and
in the possession or under the control of affiliates of the Seller, or
its representatives (the "Books and Records");
(iv) all copies of computer programs, including any and all
software implementations of algorithms, models and methodologies whether
in source code or object code form, databases and compilations,
including any and all data and collections of data, all documentation,
including user manuals and training materials, related to any of the
foregoing and the content and information
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contained on any Web site (collectively, "Software") held for use or
used in the Business as conducted as of the Closing Date (as hereinafter
defined) or as presently contemplated to be conducted;
(v) all accounts receivable related to the Business set
forth in Section 1.1(a)(v) of the Seller Disclosure Schedule as well as
those accounts receivable related to the Business arising after the date
set forth in Section 1.1(a)(v) of the Seller Disclosure Schedule and all
rights to insurance proceeds in respect of any of the Acquired Assets;
(vi) all rights to all telephone numbers related to the
Business;
(vii) all intangible assets held for use or used in the Busi
ness as conducted as of the Closing Date or as presently contemplated to
be conducted, including without limitation the following:
(A) the confidential information, technology, know-
how, inventions, processes, formulae, algorithms, models and
methodologies (such confidential items collectively, "Trade
Secrets") held for use or used in the Business as conducted as
of the Closing Date or as presently contemplated to be conducted
(including all documentation relating thereto);
(B) the copyrights, copyright registrations and
copyright applications (collectively, "Copyrights") set forth in
Section 1.1(a)(vii) of the Seller Disclosure Schedule;
(C) the patents, patent applications, disclosures of
inventions and the patents issued upon patent applications or
based upon such invention disclosures (collectively, "Patents")
set forth in Section 1.1(a)(vii) of the Seller Disclosure
Schedule;
(D) the trade names, trademarks, service marks,
product designations, trade dress, logos, slogans, and designs
and general intangibles of a like nature together with goodwill,
all registrations and applications related to the foregoing
(collectively, "Trademarks") set forth in Section 1.1(a)(vii) of
the Seller Disclosure Schedule;
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(E) the Internet domain names set forth in Section
1.1(a)(vii) of the Seller Disclosure Schedule;
(F) subject to the consent requirements for the
agreements set forth in Section 2.3 of the Seller Disclosure
Schedule, license agreements held for use or used in, or related
to the Business as conducted as of the Closing Date or as
presently contemplated to be conducted and relating to any of
the foregoing types of intangible assets whether Seller is a
party as licensor or licensee thereunder, including the licenses
set forth in Section 1.1(a)(vii) of the Seller Disclosure
Schedule;
(viii) all payments, deposits (including security deposits) and
prepaid expenses of the Seller related to the Business;
(ix) all furnishings, furniture, office supplies, hardware,
fixtures and other tangible personal property related to the Business;
(x) all rights under warranties, representations and guaran
tees made by suppliers, manufacturers or contractors in connection with
the operation of the Business or affecting any of the Acquired Assets;
(xi) to the extent assignable, all Permits (as hereinafter
defined); and
(xii) all other assets of the Seller other than the Retained
Assets (as hereinafter defined).
For purposes of this Agreement, "Liens" shall mean all liens, pledges, charges,
claims (excluding claims of vendors of supplies or services used in the ordinary
course for payment of invoices issued in the ordinary course, and claims of
customers for refunds in the ordinary course), security interests or other
encumbrances except for statutory liens relating to taxes not yet due and
payable.
(b) RETAINED ASSETS. Notwithstanding anything contained herein to
the contrary, the Seller shall not sell, transfer, convey or deliver, or cause
to be sold, transferred, conveyed or delivered, to the Buyer (or the Sub if
designated by the Buyer),
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and the Buyer (or the Sub if designated by the Buyer) shall not purchase from
the Seller the following assets, properties, interests and rights of the Seller
(the "Retained Assets"):
(i) all books and records solely related to the Retained
Liabilities (as hereinafter defined);
(ii) any cash or bank account balances of the Seller in
excess of (x) an amount reasonably anticipated to be necessary to fund
the Business from the Closing Date through December 31, 1999 to be
calculated as of the Closing Date by the Seller and reasonably agreed to
by the Buyer (or the Sub if designated by the Buyer) and (y) cash to
fund the outstanding but unpaid checks as of the Closing Date; such
amount to be calculated at least three business days prior to the
Closing by the Seller on a certificate detailing the Seller's
calculation of excess cash and certified by the Seller as complete and
correct along with copies of all documents used in calculating said
amounts;
(iii) the shareholders' agreement among the Seller and the
Seller Shareholders listed in Section 2.17 of the Seller Disclosure
Schedule (the "Shareholders' Agreement");
(iv) any Employment Agreement (as hereinafter defined) for
which the employee of the Seller who is a party to such Employment
Agreement does not receive an offer of employment from the Buyer (or the
Sub if designated by the Buyer) following the Closing pursuant to
Section 4.9(a) (the "Retained Employment Contracts"); and
(v) the Seller's workers compensation insurance policy
(policy number 97-NK-0608-9) with State Farm Fire and Casualty Company
and business insurance policy (policy number 97-EK-5805-2) with State
Farm General Insurance Company (the "Retained Insurance Policies")
Section 1.2. ASSUMPTION OF LIABILITIES. Subject to the terms of this
Agreement and excluding the Retained Liabilities, the Buyer (or the Sub if
designated by the Buyer) hereby agrees to assume, pay, perform and discharge
when due all the liabilities and obligations of the Business, whether fixed,
absolute, contingent, material or immaterial, matured or unmatured other than
the Retained Liabilities (collectively, the "Assumed Liabilities"), including
without limitation:
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(a) all liabilities and obligations reflected on the Balance Sheet
(as hereinafter defined) and any liabilities or obligations arising in the
ordinary course of the Business and consistent with past practice since the date
of the Balance Sheet (excluding all costs and expenses (including legal fees and
expenses) incurred in connection with, or in anticipation of, this Agreement and
the transactions contemplated hereby) including, without limitation, any amounts
payable or reserved for payments of refunds to customers of the Seller in the
ordinary course;
(b) all liabilities and obligations of the Seller under the
Contracts; and
(c) all liabilities and obligations that the Buyer (or the Sub if
designated by the Buyer) has agreed to assume pursuant to Section 4.9.
Section 1.3. RETAINED LIABILITIES. Subject to the terms of this
Agreement, the Buyer (or the Sub if designated by the Buyer) shall not assume
and the Seller or the Seller Shareholders, as applicable, shall retain all the
liabilities and obligations of the Seller or the Seller Shareholders, as
applicable not specifically assumed by the Buyer (or the Sub if designated by
the Buyer) in Section 1.2, including without limitation, the following (the
"Retained Liabilities"):
(a) all Taxes (as hereinafter defined) attributable to or related to
the Business or the Acquired Assets for all taxable periods (or portions
thereof) ending on or prior to the Closing Date including, without limitation,
Taxes incurred as a result of the transactions contemplated by this Agreement
and the Preclosing Transactions (as hereinafter defined) and all Taxes imposed
upon the Seller or the Seller Shareholders for any taxable period;
(b) all costs and expenses (including legal fees and expenses)
incurred in connection with, or in anticipation of, this Agreement and the
transactions contemplated hereby including, without limitation, the fees and
expenses of Booth Capital Corporation and ▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the
"Seller Financial Advisor") and the Preclosing Transaction Expenses (as
hereinafter defined);
(c) all liabilities and obligations of the Seller in connection with
the Shareholders' Agreement and the promissory note payable to Preis by the
Seller in the amount of $390,000 listed in Section 2.17 of the Seller Disclosure
Schedule;
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(d) the Retained Employment Contracts; and
(e) the Retained Insurance Policies.
Section 1.4. PURCHASE PRICE. Subject to the terms of this Agreement, in
consideration of the aforesaid sale, assignment, transfer and conveyance of the
Acquired Assets, the Buyer (or the Sub if designated by the Buyer) agrees to (i)
assume the Assumed Liabilities and (ii) pay to the Seller a purchase price of up
to $9.0 million (the "Purchase Price") to be paid as follows: (a) at the
Closing, $2.0 million in cash by wire transfer in immediately available funds to
an account designated in writing by the Seller (the "Closing Cash Payment") and
a payment of $1.0 million in Share Equivalents (as hereinafter defined) (the
"Closing Stock Payment" and together with the Closing Cash Payment, the "Closing
Payments"); (b) up to $6.0 million in Deferred Payments as set forth in Section
1.5 below. "Share Equivalents" for a given payment amount shall mean (i) that
number of shares of Buyer Common Stock (as hereinafter defined) determined by
dividing such payment amount by the Share Value (as hereinafter defined), or
(ii) if the CIB Stock has been issued, that number of shares of CIB Stock
determined by calculating the number of shares of Buyer Common Stock that would
have been issued pursuant to (i) above and converting such shares into CIB Stock
at the same conversion ratio at which the Buyer Common Stock converted into CIB
Stock at the time of the IPO. "Buyer Common Stock" means the Non-Voting Common
Stock, par value $.01 per share of the Buyer. The key provisions of the Buyer
Common Stock are attached as Exhibit A hereto. "Share Value" shall mean $20.51
per share, as the same may be adjusted to reflect stock dividends, stock-splits,
combinations or other reclassifications of stock or any other similar
transactions.
Section 1.5. DEFERRED PAYMENTS.
(a) DEFINITIONS. The following terms shall be defined as follows:
(i) "Accepted Addition" means any expansion of the
activities of the Business to a new location other than those
contemplated by Budgeted Capital or any expansion to a location or
activity not previously contemplated by Budgeted Capital or Budgeted
Expenses, and which is accepted in writing as an "Accepted Addition" by
the Buyer (or the Sub if designated by the Buyer) and Preis. An
"Accepted Addition" may be proposed by any party hereto. Accepted
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Additions are intended only to affect the calculation of the Deferred
Payments hereunder and shall not be construed as giving any other party
veto power or control over investment decisions of Cendant, the Buyer or
the Sub, which power and control shall remain in the sole discretion of
Cendant, the Buyer and the Sub. Any location or business activity which
is not an Accepted Addition shall be excluded from the calculation of
Actual Capital Expenditures, Excess Capital Expenditures, Actual
Revenues and Actual Expenses (including, if such activities or locations
are not Accepted Additions and the Seller Shareholders or the Expanded
Business devote a material amount of time to such locations or
activities, an adjustment to allocate overhead to the excluded location
or activity to be determined in good faith by the Buyer (or the Sub if
designated by the Buyer)) in calculating the Calculated Deferred
Payment. If an expansion is an Accepted Addition the actual results of
the Accepted Addition (determined according to Section 1.5(c) hereof)
shall be included in determining Actual Capital Expenditures, Actual
Revenues and Actual Expenses for purposes of determining the Calculated
Deferred Payment.
(ii) "Actual Capital Expenditures" means the cumulative
amount of capital expenditures of the Expanded Business (as hereinafter
defined) actually made from the Closing Date until the end of the
Deferred Payment Period (as hereinafter defined).
(iii) "Actual Expenses" means the expenses of the Expanded
Business (as determined under Section 1.5 (c)) for a particular Year (as
hereinafter defined) during the Deferred Payment Period (including any
expenses associated with moving, closing or opening an office for the
Expanded Business except for expenses associated with any relocation of
the Fillmore Street office within six months of the Closing Date which
is directed by the Buyer (and not agreed to by Preis) without a legal
requirement for such relocation to have occurred) and referred to by
reference to the particular Year, e.g., "Year 2 Actual Expenses."
(iv) "Actual Revenues" means the revenues of the Expanded
Business (as determined under Section 1.5 (c)) for a particular Year
during the Deferred Payment Period and referred to by reference to a
particular Year, e.g., "Year 3 Actual Revenues" (including Ancillary
Revenues as described in Section 4.16).
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(v) (1) "Budgeted Capital" means $1,900,000 for the
entire Deferred Payment Period, measured on a cumulative basis from the
Closing Date until the end of the Deferred Payment Period.
(2) Section 1.5(a)(v)(2) of the Seller Disclosure
Schedule sets forth a description of all targeted acquisitions by
region, including the targeted capital expenditures, revenues and
expenses allocated to each such acquisition in the Budgeted Capital,
Budgeted Expenses and Budgeted Revenues and including, where known, the
name and the aforementioned information with respect to each individual
target within such region.
(vi) "Budgeted Revenues" and "Budgeted Expenses" mean, for
Year 1, Year 2, and Year 3 of the Expanded Business, the following gross
dollar amounts:
Budgeted Revenues Budgeted Expenses
----------------- -----------------
Year 1 $ 5,930,000 $ 7,229,000
Year 2 $10,215,000 $ 8,883,000
Year 3 $12,593,000 $10,062,000
Budgeted Revenues and Budgeted Expenses are referred to in this Section
1.5 by reference to a specific year (e.g., "Year 2 Budgeted Revenues and
Year 2 Budgeted Expenses").
(vii) "Calculated Deferred Payment" means, for each Year, the
portion of the Deferred Payment Target (as hereinafter defined) actually
calculated to be due and payable to the Seller pursuant to this Section
1.5. The Calculated Deferred Payment is referred to by reference to the
particular Year with respect to which the calculation is made, e.g., the
Year 3 Calculated Deferred Payment.
(viii) "Capital Adjustment" means, for each Year during the
Deferred Payment Period, an adjustment determined as follows:
(1) If there are no Excess Capital Expenditures (as herein
after defined) for the Year, or for any period Year, the Capital
Adjustment is zero ($0).
9
(2) If there are Excess Capital Expenditures in Year 1, the
Year 1 Capital Adjustment shall be equal to twenty five percent
(25%) of the Year 1 Excess Capital Expenditures.
(3) If there are Excess Capital Expenditures in either Year
1 or Year 2, the Year 2 Capital Adjustment shall be (A) fifty
percent (50%) of the Year 2 Excess Capital Expenditures, plus (B)
fifty percent (50%) of the Year 1 Excess Capital Expenditures.
(4) If there are Excess Capital Expenditures in any of Year
1, Year 2 or Year 3, the Year 3 Capital Adjustment shall be (A) one
hundred percent (100%) of the Year 3 Excess Capital Expenditures,
plus (B) fifty percent (50%) of the Year 2 Excess Capital
Expenditures, plus (C) twenty five percent (25%) of the Year 1
Excess Capital Expenditures.
In all cases where the Capital Adjustment is a number other than zero
($0), it will be expressed as a negative number.
(ix) "Capital Savings" means, for each Year during the
Deferred Payment Period, the amount, if any, by which Actual Expenses
for the Year are less than Budgeted Expenses for the Year, PROVIDED,
HOWEVER that such Capital Savings cannot exceed the positive difference
between (A) Actual Revenues for the Year multiplied by the Expense
Percentage at Budget (as hereinafter defined) for the Year minus (B)
Actual Expenses for the Year.
(x) "Deferred Payment" means any one of the payments
determined hereunder for Year 1, Year 2 and Year 3.
(xi) "Deferred Payment Period" means the period from the
Closing Date until the end of Year 3.
(xii) "Deferred Payment Target" means, with respect to each
Year the following dollar amounts:
10
Year Deferred Payment Target
---- -----------------------
Year 1 $2,000,000
Year 2 $3,000,000
Year 3 $1,000,000
The Deferred Payment Target for a particular Year is referred to by
reference to such Year, e.g., "Year 2 Deferred Payment Target."
(xiii) "Excess Capital Expenditures" means, to the extent that
such amount is greater than zero, (A) the amount of Actual Capital
Expenditures made in any Year, minus (B) the Budgeted Capital less
aggregate Capital Expenditures in all prior Years, minus (C) the Capital
Savings for the Year, PROVIDED, HOWEVER, that if there were Excess
Capital Expendi tures in any prior Year, then the Excess Capital
Expenditures for the Year being calculated shall equal the Actual
Capital Expenditures for such Year. The Excess Capital Expenditures are
referred to by reference to each particular Year, including only the
Actual Capital Expenditures made during that Year. (e.g., If there are
no Capital Savings in Year 1 or Year 2, and if $2,000,000 in chargeable
capital is spent on the Expanded Business before the end of Year 1, and
an additional $200,000 in Year 2, the Year 1 Excess Capital Expenditures
would be $100,000, and the Year 2 Excess Capital Expenditures would be
$200,000.) Year 1 Excess Capital Expenditures includes all Actual
Capital Expenditures made from the Closing Date through the end of Year
1.
(xiv) "Expanded Business" means, for purposes of determin ing
the Actual Revenues, Actual Expenses and Actual Capital Expenditures for
any Year of the Expanded Business the operations of the Business,
expanded by (i) additionaloperations, locations or offices contemplated
by the Budgeted Capital or in the existing Budgeted Expenses and
included in Section 1.5(a)(v)(2) of the Seller Disclosure Schedule, and
(ii) any Accepted Additions.
(xv) "Expense Adjustment" means a dollar amount (which may be
positive or negative) determined for each of Year 2 and Year 3 as
follows:
(1) If Actual Expenses for the Year are less than Budgeted
Expenses for the Year, the Expense Adjustment is zero ($0).
11
(2) If Actual Expenses for the Year are greater than
Budgeted Expenses for the Year, the Expense Adjustment is equal to:
(A) Actual Revenues for the Year multiplied by the
Expense Percentage at Budget for the Year,
minus
(B) Actual Expenses for the Year.
A positive difference is a positive Expense Adjustment for the Year; a
negative difference is a negative Expense Adjustment for the Year.
(xvi) "Expense Percentage at Budget" means, for each of Year
1, Year 2 and Year 3, Budgeted Expenses for the Year divided by Budgeted
Revenues for the same Year, expressed as a percentage. The Expense
Percentage at Budget for each of Year 1, Year 2 and Year 3 is as
follows:
Year 1 121.91%
Year 2 86.96%
Year 3 79.90%
(xvii) "Revenue Adjusted Target" means the dollar amount
determined for each of Year 2 and Year 3 by multiplying the appropriate
Revenue Adjustment Percentage in the following chart, by the Deferred
Payment Target for the Year:
12
Actual Revenues for the
Year as a Percentage of Revenue Adjustment
Budgeted Revenues for the Year Percentage for the Year
------------------------------ -----------------------
65% 32.5%
70% 45.8%
75% 59.2%
80% 72.5%
Above 80% Same Percentage Above 80%
If Actual Revenues as a percentage of Budgeted Revenues falls at an
intermediate point between 65% and 80%, the Revenue Adjustment
Percentage for such intermediate point is determined by linear
interpolation from the results indicated for 65%, 70%, 75% and 80%.
(xviii) "Year" means any one of Year 1, Year 2, or Year 3.
(xix) "Year 1, Year 2, and Year 3" mean the following time
periods regardless of the scheduled time for payment of a Calculated
Deferred Payment with respect to such periods:
Period Covered (Inclusive)
--------------------------
Year 1 1/1/2000-12/31/2000
Year 2 1/1/2001-12/31/2001
Year 3 1/1/2002-12/31/2002
(b) DETERMINATION OF CALCULATED DEFERRED PAYMENT.
(i) YEAR 1 CALCULATED DEFERRED PAYMENT.
(1) If Year 1 Actual Revenues are less than fifty percent
(50%) of Year 1 Budgeted Revenues, the Year 1 Calculated Deferred
Payment is zero ($0).
(2) If Year 1 Actual Revenues equal or exceed fifty per cent
(50%) of Year 1 Budgeted Revenues, the Year 1 Calculated Deferred
13
Payment will be the sum of (A) the Year 1 Deferred Payment Target,
and (B) the Year 1 Capital Adjustment, if any. No other adjustments
will be taken into account or applied in determining the Year 1
Calculated Deferred Payment.
(3) The Year 1 Calculated Deferred Payment shall be payable
fifty percent (50%) in cash and fifty percent (50%) in Share
Equivalents.
(ii) YEAR 2 CALCULATED DEFERRED PAYMENT.
(1) If Year 2 Actual Revenues are less than sixty five
percent (65%) of Year 2 Budgeted Revenues, the Year 2 Calculated
Deferred Payment will be zero ($0), and no adjustments will apply to
raise the Year 2 Calculated Deferred Payment above zero ($0).
(2) If (A) Year 2 Actual Revenues equal or exceed Year 2
Budgeted Revenues, (B) Year 2 Actual Expenses are less than or equal
to Year 2 Budgeted Expenses, and (C) there are no Excess Capital
Expenditures for Year 2 or Year 1, then the Year 2 Calculated
Deferred Payment will be the Year 2 Deferred Payment Target.
(3) In any circumstances other than those described in
Sections 2.15(b)(ii)(1) and (2) above, the Year 2 Calculated
Deferred Payment will be the sum of: (A) the Year 2 Revenue Adjusted
Target, (B) the Year 2 Expense Adjustment and (C) the Year 2 Capital
Adjustment; PROVIDED, HOWEVER, that in no event shall the Year 2
Calculated Deferred Payment exceed the Year 2 Deferred Payment
Target.
(4) The Year 2 Calculated Deferred Payment shall be payable
in Share Equivalents.
(iii) YEAR 3 CALCULATED DEFERRED PAYMENT AMOUNT.
(1) If Year 3 Actual Revenues are less than sixty five
percent (65%) of Year 3 Budgeted Revenues, the Year 3 Calculated
Deferred
14
Payment will be zero ($0), and no adjustments will apply to raise
the Year 3 Calculated Deferred Payment above zero ($0).
(2) If (A) Year 3 Actual Revenues equal or exceed Year 3
Budgeted Revenues, (B) Year 3 Actual Expenses are less than or equal
to Year 3 Budgeted Expenses, and (C) there are no Excess Capital
Expenditures for Year 3, Year 2 or Year 1, then the Year 3
Calculated Deferred Payment will be the Year 3 Deferred Payment
Target.
(3) In any circumstances other than those described in
Sections 2.15(b)(iii)(1) and (2) above, the Year 3 Calculated
Deferred Payment will be the sum of: (A) the Year 3 Revenue
Adjusted Target, (B) the Year 3 Expense Adjustment and (C) the
Year 3 Capital Adjustment; PROVIDED, HOWEVER, that in no event
shall the Year 3 Calculated Deferred Payment Amount exceed the
Year 3 Deferred Payment Target.
(4) The Year 3 Calculated Deferred Payment shall be payable
in Share Equivalents.
(iv) CAPITAL ADJUSTMENT OPTION. Notwithstanding anything to
the contrary contained within this Section 1.5(b), if the Calculated
Deferred Payment for a Year includes a number other than zero as the
Capital Adjustment for such Year, then the Seller may, by written notice
to the Buyer (or the Sub if designated by the Buyer), elect to pay to
the entity issuing such Share Equivalents an amount of cash equal to but
no more or less than the Capital Adjustment for such Year in lieu of a
reduction in the Share Equivalents payable to the Seller for such Year
due to the Capital Adjustment for such Year.
(c) DETERMINATION OF ACTUAL REVENUES, ACTUAL EXPENSES AND ACTUAL
CAPITAL EXPENDITURES. Promptly after the end of a Year and in any event not
later than 90 days following the end of such Year, the Buyer (or the Sub, if
designated by the Buyer) shall prepare and deliver to the Seller a calculation
of the Actual Revenues, Actual Expenses and Actual Capital Expenditures for the
Year (the "Actual Results") and a certificate (the "Calculation Certificate")
signed by the Chief Operating Officer of the Buyer (or the Sub, if designated by
the Buyer) setting forth the calculation of the Calculated Deferred Payment for
such Year. The Actual Results shall be prepared in good faith in a
15
manner consistent with the Seller's current accounting practices (after
consultation and due regard for the suggestions of Preis).
(d) DISPUTES CONCERNING ACTUAL RESULTS. The Seller may dispute (a
"Closing Dispute") any aspect of the Actual Results or the Calculation
Certificate by notice (a "Dispute Notice") in writing given to Cendant within 30
days (the "Review Period") following the delivery of the Actual Results and the
Calculation Certificate to the Seller. The Seller shall be provided with
reasonable access during normal business hours under the supervision of the
Buyer's (or the Sub's if designated by the Buyer) personnel and upon reasonable
prior notice, to all documents, records, facilities and personnel reasonably
necessary to conduct its review of the Actual Results and the Calculation
Certificate. The Seller shall conduct such review in such a manner as not to
disrupt the business operations of the Buyer (or the Sub if designated by the
Buyer). The Dispute Notice shall specify the item or items on the Actual Results
or the Calculation Certificate which the Seller disputes and shall specify the
aggregate amount by which the Seller believes the Calculated Deferred Payment
for the year should be increased. In the event that no Dispute Notice is given
within 30 days following the delivery of the Actual Results and the Calculation
Certificate to the Seller, the Actual Results and the Calculation Certificate
shall be deemed to have been accepted by the Seller in the form in which it was
delivered to the Seller and shall be final and binding upon the parties hereto.
If the Seller has a Closing Dispute and delivers a Dispute Notice, the Buyer (or
the Sub if designated by the Buyer) and the Seller shall attempt to resolve the
Closing Dispute. In the event that such Closing Dispute is not resolved by
agreement of the parties within 60 days of delivery of such notice by the
Seller, the Closing Dispute shall be finally settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA Rules") then in effect, except as modified herein. The
place of arbitration shall be New York, New York. There shall be a single
arbitrator (the "Closing Arbitrator") appointed by the Seller and Cendant and
who shall be a mutually acceptable certified public accountant from either (w)
Deloitte & Touche LLP, (x) PricewaterhouseCoopers LLP, (y)▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or
(z) KPMG Peat Marwick LLP (each, individually, a "Big Five Accounting Firm")
(PROVIDED, HOWEVER, that in no event shall a certified public accountant from
the accounting firm of Ernst & Young LLP be chosen, and Ernst & Young LLP shall
not, for the purposes of this agreement, be defined as a Big Five Accounting
Firm). If Cendant and the Seller are unable to agree as to the identity of the
Closing Arbitrator within 30 days of receipt by respondent of the notice of the
demand for arbitration sent by the American Arbitration Association (the "AAA"),
such appointment shall be made by the AAA in accordance with the AAA Rules and
this Section 1.5. Any Closing Arbitrator
16
appointed by the AAA shall be a certified public accountant who is a partner
from a Big Five Accounting Firm (excluding Ernst & Young LLP) who is
experienced in large business transactions of this type. In connection with
the resolution of any Closing Dispute, the Closing Arbitrator shall have
access to all documents, records, facilities and personnel necessary to
perform his function. The Closing Arbitrator shall resolve all Closing
Disputes in accordance with the terms of this Agreement. Any arbitration
proceedings, decision or award rendered hereunder and the validity, effect
and interpretation of this arbitration agreement shall be governed by the
United States Federal Arbitration Act, 9 U.S.C. Section 1 ET SEq. The
decision of the Closing Arbitrator shall be final and binding on all the
parties hereto and judgment upon any award may be entered in any court having
competent jurisdiction. Upon agreement by the parties with respect to all
matters in dispute, or upon an award or decision of the Closing Arbitrator
with respect to all matters in dispute, such amendments shall be made to the
Actual Results and the Calculation Certificate as may be necessary to reflect
such agreement or such decision, as the case may be. In such event,
references in this Agreement to the Actual Results and the Calculation
Certificate shall refer to the Actual Results or the Calculation Certificate,
as the case may be, as amended in accordance with the foregoing sentence, and
the final determination of the Calculated Deferred Payment for the Year and
any resulting payment pursuant to this Section 1.5 shall be made in
accordance therewith. The fees payable to the Closing Arbitrator shall be
paid equally by the Seller and Cendant and each party shall bear their own
costs and attorneys fees.
(e) TIMING OF DEFERRED PAYMENTS.
(i) The Year 1 Calculated Deferred Payment shall be effected
through the payments and transfers to the Escrow Agent as provided in
Section 4.17 of this Agreement, and the timing and terms of the release
of the Year 1 Calculated Deferred Payment will be governed by the Escrow
Agreement.
(ii) The Year 2 Calculated Deferred Payment, if any, shall be
paid on or after January 1, 2002, as follows: (A) the amount of the Year
2 Calculated Deferred Payment based upon the calculation of the Actual
Results included in the Calculation Certificate under Section 1.5(c) of
this Agreement shall accompany the Buyer's delivery of the Calculation
Certificate to the Seller with respect to the Year 2 Actual Results, and
(B) any additional Year 2 Calculated Deferred Payment payable as the
result of resolution of any dispute concerning the Actual Results under
Section 1.5(d) of this Agreement shall be paid to the Seller
17
within ten (10) business days after such dispute is resolved pursuant to
Section 1.5(d).
(iii) The Year 3 Calculated Deferred Payment, if any, shall be
paid on or after January 1, 2003, as follows: (A) the amount of the Year
3 Calculated Deferred Payment based upon the calculation of the Actual
Results included in the Calculation Certificate under Section 1.5(c) of
this Agreement shall accompany the Buyer's delivery of the Calculation
Certificate to the Seller with respect to the Year 3 Actual Results, and
(B) any additional Year 3 Calculated Deferred Payment payable as the
result of resolution of any dispute concerning the Actual Results under
Section 1.5(d) of this Agreement shall be paid to the Seller within ten
(10) business days after such dispute is resolved pursuant to Section
1.5(d).
Section 1.6. TIME AND PLACE OF CLOSING. Upon the terms and subject to
the conditions of this Agreement, the closing of the transactions contemplated
by this Agreement (the "Closing") will take place at the offices of Skadden,
Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at
10:00 a.m. (local time) on the third business day following the date on which
all the conditions to each party's obligations specified in Article V hereunder
that are susceptible to being satisfied prior to the Closing have been satisfied
or waived by the party entitled to waive the applicable condition, or at such
other date, place or time as the parties may agree in writing; PROVIDED,
HOWEVER, that if Cendant's auditors, Deloitte & Touche LLP, notifies Cendant
that audited financial statements of the Seller or the Business are required in
order to file Cendant's proxy statement for the shareholder vote on the creation
of the CIB Stock, then the Closing shall take place on the third business day
after the filing of such proxy statement. The date on which the Closing occurs
and the transactions contemplated hereby become effective is referred to herein
as the "Closing Date".
Section 1.7. DELIVERIES BY THE SELLER. At the Closing, the Seller will
deliver the following to the Buyer (or the Sub if designated by the Buyer):
(a) the officer's certificate provided for in Section 5.3(c);
(b) the Secretary's certificate provided for in Section 5.3(d);
18
(c) a ▇▇▇▇ of Sale and Assignment duly executed by the Seller and
substantially in the form of Exhibit B hereto;
(d) a certificate of non-foreign status as provided in Treasury
Regulation Section 1.1445-2(b);
(e) copies of certificates from the appropriate taxing authorities
stating that no Taxes (as hereinafter defined) are due to any state or other
taxing authority for which the Buyer (or the Sub if designated by the Buyer)
could have liability to withhold or pay Taxes with respect to the transfer of
the Acquired Assets;
(f) an Escrow Agreement duly executed by the Seller and
substantially in the form of Exhibit C hereto (the "Escrow Agreement");
(g) a Registration Rights Agreement duly executed by the Seller and
substantially in the form of Exhibit D hereto (the "Registration Rights
Agreement");
(h) all other assignments and other instruments or documents
reasonably necessary in the reasonable judgement of the Buyer (or the Sub if
designated by the Buyer) to evidence the sale, assignment, transfer and
conveyance by the Seller of the Acquired Assets in accordance with the terms of
this Agreement; and
(i) all other documents, instruments and writings required to be
delivered by the Seller at or prior to the Closing Date pursuant to this
Agreement.
Section 1.8. DELIVERIES BY THE BUYER OR THE SUB. Subject to the terms
and conditions hereof, at the Closing the Buyer (or the Sub if designated by the
Buyer) will deliver to the Seller:
(a) the officer's certificate provided for in Section 5.2(c);
(b) the Closing Payments;
(c) an Instrument of Assumption duly executed by the Buyer (or the
Sub if designated by the Buyer) and substantially in the form of Exhibit E
hereto;
(d) the Secretary's certificate referenced in Section 5.2(d);
19
(e) the Escrow Agreement duly executed by the Buyer (or the Sub if
designated by the Buyer);
(f) the Employment Agreements between the Buyer (or the Sub if
designated by the Buyer) and each of the Seller Shareholders duly executed by
the Buyer (or the Sub if designated by the Buyer) and substantially in the form
of Exhibit F hereto (each a "Seller Shareholder Employment Agreement"); and
(g) The Registration Rights Agreement duly executed by the Buyer and
Cendant;
(h) all other documents, instruments and writings required to be
delivered by the Buyer (or the Sub if designated by the Buyer) at or prior to
the Closing Date pursuant to this Agreement.
Section 1.9. DELIVERIES BY THE SELLER SHAREHOLDERS. At the Closing, each
of the Seller Shareholders shall deliver to the Buyer (or the Sub if designated
by the Buyer):
(a) the Seller Shareholder Employments Agreements duly executed by
each Seller Shareholder;
(b) all other assignments and other instrument or documents
reasonably necessary in the reasonable judgement of the Buyer (or the Sub if
designated by the Buyer) to evidence the sale, assignment, transfer and
conveyance by the Seller of the Acquired Assets in accordance with the terms of
this Agreement; and
(c) The Registration Rights Agreement duly executed by each Seller
Shareholder;
(d) all other documents, instruments and writings required to be
delivered by the Seller Shareholders at or prior to the Closing Date pursuant to
this Agreement.
Section 1.10. PRECLOSING TRANSACTIONS. Prior to the Closing, the Seller
Shareholders shall contribute to the Seller the Internet domain names "▇▇▇▇.▇▇▇"
and "▇▇▇-▇▇▇▇.▇▇▇", any and all assets (tangible or intangible) relating to
those domain names
20
and the Websites located at such domain name addresses. The foregoing
transactions (the "Preclosing Transactions") shall be consummated pursuant to
and in accordance with instruments of conveyance and otherwise on terms and
conditions reasonably acceptable to Cendant and its outside counsel. The Seller
and the Seller Shareholders shall provide Cendant with copies of the executed
documents promptly following the execution thereof. The Seller and the Seller
Shareholders shall be responsible for all costs, expenses and Taxes relating to
the Preclosing Transactions (the "Preclosing Transaction Expenses").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE SELLER AND THE SELLER SHAREHOLDERS
Each of the Seller and the Seller Shareholders hereby represents and
warrants to the Buyer and the Sub as follows:
Section 2.1 ORGANIZATION; ETC. The Seller (i) is a corporation validly
existing and in good standing under the laws of its jurisdiction of
incorporation, (ii) has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as it
is now being conducted, and (iii) is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership, operation or leasing of its properties makes such qualification
necessary. All of the outstanding capital stock of the Seller is owned
beneficially and of record by the Seller Shareholders.
Section 2.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of the Seller
and the Seller Shareholders has the requisite power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
requisite action on the part of the Seller and each of the Seller Shareholders.
This Agreement has been duly and validly executed and delivered by the Seller
and each of the Seller Shareholders and (assuming this Agreement has been duly
authorized, executed and delivered by Cendant, the Buyer and the Sub)
constitutes a valid and binding agreement of the Seller and each of the Seller
Shareholders, enforceable against the Seller and each of the Seller Shareholders
in accordance with its terms, except that (a) such enforcement may be subject to
any bankruptcy, insolvency,
21
reorganization, moratorium, fraudulent transfer or other laws, now or hereafter
in effect, relating to or limiting creditors' rights generally and (b)
enforcement of this Agreement, including, among other things, the remedy of
specific performance and injunctive and other forms of equitable relief, may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
Section 2.3. CONSENTS AND APPROVALS; NO VIOLATIONS. () Except as set
forth in Section 2.3 of the Seller Disclosure Schedule, neither the execution
and delivery of this Agreement by the Seller and each of the Seller
Shareholders, nor the consummation by the Seller and each of the Seller
Shareholders of the transactions contemplated hereby will (w) conflict with or
result in any breach of any provision of the certificate or articles of
incorporation, as the case may be, or by-laws of the Seller, (x) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, or require any consent under, any indenture, license,
contract, agreement or other instrument or obligation to which the Seller is a
party or by which any of them or any of their respective properties or assets
are bound, (y) violate any order, writ, injunction, decree or award rendered by
any Governmental Entity (as hereinafter defined) or any statute, rule or
regulation (collectively, "Laws" and, individually, a "Law") applicable to the
Seller or any of their respective properties or assets, or (z) require any
filing with, or the obtaining of any permit, authorization, consent or approval
of, any governmental or regulatory authority, domestic or foreign (a
"Governmental Entity"), except in the case of clauses (x), (y) and (z) of this
Section 2.3 for any such violations, breaches, defaults, rights of termination,
cancellation or acceleration or requirements that (i), individually or in the
aggregate, would not have a Business Material Adverse Effect (as hereinafter
defined) or would not adversely affect the ability of the Seller or each of the
Seller Shareholders to consummate the transactions contemplated by this
Agreement; (ii), individually or in the aggregate become applicable as a result
of the business or activities in which the Buyer, the Sub or Cendant is or
proposes to be engaged (excluding the Expanded Business) or as a result of any
acts or omissions by, or the status of or any facts pertaining to, the Buyer,
the Sub or Cendant; or (iii) are listed in Section 3.7 of the Seller Disclosure
Schedule. Notwithstanding anything to the contrary in this Agreement, prior to
the Closing, the Seller will not seek a consent (which may or may not be
required) for the transfer to the Buyer (or the Sub if designated by the Buyer)
of that certain agreement between the Seller and SFGate listed in Section 2.3 of
the Seller Disclosure Schedule unless previously authorized in writing by the
Buyer. The Seller will use its commercially reasonable efforts to obtain such
consent as soon as practicable following the Closing.
22
(b) As used in this Agreement, the term "Business Material Adverse
Effect" shall mean a material adverse change in, or effect on, the Acquired
Assets or the business, prospects, financial condition or results of operations
of the Business.
Section 2.4. FINANCIAL STATEMENTS. () The Seller previously has
delivered to Cendant the unaudited consolidated balance sheet of the Business as
of August 31, 1999 (the "Balance Sheet") and the related unaudited consolidated
statement of income of the Business for the nine months then ended (collectively
the "Financial Statements"). The Financial Statements have not been prepared
according to GAAP. The Seller has identified the changes which, to its
knowledge, should conform its current method of accounting to GAAP. The effects
of these changes are listed in Section 2.4 of the Seller Disclosure Schedule,
and the changes in treatment of customer receipts and refunds are set forth in
detail in Section 2.4 of the Seller Disclosure Schedule (the "Accounting
Changes"). The Financial Statements together with the Accounting Changes present
fairly and accurately the consolidated financial condition of the Business as of
such date and the results of its operations for the nine months then ended.
(b) The Financial Statements together with the Accounting Changes,
including the related schedules and notes thereto, have all been prepared from
the books and records of the Seller consistently throughout the periods
involved. Except for the Accounting Changes, the statements of income included
in the Financial Statements do not contain any special or nonrecurring items
except as expressly specified therein, and the balance sheets included in the
Financial Statements do not reflect any write-up or revaluation increasing the
book value of any assets. The books and accounts of the Seller are, to the
knowledge of the Seller and the Seller Shareholders, complete and correct and
fully and fairly reflect all of the transactions of the Seller.
(c) Notwithstanding paragraphs (a) and (b) of this Section 2.4, the
Buyer, the Sub and Cendant acknowledge that the Seller's accounting for refund
obligations owed to its clients and reflected on the Financial Statements is not
in accordance with GAAP, and may therefore constitute a special or nonrecurring
item.
Section 2.5. ABSENCE OF UNDISCLOSED LIABILITIES. Except for (a)
liabilities or obligations incurred in the ordinary course of business and
consistent with past practice since August 31, 1999, (b) liabilities or
obligations accrued or reserved against in the Financial Statements or (c)
liabilities or obligations disclosed herein or since August 31,
23
1999, the Business has not incurred any material liabilities or obligations
(whether direct, indirect, known, unknown accrued, unaccrued, contingent or
otherwise relating to the Acquired Assets or the Business).
Section 2.6. ABSENCE OF CERTAIN CHANGES. Except as set forth in Section
2.6 of the Seller Disclosure Schedule oras otherwise contemplated by this
Agreement, since August 31, 1999, (a) there has not been any development or
event that has had or could reasonably be expected to have, individually or in
the aggregate, a Business Material Adverse Effect and (b) the Business has been
conducted in the ordinary course consistent with past practice.
Section 2.7. LITIGATION. Except as set forth in Section 2.7 of the
Seller Disclosure Schedule, there is no action, suit, proceeding (each, a "Legal
Proceeding") or governmental investigation pending or, to the knowledge of the
Seller or either of the Seller Shareholders, threatened against any of the
Seller or either of the Seller Shareholders in respect of the Business by or
before any court or Governmental Entity. There is no Legal Proceeding pending
or, to the knowledge of the Seller or either of the Seller Shareholders,
threatened, against any of the Seller or the Seller Shareholders in respect of
the Business that questions the validity of this Agreement or any action taken
or to be taken by the Seller or either of the Seller Shareholders in connection
with the consummation of the transactions contemplated hereby or except as set
forth in Section 2.7 of the Seller Disclosure Schedule that, individually or in
the aggregate, could have or could reasonably be expected to have a Business
Material Adverse Effect. Except as set forth in Section 2.7 of the Seller
Disclosure Schedule, there is not outstanding or, to the knowledge of the Seller
or either of the Seller Shareholders, threatened, any orders, judgements,
decrees or injunctions issued by any Government Entity against, affecting or
naming any of the Seller or the Seller Shareholders or affecting any of the
Acquired Assets.
Section 2.8. COMPLIANCE WITH LAW. Except as set forth in Section 2.8 of
the Seller Disclosure Schedule, to the knowledge of the Seller or either of the
Seller Shareholders, the Business is not being and has not been conducted in
material violation of any applicable Law or any order, writ, injunction or
decree of any court or Governmental Entity. Except as set forth in Section 2.8
of the Seller Disclosure Schedule, the Business has all material permits,
licenses, and other governmental authorizations, consents, and approvals
necessary to conduct its business as currently conducted (collectively, the
"Permits"). All of the Permits are identified in Section 2.8 of the Seller
Disclosure
24
Schedule. Except as set forth in Section 2.8 of the Seller Disclosure Schedule,
the Business is not in material violation of the terms of any Permit.
Section 2.9. EMPLOYEE BENEFIT PLANS. (a) Section 2.9(a) of the Seller
Disclosure Schedule sets forth, as of the date of this Agreement, a list of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Security Act of 1974, as amended ("ERISA")), "employee welfare
benefit plans" (as defined in Section 3(1) of ERISA), and deferred compensation,
bonus, retention bonus, incentive, severance, stock bonus, stock option,
restricted stock, stock appreciation right, stock purchase, holiday pay, and
vacation pay plans, and any other employee benefit plan, program, policy or
arrangement that is either maintained by orcontributed to by the Seller or any
of their subsidiaries or any of their ERISA Affiliates (as hereinafter defined)
or to which the Seller or any of their subsidiaries or any of their ERISA
Affiliates is obligated to make payments or otherwise have any liability,
(collectively, the "Plans"), and each employment, severance, consulting or
similar agreement currently in effect that has been entered into by the Seller
or a subsidiary of the Seller, on the one hand, and any employee of the
Business, on the other hand (collectively, the "Employment Agreements"). For
purposes of this Agreement, "ERISA Affiliate" shall mean any person (as defined
in Section 3(9) of ERISA) that, is or has been a member of any group of persons
described in Section 414(b), (c), (m) or (o) of the Internal Revenue Code of
1986, as amended (the "Code"), including, without limitation, the Seller and its
subsidiaries. Accurate and complete copies of all such Plans and Employment
Agreements have been delivered to the Buyer (or the Sub if designated by the
Buyer).
(b) No Plan is subject to Title IV of ERISA. The Business is not a
participant in any "multiemployer plan" within the meaning of Section 3(37) of
ERISA. No liability or contingent liability under Title IV or Section 302 of
ERISA has been incurred by the Seller or any ERISA Affiliate that has not been
satisfied in full, and no condition exists that presents a material risk to the
Seller or any ERISA Affiliate of incurring any such liability or contingent
liability. The Internal Revenue Service has issued a favorable determination
letter for each Plan that is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Code, and each such Plan is qualified.
(c) (i) All payments required to be made by or under any Plan,
any related trusts, insurance policies or ancillary agreements, or any
collective bargaining agreements have been timely made; (ii) the Seller has
performed all obligations required to be performed by it under any Plan; (iii)
the Plans have been administered and are in
25
compliance with their terms, the terms of any collective bargaining agreements,
and the requirements of ERISA, the Code and other applicable Laws; and (iv)
there are no actions, suits, arbitrations or claims pending or, to the knowledge
of the Seller or the Seller Shareholders, threatened against any Plan.
(d) Except as set forth in Section 2.9(d) of the Seller Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, (i) increase any
benefits otherwise payable under any Plan or Employment Agreement, or (ii)
result in the acceleration of the time of payment or vesting of any such
benefits. Except as set forth in Section 2.9(d) of the Seller Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in any payment
becoming due, or increase the compensation due, to any current or former
employee or director of the Seller or any of its subsidiaries.
(e) Except as set forth in Section 2.9(e) of the Seller Disclosure
Schedule, none of the Plans provides for post-employment or post-retirement life
or health insurance, benefits or coverage for any participant or any beneficiary
of a participant, except as may be required under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended.
Section 2.10. LABOR RELATIONS. Except as set forth in Section 2.10 of
the Seller Disclosure Schedule, (a) the Business is, and has been, in compliance
in all material respects with all applicable Laws respecting employment and
employment practices, terms and conditions of employment, wages, hours of work
and occupational safety and health, and is not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other applicable
Law; (b) there is no labor strike, slowdown, stoppage or lockout actually
pending, or threatened against or affecting the Business; and (c) the Business
is not now, and has never been, a party to or bound by any collective bargaining
or similar agreement with any labor organization.
Section 2.11. TAXES. Except as set forth on Section 2.11 of the Seller
Disclosure Schedule: All Taxes that are dueand payable or required to be
withheld, collected and/or paid over by the Seller or the Seller Shareholders
for all periods ending on or before the Closing Date have been paid in full, and
adequate reserves for all other Taxes of the Seller attributable to the Business
or the Acquired Assets, whether or not due and payable, and whether or not
disputed, have been set up on the Financial Statements
26
except for payroll taxes for a period of up to two weeks, and other Taxes
accruing after the date of the Financial Statements. The Seller and the Seller
Shareholders have duly and timely filed (or there has been filed on their
behalf) with the appropriate governmental authorities all Tax Returns required
to be filed with respect to the Business and the Acquired Assets, and all such
Tax Returns are true, correct and complete in all material respects. No audit is
pending or, to the knowledge of the Seller, threatened with respect to any Taxes
due from the Seller or the Seller Shareholders or attributable to the Business
or the Acquired Assets. There are no outstanding waivers extending the statutory
period of limitations relating to the payment of Taxes due from the Seller or
the Seller Shareholders for any taxable period ending on or prior to the Closing
Date that are expected to be outstanding as of the Closing Date. No deficiency
or adjustment for any Taxes has been threatened, proposed, asserted or assessed,
in writing, against the Seller or any of the Seller Shareholders. None of the
Assumed Liabilities is an obligation to make a payment that will not be
deductible by reason of Section 280G of the Code. The Seller is not a party to
any Tax allocation or sharing agreement, or similar arrangement. There are no
Liens on the Acquired Assets. "Tax" or "Taxes" shall mean taxes of any kind,
levies or other like assessments, customs, duties, imposts, charges or fees,
including income, gross receipts, ad valorem, value added, excise, real or
property, asset, sales, use, license, payroll, transaction, capital, net worth,
withholding, estimated, social security, utility, workers' compensation,
severance, production, unemployment compensation, occupation, premium, windfall
profits, transfer and gains taxes, other governmental taxes imposed or payable
to the United States, or any state, county, local or foreign government or
subdivision or agency thereof, including any such liabilities that arise by
virtue of transferee liability, successor liability, bulk transfer or sales
laws, fraudulent conveyance statute, contracts, or otherwise, together with any
interest, penalties or additions with respect thereto and any interest in
respect of such additions or penalties; and "Tax Returns" shall mean all
returns, reports, statements, declarations, estimates and forms or other
documents (including any related or supporting information), required to be
filed with respect to any Taxes.
Section 2.12. CONTRACTS. (a) The Seller has made available to the Buyer
(or the Sub if designated by the Buyer) true, correct and complete copies of all
Contracts which individually, or together with related Contracts with the same
or related parties, involves the receipt or payment after the date hereof of
more than $10,000 on an annual basis or over the remaining term thereof. Except
as provided in Section 2.12(a) of the Seller Disclosure Schedule, neither the
Seller, the Seller Shareholders nor any of the Acquired Assets, is a party to or
is bound by any: (i) employment, personal services,
27
consulting, non-competition or other similar restriction on the conduct of the
Business, severance, golden parachute or director, officer or employee
indemnification agreements; (ii) contracts granting a right of first refusal or
first negotiation with respect to any assets or line of business of the
Business; (iii) partnership or joint venture agreements; (iv) agreements for the
acquisition, sale or lease of material properties or assets of the Business (by
merger, purchase or sale of assets or stock or otherwise) entered into since
January 1, 1997; (v) contracts or agreements with any Governmental Entity; (vi)
Real Property Leases (as hereinafter defined); (vii) loan agreements, credit
agreements, promissory notes, guarantees, subordination agreements, letters of
credit or other similar types of contract; (viii) collective bargaining or other
agreements with any labor unions; (ix) other contracts which individually, or
together with contracts with the same or related parties, involve the receipt or
payment after the date hereof of more than $10,000 on an annual basis or over
the remaining term thereof; (x) contracts or agreements restricting the conduct
of the Business; and (xi) commitments and agreements to enter into any of the
foregoing.
(b) Except as set forth in Section 2.12(b) of the Seller Disclosure
Schedule: (i) there is no material default under any Contract by the Seller or,
to the knowledge of the Seller or the Seller Shareholders, by any other party
thereto, and no event has occurred that with the lapse of time or the giving of
notice or both would constitute a material default thereunder by the Seller, or
to the knowledge of the Seller or the Seller Shareholders, any other party; (ii)
no party to any such Contract has given notice to the Seller of, or made a claim
against the Business with respect to, any breach or default thereunder; and
(iii) all the Contracts, to the extent not fully performed by Seller, are valid,
binding and enforceable (except as such enforceability may be subject to any
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other
laws, now or hereafter in effect, relating to or limiting creditors' rights
generally, or to equitable defenses or the discretion of the court before which
proceedings may be brought) obligations of the Seller. Except as set forth in
Section 2.3 of the Seller Disclosure Schedule, each Contract is transferrable to
the Buyer (or the Sub if designated by the Buyer) without third party consent.
Section 2.13. REAL PROPERTY. Section 2.13 of the Seller Disclosure
Schedule sets forth a list of all real property leased on behalf of the Business
(the "Real Property Leases") and includes the expiration dates of such Real
Property Leases. The Seller does not own any real property.
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Section 2.14. INTELLECTUAL PROPERTY. (a) As used herein, the term
"Intellectual Property" means all Trademarks, Internet domain names, Patents,
Copyrights, Software, and Trade Secrets, held for use, used in or related to the
Business as conducted as of the Closing Date or as presently contemplated by the
Seller or the Seller Shareholders to be conducted and any licenses to use any of
the foregoing (except for additional "shrink wrap" or other software licenses
which may be needed in connection with expanding the Business).
(b) Section 1.1(a)(vii) of the Seller Disclosure Schedule sets
forth, for all Intellectual Property owned directly or indirectly by the Seller
or a subsidiary of the Seller, a complete and accurate list, of all U.S. and
foreign: (i) patents and patent applications; (ii) trademark and service ▇▇▇▇
registrations (including Internet domain name registrations owned directly or
indirectly by the Seller), trademark and service ▇▇▇▇ applications and material
unregistered trademarks and service marks; and (iii) copyright registrations,
copyright applications and material unregistered copyrights. Neither of the
Seller Shareholders own any Internet domain names held for, used in or related
to the Business.
(c) Section 1.1(a)(vii) of the Seller Disclosure Schedule lists all
contracts for material Software which is licensed, leased or otherwise used by
the Seller or a subsidiary of the Seller, and all Software which is owned by the
Seller or a subsidiary of the Seller ("Proprietary Software"), and identifies
which Software is owned, licensed, leased, or otherwise used, as the case may
be.
(d) Section 1.1(a)(vii) of the Seller Disclosure Schedule sets forth
a complete and accurate list of all material agreements granting or obtaining
any right to use or practice any rights under any Intellectual Property, to
which the Seller or a subsidiary of the Seller is a party or otherwise bound, as
licensee or licensor thereunder, including, without limitation, license
agreements, settlement agreements and covenants not to ▇▇▇ (collectively, the
"License Agreements").
(e) Except as would not individually or in the aggregate have a
Business Material Adverse Effect on the Seller or any subsidiary of the Seller:
(i) The Seller and its subsidiaries own or have the right to
use all Intellectual Property, free and clear of all Liens, other than
any Liens disclosed
29
on Section 2.11 of the Seller Disclosure Schedule or as otherwise
disclosed in Section 2.14(e) of the Seller Disclosure Schedule;
(ii) any Intellectual Property owned or used by the Seller or
any subsidiary of the Seller has been duly maintained, is valid and
subsisting, in full force and effect and has not been cancelled, expired
or abandoned;
(iii) except as may be otherwise disclosed in Section 2.14(e)
of the Seller Disclosure Schedule, the Seller has not received written
notice from any third party regarding any actual or potential
infringement by the Seller or any subsidiary of the Seller of any
intellectual property of such third party, and the Seller and either of
the Seller Shareholders have no knowledge of any basis for such a claim
against the Seller or any subsidiary of the Seller;
(iv) the Seller has not received written notice from any
third party regarding any assertion or claim challenging the validity of
any Intellectual Property owned or used by the Seller or any subsidiary
of the Seller and the Seller has no knowledge of any basis for such a
claim;
(v) neither Seller nor any subsidiary of the Seller has
licensed or sublicensed its rights in any Intellectual Property, or
received or been granted any such rights, other than pursuant to the
License Agreements;
(vi) to the knowledge of the Seller and each Seller Share
holder, and except as disclosed in Section 2.14(e) of the Seller
Disclosure Schedule, no third party is misappropriating, infringing,
diluting or violating any Intellectual Property owned by the Seller or
any subsidiary of the Seller;
(vii) the License Agreements are valid and binding obligations
of the Seller or its subsidiaries, enforceable in accordance with their
terms (except as may be limited by bankruptcy or creditors' rights laws,
equitable principles or the discretion of the courts), and there exists
no event or condition which will result in a violation or breach of, or
constitute a default by the Seller or any subsidiary of the Seller or,
to the knowledge of the Seller or either of the Seller Shareholders, the
other party thereto, under any such License Agreement;
30
(viii) the Seller and each subsidiary of the Seller take
reasonable measures to protect the confidentiality of Trade Secrets
including requiring third parties having access thereto to execute
written nondisclosure agreements. To the knowledge of the Seller and
each Seller Shareholder, no Trade Secret of the Seller or any subsidiary
of the Seller has been disclosed or authorized to be disclosed to any
third party other than pursuant to a written nondisclosure agreement
that adequately protects the Seller's and the applicable Seller
subsidiary's proprietary interests in and to such Trade Secrets;
(ix) except as disclosed in Section 2.3 of the Seller Disclo
sure Schedule, the consummation of the transactions contemplated hereby
will not result in the loss or impairment of the Seller's or any Seller
subsidiary's rights to own or use any of the Intellectual Property, nor
will such consummation require the consent of any third party in respect
of any Intellectual Property; and
(x) all Proprietary Software set forth in Section
1.1(a)(vii) of the Seller Disclosure Schedule, was either developed (a)
by employees of the Seller (or its predecessors) or any subsidiary of
the Seller within the scope of their employment; or (b) by independent
contractors of Seller or the Seller's predecessors, all of whose
interests have been assigned to the Seller or any subsidiary of the
Seller pursuant to written agreement.
(f) Except as set forth in Section 2.14(f) of the Seller Disclosure
Schedule, neither the Seller nor any subsidiary of the Seller:
(i) has granted to any third party any exclusive rights of
any kind (including, without limitation, exclusivity with regard to
categories of advertisers on any World Wide Web site, territorial
exclusivity or exclusivity with respect to particular versions,
implementations or translations of any of the Intellectual Property),
nor has the Seller or any subsidiary of the Seller granted any third
party any right to market any of the Intellectual Property under any
private label or "OEM" arrangements;
(ii) has any outstanding sales or advertising contract,
commitment or proposal (including, without limitation, insertion orders,
slotting agreements or other agreements under which the Seller or any
subsidiary of the Seller has allowed third parties to advertise on or
otherwise be included in a World
31
Wide Web site) that the Seller currently expects to result in any loss
to the Seller upon completion or performance thereof;
(iii) has any oral contracts or arrangements for the sale of
advertising or any other product or service which individually, or
together with related oral contracts or arrangements with the same or
related parties, involve the receipt or payment of more than $5,000 on
an annual basis or over the remaining term thereof; or
(iv) employs any employee, contractor or consultant who, to
the knowledge of the Seller or the Seller Shareholders, is, as a result
of that employee's, contractor's or consultant's relationship to the
Seller or any subsidiary of the Seller or because of the nature of the
Business, in violation of any term of any written employment contract,
patent disclosure agreement or any other written contract or agreement.
Section 2.15. YEAR 2000 COMPLIANCE. (a) Except as otherwise disclosed in
Section 2.15(a) of the Seller Disclosure Schedule, and to the knowledge of the
Seller and each Seller Shareholder, all Software listed in Section 1.1(a)(vii)
of the Seller Disclosure Schedule and internal systems and equipment of the
Seller are Year 2000 Compliant. 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).
(b) Except as disclosed in Section 2.15(b) of the Seller Disclosure
Schedule, prior to the Closing, the Seller shall have obtained (and have
provided to the Buyer (or the Sub, if designated by the Buyer) copies of)
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
32
information ("Date Data") to the Seller or any subsidiary of the Seller, (y)
processes in any way Date Data for the Seller or any subsidiary of the Seller or
(z) otherwise provides any material product or service to the Seller or any
subsidiary of the Seller that is dependent on Year 2000 Compliance, that all of
such entity's Date Data and related software and systems that are used for, or
on behalf of, the Seller or any subsidiary of the Seller are either (i) Year
2000 Compliant or (ii) reasonably expected to be Year 2000 Compliant prior to
the occurrence of any Year 2000 Compli ance related failure, except where the
failure of such provision or processing would not, individually or in the
aggregate, have a Business Material Adverse Effect.
Section 2.16. ASSETS. () Except as set forth in Section 2.16(a) of the
Seller Disclosure Schedule, the Seller has good and marketable title to, or a
valid leasehold interest in or right to use by license or otherwise, the
Acquired Assets, free and clear of all Liens.
(b) Except as set forth in Section 2.16(b) of the Seller Disclosure
Schedule, the Acquired Assets include or will include as of the Closing Date,
without limitation, all personal property, both tangible and intangible, rights
and agreements necessary to conduct the Business in all material respects as
conducted on or immediately prior to the date hereof.
Section 2.17. AFFILIATE TRANSACTIONS. Section 2.17 of the Seller
Disclosure Schedule sets forth a complete and correct list as of the date hereof
of all contracts and agreements to which both (i) the Business and the Seller or
its predecessors, on the one hand, and (ii) the Seller Shareholders or any of
their affiliates, on the other hand, are a party that are in effect as of the
date hereof or have been in effect during the prior three years.
Section 2.18. BROKERS; FINDERS AND FEES. Except for the fees of Seller
Financial Advisor which shall be the sole responsibility of the Seller and the
Seller Shareholders, neither the Seller nor either of the Seller Shareholders
has employed any investment banker, broker or finder or incurred any liability
for any investment banking fees, brokerage fees, commissions or finders' fees in
connection with this Agreement or the transactions contemplated hereby.
Section 2.19. RESTRICTED SECURITIES. The Seller and each of the Seller
Shareholders understand that the Buyer Common Stock and the CIB Stock to be
received
33
by the Seller and each of the Seller Shareholders hereunder as part of the
Purchase Price are characterized as "restricted securities" under the federal
securities laws inasmuch as such securities are being acquired from Cendant, the
Buyer or the Sub in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without
registration under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), only in certain
limited circumstances.
Section 2.20. SUITABILITY STANDARDS.
(a) The Seller and each Seller Shareholder are acquiring the Buyer
Common Stock for investment purposes only and solely for their own accounts and
not with a view to, or for resale in connection with, the distribution or
disposition thereof, except for such distributions or dispositions which are
effected in compliance with the Securities Act and in accordance with the terms
of the Certificate of Incorporation of the Buyer;
(b) The Seller and each Seller Shareholder understand that there is
no established market for the Buyer Common Stock (and it is not anticipated that
such a market will develop) and that the Buyer Common Stock has not been
registered under the Securities Act or under any state securities or "blue sky"
laws;
(c) The Seller and each Seller Shareholder will not directly or
indirectly offer, sell, transfer, assign, pledge, hypothecate or otherwise
dispose of, or solicit any offers to purchase or otherwise acquire or take a
pledge of, any shares of the Buyer Common Stock, except in accordance with the
Securities Act and all applicable state securities or "blue sky" laws, and in
any event subject to the terms of the Certificate of Incorporation of the Buyer;
(d) The Seller and each Seller Shareholder's financial situations
are such that they can afford to bear the economic risk of holding the Buyer
Common Stock for an indefinite period of time and suffer complete loss of their
investment in the Buyer Common Stock;
(e) The Seller and each Seller Shareholder have such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks relating to their investment in the Buyer Common Stock;
34
(f) The Seller and each Seller Shareholder have been given the
opportunity to examine documents relating to the Buyer, and to ask questions of
and receive answers from the Buyer concerning the terms and conditions of the
Buyer Common Stock, and to obtain any additional information necessary to verify
the accuracy of the information provided;
(g) The Seller and each Seller Shareholder acknowledge that the
Buyer Common Stock must be held indefinitely and the Seller and each Seller
Shareholder must continue to bear the economic risk of their investments in the
Buyer Common Stock unless the Buyer Common Stock is subsequently registered
under the Securities Act or an exemption from such registration is available;
(h) The Seller and each Seller Shareholder understand that the Buyer
Common Stock represents a speculative investment which involves a high degree of
risk of loss of their investment therein, and for an indefinite period following
the Closing there may be no public market for the shares of the Buyer Common
Stock;
(i) in making their decisions to receive the Buyer Common Stock
under this Agreement, the Seller and each Seller Shareholder have relied upon
independent investigations made by them and, to the extent believed by them to
be appropriate, their representatives, including their own professional, tax and
other advisors; and
(j) all information the Seller and each Seller Shareholder have
provided to the Buyer concerning themselves and their financial position and the
financial position of each Seller Shareholder and his spouse is true, complete
and correct as of the date of this Agreement.
(k) The Buyer, the Sub and Cendant acknowledge and agree that the
Share Equivalents received by the Seller under Sections 1.4 and 1.5, as well as
the Seller's right to receive any interest in any Share Equivalents under the
terms of the Escrow Agreement, may be distributed or otherwise transferred in
whole or in part, at any time and from time to time, by the Seller to the Seller
Shareholders, or either of them (subject to restrictions, conditions or other
limitations imposed upon the Seller or the Seller Shareholders under state or
federal securities laws or in conjunction with a Lockup Period (as hereinafter
defined)), and that such distribution or transfer is not intended to be
35
restricted or limited under any term of this Agreement or any other agreement or
document executed in connection herewith.
Section 2.21. NO GENERAL SOLICITATION. The offer to invest in the Buyer
was made to the Seller and each Seller Shareholder on a personal contact basis
and not by means of any general solicitation or general advertising.
Section 2.22. PRIVATE PLACEMENT. The Seller and each Seller Share holder
understand that the Buyer Common Stock has not been registered with the
Securities and Exchange Commission and has not been qualified with any state
securities regulatory authority, but is offered and sold under exemptions under
the Securities Act predicated in part upon information and representations
provided by the Seller and each Seller Shareholder to the Buyer. The Seller and
each Seller Shareholder understand that the Buyer Common Stock must be held by
each Seller Shareholder for an indefinite period, and may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of or encumbered except
in accordance with the terms of this Agreement and the Certificate of
Incorporation of the Buyer.
Section 2.23. FAIR CREDIT REPORTING ACT. The Seller is in material
compliance with the Fair Credit Reporting Act, 15 U.S.C. Sections 1681-1681u.
Section 2.24. SALE OF INVENTORY. The principle activities of the
Business are not the sale of inventory (as such term is defined in Section 9109
of the California Commercial Code) from stock.
Section 2.25. HOMERENTERS GUIDE. All obligations of and payments due
from the Seller and Preis relating to the purchase of the assets of Homerenters
Guide (including all amounts due under the promissory note executed by Preis in
relation to such purchase) have been fully satisfied and paid by the Seller and
Preis.
36
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE BUYER, THE SUB AND CENDANT
The Buyer, the Sub and Cendant hereby represent and warrant to the
Seller and the Seller Shareholders as follows:
Section 3.1. ORGANIZATION; ETC. The Buyer, the Sub and Cendant (i) are
corporations validly existing and in good standing under the laws of their
respective jurisdictions of organization, (ii) have all requisite corporate
power and authority to own, lease and operate their respective properties and
assets and to carry on their respective businesses as they are now being
conducted, and (iii) are duly qualified and in good standing to do business in
each jurisdiction in which the nature of their respective business or the
ownership, operation or leasing of their respective business properties makes
such qualification necessary.
Section 3.2. AUTHORITY RELATIVE TO THIS AGREEMENT. The Buyer, the Sub
and Cendant have the corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all requisite
corporate action on the part of the Buyer, the Sub and Cendant. This Agreement
has been duly and validly executed and delivered by the Buyer, the Sub and
Cendant and (assuming this Agreement has been duly authorized, executed and
delivered by the Seller and the Seller Shareholders) constitutes a valid and
binding agreement of the Buyer, the Sub and Cendant, enforceable against the
Buyer, the Sub and Cendant in accordance with its terms, except that (a) such
enforcement may be subject to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws, now or hereafter in effect,
relating to or limiting creditors' rights generally and (b) enforcement of this
Agreement, including, among other things, the remedy of specific performance and
injunctive and other forms of equitable relief, may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
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Section 3.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Neither the
execution and delivery of this Agreement by the Buyer, the Sub and Cendant nor
the consummation by the Buyer, the Sub and Cendant of the transactions
contemplated hereby will (a) conflict with or result in any breach of any
provision of the certificate of incorporation or by-laws of the Buyer, the Sub
or Cendant, (b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, or require any
consent under, any indenture, license, contract, agreement or other instrument
or obligation to which the Buyer, the Sub or Cendant is a party or by which any
of them or any of their respective properties or assets may be bound, (c)
violate any order, writ, injunction, decree or Laws applicable to the Buyer, the
Sub or Cendant, any of its subsidiaries or any of their respective properties or
assets, or (d) require any filing with, or the obtaining of any permit,
authorization, consent or approval of, any Governmental Entity, except in the
case of clauses (b), (c) and (d) of this Section 3.3 for any such violations,
breaches, defaults, rights of termination, cancellation or acceleration or
requirements that, individually or in the aggregate, would not have a Buyer
Material Adverse Effect (as hereinafter defined). As used in this Agreement, the
term "Buyer Material Adverse Effect" shall mean an event, change or circumstance
that would adversely affect the ability of the Buyer, the Sub and Cendant to
consummate the transactions contemplated hereby or to perform their obligations
hereunder.
Section 3.4. AVAILABILITY OF FUNDS. Cendant, the Buyer and the Sub
currently have and will at the Closing have sufficient immediately available
funds, in cash, to pay the Closing Payment and to pay any other amounts payable
pursuant to this Agreement and to effect the transactions contemplated hereby.
Section 3.5. BROKERS; FINDERS AND FEES. Neither Cendant, the Buyer, the
Sub nor any of their affiliates has employed any investment banker, broker or
finder or incurred any liability for any investment banking, financial advisory
or brokerage fees, commissions or finders' fees in connection with this
Agreement or the transactions contemplated hereby.
Section 3.6. STATUS OF SHARE EQUIVALENTS. The Share Equivalents to be
issued to the Seller pursuant to Section 1.4, when so issued, shall be duly and
validly issued, fully paid and non-assessable.
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Section 3.7. LICENSES AND APPROVALS. The Buyer (or the Sub, if
designated by the Buyer) will use its commercially reasonable efforts to obtain
and have in force at the Closing the licenses and approvals listed in Section
3.7 of the Seller Disclosure Schedule, or provide reasonable assurances to the
Seller that the Buyer (or the Sub, if designated by the Buyer) will be permitted
to operate the Business after the Closing in substantially the form currently
operated by the Seller.
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.1 CONDUCT OF BUSINESS OF THE SELLER. During the period from
the date of this Agreement to the Closing Date, except (x) as otherwise
contemplated by this Agreement or the transactions contemplated hereby, (y) for
those matters set forth in Section 4.1 of the Seller Disclosure Schedule, or (z)
consented to by Cendant in writing, the Seller shall:
(a) use its best efforts to conduct the Business in the ordinary
course consistent with past practice, including the payment of salaries in the
ordinary course; and
(b) not (i) sell, assign, license, transfer, convey or otherwise
dispose of any of its properties or assets, except in the ordinary course of
business; (ii) make any loans, advances (other than advances in the ordinary
course of business consistent with past practice) or capital contributions to,
or investments in, any other Person; (iii) terminate, modify, transfer or amend
any of its Contracts, except in the ordinary course of business; (iv) enter into
any new material agreement other than renewals of existing agreements or
otherwise in the ordinary course of business consistent with past practice; (v)
enter into any written employment agreement with any employee providing for
annual cash compensation in excess of $50,000 or increase the compensation of
any of the officers or other employees of the Business, except for such
increases as are granted in the ordinary course of business in accordance with
its customary practices (which shall include normal periodic performance reviews
and related compensation and benefit increases); (vi) adopt, grant, extend or
increase the rate or terms of any bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with any such officers or
employees of the Business, except (A) increases required by any applicable Law,
(B) increases in the ordinary course of business consistent with past practice,
and (C) any
39
other benefits payable in any form by the Seller or any affiliate of the Seller;
(vii) make any change in any of its present accounting methods and practices,
except as required by changes in GAAP; (viii) license any intellectual property
rights to or from any third party pursuant to an arrangement other than in the
ordinary course of business consistent with past practice; (ix) make or
authorize any capital expenditures other than in accordance with its annual plan
or other than capital expenditures not exceeding $5,000 individually or $15,000
in the aggregate; (x) incur any indebtedness for borrowed money, issue any debt
securities or assume, guarantee or endorse the obligations of any other Persons
or subject any of their respective properties or assets to any Liens; (xi) amend
its certificate of incorporation or by-laws; (xii) issue, sell, pledge or
transfer, or propose to issue, sell, pledge or transfer, any shares of its
capital stock, or securities convertible into or exchangeable or exercisable
for, or options with respect to, or warrants to purchase or rights to subscribe
for, any shares of its capital stock; (xiii) cancel or compromise any debt or
claim or waive or release any rights of the Seller; (xiv) utilize its working
capital except in the ordinary course consistent with past practice; (xv)
collect any receivables except in the ordinary course consistent with past
practice; or (xvi) take, or agree to take, any of the foregoing actions.
Section 4.2. ACCESS TO INFORMATION FOR CENDANT, THE BUYER AND THE SUB.
(a) From the date of this Agreement to the Closing, the Seller shall (i) give
Cendant, the Buyer and the Sub and their authorized representatives reasonable
access to all books, records, personnel, offices and other facilities and
properties of the Business and its accountants, (ii) permit Cendant, the Buyer
and the Sub to make such copies and inspections thereof as Cendant, the Buyer or
the Sub may reasonably request and (iii) cause the officers of the Seller to
furnish Cendant, the Buyer or the Sub with such financial and operating data and
other information with respect to the business and properties of the Business as
Cendant, the Buyer or the Sub may from time to time reasonably request;
PROVIDED, HOWEVER, that any such access shall be conducted at Cendant, the Buyer
and the Sub's expense, at a reasonable time, under the supervision of the
personnel of the Seller and in such a manner as to maintain the confidentiality
of this Agreement and the transactions contemplated hereby and not to interfere
unreasonably with the normal operation of the business of the Seller.
(b) All such information and access shall be subject to the terms
and conditions of the letter agreements (the "Confidentiality Agreements")
between the Seller and Cendant, dated July 16, 1999.
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Section 4.3. CONSENTS; COOPERATION. Each of the parties shall cooperate
and use its commercially reasonable efforts to make all filings and obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities and other third parties necessary to consummate
the transactions contemplated by this Agreement. In addition to the foregoing,
the Buyer, the Sub and Cendant agree to provide such assurances as to financial
capability, resources and creditworthiness as may be reasonably requested by any
third party whose consent or approval is sought hereunder. Notwithstanding the
foregoing, in no event shall any of the parties be required to offer
consideration to any third party to obtain consents or to initiate litigation.
Section 4.4. NO SOLICITATION. Neither the Seller nor any of its
officers, directors, employees, shareholders, affiliates, agents or
representatives will, directly or indirectly, solicit, initiate or encourage the
submission of any proposal or offer from any Person other than Cendant, the
Buyer and the Sub or their directors, officers, employees, or other affiliates
or representatives, enter into or continue any discussions or negotiations with,
or provide any information to, any Person other than Cendant, the Buyer and the
Sub or its directors, officers, employees or other affiliates or
representatives, relating to any (a) merger, consolidation or other business
combination involving the Seller, (b) restructuring, recapitalization or
liquidation of the Seller, or (c) acquisition or disposition of any material
assets of the Seller or any of their securities (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal"). The Seller will
immediately cease and cause to be terminated any activities, discussions or
negotiations conducted prior to the date of this Agreement with any parties
other than Cendant, the Buyer and the Sub with respect to any of the foregoing.
The covenant contained in this Section 4.4 is not intended to preclude the
Seller or Preis from engaging in discussions with potential candidates for
acquisition by the Seller; PROVIDED, HOWEVER, that such discussions will be
conducted only with the prior knowledge of the Buyer or the Sub, and until the
Closing no final commitment or use of Cendant's, the Buyer's or the Sub's name
with respect to any acquisition may be undertaken without the prior written
consent of the Buyer or the Sub.
Section 4.5. BEST EFFORTS. Each of the parties shall cooperate and use
its commercially reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable Laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
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Section 4.6. PUBLIC ANNOUNCEMENTS. Prior to the Closing, except as
otherwise agreed to by the parties, the parties shall not issue any report,
statement or press release or otherwise make any public statements with respect
to this Agreement and the transactions contemplated hereby, except as in the
reasonable judgment of a party may be required by law or in connection with its
obligations as a publicly-held, exchange-listed company, in which case the
parties will use their best efforts to reach mutual agreement as to the language
of any such report, statement or press release.
Section 4.7. TAX MATTERS.
(a) TRANSFER TAXES. All excise, sales, use, transfer (including real
property transfer or gains), stamp, documentary, filing, recordation and other
similar taxes, together with any interest, additions or penalties with respect
thereto and any interest in respect of such additions or penalties, resulting
directly from the transactions contemplated by this Agreement, shall be borne by
the Seller.
(b) ALLOCATION OF PURCHASE PRICE; TAX FILINGS. Within ninety days
following of the Closing and within ninety days following the payment of each
Deferred Payment, the Buyer, the Sub and the Seller shall negotiate and draft a
schedule (each an "Allocation Schedule") allocating the Closing Payments (which
for purposes of this Section 4.7 shall include the Assumed Liabilities) or the
Deferred Payments, as applicable, among the Acquired Assets. Each Allocation
Schedule shall be prepared in accordance with Section 1060 of the Code and the
regulations thereunder, it being agreed among the parties that $100,000 (in cash
payments, with no more than $66,667 of payments at the Closing to be so
allocated) of the Purchase Price shall be allocated to the non-compete
obligations of the Seller and the Seller Shareholders. The Buyer, the Sub and
the Seller further agree that the amount of the Purchase Price allocated to
tangible personal property shall not exceed the amounts allocated to such
Acquired Assets on the Financial Statements. Each of the Buyer, the Sub and the
Seller shall (a) timely file all forms and Tax Returns required to be filed in
connection with such Allocation Schedules, (b) be bound by such Allocation
Schedules for purposes of determining Taxes, (c) prepare and file, and cause its
affiliates to prepare and file, all of its Tax Returns including amended Tax
Returns and Form 8594 on a basis consistent with such Allocation Schedules and
(d) take no position, and cause its affiliates to take no position, inconsistent
with such Allocation Schedules on any applicable Tax Return, in any audit or
proceeding before any taxing authority, in any report made for Tax, financial
accounting or any other purposes or otherwise PROVIDED, HOWEVER, that to the
extent permitted under applicable law, the Buyer,
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the Sub and the Seller shall be permitted, for purposes of filing Form 8594 and
all other purposes, to take into account legal and accounting fees and other
buying and selling expenses, respectively, as applicable. In the event that any
Allocation Schedule is disputed by any taxing authority, the party receiving
notice of such dispute shall promptly notify the other parties hereto concerning
the existence and resolution of such dispute.
(c) ASSISTANCE AND COOPERATION. After the Closing Date, the Buyer
and the Sub shall, and shall cause their respective affiliates to, provide and
make available to the Seller all information relating to taxes of the Seller or
the Business that is reasonably required by the Seller in connection with the
preparation or filing of any tax return of the Seller or any matter relating to
taxes of the Seller.
Section 4.8. KNOWLEDGE OF BREACH; PRIOR KNOWLEDGE; SUPPLEMENTAL
DISCLOSURE. If prior to the Closing any party shall have actual knowledge of any
breach of a representation and warranty of other party, such party shall
promptly notify all other parties of its knowledge, in reasonable detail;
PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section 4.8
shall not limit or otherwise affect any remedies available to the parties
hereunder. The Seller shall from time to time prior to the Closing supplement or
amend the Seller Disclosure Schedule with respect to any matter hereafter
arising or discovered which if existing or known at the date of this Agreement
would have been required to be set forth or described in the Seller Disclosure
Schedule. No such supplemental or amended disclosure shall be deemed to have
cured any breach of any representation, warranty or covenant made in this
Agreement or to limit or otherwise affect any remedies available to the parties
hereunder.
Section 4.9. EMPLOYEES; EMPLOYEE BENEFITS. (a) As promptly as
practicable, but no later than 45 days, following the Closing, the Buyer (or the
Sub if designated by the Buyer) shall provide a list to the Seller of each
employee of the Seller who has accepted the Buyer's (or the Sub's if designated
by the Buyer) offer of employment and who shall become (and shall be deemed to
have become) employed by the Buyer (or the Sub if designated by the Buyer)
effective as of the Closing (each such employee, an "Affected Employee");
PROVIDED, THAT, prior to the Closing the Buyer and the Sub are given reasonable
access to the employment records for all employees (including, but not limited
to, a list of all employees of the Seller along with salaries of each employee
of the Seller) to the extent permitted under applicable law; and, PROVIDED,
FURTHER, that immediately after the Closing, the Buyer and the Sub are given
reasonable access to such employees for the purpose of conducting interviews. As
soon as practicable after the
43
Closing, the Buyer (or the Sub if designated by the Buyer) or its affiliates
shall provide Affected Employees who accept the Buyer's (or the Sub's if
designated by the Buyer) offer of employment with salaries, incentive
opportunities and benefit plans, programs and arrangements comparable in the
aggregate to those currently provided as of the date hereof by the Seller.
Without limiting the generality of the preceding sentence, the foregoing is not
intended to require the Buyer or the Sub to modify any of their existing
employee benefit plans or establish any new employee benefit plans.
(b) If any Affected Employee becomes a participant in any employee
benefit plan,practice or policy of the Buyer, the Sub or any of their
affiliates, such Affected Employee shall be given credit under such plan for all
service prior to the Closing Date with the Seller (to the extent such credit was
given by the Seller) for purposes of determining eligibility and vesting;
PROVIDED, HOWEVER, such service need not be credited to the extent it would
result in a duplication of benefits. Such service also shall apply for purposes
of satisfying any waiting periods, evidence of insurability requirements, or the
application of any preexisting condition limitations. Affected Employees shall
be given credit for amounts paid under a corresponding benefit plan during the
same period for purposes of applying deductibles, copayments and out-of-pocket
maximums as though such amounts had been paid in accordance with the terms and
conditions of the comparable Buyer or Sub employee benefit plan.
Section 4.10. MAINTENANCE OF BOOKS AND RECORDS. Each of the parties
hereto shall preserve, until at least the seventh anniversary of the Closing
Date, all pre-Closing Date records possessed or to be possessed by such party
relating to the Business. After the Closing Date and up until at least the
seventh anniversary of the Closing Date, upon any reasonable request from a
party hereto or its representatives, the party holding such records shall,
subject to the confidentiality provisions of Section 4.2(b), (x) provide to the
requesting party or its representatives reasonable access to such records during
normal business hours and (y) permit the requesting party or its representatives
to make copies of such records, in each case at no cost to the requesting party
or its representatives (other than for reasonable out-of-pocket expenses). Such
records may be sought under this Section 4.10 for any reasonable purpose,
including, without limitation, to the extent reasonably required in connection
with the audit, accounting, tax, litigation, federal securities disclosure or
other similar needs of the party seeking such records. Notwithstanding the
foregoing, any and all such records may be destroyed by a party if such
destroying party sends to the other parties hereto written notice of its intent
to destroy such records, specifying in reasonable detail the contents of the
records to be destroyed;
44
such records may then be destroyed after the 60th day following such notice
unless another party hereto notifies the destroying party that such other party
desires to obtain possession of such records (subject to the confidentiality
provisions of Section 4.2(b) above), in which event the destroying party shall
transfer the records to such requesting party and such requesting party shall
pay all reasonable expenses of the destroying party in connection therewith.
Section 4.11 COVENANT NOT TO COMPETE.
(a) The parties agree that this Agreement and the transactions
contemplated hereby constitute a sale of all or substantially all of the
operating assets of the Seller for the purposes of Section 16601 of the
California Business and Professions Code. In furtherance of the sale to the
Buyer (or the Sub if designated by the Buyer) of the Acquired Assets and the
Business, the Seller and Preis shall not, directly or indirectly, through
equity ownership or otherwise anywhere in the world compete with the Buyer or
the Sub in any business in which the Buyer, the Sub or the Expanded Business
competes, for a period of five years from the Closing and McWeeny shall not,
directly or indirectly, through equity ownership or otherwise, anywhere in
the world compete with the Buyer or the Sub in any business in which the Sub
or the Expanded Business competes, for a period of three years from the
Closing. Notwithstanding the foregoing, the Seller Shareholders shall not be
prevented from owning, at any time, as an investment, upto 1% of a class of
equity securities issued by any competitor of Cendant, the Buyer or the Sub
that is publicly traded and each Seller Shareholder will be released from
such obligations if such Seller Shareholder's employment with the Buyer or
the Sub is Terminated Without Cause (as such term is defined in the
respective Seller Shareholder Employment Agreements);
(b) The parties intend that the covenant contained in the preceding
Section 4.11(a) shall be construed as a series of separate covenants, one for
each area of business and country, county and city included within each state
and, except for business and geographic coverage, each such separate covenant
shall be deemed identical. The parties agree that the covenants included in this
Section 4.11 are, taken as a whole, reasonable in their business scope,
geographic scope and duration and no party shall raise any issue of the
reasonableness of the scope or duration of the covenants in any proceeding to
enforce any such covenants. The unenforceable covenant shall be deemed
eliminated from these provisions for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants to be enforced.
Furthermore, because a substantial portion of the Business is conducted on the
Internet, geographic
45
boundaries should not apply and, therefore, the parties further agree that the
geographic scope of the convenants contained herein should not be limited to any
particular geographic region smaller than the range of places where the Internet
is accessible. If, in any judicial proceeding, a court shall refuse to enforce
any of the separate covenants deemed included in this Section 4.11, it is
expressly agreed that the parties intend that they be bound by the longest time
period and the maximum geographic coverage permitted by law.
Section 4.12. POST-CLOSING CONFIDENTIALITY. For a period of seven years
after the Closing and without limitation solely in the case of Trade Secrets of
the Business included in the Acquired Assets, the Seller and the Seller
Shareholders agree to, and to cause each of their affiliates to, maintain the
confidentiality of all confidential or proprietary information with respect to
the Business and the Acquired Assets (collectively, "Confidential Information")
and shall not disclose any Confidential Information except (i) where
specifically required by Law or legal process (and in such case only after
providing Cendant, where practicable, with sufficient notice to enable it to
move for a protective order), (ii) to the extent such information becomes
generally available to the public other than as a result of a disclosure by the
Seller or either of the Seller Shareholders or any of their affiliates in
violation of this Section 4.12, (iii) to the extent such information becomes
available to the Seller or the Seller Shareholders or their affiliates on a
non-confidential basis from a source other than Cendant, the Buyer or the Sub,
provided such source is not prohibited from disclosing such information by a
contractual, legal or fiduciary obligation (whether or not in writing) or (iv)
independently developed by the Seller, or the Seller Shareholders or any of
their respective affiliates, without use of or inclusion of any Confidential
Information.
Section 4.13. TRANSFERS NOT EFFECTED AS OF CLOSING. Nothing herein shall
be deemed to require the conveyance, assignment or transfer of any Acquired
Asset that by its terms or by operation of law cannot be freely conveyed,
assigned, transferred or assumed. To the extent the parties hereto have been
unable to obtain any governmental or any third party consents or approvals
required for the transfer of any Acquired Asset and to the extent not otherwise
prohibited by the terms of any Acquired Asset, the Seller shall continue to be
bound by the terms of such applicable Acquired Asset and the Buyer (or the Sub
if designated by the Buyer) shall pay, perform and discharge fully all of the
obligations of the Seller or any of their respective affiliates thereunder from
and after the Closing. The Seller shall, without consideration therefor, pay,
assign and remit to the Buyer (or the Sub if designated by the Buyer) promptly
all monies, rights and other
46
consideration received in respect of such performance. The Seller shall exercise
or exploit their rights in respect of such Acquired Assets only as reasonably
directed by the Buyer (or the Sub if designated by the Buyer) and at the Buyer's
or the Sub's expense. Subject to and in accordance with Section 4.3, the parties
hereto shall continue to use their commercially reasonable efforts to obtain all
such unobtained consents or approvals at the earliest practicable date. If and
when any such consents or approvals shall be obtained, then the Seller shall
promptly assign its rights and obligations thereunder to the Buyer (or the Sub
if designated by the Buyer) without payment of consideration and the Buyer (or
the Sub if designated by the Buyer) shall, without the payment of any
consideration therefor, assume such rights and obligations. The parties shall
execute such good and sufficient instruments as may be necessary to evidence
such assignment and assumption.
Section 4.14. SELLER SHAREHOLDER LOANS. (a) If Share Equivalents
delivered to the Seller with respect to the Year 2 Calculated Deferred Payment
or the Year 3 Calculated Deferred Payment are not freely tradeable on a
nationally recognized securities market (either (i) due to the lockup set forth
in Section 4.18 or similar terms of other agreements to which the Seller or the
Seller Shareholders and one or more of the Sub, the Buyer and Cendant are a
party, (ii) due to restrictions set forth in Rule 144 promulgated under the
Securities Act, or (iii) because the IPO has not occurred) before the day on
which an estimated income Tax Return or an annual income Tax Return for the
taxable year ending on December 31, 2002 or for the taxable year ending December
31, 2003, as applicable, is required to be filed by the Seller Shareholders, and
the Seller has received the Year 2 Calculated Deferred Payment with respect to
Year 2, or the Year 3 Calculated Deferred Payment with respect to Year 3, as
applicable, then, upon written request of the Seller, but not more than 5 days
before the day that the Tax reported on such income Tax Return is required to be
paid by a Seller Shareholder in respect of the receipt of the Year 2 Calculated
Deferred Payment or the Year 3 Calculated Deferred Payment, as applicable,
Cendant, the Buyer or the Sub will loan (each, a "Seller Shareholder Loan" and
together the "Seller Shareholder Loans") to the Seller an amount, subject to
reduction pursuant to Section 7.2(b)(v) hereof, equal to the lesser of (x) the
Actual Tax Payment (as hereinafter defined) made in connection with the filing
of such Tax Return or (y) the tax liability of the Seller Shareholders that
would be deemed to be payable in connection with the filing of such Tax Return
as a result of the receipt by the Seller of the Year 2 Calculated Deferred
Payment or the Year 3 Calculated Deferred Payment, as applicable (the "Tax
Liability"). For purposes of computing the Tax Liability, it shall be assumed
that the tax rate of each Seller Shareholder is 30%, that the value of the Share
Equivalents received in Year 2 is the Year 2 Calculated Deferred Payment, and
that
47
the value of the Share Equivalents received in Year 3 is the Year 3 Calculated
Deferred Payment. The Seller's written request for a Seller Shareholder Loan
shall set forth the last day on which the Seller Shareholders will be required
to file such Tax Return, with respect to the Year 2 Calculated Deferred Payment
or the Year 3 Calculated Deferred Payment, as applicable (without incurring
interest or penalties in respect thereto), and the amount of tax to be paid with
such Tax Return, as reflected on such Tax Return, in respect of the Year 2
Calculated Deferred Payment, or the Year 3 Calculated Deferred Payment, as
applicable (the "Actual Tax Payment"). Each of such Seller Shareholder Loans, if
any, shall: (i) be evidenced by a loan agreement containing commercially
reasonable terms in form reasonably satisfactory to Cendant, (ii) have a
two-year term, (iii) be interest free until due or callable, (iv) bear interest
at a rate of ten percent until paid from the due date or the date the loan is
callable pursuant to subsection (vi) of this Section 4.14(a), (v) be
collateralized by Share Equivalents with a value (based on Appreciated Value) of
not less than 120% of the aggregate amount of all Seller Shareholder Loans, and
(vi) be callable as to each Seller Shareholder by Cendant, the Buyer or the Sub
(x) in full, if such Seller Shareholder ceases to be employed by Cendant, the
Buyer, the Sub or any of their subsidiaries or affiliates (unless such cessation
is the result of a Without Cause Termination (as such term is defined in the
respective Seller Shareholder Employment Agreements)), or (y) if any Share
Equivalents owned by the Seller or the Seller Shareholders become freely
tradeable on a nationally recognized securities market, in an amount equal to
70% of the excess of (A) the fair market value of such Share Equivalents on the
day that such Seller Shareholder Loan is so called, over (B) the Seller's or the
Seller Shareholders' tax basis in such Share Equivalents.
(b) GROSS-UP OF THE SELLER SHAREHOLDERS. If it is determined that a
Seller Shareholder is required to include an amount in income as a result of the
imputation of compensation to a Seller Shareholder in connection with a Seller
Shareholder Loan, Cendant, the Buyer or the Sub shall pay to such Seller
Shareholder upon a written request filed by such Seller Shareholder, but not
earlier than January 15 of any year following a year in which the Seller
Shareholder recognized imputed compensation income, an amount equal to the
"Gross-up Amount". For purposes of this section, the Gross-up Amount in respect
of any such Tax shall be the product of (i) 0.82 and (ii) the amount of
compensation imputed to the Seller Shareholder in the taxable year in which the
Seller Shareholder Loan is outstanding; PROVIDED, that neither Cendant, the
Buyer nor the Sub shall have an obligation to pay a Gross-up Amount to a Seller
Shareholder in respect of any period after such Seller Shareholder Loan ceases
to be interest free as provided in subsection (a) or is called pursuant to
subsection (a)(v) of this Section 4.14. Cendant, the
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Buyer and the Sub shall be entitled to deduct and withhold all applicable
amounts and taxes in respect of the Gross-up Amount as required by any law, and
such amounts shall be treated as received by the Seller Shareholders.
(c) INTEREST BEARING SELLER SHAREHOLDER LOAN. If at the time that
Cendant, the Buyer or the Sub makes a Seller Shareholder Loan to any of the
Seller Shareholders pursuant to subsection (a) of this Section 4.14, the fair
market value of the Share Equivalents, as reported on the estimated and annual
Tax Returns for Year 2 or Year 3, paid as part of the Year 2 Calculated Deferred
Payment or the Year 3 Calculated Deferred Payment, as applicable, exceeds the
Year 2 Calculated Deferred Payment or the Year 3 Calculated Deferred Payment, as
applicable, (such excess shall be referred to as the "Appreciated Value"), then
upon written request of the Seller, Cendant, the Buyer or the Sub will make an
"Interest Bearing Seller Shareholder Loan" to the Seller at the same time it
makes a Shareholder Loan. The amount of each Interest Bearing Seller Shareholder
Loan shall be, subject to reduction pursuant to Section 7.2(b)(v) hereof, the
lesser of (x) the excess of the Actual Tax Payment (as defined above) in respect
of such Tax Return over the Seller Shareholder Loan in respect of such Tax
Return; or (y) the product of 30% and the portion of the Appreciated Value with
respect to which a Tax has to be paid, as reported on such Tax Return. The
Seller's written request for an Interest Bearing Shareholder Loan shall be filed
at the time and in the manner described in Subsection (a) of this Section 4.14.
Each such Interest Bearing Seller Shareholder Loan, if any, shall: (i) be
evidenced by a loan agreement containing commercially reasonable terms in form
reasonably satisfactory to Cendant, (ii) have a two-year term, (iii) bear
interest at the applicable federal rate for short term loans for the month of
such loan as published by the Internal Revenue Service, to be paid annually at
the anniversary of such loan, (iv) bear interest at a rate of ten percent until
paid from the due date or the date the loan is callable pursuant to subsection
(vi) of this Section 4.14(c), (v) be collateralized by Share Equivalents with a
value (based on Appreciated Value) of not less than 120% of the aggregate amount
of all Interest Bearing Seller Shareholder Loans, and (vi) be callable as to
each Seller Shareholder by Cendant, the Buyer or the Sub (x) in full, if such
Seller Shareholder ceases to be employed by Cendant, the Buyer, the Sub or any
of their subsidiaries or affiliates (unless such cessation is the result of a
Without Cause Termination (as such term is defined in the respective Seller
Shareholder Employment Agreements)), or (y) if any Share Equivalents owned by
the Seller or the Seller Shareholders become freely tradeable on a nationally
recognized securities market, in an amount equal to 70% of the excess of (A) the
fair market value of such Share Equivalents on the day that such Interest
49
Bearing Seller Shareholder Loan is so called, over (B) the Seller's or the
Seller Shareholders' tax basis in such Share Equivalents.
Section 4.15. POST CLOSING CAPITAL BUDGETS AND ACQUISITIONS. Cendant,
the Buyer or the Sub agree to fund acquisitions for the Business identified by
Preis and approved by the executive committee of the board of directors of the
Buyer (or the Sub if designated by the Buyer) in its sole discretion after the
Closing and until December 31, 2002 up to a cumulative maximum value of
$1,900,000; PROVIDED that any portion or all of that amount may be funded in CIB
Stock or Buyer Common Stock.
Section 4.16. ANCILLARY REVENUES. The Buyer, the Sub and the Seller
understand that the acquisition and operation of the Business by the Buyer (or
the Sub if designated by the Buyer) will likely generate ancillary revenues for
other business units of Cendant, the Buyer, the Sub and/or the Cendant Internet
Business. The Buyer, the Sub and the Seller agree that for the purposes of
calculating the Deferred Payments, the Sellers will get an allocation toward
Actual Revenues for a given year for any such ancillary revenues actually
realized in such year, such allocation amount to be finally determined in
accordance with Schedule 4.16.
Section 4.17. ESCROW DELIVERY. On January 1, 2000, the Buyer (or the Sub
if designated by the Buyer) shall deliver to the escrow agent (the "Escrow
Agent") named in the Escrow Agreement (i) $940,000 (the "Escrow Amount") to be
paid in cash to a bank account designated by the Escrow Agent upon three days
prior written notice to the Buyer (or the Sub if designated by the Buyer), and
(ii) that number of shares of Buyer Common Stock calculated by dividing $1.0
million by the Share Value to be released to the Seller or the Seller
Shareholders, as the case may be, pursuant to Section 1.5 in connection with the
Year 1 Calculated Deferred Payment Amount.
Section 4.18. LOCKUP. In the event of an IPO, the Seller or the Seller
Shareholders, as the case may be, shall not directly or indirectly transfer,
sell, assign, pledge, hypothecate, encumber or otherwise dispose of ("Transfer")
any CIB Stock owned by it for a period (the "Lockup Period") commencing on the
date on which such IPO is consummated. The length of the Lockup Period shall be
determined by the Buyer, after consultation with the underwriters in connection
with the IPO and shall be no longer than the Lockup Period required for
similarly situated shareholders of the Buyer. The Seller or the Seller
Shareholders, as the case may be, shall, if requested by the Buyer, enter into a
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separate agreement in customary form evidencing the restrictions on Transfer
during the Lockup Period.
Section 4.19. POST CLOSING OPERATIONS AND EXPENSE BUDGET. Cendant, the
Buyer or the Sub agree to fund those amounts needed to fund the Budgeted
Expenses and to cooperate reasonably in allowing Preis and McWeeny to execute
current plans for maintaining, expanding and improving the Business.
Section 4.20. RELEASE OF PERSONAL LIABILITY. Promptly after the Closing,
Cendant, the Buyer or the Sub shall use its reasonable best efforts to obtain
releases of the Seller Shareholders from all "Personal Liability Creditors" of
the Business. As used herein, the term "Personal Liability Creditors" shall mean
the creditors of the Business which at the Closing are owed money or a duty
which is an Assumed Liability for which either or both Seller Shareholders have
or may have personal liability, including but not limited to the Real Property
Leases or equipment lessors and parties extending loans or other credit lines in
the name of or otherwise utilized by the Seller and which shall be set forth on
Section 4.20 of the Seller Disclosure Schedule. If and to the extent the
releases set forth on Section 4.20 of the Seller Disclosure Schedule are not
obtained, Cendant, the Buyer or the Sub shall indemnify and hold harmless the
Seller Shareholders for any amounts due to such Personal Liability Creditors.
Section 4.21. MONTHLY FINANCIAL INFORMATION. Within 10 business days
after the end of each calendar month after the date hereof until the earlier of
the Closing Date or the termination of this Agreement, the Seller shall deliver
to Cendant (i) an unaudited balance sheet of the Seller and its subsidiaries as
of the end of such monthly period and the related unaudited statements of
operations for the period then ended (together, the "Monthly Unaudited Financial
Information") and (ii) a certificate, duly executed by the chief executive
officer of the Seller restating with respect to such Monthly Unaudited Financial
Information, the representations and warranties set forth in Section 2.4.
Section 4.22. MAIL RECEIVED AFTER THE CLOSING. Following the Closing,
Cendant, the Buyer and the Sub may receive and open all mail addressed to the
Seller, any subsidiary of the Seller or the Seller Shareholders and deal with
the contents thereof in their sole discretion to the extent that such mail and
the contents thereof relate to the Expanded Business, the Acquired Assets or any
of the Assumed Liabilities. Cendant, the Buyer or the Sub shall deliver or cause
to be delivered to the Seller or the Seller Shareholders all mail received by
Cendant, the Buyer or the Sub after the Closing addressed to the Seller, any
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subsidiary of the Seller or the Seller Shareholders which does not relate to the
Expanded Business, the Acquired Assets or the Assumed Liabilities.
Section 4.23. USE OF TRADEMARKS. The Seller and the Seller Share-
holders agree that promptly following the Closing Date, the Seller and the
Seller Shareholders shall cease and desist from all further use of the
"Metro-Rent" Service ▇▇▇▇ and all logos of the Seller (the "Seller's Service
▇▇▇▇ and Logos") and will (i) adopt new trade names, trademarks, identifying
logos and service marks related thereto which are not confusingly similar to the
Sellers's Service ▇▇▇▇ and Logos, (ii) file amendments to the Articles of
Incorporation of the Seller with the California Secretary of State and shall
make appropriate filings with any other applicable registry(ies) changing the
Seller's corporate name and any d/b/a to a name that does not include any of the
Sellers's Service ▇▇▇▇ and Logos or words confusingly similar thereto; and (iii)
neither the Seller, the Seller Shareholders nor any of their affiliates shall
make any further use of the Sellers's Service ▇▇▇▇ and Logos.
ARTICLE V
CONDITIONS TO CONSUMMATION OF THE ASSET PURCHASE
Section 5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO CONSUMMATE THE
ASSET PURCHASE. The respective obligations of each party to consummate the
transactions contemplated hereby are subject to the satisfaction at or prior to
the Closing Date of the following conditions:
(a) No statute, rule, regulation, executive order, decree, or
injunction shall have been enacted, entered, promulgated or enforced by any
court or Governmental Entity that remains in force and prohibits the
consummation of the transactions described herein; and
(b) There shall not be any suit, action, or other proceeding pending
by any Governmental Entity or administrative agency or commission that seeks to
enjoin or otherwise prevent consummation of the transactions contemplated
hereby, other than suits, actions or proceedings that, in the reasonable opinion
of counsel to the parties hereto, are unlikely to result in a Business Material
Adverse Effect or Buyer Material Adverse Effect;
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PROVIDED, HOWEVER, that the provisions of this Section 5.1(b) shall not apply to
any party that has directly or indirectly encouragd such suit, action or
proceeding.
Section 5.2. FURTHER CONDITIONS TO THE SELLER'S AND THE SELLER SHARE
HOLDERS' OBLIGATIONS. The obligations of the Seller and the Seller Shareholders
to consummate the transactions contemplated hereby are further subject to
satisfaction or waiver by the Seller and the Seller Shareholders of the
following conditions:
(a) The representations and warranties of Cendant, the Buyer and the
Sub contained in this Agreement (without giving effect to any "materiality" or
Buyer Material Adverse Effect qualification or exception contained therein)
shall be true and correct at and as of the Closing Date as though such
representations and warranties were made at and as of such date (except to the
extent expressly made as of an earlier date, in which case, as of such date),
except where the failure of such representations and warranties to be so true
and correct does not have, in the aggregate, a Buyer Material Adverse Effect;
(b) Cendant, the Buyer and the Sub shall have performed and complied
in all material respects with all agreements, obligations and covenants required
by this Agreement to be performed or complied with by them on or prior to the
Closing;
(c) Cendant, the Buyer and the Sub shall have delivered to the
Seller a certificate satisfactory in form and substance to the Seller to the
effect that each of the conditions specified above in Sections 5.2(a) and (b) is
satisfied in all respects;
(d) The Seller shall have received a certificate of the Secretary of
the Buyer (or the Sub if designated by the Buyer) satisfactory in form and
substance to the Seller setting forth resolutions of the Board of Directors of
the Buyer (or the Sub if designated by the Buyer) authorizing the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and certifying that such resolutions have been duly made and have not
been rescinded or amended as of the Closing Date; and
(e) The Buyer (or the Sub if designated by the Buyer) shall have
obtained the licenses, consents and approvals listed in Section 3.7 of the
Seller Disclosure Schedule or have provided reasonable assurances to the Seller
that the Buyer (or the Sub if designated by the Buyer) will be permitted to
operate the Business after the Closing in substantially the form currently
operated by the Seller.
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Section 5.3. FURTHER CONDITIONS TO CENDANT'S, THE BUYER'S AND THE SUB'S
OBLIGATIONS. The obligations of Cendant, the Buyer and the Sub to consummate the
transactions contemplated hereby are further subject to the satisfaction or
waiver by Cendant, the Buyer and the Sub at or prior to the Closing Date of the
following conditions:
(a) The representations and warranties of the Seller and the Seller
Shareholders contained in this Agreement (without giving effect to any
"materiality" or Business Material Adverse Effect qualification or exception
contained therein) shall be true and correct at and as of the Closing Date as
though such representations and warranties were made at and as of such date
(except to the extent expressly made as of an earlier date, in which case, as of
such date), except where the failure of such representations and warranties to
be so true and correct does not have, in the aggregate, a Business Material
Adverse Effect;
(b) Each of the Seller and the Seller Shareholders shall have
performed and complied in all material respects with all agreements, obligations
and covenants required by this Agreement to be performed or complied with by it
on or prior to the Closing;
(c) Each of the Seller and the Seller Shareholders shall have
delivered to Cendant, the Buyer and the Sub a certificate satisfactory in form
and substance to Cendant to the effect that each of the conditions specified
above in Sections 5.3(a) and (b) is satisfied in all respects;
(d) Cendant, the Buyer and the Sub shall have received a certifi
cate of the Secretary of the Seller satisfactory in form and substance to
Cendant setting forth resolutions of the Board of Directors of the Seller
authorizing the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and certifying that such resolutions have
been duly made and have not been rescinded or amended as of the Closing Date;
(e) Cendant shall have completed a due diligence investigation of
the Seller and the Business including, without limitation, meetings with
management, office visitations and other informational requests in scope,
detail, substance and result reasonably satisfactory to Cendant; PROVIDED,
HOWEVER, that if Cendant shall not have exercised its termination right pursuant
to Section 6.1(d) hereof within 30 days of the date of this Agreement, this
condition shall be deemed to be satisfied;
54
(f) Notwithstanding anything to the contrary contained herein, if
the Seller fails to provide the Buyer (or the Sub if designated by the Buyer)
with the certificates described in Section 1.7(d) hereof and the Buyer (or the
Sub if designated by the Buyer) elects to proceed with the Closing, the Buyer
(or the Sub if designated by the Buyer) shall be entitled to withhold from the
amount realized by the Seller the amount required to be withheld pursuant to
Section 1445 of the Code. If the Seller fails to provide the Buyer (or the Sub
if designated by the Buyer) with any of the certificates described in Section
1.7(e) hereof and the Buyer (or the Sub if designated by the Buyer) elects to
proceed with the Closing, the Buyer (or the Sub if designated by the Buyer)
shall withhold or, where appropriate, escrow such amount as necessary based upon
Buyer's (or the Sub's if designated by the Buyer) reasonable estimate of the
amount of such potential liability, or as determined by the appropriate taxing
authority, to cover such Taxes until such time as the required certificates are
provided;
(g) The Preclosing Transactions shall have been consummated in form
and substance reasonably satisfactory to Cendant;
(h) The Buyer (or the Sub if designated by the Buyer) shall have
approved the certificate called for in Section 1.1(b)(2);
(i) The Buyer (or the Sub if designated by the Buyer) shall have
obtained the licenses, consents and approvals described in Section 3.7 of the
Seller Disclosure Schedule; and
(j) The Seller shall have obtained the licenses, consents and
approvals described in Section 5.3(j) of the Seller Disclosure Schedule.
ARTICLE VI
TERMINATION AND ABANDONMENT
Section 6.1. TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date:
(a) by mutual written consent of the Seller and Cendant;
55
(b) by the Seller or Cendant at any time after December 31, 1999 if
the Closing shall not have occurred by such date; PROVIDED, HOWEVER, that the
right to terminate this Agreement under this Section 6.1(b) shall not be
available to (i) the Seller, if the Seller has breached any of its
representations, warranties or covenants hereunder in any material respect and
such breach has been the cause of or resulted in the failure of the Closing to
occur on or before such date or (ii) Cendant, if Cendant has breached any of its
representations, warranties or covenants hereunder in any material respect and
such breach has been the cause of or resulted in the failure of the Closing to
occur on or before such date;
(c) by the Seller or the Seller Shareholders, on the one hand, or
Cendant, the Buyer or the Sub, on the other hand, if one of the others shall
have breached or failed to perform in any material respect any of its respective
representations, warranties, covenants or other agreements contained in this
Agreement, which breach or failure to perform (i) would give rise to the failure
of a condition set forth in Section 5.2(a) or (b) or 5.3(a) or (b), as
applicable, and (ii) cannot be or has not been cured within 30 days after the
giving of written notice to the Seller or Cendant; and
(d) by Cendant, if it shall not be reasonably satisfied with its due
diligence investigation of the Seller contemplated by Section 5.3(e) hereof;
PROVIDED, HOWEVER, that if Cendant shall not have exercised its termination
right contained in this Section 6.1(d) within 30 days of the date of this
Agreement, this termination right shall be deemed to have lapsed.
Section 6.2. PROCEDURE FOR AND EFFECT OF TERMINATION. In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby by the parties hereto pursuant to Section 6.1 hereof, written notice
thereof shall be given by a party so terminating to the other party and this
Agreement shall forthwith terminate and shall become null and void and of no
further effect, and the transactions contemplated hereby shall be abandoned
without further action by the Seller, the Seller Shareholders, Cendant, the
Buyer or the Sub. If this Agreement is terminated pursuant to Section 6.1
hereof:
(a) each party shall redeliver all documents, work papers and other
materials of the other parties relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same, and all
56
confidential information received by any party hereto with respect to the other
party shall be treated in accordance with the Confidentiality Agreements and
Section 4.2(b) hereof;
(b) all filings, applications and other submissions made pursuant
hereto, if any, shall, to the extent practicable, be withdrawn from the agency
or other Person to which made; and
(c) there shall be no liability or obligation hereunder on the part
of the Seller, the Seller Shareholders, Cendant, the Buyer or the Sub or any of
their respective directors, officers, employees, affiliates, controlling
persons, agents or representatives, except that the Seller, the Seller
Shareholders, Cendant, the Buyer or the Sub, as the case may be, may have
liability to the other parties if the basis of termination is a material breach
by the Seller, the Seller Shareholders, Cendant, the Buyer or the Sub, as the
case may be, of one or more of the provisions of this Agreement, and except that
the obligations provided for in Sections 4.2(b), 6.2 and 8.8 hereof shall
survive any such termination.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
Section 7.1. SURVIVAL PERIODS. Each of the representations and
warranties made by the parties in this Agreement shall survive the Closing for a
period of three years; PROVIDED, HOWEVER, that (i) the representations and
warranties contained in Sections 2.2 and 3.2 shall survive the Closing without
limitation (subject to any applicable statutes of limitations), other than the
termination of this Agreement, and (ii) the representations and warranties
contained in Section 2.11, clause (iv) of Section 2.9(c) and Section 2.14 shall
survive for the applicable period of the relevant statute of limitations (taking
into account valid extensions thereof). No claims or causes of action may be
brought against the Seller, the Seller Shareholders, Cendant, the Buyer or the
Sub based upon, directly or indirectly, any of the representations, warranties
or agreements contained in Articles II and III hereof after the applicable
survival period or, except as provided in Section 6.2(c) hereof, any termination
of this Agreement. This Section 7.1 shall not limit any covenant or agreement of
the parties that contemplates performance after the Closing, including, without
limitation, such covenants and agreements set forth in Sections 1.4, 1.5 and
Article IV hereof.
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Section 7.2. THE SELLER'S AND THE SELLER SHAREHOLDERS' AGREEMENT TO
INDEMNIFY. (a) Subject to the terms and conditions set forth herein, from and
after the Closing, the Seller and each of the Seller Shareholders shall jointly
and severally indemnify and hold harmless Cendant, the Buyer, the Sub and their
respective directors, officers, employees, affiliates, controlling persons,
agents and representatives and their successors and assigns (collectively, the
"Buyer Indemnitees") from and against all liability, demands, claims, actions or
causes of action, assessments, losses, damages, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) (collectively, the
"Buyer Damages") asserted against or incurred by any Buyer Indemnitee as a
result of or arising out of (i) a breach of any representation or warranty of
the Seller or the Seller Shareholders contained in this Agreement (determined
without regard to any materiality or Business Material Adverse Effect
qualification contained in such representation or warranty), (ii) a breach of
any covenant or agreement on the part of the Seller or the Seller Shareholders
under this Agreement, (iii) the Retained Liabilities and the Retained Assets, or
(iv) any failure to comply with any "bulk sales" laws applicable to the
transactions contemplated hereby.
(b) The Seller's and the Seller Shareholders' obligation to indem
nify the Buyer Indemnitees pursuant to Section 7.2(a) hereof is subject to the
following:
(i) No indemnification on the part of either the Seller or
the Seller Shareholders to indemnify the Buyer Indemnitees under clauses
(i) and (ii) of Section 7.2(a) shall arise unless the aggregate amount
of Buyer Damages exceeds $20,000;
(ii) In the absence of fraud or willful misconduct on the
part of the Seller or either of the Seller Shareholders, in no event
shall the Seller's and the Seller Shareholders' aggregate obligation to
indemnify the Buyer Indemnitees under clauses (i) and (ii) of Section
7.2(a) exceed the aggregate dollar value, as set forth in Section 1.4 of
this Agreement, of (a) the Closing Cash Payment, (b) the Closing Stock
Payment and (c) the actual Calculated Deferred Payments for Year 1, Year
2 and Year 3; PROVIDED, HOWEVER, that the foregoing limitation shall not
apply to Buyer Damages in respect of Taxes;
(iii) The Seller or the Seller Shareholders shall be obligated
to indemnify the Buyer Indemnitees pursuant to clause (i) of Section
7.2(a) only for those claims giving rise to Buyer Damages as to which
the Buyer Indemnitees have
58
given the Seller and the Seller Shareholders written notice thereof
prior to the end of the applicable survival period (as provided for in
Section 7.1). Any written notice delivered by a Buyer Indemnitee to the
Seller and the Seller Shareholders with respect to Buyer Damages shall
set forth with as much specificity as is reasonably practicable the
basis of the claim for Buyer Damages and, to the extent reasonably
practicable, a reasonable estimate of the amount thereof;
(iv) Notwithstanding anything to the contrary in this
Agreement, the Seller and the Seller Shareholders shall have no
obligation to indemnify any Buyer Indemnitee for incidental,
consequential, exemplary, special or punitive damages; and
(v) Cendant, the Buyer and the Sub shall be entitled to set-
off any Buyer Damages against any Calculated Deferred Payment, if any,
payable to the Seller or the Seller Shareholders; PROVIDED, that any
such set-off shall be made only against the cash portion of such
Calculated Deferred Payment, unless the cash portion is insufficient to
satisfy the full amount of the set-off, in which case the balance may be
set-off against the Share Equivalent portion of such Calculated Deferred
Payment (at the Appreciated Value at the time of set-off); and PROVIDED,
FURTHER, that the principal amount of any Seller Shareholder Loans or
Interest Bearing Seller Shareholder Loans to which the Seller
Shareholders may be entitled pursuant to Section 4.14 of this Agreement
will be reduced by the total amount of any set-off made against the cash
portion of such Calculated Deferred Payment.
Section 7.3. THE BUYER'S AND THE SUB'S AGREEMENT TO INDEMNIFY. (a)
Subject to the terms and conditions set forth herein, from and after the
Closing, Cendant, the Buyer and the Sub shall indemnify and hold harmless the
Seller and the Seller Shareholders and their respective directors, officers,
employees, affiliates, controlling Persons, agents and representatives and their
successors and assigns (collectively, the "Seller Indemnitees") from and against
all liability, demands, claims, actions or causes of action, assessments,
losses, damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) (collectively, "Seller Damages") asserted against
or incurred by any Seller Indemnitee as a result of or arising out of (i) a
breach of any representation or warranty of Cendant, the Buyer and the Sub
contained in this Agreement (determined without regard to any materiality or
Buyer Material Adverse Effect qualification contained in such representation or
warranty) and (ii) a breach of any covenant or agreement on the part of Cendant,
the Buyer or the Sub under this Agreement.
59
(b) Cendant, the Buyer and the Sub's obligation to indemnify the
Seller Indemnitees pursuant to Section 7.3(a) hereof is subject to the following
limitations:
(i) No indemnification on the part of Cendant, the Buyer or
the Sub to indemnify the Seller Indemnitees under clauses (i) and (ii)
of Section 7.3(a) shall arise unless the aggregate amount of Seller
Damages exceeds $20,000;
(ii) In the absence of fraud or willful misconduct on the
part of Cendant, the Buyer or the Sub, in no event shall Cendant, the
Buyer and the Sub's aggregate obligation to indemnify the Seller
Indemnitees under clauses (i) and (ii) of Section 7.3(a) exceed the
Purchase Price;
(iii) Cendant, the Buyer and the Sub shall be obligated to
indemnify the Seller Indemnitees pursuant to clause (i) of Section
7.3(a) only for those claims giving rise to Seller Damages as to which
the Seller Indemnitees have given Cendant, the Buyer and the Sub written
notice thereof prior to the end of the applicable survival period (as
provided for in Section 7.1). Any written notice delivered by a Seller
Indemnitee to Cendant, the Buyer and the Sub with respect to Seller
Damages shall set forth with as much specificity as is reasonably
practicable the basis of the claim for Seller Damages and, to the extent
reasonably practicable, a reasonable estimate of the amount thereof; and
(iv) Notwithstanding anything to the contrary in this
Agreement, Cendant, the Buyer and the Sub shall have no obligation to
indemnify any Seller Indemnitee for incidental, consequential,
exemplary, special or punitive damages.
Section 7.4. THIRD-PARTY INDEMNIFICATION. The obligations of the Seller
and the Seller Shareholders to indemnify the Buyer Indemnitees under Section 7.2
hereof with respect to Buyer Damages and the obligations of Cendant, the Buyer
and the Sub to indemnify the Seller Indemnitees under Section 7.3 with respect
to Seller Damages, in either case resulting from the assertion of liability by
third parties (each, as the case may be, a "Claim"), will be subject to the
following terms and conditions:
(a) Any party against whom any Claim is asserted will give the
indemnifying party written notice of any such Claim promptly after learning of
such Claim, and the indemnifying party may at its option undertake the defense
thereof by
60
representatives of its own choosing. Failure to give prompt notice of a Claim
hereunder shall not affect the indemnifying party's obligations under this
Article VII, except to the extent the indemnifying party is materially
prejudiced by such failure to give prompt notice. If the indemnifying party,
within 30 days after notice of any such Claim, or such shorter period as is
reasonably required, fails to assume the defense of such Claim, the Buyer
Indemnitee or the Seller Indemnitee, as the case may be, against whom such claim
has been made will (upon further notice to the indemnifying party) have the
right to undertake the defense, compromise or settlement (subject to the terms
of Section 7.4(c)) of such claim on behalf of and for the account and risk, and
at the expense, of the indemnifying party, subject to the right of the
indemnifying party to assume the defense of such Claim at any time prior to
settlement, compromise or final determination thereof.
(b) So long as the indemnifying party has assumed the defense of any
Claim in the manner set forth above, the indemnifying party shall have the
exclusive right to contest, defend and litigate such Claim and, except as
expressly provided in Section 7.4(c), shall have the exclusive right, in its
sole discretion, to settle any such claim, either before or after the initiation
of litigation at such time and on such terms as the indemnifying party deems
appropriate. If the indemnifying party elects not to assume the defense of any
such Claim (which shall be without prejudice to its right at any time to assume
subsequently such defense), the indemnifying party will nonetheless be entitled,
at its own expense, to participate in such defense. The indemnified party shall
have the right to participate, with separate counsel (which counsel shall act in
an advisory capacity only), in any such contest, defense, litigation or
settlement conducted by the indemnifying party. After notice from the
indemnifying party to such indemnified party of the indemnifying party's
election to assume the defense of such Claim, the indemnifying party will not be
liable to such indemnified party for any expenses of the indemnified party's
counsel that are subsequently incurred in connection with the defense thereof;
PROVIDED, HOWEVER, that the expense of such indemnified party's counsel shall be
paid by the indemnifying party if (i) the indemnifying party requested such
separate counsel to participate or (ii) in the reasonable opinion of counsel to
the indemnified party, a significant conflict of interest exists between the
indemnifying party, on the one hand, and the indemnified party, on the other
hand, that would make such separate representation clearly advisable.
(c) Without the prior written consent of the indemnified party
(which consent shall not be unreasonably withheld or delayed), the indemnifying
party shall not admit any liability with respect to, or settle, compromise or
discharge, any Claim or consent to the entry of any judgment with respect
thereto, except in the case of any settlement that
61
includes as an unconditional term thereof the delivery by the claimant or
plaintiff to the indemnified party of a written release from all liability in
respect of such Claim. In addition, whether or not the indemnifying party shall
have assumed the defense of the Claim, the indemnified party shall not admit any
liability with respect to, or settle, compromise or discharge, any Claim or
consent to the entry of any judgment with respect thereto, without the prior
written consent of the indemnifying party (which consent shall not be
unreasonably withheld or delayed), and the indemnifying party will not be
subject to any liability for any such admission, settlement, compromise,
discharge or consent to judgment made by an indemnified party without such prior
written consent of the indemnifying party.
(d) The indemnifying party and the indemnified party shall cooperate
fully in all aspects of any investigation, defense, pre-trial activities, trial,
compromise, settlement or discharge of any claim in respect of which indemnity
is sought pursuant to this Article VII, including, but not limited to, by
providing the other party with reasonable access to employees and officers
(including as witnesses) and other information.
Section 7.5. NO DUPLICATION; SOLE REMEDY. (a) Any liability for
indemnification hereunder shall be determined without duplication of recovery
by reason of the state of facts giving rise to such liability constituting a
breach of more than one representation, warranty, covenant or agreement.
(b) Cendant's, the Buyer's and the Sub's, on the one hand, and the
Seller's and the Seller Shareholders', on the other hand, respective rights to
indemnification as provided for in Sections 7.2 and 7.3, as applicable, shall be
the exclusive remedy for any Buyer Damages or Seller Damages, respectively, for
which indemnification is provided hereunder; PROVIDED, HOWEVER, that nothing
contained herein shall prevent an indemnified party from pursuing remedies as
may be available to such party under applicable law in the event of (i) fraud or
willful misconduct, (ii) only equitable relief being suitable to address the
injury or possible injury, or (iii) an indemnifying party's failure to comply
with its indemnification obligations hereunder.
Section 7.6. INDEMNIFICATION MATTERS GOVERNED BY THIS ARTICLE VII. The
indemnification and other provisions of this Article VII shall govern the
procedure for all indemnification matters under this Agreement.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1. ENTIRE AGREEMENT. This Agreement (including the Seller
Disclosure Schedule), the Seller Shareholder Employment Agreements, the Escrow
Agreement, the Registration Rights Agreement and the Confidentiality Agreements
constitute the entire agreement of the parties relating to the subject matter
hereof and supersede other prior agreements and understandings between the
parties both oral and written regarding such subject matter.
Section 8.2. SEVERABILITY. Any provision of this Agreement that is held
by a court of competent jurisdiction to violate applicable law shall be limited
or nullified only to the extent necessary to bring the Agreement within the
requirements of such law.
Section 8.3. NOTICES. Any notice required or permitted by this Agreement
must be in writing and must be sent by facsimile, by nationally recognized
commercial overnight courier, or mailed by United States registered or certified
mail, addressed to the other party at the address below or to such other address
for notice (or facsimile number, in the case of a notice by facsimile) as a
party gives the other party written notice of in accordance with this Section
8.3. Any such notice will be effective as of the date of receipt:
(a) if to Cendant, the Buyer or the Sub, to
Cendant Corporation
▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇, Esq.
63
(b) if to the Seller, to
Metro-Rent, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & Stikker LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(c) if to the Seller Shareholders, to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
c/o Metro-Rent, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
c/o Metro-Rent, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
64
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & Stikker LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Section 8.4. GOVERNING LAW; JURISDICTION. This Agreement shall be
governed by, enforced under and construed in accordance with the laws of the
State of New York, without giving effect to any choice or conflict of law
provision or rule thereof. Each of the parties hereto hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of New York and of the United States of America in each case
located in the County of New York for any litigation arising out of or relating
to this Agreement and the transactions contemplated hereby (and agrees not to
commence any litigation relating thereto except in such courts) and further
agrees that service of any process, summons, notice or document by U.S.
certified or registered mail to its respective address set forth in Section 8.3
(or to such other address for notice that such party has given the other party
written notice of in accordance with Section 8.3) shall be effective service of
process for any litigation brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of New York or of
the United States of America in each case located in the County of New York and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such litigation brought in any such court has
been brought in an inconvenient forum.
Section 8.5. DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and shall in no way be construed to
define, limit, describe, explain, modify, amplify, or add to the interpretation,
construction or meaning of any provision of, or scope or intent of, this
Agreement nor in any way affect this Agreement.
Section 8.6. COUNTERPARTS. This Agreement may be signed by facsimile
and in counterparts and all signed copies of this Agreement will together
constitute one original of this Agreement. This Agreement shall become effective
when each party hereto shall have received counterparts thereof signed by all
the other parties hereto.
65
Section 8.7. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns. Notwithstanding anything in this
Agreement to the contrary, Cendant, the Buyer, the Sub or their permitted
assigns may assign all or a part of their respective rights and obligations
under this Agreement to any Person that directly or indirectly acquires all or a
part of the assets and operations of the Expanded Business.
Section 8.8. FEES AND EXPENSES. Whether or not this Agreement and the
transactions contemplated hereby are consummated, and except as otherwise
expressly set forth herein, all costs and expenses (including legal fees and
expenses) incurred in connection with, or in anticipation of, this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses. Each of the Seller and the Seller Shareholders, on the one hand, and
Cendant, the Buyer and the Sub, on the other hand, shall indemnify and hold
harmless the other parties from and against any and all claims or liabilities
for financial advisory and finders' fees incurred by reason of any action taken
by such party or otherwise arising out of the transactions contemplated by this
Agreement by any Person claiming to have been engaged by such party.
Section 8.9. INTERPRETATION. Throughout this Agreement, nouns, pronouns
and verbs shall be construed as masculine, feminine, neuter, singular or plural,
whichever shall be applicable. Unless otherwise specified, all references herein
to "Section" shall refer to corresponding provisions of this Agreement or the
Seller Disclosure Schedule, as the case may be, whenever the words "include,"
"includes" or "including" are used in this Agreement, they are deemed to be
followed by the words "without limitation." The phrase "to the knowledge of the
Seller" or any similar phrase shall mean such facts and other information that
as of the date hereof are actually known to any executive officer of the Seller
or the Seller Shareholders after due inquiry. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement. As used in this Agreement, the term "Person"
includes an individual, a partnership, a limited partnership, a joint venture, a
syndicate, a sole proprietorship, a company or corporation with or without share
capital, a limited liability company, an unincorporated association, a trust, a
trustee, an executor, an
66
administrator or other legal personal representative, a regulatory body or
agency, any domestic or foreign national, supranational, state, provincial,
county, municipal, district or local government or government body, or any
public administrative or regulatory agency, political subdivision, commission,
court, board or body of or established by any such government or government body
which has authority in respect of a particular matter or any quasi-governmental
body having the right to exercise any regulatory or taxing authority thereunder,
an authority or entity however designated or constituted, and every other legal
or business entity whatsoever.
Section 8.10. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
benefit or create any right or cause of action in or on behalf of any Person
other than the parties hereto, the Buyer Indemnitees and the Seller Indemnitees;
PROVIDED, HOWEVER, that this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors
and permitted assigns.
Section 8.11. NO WAIVERS; MODIFICATION. Any waiver of any right or
default hereunder will be effective only in the instance given and will not
operate as or imply a waiver of any other or similar right or default on any
subsequent occasion. No waiver, modification or amendment of this Agreement or
of any provision hereof will be effective unless in writing and signed by the
party against whom such waiver, modification or amendment is sought to be
enforced.
Section 8.12. SPECIFIC PERFORMANCE. The parties hereto agree that if any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof and immediate injunctive relief, without the necessity of proving the
inadequacy of money damages as a remedy, in addition to any other remedy at law
or equity.
67
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to
be duly signed as of the date first above written.
CENDANT CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice Chairman
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
RENT NET, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chairman
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
METRO-RENT, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
SPOUSAL CONSENT
The undersigned represents that the undersigned is the spouse of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
and that the undersigned is familiar with the terms of the Asset Purchase
Agreement attached hereto and all related agreements and instruments executed
pursuant to or in connection with the Asset Purchase Agreement (together the
"Agreements"). The undersigned hereby agrees that the interest of the
undersigned's spouse in all property which is the subject of such Agreements
shall be irrevocably bound by the terms of such Agreements and by any amendment,
modification, waiver or termination signed by the undersigned's spouse . The
undersigned further agrees that the undersigned's community property interest,
if any, in all property which is the subject of such Agreements shall be
irrevocably bound by the terms of such Agreements, and that such Agreements
shall be binding on the executors, administrators, heirs and assigns of the
undersigned. The undersigned further authorizes the undersigned's spouse to
amend, modify or terminate such Agreements, or waive any rights thereunder, and
that each such amendment, modification, waiver or termination signed by the
undersigned's spouse shall be binding on the community property interest, if
any, of the undersigned in all property which is the subject of such Agreements
and on the executors, administrators, heirs and assigns of the undersigned, each
as fully as if the undersigned had signed such amendment, modification, waiver
or termination.
Dated: October 29, 1999
-----------------------------
Name: