EXHIBIT 2.02
STOCK PURCHASE AGREEMENT
BY AND AMONG
▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
FAS-HOTLINE, INC.
THE SHAREHOLDERS OF THE FAS-HOTLINE, INC.
AND
CENTRAL NEWSPAPERS, INC.,
AS SHAREHOLDER AGENT
Dated as of October 12, 1999
CONFIDENTIAL
EXECUTION COPY
TABLE OF CONTENTS
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ARTICLE 1. PURCHASE AND SALE OF THE SECURITIES...................................................... 2
1.1 Purchase and Sale of the Securities..................................................... 2
1.2 Closing................................................................................. 2
1.3 Closing Deliveries...................................................................... 3
1.4 Further Assurances...................................................................... 4
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF FAS AND THE SHAREHOLDERS............................... 4
2.1 Organization of FAS..................................................................... 4
2.2 FAS Capital Structure................................................................... 5
2.3 Obligations With Respect to Capital Stock............................................... 6
2.4 Authority; Non-Contravention............................................................ 6
2.5 HBF Financial Statements................................................................ 7
2.6 Absence of Certain Changes or Events.................................................... 8
2.7 Taxes................................................................................... 8
2.8 Title to Properties; Absence of Liens and Encumbrances.................................. 10
2.9 Intellectual Property................................................................... 10
2.10 Compliance; Permits; Restrictions....................................................... 13
2.11 Litigation.............................................................................. 13
2.12 Brokers' and Finders' Fees.............................................................. 14
2.13 Interested Party Transactions........................................................... 14
2.14 Employee Benefit Plans.................................................................. 14
2.15 Environmental Matters................................................................... 18
2.16 Year 2000 Compliance.................................................................... 19
2.17 Agreements, Contracts and Commitments................................................... 19
2.18 Insurance............................................................................... 20
2.19 Contingent Payment Arrangements......................................................... 21
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER....................................... 21
3.1 Ownership of Shares..................................................................... 21
3.2 Authority; Non-Contravention............................................................ 21
3.3 Investment Representations.............................................................. 22
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.............................................. 23
4.1 Authority; Non-Contravention............................................................ 23
4.2 Organization of Purchaser............................................................... 24
4.3 Purchaser SEC Filings; Financial Statements............................................. 25
4.4 No Material Adverse Change.............................................................. 25
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CONFIDENTIAL
EXECUTION COPY
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4.5 Brokers' and Finders' Fees.............................................................. 25
4.6 Corporate Approvals..................................................................... 25
4.7 Share Issuance.......................................................................... 26
ARTICLE 5. CONDUCT PRIOR TO THE CLOSING DATE........................................................ 26
5.1 Conduct of Business of FAS.............................................................. 26
5.2 Exclusivity............................................................................. 28
ARTICLE 6. ADDITIONAL AGREEMENTS.................................................................... 29
6.1 Restrictions on Transfer................................................................ 29
6.2 Access to Information................................................................... 30
6.3 Confidentiality......................................................................... 30
6.4 Expenses................................................................................ 30
6.5 Public Disclosure....................................................................... 30
6.6 Consents................................................................................ 30
6.7 HSR Act................................................................................. 30
6.8 FIRPTA Compliance....................................................................... 31
6.9 Reasonable Efforts...................................................................... 31
6.10 Notification of Certain Matters......................................................... 31
6.11 Cooperation of Independent Accountants.................................................. 32
6.12 Employment Matters...................................................................... 32
6.13 Employment and Non-Competition Agreements............................................... 32
6.14 Contingent Payment Agreements........................................................... 32
6.15 Director Resignations................................................................... 32
6.16 Release................................................................................. 32
6.17 Termination of Employment, Contingent Payment and Buyback Arrangements.................. 34
6.18 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Consent.................................................................. 34
ARTICLE 7. CONDITIONS TO THE PURCHASE AND SALE OF THE SHARES........................................ 34
7.1 Conditions to Obligations of the Parties................................................ 34
7.2 Conditions to Obligations of Purchaser.................................................. 35
7.3 Conditions to the Obligations of the Shareholders....................................... 36
ARTICLE 8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES............................................... 37
8.1 Survival of Representations and Warranties.............................................. 37
8.2 Indemnification......................................................................... 37
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CONFIDENTIAL
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ARTICLE 9. TERMINATION, AMENDMENT AND WAIVER........................................................ 40
9.1 Termination............................................................................. 40
9.2 Effect of Termination................................................................... 42
9.3 Amendment............................................................................... 42
9.4 Extension; Waiver....................................................................... 42
ARTICLE 10. GENERAL PROVISIONS...................................................................... 42
10.1 Notices................................................................................. 42
10.2 Interpretation.......................................................................... 44
10.3 Counterparts............................................................................ 44
10.4 Entire Agreement; Assignment............................................................ 44
10.5 Severability............................................................................ 44
10.6 Other Remedies.......................................................................... 44
10.7 Governing Law........................................................................... 44
10.8 Rules of Construction................................................................... 45
10.9 Attorneys' Fees......................................................................... 45
Exhibit A Shareholders and Payments
Exhibit B Form of Promissory Note
Exhibit C Form of Employment and Non-Competition Agreement
Exhibit D Form of Non-Competition and Non-Solicitation Agreement
Exhibit E Form of Consulting and Non-Competition Agreement
Exhibit F Form of Pledge Agreement
Exhibit G List of Employees Signing Employment and Non-Competition Agreements
Exhibit H Form of ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P. Legal Opinion
Exhibit I Form of Fenwick & West LLP Legal Opinion
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of October 12, 1999 by and among ▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation
("Purchaser"), The FAS-Hotline, Inc., an Arizona corporation ("FAS"), the
shareholders of FAS as listed on Exhibit A hereto (collectively, the
"Shareholders" and each, a "Shareholder") and, also with respect to Article 8,
Central Newspapers, Inc., an Indiana corporation ("CNI"), as Shareholder Agent.
RECITALS
A. The Shareholders own and will own all of the outstanding capital stock
of FAS (including all options, warrants and other rights to acquire capital
stock of FAS).
B. Upon the terms and subject to the conditions hereof, the Shareholders
wish to sell to the Purchaser, and the Purchaser wishes to purchase from the
Shareholders, all of the outstanding capital stock of FAS (including all
options, warrants and other rights to acquire capital stock of FAS) for an
aggregate purchase price of six million four hundred twelve thousand eight
hundred thirty dollars ($6,412,830.00) in cash to be paid at the Closing (as
defined in Section 1.2 hereof), thirty three thousand and sixty two (33,062)
shares of common stock of the Purchaser to be issued at the Closing, and six
million nine hundred twenty two thousand nine hundred thirty two dollars
($6,922,932.00) principal amount in the form of secured subordinated promissory
notes in the form attached hereto as Exhibit B (the "Notes") to be delivered at
the Closing.
C. Purchaser shall have the right to set off a portion of the principal
and interest on the Notes for purposes of satisfying certain liabilities,
damages, losses, expenses and other similar charges which result from a breach
of the representations, warranties, covenants and agreements of FAS and the
Shareholders as set forth in Article 8.
D. As a material inducement for Purchaser to purchase the capital stock
of FAS, certain key employees are entering into employment and non-competition
agreements in the form attached hereto as Exhibit C (the "Employment and Non-
Competition Agreement") with Purchaser, each of which shall become effective as
of the Closing.
E. As a material inducement for Purchaser to purchase the capital stock
of FAS, CNI is entering into the non-competition and non-solicitation agreement
in the form attached hereto as Exhibit D (the "Non-Competition and
Non-Solicitation Agreement") with Purchaser, which shall become effective as of
the Closing.
F. As a material inducement for Purchaser to purchase the capital stock
of FAS, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ is entering into the consulting and non-competition
agreement in the form attached hereto as Exhibit E (the "Consulting Agreement")
with Purchaser, which will become effective as of the Closing.
G. In connection with the Notes, the Purchaser will enter into a stock
pledge agreement in the form attached hereto as Exhibit F (the "Pledge
Agreement") at the Closing.
H. As a material inducement for Purchaser to purchase the capital stock
of FAS, certain stockholders and employees of FAS are terminating existing
employment and contingent payment obligations on the part of FAS.
I. The parties hereto desire to make certain representations, warranties,
covenants and other agreements in connection with the transactions contemplated
hereby.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF THE SECURITIES
1.1 Purchase and Sale of the Securities. On the Closing Date and
effective as of the Closing (each as defined in Section 1.2 hereof), upon the
terms and subject to the conditions of this Agreement, the Shareholders shall
sell, convey, assign, transfer and deliver to the Purchaser, and the Purchaser
shall purchase from the Shareholders, the securities set forth opposite each
such shareholder's name on Exhibit A hereto, in exchange for the total
consideration, consisting of the Cash Payment, the Share Payment and the Notes
(the "Total Consideration"). The Total Consideration shall be payable by the
Purchaser to the Shareholders in accordance with the following:
(a) Six million four hundred twelve thousand eight hundred thirty
dollars ($6,412,830.00) of the total consideration shall be payable in cash at
the Closing (the "Cash Payment");
(b) Thirty three thousand and sixty two (33,062) shares of Common
Stock of the Purchaser shall be delivered at Closing (the "Share Payment"); and
(c) Six million nine hundred twenty two thousand nine hundred thirty
two dollars ($6,922,932) principal amount of the Notes shall be delivered at the
Closing and will be subject to Purchaser's right of set off according to the
terms of Article 8 hereof.
(d) The Cash Payment, the Share Payment and the Notes shall be
allocated among Shareholders in accordance with, and in the manner set forth on,
Exhibit A hereto (such allocation being referred to herein as the "Allocation
Portion").
1.2 Closing. Subject to the satisfaction or waiver of the conditions set
forth in Article 7 hereof, the consummation of the transactions contemplated
hereby pursuant to the terms and
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provisions hereof (the "Closing") shall take place at the offices of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. local California time, no later than the
second business day after satisfaction or waiver of the conditions set forth in
Article 7 hereof, or at such other place, time and date as shall be mutually
agreed upon in writing by the parties hereto. The date upon which the Closing
shall actually occur shall be referred to herein as the "Closing Date."
1.3 Closing Deliveries.
(a) At the Closing, upon the terms and subject to the conditions
set forth herein, Shareholders shall jointly deliver each of the following:
(i) Certificates representing all of the outstanding
capital stock of FAS (including all original instruments evidencing outstanding
options, warrants or other rights to acquire capital stock of FAS);;
(ii) Duly and validly executed copies of the
Employment and Non-Competition Agreements for each employee listed on Exhibit G
hereto;
(iii) A duly and validly executed copy of the Non-
Competition and Non-Solicitation Agreement;
(iv) Duly and validly executed copies of the
employment agreement termination and release described in Section 6.12 below for
each employee of HBF or its subsidiaries of FAS subject to an employment
agreement with HBF or any of its subsidiaries or FAS;
(v) Duly and validly executed copies of the
contingent payment termination and release described in Section 6.14 below for
each individual or entity to which FAS has an existing obligation to make
payments based upon the financial performance of FAS;
(vi) A duly and validly executed copy of the Pledge
Agreement executed by each Shareholder;
(vii) Evidence of the First Refusal Release (as
defined in Section 7.2(i) below); and
(viii) A duly and validly executed copy of the
Consulting Agreement.
(b) The Purchaser shall deliver:
(i) The Cash Payment payable by check or wire
transfer to the accounts designated by the Shareholders; and
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(ii) Stock certificates representing the Share
Payment, registered in the names designated by the Shareholders, which stock
certificates shall carry the legend set forth in Section 6.1(a) hereof.
(iii) The Notes, in favor of the persons designated on
Exhibit A hereto, subject to Purchaser's right of set off in accordance with the
terms of Article 8;
(iv) A duly and validly executed copy of the Pledge
Agreement executed by the Purchaser; and
(v) Evidence of the Underwriter Consent (as defined
in Section 6.18 below);
1.4 Further Assurances. On and after the Closing, upon the reasonable
request of any of the other parties hereto, the parties hereto shall prepare,
execute and deliver such other and further agreements, instruments,
certificates, and other documents, and take, do and perform such other and
further actions, as may be necessary or appropriate in order to effectuate
completely the purposes and intent of this Agreement and to fully consummate the
transactions contemplated hereby .
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF FAS AND THE SHAREHOLDERS
As of the date hereof and as of the Closing Date, FAS and each of the
Shareholders represents and warrants to Purchaser, subject to the exceptions
specifically disclosed in writing in the disclosure letter and referencing a
specific representation (unless it would be clearly apparent to a reasonable
person that the disclosure would be relevant to another representation) supplied
by FAS and the Shareholders to Purchaser dated as of the date hereof and
certified by a duly authorized officer of FAS and each of the Shareholders (the
"FAS Schedules"), as follows:
2.1 Organization of FAS.
(a) Except as disclosed in Part 2.1(a) of the FAS Schedules, FAS
has no subsidiaries and FAS owns no capital stock of, or any equity interest of
any nature in, any other entity. FAS has not agreed and is not obligated to
make, nor bound by any written, oral or other agreement, contract, subcontract,
lease, binding understanding, instrument, note, option, warranty, purchase
order, license, sublicense, insurance policy, benefit plan or legally binding
commitment or undertaking of any nature, as in effect as of the date hereof or
as may hereinafter be in effect ("Contract") under which Contract it may become
obligated to make any future investment in or capital contribution to any other
entity. FAS has not, at any time, been a general partner of any general
partnership, limited
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partnership or other entity. When used herein, as applicable "FAS" refers to
FAS, its subsidiaries and predecessor entities.
(b) FAS is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Contracts by which it is bound.
(c) FAS is qualified to do business as a foreign corporation,
and is in good standing, under the laws of all jurisdictions where the nature of
its business requires such qualification and where the failure to so qualify
would have a Material Adverse Effect (as defined below) on FAS. With respect to
any entity, "Material Adverse Effect" shall mean any change, event or effect
that is materially adverse to the consolidated business, assets (including
intangible assets), financial condition or results of operations of such entity.
(d) FAS has delivered or made available to Purchaser a true and
correct copy of the Articles of Incorporation and Bylaws of FAS, each as amended
to date (collectively, the "FAS Charter Documents"), and each such instrument is
in full force and effect. FAS is not in violation of any of the provisions of
the FAS Charter Documents.
(e) There are no proposed or considered amendments to FAS
Charter Documents.
2.2 FAS Capital Structure.
(a) The authorized capital stock of FAS consists of: 100,000
shares of FAS Common Stock, of which 2,000 shares are outstanding as of the date
of this Agreement. The FAS Common Stock, together with any other capital stock
(including any options, warrants or other rights to acquire FAS capital stock),
shall herein be referred to as the "FAS Capital Stock". All of the outstanding
shares of FAS Capital Stock have been duly authorized and validly issued, and
are fully paid and nonassessable. As of the date of this Agreement, there are no
shares of FAS Capital Stock held in treasury by FAS. Part 2.2(a) of the FAS
Schedules contains a true, correct and complete list of the persons and entities
who are record holders of any issued and outstanding shares of FAS Capital
Stock, the respective number of shares, and the class or series, of FAS Capital
Stock held by each such person or entity, as of the date hereof and as of the
Closing. There are no declared or accrued and unpaid dividends payable in
respect of any shares of FAS Capital Stock.
(b) All outstanding shares of FAS Capital Stock have been issued
and granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements (as defined below) and (ii) all requirements set
forth in applicable Contracts. For the purposes of this Agreement, "Legal
Requirements" means any federal, state, local, municipal, foreign or other law,
statute, constitution, principle of common law, resolution, ordinance, code,
edict, decree, rule,
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regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
Governmental Entity (as defined below).
2.3 Obligations With Respect to Capital Stock . Except as set forth in
Section 2.2(a) hereof, there are no equity securities, partnership interests or
similar ownership interests of any class of any FAS equity security, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except for securities FAS owns free and
clear of all claims and Encumbrances, as of the date of this Agreement, there
are no equity securities, partnership interests or similar ownership interests
of any class of equity security of any subsidiary of FAS, or any security
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. For the purposes of this Agreement, "Encumbrances"
means any lien, pledge, hypothecation, charge, mortgage, security interest,
encumbrance, claim, infringement, interference, option, trust, right of first
refusal, preemptive right, community property interest or restriction of any
nature (including any restriction on the voting of any security, any restriction
on the transfer of any security or other asset, any restriction on the receipt
of any income derived from any asset, any restriction on the use of any asset
and any restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset). There are no subscriptions, options,
warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which FAS is a party or by which it is bound
obligating FAS to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock, partnership interests
or similar ownership interests of FAS or obligating FAS to grant, extend,
accelerate the vesting of or enter into any such subscription, option, warrant,
equity security, call, right, commitment or agreement. As of the date of this
Agreement, there are no registration rights and there is no voting trust, proxy,
rights plan, antitakeover plan or other agreement or understanding to which FAS
is a party or by which it is bound with respect to any equity security of any
class of FAS.
2.4 Authority; Non-Contravention.
(a) FAS has all requisite corporate power and authority to enter
into 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 authorized by all necessary
corporate action on the part of FAS. This Agreement has been duly executed and
delivered by FAS and, assuming due execution and delivery by the other parties
hereto, constitutes a valid and binding obligation of FAS, enforceable against
FAS in accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws and general principles of equity. The
execution and delivery of this Agreement by FAS does not, and the performance of
this Agreement by FAS will not, (i) conflict with or violate the FAS Charter
Documents, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to FAS or by which FAS or any of its respective
properties is bound or affected, subject
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to compliance with the requirements set forth in Section 2.4(b) below or (iii)
result in any material breach of or constitute a material default (or an event
that with notice or lapse of time or both would become a material default)
under, or impair FAS's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a material lien or
Encumbrance on any of the material properties or assets of FAS or any of its
subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, concession, or other
instrument or obligation to which FAS or any of its subsidiaries is a party or
by which FAS or any of its subsidiaries or its or any of their respective assets
are bound or affected. Part 2.4(a) of the FAS Schedules lists all consents,
waivers and approvals under any of FAS's or any of its subsidiaries' agreements,
contracts, licenses or leases required to be obtained in connection with the
consummation of the transactions contemplated hereby, which, if individually or
in the aggregate not obtained, would result in a material loss of benefits to
FAS or the Purchaser.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality, foreign or
domestic ("Governmental Entity"), is required to be obtained or made by FAS in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated by this Agreement, except for (i) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal, foreign and state
securities (or related) laws, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended (the "HSR Act") and the securities or antitrust laws of any
foreign country, and (ii) such other consents, authorizations, filings,
approvals and registrations which if not obtained or made would not be material
to Purchaser or FAS or have a material adverse effect on the ability of the
parties hereto to consummate the transactions contemplated hereby.
2.5 HBF Financial Statements. Part 2.5 of the FAS Schedules sets forth
unaudited balance sheet of The Homebuyer's Fair, Inc., an Arizona corporation
("HBF"), as of December 31, 1997 and the related unaudited statements of income
and cash flow for the 12 months ended December 31, 1997, and HBF's unaudited
balance sheet as of December 31, 1998 and the related unaudited statements of
income and cash flow for the 12 months ended December 31, 1998 (collectively,
the "Year End Financials") (which Year End Financials include the results of
FAS), and (ii) HBF's unaudited balance sheet as of June 27, 1999 (the "HBF
Current Balance Sheet") and the related unaudited statements of income and cash
flow for the six (6) months then ended (collectively, the "HBF Current
Financials") (which Current Financials include the results of FAS). The Year End
Financials and the HBF Current Financials shall collectively be referred to as
the "HBF Financials." The HBF Financials are correct in all material respects
and have been prepared in accordance with GAAP, applied on a basis consistent
throughout the periods indicated and consistent with each other except as may be
indicated therein. The HBF Financials present fairly the financial condition,
operating results and cash flows of HBF as of the dates and during the periods
indicated therein, subject in the case of the HBF Current Financials, to normal
year-end adjustments, which will not be material in amount or significance.
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2.6 Absence of Certain Changes or Events. Since the date of the HBF
Current Balance Sheet there has not been: (i) any Material Adverse Effect on
FAS, (ii) any declaration, setting aside or payment of any dividend on, or other
distribution (whether in cash, stock or property) in respect of, any of FAS
Capital Stock, or any purchase, redemption or other acquisition by FAS of any of
FAS's Capital Stock or any options, warrants, calls or rights to acquire any
such shares or other securities, (iii) any split, combination or
reclassification of any FAS Capital Stock, (iv) any granting by FAS of any
increase in compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by FAS of any bonus, except for bonuses made in the ordinary
course of business consistent with past practice, or any granting by FAS of any
increase in severance or termination pay or any entry by FAS into any currently
effective employment, severance, termination or indemnification agreement or any
agreement the benefits of which are contingent or the terms of which are
materially altered upon the occurrence of a transaction involving FAS of the
nature contemplated hereby, (v) entry by FAS into any licensing or other
agreement with regard to the acquisition or disposition of any material
Intellectual Property (as defined in Section 2.9) other than licenses in the
ordinary course of business consistent with past practice, (vi) any material
change by FAS in its accounting methods, principles or practices, except as
required by concurrent changes in GAAP or (vii) any revaluation by FAS of any of
its assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable other than in the ordinary
course of business and consistent with past practice.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or "Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) FAS has timely filed all federal, state, local
and foreign returns, estimates, information statements and reports ("Returns")
relating to Taxes required to be filed by FAS with any Tax authority. FAS has
paid all Taxes shown to be due on such Returns.
(ii) FAS as of the Closing will have withheld and
remitted on a timely basis to the appropriate authority all federal and state
income taxes, Taxes pursuant to the Federal Insurance Contribution Act ("FICA"),
Taxes pursuant to the Federal Unemployment Tax Act ("FUTA") and other Taxes
required to be withheld.
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(iii) FAS has not been delinquent in the payment of
any Tax nor is there any material Tax deficiency outstanding, proposed or
assessed against FAS, nor has FAS executed any unexpired waiver of any statute
of limitations on or extending the period for the assessment or collection of
any material Tax.
(iv) No audit or other examination of any Return of
FAS by any Tax authority is presently in progress, nor has FAS been notified of
any request for such an audit or other examination.
(v) No adjustment relating to any Returns filed by
FAS has been proposed in writing formally or informally by any Tax authority to
FAS or any of its representatives.
(vi) FAS has no liability for unpaid Taxes which has
not been accrued for or reserved on the HBF Current Balance Sheet, whether
asserted or unasserted, contingent or otherwise, which is material to FAS, other
than any liability for unpaid Taxes that may have accrued since the date of the
HBF Current Balance Sheet in connection with the operation of the business of
FAS in the ordinary course.
(vii) There is no contract, agreement, plan or
arrangement to which FAS is a party as of the date of this Agreement, including
but not limited to the provisions of this Agreement, covering any employee or
former employee of FAS (including leased employees from Novacare) that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Sections 280G, 404 or 162(m) of the Code.
(viii) FAS has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by FAS.
(ix) FAS is not a party to or has any obligation
under any tax-sharing, tax indemnity or tax allocation agreement or arrangement.
(x) Except as may be required as a result of this
Agreement, FAS has not been and will not be required to include any adjustment
in taxable income for any Tax period (or portion thereof) pursuant to Section
481 or Section 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions, events or accounting methods
employed prior to the Closing.
(xi) None of FAS's assets are tax-exempt use property
within the meaning of Section 168(h) of the Code.
(xii) Part 2.7 of the FAS Schedules lists (A) any
foreign Tax holidays, (B) any inter-company transfer pricing agreements, or
other arrangements that have been established by FAS with any Tax authority and
(C) any expatriate programs or policies affecting FAS.
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2.8 Title to Properties; Absence of Liens and Encumbrances.
(a) Part 2.8(a) of the FAS Schedules lists all real property
leases to which FAS is a party as of the date of this Agreement and each
amendment thereto that is in effect as of the date of this Agreement. All such
current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default) that would give rise to a
material claim. Other than the leaseholds created under the real property leases
identified in Part 2.8(a) of the FAS Schedules, FAS owns no interest in real
property.
(b) FAS has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("Liens"), except as reflected in
the HBF Financials and except for liens for taxes not yet due and payable,
statutory liens and such Liens or other imperfections of title and encumbrances,
if any, which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present use,
of the property subject thereto or affected thereby.
2.9 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following
and all rights in, arising out of, or associated therewith: (i)
all United States, international and foreign patents and
applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part
thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing;
(iii) all copyrights, copyrights registrations and applications
therefor, and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and
applications therefor throughout the world; (v) all trade names,
logos, URLs, common law trademarks and service marks, trademark
and service ▇▇▇▇ registrations and applications therefor
throughout the world; (vi) all databases and data collections and
all rights therein throughout the world; (vii) all moral and
economic rights of authors and inventors, however denominated,
throughout the world and (viii) any similar or equivalent rights
to any of the foregoing anywhere in the world.
"FAS Intellectual Property" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, FAS.
"Registered Intellectual Property" means all United States,
international and foreign: (i) patents and patent applications
(including provisional applications); (ii)
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registered trademarks, applications to register trademarks, intent-to-
use applications, or other registrations or applications related to
trademarks; (iii) registered copyrights and applications for copyright
registration; and (iv) any other Intellectual Property that is the
subject of an application, certificate, filing, registration or other
document issued, filed with, or recorded by any state, government or
other public legal authority.
"FAS Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, FAS.
(a) No material FAS Intellectual Property or product or service of FAS
is subject to any proceeding or outstanding decree, order, judgment, agreement
or stipulation restricting in any manner the use, transfer, or licensing thereof
by FAS, or which may affect the validity, use or enforceability of such FAS
Intellectual Property.
(b) Part 2.9(b) of the FAS Schedules is a complete and accurate list
of all FAS Registered Intellectual Property as of the date hereof and specifies,
where applicable, the jurisdictions in which each such item of FAS Registered
Intellectual Property has been issued or registered or in which an application
for such issuance and registration has been filed, including the respective
registration or application numbers. Each material item of FAS Registered
Intellectual Property is valid and subsisting, all necessary registration,
maintenance and renewal fees currently due in connection with such Registered
Intellectual Property have been made and all necessary documents, recordations
and certificates currently due in connection with such Registered Intellectual
Property have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may be,
for the purposes of maintaining such Registered Intellectual Property.
(c) FAS owns and has good and exclusive title to, or has license
(sufficient for the conduct of its business as currently conducted and as
currently proposed to be conducted) to, each item of FAS Intellectual Property
or other material Intellectual Property used by FAS free and clear of any lien
or encumbrance (excluding licenses and related restrictions); and FAS is the
exclusive owner of all trademarks and trade names used in connection with the
operation or conduct of the business of FAS, including the sale of any products
or the provision of any services by FAS, within the scope of FAS 's use of such
trademarks and trade names.
(d) FAS owns exclusively, and has good title to, all copyrighted works
that are FAS products or which FAS otherwise expressly purports to own.
(e) To the extent that any material Intellectual Property has been
developed or created by a third party for FAS, FAS has a written agreement with
such third party with respect thereto and FAS thereby either (i) has obtained
ownership of, and is the exclusive owner of or (ii) has obtained a license
(sufficient for the conduct of its business as currently conducted and as
currently proposed to
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be conducted) to all such third party's Intellectual Property in such work,
material or invention by operation of law or by valid assignment, to the fullest
extent it is legally possible to do so.
(f) FAS has not transferred ownership of, or granted any exclusive
license with respect to, any Intellectual Property that is or was material to
FAS Intellectual Property, to any third party.
(g) The FAS Schedules list all material contracts, licenses and
agreements to which FAS is a party as of the date hereof (i) with respect to FAS
Intellectual Property licensed or transferred to any third party (other than
end-user licenses in the ordinary course); or (ii) pursuant to which a third
party has licensed or transferred any material Intellectual Property to FAS.
All material contracts, licenses and agreements relating to FAS
Intellectual Property are in full force and effect. The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination or suspension of such
contracts, licenses and agreements. FAS is in material compliance with, and has
not materially breached any term any of such contracts, licenses and agreements
and, to the knowledge of FAS, all other parties to such contracts, licenses and
agreements are in compliance with, and have not materially breached any term of,
such contracts, licenses and agreements. Following the Closing Date, the FAS
will be permitted to exercise all of FAS's rights under such contracts, licenses
and agreements to the same extent FAS would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which FAS would otherwise be required to pay.
(h) The operation of the business of FAS, including FAS's design,
development, manufacture, marketing and sale of the products or services of FAS
(including products and services currently under development) has not, does not
and will not infringe or misappropriate the Intellectual Property of any third
party in any respect adverse to such party or constitute unfair competition or
trade practices under the laws of any jurisdiction.
(i) FAS has not received notice from any third party that the
operation of the business of FAS or any act, product or service of FAS,
infringes or misappropriates the Intellectual Property of any third party or
constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(j) To the knowledge of FAS, no person has or is infringing or
misappropriating, in any respect materially adverse to FAS, any FAS Intellectual
Property.
(k) FAS has taken reasonable steps to protect FAS's rights in FAS's
confidential information and trade secrets that it wishes to protect or any
trade secrets or confidential information of third parties provided to FAS, and,
without limiting the foregoing, FAS has and enforces a policy requiring each
employee (including leased employees from Novacare) and software and/or web
development contractor (and the like) to execute a proprietary
information/confidentiality agreement
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and all current employees (including leased employees from Novacare), software
and/or web development contractors (and the like) of FAS have executed such an
agreement.
2.10 Compliance; Permits; Restrictions. FAS is not in any material respect
in conflict with, or in default or in violation of (i) any law, rule,
regulation, order, judgment or decree applicable to FAS or by which FAS or any
of its respective properties is bound or affected or (ii) any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which FAS is a party or by which
FAS or any of its respective properties is bound or affected, except for
conflicts, violations and defaults that (individually or in the aggregate) would
not cause FAS to lose any material benefit or incur any material liability. To
FAS's knowledge, no investigation or review by any Governmental Entity is
pending or has been threatened against FAS, nor, to FAS's knowledge, has any
Governmental Entity indicated an intention to conduct an investigation of FAS.
There is no material agreement, judgment, injunction, order or decree binding
upon FAS which has or would reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of FAS or Purchaser,
any acquisition of material property by FAS or the conduct of business by FAS as
currently conducted.
(a) FAS holds, to the extent legally required, all permits, licenses,
variances, exemptions, orders and approvals from Governmental Entities that are
material to and required for the operation of the business of FAS as currently
conducted (collectively, the "FAS Permits"). FAS is in compliance in all
material respects with the terms of the FAS Permits, except where the failure to
be in compliance with the terms of the FAS Permits would not be material to FAS
or Purchaser.
(b) There is no agreement (non-compete or otherwise), commitment,
judgment, injunction, order or decree to which FAS is a party or otherwise
binding upon FAS which has, or may have the effect of, prohibiting or impairing
any business practice of FAS, any acquisition of property or assets (whether
tangible or intangible) by FAS, the conduct of business by FAS in any manner or
otherwise limiting the freedom of FAS to engage in any line of business or
compete with any person. FAS has not entered into any agreement, understanding
or other arrangement under which FAS is prohibited or restricted in any manner
from selling, licensing or otherwise distributing any technology or products to,
or providing services to, customers or potential customers or any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
2.11 Litigation. There are no claims, suits, actions or proceedings
pending or, to the knowledge of FAS, threatened against, relating to or
affecting FAS, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seeks to restrain or enjoin
the consummation of the transactions contemplated by this Agreement or which
would reasonably be expected, either singularly or in the aggregate with all
such claims, suits, actions or proceedings, to be material and adverse to FAS.
No Governmental Entity has at any time challenged or questioned in a writing
delivered to FAS the legal right of FAS to design, manufacture, offer or sell
any of its products or services in the present manner or style thereof. As of
the date hereof, to
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the knowledge of FAS, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that will, or that would reasonably be
expected to, cause or provide a bona fide basis for a director or executive
officer of FAS to seek indemnification from FAS.
2.12 Brokers' and Finders' Fees. FAS has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.13 Interested Party Transactions. No officer or director of FAS (nor, to
the knowledge of FAS, any shareholder of FAS or any ancestor (up to once
removed), sibling, descendant (up to once removed), spouse, parent, subsidiary
or other affiliate of any officer, director or shareholder, or any trust,
partnership or corporation in which any of such persons has or has had an
interest), has or has had, directly or indirectly, (i) any material interest in
any entity that furnished or sold, or furnishes or sells, services, products or
technology that FAS furnishes or sells, or proposes to furnish or sell, (ii) any
material interest in any entity that purchases from or sells or furnishes to FAS
any goods or services or (iii) a material beneficial interest in any Contract
other than employment or consulting agreements with officers of FAS and
indemnification agreements with directors and officers of FAS, in each case
previously provided or made available to Purchaser; provided, however, that
ownership of no more than one percent (1%) of the outstanding voting stock of a
publicly traded corporation and no more than percent (5%) of the outstanding
equity of any other entity shall not be deemed a material "interest in any
entity" for purposes of this Section 2.13.
2.14 Employee Benefit Plans.
(a) Definitions. With the exception of the definition of "Affiliate"
set forth in Section 2.14(a)(i) below (which definition shall apply only to this
Section 2.14), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity
under common control with FAS within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations issued thereunder;
(ii) "FAS Employee Plan" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or stock-
related awards, fringe benefits or other employee benefits or remuneration of
any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by FAS or any Affiliate for the benefit of any
Employee;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
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(iv) "DOL" shall mean the United States Department of
Labor;
(v) "Employee" shall mean any current, former, or retired
employee, officer, or director of FAS or any Affiliate (including any leased
employee from Novacare);
(vi) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or similar agreement or contract between FAS or any Affiliate
or Novacare and any Employee or consultant;
(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of
1993, as amended;
(ix) "International Employee Plan" shall mean each FAS
Employee Plan that has been adopted or maintained by FAS, whether informally or
formally, for the benefit of Employees outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "Multiemployer Plan" shall mean any multiemployer
plan as defined in Section 4001(a)(3) of ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xiii) "Pension Plan" shall mean each FAS Employee Plan
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Part 2.14(b) of the FAS Schedules contains an accurate
and complete list of each FAS Employee Plan and each Employee Agreement. FAS
does not have any plan or commitment to establish any new FAS Employee Plan, to
modify any FAS Employee Plan or Employee Agreement (except to the extent
required by law or to conform any such FAS Employee Plan or Employee Agreement
to the requirements of any applicable law, in each case as previously disclosed
to Purchaser in writing, or as required by this Agreement), or to enter into any
FAS Employee Plan or Employee Agreement, nor does it have any intention or
commitment to do any of the foregoing.
(c) Documents. FAS has provided or, except in the case of clause (i)
below, made available through Novacare to Purchaser: (i) correct and complete
copies of all documents relating to each FAS Employee Plan and each Employee
Agreement including all amendments thereto and written interpretations thereof;
(ii) the most recent annual actuarial valuations, if any, prepared for each FAS
Employee Plan; (iii) the three (3) most recent annual reports (Form Series 5500
and all
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schedules and financial statements attached thereto), if any, required under
ERISA or the Code in connection with each FAS Employee Plan or related trust;
(iv) if FAS Employee Plan is funded, the most recent annual and periodic
accounting of FAS Employee Plan assets; (v) the most recent summary plan
description together with the summary of material modifications thereto, if any,
required under ERISA with respect to each FAS Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters, and rulings relating
to FAS Employee Plans and copies of all applications and correspondence to or
from the IRS or the DOL with respect to any FAS Employee Plan; (vii) all
material written agreements and contracts relating to each FAS Employee Plan,
including, but not limited to, administrative service agreements, group annuity
contracts and group insurance contracts; (viii) all communications material to
any Employee or Employees relating to any FAS Employee Plan and any proposed FAS
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to FAS; (ix) all COBRA forms and related notices; and (x) all registration
statements and prospectuses prepared in connection with each FAS Employee Plan.
(d) Employee Plan Compliance. (i) FAS has performed in all material
respects all obligations required to be performed by it under, is not in default
or violation of, and has no knowledge of any default or violation by any other
party to each FAS Employee Plan, and each FAS Employee Plan has been established
and maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) to the knowledge of FAS,
each FAS Employee Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code has either
received a favorable determination letter from the IRS with respect to each such
Plan as to its qualified status under the Code, including all amendments to the
Code effected by the Tax Reform Act of 1986 and subsequent legislation, or has
remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such a determination letter and make any
amendments necessary to obtain a favorable determination; (iii) to the knowledge
of FAS, no "prohibited transaction," within the meaning of Section 4975 of the
Code or Sections 406 and 407 of ERISA, and not otherwise exempt under Section
408 of ERISA or 4975 of the Code, has occurred with respect to any FAS Employee
Plan; (iv) to the knowledge of FAS, there are no actions, suits or claims
pending, threatened or reasonably anticipated (other than routine claims for
benefits) against any FAS Employee Plan or against the assets of any FAS
Employee Plan; (v) to the knowledge of FAS, each FAS Employee Plan can be
amended, terminated or otherwise discontinued after the Closing Date in
accordance with its terms, without liability to Purchaser, FAS or any of its
Affiliates (other than ordinary administration expenses typically incurred in a
termination event); (vi) to the knowledge of FAS, there are no audits, inquiries
or proceedings pending or threatened by the IRS or DOL with respect to any FAS
Employee Plan; and (vii) to the knowledge of FAS, either FAS nor any Affiliate
is subject to any penalty or tax with respect to any FAS Employee Plan under
Section 402(i) of ERISA or Sections 4975 through 4980 of the Code.
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(e) Pension Plans. FAS does not now, nor has it ever, maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has FAS contributed to or been
requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No FAS Employee Plan provides, or
has any liability to provide, retiree life insurance, retiree health or other
retiree employee welfare benefits to any person for any reason, except as may be
required by COBRA or other applicable statute, and FAS has never represented,
promised or contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) or any other person that such
Employee(s) or other person would be provided with retiree life insurance,
retiree health or other retiree employee welfare benefit, except to the extent
required by statute.
(h) To the knowledge of FAS, neither FAS nor any Affiliate has, prior
to the Closing, and in any material respect, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of state law applicable to its Employees.
(i) Effect of Transaction. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any FAS Employee Plan or Employee Agreement that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(j) Employment Matters. FAS: (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to Employees; (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing; and (iv) is not liable for any material payment to any trust or
other fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending,
threatened or reasonably anticipated claims or actions against FAS under any
worker's compensation policy or long-term disability policy. To FAS's
knowledge, no employee of FAS has violated any employment contract,
nondisclosure agreement or noncompetition agreement by which such employee is
bound due to such employee being employed by FAS and disclosing to FAS or using
trade secrets or proprietary information of any other person or entity.
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(k) Labor. To the knowledge of FAS, no work stoppage or labor strike
against FAS is pending, threatened or reasonably anticipated. FAS has no
knowledge of any activities or proceedings of any labor union to organize any
Employees. To the knowledge of FAS, there are no actions, suits, claims, labor
disputes or grievances pending, threatened or reasonably anticipated relating to
any labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to FAS. FAS has not engaged in any
unfair labor practices within the meaning of the National Labor Relations Act.
FAS is not presently, nor has it been in the past, a party to, or bound by, any
collective bargaining agreement or union contract with respect to Employees and
no collective bargaining agreement is being negotiated by FAS.
(l) International Employee Plan. FAS does not now, nor has it ever
had the obligation to, maintain, establish, sponsor, participate in, or
contribute to any International Employee Plan.
2.15 Environmental Matters.
(a) Hazardous Material. Except as would not result in material
liability to FAS, no underground storage tanks and no amount of any substance
that has been designated by any Governmental Entity or by applicable federal,
state or local law to be radioactive, toxic, hazardous or otherwise a danger to
health or the environment, including, without limitation, PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies (a "Hazardous Material") are present, as a result of the
actions of FAS or any affiliate of FAS, or, to FAS's knowledge, as a result of
any actions of any third party or otherwise, in, on or under any property,
including the land and the improvements, ground water and surface water thereof,
that FAS or any of its subsidiaries has at any time owned, operated, occupied or
leased.
(b) Hazardous Materials Activities. Except as would not result in a
material liability to FAS (in any individual case or in the aggregate) (i) FAS
has not transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to Hazardous Materials in violation of any law
in effect on or before the Closing Date and (ii) FAS has not disposed of,
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
"Hazardous Materials Activities") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
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(c) Permits. FAS holds all environmental approvals, permits,
licenses, clearances and consents (the "FAS Environmental Permits") necessary
for the conduct of FAS's and its subsidiaries' Hazardous Material Activities and
other businesses of FAS and its subsidiaries as such activities and businesses
are currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ or injunction is pending, and to the
knowledge of FAS, no action, proceeding, revocation proceeding, amendment
procedure, writ or injunction has been threatened by any Governmental Entity
against FAS or any of its subsidiaries in a writing delivered to FAS concerning
any FAS Environmental Permit, Hazardous Material or any Hazardous Materials
Activity of FAS. FAS has no knowledge of any fact or circumstance which would
involve FAS in any environmental litigation or impose upon FAS any material
environmental liability.
2.16 Year 2000 Compliance. FAS's products and internal systems have been
designed to ensure date and time entry recognition, calculations that
accommodate same century and multi-century formulas and date values, leap year
recognition and calculations, and date data interface values that accurately
reflect the century. FAS's products and internal systems manage and manipulate
data involving dates and times, including single century formulas and multi-
century formulas, and do not cause an abnormal ending scenario within the
application or generate incorrect values or invalid results involving such
dates.
2.17 Agreements, Contracts and Commitments. Except as otherwise set forth
in Part 2.17 of the FAS Schedules, as of the date hereof FAS is not a party to
or bound by:
(a) any employment or consulting agreement, contract or commitment
currently in force with any employee, officer or member of FAS's Board of
Directors, other than those that are terminable by FAS or any of its
subsidiaries on no more than thirty (30) days' notice without liability or
financial obligation, except to the extent general principles of wrongful
termination law may limit FAS's ability to terminate employees at will;
(b) any agreement of indemnification or any guaranty by FAS currently
in force other than any agreement of indemnification entered into in connection
with the sale or license of software products in the ordinary course of
business;
(c) any agreement, contract or commitment containing any covenant
currently in force limiting in any respect the right of FAS to engage in any
line of business or to compete with any person or granting any exclusive
distribution rights;
(d) any agreement, contract or commitment currently in force relating
to the disposition or acquisition by FAS after the date of this Agreement of a
material amount of assets not in the ordinary course of business or pursuant to
which FAS has any material ownership interest in any corporation, partnership,
joint venture or other business enterprise other than FAS's subsidiaries;
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(e) any joint marketing or development agreement currently in force
under which FAS or any of its subsidiaries have continuing material obligations
to jointly market any product, technology or service and which may not be
canceled without penalty upon notice of ninety (90) days or less, or any
material agreement pursuant to which FAS has continuing material obligations to
jointly develop any intellectual property that will not be owned, in whole or in
part, by FAS and which may not be canceled without penalty upon notice of ninety
(90) days or less;
(f) any agreement, contract or commitment currently in force to
provide source code to any third party for any product or technology that is
material to FAS;
(g) any agreement or plan currently in force, including, without
limitation, any stock option plan, stock appreciation right plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement;
(h) any agreement, contract or commitment currently in force to sell
or distribute any FAS products, service or technology except agreements with
distributors or sales representatives in the normal course of business
cancelable without penalty upon notice of ninety (90) days or less and
substantially in the form previously provided or made available to Purchaser;
(i) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments currently in force
relating to the borrowing of money or extension of credit;
(j) any settlement agreement entered into within two (2) years prior
to the date of this Agreement; or
(k) any other agreement, contract or commitment that has a value of
$50,000 or more individually.
Neither FAS, nor to FAS's knowledge any other party to a material Contract,
is in breach, violation or default under, and FAS has not received written
notice that it has breached, violated or defaulted under, any of the material
terms or conditions of any material Contract to which FAS is bound, in such a
manner as would permit any other party to cancel or terminate any such material
Contract, or would permit any other party to seek material damages or other
remedies (for any or all of such breaches, violations or defaults, in the
aggregate).
2.18 Insurance. FAS maintains insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors of FAS (collectively, the "Insurance Policies") which are
set forth on Part 2.18 of the FAS Schedules. There is no material claim by FAS
pending under any of the material Insurance Policies as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds.
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2.19 Contingent Payment Arrangements. Following the Closing, neither
Purchaser nor FAS will have any obligation to make any payments to any
individual or entity based upon the financial performance of FAS.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER
As of the date hereof and as of the Closing Date, each of the Shareholders
further represents and warrants to Purchaser, as follows:
3.1 Ownership of Shares. As of the date hereof, such Shareholder is the
sole record and beneficial owner of the shares of FAS Capital Stock designated
as being owned by such Shareholder opposite such Shareholder's name in Part
2.2(a) of the FAS Schedules. As of the Closing, such Shareholder will be the
sole record and beneficial owner of the shares of FAS Capital Stock designated
as being owned by such Shareholder opposite such Shareholder's name in Part
2.2(a) of the FAS Schedules. Such shares are not subject to any Encumbrances and
will not become subject to any Encumbrances upon transfer to the Purchaser, and
such Shareholder has not granted any rights to purchase such shares to any other
person or entity. Such Shareholder has the sole right to transfer such shares to
Purchaser. Such shares constitute all of the FAS Capital Stock owned by such
Shareholder, and such Shareholder has no options, warrants or other rights to
acquire FAS Capital Stock. Upon the Closing, Purchaser will receive good title
to such shares, subject to no Encumbrances retained, granted or permitted by
such stockholder or FAS. Such Shareholder has not engaged in any sale or other
transfer of any FAS Capital Stock in contemplation of the transactions
contemplated by this Agreement.
3.2 Authority; Non-Contravention.
(a) Such Shareholder has all requisite power and authority to
enter into 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 authorized by all necessary
action on the part of such Shareholder. This Agreement has been duly executed
and delivered by such Shareholder and, assuming due execution and delivery by
other parties hereto, constitutes a valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except as enforceability may be limited by bankruptcy and other similar laws and
general principles of equity. The execution and delivery of this Agreement by
such Shareholder does not, and the performance of this Agreement by such
Shareholder will not, (i) if applicable, conflict with the organizational
documents of such Shareholder, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to such Shareholder or by which
Shareholder or, if applicable, any of its respective properties is bound or
affected, subject to compliance with the requirements set forth in Section
3.2(b) below
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(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity, is required to be obtained
or made by such Shareholder in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby,
except for (i) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal, foreign
and state securities (or related) laws, the HSR Act and the securities or
antitrust laws of any foreign country, and (ii) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not be material to Purchaser or FAS or have a material adverse effect
on the ability of the parties hereto to consummate the transactions contemplated
by the Agreement.
3.3 Investment Representations.
(a) Shareholder is aware of the Purchaser's business affairs and
financial condition and has acquired sufficient information about the Purchaser
to reach an informed and knowledgeable decision to acquire the securities.
Shareholder is purchasing such Shareholder's allocation of the Share Payment for
investment for his own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the Securities
Act of 1933, as amended (the "Securities Act").
(b) Shareholder understands that the shares constituting the Share
Payment have not been registered under the Securities Act by reason of a
specific exemption therefrom, which exemption depends upon, among other things,
the bona fide nature of his investment intent and other representations as
expressed herein.
(c) Shareholder further acknowledges and understands that the
Shareholder's portion of the shares constituting the Share Payment must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. Shareholder understands that
the certificate evidencing such Shareholder's portion of the Share Payment will
be imprinted with a legend which prohibits the transfer of the securities unless
they are registered or such registration is not required in the opinion of
counsel for the Purchaser. Shareholder further acknowledges that the Purchaser
is under no obligation to register the shares constituting the Share Payment.
(d) Shareholder is an accredited investor as defined in Rule 501(a)
of Regulation D promulgated under the Securities Act or Shareholder, by reason
of Shareholder's business or financial experience has the capacity to protect
Shareholder's own interests in connection with the receipt of the shares
constituting the Share Payment.
(e) Shareholder is aware of the adoption of Rule 144 by the
Securities and Exchange Commission (the "SEC"), promulgated under the Securities
Act, which permits limited public resale of securities acquired in a non-public
offering subject to the satisfaction of certain conditions set forth therein,
including, among other things, a one-year holding period, the availability of
certain public information about the issuer, the requirement that the sale be
effect through a "broker's
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transaction" or in transactions directly with a "market maker" (as defined in
Rule 144) and the number of shares being sold in any three-month period not
exceeding specific limitations.
(f) Shareholder further acknowledges that in the event all of the
requirements of Rule 144 are not met, some other registration exemption will be
required; and that although Rule 144 is not exclusive, the staff of the SEC has
expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and other than pursuant to Rule
144 will have a substantial burden of proof in establishing that an exemption
from registration is available for such offers or sales and that such persons
and the brokers who participate in the transactions do so at their own risk.
(g) The Shareholder understands that Shareholder (and not the
Purchaser) shall be responsible for his own federal, state, local or foreign tax
liability and any of his other tax consequences that may arise as a result of
the transactions contemplated by this Agreement. Shareholder shall rely solely
on the determinations of his tax advisors or his own determinations, and not on
any statements or representations by the Purchaser or any of its agents, with
regard to all such tax matters.
(h) Shareholder understands that the transfer of the Shares has not
been qualified with the Commissioner of Corporations of the State of California
and the issuance of such securities or the payment or receipt of any part of the
consideration therefor prior to such qualification is unlawful unless the sale
of securities is exempt from qualification by the California Corporations Code.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As of the date hereof and as of the Closing Date, Purchaser represents and
warrants to each Shareholder, subject to the exceptions specifically disclosed
in writing in the disclosure letter and referencing a specific representation
(unless it would be clearly apparent to a reasonable person that the disclosure
would be relevant to another representation) supplied by Purchaser to each of
the Shareholders dated as of the date hereof and certified by a duly authorized
officer of Purchaser (the "Purchaser Schedules"), as follows:
4.1 Authority; Non-Contravention.
(a) Purchaser has all requisite corporate power and authority to
enter into 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 authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and assuming execution and delivery by the other
parties hereto constitutes a valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and
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general principles of equity. The execution and delivery of this Agreement by
Purchaser does not, and the performance of this Agreement by Purchaser will not,
(i) conflict with the Purchaser Charter Documents (as defined below), (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Purchaser or any of its subsidiaries or by which Purchaser or any
of its subsidiaries or any of their respective properties are bound or affected,
subject to compliance with the requirements set forth in Section 4.1(b) below or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a material default) under, or
impair Purchaser's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of lien or Encumbrance on any of the
properties or assets of Purchaser or any of its subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise, concession, or other instrument or obligation to which Purchaser or
any of its subsidiaries is a party or by which Purchaser or any of its
subsidiaries or its or any of their respective assets are bound or affected, any
of which would result in a Material Adverse Effect on Purchaser. Part 4.1(a) of
the Purchaser Schedules lists all consents, waivers and approvals under any of
Purchaser's or any of its subsidiaries' agreements, contracts, licenses or
leases required to be obtained in connection with the consummation of the
transactions contemplated hereby, which, if individually or in the aggregate not
obtained, would result in a material loss of benefits to the Purchaser.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity, is required to be obtained
or made by Purchaser or any of its subsidiaries in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement, except for (i) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related) laws, the HSR Act
and the securities or antitrust laws of any foreign country and (ii) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not be material to Purchaser or have a material adverse
effect on the ability of the parties hereto to consummate the transactions
contemplated by this Agreement.
4.2 Organization of Purchaser.
(a) Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
all necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all material Contracts by which it is bound.
(b) Purchaser is qualified to do business as a foreign corporation,
and is in good standing, under the laws of all jurisdictions where the nature of
its business requires such qualification and where the failure to so qualify
would have a Material Adverse Effect on Purchaser.
(c) Purchaser has delivered or made available to FAS a true and
correct copy of the Certificate of Incorporation and Bylaws of Purchaser, each
as amended to date (collectively, the
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"Purchaser Charter Documents"), and each such instrument is in full force and
effect. Purchaser is not in violation of any of the provisions of the Purchaser
Charter Documents.
4.3 Purchaser SEC Filings; Financial Statements.
(a) Purchaser has filed all forms, reports and document required to
be filed with the SEC since August 4, 1999. All such required forms, reports and
documents (including those that Purchaser may file subsequent to the date
hereof) are referred to herein as the "Purchaser SEC Reports"). As of their
respective dates (or, if amended, as of the respective dates of such
amendments), Purchaser SEC Reports (i) complied as to form in all material
respects with the requirements of the Securities Act, or the Exchange Act of
1934, as amended (the "Exchange Act"), as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Purchaser SEC Reports and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of Purchaser's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in Purchaser SEC Reports (the
"Purchaser Financials") (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (iii) fairly presented the consolidated
financial position of Purchaser and its subsidiaries as at the respective dates
thereof and the consolidated results of Purchaser's operations and cash flows
for the periods indicated, except that unaudited interim financial statements
may not contain footnotes and were or are subject to normal and recurring year-
end adjustments which would not have a Material Adverse Effect on Purchaser.
4.4 No Material Adverse Change. Since June 30, 1999, there has not been a
Material Adverse Effect on Purchaser.
4.5 Brokers' and Finders' Fees. Neither Purchaser nor its subsidiaries have
incurred, nor will they incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
4.6 Corporate Approvals. The Board of Directors of Purchaser has, as of the
date of this Agreement, approved this Agreement and the transactions
contemplated hereby. To the extent necessary, as of the Closing, the
Stockholders of the Purchaser will have approved this Agreement and the
transactions contemplated hereby.
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4.7 Share Issuance. The shares representing the Share Payment when
delivered will be duly authorized, fully paid and non-assessable.
ARTICLE 5.
CONDUCT PRIOR TO THE CLOSING DATE
5.1 Conduct of Business of FAS. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Closing, FAS agrees to, and the Shareholders agree to cause FAS to, carry
on FAS's business in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted, to pay the debts and Taxes of FAS when due,
to pay or perform other obligations when due, and, to the extent consistent with
such business, use all reasonable efforts consistent with past practice and
policies to preserve intact FAS's present business organization, keep available
the services of FAS's present officers and employees and preserve FAS's
relationships with customers, suppliers, distributors, licensors, licensees and
others having business dealings with it, all with the goal of preserving
unimpaired FAS's goodwill and ongoing business at the Closing. Except as
expressly contemplated by Part 5.1 of the FAS Schedules or as otherwise
expressly provided in this Agreement, FAS shall not, and the Shareholders shall
cause FAS to not, without the prior written consent of Purchaser:
(a) other than performing the Contracts listed in the FAS Schedules
in accordance with their terms existing on the date hereof, make any expenditure
or enter into any transaction exceeding $50,000 or any commitment or transaction
of the type described in Section 2.17 hereof;
(b) sell, license or transfer to any person or entity of any rights
to any FAS Intellectual Property or enter into any agreement with respect to the
FAS Intellectual Property with any person or entity other than in the ordinary
course of business consistent with past practice;
(c) amend or change its Articles of Incorporation or Bylaws;
(d) revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practice;
(e) issue, sell, grant, contract to issue, grant or sell, or
authorize the issuance, delivery, sale or purchase of any shares of FAS Capital
Stock or securities convertible into, or exercisable or exchangeable for, shares
of FAS Capital Stock, or any securities, warrants, options or rights to purchase
any of the foregoing;
(f) declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any FAS Capital
Stock, or split, combine or reclassify any shares of FAS Capital Stock, or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of FAS Capital Stock, or repurchase, redeem, or
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otherwise acquire, directly or indirectly, any shares of FAS Capital Stock (or
options, warrants or other rights convertible into, exercisable or exchangeable
therefor);
(g) grant any severance or termination pay (i) to any director or
officer or (ii) to any employee, or increase in the salary or other compensation
payable or to become payable by FAS to any of its officers, directors, employees
or advisors, or declare, pay or make any commitment or obligation of any kind
for the payment by FAS of a bonus or other additional salary or compensation to
any such person, or adopt or amend any employee benefit plan or enter into any
employment contract other than in the ordinary course of business consistent
with past practice;
(h) sell, lease, license or otherwise dispose of any of the assets or
properties of FAS which are not Intellectual Property other than in the ordinary
course of business and consistent with past practices, including but not limited
to the performance of obligations under contractual arrangements existing as of
the date hereof set forth on the FAS Schedules, or create any security interest
in such assets or properties;
(i) grant any loan to any person or entity except for accounts
receivable in the ordinary course of business consistent with past practice,
incur any indebtedness or guarantee any indebtedness except for accounts payable
incurred in the ordinary course of business consistent with past practice, issue
or sell any debt securities, guarantee any debt securities of others, purchase
any debt securities of others or amend the terms of any outstanding agreements
related to borrowed money, except for advances to employees for travel and
business expenses in the ordinary course of business consistent with past
practice;
(j) amend in any material respect or otherwise modify (or agree to do
so), or violate the terms of any of the Contracts set forth or described in the
FAS Schedules or enter into any material Contract except in the ordinary course
of business consistent with past practice;
(k) commence or settle any litigation;
(l) acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities or, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to FAS's business;
(m) pay, discharge or satisfy, in an amount in excess of $50,000 (in
any one case) or $100,000 (in the aggregate), any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction of liabilities in the ordinary course of
business and in a manner consistent with past practice;
(n) make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or
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assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes;
(o) terminate any employees other than for cause or encourage any
employees to resign from FAS;
(p) enter into any contract, purchase order or other agreement
pursuant to which FAS would be required to book any amounts due thereunder as
deferred revenue; or
(q) take or agree in writing or otherwise to take any of the actions
described in the preceding clauses (a) through (p) of this Section 5.1 or any
other action that would prevent FAS from performing or cause FAS not to perform
its covenants hereunder.
5.2 Exclusivity. Until the earlier of (i) the Closing or (ii) the date of
termination of this Agreement pursuant to the provisions of Section 9.1 hereof,
FAS and the Shareholders, jointly and severally, agree that they shall not (nor
shall they permit any of their respective officers, directors, agents,
representatives or affiliates to) directly or indirectly, take any of the
following actions with any party other than Purchaser and its designees: (a)
solicit, encourage, initiate or participate in any inquiry, negotiations or
discussions or enter into any agreement with respect to any offer or proposal to
acquire any portion of FAS's business and properties or any shares of FAS
Capital Stock (whether or not outstanding) whether by merger, purchase of
assets, tender offer or otherwise, or effect any such transaction, (b) disclose
any information not customarily disclosed to such person concerning FAS's
business, technologies, or properties, or afford to any person or entity access
to its properties, technologies, books or records, not customarily afforded such
access, (c) assist or cooperate with any person to make any proposal to purchase
all or any part of the FAS Capital Stock or FAS's assets or (d) solicit,
negotiate or enter into any agreement with any person providing for the
acquisition of FAS (whether by way of merger, purchase of assets, tender offer
or otherwise). In the event FAS or any Shareholder shall receive, prior to the
Closing or the termination of this Agreement, any offer or proposal, directly or
indirectly, of the type referred to in clause (a) or (c) above, or any request
for disclosure or access pursuant to clause (b) above, FAS and the Shareholders
shall immediately inform Purchaser as to any such offer or proposal, including
information as to the identity of the offeror or the party making such offer or
proposal and the specific terms of such offer or proposal, as the case may be.
The parties hereto agree that irreparable damage would occur in the event that
the provisions of this Section 5.2 were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed by FAS and
the Shareholders that Purchaser shall be entitled to seek an injunction or
injunctions to prevent breaches of the provisions of this Section 5.2 and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which Purchaser may be entitled at law or in equity. Without limiting
the foregoing, it is understood that any violation of the restrictions set forth
in this Section 5.2 by any officer, director or employee of FAS or a Shareholder
or any investment banker, attorney or other advisor or representative of FAS or
a Shareholder shall be deemed to be a breach of this Section 5.2.
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ARTICLE 6.
ADDITIONAL AGREEMENTS
6.1 Restrictions on Transfer
(a) All certificates representing Common Stock of Purchaser and
deliverable to any Shareholder pursuant to this Agreement and any certificates
subsequently issued with respect thereto or in substitution therefor (including
any shares issued or issuable in respect of any such shares upon any stock
split, stock dividend, recapitalization, conversion or similar event) shall be
stamped or otherwise imprinted with legends in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES REPRESENTED
BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR A LEGAL OPINION IN ACCORDANCE WITH A WRITTEN
OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER IN FORM AND
SUBSTANCE, THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933.
THE TRANSFER RESTRICTIONS APPLICABLE TO THESE SHARES ARE BINDING ON
TRANSFEREES OF THESE SHARES.
(b) The certificates evidencing the Share Payment Shares shall also
bear any legend required by the Commissioner of Corporations of the State of
California or such as are required pursuant to any state, local or foreign law
governing such securities.
(c) The shares comprising the Share Payment will not be registered
under the Securities Act.
(d) No Shareholder shall be permitted to sell or otherwise dispose of
any of the shares comprising the Share Payment pursuant to this Agreement,
unless the resale of such shares has been registered under the Securities Act by
the Purchaser or Purchaser receives an unqualified written opinion of counsel
reasonably acceptable to it stating that the proposed transfer of such shares
may be effected without registration under the Securities Act.
(e) Purchaser shall be entitled to impose "stop-transfer" orders with
the transfer agent for its Common Stock to enforce the provisions of this
Section 6.1.
(f) Each Shareholder agrees not to sell or otherwise transfer or
dispose of any shares of Purchaser Common Stock deliverable to pursuant to this
Agreement unless the transferee agrees to be bound by the restrictions of this
Section 6.1.
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6.2 Access to Information. FAS shall afford, and the Shareholders shall
cause FAS to afford, Purchaser and its accountants, counsel and other
representatives reasonable access during normal business hours during the period
prior to the Closing to (a) all of FAS's properties, books, contracts,
commitments and records, (b) all other information concerning the business,
properties and personnel (subject to restrictions imposed by applicable law) of
FAS and (c) all key employees of FAS. FAS agrees, and the Shareholders shall
cause FAS, to provide to Purchaser and its accountants, counsel and other
representatives copies of internal financial statements promptly upon request.
No information or knowledge obtained in any investigation pursuant to this
Section 6.3 shall affect or be deemed to modify any representation or warranty
contained herein or the conditions to the obligations of the parties to
consummate the transactions contemplated by this Agreement.
6.3 Confidentiality. Each of the parties hereto hereby agrees that the
information obtained in any investigation pursuant to Section 6.2 hereof, or
pursuant to the negotiation and execution of this Agreement or the effectuation
of the transactions contemplated hereby, shall be governed by the terms of the
Confidentiality Agreements, executed effective as of June 10, 1999, and
September 2, 1999, respectively, between CNI and Purchaser (collectively, the
"Confidentiality Agreements"). Each Shareholder agrees to be bound by the terms
of the Confidentiality Agreements as if such Shareholder were a party to the
Confidentiality Agreements.
6.4 Expenses. Whether or not the transactions are consummated, all fees and
expenses incurred in connection with the transactions contemplated hereby
including, without limitation, all legal, accounting, financial advisory,
consulting and all other fees and expenses of third parties incurred by a party
hereto in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby or
thereby, shall be the obligation of the respective party incurring such fees and
expenses.
6.5 Public Disclosure. Unless otherwise required by law, no disclosure
(whether or not in response to an inquiry) of the subject matter of this
Agreement shall be made by any party hereto unless approved by the other party
prior to release; provided, however, that such approval shall not be
unreasonably withheld, subject in the case of Purchaser, to Purchaser's
obligation to comply with applicable securities laws and the rules of The Nasdaq
Stock Market and, subject in the case of CNI, to CNI's obligation to comply with
applicable securities laws and the rules of the New York Stock Exchange.
6.6 Consents. FAS shall use commercially reasonable efforts, and the
Shareholders shall use commercially reasonable efforts to cause FAS, to obtain
the consents, waivers and approvals under any of the Contracts required in
connection with the transactions contemplated hereby, including all such
consents, waivers and approvals set forth in FAS Schedules, so as to preserve
all rights of, and benefits to, Purchaser thereunder.
6.7 HSR Act. Purchaser, FAS and any applicable Shareholder each shall file
with the United States Federal Trade Commission ("FTC") and the Antitrust
Division of the United States.
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Department of Justice (the "DOJ") any Notification and Report Forms relating to
the transactions contemplated herein required by the HSR Act. Each of the
parties hereto shall promptly (i) supply the others with any information which
may be required in order to effectuate such filings and (ii) supply any
additional information which may reasonably be required by the FTC or the DOJ.
6.8 FIRPTA Compliance. On the Closing Date, FAS shall deliver, and the
Shareholders shall cause FAS to deliver, to Purchaser a properly executed
statement in a form reasonably acceptable to Purchaser for purposes of
satisfying Purchaser's obligations under Treasury Regulation Section 1.1445-
2(c)(3).
6.9 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings (including any filings or
registrations necessary to perfect Purchaser's ownership of any FAS Registered
Intellectual Property after the Closing) and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement.
6.10 Notification of Certain Matters. FAS and the Shareholders shall give
prompt notice to Purchaser of (i) the occurrence or non-occurrence of any event,
the occurrence or non-occurrence of which would cause any representation or
warranty of FAS or the Shareholders contained in this Agreement to be untrue or
inaccurate, such that the condition set forth in Section 7.2(a) would not be
satisfied and (ii) any failure of FAS or the Shareholders, as the case may be,
to comply with or satisfy in all material respects any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 6.10 shall not limit or
otherwise affect any remedies available to the party receiving such notice. No
disclosure by FAS pursuant to this Section 6.10 shall be deemed to amend or
supplement the FAS Schedules or prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
Purchaser shall give prompt notice to FAS and the Shareholders of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
would cause any representation or warranty of Purchaser contained in this
Agreement to be untrue or inaccurate, such that the condition set forth in
Section 7.3(a) would not be satisfied and (ii) any failure of Purchaser to
comply with or satisfy in all material respects any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 6.10 shall not limit or
otherwise affect any remedies available to the party receiving such notice. No
disclosure by Purchaser pursuant to this Section 6.10 shall be deemed to amend
or supplement the Purchaser Schedules or prevent or cure any misrepresentation,
breach of warranty or breach of covenant.
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6.11 Cooperation of Independent Accountants. At Purchaser's request, FAS
shall use commercially reasonable efforts, and the Stockholders shall use
commercially reasonable efforts to cause FAS, to cause its independent
accountants, PricewaterhouseCoopers LLP, to provide assistance, to Purchaser,
its affiliates and successors and Purchaser's independent accountants in
connection with the filing of any (i) registration statement under the
Securities Act (and any amendments or supplements thereto), including but not
limited to, consenting to the inclusion of the HBF Audited Financials in the
registration statement as required by Regulation S-X under the Exchange Act, and
providing, at Purchaser's expense, a "comfort letter" addressed to the
underwriters containing such representations as the underwriters may reasonably
request and (ii) periodic or current reports required to be filed by Purchaser
pursuant to the Exchange Act.
6.12 Employment Matters. FAS and the Shareholders shall use all reasonable
efforts to cause each existing employment agreement between FAS or its
subsidiaries and an employee of FAS or its subsidiaries to be terminated as of
or before the Closing and shall use all reasonable efforts to obtain a release
from each such employee releasing Purchaser and FAS and their respective
subsidiaries against any and all claims arising out of such employee's
employment arrangement.
6.13 Employment and Non-Competition Agreements. Prior the Closing, each
Shareholder listed on Exhibit G shall deliver to Purchaser a duly executed
Employment and Non-Competition Agreement and the Shareholders shall use all
reasonable efforts to deliver or cause to be delivered to Purchaser a duly
executed Employment and Non-Competition Agreement from each of the other
individuals listed on Exhibit G. Prior to Closing, CNI shall deliver a duly
executed Non-Competition and Non-Solicitation Agreement and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall
deliver a duly executed Consulting Agreement.
6.14 Contingent Payment Agreements. Each of the Shareholders shall cause
any existing obligation of FAS or any of its subsidiaries to make payments to
such Shareholder based upon the financial performance of FAS or any of its
subsidiaries to be terminated as of immediately prior to the Closing and shall
provide a release from each such Shareholder releasing Purchaser, CNI and FAS
and their respective subsidiaries against any and all claims arising out of such
contingent payment arrangement. FAS and the Shareholders shall use all
reasonable efforts to cause any other existing obligation of FAS to make
payments to any individual or entity based upon the financial performance of FAS
to be terminated as of immediately prior to the Closing and shall obtain a
release from each such individual or entity releasing Purchaser, CNI and FAS and
their respective subsidiaries against any and all claims arising out of such
contingent payment arrangement.
6.15 Director Resignations. Each Shareholder who is a director, by
signature below, hereby tenders resignation from the FAS Board of Directors,
effective on the Closing. Each Shareholder who has the right to appoint and
remove a director shall take all measures to remove all directors elected by
such Shareholder effective on the Closing.
6.16 Release. As of and following the Closing, each Shareholder, on behalf
of himself, herself or itself, as the case may be, and his, her or its
respective heirs, family members, executors,
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successors and assigns, hereby fully and forever releases HBF and FAS, and their
respective officers, directors, employees, investors, shareholders,
administrators, affiliates, divisions, subsidiaries, predecessor and successor
corporations, and assigns (collectively, the "Released Parties"), from, and
agrees not to ▇▇▇ concerning, any claim, duty, obligation or cause of action
relating to any matters of any kind, whether presently known or unknown,
suspected or unsuspected, that he, she or it may possess arising from any
omissions, acts or facts that have occurred up until the Closing (other than
with respect to claims for payment of ordinary course salary not in arrears as
of the date hereof), including:
(a) any and all claims arising under Shareholder's employment
arrangements or employment relationship with CNI, HBF or FAS and their
respective subsidiaries;
(b) any and all claims arising under that certain Stockholder's
Agreement by and among CNI, HBF and certain shareholders of HBF ("HBF
Stockholder's Agreement"); that certain Earn-Out Agreement between HBF, National
School Reporting Services, Inc. ("NSRS") ("NSRS Earn-Out Agreement"), and the
former stockholders of NSRS; that certain Stockholder's Agreement by and among
CNI and the former stockholders of FAS (the "FAS Stockholder's Agreement"), and
any other bonus sharing, earn-out or contingent payment arrangement to which
HBF, FAS or any of their respective subsidiaries is a party (each, a "Contingent
Payment Arrangement"), and any share repurchase, buyback or similar arrangement
between such Shareholder to which HBF or FAS or any of their respective
subsidiaries is party (each, a "Buyback Arrangement"); and
(c) any and all claims relating to, or arising from, Shareholder's
acquisition of shares of stock of HBF or FAS or any of their subsidiaries,
including any claims for fraud, misrepresentation, breach of fiduciary duty,
breach of duty under applicable state corporate law, and securities fraud under
any state or federal law.
Shareholder agrees that the releases set forth in this section shall be and
remain in effect in all respects as a complete general release as to the matters
released. This release does not extend to any obligations incurred under this
Agreement. Each Shareholder represents that he, she or it, as the case may be,
is not aware of any claims against the Released Parties other than the claims
released by this Agreement. Each Shareholder acknowledges that he, she or it, as
the case may be, has been advised by legal counsel and is familiar with the
provisions of California Civil Code Section 1542, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
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Shareholder, being aware of said code section, agrees to expressly waive
any rights he, she or it, as the case may be, may have thereunder, as well as
under any other statute or common law principles of similar effect.
6.17 Termination of Employment, Contingent Payment and Buyback
Arrangements. If and to the extent a Shareholder is a party to any employment
arrangement with HBF, FAS or any of their subsidiaries, the HBF Stockholder's
Agreement, the NSRS Earn-Out Agreement, the FAS Stockholder's Agreement, a
Contingent Payment Arrangement and/or a Buyback Arrangement, such Shareholder
agrees that such employment arrangement, HBF Stockholder's Agreement, NSRS Earn-
Out Agreement, FAS Stockholder's Agreement, Contingent Payment Arrangement or
Buyback Arrangement, as the case may be, shall terminate and be of no further
force effect at and following the Closing.
6.18 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Consent. Purchaser will use commercially reasonable
efforts to obtain the written consent to issue the Shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ &
Co. Incorporated under the terms of Section 2 of that certain underwriting
agreement dated August 4, 1999 by and among the Purchaser and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ &
Co. Incorporated, ▇▇▇▇▇▇▇▇▇ Lufkin & ▇▇▇▇▇▇▇▇ Securities Corporation, BancBoston
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated as
representatives of the several underwriters named in Schedule I thereto (the
"Underwriter Consent").
ARTICLE 7.
CONDITIONS TO THE PURCHASE AND SALE OF THE SHARES
7.1 Conditions to Obligations of the Parties. The respective obligations
of each party to this Agreement to the purchase and sale of the securities set
forth in Section 1 shall be subject to the satisfaction at or prior to the
Closing of the following conditions:
(a) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transaction contemplated by this Agreement
shall be in effect, nor shall any proceeding brought by an administrative agency
or commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the transactions contemplated hereby, which makes the
consummation of the transactions contemplated hereby illegal.
(b) Permits. All approvals from government authorities, including
any requisite Blue Sky approvals or HSR Act approvals, which are appropriate or
necessary for the consummation of the transactions contemplated by this
Agreement, shall have been obtained.
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(c) The Homebuyer's Fair, Inc. Closing. All of the conditions to the
obligations of the parties to consummate the transactions contemplated by the
Stock Purchase Agreement dated as of the date hereof among Purchaser, HBF, the
Shareholders of HBF and CNI, as Shareholder Agent (the "HBF Agreement") shall
have been satisfied or waived.
7.2 Conditions to Obligations of Purchaser. The obligation of Purchaser to
consummate and effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, any of which may be waived, in writing, exclusively by
Purchaser:
(a) Representations and Warranties. Each representation and warranty
of FAS and the Shareholders contained in this Agreement (i) shall have been true
and correct as of the date of this Agreement and (ii) shall be true and correct
on and as of the Closing Date with the same force and effect as if made on the
Closing Date except, (A) in each case, or in the aggregate, as does not
constitute a Material Adverse Effect on FAS or materially affect any of the
Shareholders' ability to consummate the transactions contemplated hereby;
provided, however, such Material Adverse Effect qualification shall be
inapplicable with respect to the representations and warranties contained in
Section 2.2, the first three sentences of Section 2.4(a), Section 3.1 and the
first three sentences of Section 3.2(a) (which representations and warranties
shall have been, and shall be, true and correct in all respects) and (B) for
those representations and warranties which address matters only as of a
particular date (which representations shall have been true and correct (subject
to the qualifications set forth in the preceding clause (A)) as of such
particular date) (it being understood that, for purposes of determining the
accuracy of such representations and warranties, any update of or modification
to the FAS Schedules made or purported to have been made after the execution of
this Agreement shall be disregarded). Purchaser shall have received a
certificate with respect to the foregoing signed on behalf of FAS by an
authorized executive officer of FAS.
(b) Agreements and Covenants. FAS and the Shareholders shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and Purchaser shall have received a certificate to such
effect signed on behalf of FAS by an authorized executive officer of FAS.
(c) Legal Opinion. Purchaser shall have received an opinion from
▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., legal counsel to CNI, substantially in the form attached
hereto as Exhibit H.
(d) Employment and Non-Competition. Each of the individuals set forth
on Exhibit G shall have entered into the Employment and Non-Competition
Agreement, and such agreements shall be in full force and effect.
(e) Non-Competition and Non-Solicitation Agreement. CNI shall have
entered into the Non-Competition and Non-Solicitation Agreement, and such
agreement shall be in full force and effect.
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(f) Third Party Consents. The consents, waivers and approvals listed
in the FAS Schedules shall have been obtained.
(g) Termination of Employment Agreements. Each existing employment
agreement between FAS or its subsidiaries and an employee of FAS or its
subsidiaries shall have been terminated and Purchaser shall have obtained a
release from each such employee in form and substance satisfactory to Purchaser
releasing Purchaser and FAS and their respective subsidiaries against any and
all claims arising out of such employee's employment arrangement.
(h) Termination of Contingent Payment Obligations. All obligations of
the Purchaser or FAS or their respective subsidiaries to make payments to based
upon the financial performance of FAS shall have been terminated and Purchaser
shall have obtained releases in form and substance satisfactory to it to such
effect.
(i) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Consulting Agreement. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have
entered into the Consulting Agreement, and such agreement shall be in full force
and effect.
7.3 Conditions to the Obligations of the Shareholders. The obligations of
the Shareholders to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Closing Date of each of the following conditions, any of which may be waived, in
writing, exclusively by the Shareholders acting together:
(a) Representations and Warranties. Each representation and warranty
of Purchaser contained in this Agreement (i) shall have been true and correct as
of the date of this Agreement and (ii) shall be true and correct on and as of
the Closing Date with the same force and effect as if made on the Closing Date
except, (A) in each case, or in the aggregate, as does not constitute a Material
Adverse Effect on Purchaser; provided, however, such Material Adverse Effect
qualification shall be inapplicable with respect to the representations and
warranties contained in the first three sentences of Section 4.1(a) and Section
4.7 (which representations and warranties shall have been, and shall be, true
and correct in all respects) and (B) for those representations and warranties
which address matters only as of a particular date (which representations shall
have been true and correct (subject to the qualifications set forth in the
preceding clause (A)) as of such particular date) (it being understood that, for
purposes of determining the accuracy of such representations and warranties, any
update of or modification to the Purchaser Schedules made or purported to have
been made after the execution of this Agreement shall be disregarded). The
Shareholders shall have received a certificate with respect to the foregoing
signed on behalf of Purchaser by an authorized executive officer of Purchaser.
(b) Agreements and Covenants. Purchaser shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them on or prior to the
Closing Date, and the Shareholders shall have received a certificate to such
effect signed on behalf of Purchaser by an authorized executive officer of
Purchaser.
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(c) Pledge Agreement. Purchaser shall have entered into the Pledge
Agreement, and such agreement shall be in full force and effect.
(d) Legal Opinion. The Shareholders shall have received an opinion
from Fenwick & West LLP, legal counsel to Purchaser, substantially in the form
attached hereto as Exhibit I.
(e) Underwriter Consent. The Shareholders shall have obtained from
Purchaser the Underwriter Consent.
ARTICLE 8.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1 Survival of Representations and Warranties. All representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Closing and continue until 5:00 p.m., California
time, on the first anniversary of the Closing Date (the "Expiration Date").
8.2 Indemnification.
(a) Indemnification. The Shareholders shall severally indemnify
Purchaser for any claims, losses, liabilities, deficiencies, costs and expenses,
including reasonable attorneys' fees and expenses and expenses of investigation
and defense, net of any benefits or proceeds of insurance (hereinafter
individually a "Loss" and collectively "Losses") incurred by Purchaser, its
officers, directors, or affiliates (including FAS) as a result of (i) any
inaccuracy or breach of a representation or warranty of FAS or the Shareholders
contained herein (as modified by FAS Schedules) or (ii) any failure by FAS to
perform or comply with any covenant contained herein. Purchaser, FAS and the
Shareholders each acknowledge that such Losses, if any, would relate to
unresolved contingencies existing at the Closing Date, which if resolved at the
Closing Date would have led to a reduction in the aggregate Total Consideration.
Nothing herein shall limit the liability of FAS or the Shareholders for any
breach of any representation, warranty or covenant if the transactions
contemplated hereby do not close.
(b) Right of Set-Off; Limitations Thereon. Purchaser shall have the
right to recover Losses indemnifiable pursuant to Section 8.2(a) by means of a
right of set-off pro rata against the principal amount of any of the Notes and
any interest paid or payable in respect of such principal amount (the "Set-Off
Right"). In the case of Losses relating to a breach of representations and
warranties set forth in Sections 2.2, 2.3, 2.4, 2.9(c), 2.9(d), 2.9(h), 3.1 and
3.2, Purchaser may bring action directly against the former Shareholders (the
"Direct Right") in the manner set forth in Sections 8.2(d) and 8.2(e) below.
Purchaser may not utilize the Set-Off Right or the Direct Right unless and until
Officer's Certificate(s) (as defined below) identifying Losses, the aggregate
amount
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of which, when aggregated with Losses (under and as defined in the HBF
Agreement) exceed $200,000, have been delivered to the Shareholder Agent as
provided in paragraph (d); in such case, Purchaser may utilize the Set-off Right
or the Direct Right for the total of its Losses; provided, however, Purchaser
shall not be entitled to utilize the Set-off Right for Losses which exceed, when
aggregated with Losses (as defined in the HBF Agreement) for which the Set-off
Right has been utilized, $8.5 million. Notwithstanding the foregoing, in the
event that Purchaser shall set off any amounts against the Note an amount in
excess of the amount of an indemifiable Loss, following the determination of
amount of the indemnifiable Loss in accordance with Sections 8.2(d) and 8.2(e)
below, Purchaser shall pay to the holders of the Notes the amount of such
excess, together with interest accrued on the amount of such excess from the
Maturity Date (as defined in the Notes) to the date of such payment at a rate
equal to ten and seven-eighths percent (10.875%) per annum, computed based on
the basis of the actual number of days elapsed and a year of 365 days.
(c) Limited Remedy. Except for claims with respect to breaches of the
representations and warranties set forth in Sections 2.2, 2.3, 2.4, 2.9(c)
2.9(d), 2.9(h), 3.1 and 3.2, the Set-off Right shall be Purchaser's exclusive
remedy for Losses after the Closing. With respect to breaches of the
representations and warranties set forth in Sections 2.2, 2.3, 2.4, 2.9(c),
2.9(d), 2.9(h), 3.1 and 3.2, the maximum amount the Purchaser shall be entitled
to recover from each Shareholder shall not exceed the aggregate of such
Shareholder's Allocated Portion of the Total Consideration set forth in Exhibit
A hereof and such Shareholder's Allocated Portion of Total Consideration set
forth in Exhibit A of the HBF Agreement.
(d) Set-Off Claims. In connection with utilizing its Set-Off Right or
Direct Right, Purchaser shall deliver to the Shareholder Agent a certificate
signed by any officer of Purchaser (an "Officer's Certificate"): (A) stating
that Purchaser has paid or properly accrued or reasonably anticipates that it
will have to pay or accrue Losses, and (B) specifying in reasonable detail the
individual items of Losses included in the amount so stated, the date each such
item was paid or properly accrued, or the basis for such anticipated liability,
and the nature of the misrepresentation, breach of warranty or covenant to which
such item is related.
(e) Resolution of Conflicts; Arbitration.
(i) In case the Shareholder Agent shall object in writing
to any claim or claims made in any Officer's Certificate, the Shareholder Agent
and Purchaser shall attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims.
(ii) If no such agreement can be reached after good faith
negotiation, either Purchaser or the Shareholder Agent may demand arbitration of
the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to arbitration; and in
either such event the matter shall be settled by arbitration conducted by three
arbitrators. Purchaser and the Shareholder Agent shall each select one
arbitrator, and the two arbitrators so selected shall select a third arbitrator.
The arbitrators shall set a limited time period and establish procedures
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designed to reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrators, to discover
relevant information from the opposing parties about the subject matter of the
dispute. The arbitrators shall rule upon motions to compel or limit discovery
and shall have the authority to impose sanctions, including attorneys' fees and
costs, to the extent as a court of competent law or equity, if the arbitrators
determine that discovery was sought without substantial justification or that
discovery was refused or objected to without substantial justification. The
decision of a majority of the three arbitrators as to the validity and amount of
any claim in such Officer's Certificate shall be binding and conclusive upon the
parties to this Agreement. Such decision shall be written and shall be supported
by written findings of fact and conclusions which shall set forth the award,
judgment, decree or order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in Santa ▇▇▇▇▇ County, California under the rules then in effect of the
American Arbitration Association. For purposes of this Section 8.2(e), in any
arbitration hereunder in which any claim or the amount thereof stated in the
Officer's Certificate is at issue, Purchaser shall be deemed to be the Non-
Prevailing Party in the event that the arbitrators award Purchaser less than the
sum of one-half (1/2) of the disputed amount plus any amounts not in dispute;
otherwise, the former Shareholders as represented by the Shareholder Agent shall
be deemed to be the Non-Prevailing Party. The Non-Prevailing Party to an
arbitration shall pay its own expenses, the fees of each arbitrator, the
administrative costs of the arbitration and the expenses, including without
limitation, reasonable attorneys' fees and costs, incurred by the other party to
the arbitration.
(f) Shareholder Agent; Power of Attorney.
(i) At the Closing, effective upon such vote, and without
further act of any Shareholder, CNI (Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇) shall be
appointed as agent and attorney-in-fact (the "Shareholder Agent") for each
Shareholder of FAS, for and on behalf of Shareholders of FAS, to give and
receive notices and communications to object to Purchaser's assertion of its
Set-off Right and Direct Right, to agree to, negotiate, enter into settlements
and compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims, and to take all actions
necessary or appropriate in the judgment of Shareholder Agent for the
accomplishment of the foregoing. Such agency may be changed by the former
Shareholders of FAS from time to time upon not less than thirty (30) days prior
written notice to Purchaser; provided that the Shareholder Agent may not be
removed unless holders of a two-thirds interest of the Shareholders' shares
agree to such removal and to the identity of the substituted agent. Any vacancy
in the position of Shareholder Agent may be filled by approval of the holders of
a majority in interest of the Shareholders' shares. No bond shall be required of
the Shareholder Agent, and the Shareholder Agent shall not receive compensation
for his or her services. Notices or communications to or from the Shareholder
Agent shall constitute notice to or from each of the Shareholders of FAS.
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(ii) The Shareholder Agent shall not be liable for any act done
or omitted hereunder as Shareholder Agent while acting in good faith and in the
exercise of reasonable judgment. The former Shareholders shall severally
indemnify the Shareholder Agent and hold the Shareholder Agent harmless against
any loss, liability or expense incurred without gross negligence or bad faith on
the part of the Shareholder Agent and arising out of or in connection with the
acceptance or administration of the Shareholder Agent's duties hereunder,
including the reasonable fees and expenses of any legal counsel retained by the
Shareholder Agent.
(g) Actions of the Shareholder Agent. A decision, act, consent or
instruction of the Shareholder Agent shall constitute a decision of all the
former Shareholders and shall be final, binding and conclusive upon each of such
former Shareholders and Purchaser may rely upon any such decision, act, consent
or instruction of the Shareholder Agent as being the decision, act, consent or
instruction of each every such former Shareholder. Purchaser is hereby relieved
from any liability to any person for any acts done by them in accordance with
such decision, act, consent or instruction of the Shareholder Agent.
(h) Third-Party Claims. In the event Purchaser becomes aware of a
third-party claim which Purchaser believes may result in an indemnity claim
(including those relating to Taxes), Purchaser shall promptly notify the
Shareholder Agent of such claim, and the Shareholder Agent, as representative
for the former Shareholders shall be entitled, at the former Shareholders'
expense, to participate in any defense of such claim. Purchaser shall have the
right in its sole discretion to settle any such claim. In the event that the
Shareholder Agent has consented (which consent shall not be unreasonably
withheld) to any such settlement or in the event the Shareholder Agent
unreasonably withheld its consent, neither the Shareholder Agent nor any
Shareholder shall have power or authority to object under any provision of this
Article 8 to the amount of any such claim by Purchaser. If the Shareholder Agent
has not consented to the settlement, in the event that the arbitrators, in
accordance with Section 8.2(e)(ii), determine that the withholding of consent
was reasonable and the settlement amount was unreasonable based upon the facts
and circumstances existing at the time of such settlement, the arbitrators shall
determine the appropriate settlement for purposes of Sections 8.2(b) and 8.2(c)
above.
(i) No Right to Indemnity or Contribution. The Shareholders shall
have no contribution, indemnity or similar right against FAS with respect to any
claim by the Purchaser for indemnification pursuant to this Article 8.
ARTICLE 9.
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. Except as provided in Section 9.2 below, this Agreement may
be terminated and the transactions contemplated hereby abandoned at any time
prior to the Effective Time:
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(a) by mutual consent of each of the parties hereto (other than the
Shareholder Agent);
(b) by Purchaser or FAS and the Shareholders acting together if: (i)
the Effective Time has not occurred by the date that is 100 days following but
not including the date of this Agreement (the "End Date"); provided, however,
that the right to terminate this Agreement under this Section 9.1(b)(i), shall
not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the transactions contemplated
by this Agreement to occur on or before such date and such action or failure to
act constitutes a breach of this Agreement; (ii) there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the transactions contemplated by this Agreement; or (iii) there
shall be any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the transactions contemplated by this Agreement by any
Governmental Entity that would make consummation of the transaction contemplated
by this Agreement illegal;
(c) by Purchaser if there shall be any action taken other than by
Purchaser or at Purchaser's behest, or any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the transactions
contemplated by this Agreement by any Governmental Entity, which would: (i)
prohibit Purchaser's ownership or operation of any portion of the business of
FAS or (ii) compel Purchaser to dispose of or hold separate all or a portion of
the business or assets of FAS or Purchaser as a result of the transactions
contemplated hereby;
(d) by Purchaser, upon a breach of any representation, warranty,
covenant or agreement on the part of FAS or any Shareholder set forth in this
Agreement, or if any representation or warranty of FAS or any Shareholder shall
have become untrue, in either case such that the conditions set forth in Section
7.2(a) or Section 7.2(b) would not be satisfied as of the time of such breach or
as of the time such representation or warranty shall have become untrue,
provided that if such inaccuracy in FAS's or any Shareholder representations and
warranties or breach by FAS or any Shareholder is curable by FAS or the
Shareholder, as the case may be, through the exercise of either of his, her or
its commercially reasonable efforts, then Purchaser may not terminate this
Agreement under this Section 9.1(d) prior to the End Date, provided FAS or such
Shareholder, as the case may be, continues to exercise commercially reasonable
efforts to cure such breach (it being understood that Purchaser may not
terminate this Agreement pursuant to this Section 9.1(d) if it shall have
materially breached this Agreement or if such breach by FAS or such Shareholder,
as the case may be, is cured prior to the End Date);
(e) by FAS and the Shareholders acting together, upon a breach of any
representation, warranty, covenant or agreement on the part of Purchaser set
forth in this Agreement, or if any representation or warranty of Purchaser shall
have become untrue, in either case such that the conditions set forth in Section
7.3(a) or Section 7.3(b) would not be satisfied as of the time of such breach or
as of the time such representation or warranty shall have become untrue,
provided, that if such inaccuracy in Purchaser's representations and warranties
or breach by Purchaser is
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curable by Purchaser through the exercise of its commercially reasonable
efforts, then FAS and the Shareholders may not terminate this Agreement under
this Section 9.1(e) prior to the End Date, provided Purchaser continues to
exercise commercially reasonable efforts to cure such breach (it being
understood that FAS and the Shareholders may not terminate this Agreement
pursuant to this Section 9.1(e) if any of them shall have materially breached
this Agreement or if such breach by the Purchaser is cured prior to the End
Date).
Where action is taken to terminate this Agreement pursuant to this Section
9.1, it shall be sufficient (and required) for such action to be authorized by
the Board of Directors (as applicable) of the party taking such action.
9.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 9.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Purchaser, FAS, the
Shareholders or their respective officers, directors, shareholders or
stockholders provided, however, that each party shall remain liable for any
breaches of this Agreement prior to its termination; and provided, further, that
the provisions of Sections 6.3, 6.4, 6.5, this Section 9.2 and Article 10 of
this Agreement shall remain in full force and effect and survive any termination
of this Agreement.
9.3 Amendment. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of the parties hereto; provided, however, execution by
the Shareholder Agent shall only be required for amendments relating to Article
8 hereof.
9.4 Extension; Waiver. At any time prior to the Closing, Purchaser, FAS
and the Shareholders may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations of the other party hereto, (ii) waive
any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE 10.
GENERAL PROVISIONS
10.1 Notices. Every notice, consent and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed given if
delivered personally or by commercial messenger or courier service, or mailed by
registered or certified mail (return receipt requested) or sent via facsimile
(with acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice), provided, however, that notices sent by mail will not be deemed
guaranteed received:
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(a) if to Purchaser to:
▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to FAS, CNI or the Shareholder Agent, to:
Central Newspapers, Inc.
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Shareholders, to:
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The address, telephone number and facsimile number set forth
opposite such Shareholders name on Exhibit A hereto or if no
address, telephone number or facsimile number is provided, to the
Shareholder Agent.
10.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The word "knowledge" when used herein with respect to a corporation
means the actual knowledge of any of the officers or directors of the
corporation. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.4 Entire Agreement; Assignment. This Agreement, the Exhibits hereto, the
FAS Schedules and the Purchaser Schedules, and the documents and instruments and
other agreements among the parties hereto referenced herein: (a) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings both written and oral, among
the parties with respect to the subject matter hereof; (b) are not intended to
confer upon any other person any rights or remedies hereunder; and (c) may not
be assigned unless agreed to by the other parties hereto, except that Purchaser
may assign its rights and delegate its obligations hereunder to majority-owned
subsidiaries of Purchaser provided that Purchaser remains contingently liable.
10.5 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
10.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
10.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto irrevocably consents to
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the non-exclusive jurisdiction and venue of any federal or state court within
the Northern District, State of California, in connection with any matter based
upon or arising out of this Agreement or the matters contemplated herein, agrees
that process may be served upon them in any manner authorized by the laws of the
State of California for such persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction, venue
and such process.
10.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
10.9 Attorneys' Fees. If any action or other proceeding relating to the
enforcement of any provision of this Agreement is brought by any party hereto,
the prevailing party shall be entitled to recover reasonable attorneys' fees,
costs and disbursements (in addition to any other relief to which the prevailing
party may be entitled).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Purchaser, FAS, the Shareholders and, with respect to
Article 8 only, the Shareholder Agent have caused this Agreement to be signed by
their duly authorized respective officers, all as of the date first written
above.
▇▇▇▇▇▇▇▇▇.▇▇▇, INC. FAS-HOTLINE, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
___________________________ ________________________________
Title: C.E.O. Title: President
________________________ _____________________________
SHAREHOLDERS
CENTRAL NEWSPAPERS, INC. RAMAS, L.P.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
___________________________ ________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
its General Partner
Title: Chairman/President/C.E.O.
________________________ Address: ▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇
___________________________
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
___________________________________
___________________________________
___________________________________
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
_____________________________
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
_________________________
***FAS STOCK PURCHASE AGREEMENT***
S-1
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
______________________________ __________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Address: ▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇ Address: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
_________________________ __________________________________
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
_________________________________ __________________________________
_________________________________ __________________________________
_________________________________ __________________________________
Phone: (▇▇▇) ▇▇▇-▇▇▇▇ Phone: (▇▇▇) ▇▇▇-▇▇▇▇
___________________________ ___________________________
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
_______________________ _________________________
SHAREHOLDER AGENT
CENTRAL NEWSPAPERS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
______________________________
Title: Chairman/President/C.E.O.
___________________________
***FAS STOCK PURCHASE AGREEMENT***
S-2